On track: Investment set to improve revenue for toll operators

Toy cars and trucksConsistently growing commuter numbers and increasing travel distance and frequency have outpaced investment in transport systems over the past five years. Population growth and a greater number of vehicles have increased traffic volumes, intensifying congestion on both toll and toll-free roads. The rising population has also increased the number of railway transport users. Rising rail and road freight volumes have boosted demand for transport over the five-year period.

Firms in the Toll Road Operators industry have taken advantage of the lack of governmental investment in railway transportation, rising household discretionary incomes, higher commuter numbers and greater road freight volumes by increasing toll prices to boost revenue and profit. Industry revenue is expected to grow at an annualised 3.7% over the five years through 2017-18, to $2.8 billion. Transurban Group, in particular, has posted strong results over the period, including a recent announcement of $331 million profit for the six months ending December 2017.

Railway construction projects depend on public-sector investment. However, federal and state governments have been reluctant to commit to funding large infrastructure projects over the past five years. The completion of several major projects, such as the Roy Hill heavy haulage railway in Western Australia and Regional Rail Link in Victoria, is expected to further reduce revenue for railway track construction firms. Revenue for the Railway Track Construction industry is expected to decline at an annualised 4.0% over the five years through 2017-18, to $7.1 billion.

Public investment in transport infrastructure is forecast to grow over the next five years. New toll roads and railway projects have been announced, primarily by the Victorian, Queensland and New South Wales governments, which are expected to boost revenue for both toll road and railway track construction operators over the period. The Toowoomba Second Range Crossing in Queensland is due to be completed in late 2018. The NorthConnex toll road in Sydney is anticipated to be completed in 2019. The West Gate Tunnel in Melbourne is forecast to be completed in 2022, with CityLink tolls increasing by 4.25% each year from 2019 to 2029 inclusive to fund the project. Early works on the Sydney Metro City and Southwest rail link have begun, with construction forecast to continue through 2024. Construction of the Melbourne Metro Rail project and the Inland Rail freight network is anticipated to continue over the next five years.

Tunnels are forecast to feature more prominently in both toll roads and railway track construction over the next five years. The NorthConnex toll road in Sydney includes significant tunnelling, and the North East Link toll road in Victoria will include five kilometres of tunnel. Construction of the West Gate Tunnel in Melbourne is underway, and the F6 Extension in Sydney will incorporate four kilometres of tunnel. The Sydney Metro Northwest rail network will include 15 kilometres of tunnels. The Sydney Metro City and Southwest rail link will include tunnels, while the Melbourne Metro Rail will have five underground stations.

Road and rail freight volumes are projected to rise at a faster pace over the next five years than they did over the past five years. This is forecast to boost demand for transport options and the need for toll roads and railways from commercial customers. Population density in major cities, congestion on toll-free roads and the number of vehicles are also set to increase over the next five years, supporting demand for toll roads and railway track construction.

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Relevant industries include:

Toll Road Operators

Railway Track Construction