Thoughts and Opinions On Today's Important Issues

Friday, August 04, 2006

Are Macquarie And Borealis Leaving Town

I went to a DRTP meeting the other night to see if they had anything new to say on their "Green Solution."

What interested me more however was one of the DRTP people who asked me why I wasn’t supporting a DRTP connection to the Ambassador Bridge to the border. He said that my BLOG gets so much publicity that I should be doing that. His comment reminded me of a similar remark made at the Teshuba conference a few weeks before. That must be the new DRTP mantra.

I thought the comment was an odd one to make. Actually, his comment heartened me. DRTP was finally coming to the realization that their Project did not work and could not. It was confirmation to me that the Bridge Co., no matter what certain bureaucrats may feel, has the only viable crossing alternative. If DRTP was now trying to partner with them, or at least was trying to make me think so, it seemed to me that the Bridge Co. had won.

I asked him why he needed my help. I thought that if they had approached the Bridge Co. and were turned down, nothing I said was going to change the Bridge Co’s mind. They had the technical skills I did not have to make judgments necessary as to whether the connection possibility made sense. If they had not approached the Bridge Co. by now, I wondered why not. What were they afraid of?

In any event, he did not answer my question and I left. It was quite a strange exchange that left me puzzled.

Then I read a news story that may have helped me out by explaining what was going on in the world of infrastructure investors. It was not pretty. It may mean more miseries for municipalities and their employees and taxpayers across Ontario if the situation applies equally to OMERS.

The following story was out of Australia. It set out the problems that infrastructure investments were having. I remembered that OMERS had written down hundreds of millions in investments a few years ago. Given the discussion I had, I wondered if this "Green Solution" push was to get rid of another asset that may have lost value, DRTP.

Since the story was about Macquarie Bank, it got me wondering whether they too were interested in selling out their interest in the Detroit Windsor Tunnel. It still has 14 years left to run. With all of the problems they might have with the Tunnel, it might be a good time to sell, especially if Windsor and Detroit may be trying to do a deal respecting the Tunnel. Why just the other day, we saw that Eddie and DCTC were fighting over the Tunnel, again. It seems that "the city of Windsor's tunnel commission has been opposed to adding more commercial vehicles at the tunnel and has remained at odds with DCTC over its truck plans. "

For DRTP and Macquarie---is it take the money and run from infrastructure investments in Windsor?

If they are going, then the question remains: why should taxpayers think that Eddie is smarter than they are as he does his Border Operator extravaganza using taxpayer money! If he is wrong in what he is doing, what are the consequences to the City?

One final thought; Mark Butler of Transport Canada made a very interesting remark in the Star the other day about the Tunnel. He said "The government's position is the tunnel must be safe, secure and promote cross-border mobility." In fact, the Federal Government intervened with Detroit officials when the Bridge Co. tried to do a deal re the Tunnel.

The question that needs asking is where is the Federal Government in all of this. Do they have any idea of what is going on? Do they know of the Windsor/Detroit dealings and have they decided that their "operational" desires are in the best interest of Canadians? If so, what were the criteria used? Are they intervening to ensure that we are protected? Have they demanded action on the Tunnel security issues?

The Feds wanted Bill C-3. What is their position when there may be issues at the Tunnel and DRTP Corridor! Or do they only act when it is the Bridge Co. that is involved.

Infrastructure funds off highs
Sydney Morning Herald, July 24, 2006

AS MACQUARIE Bank looks to split itself into a banking and infrastructure investment business operating under a holding company, investors in the listed infrastructure funds that have fired Macquarie's growth have faced a year of heavy capital losses.

Most of Macquarie's listed funds, along with those created by its major competitor in the sector, Babcock & Brown, have declined dramatically in the past 12 months despite making significant investments in new assets.

Babcock & Brown Infrastructure is trading down 6 per cent at $1.60 over 12 months and is well off highs of $1.90.

Macquarie Infrastructure Group, the biggest listed vehicle in the Macquarie stable with $7.7 billion in market capitalisation, is down 18 per cent for the year to $3.15 and Macquarie Communications Group, one of the stable's best performers over time, is down 10 per cent for the year to $6.07.

The declines have occurred despite many of the funds spending big on assets.

MIG and partners have invested over $20 billion in roadways on two continents, virtually pioneering private tollways in the US.

BBI has spent over $3 billion on acquisitions in ports, rail and energy infrastructure and been to the markets for a $700 million equity raising.

And the listed infrastructure trusts have performed far worse than the infrastructure index on the Australian Stock Exchange.

The index is up 19 per cent in the past 12 months.

Much of that gain is accounted for by the performance of mixed energy and infrastructure stocks like Australian Gas Light and Alinta which are about to join forces and split into separate energy and infrastructure entities.

But some pure infrastructure plays in that index have performed better, with Australian Pipeline Trust and the Hastings Utilities Fund both turning in positive performances for the year.

The listed offshoots of the investment banks appear to have performed so poorly because their growth prospects are seen as being linked closely to the interest rate cycle.

Burdened with heavy debt loads, there are market concerns a rise in interest rates will result in disappointing performances.

Shaw Stockbroking analyst John Colnan said this view was overstated as most of the funds had their debt locked in with hedging deals for up to five years, meaning it would take much more than a short term rate rise to dramatically affect them.

But interest rates are an important driver of their share prices as institutions trade them according to the direction of long-term bond rates.

If rates rise, the institutions will sell infrastructure trusts and buy bonds.