Atlas Arteria Limited (ALX) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Atlas Arteria H1 2020 Results Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Graeme Bevans, CEO. Please go ahead.

Thank you, operator, and good morning, everyone. I would like to thank you all for joining us this morning. I'm joined on the call by Nadine Lennie, our CFO. And today, we will be presenting Atlas Arteria's results for the first half of 2020. Moving to Slide 4 in today's agenda. I'll start with the highlights of the half, and then hand over to Nadine to run through key financial matters. I will then provide an update on operational progress during the half and close with an overview of our growth strategy, the key priorities and outlook for the remainder of the year. We will then open to questions. Turning to Slide 6. I would like to start off by thanking our fantastic team members here at Atlas Arteria, APRR, Dulles Greenway and Warnow Tunnel to the exceptional job they've done during these unprecedented times. Our teams have maintained an unwavering focus on the safety and well-being of our employees and customers, maintained operations and continued to progress towards our 2020 sustainability priority. While our European businesses saw a significant drop in traffic from late March through mid-May, I'm very pleased to report that traffic has rebounded strongly to pre-COVID levels across both APRR and Warnow Tunnel. While operationally, it has been a challenging half, it has also been a very productive one and continues our transformation journey. In March, we finalized the transaction to increase Atlas Arteria's ownership interest in APRR. As we've said previously, this is transformational for our business, delivering enhanced governance rights and direct participation at APRR. Following the termination of the last Macquarie management agreements, we are now finally operating as a fully independent business. In late May, the Board's made the strategic decision to repay the MIBL facility. We funded this through canceling our half 2 2019 distribution and raised $420 million of equity via an oversubscribed placement. In addition, we raised a further $75 million in early July through a security purchase plan that was also well oversubscribed. I'd like to thank shareholders who've that participated in the equity raising for their support. The repayment of the debt facility leaves us with no corporate level debt, ample liquidity and an improved ability through the removal of covenant constraints to support APRR to take advantage of growth opportunities in France as they become available. Although we are clearly still in uncertain times, Atlas Arteria's balance sheet has never been stronger and together with strong cash flows from improving traffic at APRR, positions us well to weather the pandemic and pursue growth opportunities that arise. Today, we also announced distribution guidance for the first half 2020 of $0.11 per security. This distribution reflects the performance of APRR during the half, underpinned by the strength of the corporate and APRR balance sheets. Turning to Slide 7. And as previously announced, we saw significant decreases in traffic, and therefore, revenue as COVID-19 related movement restrictions affected traffic across our networks. Now we're turning to Slide 8. Traffic at APRR and Warnow Tunnel has recovered strongly since the end of June, now sitting at or above 2019 comparable levels. France started to ease movement restrictions on the 11th of May. And since then, we have seen strong recovery at APRR. As we've moved into the summer and holiday months in Europe, APRR has also benefited from domestic summer travel as people are choosing to stay in-country and take driving holidays. Warnow Tunnel continues to perform strongly, owing to its location in a region that has been substantially less impacted by COVID-19. New surrounding roadworks have supported traffic in the tunnel and underlying performance has been strong, with traffic for the second half to date returning to growth. The traffic recovery at Dulles Greenway has been slower than we've seen in Europe. As a commuter road, this is to be expected. However, it has retained 60% of its traffic during the half. I will touch on traffic at the Greenway later in the presentation. Turning to Slide 9. We are making strong progress across all our sustainability priorities for 2020. The safety of our employees and customers is our #1 priority. And in addition to actions taken to directly respond to COVID-19, we're implementing various initiatives throughout the business to reinforce the safety culture. NumA's protocols are an important part of this. We've also engaged consultants to conduct a customer behavior study in Warnow Tunnel to improve the safety at the toll plaza as well as improve customer satisfaction through improved processes for toll payment. You can see a range of initiatives outlined on the slide, so I'll just call out our few community, diversity and environmental initiatives. Supporting our communities, particularly during this time, is important. To this end, APRR donated masks to health care workers in France and also displayed messages of support along its motorways. In addition, both APRR and Dulles Greenway provided free travel to health care workers in support of the fight against COVID-19. We have actively pursued gender balance across the organization, including at a Board level. If we exclude me, we currently have equal gender representation across the nonexecutive directors of the 2 boards, and 53% of the total organization is female. We're currently revising our diversity framework through recruitment partners, and we're about to embark on our unconscious bias trend. We're also very pleased to announce that in September on the A48 in Grenoble, APRR will be opening the first dedicated lane for carpooling and low-emission vehicles in France. To enable this achievement, the innovative print tech solution utilizes advanced artificial intelligence technologies that analyze vehicle occupancy rates from both the front and the rear and in various conditions. With that, I'd like to now hand over to Nadine, who will present our financial performance for the half.

