CKI's Sydney tunnel asset in receivership
Cheung Kong Infrastructure Holdings' 50 per cent-owned Sydney Cross City Tunnel Motorway in Australia has gone into receivership with debt of A$560 million (HK$3.41 billion), fuelling analysts' fears of a possible provision for the remaining HK$400 million value of the toll tunnel.
CKI, the infrastructure and energy flagship of tycoon Li Ka-shing, played down any adverse impact of the receivership on the group's books and said 'the investment has been largely provided for and the financial impact on the group is negligible'.
Cross City Tunnel Motorway, which owns a 2.1km tunnel designed as an alternative route from congested roads in the city's main business district, was placed in the hands of receivers and managers Martin Madden and David Winterbottom of KordaMentha yesterday, 16 months after it started operating.
The debt-ridden toll firm failed to earn enough to cover its interest payments as traffic volume in the tunnel daily was barely 33 per cent of its 90,000-car forecast, according to the Sydney Morning Herald. The tunnel's charge of A$3.50 each way for a two-minute ride partly led to its poor traffic.
Some analysts said by going into receivership, Cross City Tunnel could continue to operate while keeping 16 syndicate bank creditors out in the cold.
'The prospect of finding any white knight is not promising, which raises CKI's need to inject funds into the tunnel firm,' said an analyst at a European brokerage.
CKI wrote down a HK$578 million impairment loss on the A$1 billion Cross City Tunnel project last year. Its remaining investment value on CKI's books is about HK$2.4 billion.
A Deutsche Bank Hong Kong research report in October forecast that CKI will incur a HK$175 million loss from the tunnel this year.
KordaMentha reportedly said it was looking for options to sustain Cross City's operations until 2040 while protecting its bank creditors.
'It will be business as usual,' the Herald quoted Mr Madden as saying. 'Our job is to ensure its continued smooth operations, including its ongoing maintenance.'
The Sydney state government ruled out buying back the project.