Transurban debt deal windfall Email Print Normal font Large font By Kirsty Simpson May 18, 2006
Advertisement AdvertisementA MUCH-NEEDED $903 million upgrade to a Melbourne arterial link from the West Gate Bridge to the Monash Freeway has allowed Transurban to buy out debt to the Victorian Government early.
The liability will be cancelled in return for Transurban paying $609 million to the Government over four years, using money to be raised from a new loan. At face value, the previous debt would have cost Transurban $2.9 billion over 30 years.
Transurban will contribute $166 million towards upgrading the West Gate Bridge, the southern section of CityLink and the Monash Freeway.
The State Government will contribute $737 million.
A swag of changes, to be managed by Transurban and VicRoads, will reduce bottlenecks and improve traffic flow along the 75-kilometre stretch of road, and will be completed by 2010.
Transurban expects it to increase capacity in its congested tunnels by 40 per cent.
"The result will be a resolution of existing congestion problems, improved safety and typical travel time savings of 38 minutes from Narre Warren in the south-east to Werribee in the south-west," Transurban managing director Kim Edwards said.
He said the investment would generate an internal rate of return of 11.1 per cent.
Mr Edwards said he expected roadworks would significantly improve traffic flows.
Transurban will recover any revenue lost during the roadworks from the additional revenue generated.
"Any remaining revenue uplift will be shared equally with the state through a one-off payment made three years after the construction completion date," he said.
He said he did not expect the changes to affect Transurban's profit or distribution to shareholders in the medium term.
The upgrade includes the construction of one new lane each way on CityLink southern link and the Monash Freeway to Heatherton Road. No new work is needed for the tunnels.
The West Gate Bridge will have a new system that devotes five of its eight lanes for morning and afternoon peak-hour traffic.
Mr Edwards said similar systems overseas had increased flows by about 20 per cent.
Overpasses will also be installed along the route.
Tenders for construction have not yet been issued.
Austock infrastructure analyst Andrew Chambers said the announcement was a win for Transurban, the Government and motorists.
"We are quite positive about it. Transurban finally gets rid of a long-term liability.
"And they get much stronger traffic flow," he said.
The concession notes were part of the original 34-year toll-road deal, and was the equivalent of paying rent for the road, before eventually returning control of it to the Government.
It is buying back the notes at a discount rate of 9.7 per cent, and if the Australian Taxation Office wins an appeal regarding the tax status of the concession fees, Transurban will reduce its payment to the state to $567 million.
While the company's shares remain well off their 12-month highs of $7.73 reached in June, investors yesterday pushed the stock 2.6 per cent higher to close at $6.70.
Mr Chambers said the market would find this positive.
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