Canada bridge joins MIP portfolio

The 7.2km A25 Bridge and Highway in Montreal has opened for traffic on budget and ahead of schedule, making the C$600m project the second operational toll bridge in the portfolio of the $4bn Macquarie Infrastructure Partners I fund.

The Chicago Skyway is no longer the only toll bridge in the portfolio of the Macquarie Infrastructure Partners’ (MIP) first fund. On Saturday, the MIP-backed A25 toll bridge in Montreal officially opened for traffic, on budget and six weeks ahead of schedule, giving local drivers a quicker way of getting into and out of a fast-growing northern suburb.

The opening also marks the completion of the first public-private partnership (PPP) for a transportation project in the province of Quebec, where public sector unions haven’t always been welcoming of such arrangements. Lack of financing, however, convinced the province to pursue the PPP nevertheless.

A25: open for business

“They turned to the private sector, and we delivered,” said Chris Leslie, chief executive of MIP. “It’s all gone very well. They’ve got a bridge well ahead of when they would have had they delivered it themselves.” Prior to the A25 project’s completion, the only other toll road in MIP’s first fund was a 22.5 stake in the Chicago Skyway, a high-profile privatisation that made Macquarie synonymous with purchasing existing bridges and toll roads as opposed to building new ones.

The A25 bridge’s opening also comes as officials in New York are considering PPPs for several bridge projects near the metropolitan New York area. The Port Authority of New York and New Jersey has launched a PPP for the replacement of a bridge connecting New Jersey and Staten Island. Further north, the New York State Department of Transportation is studying a PPP for the replacement of the Tappan Zee Bridge over the Hudson River, which could cost as much as $16 billion.

Massive bridge replacement projects historically have taken a long time to deliver in the US because of lack of funding as well as planning, environmental and political obstacles. Leslie said PPPs can help the public sector overcome some of these obstacles. “If you have the political will to do this, it can actually go quite smoothly,” he said. “Dare I say there is nothing to be afraid of.”

Karl Kuchel, a senior vice president at Macquarie who manages the firm’s North American road assets, said the firm was able to deliver the C$600 million (€772 million; $614 million) project on budget and ahead of schedule thanks to an “active approach to construction management”, such as tackling contaminated soil and other issues as they came up. He also praised Macquarie’s partner on the project, engineering firm Kiewit, for their work on building the 1.2 kilometre bridge and six kilometers of related road. 

Quebec’s Ministry of Transport awarded the MIP- Kiewit team a 35-year concession on the project in September 2007. MIP ended up contributing C$250 million of equity toward the project from its first fund, MIP I, which closed on $4 billion in March 2007. The fund had a 25 percent allocation to greenfield, or new construction, projects such as the A25.“Over 25 percent of MIP I’s money comes from labour union funds, most of which are construction trades,” Leslie said. “These investors, in part, acquired an interest in greenfield construction and potentially marrying their trade with their retirement.”

The Quebec province contributed C$80 million toward the bridge’s A$600 million cost. A syndicate of 12 banks provided the remaining C$260 million in debt financing, according to Kuchel.

Kuchel said “it’s possible” that MIP may someday refinance the debt in the Canadian bond market, which has been steadily warming up to the idea of PPP-backed bonds. Last year, the Canadian market saw issuance of at least C$1.5 billion of PPP bond debt, easily eclipsing prior years’ totals.