Tuesday, January 12, 2010

Unfair Dinkum: Australian Toll Road Investors Lose A$3.5 Billion

Toll roads fail to support investors: analysis


Business Spectator (Australia)
Copyright 2010

Investors have lost an estimated $3.5 billion on toll road projects as upbeat traffic forecasts and high debt levels resulted in large write-downs and collapses across the sector, according to an Australian Financial Review report.

The losses are seen weighing on state governments with tight budgets, and will add to pressure for an overhaul of infrastructure funding and private sector support for major projects.

The newspaper said that further write-downs are expected when Brisbane's RiverCity Motorway opens to traffic this year, and the city's Airport link is also expected to bring associated problems.

Investors in Sydney's Lane Cove Tunnel may sustain losses of more than $1 billion, as the company faces receivership.

Nomura Australia credit analyst Ben Byrne warned that investors won't tolerate such high gearing levels in future projects.

Shareholders in Melbourne's ConnectEast, which owns the EastLink road network, were revealed to have suffered losses of as much as $900 million in the four years since the toll road operator was floated.

The stock in the company remains about 53 per cent below its $1.00 issue price.

Infrastructure minister Anthony Albanese will employ the services of KPMG to look at overhauling the public private partnership (PPP) project model.

Mr Byrne said that investors will only accept much lower gearing levels on future greenfield projects, and that this may hinge on more assurance about the credibility of traffic forecasts.

One proposed model would involve government provision of a partial underwriting of these traffic figures, thereby lowering the risks for investors, although this may see an added cost for taxpayers.

© 2010 Business Spectator: www.businessspectator.com.au

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