Transurban Inks West Gate Tunnel Project
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Another major deal for Transurban, the country’s toll road king, to swallow, this time in Melbourne.
Trading in Transurban securities was halted yesterday to allow a major part of a $1.9 billion fund raising to take place with major institutional investors and be wrapped up by Friday.
Construction will start in January after contracts were signed yesterday by the Victorian government with builders CPB/John Holland and Transurban.
The new toll road originally was due to cost $5.5 billion but will now end up costing $6.7 billion when complete in 2022.
That will see Melbourne motorists will be hit with tolls until 2045 on two existing roads to cover the $1.2 billion blow-out.
Premier Daniel Andrews Treasurer Tim Pallas would not say how much Transurban is forecast to reap from the 10-year CityLink toll extension and media reports said the company’s chief executive Scott Charlton, who was at the press conference, refused to speak to reporters.
The contract will see Transurban will raise $1.9 billion through an equity raising to part-fund its share of the cost. The deal gives the Victorian government the ability to make payments to Transurban if needed to complete this project.
All up, Transurban will fund $4 billion of the $6.7 billion cost of the new freeway, and in return will get an extra 10 years of tolls on Melbourne’s
CityLink network, into which the new project will be integrated.
The company is raising funds through a three-for-37 rights entitlement offer, with new securities to be offered at $11.40 each, or a 5% to Monday’s closing price of $12.28 less the 28 cents half-year distribution.
It will also use a $1.65 billion corporate syndicated bank facility and additional market funding to meet the balance of its requirements. The institutional component of the entitlement offer is set to be completed on Friday, while the retail portion will open on December 19 and close on January 24.
Despite not talking to the media at the press conference, Transurban’s CEO, Scott Charlton did issue a statement yesterday lauding the new project.
"This project will take around 28,000 vehicles off the West Gate Bridge and 22,000 off the Bolte Bridge, as well as taking more than 9,000 trucks off local streets every day," Mr Charlton said.
The West Gate project has been planned to relieve congestion in Melbourne and provide a direct freight link to the Port of Melbourne and remove trucks from residential areas.
It includes the Monash Freeway upgrade, which will relieve congestion in Melbourne's east, and will also include improved access to the port. Transurban reaffirmed its 56 cents per share distribution guidance for the 2018 financial year, which includes the interim 28 cents payout for the first half.
The new shares issued in the new fund raising will not receive that first half distribution.
The other listed beneficiary of the Melbourne deal is CIMIC (The old Leighton Holdings).
In a 50:50 joint venture with John Holland (which used to be part of Leighton and was sold in late 2014 to China Communications Construction Company), CIMIC’s CPB Contractors will share design and construction on the West Gate tunnel project.
The project is worth around $2.5 billion to CPB Contractors.
And CIMIC also revealed that that its UGL subsidiary had won a contract to provide engineering procurement and construction for a 270 megawatt (MW) solar farm project, as part of Genex Power’s Kidston hydro-solar and “giant water battery” project.
That project is expected to generate 783 gigawatt hours of renewable electricity, equivalent to powering around 140,000 Australian homes per year. Also, CIMIC Group's mineral contracting company, Sedgman, has been awarded contracts worth almost $100 million by QCoal Group to deliver facilities at the greenfield Byerwen Coal Mine in Central Queensland.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.