Transurban Group (TCL) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us for Transurban's 2022 Investor Day. And I am really pleased to be able to hold this as a live event and to catch up with so many of you in person again, particularly in this venue, which is our information center for the West Gate Tunnel Project here in Yarraville in Melbourne and in the inner west. Now of course, we are webcasting this event this morning. So welcome to all of you who are attending online. I'd like to start today by formally acknowledging the many traditional owners of the country throughout Australia. And the center where we are situated today is located next to the Maribyrnong River, which is the specific importance to the Wurundjeri and the Bunurong peoples who are the traditional owners of the land we're here on today. And Melbourne's inner west has a rich indigenous culture and the West Gate Tunnel Project will feature some world-class architecture, urban and landscape designs and they seek to celebrate the rich Aboriginal heritage and maritime history of Melbourne's West. The project actually passes through 4 waterways and resource-rich areas for Aboriginal people. And there are some historical elements such as eels, canoes, netting and rope and you'll see these reflected in the project's structures, bridges and piers. And for example, in the tunnel portals, it's been inspired by the form of the nets and traps used to catch eels, which historically has been a very important indigenous food source. In the forms of the ventilation structures, also draw on the shapes of the Aboriginal canoes and also as well as modern boat holes. So moving to the agenda for today. This morning, we'll cover a number of topics. Hopefully, you can see on the slide, there we go. Henry Byrne, our Victorian & Strategy Group executive, will present our latest traffic insights. Michelle Jablko, our CFO, will take us through our approach to capital management. The session will conclude with Q&A with all members of the Executive Committee and that will finish up around 11:00 a.m., and people will be able to ask questions obviously online, in the room, and I believe, by phone as well. Those of us that are in this room will then proceed to a tour of the West Gate Tunnel Project. In regards to West Gate Tunnel Project, I said it's great to be here in the information center. To date, more than 3,500 community members have visited this center to learn about the project from our engineers and our community engagement. And for those of you who know Melbourne will understand just how significant this project is to the city, and in particular, the western suburbs, which are the fastest-growing areas of the city and indeed parts of Australia. The West Gate Tunnel provides an alternative route to the West Gate Bridge to cross the Yarra River. The bridge is heavily congested and has carried more than 200,000 vehicles a day. And I think everyone in Melbourne knows too well that when there's an incident, it has a major impact across the whole road network. And Melbourne happens to be one of the few global cities without a motorway connecting directly into its port. Our new estimated completion day, which we informed the market, is towards the end of 2025. But already the first tunnel boring machine, or TBM has progressed some 550 meters on its 4-kilometer outbound tunnel. And I was just talking to the project director, I think the second TBM is about 187 meters in. So we're doing very well. These 2 TBMs are the largest in the southern hemisphere at 15.6 meters in diameter and 90 meters long. I think they're currently the second largest in the world that are operating. They do operate 24/7 with 2 revolutions per minute. So if you put that in perspective, it's the same as having a 5-story building rotate around twice every minute. Now today, for those of you who see the TBMs, they've been slowed down to a very slow speed so that we can visit the site safely. The project also includes widening works on the West Gate Freeway, which is now more than 70% complete and more than 700 meters of the new elevated roadway above Footscray Road has been completed, which we'll visit today as well. Now once this project is finished, it will deliver more than 70 kilometers of new traffic lanes, and combined with CityLink, will create an integrated network of safer, faster and more reliable travel and make a substantial difference, particularly to freight. Now unlike most recent road projects, particularly in Sydney, a substantial part of this project is not underground. And for those of you again on the tour, when you're on top of the launching gantry, you'll be amazed at the scale and the impact that this project will have on the city. You can almost think of it as a WestConnex above ground. Now today, in the room as well, we have the -- all of the executive team here with the exception of Pierce Coffee. Our President of North America will be joining us remotely from Northern Virginia on that screen over there, which I'm sure will work. And I'm exceptionally proud of the diverse range of experience and expertise we have among our team who have now been well embedded in the business. As you know, we realigned our leadership operating model in 2020 to ensure we are best positioned for growth and taking advantage of the emerging opportunities in technology and the customer space as well as our development pipeline. Now you'll have the opportunity to ask questions of our team later today, but you also can hear from each of them by visiting our Investor Day Hub on Transurban's website, which has been identified, I think, on our ASX or our investor material today. And we are launching today our Transurban's Insight hub, where we aim to show the data we source from our business and commission from third parties. This data will provide insights on mobility and trends relevant to our business. We have tools and information covering freight, road safety, travel and some of our more futuristic insights as well. And