Transurban Group (TCL) Earnings Call Transcript & Summary

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

Great. Thanks, Rachel, and thanks, everyone, for joining us today for an update on Transurban. As we all know, the external environment continues to change quite quickly which is why we're making this further update ahead of what will be our full year results, which released on the 12th of August. Today's presentation to -- hopefully only take about 15 minutes. And then we'll follow it up with time for questions. I'm joined also on the phone by our CFO, Adam Watson, who will be available for questions as well as Tess Palmer from our Head of Investor Relations. And as always, if your question -- we can't get to your question, please follow up with the Investor Relations team. So hopefully, everyone's had a chance to review the materials, and I'm just going to walk through those slides today. So if we turn to Page 3, which sort of summarizes our trading update. This is the -- I think the last we spoke to the market was on the 4th of May at our annual investor event. Obviously, first and foremost, today, we want to declare our distribution of $0.16 per security for the second half of FY '20. That will take our annual distribution to $0.47 per security, which is equivalent to approximately $1.3 billion of cash paid out to our securityholders this financial year. And our confidence in declaring the distribution today reflects, obviously, the improving external environment and the traffic numbers, which are increasingly -- continue to increase steadily week on week. Now notwithstanding the improving traffic profile, it'd be difficult to declare distribution today if we didn't feel we've done all we could do as well during the crisis to keep our people safe, our people in jobs, our roads fully operational and to support our customers and members of the community badly impacted by COVID-19. Now we established these priorities for Transurban early in the crisis and we've ensured our actions have matched our words over the last 3 months and indeed, the next months going forward. Today, I'm very proud to report that we've granted over $3.5 million in total credit to front-line workers and other customers in hardship to this period over and above our normal programs. And we're extending the program for a further 3 months until September, and I'll talk a little bit about that later. We've maintained our workforce and thousands of subcontractors to operate our assets and deliver our projects. And there's no doubt that it's been a challenging time for so many people in our workforce. A number of our people, particularly in the U.S. have been personally affected by COVID-19, people close to them taking ill. And in recent weeks, many of us have also been personally impacted by the issues around race and racism to gain attention and brought the long-standing issue of racial and social inequality to the forefront of our minds across the globe. I think in periods like this, we've seen so far in 2020, with all the challenges and uncertainties brought have been a great test of our organizational culture. I'm very proud of Transurban and our people and our stakeholders, and it's been great to feel the excitement engagement as we all start to return back to the office over the recent weeks. With that, let's now move to Slide 4 and some of the data which shows recovery we're seeing in our markets. Today, we're given approximately 7 weeks of extra data since our investor update on the 4th of May. Across all Transurban's markets, we've seen a clear and progressive recovery from mid-April in line with the easing government restrictions. Our traffic volumes, which were averaging about 2.3 million daily trips pre-COVID-19, dipped down to around a low of 1 million daily trips in mid-April. And since then, we've seen average daily trips climb week-on-week. We're close to 1.8 million last week. The small dip we saw in the week commencing the 7th of June can be attributed to the Queen's Birthday holiday and several RDOs, which occurred in both New South Wales and Victoria. And as we've seen through the whole crisis, large vehicle traffic has continued to show greater resilience, with Sydney performing particularly strong in recent weeks and back to positive growth territory last week in heavy vehicles. In Québec, tolling on the A25 were suspended between late March and late May. And you can see that jump up and then jump down as we put the tolling back on in late May. And we've now finalized the compensation, which we will realize for that untolled period with the Ministry of Transport of Québec. An agreement which we're pleased reflects the ongoing collaborative and successful partnership with our client there. We also look forward to working with the MTQ to find ways to support the economic recovery in the Montreal region as they come out of the pandemic. Now look at -- focusing on Slide 5, the Australian market in particular. We've been incredibly fortunate here in Australia to see a relative low number of COVID-19 cases. And the state and federal government's move early to restrict movement. And obviously, we've been remarkably successful in containing the spread of the virus. Those peak measures to restrain movement were in place for a relative short time compared to other places in the world. And from the end of April, Queensland and New South Wales began to remove restrictions. Children were obviously allowed back at school and restaurants and cafés were opened from mid-May. Victoria is running behind the other states. And obviously, this weekend, the Premier announced that the statewide mandate to work from home would be extended until the end of July given the recent uptick in the cases. And this is evident in the performance of the various markets with Sydney and Brisbane outperforming Melbourne. But overall, we're seeing a strong positive trend as Australians get moving again and activity continues to increase week on week. On Slide 6 then, in relation to North America, the recovery has been slower but the recovery trend is still evident. In the Greater Washington Area and Québec, we saw a longer period of peak impact on our traffic numbers in Australia, reflecting peak restrictions remaining in place through May and also in U.S., and particularly in relation to dynamically priced lanes. Those restrictions have started to lift at the end of May, although a safer at home public health advisory remains in place for the Washington, D.C. area. We've also given more information today on toll pricing on our Express Lane assets in the update. And you can see prices fell as congestion disappeared from these roads as they're dynamically priced. And as traffic has increased, we also see the average toll prices recover. The latest traffic information shows traffic on the free general purpose lanes growing quite strongly, which is a leading indicator for traffic on the Express Lanes. And in fact, in the last weekend, traffic on the Capital Beltway was over 80% near the levels of pre-COVID in the general-purpose lanes; in the I-95, close to 95%, near the pre-COVID levels in the general purpose lanes. So we're starting to see traffic come back there quite strongly. Again, close to 2019 levels on the weekends. Moving now to Slide 7, a few comments about our recovery and this slide in particular, pertains to the Brisbane market. So we've talked about in some of the last updates some of the factors which impact the return to traffic both positively and negatively that stemmed from changes both the consumer behavior as a result of the pandemic as well as government restrictions. In the short term, we expect to see traffic in growth supported by the capacity we have available on our roads, which means drivers will have a positive driving experience as well as the fact that people may have a preference for maintaining social distancing in their transport modes. In some markets, the state government is enforcing capacity restrictions