In a surprise move, the Queensland government announced that it would sell its multibillion-dollar toll-road asset in an off-market transaction to the Queensland Investment Corporation (QIC) instead of proceeding with the bidding process.

The toll-road asset was forecast to attract bids worth US$3 billion to US$4 billion when it was sold to state-owned QIC for US$3 billion. It was reported that possible bidders for the road included Transurban, Brisbane City Council, Canadian pension funds plus industry funds and infrastructure funds.

Queensland Treasurer Andrew Fraser said QIC had expressed interest in the toll-road asset since last year."They've approached us in the last couple of months ahead of the formal start of the transaction and the government made the decision at cabinet on Monday," he said.

Investors were taken by surprise by the sudden sale to QIC. An infrastructure fund manager told The Age that the decision was politically motivated after the negative publicity connected to the Queensland Rail float. "They got cold feet on the whole thing and found an easy way out," he said. "There was pretty good interest for this asset and it has been taken off the market in an off-market deal with little transparency."

Queensland's next asset up for privatization will be the Abbot Point Coal Terminal to be sold next year for US$1.5 billion to US$1.6 billion. The sale is expected to improve the state's balance sheet and hopefully reclaim its previous AAA credit rating.

"That's what we've consulted with ratings agencies about,'' Fraser said. ''What's critical here is that you get that net financial liability to revenue ratio that we've spoken about many times. And that's what the ratings agencies are interested in. This is all about getting back to AAA credit rating and this drives us towards it."