Thank you, Graeme. On Slide 11, we presented our income segment for the half and our management results which show more normalized earnings. And these reflect the statutory earnings removing notable items, which are not necessarily related to underlying operational performance. You would have seen us do this a few times now, but again, the idea is that the profit you see without these items essentially reflects underlying business performance. Underlying operational net profit after tax was $9.1 million, down 90% for the first half of 2019, and it looks like a large drop. So let me step you through the elements that led to these results. Toll revenue, which is the consolidated performance of the Dulles Greenway and Warnow Tunnel, decreased by 32% as a result of the lower traffic with the COVID-19 movement restrictions. If you look at the revenue performance from both businesses, you will see that stronger performance from Warnow Tunnel somewhat offset lower performance from the Dulles Greenway, but there's also some support from the average devaluation of the Aussie dollar coming through there as well. Movement in the other income line reflects primarily smaller IFRIC 12 adjustments in the prior period. In terms of costs, business operations costs were 13% lower than 2019. As variable costs reduced with lower traffic, we saw the benefit of the cost reduction programs at the Dulles Greenway, and there were lower IFRIC 12 costs. And devaluation of the Aussie dollar had the opposite effect on the expense line. Corporate costs were in line with previous guidance of around that $25 million per annum mark. The share of profits from associates reflects APRR. And while its EBITDA performance was [ 29 ]%, APRR has fixed costs such as depreciation that reduced net profits and therefore, our share of it. There's also the Eiffarie [indiscernible] this line item. The performance here reflects our 25% ownership until the second of March and then our 31% ownership for the remainder of the half. And this is different, of course, to the calculation of the distributions we received in March which is based on holdings at a point in time, and I'll discuss that later. So as you can see, our underlying operational net profit was disproportionately affected in the period by financing costs. And we'll talk about financing at the Greenway later. And the holding company facility, of course, as Graeme mentioned, was repaid in June. And this is a notable item. The Macquarie management fee relates to the final payment of management fees to Macquarie up to the 2nd of March when the APRR transaction was completed, and these fees will not be a recurring expense. We advised the market in May that we are expecting to take an impairment of USD 50 million to USD 100 million across holdings in the Dulles Greenway. And look, given the decline in traffic at the Greenway, even since May and uncertainty around how the U.S. economy will recover as a result of this COVID-19 pandemic, the boards of ATLIX and ATLAX decided that the impairment should really be at the top end of this range. And so they impaired their respective investments by a total of USD 100 million. And that translates to the AUD 152 million that you see there on the slide also in the account. I think it's important to reiterate that the Greenway does remain an important part of our portfolio, and the impairment doesn't reflect a fundamental change to the long-term outlook. We are working through a recovery strategy. But given its gearing structure, the business is more exposed to shocks than what we would like. And hence, restructuring the balance sheet will be a good outcome if it can be achieved. An additional notable item for this half is the FX impact of significant transactions, which is just an accounting item. It is noncash, and it provided a positive impact in the last half of the $15 million. Tax effect for the notable items, you can clearly then see the link between the operational performance that we've talked about and the statutory results. Moving on to Slide 12 and APRR's first half performance. As expected and as we've talked about, operating revenues were impacted by the COVID-19 movement restriction. Some operating costs responded to these, and we saw a 15% reduction in operational expenses, primarily because of the associated reduction in variable taxes. So there's only a small change in the EBITDA margin there. I will point out because we do have quite a number of questions about this and we've had questions in the past, the smaller net increase in the provisions item in the first half of the year was due to an increase in the forward maintenance obligations as calculated each half by APRR. And in this last half, they were offset by lower construction inflation indicators. But you can see there, only $8 million versus the $23 million in 2019. Despite challenging debt markets during the last half, APRR completed a series of debt transactions and did see at favorable rates which continued the reduction in average debt cost. You can see that the average cost of debt for APRR has come down from 1.5% to 1.2% and for Eiffarie, has come down from 0.9% to 0.7%. Moving on to Slide 13 in the current capital structure at APRR. APRR is in a very strong financial position. It is rated A- by Fitch, and S&P reaffirmed its A- rating again in April this year. And it's particularly notable that S&P also reaffirmed its stable outlook for APRR despite COVID-19 traffic impacts. During the half, APRR refinanced close to EUR 4.7 billion across the EMTN market, bank debt and commercial paper markets. The 2 Eurobond tranches both received strong support from bond investors and one that actually priced at the height of the pandemic in April. It was still well oversubscribed and competitively priced. APRR now only has the EUR 320 million of debt which will mature this year against liquidity of $3.1 billion. Turning now to Dulles Greenway on Slide 14. As we've talked about, operating revenues again impacted by reduced traffic