Bank of Tokyo–Mitsubishi, Macquarie Group in rival consortiums short-listed for Transmission Gully highway PPP project

The Bank of Tokyo–Mitsubishi, which has a growing presence in New Zealand as a corporate lender, features in one of two consortiums short-listed by the Government for the Transmission Gully public-private partnership (PPP) roading project.

Transport Minister Gerry Brownlee says the Bank of Tokyo–Mitsubishi is a member of the Wellington Gateway Partnership, a consortium led by Leighton Contractors Pty Ltd, and which also includes HEB Construction Ltd, InfraRed Infrastructure General Partner Ltd, and the Accident Compensation Corporation.

The second consortium, Positive Connection, includes Macquarie Group Holdings New Zealand Ltd. It's led by John Laing Investments Ltd, and includes Fulton Hogan Ltd, The Fletcher Construction Company Ltd, and Woodward Infrastructure Ltd as general partner of the Morrison & Co managed Public Infrastructure Partners LP.

The Bank of Tokyo-Mitsubishi, which operates in New Zealand as a specialist lender to big companies, grew corporate loans by more than two of the country's big four banks in the December quarter. It operates in New Zealand as "the Auckland Branch" of Japan's Bank of Tokyo-Mitsubishi UFJ Ltd, and has grown assets to a level where it's bigger than SBS Bank, plus new banks Heartland Bank and the Co-operative Bank, with total assets of NZ$2.86 billion.

Brownlee says the 27 kilometre Transmission Gully highway will form a key part of the Wellington Northern Corridor, one of seven key state highway routes being progressed by the Government as Roads of National Significance. The road's price tag was initially put at NZ$1 billion, but opposition MPs reportedly claim it could rise as high as NZ$3.4 billion.

Brownlee says Cabinet's approval last year of an application from the New Zealand Transport Agency (NZTA) to pursue a PPP to finance, build and maintain the highway had allowed the project to progress.

"The announcement of a short-list is another important step towards beginning construction of the Transmission Gully project in 2014 and opening the road by 2020, delivering the economic and safety benefits to New Zealanders within eight years," says Brownlee.

Successful bidder to be named in 2014

NZTA chief executive Geoff Dangerfield says the announcement of the short-listed consortium came after a "rigorous evaluation and selection process." A request for proposal will be issued to the consortiums in May, with NZTA planning to announce the successful bidder in early 2014.

"The NZTA is proposing to use an availability and performance-based PPP contract for the design, construction, operation and maintenance of the Transmission Gully highway," says Dangerfield. "This is what the two short-listed consortiums will bid on."

"A key requirement for either consortium to be successful would be to demonstrate that their proposal would provide better value for money over the life of the road than could be achieved using traditional procurement models."

Under a PPP the successful bidder would put up the capital to design and construct the highway, and would then operate the publicly-owned road for 25-years. The consortium would recover the initial construction costs and ongoing financing and maintenance costs through regular, fixed payments from the NZTA.

"Under the terms of the PPP contract, the successful consortium would only be paid when the road is open to traffic and specified performance levels have been met. Payments would be linked to the road’s performance, not to the volume of traffic using the road," says Dangerfield.

Interest.co.nz reported last year that NZTA paid out NZ$30.8 million over six years to bidders for national roading projects, including unsuccessful bidders, to help cover the cost of their bids.