Atlas Arteria Limited (ALX) Earnings Call Transcript & Summary

Good morning, everyone. My name is Chloe Ranicar, and I am the acting Director, Investor Relations at Atlas Arteria. I welcome you to Atlas Arteria's 2023 Annual General Meetings. This is Atlas Arteria's first hybrid AGM, which means we have security holders and proxy holders attending both in person and online. As a result, there are a few important housekeeping matters to cover before we start. First, for those attending in person, if the building fire alarm sounds or you're advised that there is an emergency in the building, please follow the directions of the warden. Exit will be via the stairs next to the lifts or via the service area back stairwell. There is no smoking allowed on site at the RACV Club. Bathrooms look past the lifts. And please turn your mobile phones to silent during the meetings. Now for everyone's information. Due to Atlas Arteria's stapled structure, there will be 2 meetings taking place this morning. One, for Atlas Arteria Limited, the Australian parent company that forms part of the Atlas Arteria Group, and one for its stapled entity, Atlas Arteria International Limited, the Bermudan parent company of the group. For today's meetings, you will hear from the Atlas Arteria Limited Chair, Debbie Goodin, the Atlas Arteria International Limited Chair, Fiona Beck; and Graeme Bevans, the CEO of Atlas Arteria. You'll also hear from each of the Directors who are being considered for election or reelection at today's meetings. In relation to the formal business of the meetings, voting on the resolutions is by way of a poll. To provide security holders and proxy holders with sufficient opportunity to vote, the chairs will declare the poll open on all items of business to be considered at the meetings after they formally open each meeting. If you are online, voting on all items will be closed 2 minutes after the meetings finish to allow time for final votes. Voting for those here in person will close at the same time. The proxy positions, including open proxies, will be shown after each resolution is introduced, and the results will be released to the ASX after the end of the meetings. As mentioned in the Notices of Meeting, the chairs will vote all undirected proxies held by them in favor of the resolutions. At the conclusion of the meetings, we'll invite those joining us in person to join us for refreshments. Security holders, proxy holders and corporate representatives may vote on the items of business once the polls are open. If you are here in person, entitled to vote at today's meetings and have registered at the attendance desk, you should have received a blue voting card. If you are entitled to speak but not vote at the meetings, you should have received a yellow card. If you haven't received a card and think you should have or you have not received the correct card, please go to the registration area where a Computershare representative will assist you. To vote on an item, please tick or mark the for, against or abstain box. You must only mark 1 box for each item. You'll be given time to vote on each item following the discussion on that item. For those attending online, when the chairs declare the polls open, a voting icon will appear on your screen, and the items of business will be displayed. To vote, press the vote icon and your voting options will appear on your screen. You can then select your voting direction, and a tick will appear to confirm receipt of your vote. There is no need to hit submit or enter button as the vote is automatically recorded. You'll receive a confirmation notification on your screen. To change your vote, select "click here" to change vote and press a different voting direction to override. You may change your vote up to the time the polls are closed and after the meetings are finished. Security holders, proxy holders and corporate representatives may also ask questions during the meetings. To ask a question in person, please approach the microphone when prompted and show your investor card to the Atlas Arteria representative. Once you have done this, please approach the microphone and state your full name and any affiliation you have. If you are unable to approach the microphone, please raise your hand so a microphone can be brought to you. We ask that you hold any questions on specific resolutions until we come to that item of business. If you are attending the meeting via the online platform, to ask a written question, click on the Q&A speech bubble icon. Once you have completed typing your question, please select the send button to submit your question. If you are asking a written question about a resolution, please start by stating the question with the resolution it relates to. If you have a written question already prepared on any item of business, please submit it now on the platform so as many questions as possible can be answered during the meetings. To ask a question verbally, please follow the instructions shown below the broadcast window on the online platform and please state your full name before asking your question. Please limit your question to only 1 or 2 questions at a time and then rejoin the queue to allow time for others to ask questions. If you are experiencing any technical issues, please call the number on the screen. And with that, I will hand over to Debbie Goodin, the Chair of Atlas Arteria Limited. Thank you.

Thank you, Chloe, and welcome to Atlas Arteria's 2023 Annual General Meetings. My name is Debbie Goodin, and I am the Chair of Atlas Arteria Limited. I'm advised that there is a quorum present, and so I declare the meeting of Atlas Arteria Limited open. I will open the polls now so you can vote at any time during meetings. Firstly, I would like to acknowledge the Wurundjeri, who are the traditional owners and custodians of the land on which I am presenting today. I would also like to pay my respects to elders past, present and emerging of the Kulin Nation. We respect and value the importance of preserving their cultures and customs. We are an Australian-listed stable group with operations over 3 continents, and I wish to acknowledge the traditional owners of all those lands. Due to Atlas Arteria's stapled structure, as we mentioned earlier, 2 meetings will take place this morning simultaneously. One for Atlas Arteria Limited, the Australian parent company, and one for its stapled entity, Atlas Arteria International Limited, the Bermudan parent company of the group. Most of you will be familiar with the relationship between the 2 companies, but it is set out on the screen for ease of reference. This morning, I will refer to the Australian entity as ATLAX, the Bermudian entity of ATLIX and the group as Atlas Arteria. In addition to chairing ATLAX, I'm also the -- I'm also a Director of ATLIX. The Chair of ATLIX is Fiona Beck, who joins us today from Bermuda. Good morning, or should I say good evening Fiona?

