Allens advises on innovative financing for Melbourne roads upgrade

Allens has advised the Netflow consortium on an innovative financing arrangement for its A$1.8 billion Western Roads Upgrade public-private partnership (PPP).

The financing of the Western Roads Upgrade represents a significant development for the project financing landscape in Australia, being Australia's first greenfield bond financing for a PPP since the Global Financial Crisis (GFC).

The deal builds on Allens' work for a Plenary-led consortium on the refinancing of the A$1 billion Victorian Comprehensive Cancer Centre (VCCC) in 2016, which marked the return of long-term bond financing for operational PPPs in Australia since the GFC. The VCCC bond arranged by Plenary was for an operational project, whereas the Western Roads Upgrade project is yet to be constructed.

Allens provided legal advice to the Netflow consortium on all aspects of the Western Roads Upgrade project, in respect of which Netflow was announced as preferred respondent in November.

The consortium - comprising Cintra and Plenary as project sponsors and SPV managers, Plenary as financial arranger, WBHO Infrastructure as design and construction lead, and the Amey Broadspectrum joint venture as services contractor - will deliver eight priority road projects, including lane duplication, widening and upgrade works, as well as a maintenance program for a wider road network of more than 260 kilometres in Melbourne's western suburbs.

'Since the Global Financial Crisis, PPP projects have been funded through shorter-term bank debt,' James Darcy said.

'The bond deal achieved by Plenary for the Western Roads Upgrade project demonstrates the ability of institutional investors to accept construction risk. For some time, people have questioned whether long term institutional debt could be accessed for new PPPs in Australia – the question has now been answered. What remains to be seen is whether the bond financing of the Western Roads Upgrade project sparks the development of a greenfield project bond market for infrastructure projects in Australia.

'More generally, we are now seeing increasing activity from infrastructure companies seeking diversification in the debt capital markets, both domestically and offshore,' James said.

Allens is at the forefront of providing legal advice on structuring and implementing bond financings for infrastructure projects in Australia, advising on bond financings across all relevant sectors including toll roads, ports, regulated utilities and social infrastructure.

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