Transurban Group (TCL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Transurban Group FY '20 Full Year results. [Operator Instructions] I would now like to hand the conference over to Mr. Scott Charlton, CEO. Please go ahead.

Great. Thank you, and thanks, everyone, for joining us at Transurban's 2020 Full Year Results Briefing. I do hope that wherever you are listening to this, that you and your family are safe and well. So today, I'm actually speaking to you from our office in Sydney, and I am joined by our CFO, Adam Watson, who is in -- working from home in Melbourne. And together, we'll take you through the presentation we've lodged with the ASX this morning. Today's presentation should take about 40 minutes, and we've left plenty of time for questions at the end. But before I go through the results today, I did want to -- and we have announced that Adam has resigned from Transurban to take on a new role as Chief Financial Officer at the APA Group. And while we are sad to see Adam go, it's a great opportunity for Adam to leverage his skills and infrastructure experience in what is a fast-growing industry that's strategically important for our country. And since joining Transurban in 2014, Adam has played an important role in the context of a number of significant transactions that have underpinned our recent success. And a global search for Adam's replacement has commenced, but please join me in wishing Adam all the best in his new role. So now we'll get through into the results. So FY '20, for pretty much everyone, has been a year like no other. The emergence of COVID-19 in early 2020 has been the defining event and obviously has weighed in our performance. And that's resulted in an 8.6% decrease in traffic volumes across the portfolio and a 3.4% decrease in proportional toll revenue. Unlike all businesses across the world, from the outset of the pandemic, we made some quick and sweeping changes to the way that we've been working to ensure our people and our customers are safe. Most importantly, we were very clear on our priorities through this period of what has been immense change and uncertainty. But as always, with our business, our aim has been through the crisis as well is to balance the needs of all stakeholders, ensuring that the business emerges through this very challenging period in a strong position. With this in mind, in April, the Board determined that it was necessary to revise our final distribution of FY '20. And as we announced back at the end of June, our second half distribution of $0.16 per share will be paid later this month, taking our total distributions to $1.3 billion paid to security holders for the year. Notwithstanding the impacts of COVID-19, we had some great successes this year, including acquiring a remaining 35% minority interest in the M5 West Motorway, taking our ownership to 100% and giving us full operational control. It's been a massive year for delivery for our business, completing 3 major projects in the first half and opening the M8 in Sydney last month, and we'll talk a little bit more about this as we go through the presentation. We've included our group strategy slide as we always do. And despite these uncertain times, we're very clear about our long-term strategy to provide transport solutions that offer real and lasting benefits to the cities and communities, and our strategy has served us well, and we don't see any changes going forward at this point in time. We've added a chart here that gives you a snapshot of our growth over the last 20 years from the inception of CityLink and Transurban. And you can see that, in that time, we've steadily grown our portfolio, our customer base and our expertise into the large-scale, sustainable business that we are today, operating 20 assets across 5 markets with our customers making an average of 2 million trips per day in FY '20. And we thought it was important as well, as we put some defining events over the last 20 years, and you can see the impact on traffic. And of course, things always eventually look to recover. And our strategy and our assets have served us well and, we believe, will continue to do so in the future. And we see lots of opportunity, again, which we'll discuss here in a minute. Now our core fundamentals in our markets and our strategy remain strong. We have 5 core markets, and they're all characterized by large and growing populations, and this creates continual congestion pressure on infrastructure, which again requires continued investment. And our assets that are generating a probably -- approximately 83% of our total revenue in FY '20 were protected by embedded toll escalation of CPI or greater, and our average concession life is 29 years. And finally, I think it's important to note, and we've shown this, I think, some of these statistics before, that the motorists traveling on our roads do it for a variety of diverse set of reasons. The majority of our customers driving cars are not daily commuters to work or study. And again, if you look at roads versus public transport, mostly roads are used to move around the cities, and public transport, a lot of it is used to access the central cities and employment districts. So one of the things that we've done during this period is obviously closely monitoring the trends and also our customers' views on transport and mobility in light of what's happened. Today, we've released a separate research report on this topic. And of course, this research is complementary to our, obviously, ongoing research around -- and modeling around long-term transport trends that we've discussed over the years. This survey of approximately, well, 4,500 people conducted for us by independent research house across Australia and North America captures our customers -- or sorry, the views of the public on how they expect to work, shop and move around cities once the health risk has eased. And some of the headline findings are that health and safety will dominate traveling behavior for some time over convenience, and 25% of respondents said they expected to use public transport less in a postpandemic environment. 86% of our survey responses in Australia said they expect to return to the workplace. And obviously, everyone has seen a huge uptick on online shopping, and almost half of the respondents said it was something they were going to do more often in the future. So there's some really interesting findings, and we also looked at some of the impacts of longer-term trends as well, and you can find the full report on our website, and I encourage you to have a look. Some changes in the way we work and move as a result of the COVID restrictions, obviously, are going to remain in the short and medium term, and there will be, potentially, volatility as we might have to move back and forth into restrictions. But the report would suggest that the drastic and permanent changes some have predicted are less likely to occur. And as operators of very long-dated concession assets, analyzing mobility trends is just business as usual for us. Now since the outbreak of COVID-19, we have maintained our workforce. We've continued the construction on all our major projects with procedures obviously in place to safeguard workers on site, and I congratulate all our partners, particularly on our construction sites, how well they've managed the COVID environment. Now as well as keeping our people healthy and safe, we've worked hard to ensure that they're engaged through this challenging time. And they have certainly risen to that challenge, and I'm extremely proud of the people of Transurban and all of our partners who have worked with us through these difficult -- through this difficult period. We've also introduced measures to support vulnerable customers, small businesses and other members of the community, including frontline personnel who play such a critical role at this time -- at times such as this, particularly in Victoria at the moment. Between April and June, we granted more than $4.7 million of tolling credits under a new program to assist customers. And I'm pleased to announce today that we'll be offering toll credits again for Melbourne's frontline workers for the duration of stage 4 restrictions. We're very proud to do our part as a Melbourne-based company as our city faces obviously difficult and challenging times. In addition, our what we call as our Phase 2 toll credit program, which provides relief for unemployed and underemployed people, will now be extended nationally until December 31, 2020. We've also expanded a number of community initiatives and social investments. And this year, we made $3.3 million of social investment, $1.5 million of that which has been directed specifically to bushfire and COVID support. Now this next chart shows you a snapshot of the impact of our business on the restrictions that were put in place to control COVID-19. As we all have been informing you, traffic started to decline quickly from early March, [ budding ] in mid-April when most of our markets were experiencing peak restrictions. And as restrictions have been progressively removed in most of the markets, we saw traffic improve steadily through May and June. Now again, hopefully, none of this is new news to you, given our efforts to keep the market informed on a regular basis over the last quarter. However, at the end of June, restrictions were reimposed in Melbourne, driving the decrease in group-level traffic, which we've tried to separate out the difference between the group and Melbourne on the chart you see here. Now the group level, traffic was down about 25% in July, with CityLink being down approximately 48%. And with Melbourne having transitioned to stage 4 restrictions just last week, again, not clear how traffic will be impacted over the next 6-week period. However, in the 7 days to Monday, traffic in CityLink was down around 62%, 63%, which is similar to the peak impacts we saw in April. I think it's important to know, though, that heavy vehicles have continued to show resilience and were down only in the 6% to 7% range across the same period, remembering in Melbourne that we show light commercial vehicles in the heavy vehicle component as well. And light commercial vehicles were down about 20%. So that -- the result of that is that revenue is impacted less than traffic, given -- about a 10% difference, given the resilience of the freight traffic. Again, I said earlier on, it was a very big year for Transurban in terms of development and delivery. And we've progressed 11 projects now with our government and partners, and we delivered 3 major projects this past year. So the M4 tunnels in Sydney opened in July, the Logan Enhancement Project in Brisbane completed during August and the 395 Express Lanes in North America opened in last November. Now together with the delivery of the 2 projects in Sydney, which are occurring in the first half of