CKI to recoup part of outlay on toll tunnel
Cheung Kong Infrastructure Holdings (CKI) will recoup only part of its investment in a beleaguered toll tunnel in Sydney after the sale of the A$1 billion (HK$6.6 billion) project for about A$700 million to an ABN Amro-led syndicate, according to the debt-ridden tunnel company's receiver.
KordaMentha, the receiver of Cross City Tunnel since December last year, said yesterday the sale proceeds would sufficiently cover the project's debts and generate a 'significant' return to its equity shareholders.
CKI has a 50 per cent stake in the tunnel while DB Capital Partners holds 30 per cent and Bilfinger Berger owns 20 per cent.
The 2.1km tunnel under Sydney's central business district, which cost A$1 billion to build, failed to service its interest payment on A$560 million debt, as traffic flow was way below forecast since its opening in August 2005. Australian media reported that the debt burden ballooned to A$620 million.
CKI declined to comment on the sale.
Although KordaMentha did not specify how much of the sale proceeds would flow to CKI, some analysts estimated the amount would be A$40 million, a far cry from its A$225 million investment in 2002.
'It is a disastrous investment,' said an analyst with a European brokerage. 'But the sale will bring about an exceptional gain, as CKI has written down the book value of the asset to zero last year.'
An impairment loss of HK$279 million on the tunnel hit CKI's book last year following an additional HK$578 million provision in 2005. In addition, the toll tunnel incurred an operating loss of HK$262 million to CKI last year.
After the sale, CKI's exposure to the transport sector in Australia will be confined to its remaining 19 per cent interest in Lane Cove toll tunnel in Sydney.
In March, CKI sold 21 per cent of Lane Cove tunnel to ABN Amro and another buyer for an undisclosed sum.
Colin McKeith, who oversaw the deal as ABN Amro Australia's Sydney-based head of global markets, said he believed Cross City Tunnel would be viable after a planned financial restructuring.
Once the deal is completed, the Dutch bank will have a 94 per cent stake in the Cross City Tunnel project while its partner, Australian contractor Leighton Holdings, will hold 6 per cent.
A Thomson First Call poll showed a profit consensus on CKI of HK$4.33 billion this year, or 18.09 per cent growth.
The stock leapt 80 HK cents, or 2.84 per cent, to finish at HK$29 yesterday after news of the sale.