on public transport to keep people safe, but we've seen easing in the last few weeks, which is positive for commuters and economic activity overall. Some of these trends are being captured by people like Apple, which is measuring the number of requests for directions using different transport modes. And we have shown the impact in Brisbane on this slide where you can clearly see car traffic increasing at a faster rate than public transport. And this is supported by we show that congestion on our Brisbane roads is consistently building week-by-week and almost coming back to the pre-COVID hours, you can see on the average hourly traffic by week. Now length and strength of this trend on our traffic volume is uncertain, but we're watching it, obviously, very closely, and it's pleasing to see a recovery today. Now turning to Slide 8, talking about where we are on some of our delivery and opportunities. Work now nearing completion on the new M5 project, which has been renamed the M8 here in Sydney, which will double the capacity of the heavily congested M5 East motorway. And the M5 East is used by more than 100,000 motorists every day and has been operating at capacity basically since it was first opened almost 20 years ago. We expect the M8 to open here in the next couple of months, at which time tolling will also commence on the existing M5 East. In the U.S., we've submitted our statement of qualifications to bid to become the preferred developer, Phase 1 of the Maryland Express Lanes project, and our consortium includes Macquarie Capital with a strong -- who obviously is a strong partner and extensive experience in PPPs in the U.S. with -- proponent selection is slated for 2021. We also, in relation to NorthConnex, we'll open that project in the next couple of months as well. So good progress and very exciting for Sydney to see those major infrastructure projects become available in the next few months. Turning to Slide 9 and just update on the West Gate Tunnel. Works are continuing. There's several thousand people still employed. And we've seen some major achievements over the last few weeks, including we've lifted the 2 main support pieces of a huge 114-meter long gantry crane into place, some 40 meters above Footscray Road to build the elevated freeway. So I think for those of you who are not aware of the project, there's 3 major components: the tunneling, the western widening of the West Gate freeway and associated works and then the elevated road along Footscray in connection to CityLink. So the West and the East section continue at pace. And obviously, we're looking still at a number of disposal sites which are participating in a tender process being run by CPB and John Holland. We've now submitted documentation for planning and environmental approvals for those sites. And to progress the contractual dispute resolution process, we've also taken action in Supreme Court to hold CPB and John Holland to the contract and the processes under the contract. Again, this contract is just like any other standard public-private partnership contract for the delivery of major infrastructure, where the parties have risk allocated to those best placed to manage it. These proceedings aim to uphold the integrity of the contracts and the frameworks, and we'll update the market as required. Most importantly, we remain committed to working with the project parties, the government and the JVs to deliver Victorians this much needed infrastructure project. Moving to Slide 10. I'll make a few comments about some of the initiatives we have in place to support our customers and the community. As I've said already, Transurban has given more than $3.5 million in total credits to customers in the last 3 months. This represents approximately $220 in the bank accounts of over 14,000 health care workers, emergency service personnel, aged and disability carriers who are doing their job through the crisis while many of us were able to stay at home. In addition, we have reversed over $0.5 million in fees. And we know that these total credits and fee waivers have been meaningful to the customers and those in most need because they've reached out and told us about how helpful the support has been, and that's pleasing to receive that feedback. In our markets now, we're starting to move from the health crisis, obviously, to more an economic recovery or crisis. And so we're refocusing the help we are providing in that aspect. So between July and September, we'll be providing financial assistance above and beyond what we normally do to support people who have lost their jobs or suffering reduced hours as a result of COVID-19. So this means that someone who might be a self-employed tradesman who've seen their number of jobs drop significantly or a retail worker has been sit down or is not receiving any hours, could be eligible for toll credits. You can go to the website to find out more details about how to apply. In parallel, we're committing social investment funds that will directly support our customers, and the Linkt Assist team support them as well and through our community partners. And in 2020, we've invested an additional $1.5 million in targeted programs and partnerships run by The Smith Family, Salvation Army and Thriving Communities Partnerships to support those not only impacted by COVID-19, but still running on our programs for those impacted by the bushfires. And we're also directing funds in the U.S. to worthy causes, including the Northern Virginia Family Services' activities. Now turning to Slide 11 and an update on our capital position. As I said upfront, we've declared a distribution of $0.16 per security to be paid to securityholders in August. This distribution, which we expect will approximately align with free cash generated by the group for the second half of FY '20 excluding capital releases, ensures that we preserve our strong liquidity position while maximizing the amount we can pay to our securityholders. We also sized the distribution with our credit metrics and covenant requirements in mind. And we maintain our commitment to strong investment credit ratings and also expect to remain compliant with our covenant requirements. So looking forward, while it's unlikely that the group will provide precise distribution growth -- sorry, guidance while the uncertainty of COVID remains, we're likely to continue to pay distributions in the near term in line with our free cash generation excluding capital releases. As always, though, it'd be better for the Board to determine the distribution in FY '21. I'm sure there'll be an update in the full year results in August. Distributions for FY '21, just a bit of background, are obviously going to be dependent on traffic performance and government restrictions. But there are also a few factors which will weigh on the distribution in the first half. One of those is likely to be lower distributions from subsidiary assets which are generally distributions paid in arrears. In addition, interest payments will continue to increase given the higher level of borrowings to fund our project pipeline. So turning now to the summary page, and I'll give just a few closing thoughts before we go to questions. Obviously, again as I stated, to begin with, the external environment continues to change quickly, but we're closely monitoring the situation in each of our markets and planning for a variety of different scenarios. At this point, our traffic bottomed out in mid-April. And since that time, we've seen strong and a progressive recovery in line with the easing of government restriction. We continue to have a very strong liquidity position. And today, we've declared second half FY '20 distribution of $0.16. And finally, we're continuing discussions with governments, peers and industry bodies about opportunities to drive growth and support the economy and look forward to playing our role in the economic recovery of each of our markets. Now with that being said, I will open up to questions.

