Leighton Holdings continues to win major contracts, and with its partnership with Macquarie Group winning Australia’s largest ever road infrastructure contract: the $4.8 billion deal which includes the Brisbane airport link.
The BrisConnections consortium, made up of Macquarie and Leighton subsidiaries, Thiess and John Holland, will build the $3.4 billion Airport Link, the next section of the Northern Busway and a new fly-over to ease traffic gridlock on the airport roundabout, according to a statement from Queensland Premier Anna Bligh yesterday.
It takes to more than $6 billion the value of contracts that Leighton has won in Australia, India, Indonesia and the Middle East so far this month.
The market was suddenly enthused at the news of a trading halt yesterday morning and then ran up strongly to a day’s high of $57.97: a rise of $2.07 on the opening quote of $55.90. But when they read the announcement, mulled it over, they realised there was nothing in it but another tender win (big though) and the shares were sold off to $54.62. It was a fall of $3 or more from the day’s high.
Macquarie Group shares fell 10c to $66.20 ahead of its 2007-08 results release today.
The reaction is due to suggestions in the past week of a possible bid deal involving a buyout of Leighton’s major shareholder, Hochtief of Germany and its 56%. A major energy group was said to be the partner for the buyout by Leighton and its management. But nothing in that yesterday, although the involvement of Macquarie Group got some tongues wagging.
It will further boost its work on hand figure, which, according to the nine month report last week from Leighton, jumped 48% in the period to March 31.
In its nine month report last week Leighton announced an "operating profit after tax (unaudited) for the nine months to 31 March 2008 of $375m ($273m last year).
"The result is a positive indicator for the full year and is consistent with the company’s guidance that 2008 profit will be up by at least 30% on last year’s record result of $450m."
Leighton Holdings’ Chief Executive, Mr Wal King, reported that this was a pleasing result for the period with total revenue for the nine months of $10.0bn, up 16% from $8.6bn last year and work in hand of $28.1bn, up 48% from $19bn at the same time last year.
According to a statement from the winning partnership, BrisConnections, the project will be funded through a combination of debt and equity, according to a statement from BrisConnections.
It said there "will be an underwritten initial public offering (IPO) of securities in BrisConnections, with a public offer expected to be launched later this year. Significant equity investments are also being made by each of the project sponsors".
BrisConnections chairman Trevor Rowe said in the statement the financing package was arranged by Macquarie Capital Group and would provide absolute certainty to the Queensland Government in a difficult market environment.
Leighton was a member of two of the bidding consortiums, with its Leighton Contractors part of the losing Northern Motorway group, in partnership with ABN Amro Australia.
The other losing consortium comprised Baulderstone Hornibrook, Abigroup and Bilfinger Berger Civil – all owned by German construction and service company Bilfinger Berger – and Babcock & Brown. Some of these (Baulderstone and Bilfinger) were involved in the Cross City Tunnel in Sydney before it went broke and was then sold to ABN Amro and Leighton Contractors.
BrisConnections will build two road tunnels and a new airport connection – the 7km Airport Link, mostly underground toll road, the 3km Windsor to Kedron section of the Northern Busway and a 750 metre fly-over above the airport roundabout.
Of the cost of the airport link, taxpayers would contribute $47 million because of the funding agreement, Ms Bligh said. For the total project, which includes land costs, the state would contribute $1.5 billion instead of the $2.37 billion for which it had budgeted originally.
Construction will begin later this year and all three roads are scheduled to be completed by mid-2012. At 6.7km, Airport Link will be the longest road tunnel in Australia.
Tunnels don’t have a good track record in Australia. The Cross Sydney Tunnel in Sydney is broke. Bauldestone was the builder of that.
Leighton was the builder and part investor in Connector Motorways, which built and owned the Lane Cove Tunnel, also in Sydney. Leighton last week wrote off more than $100 million in direct and indirect investment in that project which is suffering from lower than forecast useage. Mirvac also wrote down some of its investment in the same project.
Leighton and Macquarie were part of the group that won the Westlink (M7) contract in western Sydney six years ago. That was a $1.5 billion contract and the largest in NSW.
