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NW Parkway concession worth $603m, defeases troubled bonds, builds extension
Posted on Thu, 2007-05-31 22:59
The NW Parkway in the Denver area is going to a $603m concession or nearly 80 times toll revenues of $7.62m expected this financial year - a ratio of concession investment to current revenues almost twice that achieved on the Chicago Skyway and the Indiana Toll Road (about 40x). Concessionaires Brisa/CCS are clearly investing in a stretch of highway they expect to become part of a complete beltway around the Denver area.
Brisa the large Portugese toll operator will have 90% equity in the joint venture and Brazilian CCR 10%.
NW Parkway executive director Steve Hogan told us that the concessionaires will:
- defease all of the authority's $500m of bond debt 100c in the dollar
- commit $60m to construction of a 3.7km (2.3 mile) extension at the western end taking the highway over and linking it to the US36 expressway
- repay about $30m to local jurisdictions they borrowed for open space
- put money in escrow to provide incentive payments to local jurisdictions for the extension
Hogan says there is a draft concession contract to which a few modifications have to be made. He says there were negotiations right up to the board meeting Wednesday which approved the agreement.
The concession probably won't be made public until the financial close which is scheduled for August 31.
The authority and concessionaire will now be working on a transition plan with Brisa/CCH due to take over Sept 1.
Hogan says the concession provides for:
- a 99 year term
- no restrictions on competing capacity
- a formula for regular raises in toll caps
- provision for flexibility in tolling to allow variable toll rates by time of day
- triggers for construction of extra capacity
- maintenance and operational standards
- construction of the extension to CO128
- procedures for amending the contract an adjudicating any disputes
European reports
Reports in Europe are that the toll cap formula provides for an increase to $3 (from the present $2 at the mainline plaza) by 2009 and after that the higher of 2%, CPI or GDP/capita annually.
"Very pleased with the result"
Hogan says he thinks "we did pretty well" in the ratio of the concession value to toll revenues: "We are very pleased with the result."
He is confident that Brisa will do an excellent job operating the road.
Hogan says the Parkway has been through "a very difficulty period" in its first few years years. The two largest employers in the area Sun Microsystems and Level 3 Communications had laid off staff and still employ fewer people than before the road opened. Now however new businesses are moving in, but the pace of development remains uncertain.
Less heavily borrowed
A concessionaire is better placed to weather the economic uncertainties of a developing fringe area than a fully borrowed toll authority. Brisa is putting
$190m of equity into the project so will be far less borrowed than the Parkway Authority. They are also willing to allow other investors to buy into the project, they said.
Brisa representatives told financial analysts in Europe today they forecast traffic growth of 9.5%/year 2006 to 2016. They expect a further substantial increase in traffic when the Missing gap in the Denver beltway is closed by construction of a 40km (24 mile) Northwest Tollroad in about 2020.
Financial analysts in Europe were told the project would have an internal rate of return on equity of 10 to 11% even with the "lightly leveraged" 1/3 equity, 2/3 debt financing.
Traffic in the fourth year of the tollroad - tolling began Jan 1 2004 - is running just over 12k AADT, 14k/weekday, up about 90% on the first year of operations. Toll revenues this year are expected to be about $7.6m.
The deal is unusual in that a public toll authority itself is concessioning out its business.
BACKGROUND: NW Parkway is built as a 14km (9 mile) extension counter-clockwise of the E470 tollroad from its start at I-25 north of Denver to 96th Street short of US36 in Broomfield northwest of Denver.
From there 3.5km (2 mile) of surface arterial posted for 45mph (72km/hr) long provides a temporary connection to US36, and CO128 and local malls and office parks in Interlocken. That is planned to be upgraded to full expressway standard and tolled.
Then there's an approximate 40km (24 mile) missing link between Broomfield and Golden at I-70 and C470 with alternatives currently under analysis by Colorado DOT. There's some opposition from the city of Golden with environmentalists contesting the need for the road. (Don't they always contest the need for any road, anywhere?)
NW Parkway is 2x2 lanes posted for 70mph (113km/hr) speed and designed for widening inward to 2x3 lanes. It has five interchanges, a mainline toll plaza with multilane highway speed electronic tolling and ramp tolls at two other locations. The tollorad uses passive backscatter 0.9GHz transponders to Title 21 California specs issued by E470PHA under the brandname EXpress Toll. Transponders do about two-thirds of tolls.
There is fiberoptic conduit the length of the tollroad and plans for a trail for bicycles, jogging and support for parkland reservations or a "greenbelt" on either side of the tolload. The tollroad serves the developing commercial center around Broomfield and provides a connection to Denver International Airport and eastern parts of the Denver area and the Boulder area and US36 corridor.
Northwest Parkway Public Highway Authority was formed in mid 1999 by the cities of Broomfield and Lafayette and Weld County.
Stantec (formerly Vollmer) did traffic and revenue forecasting (CORRECTION made 2007-06-01 10:35) for NWPPHA. RBC were financial advisers on the deal. Laywers for NWPPHA were Denver based Icenogle Norton Smith & Blieszner and Chicago based Mayer Brown Rowe & Maw.
