Tolling Agreement Financing

Tolling Agreement Financing: Everything You Need to Know

Tolling agreement financing is a growing trend in the world of project finance and is becoming increasingly popular due to its unique characteristics. It is a contract between the toller (the party who operates the infrastructure) and the toll road developer, which allows the developer to finance the construction of the toll road by selling capacity on the road to users.

In this article, we’ll take a closer look at tolling agreement financing and everything you need to know about it.

What is Tolling Agreement Financing?

Tolling agreement financing is a contract in which a private party (the developer) constructs or upgrades a road or highway and then enters into a long-term agreement with the government to operate and maintain the road. The toller (developer) finances the construction or upgrade of the road through the sale of future toll revenues, which are typically guaranteed by the government.

Under a tolling agreement, the developer is responsible for the operation and maintenance of the toll road, while the government retains ownership of the infrastructure. The government also guarantees to pay the developer for the use of the road by motorists.

Why is Tolling Agreement Financing Popular?

Tolling agreement financing is becoming increasingly popular because of its unique advantages over traditional financing arrangements. These advantages include:

1. Reduced financial risk – By selling future toll revenues, tolling agreement financing reduces the financial risk for the developer.

2. Guaranteed revenue stream – The government guarantees to pay the developer for the use of the road by motorists, providing a predictable revenue stream.

3. Lower construction costs – Since the developer is responsible for the construction and maintenance of the road, it can reduce construction costs by implementing cost-saving measures.

4. Revenue sharing – Tolling agreements often include revenue-sharing provisions, which provide additional revenue streams for the developer.

5. Greater flexibility – Tolling agreements provide greater flexibility for the developer to design, build, and operate the toll road.

Examples of Tolling Agreement Financing

Tolling agreement financing has been used successfully in many projects around the world. For example, the North Tarrant Express project in Texas is a toll road developed by a private consortium, which financed the project through tolling agreement financing. The project involved the redevelopment of two major highways in the Dallas-Fort Worth area, and the consortium was responsible for the construction, operation, and maintenance of the roads.

Another example is the LBJ Express project in Texas, which involved the construction of a 13.3-mile toll road in the Dallas-Fort Worth area. The project was financed through a public-private partnership and tolling agreement financing, and the private developer was responsible for the construction, operation, and maintenance of the road.

Conclusion

Tolling agreement financing is a growing trend in the world of project finance, and for good reason. It offers unique advantages over traditional financing arrangements, including reduced financial risk, a guaranteed revenue stream, lower construction costs, revenue sharing, and greater flexibility. As more and more projects are completed using tolling agreement financing, it will continue to be an attractive option for developers looking to finance infrastructure projects.