16/05/2008 - Construction company Leighton Holdings Ltd has written off all $132 million of its investment in Sydney's Lane Cove Tunnel, which is in danger of insolvency because of a lack of usage.
Leighton wrote down its $60 million investment in Connector Motorways, operator of the tunnel, and its $72 million holding in JF Infrastructure, including that group's stake in the tunnel operator, according to a statement on Thursday.
Chief financial officer Scott Charlton said the company had based the investment on incorrect assumptions about traffic levels.
"There also appears to be toll fatigue creeping into the community," Charlton said in an interview.
"The Lane Cove Tunnel is a great piece of infrastructure, but it goes into the big traffic jam of the bridge at the end."
Connector Motorways has previously stated it expected traffic volumes of 100,000 vehicles per day by September.
New South Wales Roads Minister Eric Roozendaal said last week about 60,000 vehicles used the tunnel each day, and that the tunnel's builders had made their own usage projections, which was a risk they accepted.
He ruled out compensation to the companies and said the contract guaranteed the tunnel would stay open.
"We had been hopeful of a big pickup in traffic once the works, including the narrowing of Epping Road, had been completed," Charlton said.
"Unfortunately, that didn't happen."
Lanes on both sides of Epping Road, which runs the same route as the Lane Cove Tunnel, have been closed to allow for 24-hour bus-only lanes, leaving only one lane in each direction for general traffic.
The credit ratings agency Moody's Investors Service downgraded the tunnel's rating for a second time in a month last week and warned the operator could go broke by late next year unless a lot more vehicles use it.
But Charlton said Leighton would continue to seek work on toll roads.
For instance, the company's returns on Sydney's M7 motorway were ahead of schedule, he said.
"You can get on and off the M7 at different points so you have more options for travel. It's more limited with the Lane Cove Tunnel," Charlton said.
The company is also bidding for the more than $3 billion airport link toll road in Brisbane.
"We'll learn our lessons and use that for future projects," Charlton said.
Source: AAP NewsWire
