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Sunday, 14th July 2024
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Canada’s Highway 407 transformed by PPP structure Back  
Last November, a full page ad was placed in the Financial Times announcing that Citibank/Salomon Smith Barney had put together a multi-billion dollar financing package for Canadian Highway 407 in seventeen days. Conor O'Malley of Citibank in Dublin provides a brief description of the project.
Last year, the State of Ontario sold a 43 mile section of Highway 407 to an international consortium which will operate it as the world’s first fully electronic open-access toll road.

What is interesting about this project is the similarities between the case in point and those which exist in Dublin today. The State of Ontario was facing major traffic congestion problems, increasing volumes of traffic etc. and decided to invest itself in a partial upgrade of Highway 407. The State then decided to sell a 55 year (later increased to 90 years) concession, at a very considerable profit, to an international consortium which would operate and significantly upgrade Highway 407, thereby resolving some of the traffic congestion problems of the area. The consortium was required to introduce a state of the art electronic tolling system which would considerably reduce delays at entrance/exit to the Highway and were also required to construct new access points and other improvements.

The consideration for the sale of 407 was in excess of US$2 billion and the State of Ontario can use these funds as it wishes for example to upgrade public transport and other infrastructure facilities. It can even build competing toll roads to Highway 407 if it so wishes.

The international consortium, Ferovial of Spain, SNC-Lavalin of Canada and Capital d'Amerique of Canada, will design build and operate the 43 mile toll road together with the East and West extensions. The financing for this public/private partnership deal in Canada was put together by Salomon Smith Barney and Citibank.

Citibank provided a USD1.7 billion bridge loan to the consortium which was subsequently refinanced in the international bond market.

Relevance for Ireland
At a recent conference organised by the Institute of Public Administration the Taoiseach, Bertie Ahern, spoke of the ‘Infrastructure Deficit’ that currently exists in Ireland and of the Government’s commitment to significant investment in infrastructure, particularly in roads and transportation to help resolve this problem. While the availability of funds, whether from the Exchequer or from private sources, through the PPP mechanism or otherwise, does not present a major problem, at this time the biggest question on everybody's mind is how soon can this investment happen and how soon can this infrastructure deficit be resolved.

There are already very many major initiatives being considered on the question of Dublin’s traffic congestion including LUAS, City Centre Underground, Special Bus Corridors, completion of an M50 Ring Road including Eastern Relief Route, a second West Link bridge, and the Dublin Port Tunnel. However will these be sufficient and will they happen soon. Does the 407 Highway structure offer an additional choice?

While it is generally accepted that the public in Dublin is in favour of tolls for new facilities, (reference National Toll Road Survey, March 1998, when 67% of the public voted in favour of tolling), it is recognised that it may be unlikely that public acceptance will be forthcoming for tolling of existing routes.

However, using a combination of shadow-tolling for existing facilities and real tolling for new facilities, it may be possible for the public sector to transfer the ownership of some of the existing road network for a limited period of time, in return for upfront consideration and the commitment (subject to the public sector delivering on such issues as planning permission) to significantly upgrade and extend facilities as required.

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