TransJamaican Highway Limited, TJH, will pay US$16.1 million for the acquisition of all the shares in Jamaican Infrastructure Operator, JIO, a French-owned company that manages and operates the East-West toll network on TJH’s behalf, under contract, and collects tolls at all four toll plazas.
TJH said that acquiring JIO, to which it pays fees, would slash costs by over 50 per cent in the first year.
“The reduction in costs to TJH as a result of the transaction will be ongoing, going forward,” said TransJamaican Managing Director Ivan Anderson, in relation to the expected savings and timeline for payback of the investment.
In June, when the negotiations were first reported, Anderson said half of TJH’s operating costs related to the fees paid to JIO and that 35 per cent of everything TJH earned ended up in JIO’s pockets.
TJH revenue amounted to US$47 million over nine months to September, but its operating expenses totalling US$29 million — around half of which would have been paid out to JIO — whittled down profit to US$4.1 million.
Shares in JIO are held by Bouygues Travaux, 49 per cent, and Vinci Concessions, 51 per cent. Bouygues and partners were initially the owners of TransJamaican Highway, through which they held a 35-year concession to build and operate East-West Highway 2000, up to 2019 when they sold the operation to the Jamaican government.
“In consideration for the call options to acquire their respective shares in JIO, the company will pay Bouygues and Vinci Concessions an option price equal to an aggregate of US$16.1 million, with funds currently in deposit in the distribution account,” TransJamaican Highway said in a market filing.
The deal will initially see Vinci sell its stake to TJH, and eventually Bouygues will sell after sign-off by state-operated National Road Operating and Constructing Company Limited, through which the highway concession was granted in 2001.
“The purchase of the Bouygues shares requires the approval of NROCC/Government of Jamaica, as per the concession agreement. The purchase of the Vinci shares does not require this approval. We have requested the approval of NROCC/GOJ and are awaiting their response,” Anderson told the Financial Gleaner.
“Once we obtain this approval we will acquire the Bouygues shares,” he said.
The TJH current ‘operation and maintenance agreement’ allows JIO to earn a monthly fixed operational fee and a monthly variable fee corresponding to 3.0 per cent of the theoretical toll revenues.
TJH plans to amend the operator fee structure so that a portion of the fixed-fee component is cut by 72 per cent, and the variable fee is increased from three per cent to five per cent.
“The operator fee is the single largest component of the operating cash costs and expenses of the concession (which are calculated as operating expenses plus administrative expenses, excluding amortisation of intangible),” TJH said.