Transurban Group (TCL) Earnings Call Transcript & Summary

[Operator Instructions] I would now like to hand the conference over to Scott Charlton, CEO. Please go ahead, Scott.

Great. Thank you, and thanks, everyone, for joining us today at such short notice. Today, we are here to discuss the agreement that Transurban has reached with the Victorian government and the CPP John Holland joint venture on revised terms for the delivery of the West Gate Tunnel project. Today, I'm joined by our CFO, Michelle Jablko. We also have our Group Executive for Victorian Strategy, Henry Byrne; and our group executive partner is delivery and risk, Hugh Wehby, and we'll be happy to take any questions into this. We have lodged a presentation with the ASX. And I'll make just a few comments on the materials followed by 20 minutes for questions. And we'll, of course, be available for follow up later in the day and as always, reach out to the IR team for any additional information that you may need. So I'll start by moving to Slide 3, I if we could. Again, this morning, we are announcing an agreement that will allow the West Gate Tunnel project to move forward, and tunneling will commence in early 2022, which contractor is committed to with project completion scheduled late 2025. This follows several years of delays as a result of disputes between the project parties. Obviously, it has not been easy to get here, and we certainly share in the disappointment and frustration of the community, our security holders from the delays and the challenges in the situation relating to the project. We also acknowledge today that the announcement we're making comes at the cost of Transurban and our security holders. However, we do firmly believe that this agreement is in the best interest of all 3 contracted parties, the Victorian road users and the broader community. And our focus for the last few years has been on how we get the most efficient path to get this project delivered, because we know it will be transformative for Melbourne. This is still a fantastic project. And from a Transurban perspective, even with this additional contribution, we would still do this project for the long-term benefit of the Victorian road network and all our stakeholders, including our security holders. There will be no changes to our concessions or tolling arrangements as a result of this agreement. If we move to Slide 4 now. Most of those listening will know that Transurban involvement in the Melbourne network started back in 1994. In 1996, the construction of CityLink began. And in 1999, the Western Link opened for traffic followed by Southern Link in 2000. Now traffic across CityLink has grown by around 60% since that time with average daily traffic reaching over 850,000 transactions in 2019. We began the West Gate Tunnel project in 2015 with Transurban and the Victorian government undertaking a comprehensive project development and tender process on an infrastructure solution that would provide a long needed alternative to the West Gate Bridge. Now we have made significant investments in the Melbourne network since our initial $1.8 billion deployed on CityLink. And in fact, between the upgrades, expansions and maintenance and operating costs, we have spent a further $11 billion on CityLink and the West Gate Tunnel with around $8 billion of that already invested. We are deeply committed to the efficient functioning of this growing network and to our role as a preferred development partner to the state of Victoria. And Slide 5 shows some of those benefits that have been delivered to the state motorists and the community as a result of the infrastructure of the CityLink and the West Gate Tunnel. And these benefits spanned job creation, travel time savings, safety advantages, community spaces, and environmental initiatives. And they include the 6,000 construction jobs created on the West Gate Tunnel project and a commitment to improving road safety through the Transurban Road Safety center and more than 25 kilometers of new and upgraded cycle, walking and cycling pathways across the city. We're very proud of what our assets have and will contribute -- continue to contribute to Melbourne. Now I'm going to move through a bit of the project update in a bit more detail. Slide 7 provides a reminder of the path that we've taken to get to today's announcement. The project actually began in 2017 and tunneling was expected to get underway in 2019, but this did not occur due to changes in regulations that came into play after the contract was signed. These changes concerning the classification of soil containing low levels of PFAS. The classification changes required a purpose-built disposal facility for the tunneling spoil with associated environmental and planning approvals also contributing to that delay. These issues resulted in a speed between the parties. However, impacts associated with COVID-19 and delays relating to relocation of utilities also contributed and compounded the dispute. Now we have maintained that we are confident in our legal position. However, we do believe that it is in the interest of -- sorry, we do not believe it's in the interest of any party to pursue a projected legal process that has the potential to further delay the delivery of the project. So again, we've reached the outcome. There's some discussion on Slide 8, but I'll skip forward right to Slide 9 and happy to come back to any slides if there's questions to talk about the agreement that has been reached between