It was a spring evening in 1995 when a government last dictated terms to a group of bankers and builders who would go on to become an Australian toll road behemoth.

Jeff Kennett recalls barking into his phone en route to a midnight signing of Victoria's first private road deal, CityLink.

"They drove a hard bargain and refused to sign the contract," recalls the former Victorian Liberal premier. "I told the top bureaucrat handling the negotiations 'if they haven't signed the contract by five to 12 I'll cancel the project'. They understood my threat was not idle."

Sign they did, as the builder and operator of the high-stakes, high-risk, answer to Melbourne's chronic traffic congestion, and the first electronic toll road in Australia.

When it publicly floated the next year, in 1996, on the back of the $1.8 billion CityLink contract, the fledgling firm raised just over $500 million. Two decades later, and now in charge of 15 major toll roads along the eastern seaboard of Australia and in the US, it is worth 50 times that.

The travelling public has arguably benefited from the explosion of toll roads in Australia. It is difficult to imagine negotiating Melbourne without CityLink or Sydney without the Sydney Harbour Tunnel.

Yet such is this particular company's dominance of the Australian private motorways – it controls 13 of the 15 Australian toll roads – that former NSW auditor-general Tony Harris describes it as a monopoly. This strategic advantage in Melbourne, Sydney and Brisbane gives it unparalleled private sector clout in transport planning and priorities.

On this point one long-time former insider is quick to clarify that the subtlety of city planning has never been core business. "Our interest was only ever the road network, and the cash."

Kennett says the tollway bosses have mastered the art of out-manoeuvring governments, citing the current negotiations with the Andrews Labor government in Victoria over the $5.5 billion Western Distributor, the proposed second route in and out of Melbourne's west.

"Money, instead of going to government, is going to the private sector; that is a total waste," Kennett says.

He is not alone in his concern about the costs, and opportunity costs, of what is a remarkable commercial success story: Transurban.

It's May 2016 and Transurban investors gathered in Melbourne are each given pairs of 3D glasses and, via a special mobile app, are taking a cyber trip through a tollway tunnel.

The simulated car they are in has no driver. This is the future: robot cars squeezing in unprecedented numbers into a vast and ever-expanding road network, all tolled by Transurban.

The vision is not just of Melbourne. After CityLink, Transurban moved northward, swooping on existing but troubled tollways including Cross City and Lane Cove in Sydney and CLEM7 in Brisbane.

This kind of long-term planning and strategic aquisitions, explains one company insider, follow the "blueprint" laid out by former chief executive, Kim Edwards, who led the company's CityLink bid in 1995 and who held the top job until 2008.

"Kim always said once we get our foot on this important bit of the road network, the state will have to deal with us on everything."

Simple but ingenious. CityLink was not just important to the Melbourne road network, it was its new spine, linking its far flung south-eastern suburbs with its west, and Melbourne Airport to the north.

Control over such an important asset would give Transurban influence over, and/or benefits from, every major road or transport scheme that connected or competed with it, or augmented or crossed it.

A controversial clause in the original contract gave the company direct and remarkable influence over Melbourne's development by allowing it to claim compensation if the state built roads or other infrastructure that competed with CityLink.

Even the Andrews government will have to negotiate with Transurban because its proposed Metro rail tunnel will need to burrow below CityLink's Burnley Tunnel.

CityLink gave Transurban financial clout. After overcoming a difficult and controversial beginning, Victoria's first private toll road has generated $5.78 billion in revenue since it opened in 1999. By the time its Kennett-era contract ends in 2034, that figure is likely to be well over $20 billion (in nominal terms). This, on a project that cost $1.8 billion.

The revenue stream transformed the company into a kind of infrastructure bank, able to underwrite road projects that governments either could not or would not do or, importantly, had not even imagined doing.

And that is how CityLink itself was created.

Hatching the golden goose

In the recession-struck days of the early 1990s the Cain-Kirner Labor governments wanted to do something to ease traffic congestion, but were in dire financial straits.

Private financing of roads was unheard of in Melbourne, and Labor took some convincing. Enter the persuasive deal maker Tony Shepherd, then a senior executive with engineering firm Transfield who had pioneered private road funding in Sydney.

Shepherd played a key role in persuading wary Labor ministers of the merits of private sector infrastructure investment, paving the way for the original tender process for the project that came to be known as CityLink. (The tender was interrupted by the state election which Labor lost.)