[Operator Instructions] The first question comes from Anthony Moulder with Jefferies.

Just a few key questions for me, if I could. So let's start with growth projects. You said that you started to talk to state governments about those. Is that a bring forward of future projects? And are you able to talk to what projects the prospective state governments are focused on?

Sure, Anthony. Look, I think the ones that are public, we can, so you've got those projects like the Maryland Express. We continue with Project NEXT in the U.S., obviously, delivering tremendous growth there. But I think you've seen New South Wales has had a big push on infrastructure, they're going to continue with the Western Harbour Tunnel. They're looking at the F6, they're looking at the M12 connection into the M7. Obviously, they're doing a scoping study on WestConnex, 49%. So I think all those projects that were in the pipeline pre-COVID, governments are looking to continue those or to some extent, accelerate. The other side of that as well is looking at, and I think working with state governments, all the different industries. BCA and others is trying to identify projects that could be ready quickly. They may not be the mega projects, but smaller projects that could create economic activity around various networks. That may or may not be associated with Transurban assets, but we're working with the different agencies to try and identify those projects given the infrastructure has been targeted as one of the lead issues in relation to the recovery. So I think what we're saying, Anthony, is all those projects certainly haven't been pushed back. If anything, they've been sort of brought forward but less than previously.

Understood. One for Adam and maybe two, Scott, capital releases. Is this a policy from the Board that could extend past fiscal '21?

So I'll let -- I mean that's a good question when you say, is this a policy for the Board. So it is a policy issue for the Board. I think what we're saying in the near term with the amount of uncertainty, it's likely that's going to be the policy going forward. I think in all those positions, Anthony, we talked about previously that once we got through this development phase, the Board would have to reassess how they use capital releases going forward, whether it's support distributions, enhance -- use that capital to -- or more developments or increase the credit rating. So I don't think that those longer-term options still exist. It will be up to the Board to make that decision in FY '21. So yes, it's one of the options the Board always has to it. It's up to the Board to determine at that time.

So any implications in the near term for, I guess, the gearing levels for the wider business? Does this support the year effectively?

Sorry, I think it was hard to hear the question. Can you say that again?

So I'm just -- the question is to whether or not this suggests that there was going to be more de-gearing through the wider business.

We still -- over the next year or so, we still have quite a lot of development, obviously, going on to finish West Gate, FredEx and then we look at all these new opportunities kicking off. It will be something further out into the future, but I don't see significant de-gearing in the near term. I don't know, Adam, do you want to make any comments?

Yes. The only other thing I'd add, Scott, is that the ability to be able to undertake capital releases is not just a decision that Transurban makes. A lot of those decisions with subsidiary assets that we don't own 100% of, and they're done in the context of agreements with the states. And the relevant rating agencies are aware of those. So I guess supporting what Scott's saying, they will -- we do have the ability to continue to do them, and we will continue to do them in the future at an asset level. It's more the Transurban Board's decision around how they use those proceeds, whether they use them to improve credit metrics at the corporate level or fund development opportunities or enhance distributions, and we've made it clear for many years -- or at least the last few years, I should say, that these have become more common to Transurban that we've always had the flexibility to apply them to those 3 areas.