the parties. All 3 parties are making a significant and meaningful contribution to this agreement. The total cost of the D&C contract has been increased by $3.4 billion, which is in line with the independent analysis of $3.3 billion that we provided in August. Transurban and the State will each fund $1.7 billion of the increased D&C contract amount as well as sharing the cost of the disposal site activation works and insurance. We have already announced to the market that the cost of the disposal site would be around $132 million, and we're pleased that the State is sharing that cost with Transurban. All parties will bear their own internal costs relating to the delay with Transurban share consistent with the amounts previously disclosed. The D&C subcontractor is foregoing their profit margin and overheads. They're withdrawing their claims and taking a reduction in revenue with the combined amount of contribution in the order of $1.6 billion. Moving to the financial impacts. Transurban will fund its contribution to the contract some adjustment from corporate liquidity. Again, this is something that we have been flagging to the market a significant financial contribution to West Gate for some period of time, and something we have been preparing for. As at 1st of December, we have close to $4 billion in corporate liquidity. I should point out we don't plan on nor expect to raise any equity in relation to funding this project. In addition, calls on our cash are delayed with no contribution to the contracts, some adjustment required til after the state funds their total of $1.7 billion. This means that we are not making any capital payments under the D&C contract either through our original capital commitments or the additional CapEx of $1.7 billion until financial year '23. And in fact, it will be probably early into the '23 year before we have to make any payments. After that time, we will fund the capital on a project S-curve, which will take approximately 3 years -- 2 to 3 years. On the NPV terms, the investment amount is significantly smaller than the headline $2 billion contribution because of the delay in the payments. We do not expect our contribution to the contract some adjustment to impact free cash as we've been planning for, again, a significant contribution to the market for some time, and our balance sheet remains very strong, and we've been speaking to the rating agencies, and we do not anticipate any issues. Now there's a whole background of various slides on the industry and some of the things that are happening in the market and traffic as well. But what I'll do is just really summarize that, so we can leave time for questions. Again, I'm not going to go through an update on the construction project and some of the insights to the Australian construction industry as a whole. Again, I hope you find this information sort of interesting, especially given the point of the cycle we find ourselves in, characterized by a huge pipeline in the mega projects and an increasing role for private industry to play with creative solutions. And as I've said before, I've lived through many cycles in the construction industry, and this is just another one. It all does have its unique sort of characteristics, but it's something that we're used to and planning for. The data we've included in the presentation focuses on the Australian market, but we do see similar dynamics in the U.S., albeit with a greater number of contractors participating in that market. Transurban itself has over 2 decades of experience in delivering major projects, and we remain confident that we'll be able to continue to do this even in the current procurement environment. Clearly, though, we are thinking about ways in which we continue to improve our approach to major project delivery and lessons learned on the West Gate tunnel project are important for us to take on board, which we have some discussion in the pack. As I have said before, this has been a difficult and complex dispute, which is why it's good to be able to reach this agreement and being able to move on with the project. We've also included an update on traffic on Slide 21, which shows the recovery trend across the markets as the impacts of the Delta strain recede. In particular, in Sydney and Melbourne, traffic has steadily improved and restrictions have lifted. And in Brisbane, we've actually seen some record days on a couple of our assets in December. We hope to see further improvements in airport-related traffic now the domestic border is largely open, and we continue to see the impacts of lower public transport patronage and resilience in commercial traffic across the portfolio. We look forward to providing more fulsome updates on these mobility trends in the half year results. Now with these commercial discussions resolved, financial close has been reached on WestConnex and traffic improving across all our markets, we believe we're in a good position to focus on our core operations and the growth pipeline ahead of us. We're very much looking forward to the Christmas break and getting on with the business in 2022. I would like to acknowledge the state and the JV, who in the spirit of partnership, who have worked with us to get the right outcome for all stakeholders. And clearly, and as well the Transurban team who have worked tirelessly to get to this point. So thank you all for your time this morning, and we're now happy to open up and take questions, please. So operator, over to you for questions.