FY '21, this marks a period of intense delivery and activity for Transurban. And these projects are now contributing to cash flows they're opening and adding to our track record of delivering and giving us the ability to move on to the next generation of projects and opportunities. Again, as I said, having delivered on this backlog of large-scale, highly complex projects, we now have the resources and capacity to take on the next phase of potential opportunities. Crucially, we maintained a strong balance sheet and liquidity position through COVID-19 and again maintaining the workforce to support these opportunities. And we're well positioned to help with the economic recovery, both in Australia and our North American markets, where infrastructure is expected to play an important role. And we've begun engaging with industry and governments on a pipeline of potential infrastructure projects, and I'll discuss probably some of the most prevalent and near-term opportunities in the next few slides. In North America, there's some good progress to report. We've been shortlisted for the opportunity to become the developer for Phase 1 of the Maryland Express Lanes project. And recently, the governor of Maryland, Larry Hogan, has been vocal about the importance of the project, saying just a month ago that as we plan for the recovery, these critical infrastructure projects are key to rebuilding our economy and keeping the supply chain moving. And in parallel, we continue to monitor the sale of the Elizabeth River Crossings asset located in the Hampton Roads region of Virginia as well. And given the material pipeline of opportunities that are emerging in North America, there is potential for us to partner on projects as we're doing on the Maryland Express Lanes project for capital and other strategic reasons. Moving back to Australia, where the opportunity set includes projects to enhance or expand on our existing asset base, I'm pleased that we have progressed to stage 2 of the New South Wales government's Unsolicited Proposals process for the M7 widening and the delivery of the M7/M12 Interchange. And as the concessionaire of the M7 with our partners, we're uniquely placed to add real value for motorists, the community and the government in that potential process. And delivery of this project would ease existing congestion issues on the M7 and connect it with the future western Sydney International Airport precinct, which is due to be delivered in 2026. And this next stage of the process will be very important in refining the potential size, scope and funding sources for the project, and we'll keep the market updated as it progresses. Also wanted to remind the market of 2 potential material opportunities, which continue to be advanced in Sydney. The first is the Western Harbour Tunnel in which the procurement process is expected to commence later this year. We hope to be considered to play a role in this important project for Sydney network. We're just really pleased that the project is proceeding because, again, it completes the vital part of the network, including the connections to WestConnex. And I think everyone is aware, the New South Wales government is conducting a scoping study to determine the outcome of its 49% stake in WestConnex. And as the current operator of the WestConnex assets and with the majority of the city's shaping infrastructure now delivered, we continue to be very interested in this process along with our partners. We've also made some really important achievements this year in sustainability including we've delivered -- and I'm very, very proud of, we've delivered our best-ever safety results for our motorists and our contractors. We've increased our commitments to climate change action by signing up to power purchase agreements to supply up to 80% of our energy needs in Brisbane and Sydney from wind power. And there's a lot of other fantastic things that the group has done this year. If you get a chance, and I'd really encourage you to access our full FY '20 reporting suite, which includes our corporate report and sustainability supplement, which gives you a lot of further detail regarding the holistic performance of the business. So I'll now move into the market update, starting -- which is now our largest market, in Sydney, our toll revenue actually grew by 2.8%. This was achieved, including revenue from the additional M5 West interest and the opening of the M4 tunnels. Excluding these new assets, toll revenue decreased by 7.7%. Traffic was down 6.5% for the year with a range of performance across various assets in the portfolio during the COVID-impacted months. And I think what you see across all our portfolios is those assets that had a larger freight component have held up better, including things like the M7, M4, M5 and the Logan and Gateway in Brisbane. We're also extremely pleased to have opened the M8 on the 5th of July of this year and commenced tolling on the M5 East on the very same day. I think, hopefully, you can see and get an opportunity to click through some footage of the new 9-kilometer M8 tunnel, which brings us to a very important step closer to delivering on the WestConnex projects. The tunnel is now double the capacity of the heavily congested M5 East Motorway, which is the major freight route between Port Botany and obviously, key distribution centers. The assets have performed very well in the first month of operation despite the impact of lower traffic on the roads due to COVID-19. The daily workday traffic has averaged close to 100,000 trips in total across both the M8 and the M5 East, and drivers are saving up to 30 minutes during peak hour trip using the M8, which is, of course, relieving traffic on the M5 East. And in the first week of August, trips using the M8 represented around 15% of taken -- of trips taken across the 2 assets as drivers start to get used to the new asset and how the network works. And I'd really like to thank the whole of the WestConnex team and Transurban team for what was a fantastic delivery handover and start-up of operation, which was done extremely professional but extremely safe as well. So well done to everyone involved in that. The spotlight now moves to our next asset, which is set to open in the next couple of months. The 9-kilometer twin tunnels will now -- and NorthConnex create a traffic light free route from Newcastle to Melbourne as part of the National Highway Network. And with the completion of NorthConnex, we will have opened approximately 25 kilometers of underground motorways in just over a year and transform the way Sydneysiders can move around the city. And I'm very excited about that opening which will occur, as I said, shortly. Here's our map of Sydney and, again, just highlights the significant position that we have in the market as well as the large opportunity set which I've spoken about, some hopefully we'll be able to participate in, some being driven by government, but we're very pleased with the government's continued investment in infrastructure. Obviously, this is just the road infrastructure, but there's a significant investment in public transport, active transport, and we see that will help serve the economy of New South Wales, both in the short term with jobs but, obviously, in the long term with productive infrastructure. So we're very pleased with what's happening in New South Wales. Moving to Melbourne, where the toll revenue fell by 8.1%, and traffic volumes fell by 11.9% on CityLink. The biggest impact was on Western Link through the government restrictions, but it also included lower level volumes, obviously, of airport-related traffic. But again, overall, large vehicles showed much more resilience, declining by just under 1%. During the year, and we've been updating the market, we confirm that the West Gate Tunnel would not be completed until 2023 and due to delays in the start of tunneling and the commercial and technical issues that still need to be resolved in relation to the tunneling portion of the project. Progress is being made on finding a disposal site for the tunnel spoil and the D&C contractor in site interstate waste management facilities across the state to put forward proposals to safely receive and handle the spoil with 3 facilities participating. And any facility considered is required, obviously, to obtain EPA and planning approvals to ensure the environment and community is protected. And the majority of the -- of their approvals documentation has now been submitted and sitting with the authorities. Meanwhile, significant works are still continuing on-site with almost 18 million construction hours worked and $2.3 billion of CapEx deployed on the project to date. And we remain committed to working with the project parties to deliver the Victorians this much needed infrastructure and continuing to employ thousands of construction workers and the supply chain. Moving to Brisbane. We saw toll revenue decline by approximately 1.9%, and average daily traffic declined by 5.3% over the last year. As in Sydney, we saw a portfolio effect in Brisbane, again, as I said earlier, with the Logan and Gateway assets performing relatively strongly through the COVID-impacted period, largely due to the freight component of the traffic. During June, we moved into a new corporate office on George Street in Brisbane, it brings us very close to our business partners and our clients. It also enables us to open our new integrated hub for operations and maintenance teams in the [ Kedron ] office, which is the Airportlink facility, which we acquired over the past few years. I'll turn now and move straight to North America, where traffic declined by 10.3%, and toll revenue declined by 13.9%. And pleasingly, although traffic has been improving more slowly in North America than in Brisbane or Sydney, we're seeing month-on-month improvements, both in the volumes of traffic in our lanes, in the freelanes, but also in the pricing, average pricing on the express lanes. We continue to progress our development projects, FredEx and the [ 495 ] expansion project as well as discussions with the Virginian government as we move towards reaching a development agreement for the Capital Beltway Accord. And in Quebec, where tolling on the A25 was suspended between late March and late May, we have recognized now the compensation we received for the untolled period in the full year results. And as I covered earlier, and regarding of North America, we're very excited about what is eventuating as the pipeline of opportunities in our market. We're committed to growing in the region, which is why -- another reason why we set up our North American Advisory Board in this last year. And I think with that being said, covering the markets, I will now pass over to Adam, who will walk us through our financial results for the period, and then I'll come back and do a quick summary. So over to you, Adam.

