ACCC Red Lights Transurban WestConnex Bid
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The ACCC reckons Transurban, the toll road giant may have just about reached the limit of its ability to invest in the sector in Australia after raising doubts yesterday about its plans to take an interest in the huge WestConnex project in Sydney.
At the same time, if the doubts by the ACCC are sustained, the Commission may have just blown up the plans for the NSW government to get some of the billions dollars it is spending on the WestConnex project from Transurban and may have to look elsewhere and perhaps at a lower price.
The ACCC pointed out the extent of Transurban’s Sydney network at the moment in its statement yesterday. In that statement, the regulator said it had preliminary competition concerns about Transurban taking a stake in the Westconnex project.
The Commissions said that Transurban (or a Transurban-controlled entity) currently holds seven of the nine toll road concessions in NSW, including the M1, M2, M5 and M7 motorways.
(WestConnex is a partially completed motorway development in Sydney. It comprises 33kms of interconnected motorways and road upgrades, which will extend the M4 motorway from Parramatta to Sydney Airport and duplicate the M5 East corridor.)
“WestConnex is a very significant toll road asset, and as such represents an opportunity to establish a strong rival toll road operator,” ACCC Chairman Rod Sims said.
“We consider that Transurban already has significant incumbency advantages when competing for future toll road projects. It has access to highly detailed traffic data when bidding for new roads and is able to leverage its existing toll roads to offer unique unsolicited proposals to state governments,” Mr Sims said.
“Transurban has been awarded five toll road concessions or upgrades following unsolicited proposals to state governments, in exchange for increases or extensions of existing tolls. It is the only operator in the past 30 years who has been granted a toll road concession in Australia following an unsolicited proposal to a state government.”
“We are concerned that the proposed acquisition may cement Transurban’s advantages when competing for future toll roads,” Mr Sims said.
The ACCC said it is assessing Sydney Transport Partners’ proposal against the likely alternative scenario if it did not proceed.
“If WestConnex is acquired by an alternative bidder, there would be two major toll road operators in Sydney. Those two players would likely compete strongly for future toll road projects and vie for government approval for unsolicited road proposals.”
The NSW government is spending $20 billion or more on the WestConnex project and Transurban was seen as the easiest way to get much of that back in a sale or partial sale.
Transurban and its partners – AustralianSuper, Abu Dhabi Investment Authority and the Canada Pension Plan Investment Board – have been vying for the past year with two other consortiums for a majority stake WestConnex. The NSW government hopes to complete the sale by early August.
If the deal is blocked, the other groups have the font running unless Transurban makes significant changes in its bid structure.
If it is blocked from buying a stake then the ACCC will have set the limits for its future growth in Australia as WestConnex is the largest single road infrastructure deal of its type in the country. The ACCC’s doubts also means Transurban, which also dominates Melbourne’s toll roads, could find it harder to expand in that city.
In addition to these worries, the ACCC said it is also concerned about the effects of the proposed acquisition on competition between toll roads in Sydney.
“We are examining whether motorists in Sydney could switch between existing Transurban toll roads and WestConnex roads for certain trips,” Mr Sims said.
“If there is potential competition between WestConnex and Transurban’s existing toll roads, motorists might lose the benefits from that competition if the acquisition goes ahead.
"For example, an alternative owner of WestConnex might lower tolls for certain trips, or make changes to its roads or services to ease traffic congestion in attempts to attract more vehicles away from Transurban roads.”
The ACCC invites submissions from interested parties in response to the statement of issues by 31 May 2018. The ACCC’s final decision is scheduled for 19 July 2018.
The Commission says it will give its decision by July 19. Transurban securities fell 1.8% to $11.34 yesterday in a weak market.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.