Transurban gets ACCC’s green light to bid for WestConnex

Transurban is set to tighten its control on toll roads after getting clearance to bid for the $16bn WestConnex motorway project.

Transurban and its partners are favourites in the bid battle for Sydney’s WestConnex. Picture: Gordon McComiskie

Transurban is set to tighten its control of Australia’s toll roads after receiving clearance from the competition regulator to buy a majority stake in Sydney’s $16 billion WestConnex motorway project.

The NSW government, which hopes to bank $5bn from selling 51 per cent of the toll road which is under construction, may pick the winner as early as today as it seeks to lock in a critical plank of its $40bn privatisation scheme ahead of a state election in March 2019.

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

Despite that dominance, a deal to share traffic data with its rivals satisfied the Australian Competition & Consumer Commission that others could successfully compete for new toll road concessions, with chairman Rod Sims saying the company’s scale in itself was not a competition problem. “If you create an advantage for yourself, that’s not anti-competitive,” said Mr Sims.

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 is likely to be the favourite with IFM an outside chance, according to CLSA.

“We believe Transurban is in a strong position, but don’t discount IFM,” CLSA analyst Anthony Moulder said. “Providing traffic data on its roads does provide a benefit for other bidders, but we still expect Transurban to be a very strong competitor for new growth projects.”

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 Mr 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 has previously argued it has no pricing power as this is controlled by the state government, while the road should not be thought of as a monopoly because there are alternative routes available for road users.

Transurban shares rose 1.3 per cent to $12.06 yesterday on the ASX.

NSW Treasurer Dominic Perrottet said yesterday the government had yet 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 today given the already drawn-out nature of the transaction.

WestConnex is seen as a critical project to drive the next phase of Transurban’s growth as new competitors like IFM look to muscle in on the Sydney-based company’s toll road revenues.

While the company maintains it has plenty of other opportunities in Australia and North America, its chief executive Scott Charlton conceded its growth would slow from double-digit pace to high single or mid-single digits.

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

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 50-50 split between equity and debt.

The ACCC chairman has also called for state governments to reject unsolicited proposals to ensure there is a competitive process.

“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.”