Regulatory Risk

Some brokers recently raised the possibility that Citylink would be taken back by the Vic Govt because the IRR would breach 17.5%.
This was self serving by the brokers, to get the SP down.

Transurban chief Scott Charlton has a sharp message for the naysayers who claim the toll road operator will be forced to hand back its mainstay CityLink asset to the Victorian government ten years earlier than the current 2035 expiry date of the concession.
Given CityLink is a regulated asset, Transurban can only enjoy a maximum return on the project but it’s claimed of late that the roadway has proved a little too lucrative at the expense of Melbourne’s impecunious motorists.
Fronting the full-year results prezzo today, Charlton blamed “speculation by a couple of parties with suspect motives and flawed analysis.’’
The key trigger for a review — an internal rate of return of 17.5 per cent — has not been breached. And as a holder of a gaggle of government concession agreements, Transurban (and independent arbiters) has its finger on the pulse on that one.
“We want to be clear (the grounds for) a potential review have not been met and are not forecast to occur,’’ he said.
Broker Credit Suisse agrees. “We think it is highly unlikely that this will eventuate as we estimate the equity internal rate of return reaching only 16.5 per cent by the end of the concession.’’