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03ROME5036 2003-11-06 08:24:00 UNCLASSIFIED Embassy Rome
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					  UNCLAS  ROME 005036 


E.O. 12958: N/A

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



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



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."



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.



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.



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



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.



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.

2003ROME05036 - Classification: UNCLASSIFIED