Someone very familiar with the negotiations between the Bracks government and Transurban reckons taxpayers have been cleaned up in the deal to release the exclusivity of the tolling technology for $10 million payable over 3 years.
The Kennett government had negotiated what was called a ‘single-purpose entity’ restriction on the technology which was widely perceived as something the State had over Transurban.
This was believed to be worth much more than $10 million in cash over three years – which is scarcely more than two weeks’ worth of toll revenue – that the government surrendered the exclusivity for.
Transurban had been negotiating for several years to ‘get free’ of this condition so it could get on with its other tollroad ventures, which have been its prime focus since the Burnley Tunnel opened.
Many observers assumed that the State would trade the single-purpose entity status for a reduction in tolls or the abolition of the material adverse effect (MAE) clauses in the City Link Concession Deed, which give Transurban the right to claim compensation for any of a long list of specified actions by the Government that have had an adverse effect on toll revenue.
For example, Transurban currently has an MAE claim against the State for about $13 million for the construction of Wurundjeri Way, adjacent to Colonial Stadium.
The reduced tolls concept was dropped, but the MAE abolition was very seriously considered, along with a few other ideas, including a share in the revenue of Transurban’s other ventures.
The Melbourne City Link Authority’s (MCLA) advice on these ideas was totally ignored by the Bracks Government in what some have described as a clumsy attempt to curry favour with the big end of town. Instead, the media reports on the deal (particularly the report in the Herald Sun) made the Government look naive.
In 1999, under Kennett, the MCLA negotiated a very tough settlement with Transurban to abolish all current and future construction-related claims against the State for the sum of….$10 million. Not a bad deal considering Transurban had already lodged construction claims in excess of $50 million.
When Bracks came to power, the Transport Minister Peter Batchelor blustered about backroom deals for Kennett’s mates and ordered a judicial inquiry into this deal. Frank Costigan QC did the inquiry and found that the MCLA had done a proper job and obtained a decent outcome.
Since then, the Bracks boys have presided over two big sell-outs of City Link motorists – one was allowing Transurban to apply the GST on top of the tolls, and the other was giving away the single-purpose entity restriction for a song.
The question to ask is why, after talking tough about City Link for so many years, has Batchelor become such a soft touch for Transurban, which must now be thinking the demise of the Kennett regime is the best thing to have happened to them.
The only conclusion you can come up with is that Macquarie Bank and Transurban have worked their close links with Steve Bracks to perfection, or that his government is simply commercially niave when it comes to negotiating. Crikey cannot believe the government would do any favours whatsoever for Transurban when they are claiming compensation over the Wurundjeri Way. And with Transurban shareholders already more than 400 per cent in front, there is no doubt who has got the better of negotiations from day one.
Feedback to [email protected]
* Crikey is Australia’s most successful independent ezine with 1700 subscribers who for $55 get a tee-shirt, 5 sealed section emails a week and access to our 800,000 word searchable archive so why not join the Crikey army by clicking here.