TOLLROADSnews 2007-05-31
The NW Parkway in the Denver area is going to a $603m concession or nearly 80 times toll revenues of $7.62m expected this financial year - a ratio of concession investment to current revenues almost twice that achieved on the Chicago Skyway and the Indiana Toll Road (about 40x). Concessionaires Brisa/CCS are clearly investing in a stretch of highway they expect to become part of a complete beltway around the Denver area.Brisa the large Portugese toll operator will have 90% equity in the joint venture and Brazilian CCR 10%.
NW Parkway executive director Steve Hogan told us that the concessionaires will:
- defease all of the authority's $500m of bond debt 100c in the dollar
- commit $60m to construction of a 3.7km (2.3 mile) extension at the western end taking the highway over and linking it to the US36 expressway
- repay about $30m to local jurisdictions they borrowed for open space
- put money in escrow to provide incentive payments to local jurisdictions for the extension
Hogan says there is a draft concession contract to which a few modifications have to be made. He says there were negotiations right up to the board meeting Wednesday which approved the agreement.
The concession probably won't be made public until the financial close which is scheduled for August 31.
The authority and concessionaire will now be working on a transition plan with Brisa/CCH due to take over Sept 1.
Hogan says the concession provides for:- a 99 year term
- no restrictions on competing capacity
- a formula for regular raises in toll caps
- provision for flexibility in tolling to allow variable toll rates by time of day
- triggers for construction of extra capacity
- maintenance and operational standards
- construction of the extension to CO128
- procedures for amending the contract an adjudicating any disputes
European reports
Reports in Europe are that the toll cap formula provides for an increase to $3 (from the present $2 at the mainline plaza) by 2009 and after that the higher of 2%, CPI or GDP/capita annually.
"Very pleased with the result"
Hogan says he thinks "we did pretty well" in the ratio of the concession value to toll revenues: "We are very pleased with the result."
He is confident that Brisa will do an excellent job operating the road.
Hogan says the Parkway has been through "a very difficulty period" in its first few years years. The two largest employers in the area Sun Microsystems and Level 3 Communications had laid off staff and still employ fewer people than before the road opened. Now however new businesses are moving in, but the pace of development remains uncertain.
Less heavily borrowed
A concessionaire is better placed to weather the economic uncertainties of a developing fringe area than a fully borrowed toll authority. Brisa is putting
$190m of equity into the project so will be far less borrowed than the Parkway Authority. They are also willing to allow other investors to buy into the project, they said. Brisa representatives told financial analysts in Europe today they forecast traffic growth of 9.5%/year 2006 to 2016. They expect a further substantial increase in traffic when the Missing gap in the Denver beltway is closed by construction of a 40km (24 mile) Northwest Tollroad in about 2020.
Financial analysts in Europe were told the project would have an internal rate of return on equity of 10 to 11% even with the "lightly leveraged" 1/3 equity, 2/3 debt financing.
Traffic in the fourth year of the tollroad - tolling began Jan 1 2004 - is running just over 12k AADT, 14k/weekday, up about 90% on the first year of operations. Toll revenues this year are expected to be about $7.6m.
The deal is unusual in that a public toll authority itself is concessioning out its business.
BACKGROUND: NW Parkway is built as a 14km (9 mile) extension counter-clockwise of the E470 tollroad from its start at I-25 north of Denver to 96th Street short of US36 in Broomfield northwest of Denver.
From there 3.5km (2 mile) of surface arterial posted for 45mph (72km/hr) long provides a temporary connection to US36, and CO128 and local malls and office parks in Interlocken. That is planned to be upgraded to full expressway standard and tolled.
Then there's an approximate 40km (24 mile) missing link between Broomfield and Golden at I-70 and C470 with alternatives currently under analysis by Colorado DOT. There's some opposition from the city of Golden with environmentalists contesting the need for the road. (Don't they always contest the need for any road, anywhere?)
NW Parkway is 2x2 lanes posted for 70mph (113km/hr) speed and designed for widening inward to 2x3 lanes. It has five interchanges, a mainline toll plaza with multilane highway speed electronic tolling and ramp tolls at two other locations. The tollorad uses passive backscatter 0.9GHz transponders to Title 21 California specs issued by E470PHA under the brandname EXpress Toll. Transponders do about two-thirds of tolls.There is fiberoptic conduit the length of the tollroad and plans for a trail for bicycles, jogging and support for parkland reservations or a "greenbelt" on either side of the tolload. The tollroad serves the developing commercial center around Broomfield and provides a connection to Denver International Airport and eastern parts of the Denver area and the Boulder area and US36 corridor.
Northwest Parkway Public Highway Authority was formed in mid 1999 by the cities of Broomfield and Lafayette and Weld County.
Stantec (formerly Vollmer) did traffic and revenue forecasting (CORRECTION made 2007-06-01 10:35) for NWPPHA. RBC were financial advisers on the deal. Laywers for NWPPHA were Denver based Icenogle Norton Smith & Blieszner and Chicago based Mayer Brown Rowe & Maw.
TOLLROADSnews 2007-05-31
