Sunday, March 11, 2007

Cintra's director: "Our strategy was to invest and to hold... After a few more years, it was a gold mine."

Cintra becoming king of the toll roads

But Spanish company's global projects are earning criticism, too

March 11, 2007

The Dallas Morning News
Copyright 2007

MADRID, Spain – Thousands of miles from the shopping centers along State Highway 121, a toll road company is banking that it can bring to Texas the success it's built among the olive groves of Spain.

Cintra Concesiones de Infraestructuras de Transporte SA, the company picked to work on two major Texas toll road projects, has operated roads and collected tolls since 1968.

In that time, it has raised tolls around Toronto, to the chagrin of politicians. It has opened sophisticated new projects in Madrid and its suburbs. It has paid billions to take over toll roads in Chicago and Indiana, with rights to toll revenues for up to 99 years. It has even taken one project full circle, giving a 35-year-old toll road – and its toll revenue – back to the Basque regional government in northern Spain.

Now it's a central player in an increasingly contentious debate over the planned Trans-Texas Corridor, which it has been hired to develop. And last month, the company was selected to build and operate State Highway 121 in Collin and Denton counties as a toll road.

No one from Cintra attended the Feb. 27 announcement of that deal, and company officials declined to comment last week for this story. But last summer, at their Madrid headquarters, they were welcoming.

"This is about investing in the very long term," said Nicolas Rubio, Cintra's business development director.

"Nothing against public roads," he said, "but if you have the private sector wanting to do it, that allows the government to concentrate on other priorities."

Toll roads have been a priority for Cintra and its corporate parent, Grupo Ferrovial, since they partnered with a company called Europistas on the A8 highway in northern Spain.

The road struggled in its first few years, and when some private companies foundered and gave their toll roads back to the Spanish government in the 1970s, Cintra did not.

"Our strategy was to invest and to hold," said Jose López, Cintra's director of U.S. and Latin American operations. "After a few more years, it was a gold mine."

Going global

It's not all been easy. Cintra's first international project, in Colombia in 1993, was abandoned after a few years when toll road opponents began blowing up toll plazas. Workers were still inside when the bombs went off.

"Now we only invest in areas where that can't happen," Mr. Rubio said.

The company turned its attention to more stable countries like Chile, where it has built 463 miles of toll roads in the last 10 years. But it was a 67-mile toll road outside Toronto that paved the way for much of the company's recent business, including its work in Texas.

Cintra garnered international attention when, in 1999, it assumed control of the existing 407 ETR project outside Toronto. It had opened as the world's first all-electronic toll road.

But in the last several years, Cintra and Ontario provincial officials have battled extensively over the rates the company can charge motorists, with the case reaching the highest courts in Canada. Cintra officials recently prevailed, although they point out that the contract provides stiff penalties should higher tolls result in less traffic.

"The tolls when we bought the project were way low," said Mr. López. "If we had kept the toll where it was, it would have been congested."

The Canadian toll rate debate has led to regular meetings between Cintra and Canadian government officials.

"We meet all the time," Mr. López said. "Especially if there is an election coming."

From Chile to Ireland and from Canada to Texas, Cintra has claimed a growing stake in the international toll road business. Most of that growth has occurred since the late 1990s, and much of it has come in its home country of Spain, where Cintra is opening hundreds of miles of new toll roads.

Growing in Spain

Headed out of Madrid on the R4 roadway one morning last summer, traffic was fairly light. The road, which leads to the Spanish capital's small but growing southern suburbs, costs about $7.50 to travel 37 miles, and it attracts only 12,000 vehicles a day.

But the company just opened a 111-mile extension of the R4, and 83 miles of that extension have tolls. It costs about $15 to drive the extension from end to end, and Cintra will collect tolls on that section of the highway for up to 38 years.

The extension is expected to be very popular, offering weary drivers a way to pay a few euros and avoid congested roads. Those motorists, headed to Spain's southeast coast, reach their destinations about four hours sooner. And due in part to the adjacent R4, the Madrid suburbs of Parla and Pinto, with about 50,000 residents each, are expected to grow dramatically.

"All of a sudden, there is a highway here, and people can now commute," said Javier Pérez Fortea, director of Cintra's European division.

Near one R4 toll plaza, examples of the area's past and future collide. Dozens of vehicles travel through one of 21 lanes at the toll plaza while in the distance a cowboy practices with his prancing horse. Farmers still tend their fields, and tractors cross the toll road on overpasses specially constructed for farmers and other local traffic.

In for the long haul

In the United States, Cintra has drawn attention for the long-term deals it has reached with local and state governments to buy existing toll projects.

In Chicago, Cintra and its partner, Macquarie Infrastructure Group, paid $1.82 billion for the rights to operate the Chicago Skyway bridge in a deal that will last until 2104.

The deal has drawn criticism for its 99-year duration. Chicago officials were also criticized for using the cash to help balance the state budget instead of building more roads.

In Indiana, Cintra and Macquarie paid $3.8 billion for the rights to all the state's toll roads through 2081. In that case, state leaders pledged to use the revenue for other transportation projects, but they came under political fire for selling the rights to a valuable toll road network for 75 years.

Cintra expects about a 13 percent return on its investment in Indiana. In Texas, that figure is about 12 percent.

On some roads, Cintra officials say, the payoff doesn't come for up to 30 years.

"We are very patient investors," Mr. López said.


Full name: Cintra Concesiones de Infraestructuras de Transporte

Headquarters: Madrid, Spain

Parent company: Grupo Ferrovial

Businesses: Manages 20 toll road concessions in Spain, Portugal, Ireland, Greece, Chile, the U.S. and Canada; and more than 250,000 parking spaces

2006 revenues: 884.7 million euros (about $1.17 billion)

2006 net income: 155.6 million euros (about $206.1 million)

Employees: More than 2,900

U.S. toll roads: Indiana Toll Road, Chicago Skyway

Texas contracts: Development contract for Trans-Texas Corridor, rights to build portion of State Highway 130 electronic toll road from Austin to Seguin, contract to build State Highway 121 in Collin and Denton counties as a toll road

SOURCE: Cintra

© 2007 The Dallas Morning News Co

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