They Should Get Out Of Forecasting
This BrisConnections thing was pretty interesting a few years ago, but now the privately owned tunnel has hit the wall.
BrisConnections shares went into a trading halt on Monday, November 14, at 0.4¢ each, when the board announced the $4.8 billion project could now be worth less than its outstanding debt, due to lower than expected traffic flows. It is now renegotiating with a 10-bank consortium of lenders. Two directors, Andrea Harcourt and Richard Wharton, resigned on Monday.
Back in 2009, Mr Bolton made front page news when he called a BrisConnections shareholders meeting to vote on winding up the project.
Here’s Nick Bolton with the crux of the problem:
‘‘A tunnel can cost seven times more to build than an above ground toll road, and a driver is unlikely to pay seven times the toll to travel on it. Accordingly, it is almost impossible to get the economic argument to stand up for private ownership of tunnel infrastructure,’’ the Melbourne University drop-out turned internet millionaire turned celebrity investor told BusinessDay.
‘‘The concerning element is how neatly the traffic forecast seemed to fit the financial model put to investors, and how grossly inaccurate this forecast has turned out to be. It’s worthwhile asking why that traffic forecast was selected, and whether there were any less optimistic forecasts available to the Directors at the time.’’
All of which is eminently sensible, and has been shown in court that entities such as Macquarie Bank continually use the same model to suite their purpose when raising money for these crappy schemes.
In fact the scuttlebutt doing the rounds is that Infrastructure NSW used the same ‘forecasting’ system to run their argument in favour of their ‘WestConnex‘ pitch. If that were the case, then we’ll probably end up seeing yet another replay of the Cross City Tunnel, Lane Cove Tunnel and this BrisConnections misadventure.