This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS  ROME 005036 
 
SIPDIS 
 
 
E.O. 12958: N/A 
TAGS: ECIN ECON ELTN IT EUN
SUBJECT: AUTOSTRADE SPA: LOOKING TO EXTEND SUCCESS ABROAD 
 
 
¶1. SUMMARY: Driven by a market imperative for private capital 
to finance massive infrastructure projects, Italy's 
successful Autostrade SpA has emerged as a world leader in 
devising innovative electronic toll collection systems that 
will soon be exported abroad.  Autostrade SpA, the 
controlling interest in the larger Gruppo Autostrade, is one 
of Italy's brightest corporate success stories, setting an 
international trend for the private management of 
traditionally public works projects.  To date, its foreign 
activities include projects in the U.S. and U.K., with a 
third significant project coming on-line in Austria in 
January 2004.  Autostrade's success has placed it at the 
forefront of the EU "Transport Corridor" initiative, which 
seeks to bind existing EU member states to the ten 2004 
accession states as well as to neighbors as far east as 
Ukraine.  END SUMMARY. 
 
AUTOSTRADE BACKGROUND 
--------------------- 
 
¶2. Econoff met on October 30 with Dr. Ruggero Borgia, 
Autostrade's director of infrastructure and sector 
development, and Ing. Riccardo Starace, head of international 
development.  Borgia gave a brief background of the company, 
which was founded in the 1950s as a state-run operation. 
Gradual privatization followed, and Autostrade ultimately 
became fully private in the mid-1990s.  Autostrade SpA is the 
controlling interest in the "Gruppo Autostrade", a consortium 
of Italian and foreign companies whose services range from 
highway service and maintenance to toll collection and 
roadside assistance.  Autostrade's annual report lists a 2002 
net income of Euro 504 million for the Autostrade Group, an 
increase from Euro 389 million in 2001 and 339 million in 
¶2000.  It boasts a workforce of over 9000 employees, while 
maintaining a labor cost of only 19.4 percent of overall 
operating costs, down steadily from 26.6 percent in 1997. 
 
¶3. The meeting at Autostrade SpA provided a look inside one 
of Italy's best-known corporate success stories.  The 
Autostrade Group provides services and maintenance for 3408 
km of highways inside Italy as well as for several highway 
and electronic toll-collection projects in the U.S., U.K. and 
Austria.  The company has seen a steady rise in profits and 
performance in the last few years, and has gained a 
reputation as one of Italy's best performing corporate 
entities.  According to its executives, Autostrade is also 
listed by the Dow Jones Index of Sustainability as one of 
only three companies in Italy that has managed to balance a 
protifable business strategy with a record of environmental 
protection.  Autostrade now looks to build on these 
successful initial projects abroad by positioning itself for 
more foreign and EU contracts, beyond the proposed EU 
transport "Corridor 5" linking Lisbon to Kiev via northern 
Italy. 
 
 
PROJECT FINANCE DEMANDS TOLL REVENUE 
------------------------------------ 
 
¶4. According to Borgia and Starace, more efficient, fair and 
creative methods of highway revenue collection are the 
cornerstone upon which financing for large-scale 
infrastructure development depends, whether in the EU or the 
Middle East and beyond.  The massive investment required for 
ten proposed EU "transport corridors" linking the current EU 
to the accession countries to the east and beyond has pushed 
corporations such as Autostrade to devise more efficient and 
creative ways of toll collection.  Although sources for the 
several billion Euro required to build Corridor 5 have yet to 
be determined, Autostrade has taken the lead in creating a 
kilometric model for successful revenue collection, in 
anticipation of projects beyond Corridor 5.  Borgia and 
Starace said that a system that charges by the distance 
traveled without forcing motorists to stop or even be 
channeled through gates "maximizes revenue" and is 
additionally "the most fair." 
 
