Aus & NZ: Transurban confident it will pass WestConnex competition test

07 August 2018 - 12:00 am UTC

Transurban chief executive, Scott Charlton, said he is confident Australia’s competition regulator, the ACCC, will approve its bid for 51% of WestConnex.

“We have been engaging with the [Australian Competition and Consumer Commission] extensively and we are confident that we will attain all the necessary approvals and the state will be able to make its decision accordingly,” Charlton told analysts at its 2018 annual results briefing on Tuesday (7 August).

A few days before final bids were due on 23 July, the ACCC extended its deadline to 6 September to make a decision on a Transurban-led bid for the controlling stake in Sydney Motorway Corporation, which is delivering the AUD 16.89bn (USD 12.48bn) WestConnex.

Numerous industry insiders have speculated that if the government waits for the ACCC to make its decision, it is likely favouring Transurban’s bid. The NSW Minister for Transport, Andrew Constance, last week criticised the ACCC’s delay in local media and called on it to speed up its decision.

Charlton added that the company is doing “everything in our power to accelerate the process and we know the regulator is working hard to come to a conclusion and the state is working as hard as possible to come to a decision”. 

He also stressed if it did win the bid, Transurban’s dividend distribution guidance would remain unchanged at AUD 59 cents per share.

At the same time, Charlton said the company has a “significant pipeline of opportunities” outside of WestConnex should it lose the bid.

Transurban also disclosed that it is finalising a purchase of an 8.24% stake in the M5 motorway in Sydney from an undisclosed seller, which will increase its stake in the road to 58.24% from 50%. Charlton said there are no pre-emption rights on the M5 and bids were called for in the past few months.

AMP Capital Infrastructure Equity Fund has a stake of that size in the motorway via the Interlink Roads consortium, however, it was not confirmed that it is the seller. Apart from AMP Capital, the other shareholders of Interlink Roads are: Utilities Trust of Australia (19.2%); IFM Investors (15.4%); REST Super (4.4%); and SunSuper (2.8%) according to Inframation Deals.

Meanwhile, Transurban named a range of “missing links” it would look to tender for.

In North America, it is eyeing upcoming express lane concessions on the I-495 and I-270 in Maryland on the east side of Washington DC.

“Maryland has a USD 9bn program around their existing assets,” Charlton said. “Expressions of interest are going to market starting a program there. That is something we are working on and watching as it is right across the river from [our I-95, 395 and 495 assets].”

The firm has shortlisted three teams for the design-build contract for the Fredricksburg Extension project. They are; Archer Western, Branch-Flatiron JV, Shirley Contracting company.  A contractor is expected to be selected in November 2018.  The financing of the project was unclear at press time.  Transurban’s last extension project in the US, the I-395 was financed using equity and private activity bonds.  Financial close was reached in July 2017.  

In Australia, it is interested in four road and tunnel projects that are planned to link to WestConnex (the Western Harbor Tunnel, Beaches Link, Sydney Gateway to Sydney Airport and F6 extension and the M12 motorway in Sydney); the North East Link PPP and Outer Melbourne Ring Road in Melbourne; and the Parkridge Connector and Commera Connector in Brisbane.

Statutory net profit after tax jumped by 124% YoY to AUD 468m in the fiscal year to end June. The biggest one-off contribution to this jump was AUD 105m in income tax benefits from previously unbooked tax losses.

Its “proportional” earnings before interest, tax, depreciation and amortisation – which excludes one-off items – rose 9.9% YoY to AUD 1.79bn.

Revenue rose 20.7% YoY to AUD 3.3bn. This includes increases across its existing assets as well as a small amount of toll revenue from its acquisition of the A25 in Montreal, which reached financial close on 6 June.

Transurban raised AUD 2.2bn in debt from capital markets in 2017-18. The company said it had about AUD 600m in debt maturing in the financial year ending June 2019.