Transurban is cleared to proceed with bid for Sydney's WestConnex toll-road project
30 August 2018. By James Panichi.
The proposed acquisition of a majority interest in Sydney's WestConnex toll-road project by a consortium led by Australian infrastructure company Transurban Group cleared an important regulatory hurdle today, after Australia’s competition watchdog announced it wouldn't oppose the deal.
In a statement released today, the Australian Competition & Consumer Commission said that it had accepted the court-enforceable undertakings of Sydney Transport Partners, the Transurban-led consortium, and that it wouldn't stand in the way of the group’s bid for the A$16.8 billion ($12.2 billion) project.
Transurban is one of just two bidders still in the running for the 33-kilometer turnpike in western Sydney. The other is a consortium led by IFM Investors, a global institutional fund manager. The government of the eastern state of New South Wales — of which Sydney is the capital city — is managing the deal.
"The ACCC found that the lessening of competition for future toll roads would not be a substantial lessening of competition" under the wording of Australia's competition laws, ACCC Chairman Rod Sims said.
The undertakings will require Transurban to publish 15-minute interval toll-gantry data for each toll road in which the company has an interest in Sydney. The data includes vehicle count, vehicle classification and the direction of traffic flow — all information used for traffic forecasts.
“We are satisfied that with this undertaking, others will be able to compete for new toll-road concessions in New South Wales if Transurban succeeds in its bid for WestConnex,” Sims said.
The ACCC also revealed that similar data-publication undertakings had been accepted by other members of the Sydney Transport Partners consortium, requiring them to give their consent to allow Transurban to publish WestConnex and other relevant traffic data.
Transurban is Australia’s largest toll-road company. It develops, owns, manages and operates tollways in both Australia and the US. In New South Wales, it holds a majority stake in the M2 Motorway, the Lane Cove City Tunnel, the Cross City Tunnel and the M1 Motorway.
In its bid to acquire WestConnex, Transurban is heading up the Sydney Transport Partners Consortium, an investment group that includes AustralianSuper and the Canada Pension Investment Board, two private pension funds.
WestConnex is a partially completed road development in Sydney owned by state government-controlled Sydney Motorway Corp. The project includes interconnected highways and road upgrades, to be completed in three stages.
In May, the ACCC published a statement of issues highlighting concerns that Transurban’s entrenched position as Australia’s largest toll-road operator could give it significant incumbency advantages.
In outlining its concerns, the regulator pointed out that Transurban and Transurban-controlled entities already held 15 of 19 turnpike concessions in Australia, and seven out of nine of those in New South Wales.
The ACCC also raised the question of whether so-called unsolicited proposals — when an infrastructure company approaches a government outside any competitive tender process — needed to be taken into account when assessing Transurban’s market position.
With tollways, an unsolicited proposal from a private entity could be either a toll-road that has been identified as a potential project by the government, or a proposal for a toll-road that hasn’t been previously identified.
The ACCC faced public criticism last month when it announced another delay to its review of the deal, after claiming that the proposed deal had forced it to deal with “unusually complex competition issues.”
Today, Sims said that the review had been “a major exercise for the ACCC” and involved extensive investigations, the review of documents and “examining executives under oath.”
“Like most observers, we were concerned by Transurban already having a majority interest in seven out of nine toll roads in Sydney,” Sims said. “Adding WestConnex, which is a major multi-part toll-road project, would further entrench its position.”
But in today’s statement, the regulator said that although some concerns remained, it ultimately decided that Transurban’s strong presence, as well as its incumbency advantages, shouldn’t stop the deal from receiving clearance.
“Bidders with existing toll-road concessions have an advantage in acquiring further ones, in particular due to the reality or a perception that they have better data and experience, and better models and better forecasts,” Sims said. “These incumbency advantages were the main focus of our investigation.”
“This is one of the most difficult decisions we’ve made, but we are confident of where we have landed,” Sims said.