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

Look, first one for me was that, I mean, quite frankly a $2 billion contribution feels like a pretty big -- it's a big contribution for no real concession changes or tolling arrangements or anything like that. Can you perhaps probably give a bit more of an outline as to why you thought you needed to do that? Is that purely just to the cost of that less than the delay in an overrun that you were likely to receive from the protracted legal proceedings? And is it more to get a sense still get a seat at the table for future projects that do pop up?

Thanks, Anthony, and thanks for your question. I mean, it's a good question. Like we said, we're still confident in our legal position. But Anthony, you go through the alternatives and what we could end up here. So we could take the high moral ground, which we're unprepared to do. In that instance, it could mean a protracted legal argument for 5 to 10 years with the project not getting complete for a period of time and sometimes to have a moral victory. It doesn't mean you won the battle. We do think it's in the best interest to complete this project efficiently and quickly as we can. There are some other alternatives where if the contractors themselves got themselves in deep trouble, I think the states mentioned in some of their discussions, if we terminate the contract or had to replace a contractor or the contractor got in such deep trouble that they would have financial difficulties that cause other issues that would be a problem for both the state and us. So looking at what is in the best outcome of all stakeholders and our security holders and everyone making roughly a similar type of contribution we deem this as the best outcome. And you'll see outlined in the financial contribution and some of the other comments I've made. As we've said, we've not taken an impairment on the project and/or don't expect to take an impairment on the project. And as I said, we would still do the project on these terms going forward even for security holders. So we still think this project offers a long-term value to all our stakeholders, including Transurban. But there's a lot of subtleties and things behind the scenes and judgments that had to be made. And obviously, we spent a lot of time with the state with our Board, with our team, and looking at the alternatives in every way we saw it getting this project completed most efficiently and quickly was in everyone's interest, and that included us making a substantial contribution. So again, I've said we're obviously disappointed for everyone, who've ended up in this situation, but we just had to fix it, and we think that's in the best interest of everyone.

Yes. No. Look, I appreciate it, it is certainly a difficult position. So thanks very much for that response. And just last one for me. In terms of the cash contribution of about $2 billion, I noticed that you did mention that no payments will likely happen until FY '23 onwards, and appreciate that curve that you did highlight. But are you able to give a bit more color as to how those payments may likely be spread over those subsequent years?

Yes. So look, it's mostly following a normal construction S-curve, and the payments aren't likely to start from us. I don't know as December, January, it depends on exactly the timing of the construction, probably not until January of 2023. And really in '23 and '24 will be the heavier payments because, obviously, as you're trailing down toward the end of the project. So most of that money will fly out in '23, '24. But again, from an NPV basis, our contribution, obviously, is materially less than the nominal number the way we have it structured. And obviously, that fits well with capital releases with everything else that's going with our discussions with the rating agencies. So it works well for our capital planning. Again, it's something we've been flagging to the market a material contribution, where it's got to -- it is material, obviously substantial, but it's something we've been planning for a period of time. And as we said in there, we don't anticipate it affecting free cash flow and how we're moving forward, and we expect it all to be capitalized onto the balance sheet.

Your next question comes from Benjamin Brayshaw with Barrenjoey.

And clarification around the soil disposal cost of the $132 million, could I just confirm the $443 million provided to the contractors in terms of the advanced payments is captured in the $2 billion?

Correct, yes. So all those advanced payments and everything has just wrapped up in the total contract, some in the numbers that are outlined to here. Yes.

Great. And just in terms of the delivery model, I mean, entering into -- back to that contracts. I mean could you perhaps discuss what changes you might look to incorporate or you are considering in terms of the future framework for development projects?

Yes. I think -- look, we talked about a little bit on that slide about lessons learned. I think there's a couple of slides around -- so a couple of comments about lessons learned, I could spend all day on this and where we got there. How do I -- let me try and summarize it really quickly. It was normal practice in the D&C construction to understand basically, in this case, the geology or the contamination or roughly the environmental issues. And have those then the responsibility as you work through the construction management plan to get approval from the EPA to do your environmental plan, that would occur after contract signing, and that was just a normal process. So that had been traditional practice in Australia for decades. In this case, unfortunately, we signed a contract and there was a substantial change from the EPA and how they are going to treat PFAS. And actually, one of the issues here was there was multiple changes over a period of time as the EPA and difficult issue for them. So they're an independent organization. There were multiple changes over 9 months, almost a year on how they were going to treat it, how to potentially treat it, which meant there wasn't enough landfill spoil sites in Victoria and then going back and getting environmental approvals and planning approvals and stuff for those changes was quite difficult and how we ended up with the majority of the issue here. I think what we would do, Ben, in the future is normally you take samples along the route from the borehole. So we had quite a few samples about what was in the boreholes. I think we would have spent more time, us and the State and the JV. So I think collectively, we learned lesson we would have drilled much more extensively rather than relying on what you typically do is drill quite a few holes and then you rely on hydrology and geological modeling, but then different models produce different results. So we would have drilled a lot more. But I think more importantly, because we would have not signed a contract until the EPA had signed off on the environmental plan on treating the spoil, which might mean that the cost of the D&C contract went up substantially. But at least we would have known that in advance and could have dealt with in advance. So I think that's one of the lessons learned that we take out of this. I note that when we discuss the Australian contracting market and what's happening at government, because of the issues around utilities and because of the issues around some of the geology issues that contractors have been experiencing that a lot of the state governments are looking at taking potentially more of that risk or sharing more of that risk. So again, for us, it's how that risk is defined and how that risk is passed through. Go back to legally, we think we are in the right place to pass through that risk one way or another. But in this unique -- there are other unique circumstances given the size, timing of delay, COVID and a bunch of other things that unfortunately have come together at the same time to create this, again, situation that's disappointing, but we just need to resolve it and move forward. I think, hopefully, that answers your question.