Understood. And lastly, the week-on-week recovery, particularly here in New South Wales has been impressive. Have you tried to quantify how many people have likely moved from public transport to driving on the roads Monday to Friday?

Look, Anthony, it's a bit hard. But I think New South Wales' public transport had talked about on certain routes, the numbers were getting up between 25% and 30%. But I think you can go to the New South Wales' websites and look at those numbers, and I'm sure our team has them somewhere, but I think public transport, depending on the route has been running at somewhere around 25% to 30%, but they've just upped the capacity in New South Wales. My understanding is at 50% and -- as people start to return back to work. The interesting thing -- sorry, the interesting thing, Anthony, I think on all our roads, whether it's -- particularly the U.S. or Sydney or Brisbane is where we've seen the motor growth is on the weekend. So clearly, people are getting out and about for their personal activities. So that gives you maybe more confidence about feeling safe once the restrictions are taken off around some of the operating environments that they'll come back to the offices as well.

Your next question comes from Ian Myles with Macquarie.

Just on that theme about the growth. Do you have maybe a bit of color on when you sort of see and what sort of quantum of back to work that you're seeing in the city? Because it strikes me all your city-centric roads still have relatively weak traffic versus your M5 and M7, which aren't so city centric are actually coming back to a stronger level.

Well, yes, there are two things. I mean obviously, the M5 has cash back as well. Yes. But look, we're -- so we have 22 offices across Transurban. Most of our -- a lot of our people are back in -- all our operational offices are close to full. Back to our corporate offices, we're still -- Queensland, we're running at sort of 50% capacity. In New South Wales, we're probably only at 30%. Obviously, Victoria, very, very tiny because of the restrictions there. U.S. has started a policy that if you want to come in, you can, but still stay at home, safer at home policy. So I think the cities has still got a way to go, Ian. But that's more company-by-company than, say, New South Wales or Queensland, where there's less restrictions. It's more about company approach. We're moving to what we call stage 3, which is basically, we have enough capacity to bring everyone back into the office shortly in New South Wales and Queensland. It really is up to the individual though. We're still doing it on a voluntary basis. But I think you'll see the numbers. Again, they just continue to steadily grow. Congestion continues to steadily grow, which is up to what happens with Victoria.

And assets like the M7 and M5, maybe good point is for where that sort of background level of growth is because of the economic activity, which has changed in the economy.

Yes. And again, we see the weekend traffic. So clearly, people are less -- we saw in the height of the pandemic that people just, well, one, where they were told to stay at home. And obviously, we're quite nervous. So it seems people are less nervous or less anxious, particularly in New South Wales and Queensland. So it's just a matter of getting people back or how they -- how people return back to the offices.

And one follow-up question, just specifically on the M7, that M12 interchange connection to the M7, it's highlighted there's been capacity shortages on the M7. I guess how has that conversation progressed with government? And should we be expecting things like a potential change to the truck toll multiply to accommodate these sort of expansion needs?

Look, I think that's solid speculation at this point in time. But obviously, the M7 was meant to be widened over time, that's how it was built. But all that's just speculation. But just to say that there's a need to connect the M12 into the M7, and longer term, to find additional capacity on the M7 given the growth in Western Sydney. I think that's all we can say at this point.

Our next question comes from Paul Butler with Crédit Suisse.

I just had a question on the proportion of the toll revenues that come from commuter traffic or -- did prior to the health crisis. And if -- and I'm just wondering if after we get through this health crisis, there's a higher incidence of people working from home, is that a -- does that have potentially a material impact on traffic levels that we might see?

Sure. Thanks, Paul. I think we've always -- when we do, I guess, are more investor days and some of the things we've always talked about these long-term trends of polycentric cities or working at home or whatever it may be. I think you have to remember, and we've given some of this data before that the average toll in Australia is around $10 a month. So it's only a couple of trips for more than 50% of our customers. So those are customers who might be commuting, but they've got certain restrictions of getting home or getting to work or getting back to pick up children or whatever may be. So our toll roads are usually -- I mean despite what's happened, there's a view that everyone just commutes and uses them every day. There is a component of those. But again, the average user is around $10, and that's 50% of our toll road customers a month. So there is a component of that commuter. It sometimes can be difficult to, I guess, clearly qualify because again, a lot of the times the toll roads are used to move around the city, not to the CBD. Mostly public transports move to get to the CBD. It could affect -- as we've said, it could affect or accelerate some longer-term trends around working at home. But the other side of that, it also could affect other trends around online delivery and different ways of working in relation to logistics, which benefit the road. So I think what we're saying overall in the long term, net-net, whilst we don't see any downside, there's some negatives and positives. But net-net overall, it's more of the underlying demographics and economic situation that we see these markets in over the next 23 years that give us a lot of confidence, but there will be some variability, obviously, in the short term.