Thank you very much, Scott, and welcome, everyone. So I'll start on Slide 30 with our statutory results. And as you can see, we've reported a statutory EBITDA of $1,841 million and a statutory net loss of $153 million to the period. The loss has been driven by significant impact of COVID on EBITDA which is obvious, but also because of the impacts of higher noncash depreciation and finance costs. I'll provide more color about these shortly. But again, I just want to reiterate, we'll get to our proportional results in a moment, and we also generated $1.2 billion worth of underlying free cash. So the majority of that statutory loss has been driven by noncash charges on our new assets. As Scott has already stated, FY '20 revenue was significantly impacted by the reduction in traffic as a result of government measures undertaken to address the impact of COVID-19 on our community. The decline in EBITDA as a result of the lower traffic on our existing assets was partially offset by contributions from our new assets, which was great, and they include the full year's contribution from WestConnex and the M5 West, the impacts from the legislative approval of the West Gate Tunnel Project on CityLink and also the opening of the 395 Express Lanes. These new assets, whilst delivering positive EBITDA contributions, have created a significant statutory uplift in finance, depreciation and amortization costs in absolute terms and when compared to the prior period. But again, I know that these costs are largely noncash. Significant items this year included integration costs of WestConnex and the M5 West. And as a reminder, the significant items in the prior corresponding period included the accounting gain upon consolidation of the M5 West into our group accounts and also the statutory and integration costs associated with the acquisition of WestConnex. So moving now to Slide 31 with the proportional results. Again, we believe that these results provide a clearer view of our final performance for the year, and as you can see, we have proportional toll revenue decreasing 3.4%, comprising of a decrease of $214 million, primarily driven by the lower traffic as a result of COVID-19 impact and again, partially offset by toll price escalations on our Australian assets. But we also saw an increase of $111 million coming from new assets, which include the M4, which is part of WestConnex, which is equity accounted to statutory reporting that included in our proportional results as well as the $14 million in favorable movements in foreign exchange rates. The other revenue increased as a result of the full year impact of WestConnex management fleet, which Transurban receives, as well as the liquidated damages we received as a result of the delayed opening of Logan and the M8. I'll talk to costs later, but suffice to say, again, we have once again demonstrated cost discipline during the period which was, given the significant focus, obviously, in light of the pressures on revenue experienced as the result of COVID-19, but again I'll talk about in a moment. And this all translated into a 6.4% or $128 million decrease in underlying EBITDA. So I'll take you to Slide 32. And our headline cost growth of 9.6% is obviously heavily influenced by the inclusion of the new assets to our cost base. And we also saw the impact of the noncash adjustment to our city maintenance provision, we flagged this in the first half, which resulted in the works required to maintain the assets for a further 10-year period through to 2045, I should say, being effectively booked for accounting purposes. Excluding foreign exchange movements and new assets, the underlying cost growth has remained low at 2.1% for the year. This increase includes about $20 million of additional costs incurred to support the progression of our development activities as we again progress the latest pipeline of opportunities that the business has seen. We signaled this at the half year results but, again, the rate of spend would be increasing, particularly in the second half as the development opportunities gain traction. Excluding the spend on strategic growth projects, underlying costs were lower in FY '20 when compared to the last year. And there was a small level of cost savings generated because of the lower activity on M roads post COVID, again, largely reflected through our lower transaction costs. However, it is important to make it clear that we were already on track to keep our cost growth low and certainly below inflation pre COVID, as you saw in our first half results. And pleasing to say, again, our investment in our systems and processes and the scalability of the operations means that we have had cost growth at an underlying level below inflation for the last 3 years. So we have been clear since the onset of COVID-19 that the maintenance of our workforce is a priority, as Scott said, and the cutting operating cost through the reduction of headcount was not an appropriate strategy for the group. So that, obviously, therefore, reflected in our results. Instead, it's been about maintaining strong cost discipline and a continued focus on benefiting from the systems and processes we've put in place over the past few years, as I said, to ensure the business is operating as efficiently as possible. And very importantly, again, talking to Scott's growth pipeline that we discussed before, these systems and processes are highly scalable, and that's obviously clearly important, given the opportunities before Transurban. Moving to Slide 33, which shows the impacts of COVID-19 to our EBITDA margins at the group individual market level and I think, importantly, the reduce revenue as a result of the decreased traffic levels have certainly lowered margins in each of our markets. And this was particularly evident in North America where pricing was also significantly reduced on our dynamically priced express lanes. In Sydney, we've been able to hold on to the margins and keep them flat as a result of the positive contributions of the M4 and the additional ownership interest in the M5 West as well as, obviously, the liquidated damages, and as I said before, that we received in relation to the M8. In Melbourne, our EBITDA margin was unfavorably impacted by the rebasing of the maintenance provision on CityLink, again, a noncash item that flows through our EBITDA results. In Queensland, we saw only a small deterioration in the margin despite the impacts of COVID, again, reflecting the revenue uplift following the completion of the Gateway Upgrade North and revenue enhancement programs but also the benefits of the recent consolidation of our operations and maintenance contracts in that market. And again, in North America, the reduction in toll revenue was also compounded by the contribution of the 395 Express Lanes, which opened in November 2019, and therefore, is in ramp-up. Moving on to Slide 34. The free cash slide decreased 10% during the year to $1,156 million when excluding capital releases. We noted that the majority of our assets, both 100% owned and non 100% owned, paid distributions in line with their individual free cash during the second half, as we've said. But COVID, obviously, had a significant impact. In a few specific cases, we saw individual assets with further distributions in order to retain sufficient asset level liquidity. And in that case, I'm referring to the eastern distributor of the M4. The net finance costs grew by about $8 million during the period, largely as a result of the increased borrowings following the opening of the new assets and because of the high liquidity levels in place to support the business through COVID-19. We saw a favorable movement of $16 million in our working capital, primarily driven by the decrease in accounts receivable in line with traffic volumes. And obviously, you'd expect to see this movement reverse in line with the traffic increases going forward. Following the onset of COVID-19, we also made the important decision to retain the proceeds from capital releases made during the second half within the business to support our credit metrics or to be used to fund future developments. We generated $320 million of capital releases from a number of our assets during FY '20, which translated to an overall free cash coverage of 115% relative to FY '20 distributions. So moving to Slide 35, which is an important slide. I wanted to just make some comments with respect to the FY '21 distribution, given we are not providing specific numeric guidance at this time. So given the short term uncertainty, the Board obviously issued guidance that expects the FY '21 distribution will be in line with free cash, excluding capital releases. Traffic is currently improving across the portfolio, as Scott mentioned, as a whole. However, the performance of the business in FY '21 will remain sensitive to government responses and economic conditions in each of our markets. And we're obviously seeing this in Melbourne at the moment as well as the Greater Washington area where those 2 markets still are being heavily impacted by government restrictions. For the non-100% owned assets, as I have outlined before, some have made the decision to defer distributions to retain liquidity, and that may continue into FY '21, those decisions haven't been made, but that is an option for the some wholly owned subsidiaries. In addition, distributions for some of the non-100% owned assets are paid in arrears, which means that the impact of peak traffic declines for FY '20, which occurred in the last quarter, may not yet have flowed through our free cash for these assets. Working capital will likely be negatively impacted as traffic improves in certain markets, thereby increasing our accounts receivable balance. And I also note that in the first half of FY '21, we've got a requirement to pay out first USD 15 million 395 transit investment payment, which will impact free cash. It is accrued during the FY '20 period that's actually paid during the first half of '21. Interest payments for the group will continue to increase as a result of the new assets coming online and increased liquidity levels retained to support the business through to the COVID period. We do expect operating costs to remain low. And -- but for the ongoing investment in development spend to support the strong pipeline of opportunities, as Scott spoke to earlier. And obviously, while I'm talking about the future, I'll also just call out that our corporate tax payment profile, I know that's an area of interest, that has been pushed out a couple of years so should the tax groups or to most of the tax groups, and certainly, the corporate tax group, largely as a result of COVID with the first full payment now scheduled for the corporate tax group in approximately 2024. So moving then to Slide 36, the capital summary. It outlines the highlights on the financing activities that we have undertaken during the year, all of which has placed us in a strong position to withstand the impacts of COVID whilst maintaining our workforce and continuing to deliver our project pipeline. The debt markets continue to be supportive of Transurban even through periods of volatility. And in April and May alone, we successfully raised about $3.7 billion of proportional debt. So overall, for the year, we raised $8.6 billion of debt. And in addition to that, you'll recall the $812 million of equity that we raised through the [ program ] institutional placement and SPP in August of last year. We continue to prioritize the diversification of our funding sources. And for example, we successfully raised funds in the Asian loan market for the first time during the period, giving around 20 new investors the opportunity to hold debt against our M2 assets. You can see that the average duration of our debt is higher than last year, and we continue to see a reduction in our average cost of debt. Our key FFO-to-debt credit metric has obviously decreased to 7% during the period, reflecting the reduction in traffic and revenue and its impact on free cash. But obviously, we see this as a temporary issue and expect metrics will be restored quickly as we make our way through COVID. So in summary, we've acted quickly this year to ensure that we're in a strong financial position, not only to get us through COVID, but importantly, to support our growth agenda. I just also note that our liquidity position remains strong with current available cash and undrawn debt facility sufficient to take us beyond December 2021 and, again, to service our proportional CapEx and debt refinancing obligations. So liquidity, in summary, is in a good space. Our capital management strategy is unchanged, and we will continue to balance our 3 fundamental objectives, which are to maintain high investment-grade credit metrics, to efficiently fund our development pipeline and to continue to provide distributions to our security holders. So with that, I thank you again for your time, and I'll hand you back to Scott.

