Sunday, February 06, 2005

Ferrovial: Road Builder for Libyan leader Moammar Gadhafi

Ferrovial sees U.S. as fertile for private pacts

Austin American-Statesman
Copyright 2005

MADRID, Spain -- Grupo Ferrovial, a large Spanish company that hopes to build and operate toll roads in Texas, was founded in 1952 as a construction firm specializing in civil engineering projects such as roads and airports.

Fifty-three years later, it has evolved into a diversified international group that has controlling or partial interests in airports in England, Northern Ireland, Australia, Mexico and Chile. It runs toll roads, most of which it also built, in six countries including Ireland and Chile. It even runs, through a subsidiary it acquired in 2003, three lines of the London Underground.

It has become, according to Family Business magazine, one of the largest family-controlled companies in the world.

Ferrovial officials see the United States as increasingly fertile ground for public-private partnerships. Executives of Cintra, a subsidiary of which Ferrovial owns 60 percent, are poised to sign an agreement soon with the Texas Department of Transportation to offer advice about how to plan the Trans -Texas Corridor .

The company also is prepared to invest $6 billion to build the roads at no cost to Texas, in exchange for the right to collect the tolls, under a formula yet to be negotiated, for 50 years.

The company has expanded rapidly under Rafael del Pino the younger, a man described by colleagues as blunt, sometimes difficult to work for and brilliant.

Shown no favoritism at the outset by his father, he began his career in the hinterlands.

"I worked in Libya for one year. I built roads there for Gadhafi -- bomb-proof roads," he joked, referring to Libyan leader Moammar Gadhafi.

Having trained as a civil engineer in Madrid, del Pino went to the United States in the mid-1980s, where he earned a master's degree in business administration from the Massachusetts Institute of Technology.

He became chief executive officer of Ferrovial in 1992. He was named vice chairman in 1999 and chairman in 2000. Now, at 46, he is also chairman of Cintra.

The company went public five years ago; the del Pino family still controls 58 percent of it.

His tenure at the top has coincided with an aggressive global expansion. The company also changed its profile, concentrating much more on services and infrastructure, with construction as a reduced portion of its activities.

As a rule, the company invests in projects in which it holds a controlling interest. If it is going to invest in a project, it wants to run it.

The strategy has paid off.

Between 1996 and 2003, sales more than tripled, to the equivalent of $7.8 billion. Operating income increased more than 14 times, to $800 million.

"I think we have a unique combination of engineering and construction experience on the one side and financial and traffic forecasting on the other," del Pino said. And, he said, the company has been willing to take on long-term risks.

Ferrovial's projects have not been popular with everyone. Its North American toll road operations began in 1999 when a group it led obtained a 99-year contract to operate and extend the 407 ETR highway in Toronto, an all-electronic toll road that never requires drivers to slow down to be charged.

A new government subsequently came to power in Ontario, having campaigned in part on a pledge to reduce the tolls that Cintra charged. But because the contract negotiated by the previous government allowed Cintra to regulate the tolls in any way it saw fit, three courts have ruled in Cintra's favor.

Del Pino said Ontario officials seem to have forgotten that they got $3.1 billion for the concession and that their other main concern at the time was that congestion on nearby roads be reduced.

Cintra officials say that tolls on its portions of the Trans -Texas Corridor could be negotiated in any way that is satisfactory to all parties.

Del Pino said Ferrovial's experience with toll roads, in which the company's income is determined by how many people choose to use the road, makes it likely that drivers will be happy with its work in Texas .

"We have found that we are more efficient than government in bringing that infrastructure into place," he said. "I think the whole process becomes more efficient when it is in private hands, because the design is adapted to the needs of the user."
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