Abertis and Goldman Sachs-Transurban the two final bidders for Penn Pike concession -Wall Street Journal "Marketwatch"

The Wall Street Journal's MarketWatch service is reporting that groups led by Abertis and Goldman Sachs are the only two remaining bidders for the 75 year lease concession on the Pennsylvania Turnpike. The third group comprising Cintra and Macquarie - two of the most aggressive bidders in past concession procurements - are out.

This was first reported Tuesday morning by Infranews of London and TOLLROADSnews (http://www.tollroadsnews.com/node/3538).

MarketWatch today cites the Spanish newspaper Expansion as one of its sources.

There has been no official confirmation, denial or comment on any of these reports because the state has imposed a blanket silence on the process until a winner is selected - which is due to occur after 'best and final' bids this Friday (May 16).

MarketWatch says that groups led by Spain's Abertis and New York's Goldman Sachs are the only remaining bidders, having submitted bids within 10% of one another. Abertis is a large toll operator in Europe and Latin America and has been involved in a takeover of the huge Italian pike Autostrade (so far blocked by the Italian government officials). It is partnered with the European bank Santander and Babcock.

Goldman Sachs is the investment partner in the Pennsylvania bid with Australia's largest tollroad operator Transurban which would take over day to day management of the Pennsylvania Turnpike. A large north American pension fund is also named as a large proposed investor.

Enabling legislation still needed

Implementation of any concession/lease proposed by the Rendell Administration is dependent on enabling legislation being passed by a state legislature that has many opponents. On the other hand proposed tolling of I-80 has politically undermined the Act 44 arrangements put in place last summer by supporters of the embattled Turnpike Commission, and increased the chances of a concession being approved.

Price the only issue

Gov Rendell has said that the choice being made after final bids tomorrow will be strictly price driven since all the bidders are qualified and they are all bidding on the one contract document.

MarketWatch says that the Cintra-Macquarie group was notified by the state following last week's bids that they were ineligible to bid further because their bid was not within 10% of the high bid. Therefore they were dropped.

The rules of the bidding have never been made public.

By other accounts all bidders were allowed a second round of bids in case of one bid being within 10% of the top bid. If that were the rule then Cintra-Macquarie chose to drop out.

French analyst says Cintra better off out

Steven Fernandez an investment analyst at the French bank Exane PNB Paribas says that Cintra are better off out of the Pennsylvania Turnpike bidding. Writing in an email this morning from London he says that winning the Turnpike concession would have added too much debt to Cintra's balance sheet.

"We estimate the PA Turnpike could be leased at least at USD10bn. This would have implied adding on around EUR3.2bn of new debt for Cintra (50% stake). While the debt can be structured to provide sufficient lender support, we're not sure the market would have welcomed this releverage exercise by Cintra, particularly for an asset that is very mature and offers limited upside," writes Fernandez.

"We estimate that the winning bid would imply an EV/EBITDA of around 28x.... We don't think it's the right project for the company (which doesn't mean it's not the right one for others)."

see http://www.marketwatch.com/ and

http://www.expansion.com/

TOLLROADSnews 2008-05-15