It does, Scott. And just one other question around contingencies. I was wondering if you could comment on whether they have been replenished as part of the recalibrated project budget. And are you making additional allowances given obviously the events that have taken place for contingencies to complete the project? Or just any comments on how you would describe the contingencies that you've allowed for a project?

Yes. Well, we do have contingency. We're not going to at the moment, and there's some incentives for the contractor and other things like that, that we don't need to go into detail. The incentives are offset by revenue that we would get on the other side for other things. So it's not really material to us because they're balancing items. But we do have contingency and we have, as we said, in the risk side of the project locked in COVID risk is definitely with the state going forward. So we do have a level of contingencies, both our side and in the contractor that we think is sufficient to get through the project, and we sufficiently nailed down, we believe, the outstanding risks to the various parties. There is some incentives on the contractor. And I think one thing -- I'm not saying things couldn't go wrong. Clearly, things could go wrong. But when you look at it, the project has substantially procured all their materials. The project has secured, obviously, the TBM sitting there waiting to be turned on. So the design is done, all the design is done. So a lot of times when you look at these major projects, a lot of the risk has been taken out of the project at this point in time when we're resetting the project.

Your next question comes from Ian Myles with Macquarie.

Sorry to belabor the point. You talked about no write-downs. And I sort of go through, you've got effectively a 50% price rise. West Gate Tunnel revenues are probably down 8% to 10% because you're not getting the 4.25%. You're only getting CPI increase for the last -- the deferral of 3.5 years. And we're not seeing any write-down of the project. Can you explain it a bit more understanding of why that's the case? And you go back to also when you first you talked about 1/3, 1/3, 1/3? 1/3, price rises; 1/3 is toll extensions, which is CityLink and the other 1/3 is this West Gate Tower project.

So Ian, I think we never discuss the details of, obviously, the valuations and investment propositions. But I mean, I think you would understand what we're saying is we're not taking an impairment. And I said even at the additional contribution, we would still do this project, that would be good for all stakeholders, including our security holders. I think that's all I can say at this point in time.

Have discounted rates changed or something like that since 2017? Because it was a while ago, which has also aided this outcome.

Discount rates haven't changed. But certainly, in the short term, debt rates that you're able to lock in have changed.

Okay. And in terms of the contract itself, is it now actually a fixed price, fixed time contract and that they have to finish by late December? And have you got a date which they've got to finish right?

We have a date, but we're just saying that towards the end of 2025. But yes, we have a date. Yes, they have a fixed time, fixed price. And yes, liquidated damages would apply if they're late from that revised date. So it is the same contract terms as the original contract with now some specific issues around COVID and other things that we've defined spoil site risk and other things, yes.

Okay. And of the $5.4 billion sort of global settlement for the global settlement for lack of a better word, how much was actually the PFAS issue versus how much is utilities and other claims, which have sort of been piled into this process?

Well, you know how a contractor works, Ian. They're going to put it all into 1 bucket where they think they have the best chance of winning. So if you talk to the content...

Can you work out what the bucket per site were though?

Look, Ian, I don't think that's -- we've come to an arrangement. We accept the arrangement. Again, we did our own independent analysis, and you'll see the contractors reducing their revenue in the contract by $600 million plus. So they clearly think it's more, but we did an analysis and relating to all those issues again, disappointed, but we think that's the right outcome. The biggest contributor -- I would just say the biggest contributor is -- the biggest contributor is delay. That's the biggest contributor, and delay -- the biggest contributor to delay is PFAS. I mean there is COVID, there's some other things, but the biggest delay is relating to PFAS.

Okay. And one final question. You made reference to your legal position and your comfort and your belief in your legal position, yet you've agreed to the settlement for a variety of reasons. How much it becomes critical that it's actually the cost of doing business to ensure your relationships with governments get fried by taking this sort of view? And is it -- I guess when you think about these issues, the broader than just a West Gate Tunnel that governments in other states and other countries all look at these situations and how you behave?

