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The Victorian state government has told the competition watchdog that it fears CityLink owner Transurban will become too powerful if it is allowed to buy EastLink and gain a monopoly over toll roads in Melbourne.
Victoria’s pushback against Transurban comes as the Australian Competition and Consumer Commission (ACCC) decides whether to block the tolling giant from buying the 39-kilometre freeway between Mitcham and Frankston, with concerns it could damage the state’s finances in the long term.
Transurban wants to buy a controlling stake in EastLink. Credit: Wayne Hawkins
Transurban – which already operates CityLink and will run the new West Gate Tunnel in Victoria when it opens in late 2025 – confirmed in February it was interested in buying a controlling stake in EastLink from a consortium of pension funds called Horizon Roads.
Victoria has previously declined to weigh in on the EastLink sale, but a government spokesman confirmed to The Age that it had “made a submission to the ACCC outlining its concerns with the proposed transaction”.
The state government declined to comment on the contents of its submission, but the ACCC outlined its own concerns about how the sale could impact Victoria in a statement of issues in late June.
Transurban buying EastLink could reduce the number of rivals interested in paying Victoria to operate toll roads in the future, the ACCC said, because they could not compete with Transurban due to its access to traffic modelling data and other “incumbency advantages”.
“Incumbency advantages can impact competition by acting as barriers to entry for rival bidders for toll road concessions, and could prevent rivals from bidding for concessions at all,” the watchdog said.
The ACCC said a sale to Transurban could also block “the emergence of a key rival to Transurban” that could “bid competitively for future toll road concessions in Victoria”.
Spain’s largest toll road group, Abertis Infraestructuras, is also bidding to buy EastLink and its parent company has flagged interest in expanding its presence in Australia.
That could create a strong rival bidder to Transurban if Victoria eventually auctions off a contract to operate tolls on the North East Link as market watchers expect.
The Andrews government has started early works on that 20-lane highway, running between Greensborough and Bulleen, and says it will open in 2028 at a cost of about $16.5 billion. Transurban has previously expressed interest in taking it over.
A Transurban spokesperson said: “We are of the view there would be no lessening of competition if we were to acquire an interest in Horizon Roads, and we continue to work with the ACCC.”
During its full-year results this month, Transurban chief executive Scott Charlton said the company had addressed the ACCC’s concerns “comprehensively” and that he looked forward to it releasing its decision on September 7.
“We’re also confident that our proven track record as a business and our history in Melbourne would allow us to deliver significant benefits to all stakeholders around this project,” Charlton said.
The ACCC said that other market participants told it that only Transurban would be able to make successful “unsolicited proposals” for new road projects, which is how Transurban pitched the West Gate Tunnel project to the Andrews government in 2015.
The Andrews government extended Transurban’s CityLink contract by 10 years to 2045 in exchange for it funding one-third of the West Gate Tunnel construction, which subsequently blew out from $6 billion to $10 billion.
The ACCC said it did not think Transurban could gouge motorists because tolls were set through long-term contracts signed with the state.
If Victoria does auction off the North East Link, it will be following a path set by NSW, which built the WestConnex tollroad and then sold it to Transurban in two tranches, in 2018 and 2021, for a total of $20.4 billion.
The ACCC held a long-running inquiry into the second of those two WestConnex transactions and raised similar concerns as those being considered in the EastLink sale, but eventually approved it after Transurban agreed to publish traffic data to help future rival bidders.
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