407 operator's profits up sharply

The Toronto Star, Feb. 24, 2003. FROM CANADIAN PRESS

Liberal decries 2002 revenue increase for 407 toll-highway operator

A 27.4 per cent rise in revenues reported today by the operator of Highway 407 is further proof that the Conservative government's decision to sell the toll road has been a costly one for taxpayers, Opposition Liberals said today.

"This has turned into a goldmine for the owners and a bottomless pit for the users," said Liberal finance critic Gerry Phillips.

"This is the most lucrative toll road in the world."

Today, 407 International Inc. reported revenues of $311 million in 2002, with an operating profit of $207.5 million.

When the highway's sale was announced almost four years ago, it was seen as a coup for the government, which doubled its original investment of more than $1.5 billion.

Critics, however, said the sale was a quick cash grab to fulfil campaign promises.

They also expressed concerns about rising toll costs.

As of Feb. 1, tolls went up 1.45 cents a kilometre in rush hour, the fifth increase in 40 months. Toll rates can be raised as long as traffic levels continue to increase.

"The reason why they love this toll road is it's the only one in the world where the tolls can go up without restrictions," said Phillips.

"Every other privately owned toll road has some restriction on it. This one has virtually no restrictions."

But a spokesman for Transportation Minister Norm Sterling said the sale of 407 has resulted in improvements to the highway.

"(The deal) put the 407 ETR company on the hook for expanding the highway," said Bill Parish.

"They're responsible for any future widening that's required."

The operator of the 108-kilometre east-west highway - co-owned by Spanish construction company Grupo Ferrovial (67 per cent), engineering group SNC-Lavalin (TSX:SNC) of Montreal (17 per cent) and Macquarie Infrastructure Group of Australia (16 per cent) - said today it had a fourth-quarter net loss of $33.6 million on revenue of $80.8 million.

This compares with a loss of $35 million on $72.6 million in the final quarter of 2001.

After accounting for depreciation, amortization, financing costs and taxes, the consortium booked a net loss of $99.1 million, compared with a loss of $96.5 million in 2001.

"We're actually pleased with the net loss, it is actually within our expectations," said Dale Albers, a spokesman for the toll route.

There were 93.2 million individual trips on the highway last year, up 8.2 per cent from 2002, with the total number of vehicle kilometres travelled up 12.8 per cent at 1.8 billion.

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