Abertis & Citigroup to pay $12.8 Billion for Pennsylvania turnpike

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In the highest pricetag fetched for an American toll road to date, Abertis, a Spanish toll road giant, along with Citigroup will pay the state of Pennsylvania a whopping $12.8 billion for the right to empty the pockets of Pennsylvanians with interest and private profits for the next 75 years! Pennsylvanians can expect BIG, FAT toll hikes to pay back such a stunning sum.

Citi tops bidding for Pa. Turnpike
A Citigroup unit and Barcelona’s Abertis Infraestructuras submit a $12.8B bid to lease the Pennsylvania toll road for 75 years.
May 19, 2008
HARRISBURG, Pa. (AP) — A Spanish company and a unit of Citigroup Inc. teamed up to submit the largest bid for the right to lease the Pennsylvania Turnpike for the next 75 years.

Barcelona-based Abertis Infraestructuras, Abertis investor Criteria CaixaCorp of Spain and Citi Infrastructure Investors offered $12.8 billion, beating their nearest competitor by $700 million, Gov. Ed Rendell said Monday.

Rendell described himself as “strongly in favor of it.” But the Legislature must approve any deal, and one leader in the Democratic-controlled House said he was not impressed with the bid.

“To be quite candid, the number is less than overwhelming,” said Majority Whip Keith McCall, D-Carbon. “It’s certainly not dead on arrival, but it’s something we do need to discuss with the entire caucus.”

Raising dollars for transportation

The Democratic governor has pursued the plan to have a private entity operate and maintain 500 miles of the turnpike system to raise billions for Pennsylvania’s transportation needs.

The lease deal would let the operator increase tolls 25% in January, and then by 2.5% or an amount equal to consumer price inflation after that. The turnpike’s operating revenue was $608 million in the fiscal year that ended last May.

Rendell predicted the Abertis and Citi (C, Fortune 500) deal would generate an average of $1.1 billion a year in the first 10 years – income from the investment of the lump-sum lease payment – for roads, bridges and mass transit.

If the deal goes through, the state would almost certainly abandon a plan to introduce tolls to Interstate 80 that would be expected to generate about $500 million a year. The tolls were the primary component of a law passed last summer that is expected to produce about $940 million annually for transportation needs.

Repealing those tolls has become a priority for many people and businesses along the highway, as well as the lawmakers who represent them.

Abertis directly manages more than 2,000 miles of toll roads in other countries; it also manages a toll bridge in Puerto Rico and airport facilities in California, Florida and Georgia.

The Abertis-Citi bid is good through June 20, but the bidders said they intended to be flexible since legislative action in the next month is not likely.

“We’d like to see it done this fall,” said Citi Infrastructure Investments partner Michael B.G. Froman.

Rendell said the two losing bidders were teams consisting of Goldman, Sachs & Co. and Transurban Group of Australia; and of the Macquarie Infrastructure Group of Australia and Cintra of Spain. Goldman-Transurban’s final bid was $12.1 billion; Macquarie-Cintra’s was $8.1 billion.