The outlook for the US toll road industry remains positive, reflecting the expectation of continued strong traffic and revenue growth in the next 12 to 18 months, according to Moody’s Investors Service in its yearly outlook, Tolls Roads – US: 2017 Outlook – Strong Traffic and Revenue Growth Support Positive Outlook.
Moody’s estimates that median traffic growth among 48 rated toll roads will range from three per cent to four per cent in the remainder of 2016 and into 2017, and that median toll revenue will grow from five per cent to six per cent at the same time.
Traffic and revenue growth have surpassed expectations so far in 2016, according to Maria Matesanz, a Moody’s senior vice president. “We expect this to continue in 2017 based on economic growth and relatively low gasoline prices,” she says.
Rate increases will also support toll revenue growth. Of the 48 Moody’s-rated toll roads, approximately 30 per cent have put annual toll increases or inflation-indexed toll increases into effect. Moody’s expects inflation-indexed toll increases to proliferate as electronic toll collection (ETC) becomes the norm, particularly for new systems.
Historically, median revenue growth has been two to three percentage points above median traffic growth, largely on account of toll rate increases; ETC systems will likely widen this gap Matesanz says.
Leverage remains a salient credit risk for US toll roads, which finance most of their capital spending with debt. A growth in toll road debt, without offsetting increases in operating revenues, would exert negative credit pressure on the toll road sector.
Moody’s could revise its outlook to stable if traffic growth stalls between zero and three per cent, or if revenue growth is less than four per cent. If traffic growth turns negative and revenue growth falls below two per cent, Moody’s could revise its outlook to negative.
Moody’s estimates that median traffic growth among 48 rated toll roads will range from three per cent to four per cent in the remainder of 2016 and into 2017, and that median toll revenue will grow from five per cent to six per cent at the same time.
Traffic and revenue growth have surpassed expectations so far in 2016, according to Maria Matesanz, a Moody’s senior vice president. “We expect this to continue in 2017 based on economic growth and relatively low gasoline prices,” she says.
Rate increases will also support toll revenue growth. Of the 48 Moody’s-rated toll roads, approximately 30 per cent have put annual toll increases or inflation-indexed toll increases into effect. Moody’s expects inflation-indexed toll increases to proliferate as electronic toll collection (ETC) becomes the norm, particularly for new systems.
Historically, median revenue growth has been two to three percentage points above median traffic growth, largely on account of toll rate increases; ETC systems will likely widen this gap Matesanz says.
Leverage remains a salient credit risk for US toll roads, which finance most of their capital spending with debt. A growth in toll road debt, without offsetting increases in operating revenues, would exert negative credit pressure on the toll road sector.
Moody’s could revise its outlook to stable if traffic growth stalls between zero and three per cent, or if revenue growth is less than four per cent. If traffic growth turns negative and revenue growth falls below two per cent, Moody’s could revise its outlook to negative.
