Wednesday, August 16, 2006

British-Portuguese consortium partners up for Texas toll roads

Balfour Targets New State-Partnership Market in U.S., Germany


Copyright 2006

Balfour Beatty Plc, the U.K.'s biggest construction company, will bid for its first U.S. contracts in partnership with the state, Chief Executive Officer Ian Tyler said today in an interview.

Balfour plans to tender for a Texas highway project with Brisa-Auto Estradas de Portugal SA, the country's biggest toll- road operator, Tyler said. The London-based company is also vying to build and operate a rail link to Oakland Airport in California along with Mitsui & Co. of Tokyo.

Tyler is targeting countries including the U.S. and Germany, where governments are beginning to adopt so-called public-private partnership contracts pioneered in the U.K. Under the agreements, companies carry the risk of costly public-works projects while benefiting from service agreements that may span three decades.

``PPP-style contracts are starting to happen in the U.S. and Germany,'' Tyler said.

The stock rose as much as 16.25 pence, or 4.6 percent, to 368.5 pence and traded at 362 pence as of 2:46 p.m. in London, for a market value of 1.54 billion pounds ($2.91 billion).

Balfour, the U.K.'s market leader in public-private tie-ups, will bid for an 11.5-mile stretch of road in the Dallas area that will cost approximately $525 million to build, according to a statement in June by Portugal's Brisa. Tyler said he doesn't yet know the value or the size of the Oakland rail venture.

A Balfour team in Germany, Europe's biggest economy, is targeting opportunities to build roads and hospitals in partnership with the government, the CEO said. The builder is seeking local partners to bid for the projects.

"The team is active in Germany, but the projects in the market are at a very early stage,'' Tyler said.

The company is also considering a tender for student housing for the National University of Singapore as a government tie-up Tyler said. Still, the greatest growth potential for Balfour is in the U.K., where Tyler estimates that 15 percent of all buildings and roads procured by the government will be built and operated as PFI deals. "Private finance is the way the U.K. and other governments increasingly want to go,'' said Rachael Waring, an analyst at Numis Securities in Liverpool with a "hold'' recommendation on the stock. "As the market leader, this is very good for Balfour.''

Balfour has invested almost 300 million pounds into more than 20 such deals, including contracts to build and maintain nearly 150 schools and the U.K.'s second-biggest hospital in Birmingham.

To contact the reporter on this story:
Sophie Kernon in London at

© 2006 Bloomberg: