Savarino Companies

Paving The Way to the Future

Buffalo News

1/15/2010

Five years ago, Samuel Savarino knew very little about Ghana, except its location on a map.

Now, the Buffalo contractor and developer is getting ready to build a four-lane divided toll highway that will connect the West African nation's two largest cities and help modernize its infrastructure.

And it's all new to him.

"I've never built a road, and I've never built a road in Africa," admits the 51-year-old Buffalonian. "It's a pretty audacious play."

Savarino Companies is playing the lead role in a private international consortium called Arterial Toll Roads Company Ltd.

Arterial was formed to construct a 147-mile modern highway between Accra, the capital of Ghana, and Kumasi, a major commercial center in the central part of the country. The $300 million project will cut a six-hour trip to two hours, saving travelers time and money.

The project involves financing from banks and investors in Europe, South Africa and Australia, and managers and labor from Africa. Construction is expected to take four years, beginning in a few weeks.

The Ghanaian project is a significant departure for Savarino, who formed his construction company in January 2001 after a predecessor was acquired.

His 35-employee company has worked on residential and commercial projects throughout Western New York, including Artspace in Buffalo, Center Court apartments in Niagara Falls, the AAA building in Amherst, D'Youville College's new academic center, Academy Place in Gowanda, a pair of charter schools, the UB Archives, and the Emergency Center and Heart Center of Niagara at Niagara Falls Memorial Medical Center.

He also has developed some senior housing and luxury apartment complexes outside the area, in the Carolinas. But most of his focus has been local or in Southern Ontario. And he's quick to stress that the Africa project won't affect his Western New York clients or company.

"We have assembled what we think is a qualified and experienced group of professionals," said Savarino, co-chairman of Arterial. "We shall not be diverting or depleting Western New York resources for this."

Sandwiched between the nations of Ivory Coast and Togo along the Atlantic Ocean, the republic of Ghana is a former British Colony that gained independence in 1957 - the first sub-saharan African nation to do so. It is a little smaller than Michigan, and has a population of 23.8 million - with 3 million in Accra and 2.6 million in Kumasi.

The country is stable, but its underdeveloped transportation system is a hindrance to development. Most roads are still not paved, and many are in bad need of repair.

"It's very difficult, if not impossible to go between major African capitals or cities by road," Savarino said. "The roads aren't constructed the way they are here, and it's just not safe."

A Strategic Piece

Ghana is following the lead of countries like Nigeria that have already used private consortiums, partnerships and concessions to build highways and airports.

Such a model attracts international capital investments to the countries without the governments incurring debt. So it's being promoted by infrastructure lenders, foreign countries and international entities like the World Bank and International Monetary Fund.

"They want to get this done, because a lot of other African countries are doing this," Savarino said. "The government sees this, rightly, as a very important strategic piece to help them build a sustainable economy."

Savarino and Howard Hurst, co-chairman and CEO of Arterial and a former Savarino executive, became involved soon after the government issued an "expression of interest" seeking proposals to convert specific existing roads or traffic corridors into divided toll highways on a "build-operate-transfer" model.

A little over five years ago, Hurst received a phone call from a Ghanaian highway contractor in Canada with whom he had worked on an office building and transit station project in Toronto. The contractor, who then worked for a highway design firm called Kamco, had been involved in the design of the Highway 407 express toll route north of Toronto, which had caught the eye of the Ghanaian government.

Kamco wanted to bid on the Ghana highway, but lacked the scale or expertise in finance. So they asked Hurst for help, and Hurst turned to Savarino, "more or less on a whim," Savarino said. Convinced the opportunity was real, Hurst and Savarino formed a predecessor to Arterial, with themselves in the lead and Kamco included.

To their surprise, their bid was accepted for consideration. At the government's invitation, Hurst and Savarino found legal representation, boarded a plane to Accra, spent a week negotiating and signed a memorandum of understanding in 2005.

That initial agreement called for the consortium to ultimately do all of the proposed roadways, starting with the primary one from Accra to Kumasi. But it took four more years to iron out the details. The group had to submit a preliminary engineering and feasibility study, a financial model, a draft concession agreement, and a preliminary design, as well as traffic and environmental studies.

Fits and Starts

Besides the road itself, the project includes nine interchanges, seven major bypasses, eight railway bridges, 24 road bridges and tunnels, and 19 river bridges, as well as toll plazas, footbridges, and rest areas.

"We had to show we could cobble together financing," Savarino said. "It all ended up moving along, though in fits and starts."

After presenting at a conference in London, Arterial assembled financing from South Africa's Standard Bank Plc, Australia's Macquarie Group Ltd., the Industrial Development Corp. of South Africa, and Dutch Development Bank FMO. And it just hired Group Five of South Africa to oversee construction and toll operations.

Perhaps most significantly, it had to overcome an election and transition last year to a new government, which could have derailed the entire effort. Instead, the new administration picked up from where the old left off, reaffirming the earlier agreement.

After a five-year odyssey of sorts, the consortium just received the final "concession" from the government Dec. 16, granting it the exclusive authority for the project.

"For us, it's pretty rewarding," said Savarino, in a telephone interview from Hong Kong. "It's just very gratifying to be a part of it."

The contract is scheduled to receive approval by the Ghanaian Parliament later this month.

"We're pretty well in shape for when the final concession comes through Parliament to get the ball rolling and get this project done," said Hurst, a Canadian developer who is the former Director of Finance and International Development at Savarino.

More Roads Ahead

Arterial's role won't end there. Under a public-private partnership popular for infrastructure in Africa, it will own, operate and manage the highway for 30 years, until the road reverts to the government.

In the interim, Arterial will collect tolls, plus construction, management and maintenance fees from Ghana, covering its costs and ensuring a profit.

And if the venture proves successful, Arterial has also won the rights to build and control several other express highways in Ghana, linking other major cities and towns in an effort the government believes is essential to economic growth.

"We've spent a significant amount of money to get where we have. We've been at it for five years," Savarino said. "This is the first phase. The hope is it works well so that we can go on and do other phases."

Ultimately, the roads as envisioned would extend to Ghana's borders as part of what supporters hope will be a trans-Africa highway system akin to the U.S. interstates.

"The Arterial Roads project is absolutely critical to this government," said Robert Joseph Mettle-Nunoo, Ghana's deputy minister of roads and highways.



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