Traffic using Lane Cove Tunnel sinks further

May 9, 2008

Scott Rochfort, The Sydney Morning Herald

THE Lane Cove Tunnel could be broke by late next year unless its flagging patronage increases.

The credit ratings agency Moody's issued the warning after the privately owned toll-road operator released another set of poor traffic figures.

"Moody's does not currently believe that traffic volumes will increase to sufficient levels to service debt in the long term," it said, after downgrading the tunnel's credit rating for the second time in a month.

The owner, Connector Motorways, conceded it might need to scale back its traffic forecasts.

Fuelling concerns that the year-old tunnel could end up in the same trouble as the Cross City Tunnel and Airport Link, Connector Motorways confirmed it was also in talks with the main guarantor of its debt, MBIA Insurance Group.

"This is a commercially confidential matter for Connector's shareholders and MBIA," a Connector spokesman said.

"However, it is in line with normal business practice. The possible recapitalisation is likely to involve a restructure of finances to realign with patronage expectations."

But Connector played down the significance of a downgrade of its credit ratings by Moody's for a second time in a month. It said it was a "conservative measure".

Moody's said unless volumes grew significantly Connector Motorways only had sufficient liquidity to service its debts until "at least the end of 2009".

"Traffic was expected to ramp up after the bus lanes on Epping Road [the surface alternative to the tunnel] became operational on March 10, but this outcome has not materialised," the agency said.

Moody's warned it could lower its ratings outlook again.

The credit downgrade came after the road reported that an average 56,384 cars a day passed its electronic toll-gates last month, a fall on the previous two months. The drop in patronage is especially disappointing, given the tunnel is meant to be going through a "ramp-up" stage.

Connector Motorways now looks well short of hitting its projection of having 100,000 cars a day through the toll-road by September. When it won the bid five years ago it forecast 180,000 cars would be travelling on the road each day by 2021.

The NSW Government has continued to distance itself from its latest infrastructure disaster.

"The financial position and credit ratings of the tunnel operator are matters for the company," said the Minister for Roads, Eric Roozendaal.

The alarm bells on the road were first sounded in March, when two of its key shareholders, Leighton Holdings and Hong Kong's CKI, wrote off the bulk of their investment in the road.