Macquarie and the Port Authority of New York and New Jersey are in talks to review certain terms of the agreement for the public-private partnership that built the Goethals Bridge, said a source familiar with the matter.
The discussions come weeks after Macquarie paused an effort to find a buyer for its 90% equity stake in the concessionaire, NYNJ Link Developer, citing unspecified “market conditions.”
The Australian infrastructure investor teamed up with developer Kiewit to win a USD 1.5bn contract in 2013 to build a new bridge that links Staten Island, New York and New Jersey. The P3 agreement, the first for the PANYNJ, was structured as a USD 1bn loan payable over 35 years in monthly principal and interest payments that increase annually, a 2022 PANYNJ budget document shows.
P3 industry sources said one risk hanging over a potential sale is that the PANYNJ has a right to terminate the concession at its full discretion and at any time.
While termination of convenience provisions are commonly found in P3 agreements, it is incredibly rare for a government to exercise the option, according to industry sources. The contractual tool is typically used when a private partner fails to live up to certain standards and performance metrics that serve as benchmarks when building an asset and then maintaining it.
At termination, the government is typically required to repay the entire capital structure of the project, including equity, debt and future interest payments owed to lenders, making termination a costly proposition. PANYNJ would likely have to raise over USD 1bn to terminate the Goethals P3, said the source familiar.
Still, Macquarie stands to earn far more selling the asset to a private bidder than receiving its original equity check back from the government, one of the industry sources said.
Any move by the PANYNJ to terminate the Goethals P3 would negatively impact the authority’s reputation with developers and send ripples across the industry, the P3 industry sources said.
Termination would undermine the value a P3 delivers over a standard government contract, said the second industry source. The third industry source added that the PANYNJ was only able to build the Goethals bridge at the pace it did by using a P3.
Rick Cotton, executive director of the PANYNY, said in a statement when the bridge opened to traffic: “It was built on time and on budget, and employed a number of very innovative techniques, both in construction, as well as financing and project management.”
The project went on to win awards for its design and construction.
Macquarie said in a statement to Infralogic: “We are very proud of our involvement with the Goethals Bridge public-private partnership since its inception in 2013, including the successful construction of the new Goethals bridge. Since the new bridge opened to traffic, we have established a world-class track record for operations and maintenance and have met or exceeded all our contractual KPIs, including no lost time due to safety incidents during this period. We are always in discussions with our project partners on various matters as a regular course of business.”
PANYNJ declined to comment. Kiewit did not respond to multiple messages seeking comment.
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