The $1.6 billion collapse of Brisbane tunnel and toll road owner RiverCity Motorway has left a cloud over two new tunnel projects currently underway in the city and has raised questions about whether investors will think twice before investing in new toll roads in the future.
RiverCity Motorway, which build, owned and operated the Clem7 tunnel in Brisbane, finally called in administrators from insolvency firm PBB after it was unable to get its syndicate of 24 lenders to agree to extend its financing arrangements on $1.6 billion of debt.
The banking syndicate subsequently appointed receivers Martin Madden and David Merryweather of Korda Mentha to try and find a buyer for the 4.8 kilometre tunnel.
They will begin working with management to assess the state of the business and are unlikely to make major changes at this early stage.
“Our objective is to put the tunnel on a firm financial footing,” Madden said.
“We will be working to assess the best option for the tunnel’s future. In the meantime the Clem7 tunnel will continue to operate as usual.”
Investors were lured to invest in the tunnel by extraordinarily aggressive traffic targets.
Prior to RiverCity’s float in 2008, the company had promised traffic levels could reach 60,000 vehicles per day.
However, the latest figures showed daily traffic slumped to about 23,000 vehicles a day in January, and only ever reached a peak of about 27,000 vehicles.
Litigation funder IMF is already examining options for a class action on behalf of smaller investors who have lost money in RiverCity’s collapse.
While Brisbane mayor Campbell Newman has said he feels sorry for these smaller investors, and has conceded the tunnel has been marketed, he has been quick to point out that the tunnel will be an asset that the city’s motorists will use “for another 100 years”.
Newman has also been forced to defend the prospects for of the Legacy Way toll road, which the Brisbane City Council is building. Traffic projections for this road, which will run from Toowong to Bowen Hills, are much more modest than those for the Clem7, with about 24,000 vehicles expected to use the road each day.
However, rival mayoral candidate Ray Smith has been quick to label the Legacy Way project as being “unfeasible” in light of the Clem7 collapse, and claims Brisbane motorists have shown they will not use toll roads in significant numbers.
The Queensland Government also has a tunnel project on the boil in the form of the Airport Link tunnel from Bowen Hills to the Brisbane Airport.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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