Transurban sells US stake to funds

Transurban has sold a 50pc stake in its US highways for $2.8bn to Australian and Canadian superannuation investors.

Transurban has sold a 50pc stake in its US highways for $2.8bn to Australian and Canadian superannuation investors. Picture: Stuart McEvoy/The Australian.

Transurban has sold a 50 per cent stake in its US highways for $2.8bn to Australian and Canadian superannuation investors, handing the toll road giant financial firepower to buy new assets including Sydney’s WestConnex.

AustralianSuper will take a 25 per cent stake with Canada’s CPPIB at 15 per cent and UniSuper to own 10 per cent.

All three already work with Transurban on Australian toll road projects.

The deal for the Chesapeake assets covers Transurban’s roads in the greater Washington area, including the 495, 95 and 395 express lanes.

The investors will also gain exposure to three projects in delivery and development: the Fredericksburg Extension, 495 Express Lanes Northern Extension and the Capital Beltway Accord.

The cash return will also set up Transurban to capitalise on a string of growth options, which include the second phase of WestConnex, Maryland in the US and unsolicited project opportunities being discussed with governments.

“Obviously the most high-profile one in Australia at the moment is WestConnex which the government is set to bring to the market. So that’s one place where we can use some of that,” Transurban chief executive Scott Charlton said in reference to the proceeds.

Morgans said the sale was at an attractive price, cutting debt and improving the balance sheet.

“This improves Transurban’s capacity to fund investment opportunities, the most obvious short-term one being the NSW government’s selldown of its remaining 49 per cent stake in WestConnex in two blocks,” Morgans analysts said. The NSW government in November threw a curve-ball into the $10bn sale of the remaining share in WestConnex by splitting the deal in two in an effort to spark more bidders.

The sale will be split into two tranches, selling equal 24.5 per cent stakes, as the NSW government seeks to “maximise competition”.

Transurban is the clear frontrunner, given the consortium it fronts has pre-emption rights after buying the original 51 per cent share in 2018.

The government sold the controlling 51 per cent stake in the 33km motorway to the Sydney Transport Partners consortium in 2018 for $9.26bn.

The STP consortium is owned by Transurban, AustralianSuper, the Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority sovereign wealth fund.

Transurban and its partners QIC and Canada’s CPPIB have also lobbed an unsolicited proposal to the NSW government to widen its busiest road, the Westlink M7 motorway, with an interchange connecting to the government-backed $1.8bn M12 road which leads to the planned Western Sydney Airport.

“There’s the M7/M12 proposal which is public which we are pursuing and there are several other things which aren’t public which we hope can create opportunities to support governments’ economic recovery through additional infrastructure, jobs and growth,” Mr Charlton said.

Transurban notes traffic on its Australian network has improved in October and November as lockdowns lifted.

“On CityLink in Melbourne, traffic has shown progressive improvement as government restrictions have been gradually eased over that period, and in Sydney the NorthConnex tunnels opened to traffic on 31 October 2020.”

Traffic on Transurban’s North American roads remains subdued, however, given the continued impact of COVID-19, particularly on the express lane toll roads.

The Sydney-based company has endured a volatile calendar year with lockdowns in Sydney, Melbourne and Brisbane slashing revenues from its toll road networks as traffic fell in April by up 50-65 per cent on some roads. However, the resumption of traffic across the nation’s major cities has seen a continued recovery in recent months.

Transurban shares rose 1.2 per cent to $14.27.