Over the next three years, two Puerto Rico highways will undergo a $56 million facelift en route to becoming world-class roads, so said the new private-sector consortium of Goldman Sachs Infrastructure Partners/Abertis, upon signing a 40-year management contract with the government at La Fortaleza Monday.
While the improvements will not initially come at a cost to drivers, come 2014, the operator putting up $1.4 billion to take over the public-private partnership contract to manage PR-22 and PR-5 will be free to increase toll fees, based on a formula that combines inflation plus a little more. At the Buchanan toll plaza, that increase could average about 5 cents a year through the next decade.
“We have to do all of the work we committed to doing in the first three years, when we will also organize the highway investment and how it will go. After that is when an increase will go into effect, if there is inflation,” said Jordi Graells, general director of Abertis’ North American and international highways division.
“As with every PPP concession, this is a regulated business, prices are set by the contract, and will evolve over time according to inflation,” said Graells, during a meeting with members of the Puerto Rico media, flanked by PPP Authority Executive Director David Álvarez, Highway Transportation Authority Executive Director Rubén Hernández-Gregorat and Jonathan Hunt, vice president of Goldman’s merchant banking division.
“We believe it is a balanced, reasonable and fair formula and users will know what to expect, so there will be no surprises,” Graells said.
Although he said the toll increases should not be significant, the Spanish executive did admit that the first hike will be retroactive to Monday — when the contract was signed — and every year thereafter.
The 52-mile PR-22 road is not “in bad shape” when compared to others Abertis has seen, but “it does need a lift, improvements related to infrastructure itself — pavement, bridges, signs, barriers drains and lighting,” Graells noted.
“That’s what we plan to do over the next three years, during which we should have repaved at least 25 percent of the highway,” he said.
Neither Abertis nor partner Goldman Sachs is new to the Puerto Rican market. Abertis is a Spanish firm with presence in 15 countries, dedicated to three main areas of business: toll roads; airports; and telecommunications infrastructure. It brings to the PPP its knowledge of managing roads in Europe and throughout the Americas, as well as the experience gained from operating the Teodoro Moscoso Bridge since the early 1990s.
Goldman, meanwhile, has already invested in Puerto Rico through another division independent from Infrastructure Partners, said Hunt.
The companies, which are working together for the first time, will operate as Autopistas Metropolitanas de Puerto Rico, LLC, or Metropistas, for short.
During the encounter with the media, the public and private sector representatives reiterated that no jobs would be lost as a result of the PPP, with Hernández Gregorat saying that so far, 25 percent of the estimated 115 agency employees “have expressed an interest in moving over to the private operator.”
However, it was not made clear how many new jobs Metropistas will create to have its own infrastructure to operate the highways. HTA employees who choose not to work with the private operator will be relocated to other roads, Hernández Gregorat said.
Other PPPs on the radar
The PPP Authority is expected to release this week the request for qualifications for its next big concession — the management of the Luis Muñoz Marín Airport in Carolina.
The proposal has been in the works for the better part of the last two years, during which the government secured the go-ahead from the Federal Aviation Administration and, more recently, the OK from at least 65 percent of the airport’s carriers.
Abertis, a seasoned airport manager with participation in facilities in the United Kingdom, Colombia, Mexico, Bolivia, Chile and Sweden, would consider participating in that transaction as well, Graells confirmed.
“We are very comfortable with being in Puerto Rico and believe in the format this administration is carrying out its PPPs, so we’re waiting for the airport transaction and other possible highways, which we will evaluate fully,” Graells said.