and COVID-19. And as a result of this and as we've advised the market previously, the Greenway widepath is 1 of 3-year lockup test at the 31st of December this year, so that means that cash will be locked up until at least 2024. We are starting to see the benefit of some cost-saving measures, as I mentioned earlier, and we also saw variable cost reductions with reduced traffic. Despite all that, liquidity in the business does remain strong with USD 200-odd million in cash across both restricted and unrestricted reserve accounts, including the $79 million of locked cash at 31 December last year. Turning to our cash flow waterfall slide, which is 15. As many of you would be aware, dividend distributions from French companies are restricted to company net profits. And it's the APRR company net profit after tax specifically that drives the size of the distributions, i.e., the cash flow that we receive at Atlas Arteria. So let me say upfront that although we increased our stake in APRR on the 2nd of March, the chart is based on our 31% ownership because the waterfall shows the calculations of the dividends we received and our cash flows, obviously, during the half. And again, just to compare and contrast, the income statement reflects the equity accounting of our investment in APRR for the half. But the dividend we received during the half reflects the performance of APRR in the prior half and our ownership level at a point the dividend is made, which is the 31%. So starting on the left-hand side with Atlas Arteria's pro forma share of APRR consolidated net profit for the 6 months ended 31 December last year, it was EUR 133 million. Consolidated adjustments at APRR were only EUR 3.4 million, down from EUR 19 million in 2019, just reflecting timing differences of consolidation adjustments. Once these are removed, APRR company net profit is EUR 129 million. If you then remove the financing costs from the Eiffarie debt, tax and underlying costs, you then have the remaining EUR 126 million. If you convert this to Aussie dollars, you get the $206.8 million in distribution which is what Atlas Arteria received from MAF2 in March. From a head office perspective during the half, we paid the holdco debt interest, Macquarie's management fees, corporate costs, et cetera, which get us to $187.9 million in net cash operating inflow. Now we already had the AUD 1.4 billion equivalent in cash on the balance sheet at the start of the period as a result of equity raising in November last year. If we add the net operating cash inflow to this balance, which you can see there in the chart, we also closed the APRR transaction with its $1.3 billion equivalent cash outflow, with the raised cash in May by way of the placement, and you can see the net cash inflow of $412 million from that, and we repaid the holding company debt facility at the AUD 571 million there. And then a result of all of these, we had a closing cash balance of $141 million equivalent at the half year end. At the SPP close on the 2nd of July, we've added the additional $75 million to show the pro forma closing cash balance of $216 million there in that slide. Turning now to Slide 16 and talking about the respective balance sheets. And I've already really touched on aspects of this slide. So really, we've provided this as a summary of the balance sheet strength that you can see across corporate head office as well as the underlying businesses. So then on to our capital management strategy on Slide 17. As Graeme mentioned with today's results, we announced the distribution guidance of $0.11 per security, reflecting the performance of APRR over this last half. As we said in May, it was the Board's objective to reinstate distributions once the operating environment was more certain. And that dividends from APRR would form the basis of Atlas Arteria's distributions for the half. We're still very much in uncertain times, obviously, but we are well placed in terms of our capital positions, as I've said, both at the corporate level and at APRR. In terms of future guidance beyond this upcoming distribution, what we can say is that distributions from APRR will continue to form the basis of Atlas Arteria's distributions in the short term. In terms of our overall cash position and capital management activity, the Board want to ensure that the company maintains adequate liquidity to protect against financial risks while also supporting the immediate needs of the business. And this is a heightened focus in times of uncertainty, but also there is opportunity. Appropriate gearing is also important. In order to create sustainable distributions and reduce risk, it would be preferable if Dulles Greenway and Warnow Tunnel provided sustainable distribution flows. In terms of gearing, we've now repaid the holding company debt facility, and we have the ability to support growth at APRR and any additional leverage at that level. Holding company debt may be a feature as we go forward, but allowing for growth in the underlying businesses is important. Maintaining capacity for balanced funding over time from different markets, including debt and equity funding, is also important, so we have flexibility for using the right capital to support growth. As I said before, we do not intend to keep cash on the balance sheet that cannot be used efficiently to manage risk or create value for securityholders and sustainable distribution growth remains our focus. Before I hand over to Graeme, I will just touch quickly on the U.S. sale -- security sale facility, which was launched in July, with the offer period closing yesterday. This transaction, although a smaller size, it is significant and that it will enable Atlas Arteria to access the U.S. for future capital raisings, which will be a material advantage, in particular, for our U.S. securityholders who will now be able to participate in our future equity offering. With that, I will now hand over to Graeme, who will talk through our operational update, growth strategy and outlook.