Good morning, everyone, and I would like to extend a warm welcome to all investors and other visitors and reiterate Debbie's thanks for your support in joining us today. Debbie and I are also joined by our fellow ATLIX Directors who are here with me in Bermuda, Caroline Foulger and Andrew Cook. I now declare the 2023 Annual General Meeting of the security holders of Atlas Arteria International Limited open and on advice, declare that we too have a quorum. I also confirm that polls are now open so you can vote at any time during the meeting. While I will Chair the ATLIX meeting today, I have asked Debbie as a Director of ATLIX to assist with the running of the meeting to make the process smoother. I will now hand back to Debbie.

Thank you, Fiona. I would now like to introduce the ATLAX Directors joining me in Melbourne today. To my left, Graeme Bevans, our Managing and CEO; and David Bartholomew. And unfortunately, John Wigglesworth is unwell today and is unable to join -- attend in person. John is, however, attending online and is on the screen. Also attending online from France is Jean-Georges Malcor, who you can also see on the screen. Also joining me on the stage are Clayton McCormack, our General Counsel and Company Secretary, and Chloe Ranicar, our Acting Director, Investor Relations, who you heard from earlier. Chloe will be assisting me by reading out any questions. And joining us in the front row are Ken Daley. Ken has been an observer representing IFM Investors since 1 January 2023 and is being considered for election at today's meeting. David Collins, our Chief Financial Officer; and Ben Gargett, our signing partner from PricewaterhouseCoopers, our auditors. Also with us is Chris Dedrick of Computershare, our registry, who will be the returning officer for today's meetings. One final point before I move to my chair's address. A number of Directors are up for election at today's meetings, and they will address security holders briefly when we come to those agenda items. I am standing for reelection as a Director of both ATLAX and ATLIX. And when the time comes, I will ask Fiona Beck to assist with the running of the meeting during consideration of these items. I will speak separately to my reelection at that time. I will now move on to my chair's address. 2022 was quite simply an exceptional year. Our people consistently and capably delivered against our strategy, helping to transform Atlas Arteria into a stronger, larger, more diverse business, a company that is now even more strongly positioned to create long-term value for you, our security holders. This unwavering commitment to delivering value was a key focus of the Board through what was an interesting and, at times, a challenging year. A strategic highlight of the past year was, of course, the acquisition of the majority interest in Chicago Skyway. The opportunity to acquire this business both rare and compelling, and one that had been on our radar for some time. The knowledge we possessed as a result of our prior ownership of this business meant we were well placed to fully evaluate this opportunity. In addition, we had a strong relationship with Ontario Teachers' in place, and we're confident that we could bring our knowledge and experience as a global operator of toll roads to create value at Chicago Skyway. We strongly believe that acquiring the skyway is in the best long-term interest of our security holders. We do, however, acknowledge that it is now up to us to demonstrate this value through the disciplined execution of our plans and by keeping you updated on our progress. More about this transformative acquisition shortly. In France, we continue to invest in growing the APRR network. Tolling commenced on a new section of the A79, a key link of the East West Link from Royan on the Atlantic Coast to the Rhone Valley and beyond towards Germany, Switzerland and Italy. In January 2023, we signed a EUR 410 million investment plan with the French state. This has secured additional toll increases for us at our APRR and AREA, and is a testament to the strong ongoing relationship APRR has built the French government. We also made progress at Dulles Greenway towards our goal of implementing distance-based tolling. We have gained the support of Virginian Governor and the Virginia Department of Transportation, both positive and promising developed. The move to distance-based tolling would benefit both our customers and our business. Importantly, it would provide us with the legislative and toll pricing framework to unlock cash in the business. We remain committed to pursuing this toll reform. Graeme will talk more about our immediate plans at Dulles Greenway in his address. The consistent and diligent execution of our long-held strategy continued to translate into security holder value, with record distribution of $0.40 per security for the year. We delivered a 9% increase in proportional toll road revenue at a 10.3% increase in proportionate EBITDA. This reflects improving traffic post COVID-19, along with toll price increases. I'm also very pleased to report that in 2022, we outperformed the ASX 200 on a total shareholder return basis, delivering 8.7% TSR versus negative 1.1%. This follows our already excellent track record since the decision to internalize management in 2018. Since then, we have outperformed the index with a shareholder return of 42.1% to the end of 2022. We achieved these impressive results while staying laser-focused on our strategy, which is to improve cash flows from each of our businesses and grow value for all our stakeholders across the 5 pillars. These 5 strategic pillars are: First, reducing legacy complexity and optimizing the value of what we own; second, active operational management to improve earnings and value; third, disciplined capital management to underpin strong and sustainable