Transurban Group (TCL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Transurban Investor Briefing Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Scott Charlton, CEO. Please go ahead.

Great. Thanks, Ashley, and welcome, everyone, to our investor day sort of update. Thanks again for joining us. It's going to be a bit unusual, but we want to take this opportunity to provide an update particularly in this quickly changing external environment that we're dealing with. Hopefully, everyone has a chance to have seen the materials that we've released this morning and you have the presentation either in front of you or you can follow on the webcast. So I'm going to turn to Page 3 and just quickly look at the agenda. Again, it's a little bit different obviously than our normal Investor Day in that it's virtual. But we still wanted to give you access to the broader leadership team. So I'm joined today on the phone across Australia and in the U.S. by our full Executive Committee as well as the Investor Relations team. So I'm going to provide an update on the business. And then -- and during that, I'll ask various members of the team to give us some extra color on some particular issues in relation to their portfolio. And then it will be followed by a more detailed session on traffic performance, what we're seeing and what we might expect, provided by Darryn Paterson, our General Manager, Strategy and Traffic, who many of you have seen present previously. And then we'll finish with a Q&A session with the whole leadership team participating. And I expect that this whole presentation will take around 90 minutes. Okay. So let's move on. If I look at Page -- Slide 4, and I'll talk about the clear priorities, it's not much different than what we presented a few weeks ago. Obviously, we're still very much focused on and the priority around the safety of our people and our customers, keeping our roads fully operational and providing financial and other assistance to our customers and members of the community who need support at this challenging time. And we're particularly targeting certain groups that we'll go through in a little bit. Again, the world continues to change since our trading update we provided on the 1st of April, and we're actually now seeing a few countries on the road to recovery, starting to relax restrictions. Obviously, the one who has come out of this the quickest because they started the earliest was China. And we've seen some traffic in China at pre-COVID levels, for example, in some of their major cities. We're also starting to see some positive sign. The government restrictions are now starting to lift, as everyone knows, here in Australia and also in Québec. And we're preparing now the business for forecast recovery. In the Greater Washington area, in [indiscernible] the situation is a bit more challenging, and we're continuing to monitor it closely. But at some point, that will start to ease restrictions, and recovery will come about. And we'll talk a little bit about the Express Lanes, and Darryn will provide an update on that as well. Turning to Slide 5 now. Talking a little bit about the traffic update. We've been providing these tables, I guess, in this format for the last few weeks just to give you an update of how quickly things change with the restrictions coming in and give everyone some transparency of what we are seeing. So again, today, we're giving another 3 weeks of extra data since our March quarter update on the 16th of April. So we provided our trading update on the 1st of April, then our March quarter update on the 16th of April, and now we're starting to give another 3 weeks of data. It's a bit confusing a little bit on the chart, so I'll explain this and Darryn can go in more detail. But notwithstanding the impact of Easter and the Anzac holidays on the data, you can see that the trend in our average daily traffic has shown improvement over the second half of April with about 1.3 million trips last week. So we got down roughly to around 50% of our normal traffic, and that has now improved to around 40% to 45% down on what would be traffic when we were back sort of at the 1st of March. So when you look at the table, it is a bit confusing at this 12 and 19 weeks of April because we're looking at the daily traffic versus comparison of last year, and the holiday weeks around Easter and Anzac Day are obviously very different or were different last year than they were this year. That's why you see it go down into the high 50s and jump back into the 30s. But I think the important data to look at is the 26th of April, that week, at 44% down versus the 29th of March at 48% down, which was when the full restrictions came in. So you can already start to see some more movement towards the end of April, and that's shown in the graph there on the left at our annual daily traffic movements. And pleasingly, on this past Saturday, we saw stronger traffic performing especially in New South Wales and Queensland, where restrictions have started to ease, and traffic in both markets was the highest since the 21st of March on that Saturday before the Stage 3 national restrictions were mandated. And across every market, large vehicle traffic has continued to show more resilience. As a reminder, the Victorian number, because it looks bigger, it also includes light vehicle classifications unlike New South Wales. If you actually look at the heavy vehicles, the performance continues to be in line with New South Wales, which is down around 9% for the month of April if you take out the light commercial vehicles in Victoria. Obviously, we see more impact on our Express Lane assets in the Greater Washington area. In the month of April, those assets were down around 80% while the Australian assets were down between 40% and 55%. But as we said, we've seen better numbers in the last 2 weeks. Pleasingly, in Québec, the government recently announced there would be a gradual reopening of some businesses actually starting from today. And if you look at the traffic around the A25, you've seen some improvements over the last week or 2. Residential construction recommenced in early April and some other activities. And we also expect that sometime during this month that the toll on the A25 will be reinstated as that market starts to come out of its restrictions. And again, Darryn will give some further insight on our traffic performance in his session. So now if I move to Slide 6. Again, our aim in this crisis is to balance the needs of all of our stakeholders in light of the fact that our traffic and revenue obviously has been significantly impacted as a result of the virus. And our response in this crisis is to prioritize maintaining our workforce and expanding the ways we support our customers in need and those particularly working on the frontline in a much targeted way. Our approach for supporting customers has been, again, as I said, a very targeted response aimed at those who are in the most need. And now I'm going to ask Kris, who heads up our customer area and has headed these efforts to expand our support for customers through the crisis, to provide a bit of color and -- on Transurban's response to date. So Kris, can I ask you to comment on this slide, please?

Sure. Thanks, Scott. Good morning, everyone. I think we're all no doubt aware that COVID-19 has resulted in unprecedented numbers of customers experiencing financial difficulty. So that's why we've expanded our Linkt Assist program to help those most in need during this crisis, those who have lost their jobs and are experiencing a significant reduction in work hours. But we're also recognizing the extraordinary effects at our frontline workers in the areas of health care, aged and disability services and also our emergency service personnel. We contact the vast majority of any customer base, so we have their contact details and we do offer to help them if they need it. And we've also promoted our support and assistance options on the website and through social media. We've got a range of support services available to help both our retail and business customers, but the main initiative over this period is our 3-month toll credit program. We've seen a huge uptake in the help that we're providing since the announcement of this expanded program. We've received more than 17,000 applications to Linkt Assist. As a comparison point, we'd normally receive about 600 inquiries per month. The majority of these customers have received assistance, and this program is still very much open, and it represents millions of dollars of investment by Transurban. As a business, we'll continue to look for further opportunities to expand our support services to those who need it most. I'll hand back to you, Scott.

Thanks, Kris. Hopefully, everyone can still hear me. Look, and as Kris has said, we've invested millions of dollars to date on this program. And we'll continue to monitor and we'll adjust the program as we move forward into different environments as we go through the different stages of the recovery to respond to the external circumstances and obviously the needs of our customers. Now if I move to Slide 7 in relation to people and operations. Very similar to what we provided as a trading update on the 1st of April, our roads have been open every day, enabling the transportation of the essential goods and services. We've been on the operation, maintenance and project delivery works, have been reconfigured to take advantage of minimized traffic on the roads during this time with efficiencies being realized through obviously less time in setting up traffic control and more time spent on roadworks and expanding access windows for our work crews. And a big part of our response, again, has been to prioritize maintaining employment for our direct workforce and the thousands of -- tens of thousands of subcontractors working to deliver our operation and major projects in all our markets. The safety and wellbeing of our people is critical, and we're running a number of initiatives to ensure our people stay healthy, connected and engaged as we move into our eighth week of working remotely. And now we're putting in plans, again, to run safely and making sure that we look after our employees and customers, to look at how we might start returning to work, assuming the government looks at easing restrictions towards the end of this week as they have flagged. Again, we maintain a focus on leadership and development to ensure we have the key talent and critical skills required to take us forward when we get to the other side. So again, we're planning on the recovery. We're retaining our workforce particularly all our key talented and skilled people, operations, delivery, customer, technology, all the things that we'll need to support our communities, support our customers on the other side as we see infrastructure is going to play a major role. And we'll talk a bit more about that in a few minutes. If I turn now to the delivery update on some of our major projects on Slide 8, please. We continue to make good progress on the 2 projects in Sydney which are very much nearing completion, NorthConnex and the new M5. Now there has been, because of the social distancing measures, to keep contractors safe on-site, has slowed down progress slightly. So now we're saying we expect to complete road projects during the first quarter of the financial year '21 or third quarter of the calendar year, so some time between July and September. I think as everyone said before, we were saying that we expect it to be finished the middle of the year, plus or minus 3 months. So it's a bit more on the plus side just as we come to the end. But very pleasing to see both of these projects are coming near the end and they’re looking fantastic and again play a major role and contribution to the community here in New South Wales. And just recently, we've taken over the operations of the existing M5 East as part of our WestConnex mandate. So that's great to have that asset now under our operation. Construction also continues on the Fredericksburg Extension Project in Virginia with site clearing earthworks and some bridge construction activity and the Virginian government, as the rest of the governments, continue to classify infrastructure construction as essential activity and works continue. On the West Gate Tunnel Project, there's been continued progress toward a tunneling solution, with a number of sites now having developed proposals to receive the spoil and progress engagement and technical reports in support of the inevitable planning and environmental approvals that will be required. And we're still hopeful in the medium term, we'll have an available site for that spoil over the next few months. However, there's still a number of matters still requiring resolution before the tunneling can commence and additional program pressures resulting from the current COVID-19 circumstances. We now believe that the project will be completed in 2023 instead of at the end of 2022. We remain committed to working with the project parties to resolve all these matters as quickly as possible. And there continues to be a large amount of work underway on-site, as you'll see in the video we're about to show, with over 3,000 people continuing to work on the projects and work is continuing on as we speak. So I'm going to ask Tony, who's leading the team and delivering on this project, to explain a little bit about what you're going to see in this video and the amount of work that's going on.

Thanks, Scott, and good morning, everyone. Over 15 million work hours have been completed on the West Gate Tunnel project to date. Towards the city end of the project, works to build 2 of the precast bridge piers are underway in the middle of Footscray Road, which hopefully you can now see playing on the screen. These concrete piers will support the 140-meter-long launching gantry that will be mounted onto the piers. The launching gantry is expected to be fully assembled in the coming months, at which point it will be used to lift around 1,600 concrete segments into place, which will form the elevated road connecting the new tunnels with CityLink. At peak construction, we expect over 1,000 staff, and we're working on the Footscray Road section of the project. And as Scott mentioned earlier on, at the moment, we have between sort of 3,000 and 4,000 people working on this project at any one point in time. Along the West Gate Freeway section of the project, crews are still focused on building structural supports for the city-bound tunnel portal entrance. Concrete retaining walls and beams are being installed to create an excavation box before major excavation works begin. And these beams you can see being placed will form the tunnel portal's roof. The beams range from 16 meters to 26 meters in length and can weigh up to 47 tonnes. And to date, crews have installed over 35 of the 146 required beams. Good progress has also been made on the production of tunnel lining segments in Benalla, with over 35% of these being complete. And that's all from me, Scott.

Thanks, Tony. And he will be available, as all the rest of the ExCos, for questions later on. So if we move on -- it's a great video. If we move on to Slide 10 and talk a little bit about the capital position. As I said a bit earlier, our aim is, obviously in the crisis, is to balance the need of all our stakeholders, again, in light of the fact that our traffic and revenue has been significantly impacted. And we are focused on ensuring our business comes through these challenging times and continues to be in a very strong position. So that means that we're going to maintain a sustainable investment proposition for our security holders, including the millions of working Australians who are part-owners of Transurban through their superannuation as well as maintaining strong investment-grade credit ratings to enable continued access to capital and global debt markets. Now as you know, previously, we have withdrawn our second half 2020 distribution guidance and instead expect to pay a distribution aligned with free cash excluding capital releases. This second half '20 distribution will be declared towards the end of June, and we'll consider available free cash flow that we have achieved, noting that distributions from some of our non-100%-owned entities will be subject to review at those entity levels. There is the potential that certain assets may choose to defer distribution payments to conserve cash at this time, and we're working through that process. But overall, we are in a very strong capital position with sufficient liquidity to fund our business requirements today and for a significant period of time. One of the things I wanted to just comment on is that there's a lot of speculation in the markets around people who may or may not need to raise equity and people taking different positions. From Transurban's perspective, we're not in a position that we need to raise equity in relation to the balance sheet. We never say never, so the situation could always occur. We're not currently planning on raising equity, nor do we think we're in that position at this point in time. And Adam will provide a bit more color on that. Again, the only reason we would seek to raise equity in the near and medium term, we believe, at this point in time would be along the lines of what we've done in the past, is if we see a strategic opportunity that will drive long-term value and growth for our security holders, and that's something we might bring back to the security holders. But at this point in time, we have no plans in raising equity. But I'll hand over to Adam to give you a bit more color around rating and covenants and liquidity and treasury management. Adam?

Thank you, Scott, and hello, everyone. Hopefully, you can see through the materials we've provided not only today but in the last few weeks, you can see, first and most importantly, at the moment that we've got a very strong liquidity position. So very happy with the position that we've been able to get ourselves into not only to deal with the COVID-19 situation, but we've always prided ourselves on having very strong liquidity arrangements in place. And hopefully, what you've been able to see is management of a conservative balance sheet. I think this goes to the heart of our capital strategy and our funding strategy, which we've spoken to you about a number of times. In the past, it goes to the diversification of our funding sources, the long tenor of our debt, minimizing refinancing risks, for example, the way we look at our maturity towers and the like and also our commitment to our strong investment grade credit metrics. So again, we feel like we're in a very good position. And again, our liquidity will take us through until at least June 2021 at this stage. During March and April, you know that we've raised about $3.7 billion worth of bank debt and capital markets issuances, again, for general corporate purposes, so we can use it for any reason. But obviously, it's principally there to fund our development pipeline and to fulfill our debt refinancing obligations. Once again, that diversification strategy has played out. Since our 1st of April update to you, we've obviously upsized our working capital facilities with strong demand there, which has been very pleasing. We were able to tap the Eurobond market with an initial issuance with our EUR 600 million raising, which we're very pleased with. And we also, late last week, received a number of reverse inquiries, so direct inquiries from some of our major lenders in the Eurobonds to do what they call a TAP, so just to upsize that initial bond by another EUR 150 million. So again, I think that plays to the fact that we've got strong support from our investors even despite the volatile environment. Slide 11 on this pack, which we're talking to at the moment, obviously provides you with an update on our credit ratings and our debt covenants. Importantly, we've received some requests. And whilst it was public information, we've also provided to you on Slide 32 in the back of the pack some more information just around our debt covenants. And I think what's important to note here is that you can see, these are 31 December calculations, that at 31 December we did have material headroom against the majority of our assets. We continue to, for the majority of our assets, improve those metrics through to the March quarter. And then obviously, there will be an impact because of the COVID-19 impacts on our traffic and our revenue. But once again, we remind people that these covenants are 12-month trailing calculation, so that helps smooth out any near-term impact. And hopefully, we can obviously withstand any short-term impacts as a result of the way that we've been able to structure those covenants. Importantly, though, we do have a number of levers available. We've set them out, we spoke about it last time, but we've set them out again to avoid our facilities entering into default. One of which is obviously having discussions with our banks, which we have not had any discussions with our banks because we don't believe we need to or will need to have any conversations with them again because we've got levers in place to be able to ensure that we don't reach the need to have a conversation with our banks. That goes to things like our ability to be able to capitalize interest on certain assets, our equity cure regime, our intercompany charge arrangements and, if you take the A25, for example, the compensation arrangements that we have in place there. So we do have a lot of levers in place. I know it's been very topical, but again, we feel as though that we've got this in control. So with that, I'll hand it back to you, Scott.

Thanks, Adam. Okay. Turning to Slide 12, a little update on the leadership. It seems like a very long time ago that we talked about at the half year results about a restructuring of the executive team and to ensure that we had the right structure and right capability to take advantage of the emerging opportunities that we were looking at in the business. That's obviously been a bit interrupted by COVID-19, but we do still believe that over the medium term and longer term, our strategy and approach and the opportunities we identified will continue to present themselves. And in fact, there may actually be more opportunities given a lot of the different government jurisdictions are looking into infrastructure as one of the levers to come out and provide productivity and activity in the economy on the other side. Obviously, we went through global and extensive executive searches for those positions. And I'm pleased to announce this morning that Simon Moorfield will join us as a Group Executive for Customer and Technology some time over the next few months. For those of you who don't know Simon, he has over 25 years' experience in technology, innovation and transformation gained across roles in Australia, the U.S., Europe and Asia Pacific. And he will join Transurban in the coming months, again, from AGL, where he's currently Executive General Manager of Future Business and Technology as well as Chief Information Officer. So we're very pleased and -- to be welcoming Simon. And he will be a great asset to the Transurban business bringing together, as we talked about before, the customer and technology functions at a time when advancements will profoundly change the way our customers make transport choices. Also to provide an update, we have appointed an individual in the group executive role that will lead Partners, Delivery and Risk. We're just in the process of notifying on the other side, and we look forward to advising who that person is in that role in the coming few weeks. So both of those positions have been filled, and we look to take the company forward in those roles. Moving on to Slide 13 about the opportunity pipeline. Again, we believe there will be an increased need for private sector investment to fund infrastructure and help drive growth for the economies on the other side of COVID-19. And in recent weeks, we continue to hear from some of our government clients, confirming their continued appetite for major and minor transport projects which they consider to be important to the recovery. And they've been reaching out to the industry itself and industry bodies and ourselves for various ideas. Again, some of the timelines may have moved out a little bit, but we are going to be prepared with the people we've retained. As we said, we've looked to retain all of our talent, prepared for these opportunities as we come out the other side. These include things like the minority stake in WestConnex which may be sold depending on the outcome of the scoping study and which people would've known have recently appointed advisers. And on Page 13, there's a list of opportunities. Again, we retain optionality over the funding of these new projects, noting that it could come from new debt, equity, partnering and/or potential from the capital releases if not used for distributions. And I think it's important to note out here there's been some comment about opportunities for Transurban. We're staying well within our strategy, well within our geographies. We have our long-term strategy. It has served us well. We have lots of opportunities in our existing markets and our existing assets, with our existing clients and partners, and that's where we'll continue to take advantage of those and continue play in a space that is our long-term strategy and we know well. So we're not moving outside of our strategy because of the current environment. Moving on to -- in Slide 14, the business. While we're dealing with the priorities around the impacts and the immediate needs, we continue to look at the long term, whether it's strategy opportunities or this long-term sustainability of the business. And I'll ask Henry Byrne, who's our Group Executive for Victoria as well as Corporate Affairs and Strategy, to give a quick update on some of the sustainability activity that's occurring across the business.

Yes. Thanks, Scott. As you can see on the slide here that we've set out our key focus areas of our sustainability strategy, which is informed by the United Nations Sustainable Development Goals. And as Scott said, despite everything going on, we remain focused on managing the business for the long term and obviously see sustainability as an important aspect of that. So far in 2020, we've made some important strides towards achieving this strategy. And specifically, I think the achievements in the environmental area are worth calling out. And we've made good progress towards our carbon emission reduction targets, which, as many of you will know and as we've got on the slide here, is to reduce our Scope 1 and 2 emissions by 52% by 2030. We're currently tracking well ahead of that 2030 timeframe to achieve those targets, and that's in part due to power purchase agreements we've executed in our Sydney and Brisbane markets that will see around 80% of the energy used in those markets come from renewable sources. The next step is to extend our carbon targets to Scope 3 emissions in order to meet the 1.5-degree temperature objectives set as a part of the Paris Agreement. And we're actively looking at this at present as the next plank in our carbon reduction strategy. We're also doing a lot of things around our major projects to support our sustainability objectives. And an example of that's found in Queensland where the Logan Enhancement Project was recently awarded the highest rating for any project in Queensland by the Infrastructure Sustainability Council of Australia. So that represents the kind of work we've been doing around use of more sustainable materials. And if I stick with the Logan Enhancement Project as an example, that was constructed using 220,000 tonnes of a more sustainable road asphalt called the EME2, which substantially reduces the carbon footprint of that project. And we're seeing initiatives like that across all of our major projects' pipeline which is translating into significant benefits in reducing the carbon footprint of the business. So that's just a couple of things I'd draw your attention to in the context of our sustainability strategy. I'll hand back to Scott.

Thanks, Henry, and I apologize if there's a little bit of noise in the background. Construction in Sydney is continuing across the road. So it's good to see that economic activity. If it's causing a little background noise, apologies for that. So if I look to Slide 15, which is just a summary sort of, of the quick section that some of us have covered and an overview of the priorities and performance, again, as we navigate this challenging -- I'm very proud particularly of the work that the Transurban employees have done during a challenging time and the decisions we've made to keep our people employed and to support our customers who need it most while ensuring that the company remains strong and prepared to support our clients coming out the other side of this. The pleasing thing is we are seeing some early signs of traffic improving here in Australia and Québec and are well positioned for the forecast recovery. I do always want to caveat that by saying, though, it's up to, obviously, government intervention and what they may do in the future in relation to restrictions. With that being said now, I'd like to hand over to an expert who can give you an outline on the traffic. And Darryn, if you want to give us some insights, that would be great.

Certainly. Thanks, Scott, and hello to everyone online. I thought I'd start on Page 17 with just a quick explanation of how we've been thinking about the COVID impacts from a traffic perspective and what we've experienced to date has eventually been a direct result of the external restrictions imposed. Now that first stage, of course, [ we'll be through ], which started in March with some initial light restrictions that were put in place. That quickly escalated as we also went to more severe restrictions through the remainder of March as the government's aim to suppress the spread of the virus. We saw that manifest in terms of traffic, was very much a sharp drop-off in activity, which we've seen played across all roads and not just freeways across our cities. So since the last major restrictions were imposed at the end of March, what we have seen is consistent conditions. And so the underlying traffic conditions stabilized essentially to what we would describe as a peak impact. And while some of our markets are still in that peak impact stage, as Scott has highlighted and others appear to be edging towards recovery, allowing us to focus more on what the recovery actually looks like and what the longer term actually holds. So turning to Page 18. And we can see from the chart on the left, which shows the weekly traffic by market, how we have progressively moved through the early restrictions and suppressant stages into an area of that peak impact. As that transition has occurred, we've seen declines broadly tracking together across all the regions. And it's also apparent from that, that the same chart shows the natural variations that we've seen across the Easter and Anzac Day holidays. And with each of those regions, traffic conditions broadly stabilized in early April and have since shown signs of some improvement. And perhaps I'd encourage you to have a look through that period and to get a good sense of the performance across the holiday period. If we disaggregate a bit further at the regional data, as you can see from that chart on the right, which shows the average for each asset across the month of April, there is broad similarity across all of the assets, which is not a surprise given the constraints imposed are pretty similar across all our regions. Now the obvious outliers to that, on the high end of the scale, are the Express Lanes, which are more exposed to the traffic and congestion levels; while at the other end of the scale, the lower end, you can see assets in ramp-up after the completion of construction works and those more heavily utilized by commercial vehicles are showing much more resilience. And that's drawn out more on the next page, 19. And as I just mentioned, traffic conditions declined relatively quickly as the more severe restrictions were imposed. But since those last major ones are introduced, conditions and traffic have broadly stabilized with some understandable variations occurring due to that timing of the Easter and Anzac Day holidays, as I mentioned. One aspect of the chart on this page that's also highlighted is a clear difference between the impacts of the vehicle classes. And then the purple line in particular highlights the resilience of commercial vehicles throughout the crisis, which is consistently showing stronger performance relative to the general lighter vehicles. Now that relative strength, again, is also reasonably understandable given the emphasis the government has placed on attempt to have some business activity and supporting the economy and livelihoods in each of the regions, such as the construction [ major ] works that are happening in Sydney and other places around the states as well. Another insight that we're able to draw from our data is the relative impacts across the week, where we've seen weekdays performing notably better than what we have at weekends. The primary reason for that is linked to the type of restrictions that have actually been imposed. And with more heavily targeted are those that are towards the discretionary trip area like shopping, restaurant, sports, which have all felt, and those invariably impact weekends more so than the weekdays. But we're also able to dig a bit further into the data as we see on the next page, Page 20. And to provide some context for the information on this page, that what the charts are actually showing is traffic conditions by hour across the day with the background gray color representing conditions before restrictions were imposed. The lines on those charts illustrate the successive changes on a weekly basis starting at the top, where it's early March and moving down through the restrictions as they've increased. Now what we see from the traffic chart on the left is the fairly consistent drops across the day, which in part is explained by the sample trip rate that are shown in the pie chart on the same page, which emphasize the diverse nature of the trips that are occurring even during the periods that we're actually seeing now. Now what that tends to mean is the reductions are felt more evenly across the day as the chart was showing. What the chart also highlights though is how traffic levels have stabilized throughout the entire day, which you can see towards the end of April, where the lighter-colored lines start to overlap. In fact, as shown on the most recent data, which is hopefully visible on the screen, the dark blue line, conditions have actually slightly improved over the last week. Another interesting factor, which is occasionally being reported, is the drop in congestion levels across all the major cities, which, as the second chart on the page highlights, we've also seen on our assets as well. What is important to note and draw out by comparing the traffic and congestion charts, though, is that you can see while the congestion and the delay has dropped on our assets, traffic is still relatively robust. Now that highlights an important factor in traffic flow to keep in mind the congestion and traffic volumes are not correlated one to one. And even in situations where there is little or no congestion at all, it can often be, and is, substantial [ amounts ] of traffic, which is what we're seeing and showing on our -- seeing on our roads and showing on those charts as well. Turning to the next page. When we take -- start to take a broader overview of the Transurban performance relative to our peers, what we can see from the overall assets is that the Transurban assets have built up particularly well compared to some of those international facilities. And those international roads, which are shown on the chart as dashed lines, are generally subject to more severe restrictions earlier than Transurban, after which they drop rapidly to levels around about the 80% below expectations and pretty much stayed there ever since. And while those are just a few comparisons, of course, information from other toll roads worldwide is also starting to be reported and indicating similar drops. And for example, the 407 just recently in Canada published information indicating traffic level reductions of around 75% as well. Now the GWA assets shown as a dark line generally follow those trends to the restrictions imposed in Washington, while in Australia and Montreal, assets have performed materially better, as you can see by the blue and purple lines. Now the strong performance in Australia in particular is broadly attributable to the less severe restrictions that have been imposed throughout the crisis, coupled with the desire of the government to maintain some level of activity such as the construction sector. And in fact, that our roads in particular are more targeted towards the critical intercity routes. So overall, that suggests our portfolio is certainly well positioned relative to our peers but also well positioned to capture that returning traffic as restrictions are eased and the recovery starts to gain momentum. Turning to Page 22. Now no surprise as we start to look at the kind of recovery side of things. We're kind of looking at what other countries further on the path are experiencing. Well, there aren't many as yet that have fully removed restrictions. China is certainly one key country from which insights can be drawn. It has demonstratively passed through the main infection wave and has certainly begun to remove restrictions, and in some places actually completely removed them. And while that single example shouldn't be taken as the only path out, there are certainly some interesting insights that we've been able to draw from it, that it will provide some guidance to the early stage of the recovery ourselves. In particular, as can be seen from the top 2 charts where the gray background represents 2019 conditions and the line for weekly congestion levels. The congestion on roads in key cities has quickly recovered in the peak periods to levels that suggest more traffic, in fact, and more congestion has actually been experienced during those periods than what would normally be expected. Now that's reinforced when you dig into a bit more by the charts on the bottom-left of the page, which highlight that the highway traffic has, in fact, increased relative to the prior year. We can see the green bars in 2020, exceeding those from the year before throughout all of March and April, actually, and by a wide margin. So while the same -- at the same time, the passengers on public transport services, which is the charts on the right-hand side of this page, collapsed by somewhere in the order of 80% to 90% during the same period and had still basically those deeply depressed levels, and really, there's no signs of any recovery yet that we're seeing. So just linking those things together, you can certainly speculate there appears to be a shift in the public transport modes to more personal travel, which we may see in other locations as well. Turning to Page 23. As we've highlighted and has been highlighted extensively in the government reporting and through the press, the severe restrictions have demonstratively proved effective in suppressing the virus spread. We start to suggest it's fairly unlikely that any additional restrictions would be required or imposed. And indeed, the measures have proved effective enough that the discussions and debate have firmly shifted to what will be lifted and when. And most recent reporting has already started to define how and when those initial steps will occur. And of course, while there are lots of different approaches being talked about across the states, the concept of a staged recovery is very much the common thread throughout them all. Now the type, extent and pace of the easing measures will, of course, have a direct impact on the levels of traffic and activity that we'll see across our cities and on our roads. But irrespective of the amount and the order of easing, we do expect to see the recoveries and traffic levels flowing through to our assets relatively quickly with each stage as we go through it. In terms of the longer term, as we discussed on Page 24, Transurban has benefited from investing in recent years and developing our in-house capabilities to examine external trends and what alternative features may look like through the different lenses like demographics, macroeconomics and technology changes, which we feel has put us in good stead to understand the potential impacts that may arise as we come out of this. It's also highlighted to us that there are a range of possibilities, both positive and negative, that may influence the transport industry over the medium- to long-term. In particular, things like working from home, and how macroeconomic and demographic factors may change and flow through to activity in our roads. It's certainly something that's been discussed. But equally offsetting those, we do see some interesting possibilities of other factors playing out as well, such as the shift to private travel and away from mass transport through a period as we've seen in China and I spoke to briefly before. But likewise, commercial activity picking up, whether that's in terms of light commercials or continuing to use home deliveries or even HCVs driven by the significant stimulus activity that's likely to follow. So certainly, from our perspective, there does appear to be a lot of potential positives to take into account as well. With that, Scott, I'll hand it back to you.

Okay. Thanks very much, Darryn. A lot of material there, a lot of insights. And as Darryn said, we have seen some positives, and we commented on this last week and covered everywhere. I should qualify as well, though, it depends on what happens with the potential for a second wave or government restrictions, and we're prepared both for the recovery or if that should be the case as well. But all positive signs -- sorry, mostly positive signs at the moment, so that's very pleasing. And hopefully, more of you are seeing that in your other businesses as well. There's a summary page there on 26. I think we've covered that. We believe we're prepared for most all scenarios that we consider coming out from here. And I think, at this point, what we'll do is just open it up to questions and answers. As I said, the whole of the executive team is on the call. So in addition to Darryn, Adam, Kris, Tony and Henry, who you've already heard from, we have Michele Huey, who obviously runs the New South Wales business; Andrew Head, WestConnex business; Sue Johnson from our Queensland business. Jen's on the call from North America. Suzette Corr, who heads our people and culture, is on the phone as well as Dennis Pozzobon, who is stepping in and running the Technology business. So everyone's on the line, so I'll try. You can direct the question if you have specific to an executive. We're all kind of in different places. So we may fumble around a bit until we get the right person to answer your question, but we'll do our best. With that being said, Ashley, I'll open it up to a question-and-answer now, please.

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

Just a quick one on West Gate Tunnel with the revised expected completion date. Is Transurban still reserving rights in relation to liquidated damages for that potential delay?

Yes. Rob, I mean we -- as we are a normal -- it's a normal project agreement, normal risk profile that we would have in the Transurban since. So yes, you can expect what we would have in place for those, including liquidated damages for late delivery, yes.

Yes. Okay. If I go to Slide 22, which is the -- I think Darryn's slide on traffic patterns in China. Can you comment on whether the rebound seen there is in part due to tolls being canceled on expressways there? Or is that taken into account in the analysis?

Look, I'll get Darryn to answer that question on 2 counts. Darryn, you might comment in relation to Montreal and the performance of the A25 because, as you know, the tolls have been suspended there for the last few weeks. Again, we expect them to come back on sometime this month. You might comment on in relation to, if you can, Darryn, on China. If not, then we'll come back to it. But also make the similar comment in relation to your view on the A25 as well.

The China one is a fairly simple one. It encompasses all of the roads and all of the public transport services. So it would be inclusive of all the facilities that you've talked about.

And Darryn, do you want to make any comment on your view on the A25 in relation to the toll being suspended and traffic?

I can throw in a small amount there. Certainly, the tolls were released in the back end of March, and there has been a slow release and certainly positive statements that Jen can allude -- speak to a little bit more. But certainly, some of the recent changes have resulted in construction and activity have been slightly eased, which has been a positive for that region as well.

Yes. Okay. All right. If I move to customer investment, and I think the company is to be applauded for the lots of different initiatives going on there. But can you maybe provide some thoughts, and this is maybe a question for either Michele and/or Andrew, about thoughts on discounting of tolls or free tolls on the new M5, M5 East and NorthConnex as they open up?

Yes. Well, maybe I'll make a comment, then I can ask Andrew and Michele to provide some color on that. I think, first of all, our philosophy has been to deal with the customers targeted who are in need and to make significant impact on their travel -- transport requirements. Again, so hundreds of dollars of toll credits to frontline personnel, those people that have been affected by the COVID virus, those people directly impacted. That's our approach rather than giving a couple of cents off a toll or a small discount to the masses or the wide majority of people that want to travel. And I assume that will be our philosophy continuing to go forward on both those assets. I'll get them to comment, but we also have partners and arrangements and things in place. So it's not just the decision of Transurban, but I'll ask -- maybe I'll start with Andrew, and then Michele's here as well, she can make a comment. Andrew?

Yes, Rob. So at WestConnex and I think more broadly at Transurban in, what I would call, the equity assets, we're very aligned with the approach that Transurban Group is taking. There is a number of shareholders who sit on various different assets. And I think it's fair to say that we're all very aligned with the approach that Transurban Group has taken to date. The conversations continue. The major focus at the moment at WestConnex is to get the assets finished, the construction done, so that we're in a position to open them and worry about the matters that you're raising. But I would expect that you'll see a consistent approach with the way Transurban Group is handling matters.

Michele, I don't know if you want to raise any issue on NorthConnex.

Yes. I think -- Rob, it's Michele here. And in preparation for opening for all these projects, we're also going to be engaging with our government stakeholders. A lot of these discussions have impact across the networks. So certainly take into account our investor partners but also the government stakeholders and what they're looking to do across the network.

Okay. Cool. Sounds very balanced. Last question for me, if you can indulge me on just one final one. I guess the distribution outlook for the next few years is pretty critical to the investment thesis out there. Can you maybe provide some thinking on your strategies and options going forward in terms of -- would capital releases become part of the dividend again in future? Or with things like maybe WestConnex coming out, would it be better to retain cash in the business? If you can give us some color on distributions going forward.

Yes. So the only definite color I can give you is this half, obviously, which is capital releases won't be part of it, but there will be substantial capital releases still going forward from the Transurban Group, whether it's from WestConnex or still the final from NorthConnex or TQ or debt reserve releases from the U.S. assets when they recover. So there still will be substantial capital releases. It will be up to the Board, obviously, discussion with -- continue to have discussions with security holders how we use those capital releases in the future. I guess, Rob, it was always a view that as we got through this, we had indicated the market, as we got through this heavy development phase, finishing off WestConnex and West Gate and the other assets that are coming online in the next few months that we would look at addressing that -- readdressing that. So my personal view, which is not the Board view, is that I suspect that the Board would look to potentially use those capital releases going forward to help fund developments, acquisition opportunities or potentially strengthening credit matrix. I mean the issue that we've always had is with the capital releases coming out, if we didn't have development opportunities, then the balance sheet would strengthen quite quickly, and we'd probably get accused of having a lazy balance sheet. But I think what I can see in discussions coming out of government is we expect quite a few opportunities over the next medium term. So I suspect, from my personal view, a likelihood that those capital releases would be used to help fund future developments and acquisitions. But as always, I have to caveat that, that is not my decision, that is a Board decision. And the next update will be at the full year result where the Board will give, I imagine, some indication of the philosophy going forward.

Your next question comes from Simon Mitchell with UBS.

Initially just a high-level question probably for Adam. Just interested in the discussions you've had with the credit market providers as to whether there have been any indications of a rethink around gearing levels across infrastructure asset classes and potential for the built-in facilities, just given the volatility we witnessed across a lot of the infrastructure asset classes.

Simon, look, the short answer is no. We haven't heard of anything in that regard from the lenders that we're speaking to or the capital markets investors in the Eurobonds and so forth. I certainly know that they've been -- we have been [indiscernible] toll road to issue in those capital markets. I'm aware of a European toll road. I'm aware of a European airport who has issued in the Eurobond markets post-COVID, and arguably, their traffic results, well not arguably, factually, their traffic results or revenue impacts are greater than ours. So there's still capacity to raise debt as required. I think it goes down to the usual things around liquidity and how you can manage exposures, the underlying fundamentals of the business and making sure that they're using the lens that the rating agencies look through, what they call business risks, so making sure that those business risks are manageable and strong. And hence, why we've been successful over the last short while and, obviously, prior to that, but in the last short while, being able to continue to strengthen our balance sheet as well.

Okay. And then just a question on the covenants. So I appreciate the detail there and the commentary around the headroom and having those issues under control. But if we look at the Washington roads in particular, there's obviously some lower headroom across those assets. And you would expect that Washington potentially is going to place a longer pathway out of these restrictions and potentially a longer-term impact on cash flow, given the economic sensitivity of those roads. Can you just touch perhaps specifically on those roads, what you think any remedy that's required to get through those covenants?

Sure. So firstly, they run a similar type of covenant as the rest of the group, so they're trailing 12 months. So obviously, it's been a challenging couple of months for that business, but obviously, there's some time to play out. Now on the assumption that it will take a little longer to recover than Australia based on the government measures, then there is a chance that the credit metrics come under further pressure therefore, so the Washington assets over the coming months. There are mechanical opportunities in place, particularly around the TIFIA interest. So you're aware that portions of our TIFIA interest can capitalize, which is very important. And they're structured in that way. In fact, when you go back and read some of the rating agencies, they make specific note that because of the way that these toll roads in the U.S., the dynamically tolled express lines work. That's why the government has put in place things like capitalization of interest, to take into account potential market shocks and so forth, not that the government or rating agencies or anyone was able to foresee this, but there are natural measures in place to try to protect the assets from going into default. Now that doesn't mean that you may not be in -- or we may not be in distribution lockup for a period of time. But again, that's very manageable on the basis that a lot of our U.S. assets haven't been able to fund material distributions recently because of the construction projects that were going on with both the 395 and now hopefully, as we move forward with Fredericksburg and the 495 project as well that typically, you're required to retain the cash in the asset to fund those development projects anyway. So in short, Simon, we think it's manageable. But obviously, we're working really closely to make sure that we're doing the right thing.

And although just -- we were there, and I know we've got Jen on the line, so she's -- I think it would be good, Jen, maybe if you provide just a quick update of what is maybe happening in the Greater Washington Area and particularly talk -- commenting, I guess, about the economic spend happening around government and government action, which should help that Northern Virginia area recover economically.

Yes, sure. Simon, I was going to actually pipe in. And you're right that the virus impact has been more severe here, about 10,000 cases in the Greater Washington Area. That includes Maryland, Virginia and D.C. However, we do expect still, despite that impact, to see progressive openings of businesses in government over the May and June timeframe. And we hope to see those dates crystallize in the coming weeks, but we are starting to see policymakers turn towards -- and government decision-makers turn toward that -- the when and the how will begin opening and behind our colleagues, obviously, in Australia and Québec. But they are turning to that opening phase. And Scott's right, one thing we know about Washington has been tested -- is tested every 7 or 8 years here in the U.S. is Washington tends to be more resilient in an economic downturn than most U.S. cities, particularly when you see a significant influx of government funding. If you're watching what's happening on the hill here, trillions of dollars that are going out to help support, release, and much of that -- it will continue to be focused on government spending. So we anticipate that Washington -- the Greater Washington Area, includes Virginia and Maryland will be, again, disproportionately resilient relative to other cities in the country, which is one of the things that has attracted us to this region to begin with.

Okay. And just my final question was on WestConnex, so perhaps for Andrew to answer. Just given the building momentum taking place there in that process, it'd be good to just hear an update on timing and then also just an update on things like preempts and also just the implications of a potentially increased stake on things such as tax.

Yes. So Simon, Andrew is the CEO of WestConnex. So we'll leave it to Michele and I to answer that question on the process and sort of timing. So Michele, I mean you may just want to talk about, I guess, high level of conversations we have just supporting the government. All their -- I mean there's quite a few processes going on, so. Yes.

Yes. Thank you, Scott. Obviously, everyone on the call would be across the scoping study the government has announced earlier and the recent appointment of the 2 partners supporting that scoping study. Based on the informal conversations that we've had with the government, we're still expecting the scoping study to be completed over the course of the calendar year 2020, and then depending on the outcome of that, what follows. I don't think we have shied away from recognizing how important the rest of that asset is for the network. And so any opportunity we can to support the government, of course, we would be willing to participate. And as Scott mentioned, there are also other pieces of the puzzle for the network, both in terms of enhancing the existing roads, whether it's through widening or increasing smart technology that we can put in to improve the flow, getting ready for traffic to recover as well as for new additions. And I think a lot of the conversations in the past we've had about Western Harbour [ tracking ] and all those other opportunities to complete the rest of the city network. We've been in close contact and constant conversations with our stakeholders and also our investment partners to understand where those opportunities come through. We expect some of them to continue on despite the COVID-19 impact because the government has announced that road constructions, engineering projects are very key to the economy and the ongoing recovery that [ each of us ] needs to have -- have seen.

Yes. So I think, as Michele said, so we have lots of conversations. Whether Transurban participates or not in any of those processes, we're just keen to see. Sydney Gateway's proceeding. We have [indiscernible] proceeding. Government's talked about [ bringing ] expressway being fast tracked. We still think they're looking at Western Harbour Tunnel. So all those things are supporting government. Whether we can participate or not is up to whatever the procurement processes are, but we'd just like to see those projects because it's just good for the network, good for the economy and infrastructure. And obviously, as Michele said, the WestConnex process -- partners and I -- sorry, our partners and Transurban remain keen to participate if there is a process going forward, but it's really in the government's hands now.

Our next question comes from Ian Myles with Macquarie.

Can I just finish off with Simon's question? I think he asked about preemptive rights or some sort of rights. You didn't actually address that, Scott, and I was just wondering if you could clarify?

Yes. Sorry, Simon. So we had the first right of -- its first right of refusal, first right of offer -- first right of offer on the transaction. But they haven't asked us to exercise that because clearly, they haven't decided whether to sell it or not. So we'll just watch the process. And I have to say that working with the New South Wales government and their directors, it's been a really good working relationship on working on WestConnex, and we're really happy with how things have gone and really pleased to get the M5 East under operations. And can't wait to get the M5 open, which will be really short there. But we have a first right of offer, and there's a whole timeframe and structure around that. And I think that's all been public, but it's -- we're just watching what the government does.

Sorry, Ian, the important clarification there is that Transurban and its partners, STP, have that first right of offer, but they are also entitled to participate in the process if the government decides to go ahead and run a process, whatever that may be, after considering the STP first right of offer.

Okay. That's great. Can I just go on a couple of other questions? Firstly, on your dividend. Can you maybe give us some color on what you think the working capital impact might be? Given you're providing COVID support relief for people, plus I note you're sort of accelerating payments to small businesses, so I expect to see some drain there. And the second one as part of that dividend is how you consider assets like America, which technically, I would say, have been in a lockup. And would you still account to that EBITDA to come through and to support the dividend?

I'll get Adam to provide a bit more color. So first, nothing's in lockup because, as Adam said, we've got the trailing thing. So nothing's in lockup. In relation to working capital, again, Adam can make a comment. Yes, there is millions of dollars tied up in that, but I don't think, from the distribution impact, it's going to be a material number. But I'll get Adam to comment in relation to that. But we do have to look at how we treat the U.S. businesses, I think, more for next year, Ian, going forward. But if that cash is available to us to fund back, as Adam said, into Fredericksburg or the 495 extension to the north, so -- and effectively, it's cash within the group instead of being put in for construction. We're just retaining cash there. We'd probably look to treat it as part of the cash available for distribution because it would just mean freed-up cash here, particularly if it's wholly owned, but that's something we'll look at in the future. But again, to Adam's point, they're not the biggest of numbers, given the activity occurring in the U.S. But Adam, do you want to give a bit more color on this -- on the working capital, in particular?

Yes. Thanks, Scott. And Ian, nothing more to add on the distributions, Scott summarized that well. So on the working capital, again, as Scott said, it will be -- there will be an impact. But again, I think in the overall context, it won't be overly material. I think if you look at things like small business suppliers, we were paying them within 30 days under the various codes anyway. Reducing that to 14 days, obviously, has an impact, and it's the right thing to do for our small business suppliers. But again, we think it's manageable.

Okay. In terms of the U.S. roads, the 495 and the 95, you haven't really talked about the pricing and the impact of how the dynamic pricing is operating in sort of minus 80%. I'm sort of interested, at what point do consumers not really worry about price and that it doesn't make a difference or it gets a threshold level? And how quickly do you think you will see that price recovery path?

I'll turn it over to Jen, and I don't know if you want to make a comment, then obviously, Darryn, if you want to comment as well. But Jen?

Sure, Ian. Good to hear from you. So obviously, you've seen our average toll price drop significantly, as you would suspect, with the traffic volumes that we've communicated to you today. And we'll have some more information on that at the full year as we do in the August timeframe. But right now, with those traffic levels, Ian, the still purpose lane traffic on Interstate 95 has dropped more than 50%. So you're not seeing the need for that sharp movement in price to be able to manage traffic levels during those peak periods as you would traditionally be. So yes, you've seen a significant drop in our average toll price, a significant reduction in that movement of the toll price simply because the general purpose lane traffic has dropped dramatically during this period of time. Now in terms of recovery, and Darryn will have a view on this as well, we are looking at a variety of different scenarios, as you would suspect. We know from our network specifically, the significant impact in our traffic that we've seen, and you'll recall that back in 2017, when we see a reduction in public transit use, you'll see our traffic -- we'll see an increase in that as well as congestion on the arterial routes. Right now, you're seeing the government [ post-time ], discouraging people from car pooling during this period of time. We have the toll work overlay. We have the e-commerce overlay. So all of that will play into how quickly we'll see those traffic levels recovering. And when that's going to happen, that will really be guided by government decisions that we expect to see over the May and June timeframe as we turn to a recovery in this market.

Okay. And just one final question. Scott, you mentioned a change of credit metrics and maybe your perception of what's appropriate is moving going through this crisis. And I was just wondering maybe you could give a bit more color. Do you sort of see roads should have a little bit more flexibility than they've had in the past? Or is it going to be back to normal post COVID-19?

I guess, Ian, what you see as back to normal -- I mean, if you look across Transurban's portfolio, we're very comfortable, as Adam said, in relation to our position, liquidity and other things. I mean back to normal, a lot of Transurban's assets are very conservatively geared relative to, I guess, when you look at, as you know, Ian, 10 years ago or 15 years ago. So I think it'll be prudent to look at the different scenarios and obviously consider pandemic scenarios maybe a bit more closely going forward. Although it's something that we looked at, traffic drops, it's probably just the timing and the extent of the traffic drops. And obviously, considering the potential for further economic impacts over the next few years. But I think what's important -- and Adam can comment on it, is maintaining our investment-grade credit rating so that we can efficiently access global capital markets, particularly from the diversity of the global capital markets. It continues to provide us with a good cost of funding as well as those optionality to continue to meet our strategic objectives. But I think the most [ important thing ] is looking at the credit ratings as opposed to a specific metric. But Adam, do you want to make a comment?

Yes, thanks, Scott. Look, I think that's a good summary. I think companies will maybe look at liquidity requirements maybe a little bit differently. I think most companies look at liquidity using sorts of metrics which are more focused on OpEx and a bit of CapEx and those sorts of things. So I think, yes, we've always focused on making sure that we've got sufficient capital to fund our refinancing and our CapEx and OpEx obligations. Again, we're happy with what we're doing in terms of our level of liquidity. We've obviously [ stretched ] it even further during the early parts of COVID because of the unknown of how long this was going to last. But I think -- and again, hopefully history will say that we did the right thing there even before the additional liquidity we put in place. So I think it's just those sorts of things. And again, I go back to what I mentioned before that when you take things like the U.S., and Jen mentioned it before, that she -- her business has been through economic impacts a little more than we've -- what we've seen in Australia. And you can see the way that the concession arrangements have levers put in place to be able to ensure that we can deal with these sorts of things. It's in no -- our understanding is, it's in no government interest to have an asset go in default and effectively hand it back to the government for them to try and sort out, and then eventually try and find another investor in those assets. It's in the government's interest to make sure that we're structured in a way that's prudent from a balance sheet perspective, and that they can work collaboratively with us and vice versa to be able to make sure that we can get through issues such as this and whatever else will be around the corner in the years to come.

I think the other thing is that...

Right, can...

Sorry, Ian, just one more thing on that. I think we have in the past -- and criticized sometimes. But we have in the past, whenever one of those development projects comes up or acquisitions comes up, we have raised equity in advance. We have raised all the equity and capital that we've needed in advance to do the projects. And we think we've done that always, again proved the right thing to do in considering that these type of environments can incur. So I think that's something, again, that has served us well and we'll continue to look at into the future if we continue to add different development projects. Sorry, Ian, go ahead.

No it's great. Just one final question I should have asked earlier. The Coomera Connector, can you maybe give us a bit of a description about that? It's the first time you've mentioned it and maybe Sue can give us some color on what you're trying to convince the Brisbane government to do?

Or vice versa, Ian. It could be the government trying to convince the private sec...

Or vice versa. Sorry...

Or the government are trying to convince the private sector. Yes. But Sue, do you want to about the Coomera and connector?

Yes. Ian, as Scott mentioned, it's probably more the government has talked a lot about a second M1, in essence, is the spirit of it. And the Coomera Connector, they have road corridor reserves for this, or parts of it anyway, and got bipartisan support for this. I think it's well-known for anybody, Queensland is, and anybody who visits Queensland [ and one ] is where we see congestion the most, so an opportunity to solve one of the busiest road corridors. And Coomera Connector is being put forward as one of those. And as you know, we're always looking to see if there's possibility for us to assist where there's congestion. So pretty embryonic, but definitely both -- or bipartisan support for a solution there.

Have they actually decided on tolling it? Or is that still to be determined?

All of that to be determined. And the focus at the moment is further south, more the Gold Coast area. But definitely looking to extend it back up through -- obviously to where the jobs are in the CBD. So trying to work out what is the best solution for Southeast Queensland.

Your next question comes from Paul Butler with Crédit Suisse.

I just had a question for Darryn on the traffic charts for Beijing and Shanghai. I didn't quite understand the answer to the previous question about whether the tolls have been removed from those roads. And also, just wanted to ask, what is it -- or do you have a view on what is it that's driving the congestion in morning peak up above previous highs, whereas the rest of the day, it doesn't seem to be doing that. Is there a change in the trip purpose mix? Or something else like that?

Certainly. So I can certainly provide a -- or I believe is going on in those circumstances. The -- that -- in how I was trying to answer the last question, if you like, is the travel time information, the congestion information is for an entire city. So it's every single road. There's toll road, private roads, government roads or just the general arterial. So -- and hence, what we're seeing here is a general activity across all of those cities as opposed to specifically focused on any toll roads. Now in terms of what's going on in those different jurisdictions, yes, the peak periods are more heavily congested, and that's around the basis that the governments are, as we understand it, are trying to [ emphasize ] the business-related activity. And business-related activity obviously tends to be occurring in the peak periods. Discretionary trips though, which is in the middle of the period of the day, tend to be the ones that will be -- are still somewhat constrained and still held back by people's desire to minimize their interactions. But the last thing I'll just remind you of a little bit, even though those congestion looks very low in those mid-day periods from those congestion charts on 22, just remember from the other information I was presenting, that doesn't necessarily mean that traffic is 0 in those periods. And there will likely be a reasonable amount of traffic even through the middle of the day and on the weekends. Just not to the previous levels as yet.

But Darryn, the other issue is -- sorry, Paul, just the other issue for the data that comes through from Bloomberg and TomTom is that the data for the week of the 27th of April, we only have up to 1 p.m. So you see the blue line stops at 1 p.m. at the blue line. If we had the rest of the data, it would probably show the peak in the p.m. would be greater. You can see, it's starting to lift with the light lines, but we only have the data until 1 p.m. for the week of the 27th. So that blue line would come up in the afternoon peak as well. Is that correct, Darryn?

That's correct. Yes.

Yes. Sorry, that's part of the data we have.

Okay. And now I have a question for Tony on the West Gate Tunnel. I'm just wondering if you have visibility on when tunneling is likely to start. And also, are you able to give any color on the potential disposal sites for the PFAS contaminated material and where EPA approval is up to for those?

Yes. Thanks for the question, Paul. I think, look at this stage, it appears that the commencement of tunneling is probably some months away at this stage. Although as a team, we are working very hard with our joint venture partners in the state to bring that to fruition as quickly as possible. In terms of the sites, there is a lot of activity going on at the moment across all project parties. The joint venture has been running a tender, a competitive process with a number of facilities, to determine those that are safely able to manage the quantity of spoil that we have, and that's still ongoing at the moment. There are a range of different facilities that we're looking at, and each of those facilities are probably at different stages of their development just due to the timeframes that we've been working through. So each of those facilities will need to go through an approval process both at the EPA level and then from a planning approval process as well. And that is actually underway. There's a lot that goes into that in terms of collection of technical data, engagement with the communities and things like that. And that all comes together to be put into the process that we then take forward with the EPA and the state in terms of resolving those approvals.

They continue to be advanced. Paul, there's multiple sites that are being progressed, and everyone is working through this. Just to remind everyone, as we did in the [ 1st of April data ] the levels of contamination from the tunnel spoil, expectation are extremely low. And again compared to what also is found in recreational waterways. But whatever the case is, they'll be handled appropriately, according to the EPA planning work safe, both for the workers and the community. And hopefully, we will get some tunneling commencing here in the next few months.

Okay. And just one more, if I may, for you, Scott. From your earlier comments, I sort of got the view that you're thinking a more conservative capital structure might be appropriate with your comments about capital releases potentially used for strengthening balance sheet metrics and funding growth. I just want to understand that a bit more. Because obviously, all of us are probably going to have a bit of a recency bias and be more concerned about risk and expecting the next pandemic to be around the corner. But I mean do you think it's -- do you think that going forward -- I mean the view sort of more generally about capital structures are going to be driven by that recency? Or is it that, that in the post-COVID world, something else is going to be fundamentally different?

That's a good -- look, it's a good question. I mean people would have said the best time to buy toll roads would have been after the collapse, a decade ago, of the capital structures that were over-leveraged and over-engineered from a traffic perspective. That was the best time to buy toll roads. So we're preparing for the opportunities to invest in infrastructure to facilitate economic recovery in support of communities and our clients. So we're not looking to be overly conservative. We're looking to be, as Adam would talk about, have appropriate liquidity, appropriate contingency to manage through these kind of activities. We're not -- obviously, we're concerned and watching what an economic recovery will look like and considerations around recessions and unemployment and impact on economic activity and what that means. But at the same time, we're investing for 30, 40, 50, 60 years. And we still have a lot of belief in the long-term economic abilities in -- of cities like Sydney, Brisbane, Melbourne, Northern Virginia, Québec, and we're investing for the long term. So maybe one of the opportunities, Paul, is to invest on the other side of this when people are in need of economic support and recovery. When you said conservative structure, we're not looking to -- it's not a conservative move. We were always looking to, at some point, how do we deal with the capital releases? It's probably just a timing issue because of the current situation that's come through and we're coming to the end of the development pipeline. But we're seeing, again, a future development pipeline. So the Board will have to decide if it's appropriate that instead of using that capital to augment distributions, maybe we use that capital to support what could be a large development pipeline over the next -- or over the medium term. So I don't think the word conservative is the right word. I think probably what we see is appropriate given the considerations of what could happen, the scenarios that play out here.

Your next question comes from Owen Birrell with Goldman Sachs.

Sorry, just wanted to ask a few questions further to Simon and Ian's questions on the U.S. assets. The volumes look like they're down, but they're clearly stabilizing. I'm wondering if you can give us a sense on what that toll rate has changed or what it's tracking at, at the moment in terms of the run rate.

In relation to the price? Or the volume? Or both?

Yes, the toll price. Just what -- how much of the toll price has moved year-on-year at this point in time?

Jen, do you want to make a comment?

Yes. We've seen a significant -- yes. We've got a -- we've seen a significant deduction in the toll price, as you'd expect, that's consistent with, is what is an 80% reduction in traffic. You can follow our day-to-day toll prices on our website. But we'll be able to provide you some -- I think, more helpful data at the full year results in August where we'll have our tracking at average toll price, which we typically provide at that time.

You don't want to give us an indication of what the run rate is at the moment? I mean looking at day-to-day toll prices, for us, we have no means to really properly average those across the network at this point.

Yes. I'm actually just popping on the website, let's see what the toll price is at the moment. It's probably about $1.75 at the moment, and you're seeing it not go much higher than that. But obviously that depends on the length of the trip. But again, that average toll price data, which I think is a little bit more valuable if you hit that full year result.

Jen, can I ask you, is there a lower bound on the -- on where -- I know it's dynamic. But is there a lower bound as to where that cost is considerable? Or is it typically a 0?

There is. There is. No [indiscernible] that lower bound.

And then are we at the lower bound now?

We're -- during off peak period, we are at that lower bound. Correct. But it -- again, that lower bound varies based on the distance that a customer travels and based on the origin and destinations across the network. Because not much dynamic pricing happening on -- I wish I had -- I wish I had a more glamorous story for you, but with, again, more than 50% reduction in the general purpose lanes, there is no material congestion. There's some slight movement, but there's nothing -- not much to report in terms of dynamic tools at the moment, but we certainly are looking for a better spring, our spring here, to see that return.

And can I just ask something on the A25s, I understand you're sort of in discussions with government around compensation, but can you give us a sense of what form of compensation that will come through? Or the broad terms of the magnitude that we can expect?

Sure, we're in -- actually, there is a compensation event -- regime for lost revenue in our partnership agreement with MTQ. And so we will seek to recoup lost revenue associated with the suspension of tolls, which as you know, started in the March 25 timeframe, and we hope to be able to hear later this month. We're currently in discussions with MTQ to agree amount -- to agree the amount of that compensation, and those discussions are going quite well. Our clients and partner in Québec, as you would suspect, is focused first and foremost on safety right now. But we are having active discussions with them and are confident we'll get that issue resolved and that revenue compensation finalized here in the near term.

Guys, does that come in the form of a lump sum? Or is it additional tolls that are over a course of a period of time?

No. It's kind of in the weeds for [indiscernible] an invoicing process for A25 associated with the government. So we're going to be able to actually work through our regular monthly invoicing process. Because remember we aim for revenue share on A25 with government as well. And so we'll be able to resolve the payments. We believe we'll be able to resolve our -- the payment through our regular monthly invoicing process. And again, just want to talk about, we do have a very sophisticated collaborative partner in MTQ. They've been dealing with a very serious region-wide safety issue. But we do appreciate their willingness. They've been very collaborative in sitting down and managing the financial impact to the A25, and we look forward to continuing to work with them and get the road open sooner rather than later.

And just finally on North America. The Maryland Express Lanes and Elizabeth River Crossings tender processes, are they continuing at the moment? Or have we seen those being put on hold?

So we are finalizing, right now, actually, our submission for the request for qualifications for Maryland, which is due on May 20. That process was delayed a few weeks, but only because -- really to provide the respondents and the government a little extra time to work out online or digital submissions instead of paper submissions because of the COVID impact. So that process is continuing to track. Governor Hogan of Maryland has been at a real leadership role on the impacts of COVID, and we suspect he will take that same bold approach on recovery and the process continues as scheduled this time. And we look forward to seeing [indiscernible] of this month. As for the Elizabeth River Crossing and the Hampton Ridge region of Virginia, we know that the sellers there are recording Skanska. Still continue to have internal business timelines or fund timelines. They would ultimately suggest that a sale will happen in the relative near term. We know that they're working now on finalizing what that timeline would be. We hope to see that process kick off this past month, but obviously are seeing some delays in that associated with COVID and look forward to hearing from those sellers when [ Skanska ] are finished updating their timeline. It's certainly something we would have directed to them.

Okay. And then just one final question on WestConnex, guys. Is there any material operational cost savings from fully consolidating that asset within Sydney Transport Partners?

Go ahead, Adam. This is the tax impact isn't it?

Yes, so look - well no the [indiscernible] was when WestConnex was brought into sort of the broader Transurban Group, we obviously saw an opportunity to take some cost out when compared to how it was being run previously. We've done the lion's share of that including putting the assets on to GLIDe, refining the operations and maintenance approach. All of the things that you would have expected us to do and have seen this do elsewhere across the Transurban Group. So that is all clearly covered in all of the material which relates to the market when we acquired WestConnex. And all of our plans are tracking to those plans that we outlined at that time.

Yes. There are some benefits to being fully in the fully private sector, whether it's STP or not. There are some benefits. But yes, I think that's probably fair.

They're not nonmaterial from the sounds of it.

No. So I think we got a couple of more people on the line. So we'll keep going, and hopefully, until we've gotten all the questions, as long as people are okay to stay on. So do you want to keep going, Ashley?

Your next question comes from Cameron McDonald with E&P.

A couple of questions for Adam and then one for you, Scott. Just in terms of the Coomera events that you outlined earlier in the presentation, Adam. Just to confirm that it's only the TPL loans that have a capitalization regime. And is that just as simple as capitalizing them under the TPL loan? Or is there a limit on the amount that can be capitalized?

Yes, a couple of things. So one, in the TPL loans, there are scheduled and mandatory interest payments. So it's a component of that, not for the full amount but it's a component of that which you can [ plug ] into the existing debt facility. So again, that provides a lot of support. I think the comment though is that every different asset has different opportunities and several opportunities in most cases to be able to do different things. So there are certain assets, for example, where there's effectively shareholder owns. Transurban generally being but one shareholder, and there's arrangements is in place, for example, where that interest is also capitalized. So yes, it's -- there are a lot of levers in place, Cameron.

