Skanska USA Inc., and Macquarie Infrastructure Partners II have sold their 50% equity stakes in Elizabeth River Crossings, operator of two toll tunnels in the Hampton Roads area of Virginia. Under terms of the nearly $2.4-billion deal with Spanish toll-road manager Abertis and Manulife Investment Management, Skanska and Macquarie will each receive $625 million. The new owners will also assume approximately $1.13 billion in debt.
Skanska's announcement did not explain the deal's rationale or timing. According to a company source, a sale of Skanska and Macquarie stakes in Elizabeth River Crossings was always a possibility.
The Sweden-based contractor announced in 2018 it would exit the US privatized infrastructure development market, after accumulating $100 million losses on major contracts.
Elizabeth River Crossings was formed in 2012, when Skanska and Macquarie partnered with the Commonwealth of Virginia for a $2.16-billion public-private partnership that rehabilitated and expanded existing Norfolk-area tunnel and surface transportation infrastructure, including a 3,800-ft-long parallel tube to the Midtown Tunnel.
In return, the consortium received an operations and maintenance concession that expires in 2070. A joint venture of Skanska, Kiewit Construction and Weeks Marine, Inc., completed the work in September 2017, a year ahead of schedule.
The contractor did not announce changes in its other U.S. P3 ventures. Skanska is a 50% partner in the development group behind the $2.3-billion I-4 Ultimate project in Orlando, which has experienced a string of financing and construction issues—as well as five fatalities—that have delayed the project’s original early-2021 total project completion date by up to a year, the Florida Dept. of Transportation said earlier this year.
The contractor also holds a 32% equity stake in LaGuardia Gateway Partners (LGP), which built and currently operates the 850,000-sq ft Terminal B at New York City’s LaGuardia Airport.
In an October report, financial ratings firm Fitch Ratings removed the airport from its "rating watch negative" list but said its outlook remained "negative" on close to $2.5 billion in bonds. Fitch said the rating reflects the P3's "demonstrated ability over the preceding six months to maintain both a stable liquidity profile and a sustainable level of operating cash flows even while terminal volume activities remain significantly below normalized performance."
It added that "these circumstances, as well as the limited interruptions to the construction stages, reduce the initial heightened level of uncertainties that surrounded the project at the start of the coronavirus pandemic.
LGP's liquidity position continues to remain sound despite the challenges underway."
But Fitch also said the negative outlook "reflects continued risks to operations and financial performance, as the effects of the pandemic to aviation remains ongoing and are unlikely to soon abate."
It said a future rating change will depend on the airport's ability "to recover facility costs and retain liquidity preservation ... while facility utilization remains depressed. While managing construction execution and cost risks remain present, key completion related milestones continue to be met, noted by the recent openings of the terminal headhouse and concourse areas. The pandemic continues to reduce monthly passenger levels by more than 80%; however."
According to its third-quarter 2020 earnings report, issued Nov. 5, Skanska’s $5.35 billion in US construction revenue marked a 9% decrease from the same period in 2019. The company attributed the drop to COVID-19 disruptions among clients, as well as its own “strategic actions to focus the operations and be more selective in bidding to improve profitability.”
The purchase of Elizabeth River Tunnels marks the US market debut for Abertis, a subsidiary of Italian infrastructure holding company Atlantia SpA, formerly Autostrade. Pending regulatory approvals, the deal calls for Abertis to control between 51% and 68% of Elizabeth River Tunnels, providing what CEO José Aljaro called “a solid platform in the U.S., a country that offers a strong commitment to public-private partnerships and to the concession framework.”
Earlier this year, Abertis purchased control of Mexican toll road concessionaire RCO, which manages five toll highways totaling more than 554 miles, including the primary connection between the El Bajio industrial corridor and the country’s two largest cities, Mexico City and Guadalajara.