Australian competition watchdog clears Transurban’s WestConnex bid

The ACCC gives the green light to a consortium led by the toll road operator acquiring a 51% stake in Sydney Motorway Corporation, but the listed firm will have to publish data from existing concessions to level the playing field.

The Australian Competition and Consumer Commission will not block Transurban’s bid for WestConnex, after accepting the ASX-listed toll road operator’s promise to publish traffic data.

The ACCC has concluded the proposed acquisition by a Transurban-led consortium of a 51 percent stake in Sydney Motorway Corporation, the entity tasked with developing and operating WestConnex, would not lessen competition in the Australian toll roads sector, despite the number of assets the firm already owns or controls – 15 of 19 toll road concessions in Australia and seven of nine in New South Wales.

Transurban’s consortium, Sydney Transport Partners, includes minority interests from AustralianSuper, Canada Pension Plan Investment Board and Tawreed Investments. It is competing head-to-head with a consortium led by IFM Investors, with backing from Canadian pension OMERS and Dutch fund APG.

Deputy premier of NSW John Barilaro told Infrastructure Investor that he welcomed the ACCC decision not to block Transurban’s bid. “Having two bidders in the game is important.

The Treasurer will now make a decision based on the best value for taxpayers in New South Wales and that decision is not far away,” he said.

A decision on the winner could come as early as tomorrow now competition concerns have been dismissed, a source close to the process said.

Why traffic data matter
In its ruling on the Transurban bid, the ACCC said the clear majority of data that Transurban currently uses for traffic modelling is “available publicly or is not exclusive to Transurban”. The ACCC said Transurban did have an advantage in bidding for WestConnex, though, due to its exclusive access to some detailed toll road traffic data from its interests in existing toll roads.

The competition watchdog went on to say that rival bidders for WestConnex were able to build traffic models of comparable sophistication to Transurban’s using available expertise and technology, but their confidence in their forecasts was impaired because they could not access the same quality of toll road data as Transurban. These data are “particularly useful” in validating traffic models, especially as there is limited time during a bid process to test models.

“These factors can lead to financiers having less confidence in rival bidders’ traffic forecasts, which can affect the cost of finance for these capital-intensive bids,” the ACCC said.

Rival bidders still obtained access to road toll traffic data held by Transurban for their WestConnex bids, the ACCC added, but there was “significant delay” in it being made available and they were not provided with the data that Transurban is proposing to make public in future.

If it wins the WestConnex concession, Transurban will be forced to publish 15-minute interval toll gantry data every quarter for each toll road in which it has an interest in Sydney. These data include vehicle count, vehicle classification (e.g. light vehicle, heavy vehicle) and direction of traffic flow. The ACCC said Transurban uses these data to maximise the reliability of its traffic forecasts.

One market observer told Infrastructure Investor that Transurban had access to much more detailed data than this, which should also be made public to level the playing field for bidders and the data which would be published under the ACCC ruling would have no material impact. The ACCC acknowledged this view in its ruling, but said it “did not agree” with it because “Transurban itself does not utilise the more detailed data for its traffic modelling and forecasts”. It was unclear how the ACCC was able to make that determination.

The competition watchdog called on the NSW government to ensure there is sufficient time during the process for bidders to build traffic models and test them, by determining earlier the scope and details of toll road projects. It also said future toll road concessions should only be awarded as the result of a competitive bid process and not through unsolicited proposals, “unless there is a truly compelling reason”.

Transurban is the only company to have had successful unsolicited bids for new toll roads accepted in Australia, including for the A$3 billion ($2.2 billion; €1.9 billion) NorthConnex road in Sydney and the A$6.7 billion West Gate Tunnel in Melbourne.

The A$16.8 billion WestConnex scheme is the largest road construction project in Australia and is being built in three phases. It will comprise 33 kilometres of interconnected toll roads and motorway upgrades once complete.

A spokesman for the NSW Treasurer declined to comment on a timeline for the announcement of the winning bid as it was still a live and ongoing process.

A Transurban spokesman said the company welcomed the ACCC decision but could not comment further on an ongoing transaction process. IFM Investors did not respond to a request for comment.