Tweet
NROCC turns to China for highway financing - Road company losses top $9 billion
published: Wednesday | April 23, 2008
Traffic streams off Highway 2000 onto Marcus Garvey Drive in Kingston. - File
Jamaica's highway com-pany has accumulated losses of $9.3 billion in its six years of operation, but NROCC's position is expected to get a lot worse by the end of the current fiscal year when it is projected to be $17.4 billion in the red.
Last night, Ivan Anderson, the chief executive of NROCC - National Road Operating and Constructing Company - said talks to cobble a new deal with Trans-Jamaican Highway (TJH) were under way.
"We are negotiating with TJH to change the concession agreement and increase the share of revenues paid to us," he told Wednesday Business.
NROCC is the vehicle that was established by the former adminis-tration to promote Highway 2000, the tolled motor way along Jamaica's south shore, but with planned spurs to the north coast.
Anderson, looking to the brighter side of the company's bleaky financial picture, said the Highway 2000 project, when completed "could generate more than 119,000 jobs and add as much as $34.5 billion to national GDP."
Charges
Already heavily weighed down by charges on its $30.3 billion-debt, NROCC's liabilities are unlikely to ease in the year ahead, given indications of new borrowings out of Asia to finance two toll projects scheduled to get off the ground in a matter of months.
Negotiations are being finalised with the China Development Bank (CDB) for a loan of US$6.8 million (J$4.83 billion). Half of those funds is earmarked for the Mount Rosser bypass - a 25-kilometre stretch from Linstead, St. Catherine to Faith's Pen in St Ann - avoiding a current route of narrow and winding mountain roads.
Another US$6.8 million will be spent on the Sandy Bay to Williamsfield segment of the highway to round out phase one of the Highway 2000 project. Negotiations with CDB are being handled by the Development Bank of Jamaica, said Anderson.
These latest projects, like the earlier segments of the highway, are being undertaken by French construction company Bouygues Travaux, owners of TransJamaican Highway.
The road was developed on 35-year build-own-operate-transfer (BOOT) concession, which required the developers to raise most of the financing. However, NROCC has raised cash both in the domestic market and internationally for on-lending to the developers - a debt that is to be serviced out of cash flow from toll earnings. NROCC is yet to collect a dime.
"Currently, it is envisaged that NROCC will begin to receive payments after the completion of the construction of the Sandy Bay-Williamsfield leg," said Anderson. But, this, he added, was subject to other loan conditions being met.
REVENUES
"Negotiations are now at an advanced stage, which should see NROCC improving its share of revenues from the toll road over the life of the concession," he told Wednesday Business.
"Once cash is available, under the existing scenario, NROCC receives 50 per cent of the cash available until all of its loans to developer TransJamaican are repaid. The other 50 per cent goes to developer as dividends on its equity investment."
With no fees rolling in, NROCC has virtually no other earnings, outside of the interest income on loan proceeds held as cash. Consequently, the company had only a $1.3 billion revenue cushion against the $6 billion of operational expenses incurred in its last financial year ending March 2008, preliminary figures show.
The result: $4.7 billion of net losses in that year alone, just about triple the $1.9 billion that NROCC haemorrhaged in 2006/07. It also makes government support inevitable.
"On the lower trafficked legs, example Mt. Rosser, we estimate that approximately 60 per cent of the costs can be covered from toll revenues, while 40 per cent would have to be supported initially by the GOJ and recovered after repayment of commercial loans," said Anderson.
COSTS COVERED
"It is in this context that NROCC financials are to be viewed. To date, all of NROCC costs have been covered through loans including all subsidy payments made as a result of toll rates being lower than those requested by the developer on the Portmore leg since 2006. Annual subsidies according to NROCC has ranged between $240 million and $352 million, NROCC's financials show.
The road company, this year, is projecting income of $1.2 billion and new losses of $8 billion, while its debts are expected to grow to $41 billion.
Finance Ministry figures indicate that, outside of debt servicing costs of $1.77 billion on debt raised to assist with financing of the island's highway infrastructure, the company's major burdens are inflation risk and foreign exchange risk.
Only $2.3 billion of the $6 billion spend was on operations.