Shepherd was an inaugural Transurban director – he went on to become head of the Business Council of Australia and audit commissioner under prime minister Tony Abbott. His astute reading of politics helped establish a culture and modus operandi for the company that remains today.

In its short life, Transurban has become known as a formidable bargainer and reader of political play. "When they leave a negotiating room nothing is left on the table, not even the Laminex," says Harris. "They just have this reputation for being superb negotiators at the taxpayers' expense."

It is a reputation boosted by advantageous deals done in particular with the Bracks Labor government through the 2000s. Particularly notable was the scrapping of part of the original CityLink deal stipulating that the pioneering tolling technology was only to be used on CityLink.

To get the government to agree to dump the clause, there was a polite suggestion by Transurban that it would effectively abandon Victoria by establishing a new company in Sydney. The government folded. It was a pivotal moment in the company's history. Freedom to use its tolling technology beyond CityLink triggered rapid expansion interstate and internationally, adding billions of dollars to its value.

In return the Bracks government settled for a one-off payment of $10 million.

Nurturing the golden goose

But Transurban is no brown paper bag-wielding property developer banging on doors for favours. Its says the "heart" of its business strategy is to be the "partner of choice" for government; a friend always at hand with advice and ideas, a kind of corporate-in-residence. After all, says a senior executive, "all we are is a collection of agreements with government".

Transurban nurtures close relationships through its politically connected executives. Its head of corporate affairs is former Bracks government media chief, Alison Crosweller. Its head of public affairs in Victoria is Tim Salathiel, an adviser and chief of staff to Victorian Treasurer Tim Pallas', when Mr Pallas was roads minister in the former Brumby government.

So successful has been the Edwards/Shepherd-inspired business model that a company formed just 20 twenty years ago has soared to 11th on the ASX list of Australian public companies, above some of Australia's most established corporates, such as the 167-year-old AMP.

What about us taxpayers?

But at what cost?

A senior transport industry analyst explains: "Transurban is now in a position where it can go to governments and say 'we can solve your traffic headaches and get you in good standing with the electorate, and we're happy to get paid in the long term. Future generations can pay for this'."

And they will pay a lot.

While the merits of public private partnerships (PPPs) have long been debated, some basics are undeniable: Governments can borrow money more cheaply and they do not have to make a profit.

Motorists are paying a hefty premium for the private sector's delivery of CityLink and, now, the Western Distributor. The Victorian government could have delivered the project at a fraction of the long-term cost to motorists.

And, had it done so, the near $600 million a year in tolls it now generates on CityLink could have been pouring into government coffers, funding hospitals and schools.

The political advantage of these deals is that the costs are kept off the government's own books. Repayments are on the "never never". And when contracts (known as concession deeds) are extended to pay for new projects like the Western Distributor, it is an abstraction that does not generate the political furore that it could, or should.

Kennett, at least, can argue that in early 1990s Victoria was broke and unable to afford the upfront costs of CityLink; that without private capital, the road would not have been built.

But 20 years on, and in a period of deflation and cheap public money, what is the rationale?

Victorian Treasurer Tim Pallas will not say. He has refused to be interviewed about the Western Distributor or Transurban despite repeated requests over months. Transurban chief executive Scott Charlton also refused requests for an interview.

During the 2014 election campaign Labor spoke little of major road projects.

Yet within months of winning the state poll, the Andrews government announced it was in advanced negotiations with Transurban over the $5.5 billion Western Distributor under the government's "market-led" procurement policy which allows the private sector to initiate, exclusively negotiate, and deliver projects without competition or tendering.

The distributor deal is textbook Transurban, according to one long-time company figure. "So Labor comes into government and it's short on big shovel-ready projects. It had cancelled the East West Link and has to fix up planning for Melbourne Metro [Rail]. Then along comes Transurban with projects like the Western Distributor, ready to go."

The government has claimed the Transurban scheme will save commuters from the west up to 20 minutes a day and take 6000 trucks off the West Gate Bridge. A heavily redacted business case assesses the project an economic winner with $1.30 benefit for each dollar spent. The real value to the Victorian economy remains debatable.

Indisputable, however is the benefit to Transurban. In return for its multibillion-dollar outlay, Transurban gets a new toll road but more importantly, a 10-year extension of the CityLink concession.