U.S. AND U.K. PROJECTS 
-------------------- 
 
¶5. Autostrade's initial foray into international investment 
took place in Northern Virginia.  In 1995, Autostrade 
completed work on the Dulles Greenway (VA 267), linking 
Northern Virginia to Dulles Airport.  According to its 
website, VA 267 was the first private toll road built in 
Virginia since 1816.  Autostrade retains responsibility for 
operation and maintenance of the road, which competes with 
 
Leesburg Pike (route 7) for traffic to and from Dulles 
airport.  Some 65,000 vehicles per day use the road for an 
average $2 fee (depending on time of day, size of vehicle, 
e.g.), collected via an electronic "Smart Tag" system that 
leaves no traffic lights or bottlenecks on any part of the 
road.  (Note: Some Northern Virginia-based readers may have 
already observed that even technological innovation has its 
limits during rush hour.  End note.)  Revenue is shared with 
the State of Virginia in a private-public partnership. 
Autostrade's operational concession for the Dulles project 
runs through the year 2035. 
 
¶6. In the U.K., Autostrade is in the final weeks of 
completing a new beltway around Birmingham, using similar 
electronic toll collection and revenue sharing with the 
public sector.  Borgia and Starace said that environmental 
concerns initially delayed the project, but that the same 
"green work" record that caused Autostrade to be listed by 
the Dow Jones Sustainability Index also inspired greater 
confidence among Birmingham locals. 
 
POSSIBLE INTEREST IN TEXAS 
-------------------------- 
 
¶7. On September 30, Autostrade sent two representatives, 
Director of Major Projects Gennarino Tozzi and Director of 
Territorial Development Franco Rapino to a seminar hosted by 
the Embassy for representatives of the Texas Department of 
Transportation.  The Texas DoT representatives were on a 
European tour promoting the $150 billion Trans-Texas Corridor 
Program, which provides for the construction of some 4000 
miles of 1200 foot-wide corridors to accommodate high-speed 
passenger and freight railways, toll roads, special truck 
lanes and gas and water pipelines.  The corridors would run 
parallel to existing major interstate highways between 
Dallas, Houston, San Antonio and Corpus Christi. 
 
THE "AUSTRIAN MODEL" 
------------------- 
 
¶8. In January 2004, Autostrade's pet project in Austria will 
come on line.  Through control of revenue collection on 
Austria's entire network of highways, the innovative system 
of toll collection for heavy vehicles will be the first of 
its kind in the world, according to Borgia and Starace.  In 
it, some 800 gates are built over the entire highway network, 
each equipped with electronic "Europpass" readers as well as 
an antenna.  Vehicles, which do not even have to slow down 
and indeed may not even be aware they have just been charged, 
pass through gates that read point of entry and point of exit 
from the highway.  In addition, the antenna picks up a second 
piece of information, the shape and size of the vehicle. 
This last piece of information, explained the executives, 
prevents transferral of an electronic payment box from one 
vehicle to another - which was, according to them, the final 
obstacle to establishing an effective and fair system.  The 
two pieces of information are sent to a central 
communications center for reconciliation of the exact payment 
amount. 
 
THE ITALIAN EXAMPLE 
------------------- 
 
¶9. Back in Italy, the still-growing Telepass system run by 
Autostrade is used by up to 60 percent of motorists in the 
vicinity of major cities such as Milan, according to Borgia. 
The two pieces of information are sent instantly via 
fiber-optic transmission to Autostrade's communications 
center in Florence, and the information is "blinded", so that 
it cannot be corrupted for use to track movements of people 
and goods.  This communications center also serves a 
"clearinghouse" function - a motorist travelling from Turin 
to Venice drives on highways administered by five different 
companies.  Autostrade's computers instantly divide the toll 
proportionately between them, while the motorist is only 
charged one lump sum. 
 
COMMENT: 
------- 
 
¶10. Electronic toll collecting is nothing new, and neither is 
the growing phenomenon of the privatization of public works 
projects.  What makes Autostrade unique is the extent to 
which it has managed to streamline efficiency and revenue 
collection, creating a successful alchemy for the 
capitalization of more ambitious infrastructure development 
projects on the horizon.  Autostrade's "Austrian Model" bears 
 
further scrutiny not only because it represents a 
technological leap forward, but because Autostrade's 
executives believe that their continued success - and that of 
ambitious projects such as the EU Corridors Project - rests 
upon this capital engine.  Although Autostrade has no 
involvement in Iraq reconstruction, Borgia and Starace are 
receptive to the idea of participation.  They feel strongly 
that their Austrian model could ultimately provide the means 
to finance international infrastructure projects in Iraq and 
elsewhere.  END COMMENT. 
SEMBLER 
 
 
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 2003ROME05036 - Classification: UNCLASSIFIED