Thank you, Adam. Can't see if you have a tie on or not, but I assume you've dressed up for the presentation. So look, coming to the summary. Look, we believe we're well positioned for the future despite the challenging environment that we're all facing right now. And look, over the last 6 months, I think we've tried to be very considered in considering what's happening in the market and deliberate in our decisions, and I think it's served us well so far. The traffic is improving at varied rates across our assets. But of course, our current experience in Melbourne is ensuring that we remain alive to the potential of further government restrictions in our markets. And so we're planning for a whole different range of scenarios, outcomes and volatility that could continue to occur as we move through the different phases of this pandemic. Through that process, we'll continue to prioritize the health and safety of our people, of course, and our customers. And we're in a strong financial position, which should enable us to maximize our opportunities that we're looking at going forward. Our strategy and our assets have served us well and we believe will continue to do so in the future. I do want to stress the point, and I know we've talked about this since I've been at Transurban, and it's been, I think, the basis of how we've dealt with you, our investors, but also our stakeholders that we will continue to focus on always balancing distributions for our security holders with the long-term value creation while we will maintain our capital discipline. And no matter what the environment, we'll continue to remain strong on that approach. So in wrapping up, I want to thank, in particular, again, the Transurban team who worked so hard this year and in very extenuating circumstance to contribute to these results; of course, our security holders who continue to support us; and for those who have attended today's call. And with that now, I will open up to questions. And there's obviously our industry report. If you get a chance, I think you'll find that very interesting, that can be found on our website.