But do you have a figure of how much of the patronage on the road relates to travel to and from work?

It relates -- each road is very different. It's not some are more freight, some -- you got freight up into the 20% in some roads and down to 4% in other. So you might have commuter traffic. On some roads, it might only be a 20% and some might be up to 40%, depending on the road, something like daily commuter traffic. So it's pretty variable, Paul.

Okay. And if I can just ask on Slide 7, where you show the data for Brisbane, on the average hourly congestion by week, there appears to be some peak congestion late in the evening. That's different than what the normal trend has been. Do you know what's behind that?

Look, I couldn't really tell you other than Queenslanders maybe enjoying going out at night trying to get out of their house because they're stuck in it all day.

I think it's just -- it's a smaller sample set is our understanding. So whilst the graph is indicative, it's not meant to be sort of perfectly correlated to what we would have seen pre-COVID.

Okay. And just if I could have one last question. Can you give us a sense of what the quantum of the issues around spoil removal on the West Gate Tunnel could be? I mean I understand, obviously, you're still negotiating or disputing who's going to cover that cost. But are we talking about something that's more to the $100 million end of the range or much higher?

Paul, we're not going to -- we're not going to give those numbers. It's a material number, but you expect the way -- you can also anticipate the way the normal construction process works under a PPP that the contractors incentivized to commercially to make the biggest client possible. But we're not going to comment on the numbers at this point in time. And one of the issues as well is until the spoil site is improved, it's also difficult to quantify the actual outcome until the site and costs associated with the spoil site are improved. But again, there's a tremendous amount of work going on, on the other 2 sections. Still thousands of people employ. We're working collectively and collaboratively with the state and the JV to try and resolve it. So there is the legal process that we're going through in trying to hold into the contract, which is obviously [ designed ]. And then there's also a collaborative process to try and collectively resolve the matter. So unfortunately, it gets played out in the press, and that's a shame, but anyway, we're just trying to resolve the matter.

Your next question comes from Cameron McDonald with EaP (sic) [ E&P ].

Just following on from the West Gate Tunnel, Scott. When does the tunnel become the critical path for the construction notice, noting that you're continuing to do a whole leap of other work, but when do you -- when does that become more of an issue for you?

Thanks, Cam. That's why we changed the outlook from 2022 to 2023, so the tunnel has now become a critical path. Although a bunch of the segmental lining has been already done at Benalla, and everything is all set up to go. And depending on the project, I guess, the production rates of the TBMs themselves, but right now the tunneling is on the critical path.

Okay. Great. And then in terms of the $0.16 second half distribution, are you receiving any contribution from the North American roads as part of that distribution? I did -- I mean I noticed that you said that the distributions were from the subsidiary assets were paid in arrears. So is there a bigger impact from North America coming than what we've already seen?

And so the only assets that we haven't got distributions are WestConnex and Eastern Distributor, both of them pretty small, but I'll let Adam talk about the U.S. asset.

Yes. So thanks, Cam. The U.S. assets, we typically don't pay the distributions up to the corporate anyway because the cash that we generate within the U.S. assets are typically used to fund the development projects. So we've got FredEx and other projects and project mix potentially coming to financial close. So the short answer is we don't pay the distributions up normally anyway. And regardless, we -- for the next 6 months, it's unlikely that we would pay them up either.

But Adam, they're counted in the free cash flow because effectively, it is free cash flow that we can use to fund the development pipeline as opposed to taking the cash out and then put it back in. And the development pipeline in relation to FredEx and NEXT is bigger than the distributions we would have received.

That's right.

So does that mean that you're then getting -- yes. So I mean if it's still included in free cash flow, that means the distribution then subsequently got to come down from those particular assets, correct?

No, no, no. Only the listed wholly owned subsidiary assets do we need to receive the distribution for it to be forming part of free cash. If it's a wholly owned subsidiary, which our U.S. assets are, then their operating cash flow is included in the free cash. And at risk of repeating what Scott said, the reason is, is because we don't want to get ourselves caught up in a round robin, where we're paying distributions up to the parent only then have to pay it back down to fund the development projects.

Okay. And so effectively, you're generating cash from elsewhere to cover that portion of the distribution.

Correct.

Which is what we [indiscernible]. Yes.

Your next question comes from Rob Koh with MS.

So the dividend guidance for FY '21 to not include capital releases is very clear. Are you able to share any color with us on how much capital release, if any, you're actually looking for anyway?

Look, I'll let Adam make a comment. I think all the capital releases that we talked about that would be available eventually for WestConnex; obviously, NorthConnex finishes and a few other things, all those capital releases, whatever they are used for still sit there. Now the timing of some of them may be pushed back a little bit because of COVID and what's happening. But it doesn't change that they're all still there for future use, but I'll let Adam talk about specifically more around some of the timing issues.