Thank you, Nadine. Turning to Slide 19. While it's been a challenging first half for all transport infrastructure businesses globally, APRR and ADELAC moved quickly to meet those challenges. During the lockdown period, the teams at APRR and ADELAC ensured the day-to-day operations of the roads continue, and customers were able to continue to use the network. Business continuity plans were quickly implemented that saw people working in shifts, thereby limiting the potential spread of the virus within our workforce. I'm very pleased to say we currently have no reported active cases of COVID-19. Importantly, as I mentioned earlier, APRR continued to support its communities through COVID in a number of ways. On the 11th of May, we've seen the progressive easing of movements, restrictions. And while there are still some social gathering restrictions in place, schools and international borders have been opened since late June. I cannot overemphasize the importance of the toll road systems for efficient road travel in the economy of France. The APRR network is part of this system and allows for the efficient movement of goods and services around the country in Eurozone, as well on its local commuter, intercity and tourism traffic. As a result, traffic recovery from the lockdown has been swift. France opened its borders to the EU and only a very limited set of other countries on 1st of July. And despite these limitations, we've seen traffic numbers already back at 2019 levels in recent weeks. We continue to make operational improvements during the half by completing the installation of Wi-Fi at all service areas, rolling out additional very high-performance electric vehicle charging stations, and growing the number of active badges or transpondence (sic) [ transponders ] used on our network. Having worked through business continuity plans, established COVID safety plans, operational ramp-down and quick ramp-ups, the team at APRR are now very well prepared for any second wave. We've seen case numbers start to creep up in France, but no doubt as a result of great summer holidays. There hasn't been an associated rise in the numbers of hospitalizations and deaths across Europe, with rates at or near to low record daily levels. While we understand the French authorities remain cautious, it appears to be pursuing a strategy of management rather than elimination or zero risk. In recent declarations, another national lockdown has been rolled out and less as a last resort. In favor of more localized strategies, including targeted lockdowns, mask wearing has been declared compulsory in several areas, including crowded thoroughfare areas. Despite this, we remain cautiously optimistic as to what the future might hold. Although we are not in a position to predict how the pandemic will play out, we are comfortable that APRR is well positioned in terms of management capability and financial strength to deal with this uncertainty. Moving to Slide 19 (sic) [ 20 ]. You can see how APRR has continued to deliver on its various capital commitments. Work on some projects was suspended under the COVID-19 restrictions. However, everything has now recommenced with all of the recommended safety arrangements in place. So although we saw some delays in spending during the first half, this stage, we anticipate no significant change to our overall delivery time lines or estimates for committed capital spend. The RCEA project is moving forward with the concession contract signed on 10th of March, and APRR taking over management of the site at that time. There are a series of remaining approvals in progress, and RCEA received environmental authorization on 7th of August. Turning to the Greenway on Slide 20 (sic) [ 21 ]. I'm very pleased to announce that we've hired Ms. Renée Hamilton as Dulles Greenway's CEO. Renée is an infrastructure and transportation leader committed to the local community. She brings a wealth of knowledge, having been a senior member of the Virginia Department of Transport (sic) [ Virginia Department of Transportation ], responsible for planning, project development, construction and maintenance. She's also worked across all levels of government when implementing various transport solutions in Northern Virginia, so she understands stakeholder management extremely well. Renée is a really important leader in our turnaround story. From a safety perspective, much like head office and our other businesses, we've encouraged people who can work from home to do so, an updated and reinforce safety protocols, with thankfully no reported active COVID-19 cases at this point in time. This road has been impacted by lockdown measures in Northern Virginia, but it continues to be an important road for the community in the local area. I'll note that we've retained 60% of our traffic for the half, and this is despite strict movement restrictions that were in place for most of the second