MacBank, Abigroup bid for freeway

Macquarie said it was in the process of forming a consortium for its bid. The consortium will include a construction group, a road operator and financiers.

Macquarie Victorian chief Robert Dunlop said the bank would be one of the capital providers, not simply an adviser to the project, if its bid won the tender.

Abigroup, one of the country's largest construction companies, is in the process of negotiating a joint venture with Leighton Contractors and is also looking for a financier to join its consortium.

Abigroup recently won $100 million worth of work constructing the Craigieburn bypass and is frontrunner for the $110 million stage four of the project.

The Mitcham-Frankston freeway project will be funded to the tune of $445 million by the Federal Government. The state government's share of the funding will be carried out under a public-private partnership with no tolls to be charged to road users, the first time such a funding arrangement will be used in Australia.

Under the funding arrangement the successful tenderer will receive yearly payments from the state government based on the satisfactory meeting of performance benchmarks. The benchmarks are likely to include keeping a set number of lanes open at all times, traffic flow and speed benchmarks and adequate maintenance levels.

The state government has ruled out tolling the freeway or even funding the roadway on the basis of a ``shadow toll", a charge per vehicle that the government pays. Shadow tolls have been ruled out to allay public fears that a user-pays toll could be introduced in the future.

Contenders for the freeway say that funding details cannot be worked out until the state government releases its funding plans when expressions of interest are called later this month.

Toll roads in Australia typically run on levels of 60 to 70 per cent debt. Public-private partnership style funding would be able to carry higher debt levels as its operators do not face traffic risk.

But viable debt levels will not be able to be established until government guidelines are released and risk assessments can be completed.

Macquarie Bank is involved in PPP road ventures in the UK and Europe.

However, Macquarie says the market will not be comfortable with the PPP arrangement at first because it will be a unique venture in the Australian market. As a result financiers will be tentative when making bids.

Environmental approvals for the Mitcham-Frankston freeway are awaiting the outcome of a court challenge to the project by public transport activists.