Virginia Toll Road a Drag on Transurban Profits

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WASHINGTON — Australian investment firm Transurban Group reported a more than 50% profit decline for fiscal year 2012 and said the drop stems from the steep devaluation of the bond-financed Pocahontas Parkway in Virginia.

Transurban announced in June that it would reduce the carrying value of the 8.8-mile tolled highway, which is seven miles south of Richmond, by $138.1 million because of reduced revenue forecasts. That was a major factor in the company’s reduced FY-2012 net profit of $58.6 million, down 50.4% from last year.

Transurban acquired the sole rights to operate and collect tolls on the Parkway for 99 years in 2006. The firm defeased the nearly $400 million bond debt created to finance the road’s construction and acquired a $150 million Transportation Infrastructure Finance and Innovation Act loan from the U.S. Department of Transportation.

In June, Transurban reduced its projections for toll revenue and average daily trips for the road.

As a result, Fitch Ratings in June issued an analysis that concluded that “these reduced forecasts are likely to impair the ability of Pocahontas 895 to service the bank and Transportation Infrastructure Finance and Innovation Act loans used to fund the road’s development.”

Transurban chief executive officer Scott Charlton remained upbeat, citing other Transurban investments in the region. The company signed a private-public partnership agreement for the Interstate 95 express lanes in Northern Virginia last week, and also has a stake in the Interstate 495 Express lanes project just outside Washington, D.C.

“Transurban enters FY-2013 well positioned,” Charlton said.

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