quarter. People mobility data for the local area suggests that people are moving as much or more than they were earlier this year. So nonwork-related travel, although travel to and from places of work remains down at historical levels. At Dulles Greenway, we've seen weekday traffic affected by remote working and remote learning, which is expected to continue as schools return post the summer holidays. Mobility data also shows that public transport usage in surrounding areas has fallen further than private vehicle usage. As a commuter road, the Greenway is well positioned to offer a good solution to travelers as they return to work. Regarding the SEC rate case. COVID-19 resulted in a short delay in the procedural time line. With the public hearings now complete, the final order is expected by early '21. In terms of construction work during the half, Phase 2 of the DTR Connector was completed slightly ahead of schedule, together with Phase 1 completed late last year. The project will help ease traffic flow at the connection of the DTR once traffic volumes start to return to normal and peak. During the half, we took the opportunity presented by lower traffic to move forward with western end ramp reconfiguration works, which are now operational. Moving to Slide 22. The actual performance of Warnow continues to be strong. With all of its bank covenants met, net cash flows are still being swept to lenders. As Nadine mentioned earlier, we also continue to consider opportunities to create sustainable distributions from this business. Turning now to Slide 24. Atlas Arteria is well positioned to play a part in the economic recovery of the regions in which we operate. With government debt at record levels, the role of the private sector in the development and maintenance of road infrastructure has never been more important. Further, we see significance in accelerating government spending on infrastructure in each of our markets, aimed at providing economic stimulus in the wake of COVID-19. As part of the French government's infrastructure agenda announced in 2018, there are over $10 billion in spending in the pipeline in France. In addition, in May '20, French government announced a large plan or a launch or stimulus plan to stimulate the economy out of the COVID-19 downturn. An important element of the plan or launch is that regions may be delegated authority to implement or assist to fund projects. The APRR leadership has always maintained a very strong relationship with regional authorities as well as the national government and has been active in positioning the business as a partner of choice. As I mentioned earlier, the RCEA project is moving forward. We also continued to evaluate near and longer-term opportunities to expand our portfolio in OECD geographies. Turning to Slide 25. We've outlined the key priorities and our outlook for the second half. At the corporate level, we are focusing on opportunities to create sustainable cash flows and lengthen average concession terms across our portfolio. Delivery against our sustainability priorities is also a focus. Traffic at APRR has returned to 2019 levels. And although we cannot predict the future of COVID-19, the resilience demonstrated in first half of '20 means we are cautiously optimistic for the second half. At Dulles Greenway, under our new CEO, our focus for the second half will be on finalizing the SEC rate case with a decision expected, as I said, by early '21. We will continue to develop our relationships with key stakeholders, including the local community by continuing our discussions on distance-based tolling to better meet the needs of the community. Finally at Warnow, as traffic has returned to growth, we continue to explore the possibility of restructuring its balance sheet to better support the business and release distribution flows. Going to Slide 26. Our approach to investment opportunities and the criteria for these has not changed. In our first year of internalization, we've built a very strong team in multiple geographies across operations, development, data management, traffic forecasting and financial assessment. All of these capabilities come together in a highly engaged, transparent and ambitious culture and underpin the disciplined approach on growing shareholder value. In conclusion, on Slide 27, operationally, the safety and well-being of our people and customers continues to be our #1 focus. We've made a strong start to the second half, and we are well positioned not just to weather the COVID-19 pandemic but with our strengthened balance sheet to support the strong pipeline of growth opportunities that we see ahead. Finally, the Boards have provided distribution guidance of $0.11 per security for the first half of 2020 based on the performance of APRR during this period and the strength of the corporate and APRR balance sheets. With that, I'll hand back to the operator for questions.

