Atlas Arteria Limited (ALX) Earnings Call Transcript & Summary

Welcome to Atlas Arteria's Investor Day, the first since we internalized management 2.5 years ago. We are all in different places around the world, and I take this opportunity to acknowledge and pay my respects to the traditional custodians of all the lands and waterways on which we are located. I also pay my respects to elders past, present and emerging. Today is an opportunity for us to provide a broader perspective of our strategy and key operations. We're also very pleased to introduce you to a number of our senior management team and Board members, who will provide more detailed insights into our businesses. We also welcome a guest presenter from Natixis in France. We expect today's session to run for approximately 2 hours. Our program for today includes discussions about the French and European economies and the political landscape in France and Virginia as well as some interesting insights into traffic, forecasting and performance in our businesses. At the conclusion of the presentations, we will conduct a Q&A session. [Operator Instructions] You may submit your questions at any time during the presentation, and we will do our best to address as many of them as possible during the Q&A session. Before I give you an overview of the strategy we are working to, there are some key takeaways I would like to impart. Firstly, traffic remains very strong in Europe, while in the U.S., it continues to recover. The political environment in Europe remains supportive of growth at APRR, and we continue to cultivate relationships at all levels of government to deliver on this. In Virginia, where the election's complete, we're positioning the business for the upcoming legislative sessions and continuing to build stronger stakeholder relationships in the region and with the incoming governor and his administration. We're very proud of the internal capabilities we are developing within the business, some of which we are outlining here today. Our financial position remains very strong, positioning us well to take advantage of opportunities as they arise. I will now touch on our strategy, which is focused on generating value for our shareholders. Let me start with who we are and where we see our strengths. Investors in Atlas Arteria have exposure to a fabulous portfolio of 4 international toll road businesses. We either own and operate these ourselves or in the case of APRR and ADELAC, we own in partnership with Eiffage, a best-in-class French construction and concession company. We are very diversified in terms of the jurisdictions in which we operate and in terms of the type of roads we own. Those include a 2,300 kilometer road network, an important consumer and critical pan-European trade route with APRR in France; a commuter road in the Dulles Greenway, Virginia; and a cross-city tunnel in Warnow, Germany. We have a nimble and passionate team both on the ground and at each business and at our corporate head office with a strong track record of successful strategy development and execution. As a team, we have a deep history in successful investing and thinking outside the box, and we are adept at unlocking value in complex multiparty transactions. We are also building distinct capabilities, including in traffic forecasting, which you'll hear more about today. We have strong relationships with governments and are well positioned to work with them as they seek to solve critical infrastructure problems. This in itself creates a rich suite of opportunities for owner-operators like us, and we're in a strong financial position with a robust balance sheet to take advantage of these opportunities as they arise. Our strategy is to leverage all these strengths to improve the cash flows from each of our businesses with the ultimate goal of growing value and distributions to securityholders. To that end, we are focused on reducing legacy complexity, maximizing operational efficiencies in our existing businesses to improve margins, applying a disciplined capital management approach to underpin distributions, lengthening our average concession life and diversifying and managing our risks. As you know, in infrastructure, everything takes time and so we are very pleased with the progress we have made in the 2.5 years since the internalization of management. The discipline and consistent execution of our strategy in this time has significantly decreased head office management costs relative to the fees formally paid to Macquarie; has seen us increase our stake in APRR to 31%, enhancing our governance rights and access to cash flows. We have restructured the shareholders' agreement at APRR to remove value-destroying poison pills and won the tender for RCEA, which will be a positive addition to the portfolio. Last year, we successfully restructured our balance sheet to support future growth opportunities in France and across our businesses. And earlier this year, we restructured Warnow Tunnel so that for the first time, we are receiving distributions. The implementation of our strategy since internalization has materially increased the value of both APRR and Warnow and our cash flow from them, and in doing so, significantly improved the value of Atlas Arteria. But there is more to do and a lot more value to unlock. We have strong growth potential within and external to the current businesses to deliver growth to our investors. Some immediate opportunities within our current portfolio are pursuing growth at APRR through bidding for new concessions in France, which are coming progressively to market. We've had success in winning RCEA, and we are working with various levels of government to achieve capital works projects that enhance value and extend our concessions. We are also working on restructuring the Dulles Greenway concession to introduce distance-based tolling and improve the efficiency of the road network in Northern Virginia. We're very excited about the opportunities we have ahead of us and are highly confident that we have the team and the strategy to deliver on it. With that, I'm very pleased that we have Jean-Francois Robin with us today. Jean-Francois is the Head of Global Market Research at Natixis, one of France's leading banks. He's among the experts consulted by the European Central Bank's Market Contact Group and by the European Commission and Parliament. Speaking to us from Paris, he will provide an update on the French and European economic environment.