[Operator Instructions] Your first question comes from Anthony Longo with CLSA.

Just a quick question from me on Slide 33. So looking at the margin compression that you have seen across the various markets. Are you able to perhaps disaggregate how much of that is COVID related? I appreciate Sydney was largely flat. But I guess I'm trying to get a sense as to what's the expectation going forward. And would you expect Melbourne to ultimately rebase?

So I'll let -- I'll start things, and I'll start, and then I'm going to let Adam go into detail. So first of all, had COVID not occurred, we'd have expected all of the margins to be as good or better than they were last year. So in effect, it's all -- the decline is all in relation to COVID from our expectations pre COVID. But to rebase is a very difficult issue because that relies on someone saying when is this all going to -- the restriction is going to be lifted. So I think that's a very difficult question. But I think what, hopefully, you can see is the behavior that we've given you, that data over the last sort of 4, 5 months on those updates, as we've gone through the different phases of restrictions, you can see how the traffic reacts to the different phases of restrictions. And now -- so we're in the hands of what the government does going forward and how we come out of this. But Adam, do you want to make some comments as well?

Yes. Thanks, Scott. And Anthony, just a couple of specific ones to add. Obviously, Sydney has got WestConnex continuing to ramp up, and we've always seen that WestConnex margins are healthy. So again, as Scott said, the Sydney margins would have been strong or stronger through the period absent COVID. The one to call out on Melbourne, we've spoken for a fair while now, but again, that noncash CityLink maintenance provision was obviously going to impact the Melbourne margins, but their cash margins would continue to improve. Brisbane is obviously seeing the effects of the positive contributions from the consolidations of O&M and the activities that have gone on there for the last few years. So Brisbane would have continued to improve. And as with North America, but again, for the ramp-up on the 395 that obviously as that asset matures, then those margins would be improving. And obviously, North America has been a story of scale, and we've got a much more scalable business there to improve margins as we continue to grow that market.

That's great. And sorry, last one for me, just on the distribution guidance. So I think -- so taking your comments with respect to free cash flow and how the business and traffic would recover and also taking into context the distribution side of things, but -- from the non-100% owned. But I was just wondering, is there any potential to lock in distributions at the road level, if you like? So any potential commentary around that?

You mean lock in distributions from the non-wholly owned subsidiaries? I mean each of the non-wholly owned subsidiaries have a Board and make the decision in the best interest of the -- of those assets, recognizing that distributions are very important to all the different shareholders. But at this point in time, again, given what happens and may or may not happen in restrictions, it's pretty difficult for any, I think, company or director to lock in a view. I think what we're very proud of, and the Board is very conscious of and all the subsidiaries' Boards are very conscious of is that distributions are very important to our security holders. And to the extent that we have free cash flow and we expect to have free cash flow, we will distribute that to security holders, but very difficult given the volatility of the restriction. Adam, I don't know if you want to make any comments as well.

No, that's just -- I don't think there's much more to add, Scott. I think at the end of the day, the subsidiary assets need to ensure that they're supporting the liquidity requirements that they have and during periods of uncertainty. As we saw last time, there were times where some cash was held back, and time will tell how that progresses post COVID. But obviously, in a post-COVID environment or a pre-COVID environment, where cash flows are very strong, and there's never been an issue in terms of paying up our distributions.

But I think, Anthony, just -- and Adam, again, I know we're not in the same room. So -- but just to make a comment, I think, which we'd updated the market on previously. We still don't expect to breach any covenants. There may be 1 or 2 assets that go into a lockup, depending on what happens here for a short period of time. But it's probably better than we thought, particularly in the non-Victorian markets. Again, Adam, I don't know if you'll make a comment.

So our next question comes from Rob Koh with Morgan Stanley.

Yes. So just a quick question about the covenants, seeing as you brought it up, and this is my last chance to grill Mr. Watson on these issues. I guess the U.S. roads are the ones that are more likely to be in lockup, as you say. Can you give us a sense of the debt market appetite to support those assets just at this point?

Rob, it's Adam. And firstly, I'm not going anywhere, so you got plenty of time to grill me. So don't be concerned about that. Now look, you've summarized it well, that we've made it pretty clear and been very transparent that, as Scott said, we're in a good position as it relates to covenants. Certainly, there've been no defaults, but lockup in our North American assets and one of our WestConnex assets. But again, in North America, we didn't actually use or use our cash to fund our distributions anyway because it was reinvested back into the construction projects in North America. And obviously, the forecast distributions from WestConnex, given the particular asset is in ramp-up, was pretty minimal anyway. So we think that's very manageable. In terms of debt markets, again, I think we've seen tremendous support from our investors, our debt investors and our bank lenders, not only now, but through the depths of COVID in the early days when no one really knew what challenges would present. And we undertook a lot of ratings during the period in new markets of various assets. And obviously, it's something that we monitor. I lost the pricing, and I know I'll get a question on pricing. Pricing still remains a little volatile, depending on the particular market that, again, the strength that we have is that we've got a very diversified funding platform now that we can dual track or triple track processes to ensure that the -- that we can attract the best pricing from the most favorable market at any one time. So a really short answer to your question, Rob, is I think markets continue to think positively about Transurban, and all of our dialogue, which is constant, has been very positive.

Okay. Good to hear. So if I can move to the survey document that you published, the Urban Mobility Trends document. Just want to ask a couple of kind of baseline-type questions. Is the -- is this a survey commissioned by Transurban? And is the survey response kind of representative of Transurban's customer base? That's first question.

Yes. So first of all, I think, Rob, it's important to know the context of we're a very data analytic-driven organization and have, I think, the best traffic forecasting and economic and other forecasting team in our industry. And we're always looking, as you know, at the long-term trends at analyzing that and strategic forecast that we use to help in our modeling and help with our assets. So as we go through this environment, there's a lot of lot of people making comments about what they thought, what they believed, making all these sort of bold predictions on one side or another. We decided what we should probably do is get some data and see what really people were thinking. So we went out, and it was commissioned by us but independent research houses and then in our markets, but they were not Transurban customers. So they went out and did normal just independent research on how people will look at some of the issues around how they expect to move after COVID, how they expect to sort of behave and what's important to them. So it's independent research to help us form a view on how we look at our assets going forward and considerations of our customers. And also, obviously, the report gives us, again, additional confidence to look at the investing in things like the M7 and 12 and other things that we're currently looking at. So we wanted to be data-driven as opposed to just an opinion piece. And so we went out and did the survey.