[Operator Instructions] The first question comes from Rob Koh with Morgan Stanley.

Please, can I ask one question about the French tax situation with the, I believe, confirmation of the corporate income tax cuts? But wonder -- and it may be too early to say, but can you comment on the previous proposal to index the motorway tax at, say, 70% of inflation? Is that proposal still being talked about? Or is there any update?

Rob, it's Nadine here. I'll take that question. So as you said, yes, the Prime Minister came out yesterday and confirms that the legislated corporate income tax rate will remain in place, which is good news. There may also be some room for some general other, what we would call, operating tax reductions, but we're yet to hear any confirm on those. In terms of the specific TAT tax, so we -- APRR is still working through arrangements on that with the government.

Okay. That's fine. And then can I ask a question about this dynamic car forming lane, the A48, which sounds very interesting, using AI technology to work out if there are real people sitting in the car. If -- can you just perhaps explain the tolling structure for that? Are such cars toll exempt and who bears that revenue risk?

It is a toll road, and everyone effectively is paying the toll. The benefit of the lane is to give priority to HOV occupants in that lane and electric vehicles or nonemission seeking vehicles. So it's a benefit within the road network to those users.

Okay. Yes, it sounds like a win-win. All right. And then one last question, if I may, on the Dulles Greenway rate case, which I understand is ongoing. So if you can't comment, that's fine. But I guess there's a considerable amount of locked up cash at the asset that has been for some time. Is that considered part of the asset base upon which the SEC should award some kind of reasonable rate of return?

It is, but it makes no -- there's no materiality in that cash relative to the outcome.

The next question comes from Ian Myles with Macquarie Group.

Just in terms of the -- I guess, the France. Historically, I think we've seen a lot more activity around the budget cycle associated with development. So I was just wondering when you might see the French government or different parts of government move on maybe some of the projects which are shovel-ready.

Yes. So we've been working continuously with government over a long period of time in terms of promoting opportunities in that context. The Minister for Transport has asked us to present our ideas to accelerate the ecological transition in [ toll roads ] and the biodiversity recovery, which is one of the key focuses of planned or launch. And they want those projects to contribute to the economic stimulus. That could lead to a massive development to EV charging points, multimodal hubs, additional wildlife crossing lanes and lanes dedicated to HOV or buses along the lines that we're seeing in Grenoble. Noting the new interchanges has secured parking lots for heavy vehicles and a range of other things that we've presented. Those discussions are ongoing and they're progressing well, but it's too soon to talk about the content or dollar value. And equally, the compensation mechanisms for those are far from clear.

Is it an industry-based discussion or is it very much company-specific?

It started as our approach in the context of these environmental type approaches, but it is moving towards, as it usually does in France, to being an industry-wide discussion.

