Transurban starts off in the slow lane with big US project

AUSTRALIA'S largest toll-road operator, Transurban, has conceded traffic volumes on its new road in the US have been lower than expected in the first six weeks.

After taking five years to build, the 495 Express Lanes near Washington DC opened on November 17. While demand had increased, Transurban said it was "lower than anticipated as local traffic patterns and user preferences adjust". However, its revenue in the week before Christmas was about double that of the opening week.

Transurban's chief executive, Scott Charlton, said he believed it would take at least six months to establish reliable trends. "We believe the 495 Express Lanes provide a compelling option to commuters stuck in the endemic congestion of the Capital Beltway," he said.

Using its preferred measure, Transurban's total proportional toll revenue rose 5.1 per cent to almost $300 million for the three months to December. The company's biggest asset, Melbourne's CityLink, recorded a 5.8 per cent rise in revenue to $125 million for the quarter after a 2.8 per cent increase in traffic.

The period included the closure of the Burnley and Domain tunnels on the CityLink for less than a day in October due to a computer malfunction. The outage prompted Transurban to waive tolls.

Andrew Chambers, a research analyst for fund manager Legg Mason, said the rate of traffic growth on the 495 in the US had been strong since its opening but the key would be whether it was maintained in the longer term. "It's hard to tell at this stage," he said.

Transurban has benefited in the past year from its reputation as a defensive stock. "Any future cuts to interest rates would tend to be positive for defensive stocks such as infrastructure companies," Mr Chambers said. "For cautious investors Transurban looks attractive but for market bulls it will probably get left behind."

One such defensive stock, Sydney Airport, fell as much as 5.5 per cent on Friday, as investors digested the implications of a Tax Office audit. The airport alerted investors just before Christmas to a position paper from the Tax Office, which related to the tax deductibility of distributions on certain redeemable preference shares.