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Operating
environment
Annual report 2007
  Group Five Annual report home  > Operating environment >
Operating environment
Key points
South Africa
Africa
Middle East
Eastern Europe
 
OPERATING ENVIRONMENT (Continued)
 
INTERTOLL IN EUROPE
Over the last few years, Group Five has concentrated Intertoll’s activities in the South African and Eastern European markets. Intertoll has developed a leading position in its core East European market of Hungary and has leveraged this market position to recent success on the A1 contract in Poland and in achieving strong positioning on a number of new contracts in the region, including new contracts in Hungary. The business also selectively considers opportunities elsewhere in Europe and are often invited onto contracts alongside key development partners. However, the group only considers participation in these contracts if stringent hurdle rates and strategic criteria are met.
 
OVERVIEW OF EXISTING OPERATIONS
Intertoll Europe is participating in three motorway concession contracts in Eastern Europe:
 
M5 Motorway Concession in Hungary – 164 kilometres of motorway
M6 Motorway Concession in Hungary – 60 kilometres of new motorway
A1 Toll Motorway Concession in Poland – 90 kilometres of new motorway
 
Intertoll Europe is an investor in the M5 and A1 contracts and is responsible for the operation and maintenance of all three. In addition, Intertoll Europe is responsible for the collection of tolls and Intertoll Europe is an investor in the M5 and A1 contracts and is responsible for the operation and maintenance of all three. In addition, Intertoll Europe is responsible for the collection of tolls and procurement, installation and commissioning of the toll and motorway equipment for the A1 and M5 contracts.
 
All the contracts are long term contracts. Intertoll Europe's participation in these contracts extends between 20 and 30 years.
 
Intertoll Europe remains active in developing opportunities that arise from the existing concession contracts, including extensions to the operation and maintenance of new linked sections of motorway and the operation of contracts such as additional weigh bridge facilities to monitor overloaded heavy vehicles. Such work is typically revenue and margin enhancing for the business.
 
The contracts that Intertoll Europe has recently pre-qualified for include:
The M6 Phase 3 in Hungary presently out to tender. Intertoll Europe has a stake in the development consortium and will be the lead partner in the operation and maintenance joint venture. The other companies in this consortium include Strabag (Austria), Bouygues Traveaux Publics (France), Colas (France), and John Laing Infrastructure (UK)
Intertoll Europe, in partnership with Bechtel (USA) and Enka (Turkey), for the high profile Western high speed diameter toll motorway contract in St Petersburg, Russia, for which the consortium officially pre-qualified on 26 March 2007
 
PROSPECTS

New contract activity in Eastern Europe has improved over the last year, which has allowed Intertoll Europe
to pursue new work with greater intensity than has been the case in recent years. The business has pursued new concession development contracts in the countries where existing operations exist, namely Hungary and Poland, as well as investigating prospects for work in neighbouring countries north of the Baltic States, east of Romania/Bulgaria, Russia (St Petersburg) and south of the Balkans

 
Road user charging (RUC) contracts
There is a definite trend in Europe (and elsewhere internationally) toward tolling vehicles for the use of motorways. These are no longer restricted to tolling individual routes, but charging for road usage across
networks. As an experienced toll road developer, operator and investor, Intertoll is well placed to actively develop partnerships with companies that are considered future role players on these RUC schemes. Parallel to securing new “traditional” concession contract prospects in targeted European markets, a strategy to secure Intertoll Europe as an operator on RUC contracts in Europe is being developed and executed.

In defining Intertoll’s strategy for RUC contracts, the following key factors and outputs have been taken
into consideration:
 
Competing technologies (eg microwave versus satellite positioning) and the varying client objectives, drivers and political environments make it unlikely that any specific technology will be adopted across Europe in the short or medium term
Intertoll is currently building relationships with leading exponents of the alternative technologies
A greater understanding of the different models that are likely to be adopted by various countries for the purposes of executing these contracts has been acquired. As a result, the role that Intertoll Europe can fulfil on these contracts has been clearly defined
 
Contracts using the RUC model that are expected to be launched in the near future include the Hungarian electronic tolling of heavy vehicles, the Polish heavy vehicle toll system and the Slovakian electronic tolling
contract. Intertoll Europe is positioning itself to play a meaningful role in all three contracts.

Intertoll’s involvement and the contribution from new RUC business activity is expected to become significant in the medium to long term.
 
SOME INTERTOLL CONTRACTS, EUROPE
Existing contracts
M5 motorway in Hungary – awarded in 1998
M6 Phase 1 motorway in Hungary – awarded in 2004
A1 toll motorway in Poland – awarded in 2006
   
Short term prospects (pre-qualified)
M6 Phase 3 motorway in Hungary
Western high speed diameter toll motorway contract in St Petersburg, Russia 
   
Medium/long term prospects
Electronic tolling of heavy vehicles in Hungary
Slovakian electronic toll collection contract
Polish electronic toll collection contract 
 
 
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