Bids for Pennsylvania Turnpike within 10% triggering BAFOs - Gov Rendell

Pennsylvania received bids for the 75 year Turnpike lease concession last Friday but there was a bid within 10% of the top bid triggering another week for best and final offers, Governor Ed Rendell said at a new conference this morning. Rendell said "there are good bids" and said they are "absolutely" good enough for the legislature to "take a hard look at." (The Turnpike Commission's annual payments to the state without tolling I-80 are $450m or the equivalent of $5.3b in an upfront concession fee.)

But suggesting bid expectations have been undershot, Rendell said "it is not a great time to be doing this" referring to the difficulties in the financial markets. He said that the bids would have been higher if they had been sought last year. This suggests to us the bids are clearly below the range $12b to $18b estimated by Morgan Stanley last year as the value of the concession on the $608m/year tollroad and frequently cited by the Rendell Administration prior to last Friday.

BAFOs

Rendell said that because there was a bid within 10% of the top bid on Friday a one week extension has been triggered to this Friday (May 16 ) to allow bidders to submit best-and-final offers. He said the selection will be based entirely on price since all bidders have been qualified, and all are bidding on the same concession and lease contract.

Rendell seemed to say first that there were three bidders. But then he seemed to be teasing reporters by saying that the number of bids was "a multiple of three" explaining this for the arithmetically challenged among us as "three, six or nine" and returning to the subject later as "three, six, nine, twelve or fifteen."

Press secretary Chuck Ardo quipped afterwards: "If it was 15 (bids) then one must have been an unqualified bidder."

14 bidders were qualified.

Guess is three

We think the bidders probably are:

- Abertis

- Cintra-Macquarie

- Transurban-Goldman Sachs

Rendell said there is "substantial American participation" in all the groups, citing as an example Macquarie as having major investments from Pennsylvania pension funds.

Asking Sec Peters for quick decision on tolling I-80

Gov Rendell has also set this Friday May 16 as a deadline for PennDOT and the Turnpike Commission to submit the state's response to USDOT questions on their application to toll I-80. Rendell said he had asked US sec transportation Mary Peters for an expedited decision on tolling I-80 once the state's response is received.

The Governor said if he were a legislator he'd be reluctant to vote on the Turnpike lease without knowing whether I-80 tolls were going to proceed or not. 40% of the Act 44 funding from the Turnpike would disappear if the Feds disallow tolling of I-80. This would put transportation finding back into crisis and "send us back to the drawing boards."

Raising the gasoline tax was not an option, he said, though a tax "holiday" as advocated by some to offset high fuel prices was unjustified.

Rendell against chartreuse

Rendell said there was "lots of misinformation out there" about the proposed lease, some calling it a loss of state control. He said it was a lease not a sale and used a house analogy: "If you sell your house the new buyer can paint it chartreuse and you may hate it but there's nothing you can do about it. If you lease it you can prevent them from painting it chartreuse. That's the difference between lease and sale."

Official statement

After the news conference the Governor's office issued this statement:

http://www.tollroadsnews.com/sites/default/files/GovPR.doc

TOLLROADSnews 2008-05-12