The Age: Trading in ConnectEast shares frozen as toll road fails to fire (21 November, 2008)
Far fewer drivers are using EastLink than predicted, forcing operator ConnectEast to freeze trading in its shares while it raises money to cover its $1.9 billion debt. Fewer than 150,000 trips a day are being made on the road. When it offered shares in the toll road in 2004, ConnectEast predicted it would have 225,000 trips a day by this stage.
Industry analysts say the road must generate at least 156,000 trips a day to cover an interest bill of about $15 million a month. But despite the road’s poorer-than-expected performance – CitiGroup last month described ConnectEast as “a looming default risk” – it is the third-busiest route in Victoria.
The Ringwood end of the road is carrying near the levels of traffic predicted. But to the south, near where the State Government wants to build the Frankston bypass, traffic drops off. Premier John Brumby, who will release the Victorian transport plan next month, has signalled he will support building the $700 million Frankston freeway.
But the performance of EastLink will cast further doubt on the viability of a $9 billion tolled tunnel from Footscray to Clifton Hill, as proposed by Sir Rod Eddington. The credit squeeze has heightened dramatically since Sir Rod’s $20 billion transport plan was released in April.
Road builders and operators are shying away from big projects, with ConnectEast and Transurban telling The Age this month they were not interested in major new projects. ConnectEast has requested that the Australian Securities Exchange freeze trade in its shares until Monday next week, while it raises as much as $450 million from investors.
Before the freeze, the shares were trading at 67 cents. When ConnectEast was floated in 2004, its shares were worth $1.
But the drop is minor in comparison to BrisConnections, the company that started building a $4.8 billion Brisbane toll road this month.
Investors paid $1 for shares in the seven-kilometre airport link in June, and must shell out another $2 in the next 18 months to keep them. The shares were worth just 0.1 cent yesterday.
Professor David Hensher, director of Sydney University’s Institute of Transport and Logistics Studies unit, said it was premature to predict the end of toll roads based on EastLink’s performance.
“They all take time to ramp up,” he said, and EastLink had performed better than similar Sydney toll roads.
“Toll roads are fairly low-risk (investments) in the long term.”
¦ AN overwhelming majority of submissions in response to Sir Rod Eddington’s transport plan oppose the Footscray-Clifton Hill tunnel, analysis by the Greens has found.
Among 2150 submissions to the Government, 1670 opposed the tunnel and 170 supported it.
Releasing a report on the submissions, made to the Department of Transport in July, western suburban Greens MP Colleen Hartland called on the Government to listen to the community.
“They can build a (road) tunnel, or they can honour their commitment to listen to the public,” she said. “They can’t have both.”