The country’s biggest toll road operator, Transurban Group says it has reached agreement with the NSW government for a $550 million upgrade of its Hills M2 motorway in Sydney’s north west.
Tolls on the motorway, which connects the Westlink M7 to the Lane Cove Tunnel, will be increased by around 8% when construction is complete in three years, the group said in a statement to the ASX yesterday.
And Leighton Group has won the contract to carry out the work, it said in a separate statement yesterday.
The upgrade will reduce congestion in peak periods and improve access to major growth areas of Sydney.
Commuters in and around the Hills District of Sydney would argue that the expansion is long overdue and more to do with the state government’s failure to build heavy rail links from the city to the area, which remains one of the fastest growing in the greater Sydney region.
Transurban said several new on and off ramps will be built, as well as additional eastbound lanes in two sections of the motorway and an additional westbound lane from Lane Cove Road to Pennant Hills Road.
Financial close is expected on the project later this year, and construction is expected to be completed in late 2012.
Transurban will spend $24 million on the project between now and financial close, with the cost underwritten by the NSW Roads and Traffic Authority (RTA) in certain circumstances if the project does not proceed.
The group’s funding of the final project will be determined after financial close.
Transurban said it will consider equity funding, existing and new debt facilities and various capital management initiatives to fund its capital spending.
"The Hills M2 upgrade is a major project that will deliver badly needed relief to the congested M2 corridor in Sydney," Transurban chief executive Chris Lynch said the statement.
"We are pleased to have reached an in-principle agreement with the NSW government and will continue to work closely with them towards the achievement of financial close."
Transurban said returns from the project will come through traffic uplifts, new tolled ramps, increases in tolls and a four-year extension to its contract for the road to 2046.
Transurban said it had estimated there would be an extra 17,300 average daily trips made on the motorway by 2016 as a result of the upgrade.
The M2 ends at Lane Cove Road and the financially stricken Lane Cove Tunnel.
There are rumours in Sydney business circles that the tunnel could be sold to Transurban at a knock down price.
There are reports that no one wants to buy it and that it could go into receivership, which would see a financial restructuring.
In its statement Leighton said it would deliver the environmental planning, design and construction of the upgrade project.
Leighton shares reacted very positively to the news with a 3% rise, or $1.03 to $37.83.
Transurban was up a more sedate 2%, or 8 cents, to $4.28.
