Part One of a four-part series analyzing Cintra’s and NCDOT’s public claims using their own numbers.
A funny thing happens when a company applies for a public loan: they have to make their loan application public. That’s how we discovered Cintra’s toll estimates and traffic projections. You may recall earlier we published a consultant’s estimate. The numbers we present below are Cintra’s own estimates, as well as refinements by the lenders themselves.
C&M performed the traffic and revenue analysis under contract to Cintra. The data below comes from their April 2014 report. Lender financial data comes from the official issuing document for the private activity bonds (PABs) dated May 13, 2015.
Cintra Estimates $17 RT When Toll Lanes Open; $44 by 2035
Toll rates by segment are given in the table below. The report has four time segments- AM, Mid-day (MD), PM, and Nighttime (NT). For simplicity we are reporting only the commuter toll rates, i.e. southbound toll rates in the morning and northbound toll rates in the afternoon.
The study assumes the project will open in 2018, so these are the initial rates once dynamic tolling starts. Note that the total round trip (i.e. from Mooresville to Charlotte) is projected to cost over $15. These are in 2012 dollars; in current year dollars (assuming 2% inflation), the cost would be $17.05. This is very close to the $20 cost that we reported earlier, and as been widely reported.
The Mooresville segments are the most expensive, but not a whole lot of people from there are paying attention, so we’ll focus the following analysis on the rest of LKN.
The table below shows the 2035 projected toll rates.
A round trip in 2035 is expected to cost $28.24 in 2012 dollars. Assuming 2% inflation, round trip tolls in 2035 are projected to cost $44.53, again quite close to what we’ve seen projected elsewhere.
Lender Is More Skeptical
The bond underwriters contracted the consulting firm of Ove Arup & Partners, based out of New York City, to review Cintra’s revenue projections. Arup concluded several of Cintra’s assumptions were overly optimistic. They developed two financial scenarios, called the “Lender’s Base Case” (LBC) and “Lender’s Downside Case” (LDC).
The Lender’s Base Case estimates revenues are 30-40% lower than Cintra’s, and the Lender’s Downside Case is 30- 40% lower than the Base Case. This has enormous implications for the Fair Market Value calculation of the cancellation penalty.
You may recall in an earlier post we mentioned the $300 million penalty that was supposedly “audited” by North Carolina used Cintra‘s revenue estimates. It was really Cintra’s dream scenario. An honest attempt at deriving a number would have used the LBC estimates.
We’ll discuss the implications to the penalty amount, as well as what the financing looks like in Part 2.