Yes. Thanks, Scott, and thanks, Rob. The more immediate ones, you would have -- you'll recall that in our first half results, we provided some views that we'd be looking for a capital release from Transurban Queensland and from the M7 this year. And the Transurban Queensland one has been paid. The M7 one, we're still deciding when the right timing is for that. So that's -- again, it doesn't make any difference with respect to distribution. So we've got a lot more flexibility. But we'll just continue to assess that. And again, as Scott said, there are a couple of other capital releases that we look at, and we sort of look over a 2-, 3-year view, and we will just continue to assess that. And really, it's just ensuring that each of the assets remain compliant within their strong investment-grade credit metric requirements and those sorts of things. So again, we've got flexibility there to defer them if we believe that, that's appropriate.

Okay. Great. Now just in relation to the A25. So I take it that a very small part of the dividend is actually being funded out of the compensation arrangement. Are you able to actually share with us how that works? Are we multiplying the traffic that was seen on the roads by the tolls? Or is there some other adjustment that we should be thinking about?

Look, in the context of the overall Transurban Group, it's not a material number. We're very comfortable with what was provided. I'm not sure how it's going to show up in the accounts, just the fact we said that it's a very fair and reasonable outcome from MTQ. So I'll turn to Adam on how it might -- I mean we just agreed in the last few days. I'd like to turn to Adam and see how the -- how it may or may not show up in accounts, but it's not a material -- it's not a material number, right, given there's only one toll road -- a toll on the A25.

Yes. We -- I suspect that it will continue to go through as ordinary revenue because it is a compensation event for revenue. And as you know, it's an arrangement that's embedded within the concession deeds. So I suspect it will be revenue, but we need to work our way through that. And I don't -- I can't be definitive on that yet.

I just have to say with the A25, we're really pleased. I mean even if you take out the toll-free period, which spiked above pre levels, you still see it's been a great -- it's been very resilient in that level.

Yes. Yes. That's fine. Now I do note that you've announced your intention to just use your concession agreements as they're intended and raise tolls as scheduled. Just wondering if you have any events, if you've given advanced notice to your government partners and if they're kind of in agreement with your approach to more targeted hardship and essential service benefits rather than a blanket toll change.

Good question, Rob. And the answer is yes. So under most of our concession agreement, we have to give notice to the government on anything. New South Wales is almost a month in advance. And elsewhere, it's several weeks in advance. There's a whole notification process that we have to go through, put in the papers, on websites, via message, whatever it may be. It starts well before this time. So yes, government's clearly aware on what we're doing and the toll increases. Doesn't necessarily stop people from -- certain people from making comments. But yes, they're aware and supportive. And in particular, we've had long discussions with Queensland. I was actually up there a couple of weeks ago for some meetings with different government people. And they noticed our targeted -- and particularly our targeted support and how well that was received and a lot of good work around targeting actually those people in need, and government is certainly aware of that. Again, it doesn't stop certain commentators on the day, but very supportive of our targeted approach. And again the concession arrangements reflect the legal, I guess, sort of undertaking that the state government gave to us under the concession arrangements.

Yes. Okay. That's good to hear. And just one final question, I guess, a bit of a flyer. There's media reports that various parts of the government and essential infrastructure have seen some setbacks. Just wondering if you're able to comment at all on whether your systems have seen anything on that front.

Look, we -- this is one we want to touch. We do have -- and I'm very proud, and hopefully, some of them are listening. We have a great cybersecurity team who have done a fantastic job for us over the last few years and have protected us very well today. But again, people are always seeking to get into the systems, whether it's just mischievous or economic -- trying to cause economic harm. So far to date, we've had a great team. We're part of a wider, I guess, group that works with the -- both state governments and Commonwealth government on what's happening behind the scenes, given more essential infrastructure, so we're aware of all these activities. And we are working with not only with the Australian but some global other institutions to do what we can to limit any potential impact on our assets. So we certainly spend a lot of time, a lot of money, a lot of time with the Board, a lot of review on our cybersecurity systems and approach. And today, I'm very proud of how the group's managed it, but it's a constant vigilance. And as someone would say, there's no such thing as victory -- claiming victory in cybersecurity. I mean unfortunately, the weakest link of the individuals and what they may or may not bring into the office in some days, and we spend a lot of time on training. But so far, the team has done a great job. But we're in the loop with the different government agencies both in the U.S., Canada adhere on what's happening on these cities. Yes, Rob. I should point out when you're talking about the targeted support. Again, from the Board's perspective and management's report, when we look at saving someone $0.01 to $0.08 on their toll versus commodity dollars to support someone who's in real need, we think that's the right approach as we've said previously, but anyway.

Your next question comes from Ben Brayshaw with JPMorgan.

I was wondering if you could comment on situation in relation to the sell-down of the remaining stake in WestConnex or potential opportunity at Western Harbour Tunnel. I know you obviously commented on this at your Investor Day. So I suppose I was just interested as to whether there was anything further that you could add to either of those 2 projects just in relation to discussions that you might be having with the New South Wales government or the potential time line involved.

