Macquarie Infrastructure Group (MIG) launches legal action against Ontario Government as Cintra prepares IPO for European Stock Market
Macquarie Infrastructure Group has raised the stakes in its battle with the Ontario Government in Canada.
July 27, 2004
By Scott Rochfort
The Sydney Morning Herald
Macquarie Infrastructure Group has raised the stakes in its battle with the Ontario Government in Canada over the ETR 407 toll-road, launching legal action against the province in a bid to bring the latest skirmish to a halt.
After nine months of frosty relations with the newly elected Liberal Government, the toll-road operator hopes it can end the series of disputes through the courts.
In the latest battle, it has lodged a judicial order pressing the Government not to renew the vehicle permits of tollway users with outstanding accounts.
The 407 also announced over the weekend it had "invoked resolution procedures" to settle a separate dispute over calculations on possible future payments to the Government over traffic congestion.
"If you have 94 years on a concession, you don't want these things to fester," said MIG chief executive Stephen Allen, a Toronto native.
The Government has shown little enthusiasm to resolve the issues and a fortnight ago threatened to appeal against an arbitration ruling which said the tollway operator had the right to raise tolls without government approval.
The dispute flared in February when the 407 raised tolls by 8 per cent without government approval.
MIG owns the 108 kilometre tollway with the Spanish tollway partner Grupo Ferrovial.
In a statement, 407 said it delivered "a notice of discriminatory action to the Government for the province's failure to comply with its legal obligation to deny [licence] plates".
Enrique Diaz-Rato, chief executive of ETR 407, said: "We have tried to resolve this issue amicably but we are left with no other choice but to take this action."
The 407 agreed to defer the suspension of licence plates for defaulters in 2000, citing problems with "customer service". The tollway now believes it has the problems ironed out.
The 407 is electronically monitored and the only deterrent for drivers who fail to pay their monthly toll bills is the threat of not having their licence plates renewed.
With drivers owing up to $C5000 ($5329), the company said it was owed $C16 million in outstanding bills.
The tollway, meanwhile, reported a loss in its second quarter of $C22.8 million, which included a depreciation charge of $C25.3 million.
Earnings before interest, tax, depreciation and amortisation were $C71.6 million for the quarter, up from $C57.8 million in the previous corresponding period.
A major positive was the 12 per cent cut in operating expenses to $C25.4 million and the strong lift in traffic volumes.
Traffic volumes for the quarter rose 9.3 per cent over the previous corresponding period, which included a one-day record of 384,242 vehicles.
JP Morgan analyst David Leitch said the move to hasten a resolution to the dispute could be related to the upcoming float of the Spanish toll-road operator Cintra Concesiones de Infraestructuras de Transporte, which is owned by MIG and Ferrovial.
"The Ontario Government is going to lose but they still have a few cards," Mr Leitch said, noting the potential fallout of the dispute on Cintra's listing price.
"Their weapon is that they can extend the process to some extent."
Macquarie Equities analyst Ian Myles said the latest action taken by the 407 over the non-renewal of licence plates and tolling issues was a "natural escalation", given the disputes had been running since January.
"It's sound logic they are trying to progress the dispute," he said.
Copyright © 2004. The Sydney Morning Herald.
© 2004 The Sydney Morning Herald:
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