Hi, everyone. Welcome to Natixis CIB. I'm Jean-Francois Robin. I'm Head of the research within Natixis CIB in Paris with teams all over the world. We are here to talk about our scenario, global scenario and especially a bit of a focus on France. A lot of things are happening or about to happen in France. So that will be probably the bulk of the focus of today. I hope you are back to the office or if you are homeworking, that you have chosen to do so and that it means that you will be closing back to normal, which is the case in Europe, most of it. So first things first, why we are turning a bit more optimistic these days is the sanitary situation regarding COVID. We are, like I said, almost back to normal in the sense that the vast majority of the population is vaccinated. And in Europe are the top 5 most vaccinated nations in the world. You have 4 European nations. In France, you have 87% of population over 12 years old which are fully vaccinated. We have started the further shot of vaccines for the older people. But clearly, the vaccination process has been quite a success. After a very slow start in Europe, we are now in a much more comfortable zone. While we are optimistic as well is that now, Europe has vast capacities of production, almost 350 million a month of vaccines which are produced in Europe. A bit of the pharmacy of the world because half of that is exported, but it means that in any case, if needed, we are able to vaccinate probably the whole European population in 1.5 months. We have the capacity and production. We have the logistical way of distributing vaccines. And we know with the end, that in 3 months' time, this new vaccine are able to cope with any variant so far in a sense that we think that probably the bulk of the COVID crisis is behind us, even though we see some variants, especially in the U.K. It means as well that we are able to live with COVID-19 without lots of hospitalization, which is probably the name of the game if we want to reopen the economies, which is the case at the moment. So the sanitary situation are behind us -- or almost behind us. It makes the rebound probably a bit more lasting in Europe. What we do see, first thing first, worldwide is, one, in the U.S., a bit of a slowdown this year, which is going to accelerate in our view. U.S. economy probably will be close to 6% this year, but it's going to decelerate down to 3% next year in our view. Why is that so? First thing first, because the budget side is going to be much more restrictive. We are going to come from a deficit of minus 15% to something close to 6%, 7% next year in the U.S. Yes, there is a Biden plan, the infrastructure plan, the family plan from the administration -- U.S. administration but: One, it's not voted; two, it's probably going to be smaller than expected; and three, if we go through the reconciliation process, as you know, we will need to have it refinanced almost entirely. So the net effect of this plan is going to be quite small. And on top of that, it's an 8 years plan, this infrastructure plan. So if you divided that by 8 years of plan, it's not that much for the U.S. economy. So budget is going to be much less supportive. A lot of things have stopped, starting to shake to the household in the U.S. So probably next year, budget is not going to be anything but a drag to U.S. economy. On top of that, we are quite confident that the Fed is going to taper, to stop -- quantitative easing starting probably in November, ending it in mid next year. So the policy mix, if you want, between budgetary and policy -- and monetary policy is going to be much less supportive. So U.S. economy, slowly but surely, probably converging towards this potential. It's not there yet. That's potential probably close to 2%. So we won't be there before end of 2023. But still next year, quite of a slowdown in the U.S. Same for China. We see the Chinese economy slowing -- a massive slowdown in Chinese economy coming from 18% in the second quarter to the 4.9% of late. And it's going to continue in our view. The consumption, you will see that the saving rate is still going up in China. The wages are going up, that's for sure. But consumption is going slower than wages so we see that the saving rate is accelerating still in China. So on top of that, we see all this crackdown on many segments of the economy. We see these bottlenecks in China. There, again, the COVID situation is way different to the European one I was mentioning because you are still very much in the 0 COVID strategy, which means that you stop a lot of activity unless you have a 0 case, while in Europe, for instance, or in the U.S. or in U.K. and now in Australia or in most of the world, we are starting to get into this strategy where we -- there is kind of cohabitation with the virus. So hence, you don't close that much economy. In China, this is not the case. So we expect this slowdown in China to continue going into next year. On top of that, we have structural factor. China is a very aging economy as well in this regard. So the structural factors are probably going to play out not only next year, but in the next decade. We shall see the Chinese economy to decelerate towards 2%, 3% maybe if nothing has changed by then. So clearly, China is decelerating. Like I said, U.S. is decelerating as well. The peak of growth is behind these 2 big economies. But it's not to say that the world economy is at risk, and we see that the global trade is probably going to be up more than 11% this year. So the idea of this segmentation, regionalization, domestication in a way of supply chain is not there at all. These bottlenecks are proof of that. We have this big acceleration of the world trade going forward, but I will be back into this inflation in a minute. So in this context, Europe, in a way, is not in a bad spot in a way in this context because it was later out of the COVID compared to China. Now probably the peak of growth is around now in a way. But next year, we shall see some good performance. Why is that so? First, because the budget situation, I talked about the U.S., is a bit more accommodative still in Europe. And we see that we have this new -- or new Europe plan of EUR 750 billion of subventions and loans by Europe. It's almost EUR 400 billion of direct subvention from the European side. So it's a bit of a federalism step taken by Europe there, and it's already distributed. If you compare that to the U.S., it's about EUR 10 billion for France, more than EUR 25 billion for Italy. So we have a lot of money coming from Europe. And on top of that, this reduction of the deficit I was mentioning for the U.S. is much less pronounced in Europe. If you take France, for instance, it's going to be coming from 9% of GDP growth last year, a bit less than that, 8% and something, to probably close to 5% next year. So you see the balance is still a bit restrictive, but much less so. And on top of that, you have investment plan coming from much of the national government. So France has had up EUR 100 billion last year, plus EUR 30 billion of new investment plan. You take Italy, you take Spain, this is kind of a same of magnitude. And now the new coalition in Germany, where we have this new -- the coalition between the center left, the green and the liberal is going probably to be more spending money or at least willing to do so. So not touching the golden rule in Germany, but what we have heard of late is probably an investment plan. We're talking about maybe EUR 500 billion even, something like that, in new infrastructure, in energy transition. So this is a massive trend in Europe these days to accelerate the digitalization and the green transition. All the countries are doing the same thing under the patronage of European plan. So if you take hydrogen, for instance, hydrogen in France is EUR 7 billion in the next 10 years. It's EUR 2 billion in '21, '22. It's EUR 9 billion for the same period in Germany. It's a couple of billion if you take Italy and Spain as well. And all these are working together to try to build up capacities of green hydrogen in Europe. So you see a massive effort in 2 sectors, and you have the same in digitalization, quantum and artificial intelligence, with Europe asking every single country to do 50% of green and 30% of digitalization. So this is a kind of a coordination. What is doing France in this context? France is a bit outperforming these days for too many reasons. That on the supply side, we have the supply side economics since President Macron has arrived. It's an acceleration of this trend which was already starting before, but it's a clear trend these days. So does it work out? We see that in France, corporates, we see the default rate of corporate at minus 40%. So we have very, very little bankruptcies during the COVID because of a quite efficient way, a lot of money once again, but quite efficient way to protect the companies. So very little default rate of companies, minus 40% still in '21 compared to 2020, which was already down compared to 2019. On the contrary, it's a record high number of job creation of enterprises in Europe -- in France, sorry. It's a record high number of new companies in France. The result of that is that you have very little unemployment. In fact, this is kind of a surprise, and we are totally wrong in our forecast. We are expecting unemployment to jump in Europe. And in France, no exception. But at the end of the day, unemployment rate in France is already below the COVID-19 -- the pre-COVID-19 situation. So we are going to be close to 7.5% at the end of this year in France, probably close to 7%, which was supposed to be the structural level of unemployment in France. So at the end of the day, France has created -- will be creating this year in 2021 almost 0.5 million job compared to a loss of EUR 220 billion last year during the COVID crisis. So net effect of that, France has created in net terms 200 -- more than 300,000 jobs in France last year. So France has created jobs during the COVID, quite surprisingly, and there is a record high number of job offer -- on offers as well in France. So the dynamics of employment in France is going to probably continue. So the supply side is doing quite okay. And the investment in France is already well above its pre-COVID level -- plus 3% above its pre-COVID levels. We expect plus 12% of new investment in France this year. Why is that so? Because the companies are cash rich. They have taken a lot of debt during the COVID-19 benefiting from negative rates. 40% of French companies are IG, investment grade. We are benefiting from negative rates. So we benefit from that and then take the opportunity of taking a lot of debt. But the net debt is unchanged because they have taken debt, but the cash situation is very, very comfortable and companies are investing a lot today in France with confidence close to the highest. The result of that, the margin rate in a French company is at the highest since 1949 since the statistics existed in France. The situation is very comfortable. Hence, we are not that worried about any inflation risk because the companies have this buffer of margin to amortize a little bit any wage increases, which are going to happen with a situation of employment, quite comfortable. So companies are doing okay. Like I said, on the demand side, the employment is surprisingly good. And on top of that, you have a saving ratios in France which is very, very, very impressive because we were having already above European level of savings in France, close to 15% of the disposable revenue. During COVID, it went up to 22%. So we are still having this EUR 160 billion of excess savings still available for French consumer. So if unemployments keep going down and the situation of COVID, the situation is as we expect, going quite okay. Probably the consumption, which is already back close to -- back to pre-COVID-19 level is going to add up to the situation. So in terms of numbers, we expect France to be above 6% of GDP growth. Think of it as a potential GDP growth. The equilibrium rate of France is probably close to 1.5%. So 6% this year because of this V-shape rebound. But next year, probably French GDP will be close to 5% again, and it will take only 20% of this additional saving I was mentioning to be consumed to get not 5%, but probably 6%, again, number for France. So the French dynamics are quite impressive. Then comes the European -- sorry, the presidential election in France next year, in May next year. So this is something to be not worried about. But clearly, we have to look at it. We are there as well quite confident because the political landscape has changed a lot. There are very few parties against euro. So the big risk of having a questioning of euro membership is absolutely not there. And the situation of Emmanuel Macron compared to any candidate is much more comfortable. He has more intention of vote in the first round this time than it was the case in 2016 when he was elected in a way. So the only candidate which is a danger for him is probably a center-right candidate, so not a big danger for market or investors. So probably next year, like this year and the year before, France is going to be attracting a record number of investment from abroad. France was #1 in Europe for attracting investment, was #1 for raising capital for start-up in Europe this year. That's something we're expecting to continue in France. So in a nutshell, France, we are quite optimistic this time. Europe is not in a bad spot in relative terms compared to China, for instance. U.S. is more a question around what's going to be voted. But clearly, we tend to say that this is a bit of the turn of Europe. There are many challenges going forward. Inflation is one of them. But that's another topic in inflation. We think that it's a temporary factor. It's like a traffic jam. It's very long when you are into it. But in the end, well, it's normalized. Thank you very much.

Thank you, Jean-Francois. With investment in France well above its pre-COVID levels and growing consumer confidence, the outlook for France looks positive. We will now hear from Ryan Reynolds, our Director of Forecasting and Analysis, who will provide some insights into our traffic performance. As previously stated, we've invested in this side of our business, and we are seeing positive outcomes from this both from an operations perspective and as we consider new investments.

Thank you, Graeme, and good morning. My name is Ryan Reynolds, and I lead the forecasting and data analytics team at Atlas Arteria. We are a small but highly skilled team of experts based in Melbourne and in Virginia in the U.S. We gather traffic data, and we also collect and mine data on a range of other factors from a range of sources. We use that data to develop quantitative models using econometric, time series and network modeling tools. And we use these models to better understand both our existing businesses and to evaluate new projects. For instance, last year, we developed some simple quantitative models for forecasting COVID cases in France and Virginia, which gave us a sense of how future policy decisions might be made, which would in turn impact traffic. I wanted to take this opportunity to provide some context for how we think about our businesses, to talk about how external events can impact our traffic and some of the factors that we consider when thinking about our traffic. Today, I'm going to talk about our 2 largest businesses, the APRR network and the Dulles Greenway. I'll start with our largest business, APRR. As Graeme showed you in his slides, the APRR group is comprised of the APRR and AREA networks, which collectively span over 2,300 kilometers with 34 different routes. As you can see on the map on the right, those routes traverse different economic regions from fast-growing urban cities to regional areas. They also provide different connections between cities and regions, too, whether that is a short route between 2 regional cities such as the A41 from Chambery to Geneva in the Southeast or whether that's part of a major international transport corridor on the A6 between Paris and Lyon or the A36 from Dijon to Germany. As you can see in the figure on the left, of those 34 different routes, the top 10 account for around 80% of both light and heavy vehicle traffic. Looking at these 10 routes allows us to better understand traffic on the network. In short, different customers use these routes for different reasons at different times of the year. In the next 3 slides, I'll talk about our light vehicle and heavy vehicle customers and how demand from those customers has translated to traffic. So why do our light vehicle customers use the APRR network? You can see in the figure on the left the diversity of light vehicle trip purposes across those 10 major routes in the APRR network. In the North and Central part of the network, leisure and visiting friends and relatives are major sources of demand, accounting for around half of all light vehicle trips. To the South and East of Lyon, commuting and business trips are much more common. The difference in trip purposes across the network is partly due to the distances between cities, the population densities and other modes of transport available. In the North, distances are longer than in the Southeast. A trip from Paris to Dijon in the A6 North is around 300 kilometers. By contrast, in the Southeast, there are many midsized destinations such as Geneva, Grenoble and [indiscernible], all of which fall in an area within 150 kilometers of Lyon. That mix of trip purposes also changes during the year. If you look at the figure on the right, the summer period at APRR is typically characterized by a strong increase in holiday travel in the months of July and August. Historically, average monthly light vehicle traffic in the summer can be 45% to 50% higher than the average monthly traffic in the rest of the year. And in the rest of the year, that mix of trip purposes rebalances towards other trip purposes, including community traffic and short distance trips. That summer season effect provides some context for our recovery over the last few months. As you can see from the figure on the right, retail and recreation mobility shown in the blue rebounded strongly after the lifting of restrictions in early May. You can also see the increase in light vehicle traffic for the summer in the figure on the left with record-high traffic levels. Other data points provide some background to these figures. A key contributor to summer this year appears to be redirected French domestic tourism demand. Protourisme, a French tourism consultancy firm, indicates that 75% of French people typically spend their summer holidays in France. But in 2021, that rose to 85%. Several tourist regions in France recorded record turnover in 2021 and high occupancy rates. Pent-up demand from savings and leave accrued over the last year may have also contributed. And the lifting of restrictions in May meant that a surge in bookings for only months ahead in July and August, timing, which may have favored travel closer to home. I'm often asked about how traffic may unfold towards the end of the year. Putting that summer leisure period aside, while workplace mobility in France is at its highest level since the start of the pandemic, it remains lower than pre-COVID levels. But as we have seen, commuters account for less than 1/4 of all trips on the APRR network. And for network demand, which comes from trips between regional areas in France, remote work may be less feasible than it is for the average employee in Paris or here in Melbourne. Alternative modes of travel may also be less viable between regional destinations in France, and customers may prefer to use private vehicles more often if they are concerned about the risk of infection. Next, let's look at our heavy vehicle traffic. The key demand drivers for heavy vehicle traffic at APRR are French domestic freight, French international freight and transit freight demand. These markets are influenced by domestic goods produced and distributed around France, trade flows from France to the rest of Europe and transit demand across France. But it's transit demand which I'd like to discuss in more detail. Transit freight occurs when goods travel through one area but start and finish their trip in another, and it's Spanish transit freight which is particularly interesting. Let's start with the map on the left. Traveling across Europe means navigating with the sea to the North, the Mediterranean to the South, the Atlantic to the West and the Alps in the center of the continent. These natural barriers help define the long-distance trade routes across Europe and the most convenient routes between major cities. These geographic boundaries mean that goods which travel from Spain and Portugal on land to the rest of Europe has to travel through France. And often, the fastest route is via the APRR network. This helps to explain why the A31 to Luxembourg, the A36 to Germany and the A6 and the A39, both of which travel North from Lyon, are some of our busiest heavy vehicle routes. And the growth in trade from Spain has had a meaningful effect on the APRR network. As shown in the figure on the middle of the slide, the growth in French and Spanish trade over the last decade and since the onset of COVID-19 has likely been a key driver in the growth we have seen in heavy vehicle traffic. International freight has also grown because investing in increased production capacity and new markets in other European countries has offered a way for French firms to grow their revenues and reduce their cost of production even if that involves longer transport routes and the costs that go with that. Post-COVID, Spanish trade has rebounded faster than French trade, providing continued support for heavy vehicle transit traffic. And the data would suggest that this relationship between Spanish trade, transit demand and heavy vehicle traffic has persisted for the last decade or more, and it's due to strong economic underlying trends. Finally, as you can see on the right, understanding our heavy vehicle traffic is just as important as understanding our light vehicle traffic as it makes up around 16% of total traffic but around 1/3 of APRR's total revenues. At the height of the pandemic last year, it was even more important than normal when heavy vehicle revenues accounted for around 40% of total revenues due to the impacts of restrictions at the time. So as you can see, there are several factors that influence how we think about traffic at APRR. For light vehicles, domestic economic conditions are naturally focused, but so too is the appetite and ability for domestic and international travelers to holiday in France or for French residents, to take their holidays elsewhere. And as Jean-Francois just mentioned, there are reasons to be optimistic in the near term about employment, household consumption and French GDP. For heavy vehicles, the demand for domestic, international and transit freight across France are key drivers of traffic, as is industrial production in Europe and the longer-term economic policies which guide that demand. Over the medium to longer term, changes in policies can also have an impact on traffic. For example, policies to reduce carbon emissions in the transport sector may have a positive impact on traffic, and Vincent Portal will talk to you about these when he talks about the APRR business. Now I'd like to turn to the Dulles Greenway. So while the APRR is a very large network with multiple routes, the Greenway is a single point-to-point motorway. It is primarily a commuter road, which connects largely residential Loudoun County in the West with the urban centers of Reston, Tysons and Washington, D.C. to the East. The Greenway has been heavily impacted by COVID-19-related movement restrictions. And as you can see on the left, traffic remains in a recovery state since the start of the pandemic last year. Renée will talk to you further about life in Virginia, but mobility data, as shown on the right, has been one of the indicators that we have used to better understand traffic at the Greenway. That data shows that while retail and recreation activity has largely recovered, workplace activity remains subdued. And looking at the corridor and not just our own traffic helps us better identify what has caused that change in traffic. At the Dulles Toll Road, which joins the Greenway to take you into Tysons and Washington, D.C., you can see that traffic has tracked along a very similar path since the start of the pandemic. And this is interesting because the Dulles Toll Road serves a similar market. It records around 6x as many transactions in the Greenway and it has many different alternative routes. This is further evidence to suggest that the primary reason for the impact on traffic has been the rapid change in demand from commuters along the corridor. The changing traffic at different times of the day provides another piece of evidence. The figures at the top show the daily traffic profiles from midnight to midnight on weekdays and on weekends. As you can see on the right, traffic on weekends and in the middle of the day has recovered much of its pre-pandemic levels. While on the left, weekday morning and afternoon peaks have yet to recover as many people continue to work from home. As the figure at the bottom shows, though, this story is one of recovery as traffic has continued to steadily increase over the past year. That recovery has had its challenges. The change in the number of COVID cases in Virginia over that time points to the impact that cases can have on traffic. This figure shows the traffic on the Greenway in blue and the number of COVID cases in Virginia in gray. You can see the impact of growing COVID cases in January this year and again, with the Delta wave in August. As cases began to rise in the middle of the year, traffic began to contract. But as cases peaked in mid-September, the traffic recovery resumed. Collectively, these observations provide some perspective on how we think about the Greenway. There are a few key factors that I'd like to touch on. In the short term, the impacts of working from home may well influence how the Greenway recovers, particularly in the peaks. Longer term, hybrid working is a potential positive for the Greenway. Loudoun County remains a high-growth, high-income and low-density region, and it's an attractive place to live while remaining within commuting distance of major urban centers. As always, the economic conditions in the region influence the number of people who live and work in the county and their purchasing power to choose to use it. Thank you for your time, and I hope this has given you a sense of how we think about our businesses. It's been a pleasure speaking with you today, and I hope you enjoy the rest of the presentations.

Thank you, Ryan. Understanding the breakdown of our traffic mixes and the different factors influencing demand at each business have been important focus areas for us over the past 12 months, and we believe this will continue to be a productive investment. We now have our Chief Operating Officer, Vincent Portal-Barrault, who will give an operational update on APRR. Vincent will then be joined by one of our Atlas Arteria directors, Jean-Georges Malcor, and they will discuss the current French political environment and how it relates to our APRR business.

Good morning, everyone. My name is Vincent Portal-Barrault, and I am the Chief Operations Officer at Atlas Arteria. Prior to this role, I was working with Macquarie Group and Macquarie Atlas Roads. So I have been working with APRR in one way or another almost since it was privatized in 2006. You have already heard today about the economic environment in France and APRR traffic performance. And shortly, I will be joined by Jean-Georges Malcor, our Atlas Arteria Director based in France, who will discuss with me the French political environment. I would like to take this opportunity to tell you a little bit more about what life in France has been like over the past 18 months; how we are thinking about ESG when undertaking our projects, which is a big focus of the French government; and to finish off, take a look at one of the projects we are currently working on, the A480/A48 renewal project. But I would like to start by mentioning the team at the APRR Group. They are a very large team with over 3,100 employees working across 200 different field and office-based roles. This provides a very diverse range of expertise and skill sets, which is invaluable. The APRR Group is also highly ranked as an employer, having been named by Capital magazine earlier this year, for instance, best employer in the sector for the seventh year in a row. This is an outstanding achievement. Unfortunately, unlike most of the world, APRR has been impacted by COVID-19-related movement restrictions. However, after a third lockdown, which started in April 2021, movement restrictions have progressively been lifted leading into the summer. At this point, the game-changing EU health pass system was implemented. The health pass system is an EU-wide certification that, in the form of a QR code, establishes a digital proof that a person has either been vaccinated against COVID-19, received a negative test result recently or recovered from COVID-19. In July, the health pass was extended to many daily life activities in France. France has also achieved high vaccination rates, with almost 90% of the eligible population having received at least one dose of the COVID-19 vaccine and 87% being fully vaccinated. Together with a record number of tests, it enabled France to break the emergence of a fourth wave, which would have or could have jeopardized the summer season. Despite the marked absence of non-European tourism, France has had a wonderful summer season that saw traffic in the third quarter reach its highest level in over 15 years. Despite the challenges we have faced over the past 2 years as a result of the COVID-19 pandemic, APRR has remained focused on helping the French government deliver on their ESG objectives. To give you some context, France has committed to its 2030 agenda, which is a road map to achieve outcomes under the United Nations Sustainable Development Goals. This road map includes significant carbon reductions and economic adaptation to climate change, a natural and sustainable resource economy and reclaiming biodiversity. The EU aims to be climate neutral by 2050, which includes ambitious changes to the transport sector, targeting a 90% reduction in transport-related greenhouse gas emissions by 2050 as well. Other targets have also been implemented to preserve and restore ecosystems and biodiversity. In France, several policies and targets have accompanied the implementation of these objectives. In terms of greenhouse gas emissions, motorways account for 20% of all transport sector emissions and 6% of the national emissions. Several targets have consequently been set for the transport sector to transition: 28% less ESG emission in 2030 compared to 2015, improving the energy performance of vehicles, mobilizing biofuels, eliminating the sale of internal combustion engine vehicles in 2035, establishing adapted infrastructures and promoting public transport and carpooling. This has opened even more opportunities for APRR to provide support to the French government. One example of this is APRR's commitment to equip all its service areas with very high power charging stations by the end of 2022. We are more than halfway through the objective, and APRR is the best-performing motorway in France with the highest proportion of service area equipped with charging stations. Let's have a look at this. [Presentation]

APRR deploys this network of EV charging stations by establishing subconcession contracts with third parties. These third parties finance the construction and operate the charging points for the duration of this contract. At expiry, the infrastructure reverses to APRR. These third parties can also utilize EUR 100 million in subbies established by the French state to support the development of this infrastructure. There is also now legislation aimed at developing lower carbon transport solutions, including via a framework for regions to implement a tax on carbon-intensive heavy vehicles on public roads. Yet our ESG commitment does not stop here. APRR is working with the French government to discuss relevant initiatives and major projects in the same way it has done so in the past. Indeed, through the 2014-2018 investment plan, the 2015 motorway stimulus plan and the 2018 motorway investment plan, APRR committed to a number of significant projects to optimize the network, but also with a focus on protecting animal species, optimizing water management and preserving the environment. In terms of protecting animal species, APRR has built a wide range of structures on their network to facilitate this. One of the biggest projects and a part of the 2018 motorway investment plan is the rollout of 19 wildlife crossings across the network by 2024. These structures are extraordinary and not only help protect the wildlife in our regions as they cross from one side of the motorway to the other, but also the improved safety for our customers by reducing avoidable road incidents. I would like to show you an example of that through the following video. [Presentation]

Now I would like to talk to you about water management. Water basins are incorporated into several of our projects in order to optimize water management. They work by collecting the rainwater from the motorway and transferring it to basins where it's treated before being discharged back into the environment. As an example, as part of the 2015 motorway stimulus plan, we upgraded the A75 to 2x 3 lanes, but we also installed 7 water basins, resulting in a big leap forward in terms of water management on this section on which the works were finalized only a few weeks ago. APRR has also been entrusted with natural heritage covering more than 10,000 hectares of earth banks, central reservations and motorway areas. Preservation of the environment around the network is a key consideration when undertaking works. For example, coming back to the A75, in addition to the 7 water basins, we also planted 700 trees, 20,000 saplings and 82,000 shrubs. APRR is committed to delivering major projects which meet the needs of our customers. And these ESG outcomes are important and will continue to define how our projects are delivered. Before I wrap up, I wanted to show you a short video about a landmark project we are working on, the A480/A48 projects near Grenoble in the alps. This renewal project is extremely important for Grenoble as the motorway crosses the urban area from North to South and forms the backbone of mobility within the metropolis. Grenoble metropolis has more than 450,000 inhabitants across 49 towns. The overall project is expected to relieve congestion and enable other forms of mobility such as cycling. Let's have a look at one element of this project, the widening of the Isère viaduct. [Presentation]

As we look forward to 2022, we're excited for the outlook at APRR. As life returns to normal in France, we've had a record traffic performance at APRR, with the third quarter of 2021 recording the highest toll traffic in a quarter over the past 15 years. Of course, APRR continues to deliver on its pipeline of capital projects, but we are also well placed to support the French government in meeting their ESG commitments whilst also ensuring our network meets the changing needs of our customers. Now our Atlas Arteria Director, Jean-Georges Malcor, who is based in France, will join me to discuss the French political environment. Jean-Georges' executive experience includes 8 years as CEO of CGG, a Euronext-listed French geoscience company in the global oil and gas industry. And prior to that, he spent 25 years at Thales Group in France and Australia. Thank you for joining us here today, Jean-Georges. So I would like to start by asking you about your views on how COVID-19 has impacted the French government's agenda, in particular their economic agenda.

Yes. Well, it is probably fair to say, Vincent, that COVID has delayed the policy reform agenda approximately 2 years. COVID-19 has created a major disruption to the initial road map of the French government. Despite the dialogue continuing on the reforms underway, government priority was clearly on sanitary measures, and all other decision-making points have been significantly delayed. As you know, we are now approaching the next presidential and legislative elections, which will focus the attention over the months to come. Any significant decisions will probably be postponed after the election and left with the new government. However, on the economy side, the French government has launched very significant economic stimulus plan. As a result, France has been able to navigate through that period relatively well. The EUR 100 billion stimulus plan covers many sectors, and we expect to have about EUR 70 billion to be incurred by the end of the year, which is, of course, a major support for the economy. The plan itself is carrying a strong sustainable and digital agenda and has been so far quite efficient in keeping the activity going, although to the expense of an unprecedented level of debt. In parallel to these economic measures, the vaccination campaign significantly accelerated over the summer with a strong push from the government and from the President Macron himself. Vaccination levels are thankfully very high now. Vaccination and health pass have allowed life to come back to what I would call a stable new normal, with social activities resuming slowly and minimal restrictions remaining. These combined measures are likely to be maintained up to mid next year. Let's hope all together that they will be sufficient to address any evolution of the pandemia.

So what do you think is the most pressing thing on the political agenda between now and the presidential election in April 2022?

First of all, Vincent, the French government will have to continue to manage the COVID-19 situation. It's not all over yet. Indicators are carefully monitored and restrictions may be rolled out if deemed necessary. On the industry side, the government is facing a number of issues. One of them is a shortage and rising prices on raw materials, which is impacting some sectors and slowing down the ramp-up. It is particularly in the case of electronic components, which is, in turn, directly impacting the automotive industry. France is also facing, like any other nations, purchasing power concerns, one of them at the time being -- one good example being the cost of energy. Expectations of high inflation and challenges linked to the balance to be found between teleworking and office-based working is also a concern for the government. No doubt that these themes will be part of the presidential campaign, which could be pretty nasty, and we should be prepared to see extreme positions from the most radical candidates. This could increase the risk of social discontent and as a consequence, of social unrest.

Now you and I know that French people like to have their say and protests are a good part of the French life. I mean everyone remembers the yellow vest movement only a few years ago. And as is quite normal, small protests continue about a variety of things today. So perhaps you could give us your view about the social environment in France.

Well, you know, Vincent, this is probably coming from our French regulation past. It is a right for people to be able to express itself in the streets. Hence, protests are certainly not unusual in France, although the intensity may vary between them. Just to be noted, however, that the more vocal protestors are usually representing a very small minority. As a good example of that, there have been process lately or -- against the health pass. It is estimated in the last protest that there were about 40,000 protesters, while there are over 45 million people vaccinated. So even -- and the media will always act as echo chambers amplifying the reach in search for sensationalism. I think we always have to put things in perspective. The yellow vest movement you mentioned was, at least at the beginning, of a different nature. The protesters were coming from the middle class part of the society, which is rather unusual. It was certainly an important and disruptive movement for a sustained period of time with, again, massive media coverage. We have to note, however, that during this period, APRR managed the situation pretty well and managed to minimize the risks to the traveling public and damage to the toll roads.

If there is social discontent, though, would you say it creates risk for the future of toll roads in France?

People tend to take radical positions during election campaigns. Populist candidates will express extreme views, including nationalization of infrastructure, including toll roads and the media could decode these positions. However, I believe the solidity of the concession contract has been tested and proven in the past. If there is any nationalization or, indeed, early termination of the concession contracts by initiative of the state, the concession holder would have to be compensated at fair market value. This has been widely recognized even by proponents of such extreme decisions. Such termination of concessions contract would also be extremely difficult to execute. And whether the government will decrease the tariffs, which I think they would have to do if they decide to nationalize, it would not be in a position to finance such concessions, their investments and development over time. Yet, as you know, there is a real need to maintain, upgrade and continue to develop our infrastructures. And let me say that the road network is more important than ever for the economy. The concession model has proven to be an excellent way to finance maintenance of the existing network and also finance new infrastructure investments without the state having to finance this. This model has been invented in France and coping throughout the world. It will be a real shame to see France walking away from it. But frankly, I do not believe it is anyone's serious intention at the moment.

In terms of opportunities at APRR, we are working hard with a foreign APRR on the growth pipeline in France. But given your experiences, perhaps you could share your views on what future opportunities may be available to APRR?

Well, France and Europe have a strong sustainability agenda and are committed to reach climate neutrality by 2050. At the moment, the motorway users represent around 6% of total carbon emissions in France. Hence there is undoubtedly a need for a transition to happen in the motorway sector. It will involve all players, users, regulator, concession granters and, of course, the concessionaires. This will require new investments, APRR is ready to support the government in reaching this objective. The road transport network, including the APRR network, is key to the logistic flow of goods and service for the economy. It's key for France. And this flow is increasing massively and will require further investments to cope with the demand. Even if it's early days for the time being, there are consultations ongoing between the local authorities and the government regarding the potential transfer of the national road network. Within this perimeter, and to start with, managing the urban and [indiscernible] roads represent a challenge for the local authorities. In turn, it may present opportunities for APRR to support those local authorities by taking over the operations of such routes.

Can you remind everyone who are the stakeholders involved in decision-making on such investment projects?

Yes, of course. There is a broad range of stakeholders from -- ranging from local to national government levels. Such big projects can be driven by national or local development plans or both. They can involve the cities, the government, but also regions, departments or metropolis. APRR is fully involved in the continuous dialogue with all the stakeholders. And this dialogue is here to ensure that we can understand and address their needs. APRR has developed an excellent working relationship with the various stakeholders at all levels. And with its presence and its contact in France and in Europe, Atlas Arteria comes in full coordination with APRR in support of these actions were necessary. As you know, it takes time to build such a relationship. And we have to recognize that as with any infrastructure development projects, it requires a long preparation time. So it is paramount to keep regular contacts at all levels.

Thank you so much for your time, Jean-Georges.

Thank you, Vincent.

Thank you, Vincent, and Jean-Georges. I hope you have found it useful to hear from those on the ground in France with daily interaction with both the business and political environment, respectively. We will now hear from Renée Hamilton, the CEO of the Dulles Greenway. Following Renée will be James Lerner, our Director, U.S. Operations; and Pierce Homer, a Director of the Board of Dulles Greenway to discuss the political environment in Virginia and how they see this affecting our operations and outlook for the Greenway.

My name is Renée Hamilton, and I'm the CEO of the Dulles Greenway. It is great to be talking with you today. I will start by telling you a little bit more about myself and our team here and what life is like here in Virginia at the moment. I will then move into our key achievements over the past 18 months, including the capital improvement projects we've been working on. I will then wrap it up by looking at the outlook for the Dulles Greenway, including the growth fundamentals for the region and our engagement in facilitating distance-based tolling. Before joining the team as CEO at the end of June last year, I spent 30 years working for the Virginia Department of Transportation. In my prior roles, I gained invaluable insight into the regional multimodal transportation network and a deep understanding of the role of federal, state and local governments in the transportation infrastructure space. This included overseeing maintenance of more than 7,800 miles of roadway, transformation of the I-66 inside and outside the Beltway project, leading the transportation team that bought Amazon's new headquarters to Northern Virginia and collaborating with local government agencies on the Silver Line metro project. I also served on the National Capital Region Transportation Planning Board of the Metropolitan Washington Council of Government for 9 years, representing the Commonwealth of Virginia. But after 30 years, I was ready for a new challenge, and I am really excited now to be leading the Greenway business. Meeting the broader team, I quickly realized that Atlas Arteria's values as a corporate citizen, its vision for the business and its commitment to the local community, truly aligned with that of my own. Joining at the height of the pandemic obviously presented some unique challenges, but I am extremely proud of how the Greenway team has navigated these unprecedented times and continue to advance the business on numerous fronts. While we're a small team, just 14 full-time staff and about 25 contractor staff assisting with maintenance, operations and toll enforcement, everyone approaches their role with care and consideration for the safety of our colleagues and our customers as the absolute priority. This comradery has proven its worth over the last 18 months. However, there's always room for improvement, and we have been working with the team at Atlas Arteria to implement several initiatives to continue to move the business forward and to position the business for future success. Before I get into that, though, I want to take some time to take a look back on what life in Virginia has been like during the COVID-19 pandemic and celebrate what we've been able to achieve during this time. As lockdown measures came into effect across Virginia in March last year, the Greenway team was quick to implement protocols across the various business functions to ensure the continuation of safe operations of the facility for our customers and our employees. Teams and key personnel were isolated to limit contact. Cash collection was suspended to minimize employee and customer exposure and where possible, staff work remotely from home. The Greenway has been heavily impacted by the COVID-19-related restrictions given the high proportion of commuter-based traffic. Strict restrictions has meant that both schools and most workplaces virtually remain closed during the height of the pandemic. Schools went back to in-person learning this fall. However, companies have yet to mandate a return to the workplace, given the recent Delta outbreak. We are hearing anecdotally that people are looking forward to returning to the workplace in some form by the end of the year. Despite these challenging times, the Greenway celebrated many major milestones over the past 18 months, including celebrating its 25th anniversary and making some exciting operational changes while also advancing our community engagement. Cash toll collections was eliminated, which was roughly 2% of trips prior to COVID. While this originally served to ensure the safety of our customers and employees, we ultimately made the decision not to reinstate cash collections to streamline our toll payment options, optimize the operations team and improve the traffic flow and safety at our main toll plaza. This is also the first step towards modernizing our total operations to better align with other facilities in the region and to utilize the latest technology available for toll payment to further improve our customers' experience. In preparation for the winter season, we took advantage of the summer months to improve the safety of snow operations in our maintenance yard. This primarily entailed altering the layout of the yard to provide for safer and more efficient maneuvering of snow trucks. We partnered with the American Eagle Foundation, Loudoun Wildlife Conservancy and HDOnTap to install 2 cameras in our 140-acre wetlands to live stream nesting bald eagles. These eagles are expected to start the nesting process this month. And we will be running a competition with local schools to name the eagles. I would like to show you some of the footage from our 2 cameras. [Presentation]

In May, we hosted the inaugural Run the Greenway fun run event, which welcomed more than 1,200 runners to the roadway as well as virtual runners from around the world. The event raised more than $150,000 for 27 local nonprofits, and we are well on our way to sign up even more runners for next year's event, which we will be hosting in May. Let's take a look. [Presentation]

In January, I was also appointed to the Northern Virginia Transportation Alliance Board of Directors. For more than 30 years, NVTA has been the visionary leader, advancing regional transportation solutions to improve our communities' quality of life and economic prosperity here in the Northern Virginia region. This gives us an opportunity to have a voice in the broader regional narrative regarding the future of transportation. At the Greenway, we're always monitoring the performance of the roadway and identifying areas where we can improve the customer experience and traffic flow. The eastern and western end of the roadway where the Greenway connects into the rest of the surrounding network, had seen increasing congestion during peak periods. In response to this, we embarked on more capital improvements to the facility. Last year, we completed an improvement project at the east end of the facility that added a lane eastbound from the Greenway's mainline toll plaza, along the Dulles Toll Road to Centerville Road. The project was designed to ease morning peak congestion and improve the safety of the merge between Greenway customers and traffic entering the Dulles Toll Road from Route 28 and the Dulles International Airport. We also completed a smaller project on the west end of the Greenway, where we reconfigured the ramp to Leesburg Bypass to accommodate increased Battlefield Parkway traffic, improve the safety of the merge of that traffic and the westbound Greenway traffic to help alleviate evening peak congestion. Over the course of this year, we completed a further project on the west end of the roadway in conjunction with Loudoun County and the town of Leesburg. This joint project has been funded 50-50 between ourselves and the county and has involved the extension of an inside lane along the westbound Leesburg Bypass a public road between Greenway and northbound King Street as well as complete reconstruction of the northbound King Street exit ramp. This project has been designed to also eliminate evening congestion in this area and create a safe merge of Greenway traffic onto the Leesburg Bypass. This project readies us for the return of traffic post COVID. We are proud to say that this project was delivered ahead of schedule with the new King Street ramp opening to traffic back in August and the final configuration opening to traffic in November. As you can see, we've been extremely busy at the Greenway, focusing internally and externally to improve customer safety and service, increased community outreach and position the business for future growth and prosperity. As a key connection from the Western region of Northern Virginia into the Dulles International Airport and major employment hubs to the East, Westin Tysons Corner and Washington, D.C., we are well placed to capitalize on the continual growth and expansion of Loudoun County. Since 2010, Loudoun has seen its population grow by 35%, making it one of the fastest-growing counties in Virginia. It's also one of the wealthiest counties in the nation with a median household income of over $150,000, which is twice that of the rest of the state and 2.3x that of the U.S. This has prompted several large-scale mixed-use development to be planned for development along the Greenway quarter. In addition to the continued development of data centers through the region, attracting the likes of Amazon, Google, Facebook and Microsoft. We're also focused on securing certainty around our future toll path. And as you know, we are very supportive of distance-based tolling. Loudoun residents have long supported plans to implement distance-based tolling, which could bring toll relief for many of our customers and provide others with the opportunity to use the Greenway for shorter trips. Increasing the utilization of our roadway could also serve to lessen the capital burden on government by relieving traffic on surrounding roadways, providing for a more efficient regional transportation network. We see an opportunity to align the regulatory regime of the Greenway with other private toll facilities in Virginia along with current investments to modernize the toll system facility and driver experience that would deliver long-awaited changes to the people in Loudoun County and Northern Virginia. As a result of the outcome of our recent rate case application and changes to our governing legislation earlier in the year, we will need to go and fund the commission on an annual basis going forward assuming no further alteration to our regulatory framework. We will work through this, though. But with recent elections here in Virginia and everyone gearing up for the legislative session early in the new year, we remain focused on delivering better outcomes for our current and future customers. So looking forward, our team here at the Dulles Greenway is continuing to add value to both our customers and the broader community through upgrades to the network and ESG initiatives. The strong growth fundamentals in Virginia make the Greenway an attractive asset with the path forward identified to address the community's preference for distance-based tolling. After a challenging year for everyone, we look forward to working with the new administration and all of our stakeholders to continue to assess opportunities to enhance the business and the customer experience. For myself and the rest of the team here at the Greenway, it has been a pleasure presenting to you today. We're excited to see what's ahead of us as we remain committed to providing a safe reliable and predictable travel experience for our customers now and in the future. I will now hand it over to James Lerner, the Director of U.S. operations at Atlas Arteria and Pierce Homer, a Director on the Board of TRIP II to talk about the political environment in Virginia and how this is relevant for the Greenway.

Good morning, everyone. I'm James Lerner, the U.S. Operations Director at Atlas Arteria here in Northern Virginia. With me today to talk about the Greenway and the political environment here in Virginia is Pierce Homer, who serves as an independent director on the Board of the Greenway. Pierce is Transportation Director and Senior Vice President at Moffatt & Nichol and he also serves as a member of the Coalition for America's Gateways and Trades Corridor Board. Prior to joining Moffatt & Nichol, Pierce served as Secretary of Transportation here in the Commonwealth of Virginia. During his tenure, he implemented numerous public-private partnerships, the Heartland Corridor multistate rail initiative, the Dulles Metrorail project that's extended down the Dulles Toll Road and the Greenway, and several other P3-managed land and congestion relief programs. Great to have you with us today, Pierce.

Well, thanks for having me. It's great to be here. And I just want to say 2 years in Atlas Arteria has kept their commitment that they made to the Commonwealth and to me to be a part of the regional transportation solutions necessary for Northern Virginia and Loudoun County, in particular, but also to bring better business practices, better outreach and better technology to transportation in Northern Virginia. So thanks for this opportunity.

It's been great working with you for the last couple of years, looking forward to the conversation. So let's start with just chatting a bit about your history with the Greenway and how long you've kind of been involved with the facility over the years?

Yes. It unfortunately has been a long time. In the late 1980s, I attended the very first briefing on the -- what became the Greenway by Lehman Brothers. Over time, those negotiations were quite visible. The project obviously got built. During my tenure as secretary, I worked with then Delegate Joe May to strike the 10-year toll deal that just expired last year on this and now on the board. So I've got over 20-some years of knowledge and experience on the Greenway. And it's important to understand how Northern Virginia thinks about it. It has always been thought about as an extension of the Dulles Toll Road. And the truth is the Dulles Toll Road's reliant on Greenway customers and vice versa. So we do have a single statewide corridor here when we talk about the Greenway.

Absolutely. And Virginia has long been one of the leaders in sort of P3 projects and particularly private toll road facilities. We've just had the elections earlier this week, Glenn Youngkin, Republican candidate, winning the governor's race, the house looking like it's going to flip to a Republican majority. What do you think that means for sort of P3 industry, but particularly toll roads in this new administration?

Well, I think the future is promising. But it's important to remember that Virginia has this very long, very steady and bipartisan -- and I want to emphasize that word, bipartisan approach, to both toll roads and private toll roads in particular. Virginia is viewed as a national leader in that regard. There have been 6 Democratic governors starting with Governor Baliles and actually the Dulles Greenway legislation, up to next January would be the fourth Republican governor who I have every expectation, his career and his political statements that would indicate a strong support to continue the prudent use of public-private partnerships to improve infrastructure and toll roads in particular, throughout the Commonwealth of Virginia.

Okay. Yes, it's going to be interesting to see how the transition goes in January. Now Renée spoke earlier about some of the recent changes to the Highway Corporations Act, which is the legislation that's governing just the Greenway at the moment, been some recent changes to that. She sort of touched on some of the ramifications, particularly the business having to get back in front of the State Corporation Commission, most likely on an annual basis. Have you got any views on those recent legislative changes and what that might mean?

So the Greenway has been a legislative topic for a number of years. One of the things that I think is understood by the legislature is that the rules that the Greenway was developed under our significantly more burdensome than every other toll road facility in Virginia that's been developed under the Public-Private Transportation Act. And so the advent of the legislature in this process, I think they come at it with a very balanced view. But the reality is these changes do in the short term, do 2 things. The first is they're more frequent and more burdensome. That's an effect. But also as part of that legislation, the Department of Transportation, or VDOT, is part of the process. They were not in the past. And VDOT is very, very good at understanding regional travel patterns, about how to estimate traffic and revenue. And I believe they will be a very positive addition to the State Corporation Commission to the extent that they are looking at toll rate increases for the Greenway. We will have the benefit of VDOT at the table as a neutral arbiter.

And Renée, you also touched on a little bit around securing certainty around the future toll path for the business and particularly the businesses support and interest in introducing distance-based tolling, something land residents have long wanted and desired for the Greenway. We all know that. But the regulatory situation seems fairly complex.

It is complex, but I will say standing back just a shade away from that, what I'll call mechanical complexity is that the politics are very good for distance-based tolling. It is very significant local support and not just in Loudoun County, but along the Dulles Toll Road. And what is needed, though, to implement distance-based tolling is a fairly significant capital investment, certainly in the Greenway and perhaps in other parts of the corridor to do that. You just can't do that without certainty around the tolls. And so the Public-Private Transportation Act is something that does allow for very long-term commitments with respect to toll rates that allows capital to be raised, investments to be made, make the route and the cost and use of the Dulles Greenway, perhaps other facilities as well cheaper, faster and more reliable throughout the entire Northern Virginia region.

And just expanding on that a bit. When you sort of go back and put your old Secretary of Transportation hat on for a second and think about the bigger picture and the role that the Greenway really plays in that regional transportation network, can you sort of talk a little bit more about what you see the impact of distance-based tolling on the Greenway really been in that context?

Sure. And I want to start off by saying the politics around distance-based tolling are really good because of the demand for simplicity, greater accessibility. And honestly, we have a facility that can accommodate significant additional traffic and importantly serve these critical economic development locations. Make no mistake, this is the most significant commercial corridor in the entire state of Virginia. It goes from Tysons Corner to Washington, D.C. all the way out to the technology economy of Loudoun County and the home base of server farms and serving the data industry globally. This is a very, very vibrant corridor. It's been growing for a number of decades and will continue to grow. One of the constraints on growth has been mobility and access. And so distance-based pricing is something that supports greater accessibility as well as greater mobility and the demand from the external actors here, this is about economic success and commercial success for not just the businesses but for the Commonwealth of Virginia. So I said before, the politics around distance-based pricing are really good. Those are a couple of reasons why.

Well, thanks, Pierce. And unfortunately, I think we might be out of time here today but, Pierce, always a pleasure chatting with you about all things politics and toll roads in Virginia. So thanks for joining us.

Thank you.

Thank you, Renée, Pierce and James. As the team have highlighted, we continue to believe there is a positive future for the Greenway and that the restructuring of governance around a distance-based tolling arrangement is an important part of that, moving us away from the bespoke governing legislation to the Public-Private Transport Act or the PPTA, as Pierce referred to it, is a key focus. We will be working hard over the next few months to highlight the benefit of the distance-based tolling proposition to all the stakeholders, existing and new before the legislative setting period in February. As I said earlier, infrastructure is a long-term play. So regardless of what happens over the next few months, we'll be working to create a product that best meets the mutual needs of all stakeholders. We will now return to Europe and hear from our Warnow Tunnel Managing Director, Yvonne Osterkamp.

Good morning. My name is Yvonne Osterkamp. I am the Managing Director here at Warnow Tunnel, and it is lovely to speak with you all today and give you some insight into our operations here. I have been working as the Managing Director of Warnow Tunnel since the end of 2014. Previously, I spent 14 years working here in various other jobs. Today, I want to present why the Warnow Tunnel is such a critical piece of infrastructure for the people of Rostock, the impact of COVID on the business over the past 18 months and what the team has been working on to improve the customer experience and support the broader community. Our team at Warnow Tunnel consists of 36 employees who are based in Rostock. I am proud to be working in this business because it is the first of its kind in Germany. It is the first privately financed road construction and operation project in Germany, and it is a project whose realization has brought enormous progress to my home city of Rostock. With a population of 209,000 people, Rostock is the largest city in the state of Mecklenburg-Western Pomerania. The Warnow River divides the town into 2 areas to the west and the east of the river. Prior to the construction of the Warnow Tunnel, the only 2 ways to cross from 1 side of the river to the other, we have ferries for which [indiscernible] may often exceed 15 minutes or via a toll-free road network of up to 19 kilometers through Central Rostock, which can be subject to delays during peak hours. For decades, the people of Rostock have dreamt of creating a connection between the river banks by means of a bridge or a tunnel. This dream finally came through in 2003 when the Warnow Tunnel was opened. This has also been interesting for us as toll roads are unusual at Germany. There are only 2 toll roads in the whole of Germany, so we needed to inform the people of Rostock as how to use them. Warnow Tunnel has also significantly improved infrastructure generally in the region. When the tunnel was finished, the City of Rostock was finally able to complete its outer ring road around the city center. This relieved congestion in the city center. It also resulted in a significantly improved connection for the port, also making the port a more attractive infrastructure for investors. Over the years, there has been a steady increase in traffic figures. The fact that they could save time by using the tunnel steadily became more and more important for our customers. Today, the primary users of Warnow Tunnel are commuters on their way to and from work, the smaller and midsized businesses and the tourists, which mainly come from the German inland, but as well from Scandinavia, Northern Europe and the states bordering Germany such as France, Austria, Poland and the Netherlands. Due to the COVID-19 pandemic, the Warnow Tunnel suffered temporary losses in traffic, down 8% in 2020 compared to 2019. However, this year, we have been more affected given the spread of the virus and shutdowns in the first half of the year. During the coronavirus restriction periods ordered by the government, we closed our customer center to avoid any direct customer contact. We continued to serve our customers by phone or e-mails. Masks, disinfectants and gloves were provided for all staff members and partition walls were erected. We also allowed our employees to temporarily work from home where possible. We have now reopened our customer center to the public and are adapting our processes where possible to minimize contact. Fortunately, there have been no identified cases of COVID-19 among our staff to date. Thankfully, here in Germany, we are now able to meet with other people, work in the office together, go to museums, the theater or the cinema. People can celebrate weddings, restaurants are often fully booked as our hotels. Pupils can go to school and students to university. Sport events have returned to stadiums with thousands of spectators. Certain restrictions must be kept like wearing masks in public transportation, in stores and shops. And access to these locations is only allowed for those who have recovered or vaccinated or have been tested negative for COVID-19. Safety is paramount, but the Warnow Tunnel is also focused on our people, customers and community and environmental stewardship. Behind me, you can see a picture of our tunnel operations center, which is where we monitor and control the tunnel and toll plaza operations. Now I would like to switch to the operations center to Torsten Raths, our Head of Operations. He will give you some insights into our sustainability approach.

Thank you, Yvonne. We have very high customer satisfaction and maintaining this is important for us. Last year, we undertook a customer behavior study at the toll plaza. And this year, we are implementing the recommendations to improve safety. The focus is on clearer signage for the individual lanes, particularly via overhead lane signs. We will also install additional signs and notices to make it easier for the tunnel users to find their way around. In response to COVID-19, we have also changed our procedures to limit direct contact between people where we can to protect our staff as well as the clients and subcontractors. In the past, tunnel users could recharge their Oscard, which are our version of a smart card and cash for discount transit. We have now given our customers the ability to recharge it online, making the process contact-free. Credit card readers are currently being installed in lanes to avoid any direct contact and at the same time to make the process more fluid. Also last year, we undertook complete tunnel clean, which reduced our energy consumption. Indeed, the walls being white, they reflect more natural light and the consumption of the automatic lighting system inside the tunnel went down as a consequence.

Thank you, Torsten. Building on this, we continue to look at ways to improve our environmental stewardship and has started measuring and reporting of our GHG emissions, which you would have seen in the Atlas Arteria annual report. Since January 2021, our electricity consumption is 100% coming from renewable energy sources. Our involvement in our local community is something we are very passionate about. Over the years, stable partnerships with associations, the local zoo, schools and more have developed. We focus on promoting sport, music and culture and supporting school children and disadvantaged groups in society. For example, at the zoo, the renovated otter enclosure was opened on the 5th of May this year by Warnow Tunnel together with our mascot, Oscar the Otter. Warnow Tunnel has been a godparent for the otters at Rostock Zoo for many years. In order to support the community further, we also allow the local police, fire and rescue service and ambulance service to use the tunnel free of charge with almost 18,000 trips completed in the first half of this year. We are also focused on improving gender balance. Unlike some businesses, here, we currently have 70% female employees. So we are actively thinking about how we increase diversity. I hope today's presentation has shown you the importance of Warnow Tunnel to the people of Rostock and why it is such a critical transport route. Whilst COVID-19 has presented many challenges, Warnow Tunnel has demonstrated resilience over the past 18 months with traffic showing its ability to rebound quickly following the easing of restrictions. We continue to work on making our company future-proof with an ESG lens. I'm confident that we will succeed in this with the Warnow Tunnel team, our long-term partners, the local authorities and Atlas Arteria. Thank you and enjoy the rest of the presentations today.

Thank you, Yvonne. It is great to see so much progress being made during the last 18 months despite COVID-19. Nadine Lennie, our CFO, will now provide a short financial update.

Good morning, everyone, and thanks for joining us today. I hope you've enjoyed all the sessions you've seen so far this morning and found them useful in terms of better understanding our business. Before we open up for questions, I will round out the morning with an overview of the financial position of Atlas Arteria and our businesses. We've been through unprecedented times over the last 2 years. I'm very pleased to say that Atlas Arteria remains well positioned with a strong balance sheet, providing resilience and flexibility for growth. At 30 June, we had around AUD 130 million in cash on the corporate balance sheet. Given COVID and the resulting market uncertainty in the interest of prudent capital management, we have a corporate policy of holding at least 2 years cash cover for our corporate costs as a buffer on the balance sheet. There's also a little extra that we're currently holding on top of that, which is available for growth. We have no holding company debt. Now we're not conceptually opposed to holding company debt, but if we were to introduce such debt again, then it would need to be on appropriate terms in terms of that wouldn't constrain growth at our underlying businesses. As Graeme mentioned right at the start, for us, delivery on strategy would see sustainable distributions and distribution growth for our security holders. To do this, we're looking to generate sustainable operating cash flows from each of our businesses. Despite the events of the last 2 years, I'm very pleased that we've continued to receive strong distributions from APRR. Now we used some of these distributions last year to repay legacy holding company debt, but we've paid distributions to our security holders for the last 3 halves. And most recently, of course, we paid the $0.155 per security in October. I'm often asked about whether we would think about a more formal distribution policy. What we're saying is that in the near term, we propose to continue to pay the net distributions we receive from APRR and now Warnow Tunnel, net of our corporate costs. So [indiscernible] policy of sorts until at least, we see more stability in the traffic numbers. Touching on each of our businesses. APRR has an A- rating from both S&P and Fitch with a stable outlook. And this has remained constant despite the fluctuations in traffic over the past 2 years. The APRR business continues to delever and has ample debt capacity to fund future growth opportunities while still maintaining this A- rating. We undertook the capital restructure at Warnow Tunnel in March. And in August, we received our first distribution. The Warnow Tunnel business now has a much more appropriate capital structure to support the business and an optimized cash management strategy. As you've heard Graeme and the U.S. team talk about today, the Dulles Greenway business remains a focus from both a financial and operational perspective. There's a lot of work going on to construct arrangements of possible distance-based tolling, which [indiscernible] occur could support additional investment and a more appropriate capital structure. Given the economic environment, I also thought it would be helpful to explain how the business is exposed to inflation and interest rates. We talked a little bit about this at our half year presentation, and I know many people found it useful. Unit revenues or toll prices are highly correlated to inflation. If we just see the first half of this year as a guide, nearly 95% of our weighted average toll revenue was explicitly linked to inflation. And given our high EBITDA margins, a rising inflationary environment also creates a strong multiplier effect to value across the business. In terms of interest rates, the significant majority of debt across the portfolio is fixed rate debt. And with long average durations, as you can see on the slide that supports my chat with you today, we have limited exposure to increases in interest rates. Recent decreases in equity risk [indiscernible] also means that as government bond yields rise, we would expect to see less than a 1:1 increase in discount rates. So whatever all does this mean? Well, it means that Atlas Arteria should perform better in an inflationary environment and is well protected from rising interest rates. And this should be further supported with the economic conditions in France and Europe that Jean-Francois talked about earlier. With that, I'll say thanks again, and hand back to Graeme.

Thank you, Nadine. We would now like to open it up to questions for which Jeanette Royce, our Head of Investor Relations, will remind you on how to lodge a question, and she will then act as questioner on your behalf.

Thanks, Graeme. And here, of course, Nadine. [Operator Instructions] We do have quite a few questions coming through already. And so I'll be consolidating some questions and asking them on your behalf and then directing them to Graeme or Nadine as appropriate. If we don't get to all your questions in the time allocated today, we will reach out after the close of the Investor Day and respond separately. Now if I have a look across the question, perhaps the first one to Graeme. We've heard about the political landscape in France and looking ahead of the upcoming presidential elections, how do you think Atlas Arteria may be impacted should a populist candidate with the nationalization agenda be successful?

So nationalization of toll roads isn't an uncommon position amongst populist candidates. So I think that is always there. And it's been in pretty much every election in -- from a presidential point of view for many years. The key issue in all of this is that the French state has to fund it. And the estimated cost is around EUR 50 billion. And we have to be compensated on a fair basis, on a DCF basis, as Jean-Georges highlighted in his answer to one of Vincent's questions. Most importantly, the French state is unable in a nationalized toll road to effectively charge more than the cost of operating that road. So the cost of buying us out is something that has to be borne by the general budget in France, which we don't believe the country has the capacity to do. In conclusion, one of the most important things is even if a populist candidate were to succeed, they also need to get control of the assembly. And without control of the assembly, they don't have the power to implement the policies on which they stood in these populist type announcements that candidates often make. So in that context, we believe that it's unlikely as we see it today, that this would be an outcome that nationalization could occur.

Thanks, Graeme. And sticking to the topic of politics in France, do you think that the recent political hostilities between Australia and France could impact on concession extensions in APRR?

As APRR is 52% owned by Eiffage. And in that context, is considered by the French government to be a French entity. So we don't see this as an issue for Atlas Arteria.

Thanks, Graeme. That's very helpful. Again, another question for you, Graeme. There seems to be increasing case numbers of COVID-19 in Germany and also other parts of Eastern Europe. Do you think there are likely to be further lockdowns in Europe? And if so, what impact do you think these case numbers will have on traffic?

So in Western Europe, government policy responses have varied but are more focused on hospitalization and ICU bed occupancy. We've also seen very strong vaccination levels, which are very, very high. The way France has approached its stepping out of lockdown was to maintain a strong degree of control on the movement of nonvaccinated people. And so in order to go to work, in order to go to a restaurant, a bar, attend a public event, you need to wear masks. And equally, you need for access to restaurants and bars, nightclubs, et cetera, to be double vaccinated, and there's a code that's required, QR code that you have to use to gain access. So in that context, it's very different to what's been happening in Denmark, in the Netherlands and in Germany, where we're seeing significant outbreaks. The level of ICU bed occupancy, which in France is one of the key things that they look at with a cap of about 5,000 as a trigger for further lockdowns. Over recent weeks, the ICU bed occupancy in France has fallen from roughly 2,000 beds occupied to about 1,000. So we're not expecting any negative effect on traffic in France, and we expect the existing constraints on behavior to continue. It was a very difficult thing for President Macron to do, but it's proven to be very successful. And now what we're seeing is Denmark and other countries are starting to implement very similar policies to those that are in France. In Rostock, in Germany, where the Warnow Tunnel is located, we've got relatively low cases of infection at this point in time. So we are hopeful that these new constraints will be implemented by the German government, and we'll see no need for a full lockdown to recur.

Perhaps one for you, Nadine. When do you think Dulles Greenway will see a return of traffic to pre-COVID levels?

Thanks, Jeanette. As Ryan explained in his presentation, off-peak traffic has been improving to pre-pandemic levels already. So it's really the traffic recovery in the peak that appears to be more reliant on that return of the commuter traffic. I am sure many people are discussing with friends and even with your own officers is about what returning work is going to look like in the U.S. What we're hearing is that the federal government, in particular, is planning for employees to return after the holiday period. So that would say people coming back to that commuter experience in the new year. This could be similar, for example, to what plays out in the likes of Melbourne. Ryan also explained that the determinants of traffic over the longer term include the economic conditions of Loudoun County, longer-term working from home preferences and the potential of the area to support hybrid working. And look, the areas surrounding the Greenway is a lovely part of the world, and it's a lovely part of the U.S. potential for [indiscernible] housing, schools, sporting facilities, et cetera, et cetera. So if you want you and you can work from home, it's a really nice place to do it. I think as Renée also mentioned in her chart, we still see the potential for the Greenway, therefore, want to play a really important part in facilitating people driving wherever they want to go be. So it may be a commuter road, but it could also be used for more of the off-peak style of trips around the rest of the day. So that's really how we're seeing things and the factors that are likely to influence traffic.

Thanks, Nadine. Obviously, a space we're watching. But on the theme of politics, perhaps back to Graeme, but sticking to the U.S., we've had quite a few questions on the outcome of the elections in Virginia. And now that there's a known, how do all of this thinking changed -- or sorry, your thinking change regarding our ability to shift the governing legislation at the Greenway.

As Pierce and James discussed in their interview, when compared to other toll road operators developed subsequently under the PPTA Act, the Greenway has an unfair burden given its bespoke governing legislation. Legislators and VDOT staff are very attracted to the political benefits of lowering our tolls through introducing distance-based tolling. Most importantly, we currently anticipate that legislators will be sponsoring the legislation along with the lines of last year's warehouse legislation for the February session. This will allow Governor Youngkin and his team to get themselves up to speed on all the issues. He is a former private equity guy, so he really understands the benefits and associated requirements of private investment. And as Pierce explained, the PPTA Act is being utilized and supported on a nonpartisan basis for many years in Virginia by both Republican and Democrat governors.

And Graeme, sticking to the Dulles Greenway, we often get asked the question, is this a business that you really want to stay in? And if so, what are your plans for restructuring the debt so that you can release distributions for that business?

So clearly, the current legislative structure for the Greenway isn't effective in meeting the needs of our stakeholders. And so a mutually beneficial solution focused on implementing distance-based tolling is the foundation stone we need to achieve to resolve the issues on Dulles Greenway. Our focus is to resolve these issues through the legislative process, as we've discussed previously. But most importantly, in terms of determining whether this is a road to keep or not keep, is the demographics of the area in which we're operating. So Renée mentioned earlier that we sit in a growth corridor in Loudoun County with very strong population growth and very high income per capita amongst the highest in the U.S. And so the combination of those 2 things project a very strong future for this business. And so our focus is fix the legislative foundations on which the business operates, restructure the business on the back of that and then drive towards achieving the benefits of the demographics of the business.

An important one for you, Nadine. In your talk, you mentioned that we're going to continue to pay through all of our net distributions that we receive from both APRR and Warnow Tunnel. Would you consider this a formal distribution policy?

So look, I wouldn't call it a formal policy per se, but certainly, our recent practice has been to pay the net distributions we received from our underlying businesses, net, of course, of our corporate costs. For us, delivery against strategy would see sustainable distributions and then distribution growth over time. We only introduced the recent practice in response to the traffic volatility we were seeing from COVID-19 shutdowns. So as I said, we expect to maintain this recent practice and so we see stability in the traffic numbers. Given that our strategy continues to evolve, now we still don't think is the right time to set a more formal distribution policy, but we will continue to review this, obviously, on an ongoing basis.

Great. Thanks so much, Nadine. And Graeme, one for you on strategy. Can you please give us more information about how you think about Atlas Arteria's growth strategy? And in particular, would you look outside of our existing asset base for further acquisitions?

Our strategy is very clear. We're focused on maximizing value from our existing businesses and delivering growth. Extending the concession lives of our existing businesses and diversifying our risk is very much our focus area. Vincent and Jean-Georges mentioned the 2018 infrastructure agenda in France, and this is ongoing, and we are actively participating in all the opportunities as they come to market. We also continue to work with all levels of government to provide solutions to their infrastructure needs and expect some progress on the management contracts in France in the next quarter. For larger programs that require legislation, as we've said, this is going to be a post-French elections in early '22. We also continue to consider opportunities more broadly that are complementary to our existing portfolio. We have said that we will look at opportunities in A-rated OECD countries, who will only pursue opportunities where we believe we can add value, and we are not participating in shootouts on a cost of capital basis.

Great. Thanks, Graeme. And as we're nearly out of time, perhaps one more for you, Nadine, and some of it's very topical at the moment. Do you think that Atlas Arteria will be setting net 0 targets by 2050 or perhaps other targets that are relevant? And also, what do you think the impact of COP26 might be on our business?

Awesome question. Importantly, we are looking to commit to targets. We have 4 pillars in our sustainability strategy. We have safety, customers and community, people and the environment. And we are preparing this year to set appropriate targets across all 4 of these sustainability pillars and also across the businesses. Business sustainability, as we have talked about, is a core priority for us, and we are working hard across the business to make sure that we get the focus right and then we get our targets right. So in terms of specifically then the environment and the question, transportation accounts for around 1/4 of global carbon emissions. And I don't believe there was a specific transportation COP26 last week. So there's a global focus on how to address decarbonization of the sector. We also know that the environment is a serious focus for France more generally. So what does that mean? That means transportation in businesses, transportation businesses in France are building really good strategies for decarbonization and APRR, of course, is one of those. So by way of example, and what we're doing at APRR and AREA, we're supporting the shift for electric vehicles through the rollout of our EV charging stations. And Vincent, of course, talked about this in his chart. We're also considering how it can contribute to boosting the performance of natural carbon sinks utilizing and enhancing green spaces along our networks. And at APRR, they partner with people such as Eiffage to identify new technologies that might seek to reduce the carbon in our roadways. And a good example of this is the biofuels as opposed to [indiscernible]. APRR also plans to transition through 100% renewable electricity by 2023 and Warnow Tunnel already has transitioned to 100% renewables. The bottom line is there's a lot of work to be done in order to limit global warming to the 1.5 degrees. And we as a business are committed to doing our part with that. We're also doing our part across other priorities such as diversity, safety and communities, which are also an important focus for us. And we want to have targets across each of these areas, included within our 2021 sustainability report.

Great. Thank you, Nadine. Obviously, a really important topic at the moment and something we'll continue to watch closely. With that, sadly we're out of time, but I want to thank you for attending today and for all your questions, and I'll now pass back to Graeme for closing remarks.

That brings us to the end of today's agenda. As the COVID situation continues to evolve in some European countries, we're starting to see the introduction of new restrictions or even lockdowns for unvaccinated people. Many of these countries relax COVID controls at lower vaccination levels than in France. As I described earlier, France took a strong approach to managing the spread of COVID when lifting from the last lockdown. They implemented COVID EU health pass requirements for workplaces and public social interaction areas such as bars, restaurants, et cetera, and mask requirements continued in many indoor and closed environments. These actions, together with overall high vaccination levels are playing an important role in keeping ICU occupancy rates under control. Following comments last week from Macron about the requirement for a third booster shot for people over 65, we understand vaccination appointments in France have jumped substantially. And this is indicative of France following Israel into a third vaccination regime for continued access over the coming months. So as you have heard, our colleagues and community in France remain optimistic about the future. I would now like to recap briefly on the key themes we discussed today. Our traffic in Europe has demonstrated resilience and continues to grow, while our U.S. traffic is continuing its recovery. The economic and political environment in France is supportive of growth at APRR. And APRR is making exciting inroads on the ESG front, which are aligned with the French government's green agenda. The Dulles Greenway has been doing some fantastic work on building its value proposition. And with the elections now behind us, the business is positioned well heading into the 22 legislative season. We continue to build capabilities and refine our understanding of the key drivers of performance of our businesses, and we're using this to optimize value as well as to evaluate future expansion opportunities. And from a financial perspective, we have ample liquidity to support growth in our portfolio and to weather any near-term volatility. With that, I want to thank you all for taking the time to join us today. The session is being recorded and will be made available on our website in the next few days. Thank you to those who sent through their questions. We endeavor to get through as many as we could in the time allocated, but our Investor Relations team are available to help with any follow-ups you may have. As always, we welcome your feedback on today's event. It helps us to make sure we are delivering the information and insights that you seek. I hope you enjoyed meeting some of our broader management team, and I want to also take the moment to thank those involved in preparing for today's Investor Day and, of course, our guest speaker. We hope that next time, we can meet in person to allow greater interaction with our broader team. Many thanks again for joining and enjoy the rest of your day.