Yes. Thanks, Ben. Look, there's not much more we can say that -- I mean the government has publicly -- is undertaking what we're calling a scoping study to look at the potential sale of the remaining 49%. And I think probably they talked about finishing that by the end of the year and potentially until the next calendar year. And so we can't -- well, we don't know any more than that as well. I mean that scoping study, we're not involved in that. So we'll watch that and support that and be very, obviously, very interested in that process. In relation to Western Harbour Tunnel and -- well, a few things. In relation to over the last few weeks as it come out the other side of COVID, the New South Wales government has confirmed continuation with, obviously, Sydney Gateway, where they expect to announce, I think, the preferred constructor for Geelong, which connects into WestConnex straight continuing with the F6. They announced that they will continue with now Western Harbour Tunnel and Warringah Expressway upgrade. And they're, I think, starting to talk to the market about what their procurement methodologies may be. So we wait for those discussions. But all 3 projects, even if we weren't to be involved, they're very positive for WestConnex because they connect on all sides. But hopefully, it will be an opportunity for Transurban or Transurban as partners to participate in some of those projects. But the good news is the New South Wales government is committed to all of those projects. I think on Northern Beaches Link, they're still considering timing of that project. But the major ones that affect us been recommitted, but we're still waiting for the procurement methodologies to see if there's a role we can play.

Your next question comes from Scott Ryall with Rimor Equity Research.

Scott, one of the things that I remember coming out at the time that you purchased your first interest in the WestConnex project was just how little traffic data governments actually had, and the fact that you can add a lot of value to the government decision-making, and I've spoken about this a little bit. But with -- I guess you mentioned a lot of the reaffirmation of projects that governments want to do, but they -- I imagine at the moment that the data that you have and are able to process is even more valuable. And thanks for sharing some of it with us, by the way, on a weekly basis. I think that's quite helpful. How much more time are you spending with governments at the moment, not necessarily just helping them understand infrastructure needs, but just purely understanding how economies are reopening? And where does that position you relative to what you might have been positioned a year or so ago with respect to just helping governments understand what's happening in their economy? Could you just explain that, please?

Yes, sure. Look, I think first of all, I think we're -- business, government, charities, I think everyone's been pulling together to help each other. So there's a whole series of different task force in different states, BCA, elsewhere, where businesses coming together to recommend ideas, share information, like you said, on the economic recovery; where is the best bang for the buck, how can we -- where are we seeing issues, whether it's just around how do we open offices, how do we get people moving, how do we get people employed? So there's a whole series of different task force and workshops and stuff that Transurban participates in, in our different jurisdictions. And that's purely not -- that's just in a purely -- let's get the economy and people -- keeping people employed and get the economy moving really has nothing to do specifically with advancing Transurban's interest. It's just the economic recovery is in everyone's interest. And so we participate in those. And then separately, there's been a bunch of different forms in both state governments and looking federally at what are those projects that could have the biggest impact, going quickly, particularly in the infrastructure space. And also, obviously, be long term, quite productive for the economy. So we provide our insight. We provide help, support into those projects as well. And it may be -- like you said, maybe some of it long-term traffic modeling or our view of economic modeling or not. So yes, there's a whole bunch of different forms, which is it's interesting how your use of your time, my use of my time has changed so much over the last 3 or 4 months in managing COVID issues and engaging with all this, and they're preparing to come out the other side. It's just incredibly active, incredibly active timing there.

And just on that, how -- so what would be the rough split of your time with government now versus what it was 3 or 4 months ago? What -- how much more time are you spending with those task forces and agencies and things like that?

I'd say I'm spending probably 50% more time dealing with macro issues like that than I was back in January.

Okay. All right. And then the last question I had just was on the Sydney heavy vehicles, that's probably one of the only positive numbers that's in your pack in the last couple of months just in the last few weeks. What do you put that down to?

Well, I think there is still construction going on and the major infrastructure projects are still happening. I think that comes back to getting the economy moving and there's the upside of -- the downside of everyone's staying at home, and then there's the upside on logistics. People doing online shopping and delivery. And so we've seen a lot of -- particularly as I think one of the -- I can't remember -- the M7, the M4 and the M5, in particular, out in that west area has been particularly strong. So I think it's a combination of some of the construction activity ramping back up after some of the restrictions that we saw. And then general economic activity and then I think some of the online logistics functioning as well. And then just the general growth in the economy that was underlying from last year.

Your next question comes from Nathan Lead with Morgans Financial.

First one for me. Can you just talk through debt market appetite, I suppose, for your credit coming into COVID now as you start to recover? Are you seeing some marked differences in there, I suppose, the appetite and pricing for your credit?

Nathan, Adam's going to love you for that. Adam, please?

