Article: Australia: Second Toll Tunnel Faces Financial Collapse
A second toll tunnel in Sydney, Australia faces imminent financial collapse. The A$1.1 billion Lane Cove Tunnel opened almost exactly one year ago to provide a connection between the M2 Motorway and the Gore Hill Freeway. So far, motorists are rejecting the idea of paying $2.59 to drive a mere 2.2 miles.
"Traffic levels have been significantly lower than expected," Cheung Kong Infrastructure Chairman Victor Li wrote in a letter to investors Monday. "As a result, full provision has been made against the remaining carrying value of this investment."
Cheung Kong initially held a forty percent stake in the tunnel but dropped its holding to nineteen percent before its March 2007 opening. The company will now write off this remaining $113 million stake as a loss.
Although the tunnel was privately financed, a substantial amount of public funds were still tied up in the route. The New South Wales government agreed to a non-compete clause designed to force motorists into the tunnel by narrowing nearby roads. Last December, however, NSW officials made a $25 million payment to Connector Motorways to buy a delay in the narrowing of nearby Epping Road from three lanes to just one lane until after elections.
A previous toll tunnel effort, Sydney's Cross City Tunnel, went bankrupt in 2006
. The route spawned controversy since its 2005 opening as the public became outraged at road closings on nearby free routes. A parliamentary inquiry
held on the issue concluded that the "no cost" deal to build the tunnel had actually "resulted in significant cost to the community." Source