Foreign exchange losses were counted at $2.85 billion. Anderson said the majority of NROCC's loans are held in euros and US dollars, and that loans to the developer are issued in the latter currency which should mitigate conversion losses.
business@gleanerjm.com
published: Wednesday | April 23, 2008
Traffic streams off Highway 2000 onto Marcus Garvey Drive in Kingston. - File
Jamaica's highway com-pany has accumulated losses of $9.3 billion in its six years of operation, but NROCC's position is expected to get a lot worse by the end of the current fiscal year when it is projected to be $17.4 billion in the red.
Last night, Ivan Anderson, the chief executive of NROCC - National Road Operating and Constructing Company - said talks to cobble a new deal with Trans-Jamaican Highway (TJH) were under way.
"We are negotiating with TJH to change the concession agreement and increase the share of revenues paid to us," he told Wednesday Business.
NROCC is the vehicle that was established by the former adminis-tration to promote Highway 2000, the tolled motor way along Jamaica's south shore, but with planned spurs to the north coast.
Anderson, looking to the brighter side of the company's bleaky financial picture, said the Highway 2000 project, when completed "could generate more than 119,000 jobs and add as much as $34.5 billion to national GDP."
Charges
Already heavily weighed down by charges on its $30.3 billion-debt, NROCC's liabilities are unlikely to ease in the year ahead, given indications of new borrowings out of Asia to finance two toll projects scheduled to get off the ground in a matter of months.
Negotiations are being finalised with the China Development Bank (CDB) for a loan of US$6.8 million (J$4.83 billion). Half of those funds is earmarked for the Mount Rosser bypass - a 25-kilometre stretch from Linstead, St. Catherine to Faith's Pen in St Ann - avoiding a current route of narrow and winding mountain roads.
Another US$6.8 million will be spent on the Sandy Bay to Williamsfield segment of the highway to round out phase one of the Highway 2000 project. Negotiations with CDB are being handled by the Development Bank of Jamaica, said Anderson.
These latest projects, like the earlier segments of the highway, are being undertaken by French construction company Bouygues Travaux, owners of TransJamaican Highway.
The road was developed on 35-year build-own-operate-transfer (BOOT) concession, which required the developers to raise most of the financing. However, NROCC has raised cash both in the domestic market and internationally for on-lending to the developers - a debt that is to be serviced out of cash flow from toll earnings. NROCC is yet to collect a dime.
"Currently, it is envisaged that NROCC will begin to receive payments after the completion of the construction of the Sandy Bay-Williamsfield leg," said Anderson. But, this, he added, was subject to other loan conditions being met.
REVENUES
"Negotiations are now at an advanced stage, which should see NROCC improving its share of revenues from the toll road over the life of the concession," he told Wednesday Business.
"Once cash is available, under the existing scenario, NROCC receives 50 per cent of the cash available until all of its loans to developer TransJamaican are repaid. The other 50 per cent goes to developer as dividends on its equity investment."
With no fees rolling in, NROCC has virtually no other earnings, outside of the interest income on loan proceeds held as cash. Consequently, the company had only a $1.3 billion revenue cushion against the $6 billion of operational expenses incurred in its last financial year ending March 2008, preliminary figures show.
The result: $4.7 billion of net losses in that year alone, just about triple the $1.9 billion that NROCC haemorrhaged in 2006/07. It also makes government support inevitable.
"On the lower trafficked legs, example Mt. Rosser, we estimate that approximately 60 per cent of the costs can be covered from toll revenues, while 40 per cent would have to be supported initially by the GOJ and recovered after repayment of commercial loans," said Anderson.
COSTS COVERED
"It is in this context that NROCC financials are to be viewed. To date, all of NROCC costs have been covered through loans including all subsidy payments made as a result of toll rates being lower than those requested by the developer on the Portmore leg since 2006. Annual subsidies according to NROCC has ranged between $240 million and $352 million, NROCC's financials show.
The road company, this year, is projecting income of $1.2 billion and new losses of $8 billion, while its debts are expected to grow to $41 billion.
Finance Ministry figures indicate that, outside of debt servicing costs of $1.77 billion on debt raised to assist with financing of the island's highway infrastructure, the company's major burdens are inflation risk and foreign exchange risk.
Only $2.3 billion of the $6 billion spend was on operations.
Foreign exchange losses were counted at $2.85 billion. Anderson said the majority of NROCC's loans are held in euros and US dollars, and that loans to the developer are issued in the latter currency which should mitigate conversion losses.
business@gleanerjm.com