Market soundings with international and local toll road investors, operators and financiers will begin next week as the next step in exploring how toll concessions could help fund, build and operate important road infrastructure, the Government has today confirmed.
Infrastructure and Transport Minister, Chris Bishop says the Government is focused on improving high-quality road infrastructure to boost economic growth and ensure people and freight can travel efficiently and safely.
“To accelerate the delivery of vital transport projects, we’re looking into alternative funding and financing methods, including the use of toll concessions,” said Mr Bishop.
New Zealand currently has three toll roads in operation in Auckland and Tauranga, with three more in various stages of construction or planning. The Government has also set expectations in the Government Policy Statement on Land Transport 2024 that other roads are considered for tolling in future, including all future Roads of National Significance.
“Although existing toll roads are currently managed by the NZ Transport Agency, the Government is, for the first time, considering private sector involvement in the operation of toll roads. This includes the potential use of toll concessions as part of a broader approach to infrastructure delivery,” said Mr Bishop.
“A toll concession involves a private entity – known as a concessionaire – being given the right to manage and maintain a toll road for a specified time. During this period, they collect toll revenue to recover costs and earn a return. In exchange, the Government receives an upfront capital payment which can be used to fund additional road projects and potentially deliver them years earlier than would otherwise be feasible.”
Concessions may apply to existing toll roads to operate and maintain a road, or be integrated into the development of new roading infrastructure, the Minister said.
“In the latter case, a private partner could be contracted to design, construct, operate, and maintain the road, and recoup operations and maintenance costs through toll collection.”
“There are several advantages to toll concessions: they can provide immediate capital that can be used to deliver more infrastructure projects sooner, draw on private sector expertise and innovation in areas like construction and tolling technology, and can help government to share and manage risks more efficiently.
“It is important to note that the Crown continues to own the toll road under a concession arrangement. The private operator manages the road for the duration of the concession, after which control reverts back to a government agency.
“Next week, my officials will begin market sounding discussions with toll road investors, operators and financiers to test opportunities for private firms to operate and maintain toll roads through concessions.”
Mr Bishop said the officials will meet with a cross-section of market participants – from international toll road operators to domestic and international investors and iwi. If work on concessions is taken forward, there will be wider opportunities to be involved in any transactions stage, he asid.
“Market sounding discussions will give us deeper insight into whether toll road concessions are viable here, under what circumstances, and the different ways they could be structured and phased.”
The Government will test concession opportunities on:
- New Zealand’s existing three toll roads – the Northern Gateway in Auckland, and Takitimu Drive and Tauranga Eastern Link in Tauranga;
- Three roads in development that Cabinet has confirmed will be tolled – Penlink, Takitimu North Link (pictured), and Ōtaki to North of Levin;
- All future Roads of National Significance.
“Officials will also seek to understand the extent to which concessions could support private investment and involvement in delivering other future projects beyond the immediate RoNS programme, including an alternative Waitematā Harbour crossing, where the significant scale of such projects and investment needed means different delivery approaches may deliver greater value for New Zealanders.”
The Ministry of Transport has appointed global investment bank, Citi, as its financial and commercial advisor to support the market sounding process.
“Citi has extensive experience advising on toll road concessions overseas and we’re pleased to have access to their expertise, connections and insights to ensure we run a high calibre market sounding process.”
“The insights we get from the market sounding will inform my decisions about whether and how to take toll concessions forward, including which ones are viable and have value. I look forward to hearing what the market has to say,” Mr Bishop says.
The Government expects to make decisions on toll road concessions later this year.