I think it's a great question. Look, we obviously work really hard at ensuring that our debt investor universe across the globe understands the business and understands our credit risks, and we obviously work really hard with the rating agencies and so forth. So we've done a lot of work leading up to where we are today to ensure that we could be in positions like we were as we went into COVID where we could do, for example, Eurobond without having to do a roadshow and whilst there are always interesting and challenging-type activities when you do a bond release just because you're always having to deal with the market dynamics on the day. But we had really strong support from our investors, and volume certainly wasn't an issue. The thing that has been a focus for us is just around -- on those transactions have just been around price. And again, pricing is really largely determined by the broader market conditions on a particular day. And we try and take a pragmatic approach where if you take the Eurobond that we recently did, we would have paid a little more for that than we would have done 3 or 4 months earlier. But again, our job is not to try and predict what the interest rates or forward curves are going to be. Our job is to ensure that we've got a strong balance sheet and a sustainable balance sheet. So we've been really happy. We've obviously done an enormous amount of funding in not only capital markets, but with our bank lenders, and we've had really strong support there. I think a lot of that comes back to, again, the transparency we have with them in terms of how we go about funding our development and having a fairly clear capital strategy and funding strategy that supports that. So yes, I don't think appetite has changed. I think the thing that we always watch is just the pricing. And again, we can't control the pricing in most cases.

Have you got a sense about how that pricing might have recovered since the sort of the depths have been at the lows?

I can tell you our secondary. So if you take the Eurobond, and this is public information. So where we price the Eurobonds, it got almost 100 basis points at 1 point tighter on the secondary. So that's a pretty material move. Now it's come way back again. Again, just given volatility over the last couple of days, I know it's come way back to where it was. But I guess that's the thing for us is, on any given day, it's no different to the share markets at the moment where share prices are moving 4%, 5%, 6%, 10% per day, depending on which company you are. We do see the same volatility in terms of pricing with the credit markets. And again, our job is not to try and predict where we think it should be. Our job is to make sure that we can access the markets when they're there and that we put ourselves in a position of strength for the longer term.

So Adam, with the, I suppose, the weakening in the earnings during this period, can you -- has there been any meaningful movement in terms of when you're thinking tax is going to start to get paid?

There will be some movements, obviously, and it will obviously push it out in some way. So we'll work our way through that for the full year result and probably provide you with some more clarity then. But it's definitely pushing it out further.

Yes. Just a final one for me. Obviously, a lot of volatility going on at the moment like you're saying. Can you just talk about your shareholder register? Has the composition of it meaningfully changed over this period?

No. Nathan, it's very much fairly stable. Some -- I mean a little bit of -- always when you get as much volatility, you get some of those general funds sort of moving in and out, but pretty much the long-term shareholders, it's remained consistent. And I think when you saw in the earlier COVID period when the share price dropped, you saw some substantial long-only players pick up more, particularly offshore. But it's not materially changed. Okay. Well, I think that's the last question. Is it, Rachel?

I have another one that's just gone through, if you'd like to take that.

Okay. Well, maybe just the last question. That puts us on the hour.

Okay. So it's James Nevin with RBC.

Just kind of two quick questions just on North America. I don't know if you'll be able to give some more...

Sorry, James. You dropped off.

Yes. I think we've lost him, Scott.

Is he there? Trying to guess his question on North America.

Hello?

Oh, there he is. Yes. Try again, James. Can you hear us?

Yes. Maybe I have a bad connection. Yes, I can hear you, yes. So just one on the traffic volumes, and can you compare that -- so it was obviously down maybe 80% in April, and then kind of 60% in May? And if you can tell us how that compares the free lanes adjacent to the toll lanes? And then also just a second part on those tolls. So although the traffic volumes were down maybe 80% at some stages, the toll -- the average toll seems to be only down maybe 50% or something like that, or a little over 50%. So is that like an indication of the certain level of traffic that is maybe probably agnostic? Or is there anything else going on there with the level of tolls?

No, that just purely represents the congestion, the GP lanes. So I think when we saw the traffic fall off in the U.S., I think it fell off even in the general-purpose lanes to similar numbers way down in -- more than 50% fall in general-purpose lanes. I think, as I said, what we've started to see come back and I think on the weekends, we're 80%, 90% in the weekend. And I think this uptake, we couldn't include because we haven't gone today. If we include the weekend in there, I think you'd see a further recovery from the 43% into right to the 30s with the weekend traffic. So we're seeing the congestion build, which the congestion relates to both the traffic and the average toll price. And coming into the summer, particularly on I-95, it's a major tourist route and destination besides being commuter and freight route which clog up the general-purpose lanes. So we're seeing substantial recovery now coming to the general-purpose lanes. And then what that should lead is to recovery both of our traffic. And just, as you said, importantly, the average toll price should -- has started to and should continue to increase. All right. Thank you, James. If -- let's -- it's been an hour, so we should probably close it there. If there's any other questions, please follow up with Tess Palmer and our Investor Relations team. Again, I appreciate -- I know we've done quite a few of these. And hopefully, they are helpful. There's been so much change. Our next update will be on our full year results on the 12th of August. And maybe some of that, we can be -- we've done some of the meetings, so that these may actually be -- will be done hopefully in person as we continue to recover in this situation. So thank you for your time and interest. I hope everyone is well and we'll talk soon.