distributions; fourth, lengthening average concession line; and finally, diversifying and managing risk. We made significant progress against these pillars in 2022, in particular, with the acquisition of a majority interest in Chicago Skyway. This acquisition fits squarely with our strategic approach, and it met all 3 of our investment criteria. Firstly, it is expected to deliver an internal rate of return greater than our risk-adjusted cost of equity at the time of acquisition. Secondly, it has lengthened our average weighted concession life. In fact, has doubled it from 18 to 37 years. And finally, its cash flows, along with those from our existing businesses, will underpin sustainable distributions for decades to come. The addition of Chicago Skyway to our portfolio has also diversified and strengthened our business, balancing exposure by both geography and currency. Our enlarged capital base has also placed us in an even stronger position to participate in any future retender process for the concessions we hold in France. We thank our security holders for your support of a $3.1 billion equity raise to fund this acquisition. It was a decision and a strategic move that represents an important step in our growth as a global owner, operator and developer of toll roads. Now moving to other developments during 2022. In June, IFM, an Australian-based global fund manager became a significant investor in Atlas Arteria. Now as I've noted, we remain focused on delivering our strategy and pursuing our promising growth agenda. However, as a public company, we are always for sale, at a price that is acceptable to our security holders. Following IFM's investment in Atlas Arteria, they requested information to help them determine whether or not to submit a proposal to acquire all the outstanding securities in our company. The Board and management worked hard to provide information to address those requests. As you would expect, we balanced IFM's request with the interest of all other security holders and the protection of Atlas Arteria's material confidential information. In July, IFM confirmed that they were not in a position to meaningfully progress a proposal for the acquisition of Atlas Arteria. As such, we continued to progress with our bid for Chicago Skyway, which had been well underway for months prior to these interactions with IFM. I can assure you that the Board's objectives at all times has been to maximize value and to consider the long-term best interest of all security holders, and this remains the case. Late last year, when IFM held an ownership position of almost 20%, they approached the Boards and requested that they be granted a nominee seat on the Board of ATLAX. Your Boards have carefully considered IFM's request and in turn, Ken Daley as the IFM Board nominated representative. Due to his qualifications, skills and experience, along with his agreement to comply with our comprehensive conflicts of interest policy, today, we recommend that security holders appoint Ken as a Director of the ATLAX Board for a period of 12 months. On the topic of Board changes, in March, Jeff Conyers stepped down as Chair of ATLIX after 13 years of committed service. We thank Jeff for his significant contribution, which has helped Atlas Arteria meet many milestones and achievements. And we officially welcomed ATLIX Non-Executive Director, Fiona Beck, to the position of ATLIX Chair. During 2022, Ariane Barker resigned as a Director of ATLAX, and we thank Ariane for his service to the company. And at the start of 2023, we welcomed John Wigglesworth as a Director and Chair of the Audit and Risk Committee of ATLAX. I also want to take this opportunity to advise our security holders that Caroline Foulger has advised that she will step down from the ATLIX Board on 1st July 2023. Caroline has made an important contribution since her appointment in 2020, and we thank her for her service. We will now commence the process to replace Caroline as well as conduct a search for a new ATLAX Director, subject to ATLAX Item 6 passing today. These Director searches will take into consideration our skills matrix and skills and experience of our other Directors. We expect to make announcements on the appointment of these Directors in the coming months. Today, we have 4 Directors standing for election or reelection. You will hear from each of us later. I am standing to be reelected to both the ATLAX and ATLIX Boards. Andrew Cook is standing to be reelected to the ATLIX Board. John Wigglesworth and Ken Daley are standing to be elected to the ATLAX Board. Moving to remuneration. In the lead up to the AGM's, we have been pleased to engage with many security holders and proxy advisers. And as is in the case in any thriving democracy, we have heard a range of different views. Of the 4 proxy firms that we engaged with, 2 were supportive of the remuneration report, including the 2022 outcomes, and 2 opposed it. As Directors, it is our job to take on board that feedback and to make decisions, which are aligned with security holders' interests, and are appropriate and consistent with market practice. We will take today's voting outcome very seriously, and we'll continue to evolve and refine our remuneration framework in 2023 and into the future. As your Chair and on behalf of your Boards, I feel privileged to have overseen Atlas Arteria through this year of positive transformative change. We would like to thank Graeme Bevans, our CEO and Managing Director, his executive team and the broader Atlas Arteria team for their hard work delivering such an exceptional year. And thank you to you, our security holders, for your ongoing support. Before I hand over to Graeme to take you through our key operational highlights, I would like to share a brief video to help bring some of our achievements to life for you. Thank you. [Presentation]

Thank you, Debbie, and good morning, everyone. It was great to see our achievements packaged up in that video. As you have seen and heard, 2022 was a year in which we executed consistently while driving strategic transformative change. As you heard from Debbie, generating long-term value for security holders drives every decision that we make. We are confident that 2022 has positioned us even more strongly to do exactly that. I'll now take you through our performance for the year and the first quarter of 2023. Our strong results were driven by the continued increase in mobility and improved operating conditions across France, Germany and the U.S.A. We are also benefiting from the current high inflationary environment. This is supporting toll increases and earnings, while the high proportion of fixed rate debt across our business is providing protection from rising interest rates. APRR had an impressive year and continues to be the major driver of our proportional revenue, underpinning distributions for you as our security holders. APRR traffic, toll revenue and EBITDA all passed pre-COVID levels. For the first quarter of 2023, traffic outperformed what was a record Q1 2022, supported by a strong ski season and reduced rail capacity as a result of pension reform strikes. Our tolls for both APRR and AREA increased by around 4.7% from 1 February this year. At Warnow Tunnel, we saw stronger-than-expected traffic as a consequence of increased time savings due to road works on competing routes. This trend continued into the first quarter of 2023 with total revenue up 14.8%. The result was supported by increase in toll prices by an average of 6.4% in November 2022. At our newly acquired business, Chicago Skyway, traffic toll revenue and EBITDA were all up on 21 levels. Again, we saw roadworks positively impact both light and heavy traffic, along with the steady increase in people returning to office-based work. The attractive toll regime for this business provides us with very good toll escalation predictability. In 2023, tolls were increased by 10.9% for heavy vehicles and 11.9% for light vehicles. And based on 2022 reported GDP to date, we are expecting an increase of around 9% for 2024. As we explained in our fundraising documentation for Chicago Skyway, 2023 traffic will fall due to significant roadworks on the Indiana Toll Road over the spring and autumn of 2023, with all lanes on both roads now open over the summer, one of our busiest periods. At Dulles Greenway, we continue to see a more gradual recovery post COVID-19. While traffic and earnings were down on 2019 levels, traffic, toll revenue and EBITDA were all up on last year. For the first quarter of 2023, traffic was 11.7% higher, with traffic in peak periods at the highest level since the start of the pandemic. I'd now like to take you through some of our ESG progress for 2022. We focus our efforts around 4 key sustainability priorities: safety, customers and community, our people and environmental stewardship. Safety will always be our top priority. Frankly, in 2022, our safety performance across our businesses was mixed. At APRR, we're deeply saddened by the tragic accident that occurred when 3 APRR employees were struck by a van at high speed. It resulted in 1 fatality and 1 serious injury. This incident highlights the inherent safety risks in our business. We're applying learnings from the accident, including innovations, which we are currently testing. Safety for us is not a set and forget exercise, and we are more committed than ever to making sure that everyone goes home safely after working in one of our businesses or using one of our roads. Overall, at APRR, we are very disappointed to have experienced an increase in accidents over the summer and Christmas periods. We missed our target to keep lost time injury frequency rate below 3. However, at all our smaller businesses and at the corporate level, we achieved our lost time injury target of 1 or less incident at each venue, with 0 lost time injuries. On the environmental stewardship front, we continued to make good progress on our emissions profile, with a 9.8% reduction in Scope 1 and 2 emissions compared with 2021. At APRR, all of our service areas are now equipped with electric vehicle charging stations, incentivizing our customers to switch to zero-emission vehicles. We made good strides in understanding potential climate-related impacts to our business, including our infrastructure, our people, customers and communities. This work represents a significant step forward in aligning our climate actions and reporting under the Task Force on Climate-Related Financial Disclosures framework. On the customer and community front, we undertook our first customer satisfaction survey at Dulles Greenway. Pleasingly, it showed very high levels of satisfaction, about 94% for road conditions, safety and travel time. As you saw in the video, diversity also matters to us. We maintained our 40% gender balance at a Board level and across senior executives and the corporate team in 2022. We're also very pleased to see strong employee engagement with 80% of our people saying they would recommend Atlas Arteria as a great place to work. Looking forward to 2023, we will continue to pursue opportunities at APRR and Dulles Greenway. In France, our understanding is that one of the government's key priorities is closing out the pension reform. Both the Finance and Transport Ministers have affirmed during parliamentary debate their view that the private concession model is the most effective manner in which to operate the French toll road network. The Transport Minister is organizing in the coming months a conference to discuss the future of the toll road concession systems once the current contracts expire. Recent debates have shown that the current direction for future concessions seems to be that the future will differ from what it has been since the 1960s and very likely will have a different risk profile and a more regulated environment. One of the numerous options could be to have a regulatory system, more like the airport regulatory model used currently in France. There have also been discussions for any future contracts to have shorter duration, although that will depend on the amount of investment and operational service levels required to operate and improve the road networks. Most importantly, the SANEF concession is the first to expire in 2031, and discussions are likely to commence on the handover 7 years prior to the expiry, making the future structure of concessions a priority for the current government. We're pleased to see the state and regulators starting to engage actively on this topic in 2023. While other reviews are concurrently occurring, we're confident in the strength of our contractual position with our concessions as has been previously tested in 2015. There is opposition from certain stakeholders against any further extensions of the current concession contracts. We remain focused on presenting opportunities for investment and considering possible evolutions that would support the government's road, transport and environmental objectives. Separately, we're progressing the initiatives contracted as part of the recently signed plan, as Debbie alluded to, as well as awaiting an outcome on the A412 project, which is expected to be announced later this year. As Debbie mentioned earlier, we are now well positioned to participate in a retender of concessions should that occur, given our increased scale since the acquisition of Chicago Skyway. At Dulles Greenway, we are working to progress a rate case application with the State Corporation Commission, which will be filed in the coming weeks. As Debbie mentioned, our preferred outcome at Dulles Greenway is to lower tolls for motorists through the implementation of distance-based tolling. However, in the absence of an outcome of the facilitating legislation, we have an obligation to you, our security holders as well as our bondholders, to pursue toll increases through the current regulatory framework. There is still a chance that the distance-based tolling legislation will be passed in the next few months, which would authorize VDOT to negotiate and execute a new concession agreement incorporating distance-based tolling. We remain very focused on establishing a clear pathway to sustainable cash flows from Dulles Greenway as we pursue these 2 parallel initiatives. At Chicago Skyway, the smooth transition of ownership and implementation of our key strategies outlined at acquisition is also a clear area of focus for us in 2023 and is proceeding to plan. We're working with the management team and our partner, Ontario Teachers', to shift Skyway's maintenance to a proactive approach, a model we use across all of our businesses. Proactive maintenance allows us to detect early stages of serious defects and target repairs early to reduce risk, improve safety, and reduce the overall CapEx requirements over the long term. To better position us to manage the structures at the Chicago Skyway, we're creating a high-resolution 100-megapixel digital twin of the Skyways infrastructure using drone photography. This will allow us to conduct virtual assessments anytime, anywhere, with regular full updates of the drone footage and use of artificial intelligence for comparative analysis. We will be able to further identify and predict maintenance requirements across the structures and repair them at lower cost. The other focus this year is refinancing maturing debt at the Chicago Skyway, along with a re-gearing to release capital. We've begun work on this, and capital releases from the refinancings in 2023 and 2024 will be used to smooth distributions to security holders as outlined at the time of acquisition. It is important to note this is a short-term strategy and does not replace our usual approach to funding distributions from operating business cash flows. In summary, I'm pleased to say that the outlook for Atlas Arteria is very positive. Our financial position is strong, and we continue to deliver in the face of changing global macroeconomic dynamics. We are positively correlated to an inflationary environment, which has translated to meaningful toll increases for us in recent months. These increases, coupled with traffic performance, give us the confidence to, again, guide to 2023 distributions of $0.40 per security. In closing, I would like to say that our achievements in 2022 are down to an exceptional commitment from our relatively small and very hard working team. I'd like to thank them for helping Atlas Arteria deliver such an exceptional year in '22. I'd also like to thank our security holders and stakeholders for your continued support. As Debbie said earlier, we're at the beginning of a new and exciting era for Atlas Arteria. You have my commitment, along with that of our team, to keep delivering on our strategy and continuing to add value to you, our security holders. Thank you.

Thanks, Graeme. We will not move on to the formal business for today. The formal proceedings involve the 2023 Annual General Meetings for both ATLAX and ATLIX, which are being held concurrently as permitted by the constitutions of each company. I now table the Notices of the Annual General Meetings for ATLAX and ATLIX and propose they be taken as read. As we indicated earlier, I will Chair the ATLAX AGM and Fiona Beck will Chair the ATLIX AGM. However, for the efficient running of the meeting, the ATLIX Board has agreed that I will take security holders through all agenda items other than those relating to my own reelection. I'll remind you that security holders and proxy holders will be able to vote on each item of business to be conducted at today's meetings in person or by the Computershare online platform. I note the instructions on how to vote and ask questions were provided at the start of the meeting. And for those attending online, you can refer to the Computershare online meeting guide for further information. The telephone lines are now open for verbal questions. For the purposes of questions and to assist with the efficient running of the meetings, we will group resolutions related to the same subject matter together. I will answer or if appropriate, redirect any questions to my colleagues, and may respond to a number of questions together if they cover the same subject matter. If it is not practical to respond to all questions, we will review the written questions submitted and seek to ensure that those read out are representative of the questions submitted. You may also ask questions of our auditors, PricewaterhouseCoopers. You will now see on the screen all the agenda items, which form part of the business to be conducted at today's meetings. I will introduce each item of business in turn, and then show the proxy position on that item before moving to questions and voting on that item. I would like to note that our largest security holder, IFM, who holds approximately 22% of our stock, has yet to cast their votes. Accordingly, the proxy positions that you see on the screen may not be representative of the final pole outcomes. I will start with the ATLAX and ATLIX item 1, the financial accounts and reports. As required by the Corporations Act, I now table the Financial report, Directors' report and Auditors' report for ATLAX for the financial year ended 31st December 2022. On behalf of the ATLIX Chair, I also table the 31st of December 2022 Audited Financial Statements of ATLIX. The financial reports are included in the 2022 Atlas Arteria Annual Report, which is available on our website. There is no formal resolution required to approve the financial accounts and reports. Instead, this item provides security holders with an opportunity to ask questions in relation to the accounts or more generally, on our business. Our auditor, PricewaterhouseCoopers, has not received any written questions in relation to the content of their report, or the conduct of the audit. However, Mr. Ben Gargett, the signing partner for the 2022 audit, is present today and will be able to address any questions that you may wish to put to him. For those attending in person, we have a microphone standing at the front. If you would like to ask a question on this item of business, please approach the microphone and show your investor card to the Atlas Arteria representative. Before you ask your question, please state your full name and any affiliation. If you are unable to approach the microphone, please raise your hand so a microphone can be brought to you. Note that you must be holding a blue or yellow voting card to speak. Are there any questions from those attending in person?

Good morning. My name is Mike Muntisov. I'm from the Australian Shareholders' Association. Today, I hold proxies for 38 shareholders, representing 183,000 securities in Atlas Arteria. First of all, we would like to commend the company for holding today's meeting as a hybrid meeting, which allows the maximum opportunity for all shareholders to participate. In terms of this item and questions, the first question I had was related to the APRR concession, but I think the address has well answered that question so I'll pass to the next question that I had, which is to do with the Chicago Skyway. So Atlas Arteria paid $2.9 billion for the Chicago Skyway. There's been criticism that Atlas Arteria paid up to $1 billion too much. What is your response to this criticism, especially given the significant increase in interest rates since then? And what annual return do you expect to derive from this asset given the price paid?

Thanks, Mike. Graeme, I might leave it to your answer.

Thank you for the question. Obviously, as we've explained in our speech, both Debbie and I, we have very clear rules on how we consider any investment opportunity. And this investment had to meet a return hurdle which was accretive to the existing rate of return that was embedded in our stock price, adjusted for currency and risk. And on our analysis of that, the acquisition was accretive. It was part of a competitive process. There were 3 other bidders involved in the process, 2 others actively bid, and it was quite a competitive process to get to the resolution of acquisition. So it was, a, a fair price in a competitive environment; secondly, it was accretive to us. That accretion was also, on the basis of the pre-IFM approach, was still accretive.

Thank you, Graeme.

Chair, I have a couple of more questions. Would you like me to ask them now or would you like...

I think it's fine if you ask a couple more questions.

Okay. Thank you. My next question is with regard to TRIP II. The financial report states that this asset is presently unable to make distributions to Atlas Arteria, pending legislation to be passed in Virginia. This has been the case for some time. What representations has ALX made to the Virginian authorities to progress the release of these funds, and when will the legislation be passed? And depending on your answer, there may be a further question that might be appropriate for the auditor to answer, which is can this asset remain on the balance sheet awaiting favorable legislation, which is out of the company's control?

Okay. So I think in relation to Dulles Greenway and the steps that we're taking was addressing quite a lot of detail, both my speech and in Graeme's speech, but maybe Graeme if you can just cover off quickly what we're doing around legislation.

Yes. So to clarify, the lack of distributions from Dulles Greenway is not due to the legislation. So we're pursuing 2 parallel paths. One is under the existing legislation to get increases in tolls, which would eventually put us in the position of being able to make distributions. We would expect that had we -- should we achieve the legislative change, that may occur slightly earlier than would otherwise be the case under the existing legislation. The inability to make distributions is driven by the very complex debt arrangements that we have around that business, which are quite advantageous to us in a period whilst we have negative cash flow, which we have had during COVID, which otherwise would have resulted in a more difficult financial situation. As to the potential risk of impairment, that is something that we test every 6 months as we do half year and annual results and was tested at 31 December.

Thank you. And Mike, I think you have one more question?

Yes. Yes. My final question on this item. You've included the ATLIX financial report. So this is in relation to ATLIX. For the benefit of the shareholders present, can you explain why ATLIX is registered in Bermuda.

Yes. Okay. So the original corporate structure was established by Macquarie under the original structure of the Macquarie toll road environment. They then split their toll roads companies out into separate companies, one of which was in called Macquarie Atlas Roads. It was a preexisting structure that we inherited, even this corporate entity. It is obviously, a corporate structure that serves us very well from the geographical locations that we operate in and that historical corporate structure, and we see no reason to change the corporate structure. Thank you. Is there any other questions from the floor? Chloe, are there any questions online in relation to this resolution?

Chair, there are no online questions in relation to this item or on general business.

Do we have any audio questions on the line?

There are no phone questions at this time.

Thank you. Next, we will consider item 2 of the ATLIX AGM. Companies to which the Bermudian Companies Act 1981 applies are required to appoint an auditor at each Annual General Meeting, and that auditor then holds office until the close of the next Annual General Meeting. Accordingly, this item of business relates to the reappointment of PricewaterhouseCoopers as auditors of ATLIX until the close of the ATLIX 2024 AGM. I would also like to mention at this point that the Boards are aware of the issues recently reported in the media relating to PwC's tax division. We have discussed these issues with our PwC audit partner, who has assured us that PwC is taking these issues very seriously, and that they will be appropriately addressed. We will continue to monitor the situation. Importantly, the Atlas Arteria Boards regularly review the relationship with PwC and the quality of the audit services provided by them and have no current concerns. The ATLIX Board has recommended the reappointment of PricewaterhouseCoopers to provide ATLIX's audit services for the 2023 year. PricewaterhouseCoopers has confirmed its independence and the ATLIX Audit and Risk Committee and the Board are satisfied with their independence. The status of the proxy votes in relation to this resolution will now be displayed on the screen. As previously advised, all undirected proxies held by the Chair will be voted in favor of this resolution. If you are in the room and have a question or comment in relation to this resolution, please approach the microphone and show your investor card to the Atlas Arteria representative. Do we have any questions from those attending in person?

Yes. Mike Muntisov from Australian Shareholders' Association. The ASA recommends regular tendering out of audit work. We wonder, and perhaps you can answer, is Atlas Arteria going to put their auditing work out to tender? Or will it simply rubber stamp PwC's appointment each year?

So there is certainly not rubber stamping that goes on with our audit process each year. PwC do conduct our audit globally, and therefore, we consider the audit services are provided at each of our businesses in each location and incorporately. So that is considered by the Audit and Risk Committees and then by the Board each year following the half year and full year audits. We have -- at this stage, we are looking for reappointment of PwC to be ATLIX -- as ATLIX auditor. Retendering is something we always consider. But at the moment, we are not retendering the audit.

Can I ask when you last re-tendered and when you might be retendering in the future?

Yes. So the last retender it was quite a long time ago. Do we know the exact year?

When the company has only been separated.

Yes. No, but I think to be fair, Macquarie Atlas Road, it was over 10 years ago. It has been a long time, and we acknowledge that, and it is something we are very aware of. And we do continue to look at whether retendering is the appropriate thing to do, and we will continue to do so. But as I said, we have a very complex audit arrangements in place at each of our businesses, some of which are held wholly, some of which owned partly. And then we have to put the corporate and the Bermudian accounts together. It is a very complex process for us to retender. That said, we will continue to review on an annual basis.

So it doesn't sound like you're planning to retender anytime soon.

It's under constant review. Thank you. Is there any other questions from the floor? Chloe, are there any questions online in relation to this item?

Chair, we did receive a question from Mr. Stephen Mayne on this topic, which I believe has now been addressed. So there are no further online questions.

Thank you, Chloe. Do we have any audio questions on the line?

There are no phone questions at this time.

Thank you. You can now vote on this resolution if you have not already done so. [Voting]

The next item of business is Item 2 of the ATLAX AGM and the adoption of the ATLAX 2022 Remuneration Report. The ATLAX 2022 Remuneration Report has been circulated to security holders, including a covering letter, which explains Atlas Arteria's remuneration philosophy and framework and the outcomes of the executive remuneration in 2022 and the annual fees paid to Directors. The report and the covering letter can be found in the 2022 Annual Report and are available on our website. As I noted earlier, unfortunately, there has been some negative sentiment regarding our reported 2022 remuneration outcomes. And based on the proxy results, it is likely that we will receive a first strike on our Remuneration Report today. While this item of business is advisory only and strictly only applies to ATLAX, the Directors of both Boards take seriously the views expressed by our security holders, and these have and will be considered in ongoing Board deliberations around enhancing the effectiveness of remuneration arrangements. Voting restrictions apply to this resolution and are set out in the Notice of Meeting. The status of the proxy votes in relation to this resolution are now displayed on the screen. As previously advised, where permitted, all undirected proxies held by the Chair will be voted in favor of this resolution. If you're in the room and have a question or a comment in relation to this resolution, please approach the microphone and show your investor card to the Atlas Arteria representative. Do we have any questions from those attending in person?

