Saturday, July 30, 2005

Plunder from Down Under: Transurban Group from Australia wants Texas toll roads

Transurban looks down US equity road

By Rod Myer
Infrastructure Reporter

The Age [Australia]
Copyright 2005

Transurban Group is likely to launch a listed investment vehicle in the US to provide capital for its ambitious expansion plans there.

The toll road operator is bidding on three road projects in the state of Virginia and considering a bid on a fourth. It is also looking at investment possibilities in Texas.

Managing director Kim Edwards told the Securities Institute yesterday that developing a significant US business would make a US equity raising vital. "If we're successful in the US, it is inevitable that we will raise funds in the US," Mr Edwards said.

Launching a US-listed vehicle would differentiate Transurban from Australia's largest listed toll-road investor, the Macquarie Infrastructure Group. MIG has bought into $8.6 billion worth of toll roads on three continents without launching an offshore-listed vehicle.

Mr Edwards did not say how much Transurban would aim to raise in the US and said the move might be three years away. Such a fund raising would only be one of a suite of actions Transurban would use to finance its offshore ambitions.

These included taking overseas projects onto its Australian balance sheet in the form of debt "but there's a limit to that", Mr Edwards said.

Existing shareholders could be asked to contribute more capital. A third option is for Transurban to align itself with North American investment funds that could provide most of the equity for particular projects. Transurban would provide its tolling systems and "have a small stake and become the manager", Mr Edwards said. "There are big funds in Canada and the US keen to work alongside us," he said.

Analyst Clinton Wood of Deutsche Bank said he thought Transurban could raise adequate funds in Australia. "They could do it from here." Raising offshore money might not be easy for Transurban because it was not yet well known in the US market, Mr Wood said.

Another analyst said Transurban could not expect to grow without "getting existing shareholders to put their hands in their pockets".

Mr Edwards said the US market was the main focus of Transurban's current expansion plans. It has gained exclusive rights to bid on the Pocahontas Parkway in Richmond, Virginia. The 15-kilometre roadway has an enterprise value (including debt) of about $US500 million ($A658 million) and was a good project for the company "to stick its toe in the water" in the US, Mr Edwards said.

It has also signed an exclusive agreement with Virginia's Department of Transport to bid for the addition of four high-occupancy lanes to 22 kilometres of the Capital Beltway, which circles Washington, DC. If the project gets the go-ahead, Transurban will contribute $US135 million and gain a 15 per cent equity stake.

The third project being bid on is a lane addition to a road that runs into the Capital Beltway.

The company is also considering bidding in the privatisation of Washington's Dulles tollway, which is expected to sell for at least $US1 billion. Mr Edwards said the company would only bid for Dulles "if we saw we had a real competitive advantage". The reporter has Transurban shares.

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