China welcomes investor tollroads while Texas shuts the door

July 2 2009 should be recorded as an important date in tollroad history. It was the day Chinese regulators gave the green light to Sichuan Expressway Company's Initial Private Offering (IPO) of shares in Shanghai, while in Texas, USA the legislature adjourned for 18 months slamming the door on investor pikes. Republican legislators in the Texas capital of Austin declared Thursday there was "no sense of urgency" about tapping investor funds and entrepreneurialism to build tollroads under concessions or "comprehensive development agreements" (CDAs) as they have been called there. They took no action on a bill sponsored by the Governor to renew authority for toll concessions, so no new investor projects can be solicited or processed further.

A special legislative session called by Governor Perry did renew authority for Texas DOT and authorized up to $2 billion in public tollroad bonds.  But a bill to extend authority for toll concessions beyond September 1 was never put to a vote. Mike Krusee who led the move to open Texas up to toll concessions in 2003 said the bill's failure "means the potential loss of billions of dollars for road construction."

Governor Perry said there would be legal uncertainty about several large concession projects.

The Texas legislature doesn't convene again until 2011.

The failure to renew aithority for toll concessions was hailed by a spokesman for Senator Kay Bailey Hutchison who said Gov Perry was attempting "to line the pockets of corporate tollroad operators." Hutchison who has sponsored anti-toll legislation in the US Congress is running for Republican nominee for Governor to succeed Perry.

COMMENT: This looks like the end of a short era of openness to investor tollroads in Texas. Krusee, Perry, Williamson and others who supported private tollroads are fading from the Texas scene, and investor pikes now have no champion. Public tollroads will continue, although they may also suffer collateral damage from the complete change in the political climate.

China

China by contrast has a huge tollroad construction program based on investor concessions.  That was slowed somewhat by the moratorium on new IPOs imposed last September in the wake of the global financial crisis.

This week the moratorium was lifted. Sichuan Expressway Company based in Chengdu, capital of Sichuan, was given permission Thursday to proceed with a share offering to the public to finance a 105km (65 miles) expressway Chengdu to Meishen, estimated to cost Y7.5b ($1.1b).

http://www.cygs.com/structure/en/index

Other major investor owned tollroad developers in China are Jiangsu Expressway, Zhejiang Expressway, and Shenzen Expressway. Several started raising their capital in free market Hong Kong, but they are now widely accepted through  the rest of China.

Making use of investor financing under the concession model more miles of expresswqay are now being built than in all the rest of the world combined. A lot of this is catch-up.

Until 1988 under socialist planning and tight restrictions on investors aznd political antagonism to motor vehicle ownership, there were virtually no expressways in the whole country.

In 1989 there were 147km (91 miles) of expressway!

Construction really got under way in 1993 after China embraced capitalism.

The concession model was adopted by provincial governments in China. By the end of 2008 there were 60,300km (37,500 miles) of expressway in operation, 6,430km (3995 miles) being added last year with average annual construction being 4,000km (2485 miles) per year over the past 15 years.

All-toll, all-concession in China

Almost 100% of the Chinese expressway construction is toll financed and developed by concessionaires.

The US doesn't have very good statistics on length of expressways but it is probably captured in interstate plus other urban freeways and expressways which at end 2007 was 92,674km (57,585 miles) or about 50% more than China now.

On a crude arithmetical projection China would overtake the US length of expressway in 2018.

In 1990 the US had 84,880km (52,742mi) so annual construction has been 460km (285 miles) a year.

On present trends by 2018:

- China would have added 40,000km (25,000 miles) for a network total of about 100,000km (62,000mi), and

- the US would have added 5,060km (3,145mi) for a total network of 97,734km (60,729mi)

Of course much US effort has in the past couple of decades gone into modernizing and widening existing centerline expressways whereas most of the Chinese construction is first generation expressway... so these comparisons can be made many different ways.

TOLLROADSnews 2009-07-03