Aus & NZ: Plenary and Cintra break new ground in roads PPP

17 December 2017 - 12:00 am UTC

Update: Banks involved and some further details on the transaction have been added since this article was first published.

The AUD 1.8bn (USD 1.38bn) Western Roads Upgrade (WRU) in Melbourne reached financial close on 19 December with the first bond financing of a greenfield PPP in Australia since the financial crisis.

The availability payment project is financed through a 60:40, US private placement and bank solution, a source familiar said.

The private placement is understood to be around AUD 400m (USD 305.9m) with a fixed interest rate and a maturity of 24 years. The bonds priced on 12 December and closed on 19 December. 

The bondholders are understood to be TIAA, Manulife, Hastings, Dongbu Insurance, and IFM Investors. The club bank financing was around AUD 300m with four banks: Westpac, Bank of China, ICBC and Mizuho. The maturity of the bank debt is four years, which is linked to the construction periods in the WRU.

The WRU project is the first of its kind in Australia involving a PPP over suburban roads and marks the first use of bond finance in a greenfield Australian PPP deal since the financial crisis struck a decade ago.

Plenary head of origination, Paul Crowe, said there was more than AUD 2bn of investor interest in the bond financing.

“The long-term PPP bond market has been dormant in Australia for the past decade, resulting in shorter debt terms. This result will reduce the refinancing risk on the project and is a boon for the PPP project bond market in Australia,” he said in a statement.

In an emailed statement, Victorian Treasurer Tim Pallas said: “This is a tremendous vote of confidence in the Victorian economy and demonstrates an innovative way to obtain longer and more secure financing for projects that maximise value for Victorian taxpayers”.

In October 2016 the Victoria Comprehensive Cancer Centre was refinanced using a USD 346m private placement. According to Inframation Deals, Hastings, IFM, Manulife and TIAA were also bondholders.  

Plenary Group (Asia-Pacific) and Cintra have made a 50:50 equity investment.

Although it was a greenfield financing, the WRU is largely a brownfield project as it involves upgrades and maintenance of suburban arterial roads over a 20-year period, although some advisers point out it is a relatively risky brownfield project because bidders can’t be sure what they will find under aging road networks.

It includes eight road upgrades, road widenings, intersection upgrades, almost 30km of duplicated road and more than 260km of road rehabilitation and maintenance across Melbourne’s west.

The Netflow consortium also includes WBHO Infrastructure as design and construction lead, ACE Contractors Group, Civilex, Fortunato Group, Negri Contractors and Winslow Group; and FerrovialServices companies as services contractor.