I hope everyone in the room and watching understands that, as we've always said, data is central to everything we do at Transurban. And this new source, we believe, will help the community, governments and our investors with some of the takeaways on the role of our roads and our operations play in relation to transport infrastructure in the cities in which we operate. Now moving to Slide 7. Over the past decade, our success has been underpinned by a deliberate and consistent application of our strategy. So some of you may notice on our website and some of our materials that the wording of our strategy statement has been updated. But I want to make it perfectly clear that our strategy has remained unchanged. We just recently refined how we actually articulate our approach because we wanted to succinctly capture for our employees, new and old, what will enable our continued success and the culture of who Transurban is. Now the strategy statement that you see on the slide highlights the important role we all play in listening to our stakeholders and building and maintaining our very strong relationships. And by executing on our strategy and creating our unique road transport solutions to deliver value to all our stakeholders, we believe we have proven over time Transurban's credentials as being a partner of choice. On the next slide and the same is our strategy statement. This is a reminder of Transurban's investment proposition, again, which remains unchanged. Over the past 20 years, we've demonstrated our investment discipline, we believe, through the delivery of 17 greenfield and brownfield projects. We've opened more than 330 kilometers of road infrastructure to make us the leading global toll road developer and operator. And just over the past decade, our business has grown from 8 assets to a portfolio of 21 in 5 markets with a further multibillion-dollar pipeline of projects being targeted. All of our markets have quality structural growth drivers, including increasing populations and wage growth. And as we know from the WestConnex transaction in New South Wales, for example, 40% of Sydney's population is expected to live within 5 kilometers of WestConnex by the end of this decade. We have an average concession life of approximately 30 years, and WestConnex, for example, has close to 40 years remaining on its concession life, and our assets in the Greater Washington area have concessions until 2087. We continue to progress the 7 projects we have in development or delivery, including additional progress on the M7 and M12 widening and the M12 interchange project, which is progressing well through the government's unsolicited proposal process. Again, though, all this growth is predicated on maintaining our relationships with our strategic partners to progress what government has laid out as their long-term infrastructure plans. We are confident that the core fundamentals of our assets will allow us to deliver on our investment proposition, again, which we've always said is creating long-term value but balancing distribution of payments to security holders in the short and medium term. And we know that's very important and we want to focus a little bit on that now. So the topics that we'll talk about today are all the key components that support our ongoing distribution growth. These are obviously the continued momentum in traffic growth. We are seeing traffic numbers continue to strengthen as the economy recovers further, and again, airline travel picks up on particular markets. This trend reflects what we have seen in the past 2 years with traffic recovering quickly in line with government restrictions being lifted, and Henry will talk about this in a bit more detail in a few moments. In addition, we have substantial balance sheet capacity, which will allow us to internally fund existing and new asset enhancement opportunities that we'll talk about it in a little bit, and Michelle will talk about the capital as well. And finally, and I know there's been a lot of discussion over the last few months, our inflation-linked tolls, which provide upside in a rising inflation environment, while our debt hedging profile provides near-term and medium-term protection in a rising interest rate environment. So this next slide shows a little bit more detail about what I've just discussed and supports our distributions. Over the past decade, our investment in additional lane kilometers provided new sources of revenue in combination with traffic growth on existing assets as they mature. And we still haven't seen the full ramp up of NorthConnex, the M8 and then, of course, we have new assets coming online over the next year, including the M4-M5 Link. And as I mentioned earlier, we have in-built inflation protection through our inflation-linked tolls and interest rate hedging. And as we outlined at the half year results, the benefit of a 1% increase in CPI is likely to be greater than the cost impact of a 1% higher interest rates again in the near to medium term. And pleasingly, and on the back of very strong CPI numbers released last week, the quarterly rates for Sydney at 2.2% are above the -- in our fixed escalators and the annualized Brisbane rates is over 6%, which will apply from the 1st of July. So we can now state that the actual CPI numbers that have been observed for our portfolio will be higher than our assumptions for the analysis we completed at the half year results, which is shown in this chart. In addition, we are confident that we have sufficient capacity to internally fund our development portfolio with excess liquidity remaining. And again, finally, we're on track to push our margins up to the early to mid-70 range as our traffic continues to recover. And all of these factors will continue to contribute to our outlook for distribution growth. Now with that, I'd like to hand over to Henry Byrne, our Group Executive for Victoria & Strategy, who will provide an update on some of the trends we've been seeing in traffic across the markets.

Thanks, Scott, and good morning to those in the room and online. I want to start by looking at our current traffic data in more detail and share some of the insights that we have, particularly around the current trends that are driving the momentum in traffic growth. And then we'll take a look at some of the more forward-looking trends that we see playing out over the business, particularly over the longer term. So if we begin with current traffic, as you can see from the chart here, the unsurprising observation is that conditions recovering as we see the easing of government restrictions in these cities. And the good news is almost all of the restrictions, including the isolation rules, have been lifted in Sydney and Melbourne from mid-April. So that should really support the continued traffic recovery that we've been seeing. The most recent data represented in the charts here also includes the Easter period, and it shows for the first time that each of our Australian markets have exceeded pre-pandemic levels in 2019. And indeed, our North American roads are less than 10% down on those levels. That's helped in part, obviously, by our continued investment into these networks, which includes the asset enhancements we've undertaken and then also the new roads that we've opened, which you'd all be familiar with. When we look to some of the more specific themes at play that are contributing to the growth that we're now observing, one relates unambiguously to the way we travel. Obviously, the roads within our portfolio that provide connections to airports have been far more impacted over the past couple of years. This is the Western Link section of CityLink here in Melbourne, it's the Eastern Distributor in Sydney, the AirportlinkM7 in Brisbane. But we're now seeing signs of recovery in these corridors, which is really positive. Traffics on those routes did start to bounce back very significantly in March and we expect that to continue as both domestic and international travel returns to more normalized levels. This recovery in airline travel was evident over the recent Easter period with more than 0.75 million people moving through the domestic terminals of Sydney and Melbourne. And we think that really is effect that highlights that every type of travel is slowly returning to the community more broadly. We're also seeing this trend confirmed in other data points as well. Many of you will be familiar with our Mobility Trends survey. We completed the most recent of those in January and that showed that 67% of the people that we surveyed are expecting to travel either domestically or internationally in 2022, and that's up from% 60 a year earlier. So certainly, there's an expectation of travel that's bearing out in those numbers. Another thing that's been really important in supporting the volumes on our networks relates to commercial traffic. I'm sure you're all aware of the fact that it's proven very resilient throughout the pandemic and that's supported, obviously, on the one hand, by increased construction activity. And then there's this other thing we've seen playing out around a shift to a more online economy. So this is where e-commerce operators are filling warehouses with product that then needs to be distributed to their customers. And it's interesting because the shift in online shopping does look like it's going to continue. In that January survey I was just mentioning a moment ago, we found 53% of people we surveyed in Australian cities are currently doing more shopping online than they were doing pre-pandemic, which probably isn't a huge surprise. But interestingly, they're doing more online shopping now than they were doing even during that early phase of the pandemic. So it's a trend that clearly is continuing. The other theme around the resilience of heavy commercial vehicles is particularly evident through the COVID period and that reflects, on the one hand, the role that governments played to keep major construction projects going. And then it also shows the role that the logistics providers played through the pandemic to keep the flow of goods through these cities as they locked down. And you can see on the chart here on the screen, it shows this thing playing out on CityLink. And what you can really see here is the consistency of commercial traffic volumes here in Melbourne during those periods wherein car traffic really declined significantly amid the lockdowns. I've touched on the data from the latest Mobility Trends report a couple of times now that we've published in January. This is a survey that's given us some really valuable insights into the broader adjustments that people have been making throughout the COVID pandemic, and ultimately, how that could flow through to how they use our roads. These reports, and we released the first one of these in August of 2020, are based on the findings of surveys that we've done of 1,000 people in each of our markets. And the real focus of these surveys has been to test the impact of the pandemic on people's attitudes in a range of different areas. It's on how they travel, it's their preferred shopping methods, as I mentioned a moment ago, and they were also looking at their working arrangements and how they're interacting with the office as well. Perhaps unsurprisingly, we've consistently seen a preference for private vehicle travel over public transport and that's mainly due to health and safety concerns as you'd expect. The latest survey found that, on average, 16% more people in Sydney, Brisbane and Melbourne intend to use a private vehicle every day post-pandemic and that compares to pre-pandemic use. And in the Greater Washington Area, that figure is around 7%. We think it's also possible that the increasing prevalence of flexible work practices is playing a role here. Hybrid working might be a factor where people are opting to driving to work rather than catch public transport if they're not coming into the office every day. Interestingly, despite most of the restrictions now being lifted, public transport is still very significantly down compared to private transport use. And then in terms of flexible working, again, we've seen really consistent results in the surveys we've done and that suggests that work from the office or office-based work is far from dead. In the most recent survey, 87% of people indicated that they expect to do most of their work back in the office once the risk of COVID-19 has passed. And that's something they have consistently been saying now throughout the pandemic when we've done these surveys. Interestingly, the average number of days that people expect to work from home once the risk of COVID-19 has passed has also come down significantly. So in the latest survey, people signaled an intention to work less than 2 days a week from home, which has come down. I think it was closer to 3 when we did the survey previously. If we turn to the North American roads and look at them in a little more detail, we're seeing a similar traffic recovery story emerge there as well. In the Greater Washington Area, traffic on the 95 Express Lanes is nearing pre-pandemic levels with March volumes the highest since the pandemic began and that's really being driven by some discretionary travel, particularly around holiday travel, which has been a key driver there. And then if we look to the 495 Express Lanes, which, obviously, a main connector for traffic around the Washington, D.C. area, they're showing a steady recovery as well as we return to more normalized position -- conditions, I should say. The average dynamic toll there is very interesting for the March quarter. That increased by around 30% compared to the prior period. So that really is an important reflection of the fact that we see demand returning to the asset there as well. And if we look just briefly at Montreal, traffic has also progressively improved through the period. So overall traffic is slightly up for the quarter compared to pre-pandemic levels. And that's despite the fact that they had restrictions in place there through the January period as well. Many of you will be aware Montreal's highways have consistently ranked as some of the most congested in Canada. So it remains a really attractive market for us and one where we see long-term opportunities to address that and enhance the network. And as Scott said, we'll have Pierce Coffee online later who can talk to that in a little bit more detail. If we just turn to the next slide, while our markets are on a recovery trajectory, one of the things that we continue to monitor really closely, cost of living impressions. Fuel prices, in particular, are topical at present, although historically we haven't really seen a strong correlation between fuel price fluctuations and traffic volumes. It's more macroeconomic factors like population and wage growth, employment levels, tourism levels that tend to exhibit a far, far stronger correlation. But when you're looking to put our business in context in the cost-of-living discussion, I do think there are a couple of factors worth considering. One is that the average spend in Australian households on tolls is relatively low when we compare it to other essential spend categories. That's very clear in the data that we've seen. And I think the other is the fact that the vast majority of our customers are occasional users. So around 80% of our retail customers are spending on average less than $10 a week on tolls. Having said that, it doesn't negate the opportunity for us to better support customers in hardship. We were working on this well before the pandemic hit, but we've significantly strengthened our activities in this area over the past couple of years. And we put in place targeted programs through the Linkt Assist service to support customers in hardship, and I'm sure many of you are familiar with our activities