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Dodgy connections in BrisConnections

Trevor Rowe is chairperson of the Queensland Investment Corporation, a state-owned corporation that invests the super of Queensland public servants. He is now also the chair of BrisConnections, a private consortium that has been given the contract to build the Queensland Government and Brisbane City Council's Airport Link car tunnel. So where is the superannuation of State government employees going, and what will be the most important urban transport investments in a future market that will be forced to acknowledge resource scarcity and the need for energy efficient transport?

Some of it is going into BrisConnections. The Queensland Investment Corporation has invested $25 million intro BrisConnections and this investment lost $15 million, days after BrisConnections opened on the Australian Securities Exchange in late July 2008 with shares dropping in value by more than 60%. Trevor Rowe is expecting things to improve in the future as the market "...differentiates the quality of these assets". Or is he just using a government-owned corporation to prop up an investment that may never produce any valuable assets? (Refer links to Courier Mail articles at the bottom of this blog). It should also be noted that Queensland Premier, Anna Bligh, is good friends with a board member of the construction company involved in the BrisCoonnections consortium.

I think it's logical that for a free-market to function effectively its participants would need to avoid these kind of investments. Current investors who are really interested in their sound long-term investment, rather than a blind faith in market growth, would be likely to avoid investments such as these. Surely they must be considering the escalation of the global fuel crisis, the poor performance of Brisbane's other tunnel building consortium, RiverCity Motorways, the financial failure of Sydney's cross-city tunnel and the strong possibility that Brisbane will have excess road space in the future as less people are able to afford to travel by car. For investors this means reduced demand for user pays road-space, tunnels in particular, which depend upon maximum traffic congestion on other roads.

The most effective infrastructure investments for business are likely to be freight and commuter rail infrastructure such as high-speed rail connectors between cities, track duplications and extensions in city rail networks But overall, the investment in infrastructure will become less important, as our city's populations will be unable to expand so rapidly due to resource constraints. This will mean increased focus on providing additional services using existing infrastructure.

This will require production of public transport vehicles and employment expansion in this sector due to increased need for good drivers, vehicle manufacturers and maintenance and logistics workers. The transport industry will have to be far more efficient in the future and this will result in a move away from wasteful and expensive means of transport. On the whole transport will and should become less of an industry and more of a public service, controlled by people and geared towards meeting community needs.

The outward growth of our cities must be stopped immediately and any short-term population growth should be directed into existing urban areas. All existing urban areas within the growth boundary should be serviced with quality public transport - a 15 minute frequency service within 400-800m of all residences that links into a grid network which services all arterial, sub-arterial and district roads as well as providing feeder services to railway and busway stations. Effectively providing people with a way to conveniently connect with the whole city via public transport.

References:
http://www.news.com.au/couriermail/story/0,20797,24148775-3122,00.html?from=public_rss
The Australian Financial Review has reported ('Toll-road punters go into reverse' 1.8.08 p.76 by Alan Jury) that 11% of units were dumped at 41 cents (from initial unit cost of $1) when Brisconnections made its debut on the Australian Stock Exchange. Given the inflated traffic projections and under estimates of construction costs associated with these projects it would not be suprising if Brisconnections performs as poorly as RiverCity Motorway Consortium (building the North South Bypass Tunnel). In 2012 when the Airport Link is meant to be complete it is unlikely that Brisbane people will be driving as much as we are now regardless of how much road infrastructure is built. Where are your super funds being invested?

Two articles from the Courier Mail regarding this topic are included below:

Tony Grant-Taylor

July 31, 2008 03:01pm

INVESTORS who backed Brisbane's Airport Link tunnel and toll road

saw 60 per cent of their investment wiped out as it listed on the stock exchange. The units in Brisconnections, the group funding the tunnel and toll road, opened at 65c. Units were sold at $1, but with two further $1 instalments due as the $4.8 billion project progresses.

There were sales a little higher at 79c, but the units had slipped lower to be 40c.

The major investors in Brisconnections' $1.2 billion float are institutions, including the giant Queensland Investment Corp. But between 10 and 15 per cent of the issue went to retail investors.

BrisConnections will pay a 14 per cent dividend in its first year and then 8 per cent until it is completed.
____________________________________________________________

James McCullough

August 02, 2008 12:00am

INVESTORS have fled the year's largest sharemarket float, with $240 million

wiped off BrisConnections market capitalisation in barely 48 hours. The price of BrisConnections stapled securities yesterday slumped to a low of 36.5c,
well down on their $1 issue price ahead of its float on Thursday.

The stock ended down 2.5c or 6 per cent at 38.5c on volume of 35.5 million securities. The fall translates to 20 per cent of the issued stock changing hands in two days.

Queensland Investment Corp, which holds 6.4 per cent, was particularly hard hit, watching $15 million wiped off the value of its investment since the market debut.

However, the $1.23 billion float of the 6.7km toll road linking Brisbane with the airport and northern suburbs is shaping up as a bonanza for investment banks, particularly Macquarie, which stands to reap $110 million in transaction fees.

The bulk of yesterday's selling was thought to have come from institutions cutting their losses, particularly given two more instalment payments on the securities are required for BrisConnections of $1 each.

The largest parcel traded was for more than 10 million BrisConnection securities.

Chairman Trevor Rowe said it was hard to tell who was selling as it involved a lot of nominee companies.

"Clearly, this is a very volatile market with strong negative sentiment but notwithstanding that this is a company with quality assets," he said.

"It is basically three toll roads built into one across Brisbane's CBD and port to the airport and what the market is not doing is differentiating the quality of these projects."

Mr Rowe expected that once sentiment settled, buying would come back into the market because the stock represented a 28 per cent yield on current prices.

He pointed out the contract was guaranteed by Leighton Holdings and "they have not failed to complete a project in their history".

Analysts said those who subscribed to the issue in May were facing a very different market today.

Comments

There are many small "home "investors who through trading internet sites such as Commsec, bought these shares without any warning or knowledge given of the future instalments......There is NO mention on the Commsec site that tells you that you will be "sued" for further instalments which in our particular case is "$400000 !!!! We are in a nightmare as are several others who will be SUED for even "MORE money which they dont have !!! How can this situation be allowed to happen ??

Your posting is dated Nov 24th so can we assume that you purchased these shares within the last month when priced at .01c each, paying $200 for the 20.000. So what did you expect when buying shares which the internet advised were listed in July at $1. Did you get some professional advice before setting out on this lunatic journey or even do a reasonable web search to get the full story?

The world is full of idiot people who can't be saved from themselves. This is how "this situation can be allowed to happen"