Ross Greenwood speaks to Shadow Minister for Roads Jodi McKay about Transurban submitting a conditional bid for a major stake in WestConnex despite the competition watchdog’s decision to extend a review of Transurban’s (ASX:TCL) market dominance.
Introduction: How can Transurban bid for WestConnex?
Ross Greenwood: Well, you can tell what’s taking place can’t you in the property markets. It is slowing down depending more or less where you live, but the second thing is those cranes are going to disappear pretty quickly and that’s where the glut of those properties has got to be absorbed. Anyway, much of the building activity is coming as a result of new infrastructure being put in, because as you’re well aware there are right now very significant pieces of infrastructure going in where major cities and as a result new cities, new apartments, new houses are all going up around that infrastructure. It’s all part of the plan.
Today however there was another significant problem and that is the Transurban which last week we heard the ACCC had delayed its approval of its bid for the WestConnex project in New South Wales which is probably one of the biggest of the infrastructure projects in Australia right now. Which then would have meant that Industry Funds Management IFM which have teamed up with a Dutch fund to try and bid for this particular piece of infrastructure would have been the sole bidder.
Well, today the New South Wales government allowed Transurban to submit a final bid for this WestConnex project but conditional on ACCC approval which may not come until September. We did speak with the chairman of the ACCC, Rod Sims, on Thursday last week.
Here’s what he told us.
Rod Sims: We basically found out that we just didn’t have enough information to make a decision because this is a very complex road project. It’s a very complex competition issue and we do have competition concerns. It means Ross that we’re taking the time to get the decision right so that we don’t lock in anti-competitive arrangements.
Ross Greenwood: Remember that Transurban has a stranglehold of many of the road pieces of infrastructure around Australia and the New South Wales government is seeking to sell a 51% stake in Transurban. I should also make one other observation to you and that is went to the government. Government says it now cannot speak because they’re in the bidding process and they do not want to disrupt that in any way, shape or form. We’ve gone to the New South Wales Shadow Minister for Roads Jodi McKay who was on the line right now.
Jodi, just explain to me here in regards to the labor party in New South Wales. If you came into power would you allow this bidding process to go through in the way in which it is now?
Interview with: Jodi McKay, Shadow Roads Minister, New South Wales Parliament
Jodi McKay: Well, I think there are two issues here, Ross. The first is that obviously when the government seeks to finalize this process in September we’re going to be just six months from an election. New South Wales goes to an election at the end of March. The second thing is with said from the very beginning that we have concerns about this sale. Those who read the business case would know that this would never to be the way that WestConnex was to be finance.
Now, we find that we are in a situation where the government is proceeding with this sale even though we don’t have the final or the findings by the ACCC. It’s certainly not an ideal environment to be selling what is the largest infrastructure project in Australia.
Ross Greenwood: Well, that is a $16.8 billion toll road. You can understand why the ACCC would be careful given the dominance that Transurban has, given the fact it owns right now seven of the nine toll road concessions in New South Wales.
Jodi McKay: Yes, exactly. I think that one of the things that the ACCC Rod Sims has said which I think is really important is that it’s about Transurban cementing it’s advantage when competing for future toll roads. Their 51% sale of the Sydney Motorway Corporation is for five toll roads, the M4, the M4 East, the M4-M5 link, the M5, and the current M5 South-West. It’s a significant proportion of toll roads and the motorways that the government is planning beyond that most of them actually lead to then from WestConnex.
If you look at the Western Harbor tunnel, the northern beach, it’s lane called the F6. They’re really sections of road off the WestConnex. Transurban when they tended for the NorthConnex so they put in a non-solicited bid there and were fortunate to get that. They did that by leveraging their hold over the M2 and so they were able to lengthen the contract period or the concession agreement for the toll.
I think this is a real concern that the ACCC is investigating but I do think that the government should be waiting until they receive the findings from the ACCC before proceeding with this sale.
Ross Greenwood: It’s going to be interesting to just watch exactly what takes place. Jodi McKay is the New South Wales Shadow Minister for Roads. Of course my inherent particularly that issue but also it comes to a point is if you own most of the roads seven out of nine and indeed many others in other capital cities as well, when somebody else comes into the network where will you go in terms of negotiability to allow that person easily into the road network as well?
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