Lendlease will consider bidding on the AUD 16.5bn (USD 12.9bn) North-East Link motorway PPP among other upcoming transport projects, but cautioned it will need to be careful not to overstretch.
At its half-year 2017-18 earnings briefing on Tuesday, chief executive Stephen McCann said work had been secured on about AUD 3bn of transport projects in the six months to 31 December. The company has been shortlisted on several other projects in Australia, including construction work on the WestConnex motorway in Sydney, the Sydney Metro City and Southwest and the Cross River Rail tunnels and stations PPP.
“In addition we are advising on the Melbourne Airport development program. Quite clearly we won’t win all those projects and we don’t want to win all of those projects,” he said. “So we will be selective on what we bid for.”
The company’s engineering division had to strip back margins on some “underperforming” projects, leading the construction business to a AUD 26.1m EBITDA loss in the six months to 31 December compared to a AUD 170.2m EBITDA increase in the first half of 2016-17.
McCann said the problems were “isolated” and “project specific”, but flagged competitive pressures in bids as a contributing factor. “[The] projects were bid and won in a competitive environment,” he said. “[There is] improved performance in the new work we have won more recently.”
Chief financial officer, Tarun Gupta, said they will “assess” North-East Link, but the exact size and structure of that has yet to be finalised. “We do have a lot of work on in Melbourne, so we will be very selective on what we bid on and depending on how that is structured, that will inform how we go on that.”
North-East Link chief executive, Duncan Elliot, has said a key factor in how it structures the PPPis the capacity of the market to take it on given its size and the amount of new transport projects happening in Australia at the moment.
5G plans for US telco fund
Gupta said it was receiving a high level of interest in its new Lendlease Tower telecommunications infrastructure fund in the US from asset owners and investors.
In October 2017, Lendlease announced the joint venture with Japan’s SoftBank, with plans to invest up to USD 5bn in the sector there, mostly using capital from private investors.
The pair have initially tipped in USD 200m each and expanded an existing investment in 423 mobile and wireless towers to 8,000, mostly from US telco Sprint.
Gupta said they are looking at investing in the 5G mobile tower roll out in the US and were talking to existing investors in its funds before trying any new ones.
“The pipeline in the US is significant, Gupta said. “The carriers are looking to expand their portfolio, [including in] 5G. We are getting a lot of inquiry from different carriers to roll out those tower programs because we can provide an integrated program.”
“We are also taking inquiries from our global capital partners. We have got about 150 capital partners and we will show our opportunities to existing partners first.”
Investors in Lendlease funds a mix of pension funds, private equity and sovereign wealth funds.