Yes. Yes. That's fantastic. It's consistent with what we would hear from Transurban about data. So if I can just drill into, I guess, one of the tentative results in the survey. So 86% of the respondents expect to do most of their work back in their workplace. Did the survey data give you a sense of what does most mean? Like is there a group of people who want to do 1 or 2 days a week at home and stuff like that? Or is that not...

Yes. Yes. That's -- they will do -- they will still continue to do some work remotely or some work from home. But that occurs now. I mean Transurban staff, prior to COVID, we had 90% of our people had the ability to be agile and work in either different environments or at home. So I think you're basically talking about a lot of similar arrangements that were in place pre COVID. And so it's the majority there -- I mean there are obviously been some grave predictions about no one will ever come back to an office and other things like that, but that's not, I guess, what the survey would suggest. And some of the statements or anecdotal statements about -- particularly this issue of as longer the pandemic goes, and there's more interference between your home life and your work life, it seems the more interested in going back to some sort of office environment, although, as you said, it might not be 100% of the time. But it's why as well we put in the data that just to remind people, rightly or wrongly, the components, the way our traffic works out is that less than 20% of our traffic is tied to commuters. Again, we're about moving around the city as opposed to necessarily being delivering all to the big employment centers. We'll give you plenty of time to grill Adam before he goes.

Your next question comes from Simon Mitchell with UBS.

Scott, just interested in how long the current stalemate can continue on West Gate Tunnel before you have to revisit the timing and push it beyond 2023. Can you just give us some insight into that?

Sure. So this -- as we pointed out, so from a stalemate perspective, there's a tremendous amount of work going on. And I know the headlines is around the tunneling, but it's really -- the job is really 3 components. There's the widening of the West, there's the elevated structure and the bridge -- sorry, the River Crossing in the East. And so there's still a tremendous amount of work. And I want to congratulate the JV and the Transurban team and all the workers who are continuing to progress those portions of work. So $60 million, $70 million a month still spent on doing that kind of work, so significant progress there. So on the tunneling, as I said, we've now submitted basically all of the documentation, final documentation to the planning authorities in relation to the small sites. So we are hopeful that is now going to be sooner than later, but that is in the hands of regulatory authorities. So we do -- obviously, very sensitive that it's their approvals. So we're doing everything we can working with the state and the JV to find a technical and commercial solution through this, Simon, but I can't be definitive until we get those approvals, and we have the details on how we can dispose of the spoil, I can't be definitive. So it will go on until it's resolved. All I can say is Transurban is doing everything in its power to try and resolve it. And the parties are actually working together to try and find a solution. That being said, at the same time, there's legal processes that continue on, and they're running in parallel. And we'll continue to do that to hold the contractor to the contract and their obligations and protect our position as they probably have a different view. But we're doing everything we can to resolve it, Simon. So I just can't be definitive until we have the answer.

Okay. And just continuing on with development projects, the M7 widening, are there any markers you can give us there on potential timing and also capital size?

Yes. Well, typically, there's next phase, I believe -- done it before, might take -- I don't know, could be 6 to 9 months to get to the next phase and then go through the procurement process. So the issue will be, and if everyone's familiar with that map on -- I think on my Slide 14, but the map of the M7, one of the things, Simon, we're trying to determine is you'd be aware that we can widen the M7 potentially in different phases. So the part of the M7 that is particularly congested is the connection between the M4, particularly going south, the M4 going down to the M5, big freight corridor, as you know. And so whether we do between the M4 and the M5 or there is some congestion around the corner up there in the north. So what we're trying to determine is what makes sense for this next phase. But just as a round ballpark figure, I would say, in the order of $1 billion-ish, but that's just really, really rough at this time, and we've got to work out all the scope and stuff. But obviously, that's with the M7 and with our partners. And you know the M7 has significant potential debt capacity in that asset as well. But it will be -- by the time you go through the process, you go through a procurement process, it's still a good 18 months to 2 years before there's significant capital deployed.

Okay. And just a question for Adam on financing costs. So just given all the activity during FY '20 around debt and movement in base rates, can you just touch on what you're expecting to play out in the interest bill cost over the next couple of years?

Yes. Thank you, Simon. So we're in that sort of mid-4s at the moment. And if -- so crystal ball, I don't know. I think the best I can say is that it's based on latest data that we get from the various banks. But average tenor, close to 10 years or to do a 10-year corporate bond at the moment to be in the high 3s, early 4s. So hopefully, there's an opportunity there to bring that down. Obviously, WestConnex will go install the program over the next couple of years where a lot of that shorter-term construction finance debt will be replaced with longer-term debt. And potentially, there's an opportunity to offset the effect that the base rates have come down a little bit over the last couple of years. But I think in short, I think there's a good opportunity to be able to continue to fund -- funding new debt facilities at rates lower than where we are today.

So if you look at the average cost of a dollar debt, it's gone from 4.6% down to 4.4%. Do we take it at that $8.6 billion of raising during FY '20 was within that range or below?

Yes. 2 things. One is everything that we funded was lower than the debt that had been placed and quite materially in some circumstances. So hence, you get an average benefit through there. But again, we were raising money, sort of 10-year money anywhere between about 3.5 -- and the corporate euro that we did, we were the first non-European issuer into that European market. So it's the very start of COVID, so there's a lot of uncertainty, but that was in the mid- to high 4s. So -- which again was below our -- or at or below our average. So everything we've done this year was either below our average or certainly below the debt that had been placed.

Your next question comes from Ian Myles with Macquarie Equities.

Just a couple of ones on the pipeline of opportunities. Can you maybe give us a bit of color about the interest in Elizabeth Crossing and also that I-64, which I think I believe it's the Virginian government might be owned?

Yes. In relation to Elizabeth River Crossing, for those of you don't know, in the Hampton regions area, I know you've written on it, Ian, I mean it is the largest naval base in the world is down there, a lot of government and defense spending and obviously is within an existing coverage of a fantastic client for us or -- which is the Virginian government. And there's some challenges down there with that asset in relation to customer and operations that we think we can add some tremendous value to. So if the opportunity presents itself, we're obviously keen to look at it. But we do believe it's a great opportunity, and we think we could add a lot of value. And there's another -- there's a whole series of toll roads down in that whole Hampton region. I can't remember how many there are, but there's another 8, I think, additional toll facilities down in that region. So we think it makes a lot of sense from us from a partner perspective and operations improvement, we can add a lot of value. In relation to 64, I'm not really sure where that's up to and what's happening down there. And so I would just be sort of speculating at this point in time.

Okay. And also, Montreal, like you talked about the opportunities there, but I may have missed it on your charts. But I don't think you sort of talked about expansion opportunity. Is that increasingly becoming like a single asset?

