ACCC clears Transurban bid for WestConnex project

ACCC clearance puts Transurban in the box seat to win a stake in Sydney’s $16bn WestConnex project, analysts say.

 

Toll road giant Transurban is the frontrunner to take control of Sydney’s $16 billion WestConnex motorway project after receiving clearance for its bid from the competition regulator.

Despite Transurban’s (TCL) dominance in the major toll road growth markets of Sydney and Melbourne, a deal to share its traffic data with its rivals satisfied the Australian Competition & Consumer Commission others could successfully compete for new toll road concessions.

That now makes Transurban and its consortium partners — AustralianSuper, the Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority sovereign wealth fund — the favourites against a rival bid led by infrastructure heavyweight IFM Investors with Canadian pension fund OMERS and Dutch fund APG.

“The ACCC’s decision increases the probability of Transurban being successful in its WestConnex bid,” Morgans analyst Nathan Lead said.

Transurban’s undertaking to publish 15 minute interval toll data for each quarter for all toll roads where it holds a stake in Sydney “made a big difference to our assessment of this matter,” according to ACCC chairman Rod Sims.

The competition tsar was concerned Transurban would gain an unfair competitive advantage by not sharing the data on future toll roads bids like Sydney’s mooted Western Harbour tunnel if its WestConnex bid proves successful.

Transurban currently runs seven of the state’s nine toll road concessions and 15 of 19 toll road concessions in Australia.

Transurban shares were trading 1.8 per cent higher at $12.12 at 2.50pm (AEST).

For the NSW government, which hopes to bank $5bn from the sale of a 51 per cent stake in the project, WestConnex represents a critical plank in its $40bn privatisation scheme ahead of a state election in March 2019.

Treasurer Dominic Perrottet said today it is continuing to finalise a decision on a preferred bidder and will make an announcement “in due course”.

Sources close to the process expect a decision as soon as tomorrow given the already drawn-out nature of the transaction.

If successful, Transurban is expected to raise up to $3bn in equity to fund its share of the deal, Citi analysts said earlier this week.

With Transurban’s share of the transaction likely to cost up to $4.4bn, it’s thought the Melbourne-based company will pursue a rights issue close to $3bn compared with the market’s original expectations of a rough 50:50 split between equity and debt.

The controversial WestConnex motorway, which links western Sydney with the inner city, has been plagued by cost overruns and community opposition.

ACCC chairman Rod Sims complicated the WestConnex bidding process on July 19 when he asked for a further seven weeks until September 6 to make a ruling on the bid. That was then brought forward to today’s deadline to reflect the NSW government’s need to name an overall winner by this weekend under the terms of the competitive offers.

Government sources have previously predicted a return of more than $5bn from the 51 per cent stake in the project’s holding company Sydney Motorway Corporation.

The ACCC chairman also called for state governments to reject unsolicited proposals from companies to ensure there is a competitive process where motorists are not paying over the odds to use roads.

“The ACCC considers that state governments should only award new toll road concessions through a competitive bid process, and not following an unsolicited proposal, unless there is a truly compelling reason,” said Mr Sims. “Accepting unsolicited proposals for new toll road concessions generally leads to higher costs to taxpayers, drivers, or both.”

Transurban made successful unsolicited bids for the $3bn NorthConnex project in Sydney and Melbourne’s $6.7bn West Gate Tunnel.