Tuesday, November 22, 2005

"Some investors question whether refinancing really adds value."

MIG shoots down toll road critics, defends public-private deals

November 22, 2005

Robert Clow
The Australian
Copyright 2005

MACQUARIE Infrastructure Group chief executive Stephen Allen defended public-private partnerships yesterday after Sydney's troubled Cross City Tunnel mired the toll-road sector in controversy.

Mr Allen said that MIG had commissioned an independent body to look at the social benefits of toll roads in terms of reduced congestion, fewer accidents and reduced emissions.

"There are many examples of successful PPP projects," Mr Allen said. "Westlink M7 will be a huge boon for Western Sydney."

He did not say when the report was expected.

Much of MIG's anticipated growth appeared likely to be fuelled by acquisitions. Mr Allen reiterated MIG's interest in tollroads in the US states of Indiana, Oregon, Texas and Virginia as well as France's SANEF and APRR roads.

He said that 47 per cent of MIG's portfolio by value was in the US, and 40 per cent of its investors now came from outside Australia - mostly from the US. "You will see more growth and more investment opportunities in the US," Mr Allen said.

Some of the company's growth was also expected to come from refinancing.

"We are financing our distributions in part by borrowing money against our assets," he said. "We believe this is a prudent thing to do."

Some investors question whether refinancing really adds value, but MIG takes the view that bringing forward revenues is a value-added activity.

Mr Allen also argued that commentators had overplayed interest-rate fears. "We fix our interest rates over the short term," he said.

Eighty-six per cent of MIG's short-term interest rate exposure was fixed.

"All of our toll roads have at least inflation-based tolls," he said.

Nor did he accept that toll roads were particularly vulnerable to increased petrol prices. Initial traffic decreases on MIG's roads in September caused by higher bowser prices were largely reversed in October, he said.

"Reduction in travel by car is a lifestyle decision," said Mr Allen. "If you are going to drive less and you live in the suburbs, it is a big decision."

MIG signalled a steady approach to its business despite some investors' doubts over toll roads and other highly specialised funds.

"The solid performance of our toll-road assets enables MIG to confirm its distribution guidance for 2006 of 21c and to provide preliminary distribution guidance of 23c for 2007, based on the assumptions of continued growth across the operating businesses," Mr Allen said.

MIG's securities rose 2c after the meeting, advancing to $3.67.

© 2005 The Australian www.theaustralian.news.com.au

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