Transurban/Fluor close on Virginia road PPP

Virginia has reached financial close on a $935m PPP to add capacity to Interstate 95. The project is eyeing a $300m TIFIA loan later this year.

Virginia has locked up a second major road project in 2012, finalising a contract at last on a $935 million public-private partnership (PPP) to add high occupancy capacity to Interstate 95 (I-95).

The state said its department of transportation – VDOT – and a consortium of Transurban/Fluor reached financial close on a mega-project to construct a high occupancy toll (HOT) lane and a high occupancy vehicle (HOV) lane along a 29-mile stretch of I-95 in Northern Virginia, from Stafford to Fairfax.

According to adviser Orrick, Herrington & Sutcliffe, which counselled the wining consortium, the project will initially be financed via $241 million in senior private activity bonds, a $400 million equity cheque from the sponsors, and a $294 million contribution from VDOT. 

Later this year, the project is expected to receive a $300 million subordinated loan from the TIFIA programme, presumably allowing the sponsors to refinance the majority of their equity. TIFIA – which stands for Transportation Infrastructure Finance and Innovation Act – recently received $1.7 billion in funding from the federal government – the largest-ever federal loan effort for transportation infrastructure.

Virginia Governor Bob McDonnell hailed the I-95 project as “historic, for transportation and the economy”. Moreover, I-95 is the second transportation-related PPP in Virginia to achieve financial close this year.

In April, the $2.1 billion Downtown Tunnel/Midtown Tunnel/MLK Extension Project concluded when Macquarie Group and Skanska Infrastructure inked a 58-year deal to construct a two-lane, 10-mile tunnel, as well as renovate the existing Midtown Tunnel and lengthen the MLK Freeway.

In addition, the financial close of the I-95 HOT/HOV deal bolstered a VDOT estimate that Old Dominion would rack up $5 billion in PPP deal flow in 2012.

Aside from Interstate 95 and the Midtown Tunnel project, VDOT is anticipating that its long-awaited State Route 460 (SR 460) toll road concession – a reputed $2 billion availability payment deal – will conclude by year end. Also, the department is expecting to outsource traffic control.

In its contract with the 95 Express Lanes consortium, VDOT has settled a mandate dating back to a 2004 offer from the consortium entered under the 1995 Virginia Public Private Transportation Act.

Financial close with 95 Express Lanes was anticipated as far back as 2009, but criticism and a poor credit market helped stall the deal. A HOT lane is a tolled roadway with a variable fee based on traffic volume. Any high occupancy vehicle, like a bus or carpool, has free access to the toll.

The I-95 deal has a 76-year lease. Construction is expected to be finished in 2014.