Toll tunnel can't pay its debt
Ailing tunnel project takes toll on investors
By Annie Guest
Updated Thu Sep 2, 2010 7:48pm AEST
Audio: Litigation funder eyes off toll road problems (PM)
Map: Brisbane 4000
Related Story: Too early to say if Clem7 going broke
Investors in Australia's latest ailing toll road project have turned their attention to legal action over grossly over-estimated traffic forecasts.
Brisbane's cross-river Clem7 tunnel opened in March with great ceremony and high hopes of easing the city's traffic congestion.
Traffic forecaster Maunsell Australia predicted 90,000 motorists a day would use the tunnel, but in reality the figure is less than 30,000 and that is with the toll slashed.
Tunnel operator Rivercity Motorway revealed this week it is struggling to pay debts exceeding $1.5 billion and Maunsell Australia is not speaking publicly about its wayward predictions.
Andrew Charles from litigation funder IMF says it has responded to investor inquiries about potential legal action against Maunsell.
"The figures that have come out in terms of the actual traffic compared to the forecast are very different," Mr Charles said.
"The question becomes... were all steps taken to give the best, accurate picture?"
The Clem7 tunnel was proposed by the Brisbane City Council, but it says the private sector now bears the risk.
Rivercity Motorway granted indemnity to Maunsell for claims over $500,000 made by a third party, but Mr Charles says that is not the end of it.
"That's however a loss they would only bear through their shareholding in Rivercity Motorway. If the investors themselves sued personally against Maunsell Australia, I don't see that indemnity would affect them," he said.
But Mr Charles says he is not aware of any precedents of investors taking successful legal action against traffic forecasters on unsuccessful toll roads.
Maunsell has not returned the ABC's calls, and Rivercity Motorway declined an interview.
Public-private partnerships
This debacle will further cool the enthusiasm for public-private partnerships.
But the company behind Australia's biggest road project - Brisbane's $5 billion Airport Link - is not flinching, publicly at least, despite its toll road eventually connecting to the under-patronised Clem7 tunnel.
Airport Link's operator BrisConnections also declined an interview but released the following statement:
"BrisConnections is confident its forecast traffic numbers remain sound," it said.
"Clem7 provides a component of our traffic, however we are satisfied the feeder roads including Clem7 will provide sufficient traffic flow for Airport Link."
But that is mocked by transport expert Dr John Goldberg, an honorary associate of the University of Sydney.
"I don't believe it, frankly. I've analysed the whole thing on the basis of the product disclosure statement. Unless I've made gross mistakes in arithmetic, I can't say that they've got any hope at all," he said.
BrisConnections has attracted considerable controversy in just over two years of operation, with investors brought to the brink of bankruptcy.
But Dr Goldberg says BrisConnections has rockier times ahead.
"If you pay the equity returns to investors, the company will never be able to amortise the debt; never be able to pay the debt back," he said.
"And the debt is far higher; we're looking at $1 billion, maybe $2 million more than the Clem7. The modelling is virtually identical; it's what they call a work-back.
"The work-back model is where they start with the returns to equity investors and work back to traffic forecasts, which will satisfy that. It's got nothing to do with the interaction of land use and transport."
Dr Goldberg has previously predicted the financial failure of Sydney's Lane Cove and Cross City tunnels.
Tags: business-economics-and-finance, company-news, industry, road-transport, australia, qld, brisbane-4000
First posted Thu Sep 2, 2010 7:45pm AEST