Part of the appeal is a high level of recurring revenue with built-in price escalators, particularly if roads are located in an area with a growing population.
A toll road, says the Cambridge Dictionary, is “a road that you have to pay to use. Your journey will be quicker but more expensive if you take the toll road”.
It is important to understand that toll road investors do not own the physical land or the road they build; they merely own the right to collect tolls for a specific period, which is known as the concession period. After this, the road reverts to the government and the debt is repaid.Dive says that the finite life of a toll road concession is sometimes used as a reason not to invest in the sector.
Dive says toll roads are long-dated monopoly assets, as no rival will build a competitor road next door. Once construction is complete, ongoing costs for a toll road are low which results in high margins, up about 80 per cent.Dive also likes the government support for the sector and uses the example in NSW, where Revenue NSW collects unpaid tolls on behalf of Transurban and suspends a driver’s licence if they do not pay.
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