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Mississippi DOT stops Jackson Airport Parkway P3 – rating agencies No to investment grade
Posted on Wed, 2009-09-09 12:54
Mississippi DOT (MsDOT) have announced “suspension” of the procurement process for a private sector concession to build the state’s first tollroad in the modern era – Jackson Airport Parkway. The concession financing depended on federal TIFIA loan support which is only provided if the rating agencies provide an investment grade rating to senior debt.
Three shortlisted potential concessionaires told MsDOT they couldn’t get the needed investment grade ratings for their loan financing, an official told us, so they were not able to make proposals which were formally due next week – Sept 15.
A statement from MsDOT quotes Executive Director Larry L (Butch) Brown as “disappointed” but saying that the parkway “project, like many other greenfield toll road projects, is suffering from general economic weakness and tight credit markets which limit the amount of credit and capital available for new transportation projects.”
Private sector must show savings
Brown is quoted further: “The private sector needs to demonstrate that it can deliver meaningful savings versus a traditional MDOT financing and delivery plan. For example, unless private sector bidders can genuinely deliver construction cost savings, operational savings, or financing savings, the numbers just don’t work. In this economy, revenue projections are under pressure and investment grade ratings for the project’s senior debt are difficult to obtain.”
Three groups shortlisted to make proposals Sep 15 but unable to raise the capital were:
– Jackson Access Mobility Group (ACS and Dragados)
– Airport Parkway P3 Group (Cintra and Ferrovial)
– Global Via
They are Spain-based international groups active around the world in toll and other concessions.
Brenda Znachko, chief financial officer at MsDOT says she gets the impression the rating agencies are generally negative about tollroads at present. She says she thinks the lack of any history of tolling in the state was also a handicap.
Znachko says they are not giving up on the project, but are considering alternatives. They will look at alternative ways of structuring the project as a concession, and also look at public financing using the credit of the state as backing.
She thinks the project is still viable as a tollroad, but it may need to be approached differently. MsDOT is supported by consultants Nossaman lawyers, JP Morgan finance, and URS engineers and traffic and revenue modelers.
MsDOT will take a new plan for advancing the parkway project to state commissioners later this year.
The project is designed to serve the most rapidly growing portion of the state, the eastern edge of the Jackson area. Although it would serve the Airport this by itself was not a major part of the projected traffic for the Parkway – which goes from the central business district east, then splits to make links to the north and south of the airport.
A URS traffic and revenue study produced for MsDOT shows toll revenues for the project at a toll of 18c/mile (11c/km) with a Jan 2013 opening as 2015 $16m, 2020 $22m, 2025 $39m, 2030 $53m.
Project cost has been put at around $500m. The project consists of 20km, 12 miles of expressway standard road with at least four interchanges. Major structure needed is a bridge over the Pearl River immediately east of the central business district.
The project has alll its environmental permits.
Most of the engineering design is done.
80% of the right of way has been acquired.
There is strong support for the project from the key three cities, and virtually no public opposition.
Znachko has said they are flexible about the scope and staging of the project. They have already deferred a downtown end ‘pitchfork’ feeding three streets as something that can be added at a later date. To start with it would have just one downtown connection. The eastern ends have also been left flexible for staging also.
summary of project: