| AggBeat |
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December 2006
by , Senior Editor |
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The inland waterway system through the heart of the United States — the Upper Mississippi-Illinois Waterway System — is responsible for transporting nearly 116 million tons of commodities valued at more than $23 billion each year, but the 1,118 miles that these goods travel is in disrepair. The Mississippi River is the only river designated by Congress as both a “nationally significant transportation system and a nationally significant ecosystem,” according to a white paper written for the Transportation for Illinois Coalition (TFIC) titled, “Our Waterway Super Highway — The Upper Mississippi-Illinois Waterway,” written by Dick Adjoran, former director at the Office of Public Affairs for the Illinois Department of Transportation, the report was publicly released in mid-September. Despite its significance, the physical condition of this navigable waterway received a D-minus from the American Society of Civil Engineers because of its deteriorating condition. “Nearly 50 percent of the 257 locks operated by the U.S. Army Corps of Engineers are functionally obsolete. By 2020, that number will rise to 80 percent,” ASCE said in its “2005 Report Card for America’s Aging Infrastructure” report. Despite the importance of this waterway, the funding needed to keep it running smoothly through modernization and maintenance is not available. The funding is provided through a two-step process. Congress must pass a Water Resources Development Act (WRDA), an authorization bill. The act, which had been passed about every two years from 1986 through 2000, is the “substantive” legislation that authorizes funding for operations and maintenance. An annual appropriations bill then follows the act. However, nearly six years have passed since the last WRDA was enacted. The TFIC called on Congress on Sept. 15 to come to an agreement on a new WRDA, which is critical to providing funding to modernize the locks on the Upper Mississippi and to make improvements on the Illinois River. In August, the U.S. Senate passed SB 728, its version of the WRDA. The House passed HR 2864, its own version of the legislation, earlier on — which required a conference committee to convene to work out the differences. Currently, there is a $500 million operations and maintenance backlog on the Upper Mississippi River basin. And though FY2006 Energy and Water spending bill provides nearly $5.4 billion in appropriations from the Inland Waterways Trust Fund and the General Fund for the U.S. Army Corps of Engineers (USACE) civil works, only $32.5 million was granted for fiscal year 2005, and the amount was reduced to $22.2 million for fiscal year 2006 — not enough to make the necessary updates and repairs. Aggregates operations throughout Illinois use barges to transport crushed stone, sand, and gravel, according to the white paper, making it even more critical to ensure waterways are not in disrepair. This is also particularly important because waterborne traffic has become increasingly more attractive with increased fuel costs. Total tonnage the aggregates industry shipped by barge in 2001 (the latest stats available in the report), was 10.8 million. “To maintain navigation on these inland rivers, substantial investment is needed,” according to the TFIC report. “Many of the locks and structures are between 60 and 70 years of age, and funding is not keeping pace with rehabilitation needs.” USACE estimates that the proposed navigation improvements needed to restore and maintain the Upper Mississippi-Illinois Waterway System to be nearly $2.6 billion, and the ecosystem restoration plan that would go hand in hand with it (and be composed of nearly 1,010 projects) is estimated to cost about $5.72 billion. More Than One-fourth of U.S. Urban Roads in Poor Condition Continued increase in urban traffic is putting significant wear and tear on the nation’s urban roads, leaving more than 25 percent of the nation’s urban roads in “substandard” condition — and the situation is only getting worse, according to a report released on Oct. 2 from The Road Information Program (TRIP). In “Rough Ride In The City: Metro Areas With the Roughest Rides and Strategies to Make Our Roads Smoother,” TRIP examines the conditions of major roads in metropolitan centers, including recent trends in urban travel and the latest developments in repairing and building roads to last longer. “The condition of the nation’s most critical metropolitan area roads and highways is getting worse, increasing the cost motorists are paying to maintain their vehicles as a result of driving on roads and highways with pavements in poor condition,” the study notes. The study identified the following 10 urban regions that have the “roughest ride” because of major roads and highways with pavement in substandard conditions: Kansas City, 71 percent; San Jose, 67 percent; St. Louis, 66 percent; Los Angeles, 64 percent; San Francisco-Oakland, 60 percent; San Diego, 58 percent; New Orleans, 55 percent; Boston, 49 percent; Sacramento, 49 percent; and Oklahoma City, 47 percent. Watch for a more detailed report on this situation in an upcoming issue of Aggregates Manager. WOA Offers Expanded Educational Opportunities The World of Asphalt (WOA) 2007 Show and Conference will offer more educational programming than in the past, with four days of education sessions and access to participate in a continuing-education tour of the research and testing facilities of the National Center for Asphalt Technology (NCAT). The trade show, scheduled to be held March 19-22, 2007, at the Georgia International Convention Center in Atlanta, will feature exhibits of the asphalt-related equipment, technologies, products, and services. Show attendees will be able to participate in two industry conferences: the Asphalt Pavement Alliance (APA) Asphalt Pavement Conference and the People, Plants and Paving Training Program, the latter of which will have two new education tracks available. WOA 2006 also will host two certification courses. For more information, go to www.worldofasphalt.com call 800-867-6060 (toll free) or 414-298-4150, or send a fax to 414-272-2672. Mergers & Acquisitions Industry M&A activity was moderate during October. Following Lafarge’s September purchase of Sun State Rock & Materials Corp. in Arizona, the company acquired four aggregate businesses in the greater Chicago area and North Central Illinois on Oct. 20. Lafarge acquired Western Sand and Gravel, Inc., Aux Sable Stone, LLC, Utica Stone, Inc., and Conco Western Stone, Inc. The acquired businesses include five aggregates facilities — including two sand and gravel operations — and a dock on the Illinois River. The acquisitions will be consolidated into Lafarge’s existing Chicago-area operations and further expand its market share in the region. Transaction terms and conditions were not disclosed. On Oct. 20, 2006, U.S. Concrete, Inc. announced the acquisition of certain aggregates assets from Pinnacle Materials, Inc. of New Jersey. The assets include a granite quarry (10 million tons of reserve and an estimated 20-year life) and a sand pit (5 million tons of reserves and a 10-year life). The total purchase price approximated $12.5 million. No other transaction terms and conditions were disclosed. With the acquisition of these assets, U.S. Concrete has further vertically integrated like many other ready-mixed concrete companies, and now has total aggregates reserves that approximate 48 million tons in one of its core markets. As this article was finalized, Cemex, S.A.B. de C. V. announced its intent to acquire all of the outstanding shares of Rinker Group Ltd. The initial offered price was for $13 per share, (equivalent to A$17.00 per share) in cash, an approximate 26-percent premium during the three-month average share price. With Rinker’s outstanding net debt, the enterprise valuation for the entire business approximates $12.8 billion, or approximately 9.2x EBITDA (trailing 12 months through June 30, 2006). The Rinker board of directors has not accepted the valuation as fair. During the next weeks (while Aggregates Manager is at press) and months, the offer more than likely will go through various permutations. In addition, Rinker may adopt certain strategies to remain independent or to find a partner (e.g., a merger with another large construction materials firm). Overall, the announcement signals additional mega-mergers within the construction materials industry, and further global consolidation. — by Bill
Watkins, director of Brown Gibbons Lang & Co. Watkins is a
contributing editor |
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Reprinted from Aggregates Manager Magazine |