No. Well, look, I mean, I think we're acting as a good partner. And I think the state has a legal position that they're not responsible either and they've come to the party for $2 billion. So I think everyone just saying we've got to get the best outcome for this project and the alternative is really ugly. The bigger issue, Ian, isn't taking on the legal position with the state. The bigger issue is the size of the problem had become so big and potentially the consequence to the contractors. And then we get into this whole regime of terminating the contractor, what does that do to the contractors and then putting in new contractors. And then that does potentially expose us to some issues or interim funding arrangements and spending, Ian. So there is risk and we just felt that if you look at the risk, you look at what's the best interest for all stakeholders, and I'll come back and I'll say one more time, Ian, we would do this project even at this additional contribution. We're comfortable with the position. But I don't think in no terms, I mean, we never want to take legal action against our clients. And the good thing is, in most instances, we talk about with our partners and particularly with our investment partners, is we normally never have to rely on the investment agreements because we're all very much aligned. So in this case, unfortunately, we have a unique set of circumstances. But we have taken on governments in the past and other regions or we have taken on contractors through the courts, and we're prepared to do this. This was a unique set of circumstances, but we don't see it as a cost of doing business in any mean -- it is a unique set of circumstances, and we think it's the best outcome.

Your next question comes from Justin Barrett with CLSA.

I just wanted to confirm in terms of the financial impacts that none of the additional costs will be actually considered for operating expenditure and that they will actually be capitalized?

That's our current belief and understanding with our auditor. I don't know. But Michelle's here. She's raring to go, you can take that on.

In the additional costs, there could be very immaterial amounts that our expectation is almost all of it is capitalized.

Great. And then just in terms of your deferral of any entitlement to liquidated damages, is there any chance that you could sort of quantify the dollar value of those liquidated damages based on new time line compared to your original study or expected opening date?

Yes, yes. I don't know, Hugh, I'll let Hugh answer that question, Hugh and Henry are both here.

Yes. Thanks, Scott. The liquidated damages entitlements have been fully preserved. So the ones that would have applied at 2022 now apply from late 2025, as Scott mentioned, for every day that it's delivered past the new revised fixed completion date. So same entitlement to lost revenue and to additional costs.

Is that your question? That's how much are we giving out during the time frame.

Yes. It's more the latter, so if that's okay.

Yes, it is roughly around -- when we talked about the number, total number with everything else around [ 450 ] is roughly somewhere $150 million to $200 million.

Your next question comes from Paul Butler with Credit Suisse.

Just could you just confirm what the tolling arrangements is on CityLink in relation to this? It's -- you still get the higher rate of toll increase that's already kicked in of around 4.25% per year. Is that correct?

Yes, that's correct, Paul. So I think if you remember the valuation, the least financial contribution to the valuation of this was actually the tolling of the West Gate itself. And the biggest contributions were the extension of the CityLink concession and the escalation on CityLink. But yes, the escalation continues.

And we've got a summary on Page 25 of the deck in the appendix.

Your next question comes from Rob Koh with Morgan Stanley.

First question, just if you could talk about the remaining risk of PFAS, if there's more found, who's bearing that risk?

Well, thanks, Rob. Well, the good thing is we couldn't find anymore because we've assumed 3 million cubic meters of it as PFAS. So on the basis that we're going forward, so there is some upside in both timing and potentially cost and sharing of some callback and some of the benefit if there's minimal amounts of PFAS, which well could be the case. So we plan for basically all of it being contaminated. So hopefully -- and we do believe that some of it will not be contaminated. So hopefully, it's the other way, Rob. And on the spoil side, in relation to the spoil side, what have the spoil side, our risk is capped.

Okay. Good. All right. Yes. And absolutely, everyone hoping for that. Can you talk to any other key milestones and risk between now and scheduled opening late 2025? Your, I guess, tunnel boring machine startup is the critical factor. Is that still the case?

Yes. So we still -- finishing the spoil side activation and starting the TBMs, which we expect in that first quarter of next year, hopefully. That's the plan, and it's all on track and the JV has been hiring tunneling experts. They've been preparing. So they're well advanced in preparing the TBMs to be turned on, which is great. And in the agreement they've committed to turn to the TBMs on as soon as the spoil site is available, which is a massive milestone. We've got some steel coming for the bridge structures early next year. And if you go out there, there's a tremendous amount of work that has been done. A lot of the major switches in the West Gate Freeway to open up the whole freeway. The launching gantry on Footscray Road is now making great progress. So you'll see a lot of work is progressing. Benalla is significantly producing on majority of the segments. So there has a lot of work. I guess the biggest milestone is the production rates of the TBMs, which I think, hopefully, we're being on a little bit on the conservative side. And with all these is in the mechanical and electrical fit out at the end. But a line tunnel is usually -- should be easier to do than, say, a tunnel in Sydney where you're dealing with water ingress and a few other things. But completion of the tunnels and then moving to the mechanical electrical will probably be the next big milestone. But in February, we'll obviously give an update on sort of expectation of progress. And hopefully, at some point, maybe Investor Day, take a tour of West Gate Tunnel.

Just a final question for me. I guess, with the material changes for the whole project cost and contract structures, does this give you any scope at all to review the tax structure for this from memory, just went into a straight company as opposed to a staple? Any chance to reopen that?

No, Rob. But obviously, the additional CapEx that will be capitalized, obviously, we depreciate that over time. So it will provide more tax shelter. It's not really what we wanted to do nor set out to do it. But obviously, it will be appreciated over time.

Yes. No, you made the comment about valuation already. I was just trying to look for other things.

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

Scott, can I just confirm that you said that the state government would contribute there $1.7 billion ahead of yours?

Yes. So 100% of their funding goes in before we put any more funding in.

Okay. And a question for Michelle. What headroom have you got of at your -- at the TCL corporate level rating for incremental debt? Not -- I appreciate you've got undrawn debt facilities, but what's the -- what do you think the headroom total terms would be within your current debt rating?

Yes. So we've worked 3 years, because you're going to take into account the timing of the payments as well. We think as these payments are being made, there's actually very significant headroom, and we've worked through that with the rating agencies over the last day or 2. So we're very comfortable with that.

I think, Cam, and maybe it's not concluded. I shouldn't make a comment, and I know that I'm just trying to find what the slide number was with our delivery slide. So we've got the funding obviously set aside for this project. Next Fredericksburg and the other projects that we're committed to. But in addition to that, in the pipeline with the M7 and a few of the other projects, Maryland and other things, we've got enough headroom in our -- with our capital releases and our liquidity to fund -- we believe, to fund the majority of those projects as well.

Yes, so I'll give you some simple numbers. We've got $3.7 billion of corporate liquidity as we sit here today. And we've already spoken about $2.3 billion of capital releases coming over the next sort of 3 years. So you take all of that together, that's $6 billion. And therefore, even after this and some of the committed CapEx we have, there's still quite a lot of liquidity headroom. And then our other metrics remain strong as we look out over the period.

Your next question comes from Suraj Nebhani with Citigroup.

A couple of questions have been answered. Just one thing I wanted to check is, has there been any change in traffic forecast for West Gate Tower?

No. Look, on the long term, that's a good question. I mean, obviously, with in relation to COVID, we've been impacted. But in relation to the long-term sort of forecast, I think, as we've said, most -- with most of our assets, we believe, by sort of 2023, certainly, we're getting back to long-term trend lines. And we see that again in Brisbane and Sydney with the performance once the restrictions have lifted. So no long-term changes in the forecast. But as I said in the beginning, the majority of the benefit comes with CityLink escalation and concession extension, but I should also point out the majority of the financial benefit of the West Gate Freeway and the West Gate is to deal with the freight community, it's a massive component and obviously much more resilient during COVID. So we don't expect any real changes, particularly by the time it opens in '25.

And just one more there, Scott. Typically, these roads have stabilization time as well. I just wanted to check, if we would have expected opening in '23 initially, maybe from what sort of stabilization period would you have expected? And then what would you expect that stabilization period to change as well?

So I think your escalation will continue on the theoretical toll, and then you're talking about what the escalation in traffic?

Traffic. Just the traffic reaching sort of your longer-term forecast and just assuming like how many years from the opening business would it take?

Yes. So normally, the ramp-up, depending on the traffic is -- I'm sorry, the situation normally the ramp-up is somewhere between 18 months to 2 years. So -- but given that this is heavy based on freight and freight is very sensitive to the benefits they receive, we think it should probably be at the shorter end of the ramp-up. So I think, operator, I believe that's all our questions. So I think what we'll do -- and we're out of time. And again, I appreciate everyone's interest. Again, if there's any questions or follow-up, please talk to Investor Relations. We look forward to seeing everyone at the half year results, which are scheduled for the 17th of February. And if we don't get a chance to speak to you before then, I wish everyone a very safe and happy holidays. And again thanks for joining this morning.

That does conclude our conference for today. Thank you for participating. You may now disconnect.