No. No. There's still -- I think there's still opportunities. It's just how we discuss some of the different markets is a little bit different. So we are looking at -- we've done some stuff on the customer side. We're doing some more stuff around operationally on the asset. But there is -- and we do believe there'll be medium-term and certainly long-term opportunities.

Going back to Simon's question on West Gate Tunnel. How many -- how long before the toll bores have to start before you need to change that 2023 guidance of the tunnel opening to 2024 financial year?

Yes. Look, we can't really give you set date. I mean if the date changes, we will obviously update the market. It usually comes back to how you can address the program because, yes, the TBMs are on the critical path, but a lot of the issues around TBM operations, the precast, tunnel lining, segmental lining, the building of the boxes for starting the TBMs, obviously, are done. But the boxes and decommissioning the TBMs and a lot of the work that would have to be done afterwards continues on, which can compress the program at the back end of the program and commissioning and other things that are still occurring. So we're just not in a position, Ian, to speculate. But when that date pushes back '23, we will inform the market.

Okay. One other question just on your LTIs. Has there been any adjustment by the Board as a result of the COVID impacts and the change in the dividend policy on a go-forward basis?

There has not, Ian. So yes, there has not. So in relation to what the previous LTIs were, so the free cash flow coverage, we got 0 vested this year because of the -- obviously, the change in the distribution for the second half. So no adjustment. And there's been no adjustment -- well, sorry, it's up to the Board, I guess, on an annual basis, but there was no adjustment this year. So I shouldn't talk on behalf of the Board, but there's been no adjustment this year. The only thing, if you read the report, what the Board has done for this coming year -- or I guess, the next 2 or 3 years, the next 3 years LTI, is they removed the free cash flow coverage and went to 100% relative TSR just because the volatility around what the free cash flow may be this year. And then as you know, when we put a free cash flow target out there, some analysts may speculate that, that's the distribution. So for this year, it's gone to 100% relative TSR, which I know our Chairman and our Chair of our rem committee had discussions with different proxy advisers and our security holders over the last few months and looking at how different people wanted to handle this issue around volatility, and I think that was the general feedback.

And one question for Adam. Do you need all the extra liquidity, given we've sort of progressed through COVID crisis we're through that immediate worry? Does the business still need to carry the additional liquidity, which you install?

Yes. Good question, Ian. And firstly, I'll just repeat, we've got liquidity that takes us out beyond December '21. So we do feel like we're in a strong position there. I think importantly, and again, I think the lenders, the bank lenders who supported us by putting in the facility back in March, but that facility going to typically be -- it's not drawn upon, so it can be terminated at any time. You obviously pay holding fees for having that line. But I think just given that we are not through COVID yet and given potential uncertainty in the future, that's something that I think is a good insurance policy for us to maintain. But as we get through COVID and it's been improving, you would expect that our liquidity would be brought back to where it had traditionally been pre COVID.

Your next question comes from Owen Birrell with Goldman Sachs.

Yes. So I'd just start with CityLink and the impact of the current stage 4 lockdown in Melbourne. I mean, obviously, you provided some monthly data in terms of the decline and then it's sort of already started to come down. But I'm just wondering, do you expect the traffic decline in Melbourne to be worse than the original lockdowns in April, given that the mobility restrictions are tighter?

Yes. Thanks, Owen. I think what I said in my speech, what we've seen in the first week -- so again, we're all learning as we go. But what we've seen in the first week is the same behavior as the middle of April. So traffics are down roughly 62%; light commercial vehicles, around 20%; and freight was sort of in that 5% to 6%, 7% range. So very, very similar to April, but we're only a week into this.

Okay. And can I ask just on...

Sorry, just to clarify that. But with 62%, that means revenue probably in the 50%, again, because of the mix of the vehicles.

Sure. Sure. And can I ask just on Sydney, I noticed the chart on the Urban Mobility Trends shows a slight downturn in traffic. I am just wondering, is Transurban seeing a similar trend on a weekly basis that sort of averages out on the month?

Look, there's just -- there's some fluctuations still with school holidays. There's still stuff around RDOs. There's still stuff around wet weather. So there is still seasonality, particularly when we're starting to do -- when we're giving you week-by-week data, it becomes -- some things around the seasonality. But yes, we started seeing some levels on certain assets leveling off, and some continue to increase. I mean we've been very pleased with the M8, M5 East. The M4 is still doing well. It just depends. Again, the eastern distributor, obviously, because it's more tied to the airport, has been less, I guess, robust. So just -- and the M7 has performed well again on big freight corridor. So it's -- some of this now becomes asset by asset. And obviously, the mobility index is the whole city rather than looking at arterial network.

Okay. And just a final question for me on North American markets. Acknowledging the fact that there's a number of different roads coming on in Virginia, so sort of distorting the numbers a little bit. But I'm just wondering if you -- I see the U.S. toll revenues are sort of down in U.S. dollar terms, down sort of 5% to 10% over the FY '20 period. I'm wondering if you can give me a sense of what the decline in U.S. dollar tolls was in the fourth quarter as the lockdown came through.

Yes. And effectively in the actual toll levels?

Yes.

Yes. So I'm just getting -- I think we were down -- just getting the final numbers. How did I -- or where did I put those. I think we're down -- and Adam, you may help. I think we were back up to sort of $4 on the Express Lanes. Sorry...

Yes. [indiscernible] $2 on the 495, Scott.

Yes. When we fell to the worst case. And then we're back up now in July to sort of $6.5 on the I-95 and around $2.7 or $3 on the 495. So you can see that the tolls have gone up by sort of 50% since the depths, and the traffic's increased as well. So the average toll's increased about 50% since the depths of the pandemic.

Just for my benefit, can you give me a sense of what they were 12 months ago?

So 12 months ago, the I-95 would have been around $9, and the 495 I think would have been around the $6, I think, roughly.

It's still circa 25%, 30% down on where they were.

Yes. Yes. They're still down. What we've seen though, interesting is the congestion in the general purpose lanes, particularly on the weekends. It's been back up to, I think, around 90% pre-COVID level. So we can see the congestion, obviously, starting to build. And again, slow improvements sort of week-on-week across the U.S., which at this point, which is pleasing to see. Always caveat that this is always subject to restrictions, and there's still pretty severe restrictions in the Virginia markets. So schools aren't back yet, so they're still -- everyone's -- I know and our staff are having to deal with that. So schools don't go back for a while in Virginia. So they're even -- they've got still pretty -- some heavy restrictions.

And can I just -- just a further question on North America. The Maryland Express Lane process, I think you suggested that again will come early next year. With the agreement that you have with your financial partner for that project, are you able to give a sense of how much capital you -- will be needed to put into that project if you are successful?

