Wednesday, August 31, 2005

Macquarie Infrastructure Group snaps up third US toll road.

MIG buys New Jersey toll road

August 31, 2005

By Scott Rochfort
The Sydney Morning Herald, Australia
Copyright 2005

Macquarie Infrastructure Group has snapped up its third US toll road and indicated it was considering a $US20 billion-plus ($26.6 billion) privatisation of two toll roads in New Jersey.

After weeks of speculation, MIG announced it had agreed to buy an 86.7 per cent stake in the 22-kilometre Dulles Greenway outside Washington DC for $US533 million.

Spruiking the road's high projected traffic growth population and ability to raise tolls from the present $US2.40 to $US3 by mid-2007, MIG chief executive Stephen Allen dubbed the road as a "high quality growth asset".

But with Macquarie Bank scouring the US for infrastructure investments, Mr Allen said he was directing its attention to the possible rush of toll-road privatisations across the US.

"Given how active the toll market is, I'm directing a lot of their focus. There are lots of opportunities that we're following," he said. With Virginia leading the way in selling off its toll-roads, MIG is considering one toll road in Texas and is said to be looking at roads from New York to Oregon.

Mr Allen said MIG was monitoring the New Jersey Government's plans to possibly sell the 190km New Jersey Turnpike and the 270km Garden State Parkway. It is speculated both roads could fetch about $US20 billion.

"They would be among the biggest privatisations that could happen in the US. They are very big. Who knows what could happen."

He said size was not a factor. "The approach we have today is that MIG has grown. We need to make bigger investments because people sort of say to me, 'If you don't make a reasonable sized investment, why bother? Why not save your firepower for the bigger ones'.

"If a deal came up and the size was going too be big we'd put a consortium together. Of course, the attractive thing about a big deal is that there are fewer people who can participate in it."

Mr Allen also played down concerns rising oil prices could affect the number of cars on the road and people using toll roads.

"Fundamentally, all the research I've seen on it tells me that you would need a very, very significant rise in oil prices before you would see any noticeable difference in people's driving behaviours," he said.

One factor in MIG's favour was a lot of its roads were based in areas where the "urban planning model" favoured car usage, instead of public transport.

Mr Allen said he was more concerned about the affect of oil prices on the economy, which could hit the number of truck trips and, to a lesser extent, car trips.

MIG shares were placed on a trading halt yesterday after the company appointed Macquarie Bank and Credit Suisse First Boston to undertake a domestic and international book-build with a minimum price of $3.77 a share. MIG hopes to raise $675 million.

The Sydney Morning Herald: