Why IFM is not the only loser in WestConnex bid

The Australian competition watchdog’s decision not to block Transurban’s offer cements the listed toll road operator’s position as the dominant player in the NSW market.

The past few weeks have seen an interesting tussle unfold over the latest – and perhaps the last – big asset privatisation in Australia: the A$16.8 billion ($6.7 billion; €5.8 billion) WestConnex toll road project in Sydney.

For those who haven’t been following closely, a consortium led by listed toll road operator Transurban won the 42-year concession after submitting a knockout bid of A$9.26 billion, beating a group led by IFM Investors.

The intrigue came following an intervention from the Australian Competition and Consumer Commission in May, when it raised concerns stemming from the company’s incumbent position – before winning WestConnex, it controlled 15 of Australia’s 19 toll road concessions and seven of nine in NSW.

This position grants Transurban access to huge amounts of detailed traffic data, which it could use to build more accurate forecasts than rival bidders, the ACCC and Transurban’s opponents contended, giving it an unfair advantage in the competitive bid process.

The listed firm dealt with this by agreeing to publish a range of traffic data, making it available to other bidders so they could build similarly accurate models. Crucially, though, this only applied to future concessions, not WestConnex, as bids had already been submitted when this undertaking was offered. Rivals also argued that Transurban was holding back more valuable and detailed data.

So perhaps the ACCC would consider blocking the Transurban bid if it had an unfair advantage? Or the NSW government would extend the bid deadline so that the IFM-led group could put in a refined offer?

In the event, neither happened. The government stubbornly refused to delay its deadline, with May 2019’s state election perhaps convincing it that it would be better to get this wrapped up swiftly to fully claim the credit for whatever windfall resulted.

The ACCC, for its part, said that the “clear majority” of the data Transurban uses for planning its forecasts when bidding is “available publicly or not exclusive to Transurban”, while then saying in the same breath that Transurban had an advantage on WestConnex due to having “exclusive access” to some detailed toll traffic data from its existing concessions. At the same time, the competition watchdog is not requiring Transurban to publish the more detailed data, claiming the toll road operator “does not utilise [it] for its traffic modelling and forecasts”, although how the ACCC would know this is unclear.

If you’re confused, you’re not alone. This is doublespeak Big Brother would be proud of.

The whole situation hasn’t been a great advert for public procurement. The late regulatory intervention cast a huge cloud over the whole process before ending in a rather contradictory ruling, but if the ACCC had ruled against Transurban, the NSW Government would have been left with just one bidder after the bid deadline had passed – not an ideal situation when you’re trying to maximise the return for taxpayers.

The net result is that the ACCC allowed Transurban’s bid to proceed and the NSW government accepted it as the winner.

Investors should take note.

Transurban’s scale in NSW has allowed it to make a huge play for WestConnex – one that will make it harder (or at least more expensive) for others to gain a slice of the pie in future.

Write to the author at daniel.k@peimedia.com