09 Jun 2011
M2 Motorway: Easing congestion in Sydney's north-west
by Stuart Cosgriff
The M2 Motorway project presented some fascinating structuring and documentation challenges.
What is the project all about?
The existing M2 Motorway starts in Sydney's north at North Ryde and travels to the north-west to join onto the Westlink M7 Motorway. It is a privately owned and operated toll road pursuant to a concession granted by the NSW Roads and Traffic Authority to Hills Motorway (wholly owned by Transurban).
In recent years, the M2 Motorway has become increasingly congested, not only because of strong business and residential growth in Sydney's north-west, but also the strong business development in the areas of Macquarie Park, Macquarie University and North Ryde.
Expected growth in the catchments served by M2 Motorway will put further pressure on the capacity of the M2 Motorway.
The M2 Upgrade Project is essentially designed to remove certain "pinch-points" on the M2 Motorway which are causes of congestion. In particular, the existing tunnel will be widened to support three lanes in each direction. In addition, some new access points are being constructed to enable more business and residential precincts to have direct access to the to the M2 Motorway.
Our client in the matter was the NSW RTA. RTA, as the grantor of the concession, is the agency responsible for the management of the concession from the Government's perspective and was the lead agency responsible for negotiating the terms on which the M2 Upgrade Project is to be carried out.
As the M2 Upgrade Project involves the expenditure of in the order of $550 million in additional capital costs, those terms include a toll increase and an extension to the term of the concession to enable the M2 Upgrade Project to be funded by Hills Motorway (by raising additional equity and project level non-recourse debt).
What was your role on the project?
My role was focused on the negotiation of the core project deed under which the upgrade project is to be delivered, including the terms upon which the upgrade works will be designed, constructed and completed by Hills Motorway and the amendments to the existing concessions deed pursuant to which the upgraded M2 Motorway will be operated by Hills Motorway.
I was also very pleased to be able to draw upon the skills and experience of senior people in Clayton Utz's project finance and planning and environment teams and was well supported by a core team who dedicated some long hours to the project.
Certainly the requirement to project finance a major upgrade to an existing asset that itself must at all times continue to meet the requirements of existing project financiers presented some fascinating structuring and documentation challenges.
It is enormously satisfying to play a part in a deal of the calibre of the M2 Upgrade Project, recognised as it has been by the 2011 Government Partnership Excellence award from Infrastructure Partnerships Australia. In my line of work, it is always satisfying to feel that I contributed in some small way to projects which have a positive impact for the ongoing development of Sydney in the way that the M2 Upgrade Project will.