Transurban shareholders could benefit from Cross City Tunnel’s demise

Reports in the Australian Financial Review suggest Sydney’s Cross City Tunnel could be just days away from being tipped into administration as the toll road struggles under a $600 million mountain of debt.

Listed toll road operator Transurban (ASX: TCL) is a logical buyer of the tunnel given it already controls many of the Sydney roads that link up to the tunnel, however given the appeal of infrastructure assets such as the Cross City Tunnel, the firm will no doubt face some stiff competition.

The potential demise of Cross City Tunnel follows in the footsteps of both Brisbane-based BrisConnections, the toll operation for the AirportlinkM7, and fellow Brisbane-based RiverCity Motorway, operator of the CLEM7.

Foolish takeaway

While it could be said that a toll road is akin to a ‘license to print money’, recent history reminds investors that the financial structure and forecast assumptions are vitally important inputs in determining the profitability and viability of an infrastructure asset.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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