Not really at this point in time. It depends on the exact when we come to the final delivery sort of approach. I mean, obviously, we're the main -- and would always be in a position to be the operator in the main equity party. And -- but at this point, it's just too early to speculate. I mean the size -- you see the size of the project. I think the government has talked about in the order of about USD 4 billion for that first phase. That's just a high level, I think, public number. But again, as we talked about, with all these opportunities, particularly in North America, potential to bring in partners, both for strategic and capital reasons. But we'll keep you updated. I mean, it's -- even if you go through the process where we get selected, if hopefully, we will be successful and be selected sometime next year, you still got to go through procurement process. It's a long time before the capital is a significant capital spend.

Your next question comes from Cameron McDonald with Evanson Partners.

Can I just ask about the WestConnex $18 million worth of other revenue and -- that recorded for the period?

Yes. Well, that would be liquidated damages, the majority of that for the project was late, and the contractor had to pay LDs, which will be the same as the case of NorthConnex. But I don't know if there was anything more in the $18 million than LDs. Adam?

Yes...

So that won't repeat effectively. That's a one-off.

Yes, it won't repeat, but we'll get the revenue for that period next year. Hopefully, the revenue will be more than the LDs, yes.

Yes. No. That's fine. And then if I look at the -- the one that stands out to me is that the Brisbane network on the proportional consolidated at $286 million EBITDA with $199 million of net interest costs. You're sort of running pretty skinny at just over 1.4x. Is that the one that you're worried about in terms of distributions? And is that the -- can we get some more guidance on which assets did not provide additional deferred FY '20 distribution?

Yes. So TQ did not defer. TQ paid. So no, we're not -- sorry, I should say, as the owner of all the assets, I worry about all the assets. I mean we worry about all the assets, but we're not particularly worried about Queensland, and we're very actually happy about the performance and, obviously, lower level of restrictions than the other governments and the assets, particularly Logan and Gateway, which are 80% plus of the portfolio are performing well. Obviously, Airportlink and Clem7 M7, given Airportlink's name, is impacted and Clem7, more CBD traffic has been impacted higher. But -- so no, not really concerned. Adam can talk about the actual ratios. I mean, the one, and we put some more disclosure in the financial accounts. I mean the A25 is our newest acquisition is probably the closest to an issue, but it's just going into, as Adam said, at the high level, at probably a lockup. And yes, I think that's about it. We feel okay, pretty good about where we are at the moment, Cam, but it all depends on what happens with government restrictions. Again, Adam, I don't know if you want to make comments.

Look, Scott, I'll just add that I think Queensland is in a good space in mature assets. So we should be fine there. And again, North America were the ones that -- again, we've got levers in place, which is really important. So you take the U.S., for example, where you've got particular interest, which can be capitalized and so forth. So there's plenty of levers there. In terms of the assets that didn't pay distributions in FY '20, I mentioned it was the eastern distributor in the M4. The M4, again, pretty minimal distribution coming out of that asset anyway, and that we're just being prudent, given the assets in ramp-up. So at the end of the day, again, at the time, there was a lot of uncertainty around airport travel and a few other things that -- and obviously, it's not an asset that we own 100%, but the Board took a prudent position there to defer that distribution for another couple of months. And again, that's a matter for that Board to determine during FY '21, but from a covenant and from a compliance perspective, it's in a good space.

And so with those deferrals, let's just assume at this stage that New South Wales doesn't go into a -- into a re-lockdown like Victoria. Is it possible that you would then receive an outsized distribution, given the deferral from FY '20 and FY '21, so you get the deferred '20 distribution and then the 2 distributions in 2021?

Yes. But it's not material. It's not material.

[indiscernible] Cameron [indiscernible] and obviously we've also got offsetting that, we've got other assets that pay their distributions in arrears in the New South Wales. So it's a bit of a mixed bag.

Yes. And remembering that the M4 just started, so...

Yes. [indiscernible] those assets that pay in arrears aren't changing, assets always pay in arrears though.

Yes.

My final question is just on that Slide 35, the free cash considerations. You've sort of mentioned strengthening credit metrics for some of the capital releases, but you don't mention sort of the protection of your credit rating. Can you make some comments about where you sit with your credit rating and the required metrics? And what sort of flexibility and leeway the rating agencies are giving you at the minute? And over what time frame would they expect you to repair that before you would have to sort of stump up your free cash sort of drag or injection?

Yes. Sure, Cam. So obviously, we work very closely with the rating agencies. I'll be speaking with them, I think, this afternoon. And there's a very clear dialogue with them in terms of how we're tracking. And we've obviously got a lot of levers in place to improve our credit metrics, and again, capital release is just one of those. So we work with the rating agencies to ensure that they are aware of what those levers are. And obviously, that helps them put their rating guidance out as a result. So you've also got the unique position that we're in where we've got a number of assets coming online over the next couple of years, as we've highlighted in our pack. So you actually get a natural uplift and quite a significant natural uplift in revenue and, therefore, in the credit metrics over time. So the rating agencies effectively used the words sustained period, and they don't want you to be below your thresholds for a sustained period. The clear item is important to them is ensuring that there's a glide path, and we're on a glide path to be able to get back up above the credit metrics over time. And obviously, we have that approach, we believe, is that we've got as well as the natural profile of the traffic.

And can you just remind us what that FFO to debt metric actually is for them at the group level?

That's -- there is a lot of detail go in that, and each of the rating agencies do it differently. So I'm not going to bog up the meeting with that. But effectively, in general, that's the free cash that we generate. So -- but again, we can take that offline, Cameron, if you want some more data.

It's not a specific -- number, Cam. Listen, we've -- sorry, apologies, we're running out of time. And unfortunately, we just have -- can we get one more question then? I'm looking at my media manager here. Yes, one more question in. I'm sure it will be a brilliant and quick question. And then if we need follow-up, then you can follow-up with Tess Palmer, or Investor Relations, or Adam and I over the next few days. So apologies. I appreciate everyone's interest. So the one last question.

Your next question comes from Ben Brayshaw with JPMorgan.

Lucky last. Just on Slide 63, the S&P methodology for funds from operations mentioned dividends from investments. So I'm just curious, perhaps, Adam, a question for you, whether if there is a delay in receiving the distributions from the non-100% owned assets, whether that free cash flow, if you like, from the assets will be included in the funds from operations definition for serviceability purposes.

The short answer is it depends. For one of the rating agencies, it's yes, and for one of the rating agents, it's no. But again, I think then, again, I could be talking to you for 10 minutes, and we shouldn't bulk up the call. So let's -- if you can look to the IR team and they can take you through the detail.

Yes. Apologies. I know there's a couple of people on the line, but we're just going to have to wrap it up because of other commitment. So please follow up with Adam or I, our Investor Relations team. But again, I want to thank everyone, again, for your interest. I hope you stay well during this period. And hopefully, when we do the half year results for the next time, we're able to get together and we'd see some of you in person. So thanks again, everyone, and talk to you soon.

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