Toll road operator Transurban will raise $1.9 billion through an equity raising to part-fund the cost of the West Gate Tunnel project in Melbourne.
The Victoria state government on Tuesday announced construction of the project will start in January after contracts with builders CPB/John Holland and Transurban were finalised.
Transurban will fund $4 billion of the $6.7 billion cost of the new freeway, and in return will get an extra 10 years of tolls on Melbourne's CityLink network, into which the new project will be integrated.
The company is raising funds through a three-for-37 rights entitlement offer, with new securities to be offered at $11.40 each, or a five per cent discount to Monday's closing price of $12.28 less the 28 cents half-year distribution.
It will also use a $1.65 billion corporate syndicated bank facility and additional market funding to meet the balance of its requirements.
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The institutional component of the entitlement offer is set to be completed on Friday, while the retail portion will open on December 19 and close on January 24.
Shares in the company have been placed in a trading halt until the completion of the institutional component of the capital raising on December 15.
Transurban chief executive Scott Charlton said the West Gate Tunnel will help address congestion along Melbourne's critical M1 corridor.
"This project will take around 28,000 vehicles off the West Gate Bridge and 22,000 off the Bolte Bridge, as well as taking more than 9,000 trucks off local streets every day," Mr Charlton said.
The West Gate project has been planned to relieve congestion in Melbourne and provide a direct freight link to the Port of Melbourne and remove trucks from residential areas.
It includes the Monash Freeway upgrade, which will relieve congestion in Melbourne's east, and will also include improved access to the port.
Construction of the tunnel is expected to be completed in 2022, with Transurban to build, toll and operate the project until 2045.
Transurban reaffirmed its 56 cents per share distribution guidance for the 2018 financial year, which includes the interim 28 cents payout for the first half.
The new shares issued now will not receive that first half distribution.
