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Transurban is keeping its financial powder dry for future acquisitions by tapping shareholders for $4.2 billion in new equity to fund the bulk of its full takeover of Sydney’s WestConnex.
The $39 billion infrastructure giant announced on Monday that it and its bidding partners had agreed to pay $11.1 billion to the NSW government for the 49 per cent of the Australia’s largest toll road project.
Transurban will take full control of WestConnex. Credit:Edwine Pickles
“Today’s announcement is incredibly significant for Transurban and a momentous moment for us,” chief executive Scott Charlton said.
Transurban and its consortium partners - AustralianSuper, the Canada Pension Plan Investment Board (CPPIB) and Abu Dhabi’s sovereign wealth fund - bought the first 51 per cent stake in WestConnex for $9.26 billion in 2018. Canadian infrastructure investor Caisse de dépôt et placement du Québec has replaced the CPPIB in the second deal, with kicked off in November last year.
The WestConnex project has been opening in stages over the past four years and when completed will form a 33-kilometre network linking Western Sydney with Sydney’s CBD, Sydney Airport and Port Botany.
Transurban will own half the road and on Monday said it would raise $4.22 billion of new equity from shareholders to cover most of its $5.56 billion contribution, with the remainder paid with cash.
Mr Charlton said that funding structure preserved its firepower to bid for other roads it has in its sights, which in Sydney include the M7 widening and M7/M12 interchange, and the potential sale of the Western Harbour Tunnel and Harbour Tunnel in Sydney; as well as the proposed North East Link in Melbourne.
“We need money for those other projects as well, so [we’re] trying to minimise the amount of times we have to come to the market,” Mr Charlton said. “We still have liquidity and capability to fund that opportunity pipeline.”
Transurban will control WestConnex until 2060. Between now and 2040, Transurban can increase tolls on the road every year by the greater of inflation (consumer price index) or 4 per cent, and then by inflation for the 20 years after that.