Transurban Group receives US$565 million extension approval

Transurban Group (ASX: TCL) is one of the largest private toll operator businesses in the world. Most of its revenue is derived in Australia but it’s growing in the USA.

This morning Transurban announced that the Virginia Department of Transportation (VDOT) has accepted its offer to extend the I-95 Express Lanes to Fredericksburg. The financial close on the US$565 million project is scheduled for the first half of 2019.

It will extend the existing reversible 95 Express Lanes south by 10 miles. It will add new access points, including two new flyover ramps.

The design-build procurement process will launch in January 2018 with construction expected to begin in early 2019 and services commencing in late 2022.

The offer includes a payment of US$45 million to the VDOT at financial close in lieu of forecast toll revenue sharing.

Transurban CEO Scott Charlton said “We currently have underway substantial enhancements to our network at both the Southern and Northern ends of the I-95 Express Lanes, which represents more than US$1 billion of investment. Once we have completed these projects, our Express Lanes network in the Greater Washington Area will be the largest connected network in the United States.”

“We continue to expand our operations in North America with additional opportunities emerging in the Greater Washington Area, as well as targeting select metropolitan areas hat fit with our strategic and financial criteria”.

Transurban is currently trading at 63x FY18’s estimated earnings with an unfranked yield of 4.55%. It could be a decent buy for investors looking for a better income than a term deposit, but I think there are much better income options out there.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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