Okay. And can I just ask a couple of technical questions? The Eiffage fee associated with managing the assets now, I think that might be appearing in the other Eiffarie FE cost line. I was just wondering because I thought the fee was about a minimum of EUR 14 million or, I think, 0.055% of revenue. And given the revenue shock, it would have been a little bit lower. Is there something I don't understand?

So it's the lower of those 2 measures.

And it goes in at the APRR line, not the Eiffarie line, coming through in the operating expenses.

So that actually has come through in the operating expenses of APRR because that's actually a gain in other profit -- that's actually a small profit like last year?

I'm not sure I follow.

Okay. So the management fee at the APRR level, whereabouts does it appear? Because external charges are down, and that would have been a pretty significant increase in external charges.

Still a significant increase.

Of about EUR 7 million?

No, because…

No. So in that order, so it comes through across those various operating cost lines.

Okay. Then can you explain what the EUR 6.8 million is in the Eiffarie cost?

So just to complete on that one whilst Nadine finds that data. The commencement date for the fee with Eiffage was the settlement, which was 2nd of March. So we're talking a third of the quarter. So we will see the full effect of it later in the full year results.

Okay. And in terms of that EUR 6.8 million?

Yes. So it's the Eiffarie facility refinancing cost.

Okay. Okay. That's great. And on the CapEx side for APRR, I think EUR 450 million was sort of the guidance which Eiffage has historically provided. Do you think that's actually an achievable target this year, that you can actually ramp the spend rates up in the second half? Or is it going to push into set next year?

A very small amount of it will push into next year. It will be a little bit lower this year than forecast. But I think we're expecting EUR 450 million this year, EUR 450 million next year and EUR 350 million in '22.

The next question comes from Simon Mitchell with UBS.

Just a question on the A79 project. You've talked about all the CapEx numbers for APRR being ex that project, certainly the forward-looking comment. I had an understanding that the ownership of that project was pretty much 99.9% Eiffage and that there would be -- wouldn't be any capital requirements from APRR for that project. Is that right? Or is the situation different?

It effectively was structured in that way for bidding purposes. Our expectation is it will be a wholly owned APRR entity.

Okay. So the capital requirements for that project, you would expect to be totally funded out of APRR?

Yes. So we're expecting EUR 200 million this year, EUR 300 million in '21 and EUR 50 million in '22 to complete it.

Okay. Great. Good to have that clarified. And then just on the corporate cash balance, the pro forma $216 million. So think about potential purposes for that, I guess the main one that comes to mind is an eventual balance sheet restructure within DG. Is there anything -- any other reason to be holding that level of cash?

So I guess, as we've stated, we are still in an uncertain time. So ensuring that we have probably more than what we would usually expect for the corporate cash needs of the business. But in addition to that, we've highlighted that we would really like to be able to create sustainable distributions from each of Dulles Greenway and Warnow. So to the extent that there are opportunities for us to deploy cash to achieve those objectives, then we've obviously got some cash to be able to do that.

And when you talk about that, are you meaning more in terms of, I guess, smoothing distributions?

No. [indiscernible]

Yes. So first and foremost, and let's just take Warnow Tunnel as an example, where we do have cash that is being swept through to lenders under the current structure. So the extent to which we can create sustainable gearing at each of the businesses, which would then allow for not only a sort of better debt structure to support the ongoing growth of those businesses, but allow distributions through to the Atlas Arteria level and then ultimately, our shareholders.

Okay. So a more consistent pass-through of cash flow from the underlying assets?

Yes.

Okay. And I guess, to ask the question a different way, are you seeing any opportunities across the market at the moment for deploying capital into brownfield or greenfield projects apart from what we talked about with APRR?

Yes. So we are looking at a number of opportunities and have looked at a number of opportunities. If we find a compelling opportunity, then we'll certainly consider it. Our priorities at the moment are the growth that we believe we can achieve within APRR and the restructuring of balance sheets that Nadine referred to, to get sustainable distributions from our existing businesses.

