Last week I revealed that Transport for London was about to be given the new road tolling powers it had wanted since 2006. I also mentioned that London’s number-plate camera based C-Charge system only managed to make 25p profit for each £5 fee paid. Which, I suppose, is why the fee is now £10.
The irony is that trying to make significant profits from the C-Charge has been surprisingly difficult. Indeed, Mayor Boris introduced an accounts payment system that helped drivers avoid massive late-payment fines, which further reduced the profits of the scheme. It’ll be interesting to see the size of last year’s C-Charge profits, now that the Western Extension zone has been abolished.
With all that in mind, my attention was caught by another tolling story in the Sunday Times. Buried in the Business section, it revealed that the Australian owners of the M6 Toll road are also in financial trouble. Apparently, Macquarie Motorways Group made a loss of £224m in 2011 and the bank that owns the company had to re-write its accounts and reduce the value of the toll road by £150m to £580m.
According to the report, in 2006 global finance company Macquarie decided to increase the loans of the division that runs the M6 Toll road, upping them from £620m to £1bn and banking the £392m windfall. The plan, it seems, was to pay the loan back double quick, as the number of vehicles using the M6 Toll rapidly increased, increasing revenue.
Of course, it didn’t happen. According to the Sunday Times the average number of vehicles using the M6 Toll dropped 13 per cent in the first quarter of 2012, compared to the previous year. If the vast majority of those 30,418 vehicles per day are cars paying £5.50, the company probably isn’t banking much more than £180,000 per day. That’s probably around £65m per year.
But with massive debts, that’s clearly not enough to even cover the interest on the (upsized) loan used to build the road in the first place.
A few weeks ago, David Cameron suggested that cash-rich Sovereign wealth funds could build new roads in the UK, with a possible M14 (running alongside the dodgy A14) the most needed. Well, if the money already exists and a fund was looking for a 100-year project at a consistent return of, say, four per cent per year, it’s not a bad proposal.
Trouble is, the Brits (especially those operating commercial vehicles) show a great reluctance to pay extra road charges. After the experience of the Australians, which sovereign fund will take a 100-year bet on the toll-phobic British?