Transurban ‘exploiting government stupidity’: Kelty

Kelty said there should be a new framework for major infrastructure projects, with all projects approved by Infrastructure Australia first and only going to tender if there is bipartisan political support.

He said bidders would include industry superfunds and possibly special business bargaining agreements for the companies building the infrastructure.

“It would take the nonsense out of political risk and drive down the market price,” he said.

“What’s wrong with superfunds spawning more independent EBA highway construction companies to create competitive forms of bidding for effective highway construction and financing? There would be more than one major road builder. It would make infrastructure projects more competitive with comparable parts of the world.”

Transurban responds

Transurban CEO Scott Charlton said three things were worth saying in response to Kelty’s criticism.

First, the terms and conditions of the infrastructure projects were established by the governments, not by Transurban.

“We do not establish the terms and conditions or the price of the toll,” he said.

Second, when Transurban bids for infrastructure projects in Australia, it bears the design and construction risk, as well as the sponsorship risk.

“We as operators believe we have the skills to get the right result for our shareholders while taking on all of those risks,” he said.

“Superfunds, in the past, preferred not to take construction and traffic risks, they wanted a guaranteed return.”

Third, many of the projects won by Transurban over the last decade, including Queensland Motorways and Westconnex, had been in tenders that included competition from IFM Investors, owned by 20 industry funds.

“We won those bids because we offered to pay more, which means more money for the governments that sell the concessions,” he said.

“We’ve invested $40 billion in infrastructure and we’ve bid for every one of those jobs.”

Charlton said it was true that tunnels and roads in Australia were more expensive to build than in other countries, but this was due to higher costs associated with regulations, utilities and construction.

Legal and regulatory costs

“In other places you don’t have problems with utilities and some other legal and regulatory costs,” he said.

“The costs here are 10 to 15 percent higher than the projects we do in the United States.”

Kelty’s criticism of Transurban in the context of the mandatory super’s 30th anniversary is unusual given that Transurban’s two largest shareholders are AustralianSuper and UniSuper. In addition, superfunds own more than 50 percent of the stock registry.

It is worth noting that Transurban’s success in awarding infrastructure bids has led to major superfunds in the industry partnering with Transurban in the bids.

Former Prime Minister Paul Keating said that Transurban’s success was a failure of competition policy.

“The emphasis must return to competition policy,” he added. “Remember, I established competition policy in the ’90s. That’s what we’re missing. You have to have a treasurer interested in the competition. If you have no interest in these things, you get Transurbans.”