Mike Muntisov from the ASA, again. The ASA will be voting against the Remuneration Report because of the positive discretion applied to the award of the short-term incentive and for the use of only a single measure for the long-term incentive plan. The ASA advocates for 2 performance measures in the long-term incentive plans. Your local peer, Transurban, has 2 measures measured over 4 years, yet you only have a single measure measured over 3 years, which is a very short period given the lengths of concession that you operate. Do you intend to introduce a second measure? And if so, when? And what is it likely to be?

Okay. So the question is about the LTI measure and about the use of 1 measure versus 2 measures. David, did you want to address that as Chair of our Remuneration Committee.

Sure. I'd point out, I guess, that the 2022 LTI measures included 2 strategic measures. One, the extension of the concession -- average concession life of the portfolio and the other, creating a pathway to cash distributions from Dulles Greenway. We reassess the basis of the LTI on an annual basis. It's not a set and forget. Having introduced those 2 measures, we believe that this year, the most important thing is to ensure that the value from that acquisition is delivered. And that value will be reflected in the relative share price performance of the portfolio. That's why we have reverted to a single measure. We have, in the past, considered other measures, particularly cash flow per security, but we don't think that's appropriate at this time, given the strategic position of the business. The decision on next year's LTI measures will be made later this year.

Are there any other questions or comments from the floor? Chloe, are there any questions online in relation to this item?

Chair, we have an online question from [ Ms. Carrie Slee ]. The question is, could you please elaborate on what it means for the CEO to have their short term bonus adjusted upwards without strong justification and in recognition of certain nonfinancial measurements. Could you please provide some examples.

Sure. Again, I think, David, maybe as Chair of Rem, you could answer this question.

Certainly. The Board did exercise discretion. It exercised downward discretion on the Chief Executive's STI based on the safety performance of our minority-owned business in APRR. We also exercised positive discretion, not based on the execution of the Skyway transaction as is contended by some of the proxy agencies. But instead, it reflected 5 years work putting together an executive team that was able to deal at high professional standards with 3 complex transactions in parallel: The acquisition and negotiation of Skyway, a $3 billion capital raising and IFM's approach to us. The Board was of the view that those 3 transactions were executed to a high degree of professionalism and needed to be recognized, but in addition, it reflected 5 years' work building an executive team that was capable of that execution. And they're the reasons that we exercised this positive discretion.

Thanks, David. Do we have any other questions, Chloe?

Chair, we have an online question from Mr. Stephen Mayne. Could IFM Board nominee, Ken Daley, please explain to shareholders how IFM intends to vote on the rem report? It has the voting power to avoid a rem strike. Is it going to use this power? Or instead destabilize the Board in a corporate control situation by raising the prospect of a full Board spill 12 months from now?

So I might take that answer because I know that Mr. Ken Daley does not know IFM voting intentions nor do we. And so IFM will vote according to what is their shareholder right to do so. If there is a strike this year, certainly, we will be having a vote next year, and certainly, there could be a strike next year, and that has a number of ramifications which a number of us understand. That said, we're not in a position to reveal any voting intentions of IFM because we don't know what they are. And I think that is absolutely within the shareholders' rights. Thank you. Any other questions, Chloe?

Chair, there are no further online questions in relation to this item.

Thank you. Do we have any audio questions on the line?

There are no phone questions at this time.

Thank you. You can now vote on this resolution if you have not already done so. [Voting]

I now turn to item 3, 4 and 5 of the ATLAX AGM, which seeks approval for the grant of performance rights and restricted securities to the Managing Director and CEO, Graeme Bevans. Details of the terms and conditions of the relevant grants and the reasons for the grants are contained in the remuneration report and the ATLAX Notice of Meeting. Voting restrictions apply in this relation and are set out on the Notice of Meeting. The status of the proxy votes in relation to these resolutions are now displayed on the screen. As previously advised, where permitted, all undirected properties held by the chair will be voted in favor of these resolutions. If you are in the room and you have a question or comment in relation to these resolutions, please approach the microphone and show your investor card to the Atlas Arteria representative. Do we have any questions from those attending in person? Chloe, are there any questions online in relation to these items?

Chair, there are no online questions in relation to these items.

Do we have any audio questions on the line?

There are no questions at this time.