Ann: M2 Upgrade Announcement , page-2

Transurban to upgrade toll roads
MATT O'SULLIVAN
October 14, 2009

TRANSURBAN has signalled its intention to upgrade its toll roads to boost traffic revenue rather than pursue acquisitions, after it signed off on a $550 million lane-widening of Sydney's congested Hills M2 motorway.

But the listed toll-road operator has said it would consider buying the ill-fated Lane Cove Tunnel should a receiver be appointed in coming weeks.

The NSW Government offered a carrot to Transurban, allowing it a one-off 8 per cent rise in tolls when the M2 upgrade is finished in late 2012, and rights to operate it for a further four years (to 2046).

The M2's car toll, now $4.95, is raised by up to 4 per cent annually.

Transurban will fork out $24 million on the design and the approvals process, which is expected to last until late next year. It is yet to consider funding options for the rest of the outlay, which is likely to include a combination of debt and equity.

Transurban chief financial officer Tom Honan said it was premature to talk about its most likely funding option for the M2 because most of the spending would not be made until 2011. A large portion of the capital expenditure will be spent on widening the M2's tunnel.

The upgrade comes amid speculation that Lane Cove Tunnel is about to be placed in receivership as lenders seek to expedite a sale of the toll road.

Mr Honan said ''if and when this one does come to the market, we will take a look at it''. He said Transurban's preference was to upgrade toll roads. ''It's easier to deliver value from our existing asset base,'' he said.