Key Highlights

  • DriveTN Consortium has reached commercial close on the I-24 Choice Lanes Project in Nashville, Tennessee, with TDOT
  • Total payments to TDOT carry a present value of US$21 billion, consistent with the original offer figure on a present-value basis
  • Construction period payments span 2027 to 2033, peaking at approximately US$1.1 billion per year in nominal terms
  • Revenue sharing with TDOT applies only when the concession outperforms the base case, and is not included in the US$21 billion figure

Commercial Close Reached on Nashville Toll Lanes

Transurban Group (ASX:TCL), whose listed notes vehicle is Transurban Finance Company Pty Ltd (ASX:TA1), has announced commercial close of the I-24 Southeast Choice Lanes Project in Nashville, Tennessee, through its participation in the DriveTN Consortium. The announcement clarifies a payment schedule and revenue-sharing arrangement with the Tennessee Department of Transportation (TDOT) that had prompted questions following an earlier public disclosure by TDOT.

The concession agreement was signed on 30 September 2026, and financial close is targeted for 12 July 2027. Transurban's Equity share in the project is expected to be funded using existing Balance Sheet capacity over time, with gearing and Capital Structure to be finalised by financial close.

Understanding the US$21 Billion Figure

A key part of the announcement addresses a perceived discrepancy between a previously circulated figure of US$24.8 billion and the US$21 billion present value cited by Transurban. The company clarified that the US$24.8 billion figure published at the time of the award combined present-value and nominal components, as required under the RFP process. On a consistent present-value basis, the total is US$21 billion, calculated using a blended discount rate of 5.2% as of the target financial close date of 12 July 2027.

Within that structure, US$0.5 billion in operating-period payments that sit outside the investment-grade rating are discounted at 8%, while all other payments are investment-grade rated and discounted at rates between 5% and 5.5% according to payment priority.

Construction and Operating Period Payments

The payment schedule is structured across both a construction period from 2027 to 2033 and a long operating concession running through to 2085. During the construction period alone, Transurban will make payments totalling approximately US$7.7 billion in nominal terms, averaging around US$1.1 billion per year at peak. Present values during this window range from US$1.50 billion in 2027 stepping down to US$0.77 billion by 2033.

Operating period payments then escalate materially over the concession's life, from US$0.47 billion present value across 2036 to 2040, rising to US$5.63 billion present value across 2076 to 2085. The structure reflects the long-dated nature of toll road concessions, where Revenue builds over decades as traffic volumes grow and the asset matures.

Sector Context

Toll road concessions of this scale are relatively rare globally, and I-24 represents one of the more significant public-private Partnership awards in US transportation infrastructure in recent years. Managed lanes — sometimes called choice or express lanes — have gained traction in US cities as a mechanism to reduce congestion while generating private returns. Nashville's rapid population growth makes it a particularly compelling market for traffic-dependent infrastructure assets.

For Transurban, the I-24 concession extends its North American footprint, which already includes toll operations in Virginia and Maryland. The addition of a Tennessee asset diversifies its US exposure beyond the Washington DC corridor.

Risks

Concessions of this duration carry material risks including traffic Volume uncertainty over a multi-decade horizon, political and Regulatory Risk in how toll pricing is managed, and the significant capital commitment during the construction phase. The 75/25 maximum Leverage Ratio under the TIFIA term sheet was a procurement requirement, and compliance with that structure will need to be maintained at financial close. Any delay to the July 2027 financial close target would shift the payment schedule and its present-value calculations.

What to Watch Next

Financial close in July 2027 is the critical near-term milestone, at which point the capital structure will be finalised. Investors in TA1 notes will be watching for any updates on Transurban's balance sheet capacity relative to the equity funding requirement, as well as any traffic or revenue updates from the company's existing North American toll operations that might inform expectations for the I-24 corridor.