Lockdowns cost Transurban $33m a week, legal showdown looms over Victorian cost blowout

Lockdowns are emptying key roads and costing Transurban $33m a week, but it’s confident traffic will rebound quickly when they end.

Transurban reported a statutory profit of $3.3bn in the year to June 30, but this was thanks to the sale of its Greater Washington toll roads, which boosted its coffers by $3.73bn. Picture: Christian Gilles/NCA NewsWire

Lockdowns across Australia’s three east coast cities are costing Transurban around $33m a week, while the toll road operator is considering suing the builders of Melbourne’s West Gate tunnel after a $3.3bn cost blowout.

Sydney’s extended lockdown is hitting the company the hardest, wiping up to $18m a week off revenue as normally busy thoroughfares are reduced to near-empty corridors.

Eroding earnings further is the working from home trend, which looks here to stay even after the pandemic eases, with people expected to commute to the office less.

Transurban reported a statutory profit of $3.3bn in the year to June 30, but this was thanks to the sale of its Greater Washington toll roads, which boosted its coffers by $3.73bn.

Excluding the US sale, the group dived 339.1 per cent deeper into the red, posting a loss of $256m. Revenue plunged 9 per cent to $2.89bn.

While the group normally focuses on the long-term – 30 or 40 years – patience is beginning to wear thin over the $6.7bn West Gate tunnel project, which has had its completion date delayed twice and now indefinitely, after the handling of toxic soil stalled works and added $3.3bn in extra costs.

Chief executive Scott Charlton said the company may have no choice but to launch legal action against builders CPB and John Holland if mediation fails.

Empty lanes at the junction of the M4 Western Motorway and the Westlink M7 at Light Horse interchange. Picture: Getty Images

“It’s not where anyone wanted to be. We understand the state’s frustration and the community’s frustration,” he said.

“It‘s taken a long time, because of the circumstances around … soil site requisite approvals … we’ve now been through that process. I don’t want to use the pun but hopefully there’s light at the end of the tunnel.

“We want to try and find a commercial resolution to the mediation process. If for some reason – we hope it’s not the case – we can’t find a commercial resolution, there is obviously the legal pathways. But that’s not our preferred pathway.”

Despite the challenges facing the company, Mr Charlton is confident that Australians’ love affair with cars will resume once restrictions are lifted.

“This is my seventh crisis that I’ve lived through – whether it’s economic or 9/11 or the GFC,” Mr Charlton said. “The world always tends to look a bit different but it does go back to what humans enjoy, which is interaction. Yes, the workplace will be different and more people working from home. But that leads to more online shopping, more home delivery and more mobility around the city, which we saw – even during Covid – and more trips taken domestically because people aren’t travelling overseas.

“So, you’ve got to combine the issue like more working from home with those other aspects.”

Transurban CEO Scott Charlton: ‘I think everyone’s plan is hopefully by the end of the calendar year we will be at a sufficient vaccination level to at least modify the amount of lockdowns.’ Picture: Aaron Francis

Mr Charlton said following Sydney’s first shutdown, Transurban quickly witnessed a boost to pre-pandemic levels.

“It depends on the strength of the restrictions, so obviously when the construction was constrained that had a big impact. But we have seen traffic bounce back by 22 per cent when construction came back,” he said.

“It looks like lockdown will persist for whatever period of time. But I think everyone’s plan is hopefully by the end of the calendar year we will be at a sufficient vaccination level to at least modify the amount of lockdowns.”

The company is also taking hope from the swing away from public transport, which fell 22 per cent last month, to private transport, which firmed 8 per cent in the same period. It also highlighted a survey which found 93 per cent of people in Sydney, Melbourne and Brisbane were concerned about congestion, underscoring the more positive outlook for toll roads.

Transurban confirmed on Monday Melbourne’s lockdown was costing it $7m-$9m a week in lost revenue. On/off lockdowns in the Victorian capital, where Transurban is based, hurt the company the most, with average daily turnover diving 24 per cent versus the previous year and 33 per cent compared with 2019.

Meanwhile, Sydney’s stoppage had been costing the company $10m-$12m but following the Berejiklian government’s tighter restrictions last month, that figure jumped to $16m-$18m. Queensland Covid-19 restrictions are also costing the company $5m-$6m a week.

But Mr Charlton said Transurban was progressing on key projects, including the M4-M5 Link Tunnels, with more than 90 per cent of total spoil removed and road paving nearing 60 per cent completion.

“Over the course of FY21 Transurban demonstrated the resilience of our business model, strengthened our balance sheet, and continued investing for long term growth. Together with our partners we opened two of Australia’s longest tunnels – the M8 and NorthConnex,” he said.

The company will pay a final dividend of 21.5c a share on August 23.