The New South Wales opposition has asked the competition regulator to intervene in the forthcoming privatisation of WestConnex, warning a successful bid by toll road giant Transurban risks creating a near-monopoly on Sydney’s motorways and higher tolls for consumers.
Transurban already owns the majority of tollways in Sydney, including NorthConnex, the M5 South-West, the M2, the Lane Cove tunnel, the Eastern Distributor and the Cross City tunnel.
It is the biggest toll road company in Australia, commanding a 73% share of tolls across the country and is widely regarded as the frontrunner to win WestConnex, the nation’s largest road infrastructure project.
Last August the NSW government announced the sale of 51% of the Sydney Motorway Corporation (which is in charge of financing WestConnex) and hoped to raise $5bn from the sale of the majority share. The sale was scheduled to be completed mid year.
The NSW’s shadow minister for transport, Jodi McKay, wrote to the Australian Competition and Consumer Commission last week asking it to take “a close interest” in the forthcoming sale and also in the fate of the government owned E-toll company, which she believes is also on the sale block.
While McKay acknowledged toll roads don’t necessarily compete for traffic, she said the creation of a near monopoly in operating toll roads would reduce the incentives to lower tolls and keep them in place for as short a time as possible.
“The damage to consumers could be substantial as toll roads developers should be faced with strong competition to ensure that tolls are as low as they possibly can be and that the length of a tolling concession is as short as it can possibly be,” she said.
McKay also argued in her letter that having a monopoly in place would put Transurban in the box seat for future toll roads. She said the NSW government had awarded Transurban the $3bn NorthConnex project without tender as an unsolicited bid because it accepted Transurban’s argument the project was unique. This was because Transurban already owned nearby toll roads which could be used to finance the project.
“With the NorthConnex precedent in mind, I am concerned that should Transurban acquire control of the SMC then its position in the market to secure, without competition, future toll roads that may be developed in Sydney in the decades to 2060 may be so strong as to be anti-competitive.”
McKay said a monopoly or near monopoly over toll roads, which would last for 40 to 50 years, was not healthy by anyone’s standards.
McKay raised concerns about the future of the government-owned E-toll company, which she believed could become part of the sale process.
The other three brands of electronic tags – Linkt, Roam and E-way – are either owned by Transurban or by companies in which Transurban has a stake.
“Should E-toll be sold to Transurban, then consumers would be faced with a market defined by the absence of meaningful competition,” she said.
The Australian Financial Review reported that Transurban was part of consortium that also includes AustralianSuper and Abu Dhabi Investment Authority. It said Transurban was the frontrunner to win WestConnex.
Other confirmed bidders are Netflow, which brings together the Cintra/Plenary Group and has backing from Canadian institutional investors.
IFM Investors, a company which invests on behalf of several major international pension funds and 27 Australian superannuation funds, was also said to be interested.
But other companies with interests in infrastructure investment are said to be circling.
The $16.8bn WestConnex project comprises 33km of new and upgraded roadway and tunnel, and is designed to improve connections between the city’s east and west.
A 2016 paper by the Bureau of Infrastructure, Transport and Regional Economics warned of the dangers of concentration in the tollway market.
“In recent years, the Australian Competition and Consumer Commission approved a series of acquisitions by Transurban on the grounds that there is adequate competition from non-toll roads and public transport, and that state governments have powers to regulate the industry,” they noted.
“There are signs that concentration in the Australian toll road operators industry will remain high for the foreseeable future. Lack of competition among toll road operators may not be desirable from the viewpoint of the efficiency of the industry over the long run,” they said.
