Comparison of recent toll road concession transactions in the United States and France.

Etats-Unis Harvard University

Description

L’enquête porte sur la comparaison d’appels d’offres de concessions routières en France et aux Etats-Unis opérés entre début 2005 et mi-2006. Elle montre que les appels d’offres, mieux encadrés et plus contraignants en France qu’aux Etats-Unis, garantissent une meilleure qualité de service et d’infrastructures.
Alors qu’aux Etats-Unis, seul le niveau de l’enchère importe, de nombreuses conditions irrévocables sont prises en compte en France : la qualité de service, la maintenance et la pérennité de l’infrastructure, le maintien de la structure sociale, la préservation de l’environnement et le respect des intérêts de l’Etat. Il s’agit, dans un cas, d’un placement financier dont le seul objectif est la maximisation des bénéfices et pour les autres, d’un investissement industriel conciliant les intérêts des consommateurs et des contribuables.
Bel (G), Foote (J). Cambridge Massachussetts. http://temis.documentation.developpement-durable.gouv.fr/document.xsp?id=Temis-0061022

Sujets

• Infrastructure de transport
• Autoroute
• Péage
• Qualité de service
• Service public

Informations

• Publié par: temis-developpement-durable
• Publié le: 01 janvier 2007
• Nombre de lectures: 7
• Licence : En savoir +
  Paternité, pas d'utilisation commerciale, partage des conditions initiales à l'identique
• Langue: English

Extrait

                    DOCUMENT DE TREBALL   XREAP2007-11                      COMPARISON OF RECENT TOLL ROAD CONCESSION TRANSACTIONS IN THE UNITED STATES AND FRANCE Germà Bel, John Foote                

     

 

 

 

   

XREAP2007-11 

COMPARISON OF RECENT TOLL ROAD CONCESSION TRANSACTIONS IN THE UNITED STATES AND FRANCE *†  

    Germà Bel ‡ and John Foote §         Abstract:      Recent concessions in France and in the US have resulted in a dramatic difference in the valuation

placed on the toll roads; the price paid by the investors in France was twelve times current cash

flow whereas investors paid sixty times current cash flow for the U.S. toll roads. In this paper we

explore two questions: What accounts for the difference in these multiples, and what are the

implications with respect to the public interest. Our analysis illustrates how structural and

procedural decisions made by the public owner affect the concession price. Further, the terms of the

concession have direct consequences that are enjoyed or borne by the various stakeholders of the

toll road.

    Keywords:infrastructures, roads, privatization, regulation and tolls.Transport   JEL Classification:L43, L92, L33     

                                                  *   elgdemtnAnkwos : Germà Bel thanks financial support from the Spanish Commission of Science and Technology (SEJ2006-04985). This paper has been presented at the 75th Annnual Meeting of the International Bridge, Tunnel and Turnpike Association (Vienna, 20007).Comments We have received useful comments and suggestions from Toni Brunet, Rick Geddes, Tony Gómez-Ibáñez and Jordi Graells. † Copyright belongs to the authors. Paper may be downloaded for personal use only.   ‡   acntCo:t   Germà Bel. Grup de Recerca en Polítiques Públiques i Regulació Econòmica (PPRE) i Institut de Recerca d’Economia Aplicada (IREA). Universitat de Barcelona, Departament de Política Econòmica, Av. Diagonal 690, 08034, Barcelona, Spain. E-mail:[e-mail]    § oCtnca:t   John Foote, Harvard University. E-mail:ud  lle.jhforne25@c    

1. 

 

Introduction

 

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There is growing interest in private toll road concessions in the United States following the well publicized transactions involving the Chicago Skyway and Indiana Toll Road and speculation about possible multi-billion dollar deals involving other US toll roads.

 

As a US concession model evolves, there is increasing scrutiny of the characteristics of European

toll road private concessions. Worrall (2006) in a discussion of the evolution of a US concession

model notes that typical concession terms for European toll roads are a) between 15 and 30 years

(contrasted with 99 years for Skyway and 75 years for the Indiana Toll Road) and b) usually include

renegotiation provisions.

 

No detailed study has been undertaken so far, however, that examines the European experience

compared with the recent US experience. The purpose of this paper is to fill this gap in the literature. In particular, this paper analyzes the main features of the Chicago Skyway and Indiana Toll Road concessions in the US and the Autoroutes du Sud de la France (ASF), Autoroutes Paris-

Rhin-Rhône (APRR) and Société des Autoroutes du Nord et de l’Est de la France (Sanef)

concessions in France.

 

All five of these toll road entities were converted from public to private ownership in a span of

eighteen months in early 2005 to mid 2006. In many respects, these roads and the processes

(including the prospective investors) by which they were privatized are similar. There was a

dramatic difference, however, in the valuation placed on the US vs. French toll roads; the price

paid by the investors for the French toll roads was twelve times current cash flow (earnings before interest, depreciation and amortization, or “EBITDA”) whereas investors paid sixty times current cash flow for the U.S. toll roads, as shown in Table 1.

 

 

(Insert table 1 around here)

In this paper we will explore two questions: What accounts for the difference in these multiples, and

what are the implications with respect to the public interest? This paper does not address the merits

of toll road concessions in general, but instead concentrates on the relative outcomes of the US and

French approaches in terms of both price and social welfare.

 

 

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Our analysis of the five US and French concessions allows us to arrive at several conclusions that

are useful in evaluating the Chicago Skyway and the Indiana Toll Road concessions with respect to

the public interest. For example, we compute what part of the price paid for the Chicago Skyway concession comes from anticipated toll increases. In addition, we compute what part of the concession price comes from efficiency/productivity gains not shared with the users of the Skyway

as is the case in the French concessions.

 

This paper is organized as follows. In Section II, we describe the two concession approaches. In

Section III we analyze the bidding parameters in both approaches. In Section IV we study the

spread of bids observed in the US and France. In Section V, we look at the relative changes in

social welfare that result from the US and French approaches. Finally, we draw the main

conclusions from our analysis.

 

 

2. Description of the Two Concession Approaches

 

Before looking at the particular concession approaches used recently in France and the US, it is useful to review the history of modern toll roads in Europe and the US. This review suggests,

among other things, that the the risks inherent in operating toll roads in the Europe and the United

States are not so different as to be a contributing factor in the difference in prices.

 

2.1. Toll Roads in Europe

 

After World War II European economies grew rapidly and by the 1960s many European countries

were developing plans for networks of motorways. Countries in Northern and Central Europe, as

well as the United Kingdom chose to finance new motorways from their general funds. The

Southern European countries opted for toll financing since funds from the general budget to finance

motorways were scarcer (Bel, 1999), as well as in recognition of the fact that much of the new road infrastructure would be used by non-resident visitors , for example tourists (Gomez-Ibañez and Meyer, 1993). In the case of France and Italy in the 1950’s and 1960’s, concessions were given to

state-owned companies and agencies which were responsible for building and operating the roads.