The next question comes from Owen Birrell with Goldman Sachs.

I just wanted to add just a further question to Simon's question just then. The $216 million at present on the corporate balance sheet, I know you highlighted the opportunities to deploy that to restructure balance sheets at Warnow and Dulles Greenway. Can I just ask, firstly, on APRR? I think you previously indicated that the growth projects would be funded at the APRR level through debt funding. Is there any expectation that the capital call from APRR to fund some of those growth projects?

We did not expect that. One of the key reasons for unwinding the MIBL debt was to effectively relieve the covenant constraint that, that put on us at that level on levels of borrowing at APRR. With that constraint removed, we significantly increased the capacity of APRR to borrow.

Right. Just at the group level, are there any major CapEx or cash outflows that you expect to draw on that $216 million in the coming 12 months?

None beyond what we've explained.

Okay. And just finally, I noticed in the growth opportunities slide, you have circled Australia as a potential market. Are any -- can you give us a bit of a sense of some of those opportunities that you may see in the Australian market or that you're looking at?

Look, it's a natural market for us to look at. Obviously, the opportunities have to be attractive. There's no active processes or projects at this point in time.

And do you have a preference for projects that you will actively manage yourself or you become a financial partner within?

We would have a preference to have investments in businesses in which we had significant influence at the minimum.

[Operator Instructions] The next question comes from James Nevin with RBC.

I was just hoping to get some color maybe on the potential reduction of debt at Warnow and Dulles Greenway and like how far advanced you are on those discussions. Like are you actually able to talk to debt holders yet? Are they willing to come to the table to negotiate on that? And in those types of discussions, is it like an NPV type discussion on the remaining debt and interest costs? And have you come to some sort of arrangement on that to be able to maybe repay that debt early?

Look, our focus is with, as other questioners have asked, with $216 million in cash sitting on our balance sheet. It obviously makes it a high priority to move forward with those projects as quickly as we can but in the context of any such move being accretive to our investors.

Right. And then I suppose just on the pipeline of projects in advance, the EUR 10 million pipeline you're talking about. And I thought would you be in conversations with -- on any specific projects yet on -- and advancing those? Or is that still sort of at the stage you're saying there's like an expectation that some of this stimulus spending will come through?

Look, we sort of explained in some detail what's happening in France, and we don't have anything beyond that to say at this point in time.

The next question is a follow-up from Rob Koh at Morgan Stanley.

Look, I guess, within the toll road community, there's a small but low following, looking at the weekly traffic updates from Atlantia. And the last couple of weeks of prints are actually showing some moderation in the recovery. I just wonder if, with your expertise, Graeme, in toll roads more generally, if you could give us any kind of guidance as to the basis risk for using Atlantia traffic versus APRR traffic, if that's possible.

Look, as you know, we report traffic on a quarterly basis, which I think gives the best trend perspective you can. When one looks at weekly traffic, there are so many things that come into the comparisons from week to week, year to year that make sort of a dangerous tool. So the context, I think, is that longer-range data gives better information on -- at various times of year. SANEF can be an indicator as to what's happening in France. But during holiday periods such as now, I don't see it as a good indicator.

The next question comes from Nathan Lead at Morgans Financial.

Just 2 for me. Just the first up, was there any fiscal support like a French sort of JobKeeper that supported the cost of the business and the APRR cost of the business during the period?

No. We deliberately chose not to, so we have not taken such support.

Okay. And second question is ultra-low bond rates around the world. Are you starting to see those being passed through in terms of sort of project return discussions both with unlisted investors as well as your sort of government clients you're talking to?

I think people will have a realistic perspective of where real bonds historically trade and tend to use that as -- on a real basis, to create an artificial or a synthetic risk-free rate seems to be the most practiced methodology.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Bevans for closing remarks.

Thank you, operator. I very much appreciate the support all our shareholders have given the business during what's been a very trying period of the company. We're very pleased to have the company in a very strong position to be able to reinstate distributions for the first half and to move forward with future growth opportunities for the business over the coming months. Thank you for your time.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.