Transurban trumpets hedge against rate rises [IMG] John Dagge,...

Transurban trumpets hedge against rate rises

John Dagge, Herald Sun
October 13, 2016 9:00pm
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TRANSURBAN chairman Lindsay Maxsted says the group has a “natural hedge” against any rise in interest rates given its tolls escalate in line with inflation.
And the tollway operator has revealed it is benefiting from new numberplate reading technology on CityLink that has resulted in a sharp increase in the number of motorists identified as driving a higher-tolling light commercial vehicle.
Shares in Transurban have shed 15 per cent after hitting a record high late in July as investors fret about the potential impact if interest rates start to rise globally, spearheaded by the US.
The Melbourne-based company has been sought out by investors in an environment of low interest rates as it provides a consistent and predictable revenue stream.
Mr Maxsted acknowledged the share price slide at its annual meeting yesterday, adding low interest rates had provided the company with a “positive environment” to trade in.
But he moved to calm investor jitters, saying any rapid rise in rates would likely lead to a similar increase in inflation, which would be reflected in Transurban’s toll prices.
“So we have a natural hedge, again, on the revenue side,” he said.

Transurban chairman Lindsay Maxsted and secretary Amanda Street. Picture: AAP
Transurban’s contracts with state governments allow it to increase tolls to the greater of an agreed figure or the inflation rate. For CityLink, it is the higher of 4.5 per cent or inflation.
The meeting was held as Transurban revealed revenue jumped 12.3 per cent to $513 million for the three months to September.
Transurban operates tollways in Melbourne, Sydney, Brisbane and the US.
Revenue from CityLink — its most lucrative asset — rose 2.6 per cent to $169 million.
The rise came despite the average number of daily users falling 0.5 per cent to 829,000 transactions due to the Tullamarine Freeway-CityLink widening project.
While car trips declined 2.6 per cent over the quarter, truck traffic jumped 10.4 per cent.
As a result of new numberplate reading technology, the number of trips on CityLink being billed as light or heavy commercial vehicles has surged about one-third since February.
The technology has allowed Transurban to identify and reclassify motorists who did not correctly register their vehicle class with the tollway operator.
The company has also begun looking for a new chairman, with Mr Maxsted telling shareholders he may not serve out his new term.
Mr Maxsted, who has chaired Transurban for nine years, was re-elected to another three-year term.
“An orderly and co-ordinated succession plan for the next two to four years is in development,” he said.
Transurban shares closed 0.4 per cent higher on Thursday at $10.66.
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