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Group offers $12.8B to lease Pa. Turnpike

75-year deal 'largest toll-road deal ever in history'

HARRISBURG - A Spanish company and a unit of Citigroup Inc. have teamed up to submit the largest bid for the right to lease the Pennsylvania Turnpike for the next 75 years.

Barcelona-based Abertis Infraestructuras, Abertis investor Criteria CaixaCorp of Spain and Citi Infrastructure Investors offered $12.8 billion, beating out their nearest competitor by $700 million, Gov. Rendell said yesterday.

Rendell said he strongly favored the leasing proposal.

"To me, it seems like a slam dunk," he said.

But the Legislature must approve any deal, and one leader in the Democratic-controlled House said he was not impressed with the bid.

"To be quite candid, the number is less than overwhelming," said Majority Whip Keith McCall, D-Carbon. "It's certainly not dead on arrival, but it's something we do need to discuss with the entire caucus."

The Democratic governor has pursued the plan to have a private entity operate and maintain 500 miles of the turnpike system to raise billions for Pennsylvania's transportation needs.

He predicted that the Abertis-Citi deal would generate an average of $1.1 billion a year in the first 10 years for roads, bridges and mass transit. The upfront lease payment would be invested by the state pension system.

Tolls could increase by 25 percent in January, and in future years by either 2.5 percent or the Consumer Price Index, whichever is greater.

If the deal goes through, Pennsylvania would almost certainly abandon a plan to introduce tolls to Interstate 80, tolls that are expected to generate, very roughly, $500 million a year. Tolling I-80 was a primary component of a law passed last summer that is expected to produce about $940 million annually - in the first decade - for transportation needs.

Repealing those tolls has become a priority for many people and businesses along the highway, as well as the lawmakers who represent them.

Abertis directly manages more than 2,000 miles of toll roads in other countries; it also manages a toll bridge in Puerto Rico and airport facilities in California, Florida and Georgia.

McCall said that the turnpike's considerable debt would cut into the lease's practical value and voiced concern that the turnpike lease, unlike the I-80 tolls, did not provide a dedicated funding source for the state's cash-starved mass-transit systems.

"It's a very, very big deal and it affects all 67 counties," McCall said.

Rendell spokesman Chuck Ardo said that McCall was "one step ahead of the process" and that decisions about how to allocate the lease proceeds will be made later.

"This is a governor who has steadfastly fought for funding for mass transit throughout his tenure in Harrisburg," Ardo said. "It's not likely that, at this point, he would forget about mass-transit needs."

The Abertis-Citi bid is good through June 20, but the bidders said they intended to be flexible since legislative action in the next month is not likely.

Citi Infrastructure Investors partner Michael B.G. Froman said he hoped that a deal could be completed by fall. Froman defended the bid price.

"This is the largest toll-road deal ever in history, and probably one of the largest infrastructure deals ever done," Froman said. "And the next-largest U.S. toll- road deal was less than one-third the size of this deal. So this is a very good and full value that was attributed to this asset as part of this transaction."

Rendell said that the two losing bidders were a team consisting of Goldman Sachs Group Inc. and Transurban Group of Australia, and another team formed by the Macquarie Infrastructure Group of Australia and Cintra of Spain. Goldman-Transurban's final bid was $12.1 billion; Macquarie-Cintra's was $8.1 billion.

The state has not yet received federal approval to put tolls on I-80, and Rendell said yesterday that he was continuing to pressure turnpike officials to speed up the process.

But Carl DeFebo, a spokesman for the Pennsylvania Turnpike Commission, said that it will likely take several weeks or months to get the additional information requested by federal regulators.

The turnpike's operating revenue in the fiscal year that ended last May was $608 million.

The Turnpike Commission predicts that the I-80 tolling law will generate nearly $84 billion over 50 years for the state Department of Transportation. *