Transurban is buying 51% of the WestConnex toll road for $9.26 billion

Hugh Peterswald/Getty Images

Sydney Transport Partners, a consortium led by Transurban has won the bid for a 51% stake in Sydney Motorway Corporation (SMC), the company overseeing the construction of the $16.8 billion toll road WestConnex.

NSW Treasurer Dominic Perrottet said the proceeds will help fund the final stage of WestConnex – the the M4-M5 Link – and future infrastructure. The figure, for a 42-year concession, is nearly double the figure many experts predicted. It beat a rival bid from IFM, an Australian investment management company.

“The transaction not only funds the completion of the congestion-busting WestConnex, but will allow the Government to inject billions more towards infrastructure projects like new schools and hospitals,” Perrottet said.

“This project means people will be able to travel from the west and south west of Sydney with ease, spend less time in traffic, and get home to their families faster.”

The announcement comes just 24 hours after the Australian Consumer and Competition Commission (ACCC) gave the SMC bid for the 33km toll road network the green light amid monopoly concerns. Transurban currently has stakes in seven out of nine toll roads in Sydney, and 15 of the 19 toll roads in Australia.

The ACCC approved the SMC bid provided Transurban publishes traffic data to assist rival bidders on future toll road concessions, but remains concerns about the unsolicited proposals for future toll road – a process Transurban used to create the NorthConnex toll road linking the M1 and M2.

Sydney Transport Partners is a consortium between Transurban (50%), Australian Super (20.5%), the Canada Pension Plan Investment Board (20.5%) and the Abu Dhabi Investment Authority’s Tawreed Investments (9%). The deal still requires Foreign Investment Review Board approval by the Commonwealth Treasurer, expected next month.

Transurban will raise $4.2 billion through a fully underwritten, 10-for-57 accelerated pro rata renounceable entitlement offer with retail entitlements trading (Entitlement Offer), with an $600 million coming from its consortium members.

The pricing of $10.80 per security is 10.4% discount on Transurban’s August 30 closing price of $12.06. Consortium member placements are at $10.85 per security.

The company said any proceeds raised from the Entitlement Offer and Placement above those required for WestConnex will be used for general corporate purposes.

Transurban’s projected equity contribution of remaining projected capex spend to completion is approximately $350 million.

The $9.3bn acquisition price includes the existing M5 West motorway, which transfers to WestConnex ownership in December 2026 once existing concession expires.

Transurban chief executive Scott Charlton said WestConnex is strategically significant for Sydney Transport Partners.

“The placement of $600 million to our partners AustralianSuper and Tawreed demonstrates their support for Transurban and the WestConnex acquisition,” he said.

WestConnex Minister Stuart Ayres said WestConnex will give the city “a truly integrated motorway network”.

“We’re months from opening brand new 6.5 kilometre tunnels between Homebush and Haberfield and more than 75% through tunnelling on the New M5,” he said.

The Government will retain a 49% residual stake in SMC, with distributions directed into the NSW Generations Fund.

Transurban already has 100% ownership of the Lane Cove and Cross City tunnels, as well as the Hills M2 motorway, plus 50% stakes in M7 and M5, along with a 75% stake in the Eastern Distributor in Sydney. It also has toll roads in Brisbane, Melbourne and internationally.

The final links in the 33km WestConnex toll road network are due to be completed in 2023.

It will use distance-based tolling to a maximum of $8.95, starting with a flagfall of $1.27, then 47 cents per km.

Those prices are 2018 figures and will be indexed by a minimum of 4% or CPI, whichever is greater. That means the cost of the toll road will currently rise at nearly double the rate of inflation, which currently sits at 2.1%.

From 2040, that increase converts to CPI (or O%, whichever is greater) to the end of Transurban’s concession in 2060.

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