Brisbane accepts the inevitable:
ONE of Queensland’s largest initial public offerings, Rivercity Motorway (which operates Brisbane’s Clem Jones tunnel*) has collapsed, owing $1.3 billion. …
Rivercity’s initial traffic forecasts predicted the road would carry 60,000 vehicles a day and that this could increase to 100,000 within 18 months. But traffic volumes are closer to 20,000 vehicles, despite initial moves to discount the toll by as much as 50 per cent to encourage motorists.
Rivercity was forced to write down the value of its assets by $1.56bn to $258 million last year, based on revised traffic forecasts for the $3bn tollroad. Actual traffic on the road in the first year of operation was less than a third of the originally forecast 60,000
Major banks including Commonwealth Bank, National Australia Bank and ANZ sold out of Rivercity’s debt at less than 50 cents in the dollar.
Hedge funds now hold more than a third of the debt after several lenders chose to exit their positions, taking hefty losses on their toll road investment. …
Brisbane’s Lord Mayor thinks the problem was “poor marketing.” He’s still pushing for more billion-dollar tunnels.
* Here’s what I said in Price Tags last May:
Just this March, Brisbane opened the “Clem7” – a tolled tunnel under its central area almost five kilometres long, a distance sufficient to take a Vancouver driver from Lost Lagoon to Main and Broadway. At a cost of well over $3 billion, it’s only one element in a scheme that includes an even longer tunnel to the airport, along with bridges and bypasses that make up the largest road project in Australia. Financed as a public-private partnership to be paid for by tolls, there’s no doubt that if Clem7 works, it will be pointed to by enthusiasts as a model for Vancouver.