Thursday, September 30, 2010

Clem7 bosses paid fat bonuses despite tunnel's poor performance

FIVE managers at RiverCity Motorways, the company that owns the troubled Clem7 tunnel, have been paid more than $1 million in bonuses.
Documents reveal  that the five were paid the incentives based on targets which included opening the road and building strong relationships with stakeholders.

The payments have been defended by RiverCity chairman Robert Morris.

RiverCity Motorway Management Ltd on Monday reported a $1.67 billion loss for the year to June 30, and said its ability to continue as a going concern would depend on future traffic levels, the tolls the group was able to charge and arrangements with its group's financiers.

 The massive loss was largely the result of the $1.56 billion writedown on the value of the Clem 7, due to much lower-than-expected traffic volumes in its first five months of operation.

Despite this, a quick look at the company's preliminary financial report reveals that CEO Flan Cleary was paid $370,960 on top of his annual salary of $410,670.

Chief financial officer Christine Hayward collected a $229,312 bonus on top of her $261,401 salary. Communications director Anthony Havers was paid an extra $189,013 on top of his $233,068 annual salary; engineering manager Colin Richmond also received $189,013 to supplement his $224,436 salary .
Former customer  operations manager Teisha Peterson, who resigned earlier from her $166,645-a-year post, received a $115,326 bonus.

The company's report says bonuses are linked to the achievement of "individual key performance indicators" but are not "related directly to total unitholder returns".

RiverCity Motorway shares closed at 1.7 cents on Thursday.
Chairman Robert Morris defended the bonuses, saying the payments were linked to the  completion and opening of  Clem7.
“The remuneration of the company’s senior executives reflects the successful delivery of the CLEM7 seven months ahead of schedule, on-budget and to the required quality standards,” Mr Morris said.
“Delivering Australia’s longest road tunnel and establishing a new tolling business are massive undertakings.
“The remuneration levels reflect the significant contribution the executive team made during the three and a half year project delivery phase,” he said.
He said RiverCity directors"used independent advice on comparative companies when setting remuneration levels".
The bonuses come as it was revealed  seven directors on the RiverCity Motorway Group board sucked out almost $670,000 in salary and fees over the past year.
Chairman Robert Morris, a former director at Leighton Contractors, attended 24 meetings in the year and was paid $205,000 in salary and fees, equating to roughly $8540 a meeting.

RiverCity's financial report, issued Tuesday, showed it paid a total of $667,660 in salary and fees to its board of directors for the year to June 30. That equates to an average cost of $26,706 for each meeting held by some or all directors.
The annual report said the directors ``note the group's ability to continue as a going concern'' will depend on traffic, toll prices and keeping its bankers on board.

The company has hired Integrated Management Information Systems to provide ``an expert view'' on traffic volumes and its report is expected by December 31.

Yesterday RiverCity directors were unavailable or unwilling to comment on the level of examination they required of the company's original traffic forecasts.

A spokeswoman for Ken MacDonald - who is deputy chairman of QIC Ltd and consults to law firm Allens Arthur Robinson - said he would not comment and that any questions related to his RiverCity role should be directed to RiverCity.
RiverCity's report shows Mr MacDonald in the year to June 30 attended 23 meetings and was paid $100,000 in cash salary and fees, equating to about $4350 a meeting.

There were 25 meetings of RiverCity directors in the year, including 15 full meetings of directors and the remainder involved meetings of up to six directors on risk and compliance, remuneration and finance strategy.

The company on Tuesday said that, after the weak traffic volumes in Clem7's first five months, its directors had ``considered a number of different traffic volumes and tolling revenue forecast scenarios''.

It said that - based on the directors' forecast scenarios - the group would have sufficient cash reserves on hand to fund any cash shortfalls for the next 12 months.

The company then said that directors were ``cognisant that a significant improvement in traffic volumes, revenue growth and close management of expenditure'' would be necessary for the group to stop drawing on cash reserves, meet its first debt covenant test in June 2012, and prevent default''.
See the financial report here.

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