Okay. And then just linking back to the previous question around OpEx. Can you give us an update on what you've been able to -- or what savings you've made on OpEx at the Transurban Group and/or any of the 100% owned assets?

Sure. I'm going to make an overall comment. I mean we made the decision, Cameron, and looking at OpEx is a major component, and we've always tried to run as most efficiently as we can. We continue to look at things where we can be more efficient, more productive and obviously invested huge amounts in technology which has served us well from working remotely and continuing to do things there. Obviously, some OpEx, in relation to the number of transactions that we're processing, and customers obviously is reduced because there is a cost with processing and transaction. But we have made the decision to maintain our workforce, continue with potential development projects and opportunities so that we come out the other side in preparation and to be strong. So I don't think you're going to see a substantial reduction in operating costs going forward. You certainly won't see a substantial rise. But we've made the decision to maintain our workforce. And if you look as well I mean, we were maintaining all of our projects. So we have to manage all these major projects. So we've made that decision to keep the staff employed for the future.

Okay. And my last question, Scott, just in terms of -- I think there was an earlier comment made about the -- when we come out of this and the economic impact. I mean you've had the benefit, since the early 2000s, of opening CityLink, where we've had uninterrupted economic growth. We understand that toll roads aren't toll roads and that you've really benefited from those commuter-type inner city toll roads. Do you have any sense or can you point to anything that gives us an insight as to how you think your roads or the Australian toll roads would react or operate from a traffic perspective in a synchronized global or national recession?

Yes. Look, it's a good question. Go back to the GFC and how the roads performed, [ see ] but we did have, as you said, we didn't go through a recession because of the impact mostly of the mining boom being driven by China. But if you look at that, manufacturing was hit really hard particularly with the Aussie dollar, and there was a move to [ move ] and West Australia out of Sydney and Victoria. And we saw some low traffic growth numbers to get in Victoria during that period. We still, I guess, Cam, are investing for decades, not for years. And as Darryn would talk about, oscillating around a long-term trend line, we still think the long-term demographics of the places where we have invested in will serve us well. But we are very conscious of the medium-term impacts and again around being efficiency, moving to technology and supporting our customers. But again, we're -- we take the advice and look across all the different economists and trying to feel how long this may or may not take to recover. I think it's everyone's view that we will recover. It's just a matter of time and to the extent of the pain that we'll have at the bottom of this. So it's difficult other than to say that historically, the urban roads have done better than the intercity roads in this context. And we still think we have strong demographics. And as Darryn pointed out, Australia seems to be traveling well compared to our counterparts globally. So that's really -- I think long term, it's decades. We're very, very comfortable. And over the short term, we're just preparing for all the different scenarios and how we best manage through.

Your next question comes from Anthony Longo with CLSA.

Look, most of my questions have been answered, but I just I did have a couple. Firstly, with respect to traffic and in particular on Slide 19, where we look at that week of the 19th of April, I do take your comments that the large vehicles have well and truly held up versus normal cars. But I just wanted to get a sense of too, is there anything that we should be aware of [ shares ] can be year-on-year for a particular [ way there ]? But should we be aware of anything in particular for that large vehicle spike year-on-year?

Yes. So if people remember, last year was interesting timing in relation to both the Easter Holiday and Anzac Day. So you had Easter holidays on Monday and you had the Anzac holiday was actually on Friday. So the Anzac -- if the Anzac falls on the weekday, then it's a holiday. If it falls on a weekend, like Saturday, there's no -- in most states, there's no official holiday. And then you had the Friday before, which was the Easter holiday. So you had the ability for people basically to take 3 days off and get 10 days in a row of holidays. So there was quite low traffic numbers last year. And in particular, there was already [ lows ] as well during that week which affect freight and construction. So you just had quite the anomaly last year when you're comparing it to this year, when comparing to that week of 19th of April where there was no holidays and it was only 1 or 2 RDOs. So it's just -- and that's why we kind of said you need to look through the holidays and look at the 26th of April compared to the 29th of March to see that sort of recovery, which is why we prefer to give you quarterly data rather than daily data because this is kind of what happens. Yes.

Yes, cool. No, that's great. I forgot about. I did take advantage of a 10-day holiday last year. So just want to be sure on that. Second one, so I think with the West Gate Tunnel Project. I think you've obviously done a really good job in terms of providing updates for the market as to when you think timing and then certainly flagging the risk that it could flip. The one thing that I wanted to get a sense of is -- talking about spoilage and disposal costs. I mean on a typical project, what proportion of those costs -- of total project costs would be attributable to spoilage? And is there any other context that you can give in terms of maybe how those initial tenders are tracking in terms of cost?

Look, every project is so different. The tonnage, the distance, the -- what's in the spoil. Some of the spoil can actually be sold and make money out of spoil because it can be in -- in Sydney sometimes sandstone clean fill can be sold to residential developments. [ You need ] to sell it as opposed to as a cost. So it's just impossible to have a sort of a rule of thumb in relation to that kind of activity. But certainly, with the PFAS and the changes we've seen down in Victoria, there is going to be additional cost in relation to that. We got one more question.

This next question comes from Nathan Lead with Morgans Financial.

Great, I managed to sneak in. Just 2 things I'm just curious on. So first up, just, I suppose, early last month, you gave the market briefing. And you're talking about how you were happy with the liquidity levels against the contemplated spend through the end of FY '21. Since then, you've gone and raised what is, I suppose, $1.3 billion of bonds at margins I understand to be like quite a bit higher than what you were able to do, say, in middle of last year. Just wondering what the trigger was for wanting to get your hands on that additional liquidity?

Yes. Well, it's not -- I mean we have no refinancings that we were going to do anyway. So that's just about doing their refinancings. And again, we're very comfortable with the rates we got. And they were substantially below the debt that we were replacing in [indiscernible]. I mean we were going to continue to do refinancing as we move forward. We just put in additional liquidity for some reason if the markets were to free up, which has -- sorry, to freeze up, which hasn't been the case. And other than WestConnex, we can go way out into FY '22 in relation to refinancing. So that was just I guess, partly in consideration what may or may not happen, but we would normally do our cycle of refinancings, which the bond we had been looking at refinancing probably a couple of weeks previously. But things started moving really quickly and we wanted to provide the trading update as, basically, as a cleansing statement to make sure that the market was fully informed before we raised any capital. I don't know, Adam, you want to make a comment about the refinancings?

Look, kind of what Scott said, I think just 2 things very quickly. One is, it's not our job to try and time the market based on what we think the best pricing is going to be in the future. So our job is to try and ensure that we've got good pricing in place to be able to fund our development pipeline and again ensure we've got strong liquidity. So Scott answered that one very appropriately. And again, it was only marginally above our existing average cost of debt, and as Scott said, well below the debt that we're replacing. So whilst we would all love to be able to raise debt at the lowest possible price, at the end of the day, this was a really good transaction for us. And with that transaction, the secondary bonds have performed really well for our investors, which is really important for the next time we go to raise debt in that market. We're obviously getting really good support from our investors in terms of the way they price those bonds. Hence why we've received those reverse inquiries over the last few days...

Okay. And my second question, I suppose if I have a look at your statement of cash flows. Historically, you seem to have spent $120 million, $130 million a year on PP&E. My understanding that was for the general corporate CapEx. Is there sort of cost containment or reduction opportunities within that cost bucket?

Go ahead, Adam. Similar sort of numbers this year, but yes.

Yes, it's true. So look, a lot of it is, obviously, most of our assets. And obviously, we are firmly focused, always have been and always will be firmly focused on maintaining our safe assets. So obviously, the other thing that we invest heavily in is our technology platforms not only to support our customer arrangements, but also to ensure that we are well-equipped to be able to deal with the future and drive efficiency in the operating cost base. So it's been reasonably consistent for the last few years now. Our level of nondevelopment [ cap ] in that space. There's certainly been some opportunities to defer some of that spend where we're not critical, where it wouldn't impact the safety and the performance of our assets. But again, in the overall scheme of things, not overly that material.

Thanks, Nathan. I think operator, actually, I think we'll probably call it there. So unless there -- if there are any more questions, if you could please send them through to Tess or IR. I think the greatest compliment I've ever had is that my CFO told me I answered the question appropriately. So that's good to -- twice, he said that? Okay. Andrew, note that he said that twice. So that's good to know. So if you have any further questions to go through Investor Relations. At this point, our next update will be at the full year result in August, unless we believe we need to come back to the market earlier for any sort of material reasons or not. And hopefully, by the time we get around to August, we might be able to see some of you in person as opposed to doing these virtual meetings. So thanks, everyone, for your participation in the call. Thanks to the executive team and all the employees of Transurban who've done such a fantastic result in what has been obviously very difficult circumstances. And we'll talk to everyone soon. Thank you.