Transurban M7 motorway widening proposal of ‘sufficient interest’ to progress

Transurban and partners QIC and Canada’s CPPIB have lobbed an unsolicited proposal to the NSW government to widen its busiest road.

An aerial view of the M4 Western Motorway and the Westlink M7 at Light Horse interchange on April 22, 2020 in Sydney, Australia. Picture: Getty Images

Toll road giant Transurban and partners QIC and Canada’s CPPIB have 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 new Western Sydney Airport.

The NSW government has already indicated the scheme is of “sufficient interest” to progress to stage two of the state’s unsolicited proposals process noting Transurban and its partners were well placed given they hold the long-term concession out to 2048.

Transurban and its partners were “uniquely placed to deliver the proposal and potentially deliver better transport and value for money outcomes than could otherwise be achieved.

The M12 operations, maintenance and incident response component of the proposal remains subject to development of a compelling and verifiable case that the proposal would provide better value for money than could be achieved by a government initiated procurement process.”

Transurban, which will present its annual results on Wednesday, revealed in May it was in talks with governments to accelerate stimulus projects such as road widenings as the lockdown eases to help boost the domestic economy.

“There‘s a series of projects that we’re trying to work with our government partners both on Transurban’s assets and off Transurban’s assets,” chief executive Scott Charlton told the Macquarie conference on May 5.

The process to receive planning and environmental approvals could be “shortened and then you could move into an accelerated procurement process which hopefully could be months as opposed to the beginning of major projects which is years before you get things deployed.”

The NSW government said a steering committee had been established including the Department of Premier and Cabinet as chair, the NSW Treasury and Transport for NSW and will make a recommendation on whether the project will proceed to stage three. Details of a probity adviser will be published once appointed.

Further works on the M7

The scheme would involve further works on the M7 to allow an interchange with the M12, which is toll free and being developed by Transport for NSW and the federal government to service the new airport.

“It is proposed to widen the M7 and construct the M7-M12 interchange at the same time with the benefit of reducing cost to government and disruption to M7 traffic and local communities,” the NSW government notice said.

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.

Traffic dropped by 70 per cent in the week starting April 5 across its three roads in Washington and Montreal following mandated lockdowns, in line with peer toll road operators in Europe which fell between 60 and 80 per cent due to lockdowns.

While Brisbane has largely recovered and Sydney‘s toll road use has reverted back to June levels with estimated declines of 13-20 per cent, Transurban faces a sizeable earnings hit from Victoria‘s Stage 4 COVID lockdown as traffic disappears on the CityLink road which connects the city and airport, according to Macquarie.

Transurban would suffer a $130m earnings impact in the 2021 financial year based on the traffic slowdown in a move that “materially hurts” the FY21 dividend by up to 11 per cent and 12 per cent lower in FY22, the broker said.