"City Link remains an absolute gold mine, which chairman Maxsted correctly claimed yesterday would cost $8 billion to $10 billion to replace in today’s dollars."Whilst some investors believe Transurban over-paid with its $7 billion acquisition of Queensland Motorways in July, its share price took off after the terms of the latest concession extension negotiated with current Victorian Treasurer Michael O’Brien were revealed on April 28. Despite the dilutive impact of raising $2.74 billion at $6.75 in May, the stock soared to a high of $8.20 in early September as its market capitalisation burst through $15 billion for the first time. While Maxsted correctly claimed yesterday that City Link has boosted Melbourne’s famed livability, you have to ask: at what price? Truth be known, City Link has been one of the worst deals any government anywhere has ever negotiated on behalf of its motorists, who will have paid more than $15 billion in tolls by the time the road is handed back to taxpayers in the 2030s. For proof of this, look no further than the Transurban share price. A company that floated at an effective $1 a share in 1996 is now closer to $8 and is forecast to pay out 39c to shareholders in 2014-15. Victorian Labor and Liberal have both been culpable in contributing to what has been a 10-bagger for those lucky Transurban shareholders who bought into the float and still hold those shares 18 years later. This includes the original chairman Laurie Cox, the retired Macquarie director who attended yesterday’s AGM and would now be sitting on shares worth almost $10 million if he had retained the 1.142 million stapled securities he held on the day he retired in 2007. While it would have been useful to debate at the AGM, Transurban today released its September quarter traffic and revenue data. It shows that City Link remains an absolute gold mine, which chairman Maxsted correctly claimed yesterday would cost $8 billion to $10 billion to replace in today’s dollars. City Link’s September quarter toll revenue was up 6.5% to a record $143.2 million, suggesting that Melbourne motorists are headed for a 2014-15 toll bill of close to $600 million. This staggering figure is more than double any other Australian toll road project. However, today’s September quarter data is also the first time in Transurban’s history that City Link has become a minority of its tolling revenue on all measures across what is now 12 different projects in four cities. Last financial year, City Link contributed $535 million out of $906 million of toll revenue on a statutory basis, and in the September quarter just passed it was $143 million out of $364.7 million, or just 39.3%. That said, City Link remains the second most valuable toll road concession in the world after Toronto’s Highway 407, which was valued at US$9 billion in 2010, when a stake was last traded. Once the latest $850 million Transurban-funded expansion is completed in 2019, and all that East West Link traffic is fed into its network, City Link could yet become No. 1.
Mayne: Transurban out-plays Victorian governments of all stripes
City Link has been one of the worst deals any government anywhere has ever negotiated on behalf of its motorists.