Transport analyst and actuary Ian Bell says the extension will yield $15 billion to $25 billion (nominal) in extra toll revenue. Transurban disputes this but won't divulge its own figures.

Kennett says the 10-year extension is an extravagant gift to Transurban. "A triple-A credit-rated government has a capacity to borrow money at interest rates much cheaper than that of the private sector. It could easily borrow to their requirements and contract it out to be built, saving the community literally billions of dollars."

The exclusive deal also raises questions about whether Transurban's foothold on the network means it is charging a monopoly premium to deliver the project.

Concern about the company's dominance in the tollway marketplace was voiced by the industry itself in 2014 when Transurban outbid all comers in its $2.5 billion purchase – with partners – of five toll roads in Brisbane. At the time competing Spanish bidder Albertis, described Transurban as a tollway "monster" now operating in a market "run by one".

It is difficult to imagine any other country where Transurban-like dominance would be allowed over something as important, and lucrative, as major city motorways. Even in the home of free market capitalism, the US, private roads are relatively rare. All the largest toll roads, by revenue, are publicly owned, including the New Jersey Turnpike Authority and Pennsylvania Turnpike Commission.

The company's foothold, some say stranglehold, on Australia's three largest cities also allows it to exploit the "market-led" infrastructure policies now in place in all states and territories.

It has either won, or is in advanced negotiations over: the $1.34 billion widening of the Tullamarine Freeway, the Western Distributor, Sydney's $3 billion NorthConnex linking the M1 and M2 Motorways, and Brisbane's $450 million upgrade of the Logan Motorway.

But as well as the cost to the public purse and motorists, there is mounting concern that Transurban's triumphs have come at the expense of other infrastructure projects and priorities, including rail.

After viewing maps of Transurban's wish list of new roads in Sydney, Melbourne and Brisbane, transport analyst and actuary Ian Bell says the company's forward planning is evidence that cities – Melbourne in particular – "have major problem with sprawl and over-reliance on roads".

"These maps highlight that there is an absolute conflict between rail and roads. Transurban has got so good at their roads and PPP deals that governments fall for this. We get sent backwards again on rail, and will continue to until proper road pricing is instituted," Bell says.

Transurban executives boast that its market-led proposal for NorthConnex in Sydney brought the project forward a decade – with $800 million in government support, money that would have been spent on other government schemes.

For a decade in Victoria both the ALP and Coalition have talked about the Metro rail tunnel – the proposed $10 billion scheme to directly link the western and south-eastern rail networks – as the city's single most important transport project.

In the 2016 state budget the Andrews government finally allocated substantial funds to the Metro project. Even then, two-thirds of the necessary funding is not yet locked in, and the anticipated completion date is a frustrating decade away – 2026.

By contrast $1.5 billion in public funds was committed in this year's budget to a project not even included in Labor's election platform: the Western Distributor that is to be operating by 2022.

The Western Distributor and the extension of Transurban's existing CityLink concession is also precisely the kind of deal that the Committee for Sydney this month warned governments against, noting that locking in toll contracts over long periods would make it more difficult to introduce broad, coherent road pricing under which motorists are equitably charged to use all roads.

As reported by Fairfax Media today, Transurban is currently looking to extend and strengthen its grip on the roads of the big three cities, including through major orbital motorways not yet built, while also positioning itself as the obvious candidate to manage a wider road charging system. If successful, it will have created what analysts Morgan Stanley describe as a "meta-monopoly".

When Kennett was trying to kickstart Victoria in the early 1990s Victorians were fleeing what was known as Australia's rust-bucket economy. The risks in building the state's first toll road were considerable. Some 20 years on and Victoria is booming, Melbourne's population exploding.

The road that launched Transurban has proven a bigger bonanza than anyone could have imagined. Of its 15 roads, CityLink remains the company's single biggest earner. Transurban is determined to ensure the money continues to flow.

Now, Kennett says the Victorian government should take advantage of record-low interest rates to finance and build its own roads and railways. "If government collected tolls (from the Western Distributor) and let the CityLink contract run out … it could fund a whole lot of infrastructure."

He is urging the Andrews government not to sign up for an extension to CityLink; for a line to be drawn under the contract he demanded be signed one evening in 1995, the contract his government once touted as a great deal for Victoria.