RiverCity fears dead end for Clem7 next year
Toll operator RiverCity Motorway Group (ASX: RCY) reported on Thursday that the group should be able to extend its current cash holdings through September next year to keep Brisbane's Clem7 tunnel operating until that time.
Beyond that, however, it could be the end of the road for the troubled toll way as its future after September of 2011 would greatly depend on increased traffic flows and the dispositions of the company's lenders.
Clem7 opened its gates with much fanfare on March 15 early this year, boasting of $3 billion construction expenses and having the distinction as the longest road tunnel in Australia with a span of 4.8 kilometres that cuts through under the heart of Brisbane.
Yet all the fanfare failed to deliver the projected traffic volumes as the year wore on and basing on the group's Thursday report to the Australian Stock Exchange (ASX), the end may come soon enough for the struggling toll road since traffic did not pick up since its March inaugural.
In a statement sent to the stock exchange, the company said that "as a result of the lower traffic volumes and yet to be finalised arrangements with its banks, the RiverCity Motorway Group final financial report has been prepared on the basis that an orderly winding-up of the group could occur sometime after September 2011."
RiverCity, however, assured that present traffic levels on Clem7 and the group's cash reserves of $107 million could very well support its existence until next year, with attending obligations of interest payment and operational expenditures all factored in.
The group added that a new traffic assessment should be expected by December this year, which RiverCity hopes would carry more encouraging figures, but for now the company stressed that "its ability to continue beyond September 2011 will depend on future traffic levels, toll pricing and/or suitable arrangements with its banks."