Troubled Brisbane toll road sold
The sale is seen as a barometer for likely interest in Sydney's Cross City Tunnel, which was placed in receivership two weeks ago for the second time in eight years.
Bringing to a close a long process, receiver KordaMentha on Friday selected Queensland Motorways ahead of three consortiums, including one led by UBS Infrastructure Fund, to buy the Clem7.
Queensland Motorways, run by the state-owned Queensland Investment Corporation, controls most of Brisbane's toll roads including Legacy Way, which makes the Clem7 tunnel a good fit with the rest of its network.
RiverCity Motorway, the previous owner of the tunnel under the Brisbane River, was placed in receivership in February 2011 owing $1.34 million to lenders, less than a year after it was opened to motorists. In striking parallels with other failed public-private projects such as Sydney's Cross City and Lane Cove tunnels, the Brisbane tunnel failed to attract anywhere near the number of motorists that were forecast.
That was despite RiverCity slashing tolls to entice motorists to use the tunnel named after a former Brisbane lord mayor, Clem Jones. Analysts had expected the tunnel to sell for less than $650 million.
The 6.8-kilometre tollway includes a 4.8-kilometre tunnel linking roads on each side of the Brisbane River.
Queensland Motorways chief executive Brendan Bourke said the deal positioned it to further consolidate the Brisbane toll road network. The sale is expected to be completed within the next three months. It comes as a tight deadline of October 9 is set for parties to lodge their expressions of interest for the 2.1-kilometre Cross City Tunnel. Top of the list of interested parties is Transurban, which has an extensive network of toll roads in Sydney including the M5, M7 and Eastern Distributor.
Transurban can buy the tunnel without having to resort to an equity raising.
Operational toll roads are more enticing to large investors than green-field infrastructure projects because they can make their investment case on the basis of actual traffic figures rather than forecasts.
"We'd expect to see a lot of large investors interested in the Cross City Tunnel . . . but the price will be significantly less than what the original investors chipped in," Legg Mason investment analyst Andrew Chambers said.
Brisbane's $4.8 billion Airport Link toll road is also likely to be put on the auction block over the next year after its operator, BrisConnections, was placed in receivership in February.
Frequently Asked Questions about this Article…
The Clem7 tunnel in Brisbane was sold to Queensland Motorways for $618 million. The receiver KordaMentha selected Queensland Motorways ahead of three other consortiums, including one led by UBS Infrastructure Fund.
Clem7 was placed in receivership after it failed to attract the traffic levels forecast, even after the previous owner RiverCity Motorway cut tolls. That weak performance and the receivership process contributed to the sale price being a fraction of the original $3 billion construction cost.
The Clem7 sale is being viewed as a barometer for likely investor interest in Sydney’s Cross City Tunnel, which was placed in receivership two weeks earlier. Analysts expect buyers will pay significantly less than original investors did, and a tight deadline was set for expressions of interest in the Cross City Tunnel.
KordaMentha ran the sale process for Clem7 and selected Queensland Motorways. A consortium led by UBS Infrastructure Fund was among the bidders. For the Cross City Tunnel, Transurban is named as a top interested party, and Legg Mason analyst commentary is cited in the article.
Operational toll roads are more enticing because investors can base their valuation on actual traffic figures and cashflows rather than forecasts, reducing uncertainty compared with green‑field projects that rely on projected usage.
The sale of Clem7 to Queensland Motorways is expected to be completed within the next three months, according to Queensland Motorways chief executive Brendan Bourke.
Yes. The article states that Transurban can buy the Cross City Tunnel without resorting to an equity raising, making it a strong potential buyer given its existing Sydney toll‑road network.
Yes. The article says Brisbane’s $4.8 billion Airport Link toll road is likely to be put on the auction block over the next year after its operator, BrisConnections, was placed in receivership in February.
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