there. More recently, governments have also been looking at ways to alleviate the pressure of rising fuel costs. As many of you will be aware, in the most recent budget, the Australian government halved the fuel excise to $0.22 for just a 6-month period. And we saw something similar over the United States with Maryland giving its drivers a 30-day gas tax reprieve. So both of those measures are going to provide some short-term relief, although we do think it shines a light on an area where longer-term structural reform really is needed. The fact is that the major source of funding for roads comes from fuel excise, and this is diminishing with the rise in electric vehicles and more fuel-efficient vehicles. And for a while now, we, alongside many others, have been advocating for a more sustainable funding model that overcomes the shortfalls in the current model. Ultimately, we think that alternative models, such as road usage charge, could provide a fairer and a more transparent way of funding roads. And I think importantly, as a business, we continue to explore opportunities for us to play a constructive role to support that. If we just turn to the next slide, let's take a look at some of the future trends in our industry that present opportunities for our business over the medium to longer term. One particularly interesting dynamic is coming from the shift to electric vehicles and CAVs or connected and automated vehicles as they're known. Advances in computing and vehicle connectivity are really creating the vehicles of the future as we all know. And the emergence of this technology in vehicles has the potential to significantly improve not just safety, but also efficiency across our networks. Advances in truck automation are particularly interesting at the moment, and we're exploring opportunities to partner with leading players in this space. Over time, this could enable us to more actively shape usage on our road. For example, shifting traffic, in this case, trucks into the off-peak period to unlock some capacity. The continued electrification of vehicle fleets will also accelerate the transition to vehicles with more advanced software and connectivity as well. And we see opportunities for the application of this data in our business that might support improved operational outcomes or even new customer offerings over time as well. Ultimately, one of the factors that's going to determine the scale and the timing of this opportunity relates to the speed of change in the vehicle fleet. And it's no secret that adoption rates for low and zero emission vehicles in Australia are still relatively low, but we do think that, that's inevitably going to shift. The Mobility Trends report that I've referenced now a couple of times shows that more than 40% of people we've surveyed in the Australian market want to buy an electric vehicle. And the main reasons they cite there, operational cost savings and environmental benefits, which again aren't particularly surprising. But it is the high purchase price that remains the #1 barrier at the moment. Nearly 3/4 of people cite that as an issue. And we can all see how that's going to erode as more options enter the market here, which are happening as we speak. Concerns around availability of charging infrastructure and also the concern that the electric vehicle is going to add too much to people's power bills are also factors that come up when people cite impediments. So with nearly 6 million customers in the Australian market, we're looking to play a role to educate people on the benefit of electric vehicles, and perhaps more importantly, to address some of the misconceptions that are proving an impediment to people taking these vehicles up. That's why we're developing a range of initiatives, including incentives such as vehicle giveaways. And we're about to launch a customer experience program where we're going to make vehicles available to people to document their experiences for others to see and that hopefully will help address some of these impediments that I've referenced. So I'm going to leave it there, but thanks for your time today. For those in the room, I look forward to seeing you all on the West Gate Tunnel project, too, that we're going to do following the presentation. But I'd now like to hand over to Michelle Jablko to cover capital management. Thanks.

Thanks, Henry, and good morning, everyone. It's also great to be here with so many in person. So as Henry just covered, with traffic now improving across all our markets, this will naturally be a key driver of distributions. And this growth will be supported by our approach to capital management. In a higher inflation and likely higher interest rate world, we're well positioned. CPI linked to toll escalations benefit revenue with last week's announced inflation outcomes starting to flow through from 1 July for many of our assets. At the same time, near-term financing costs are protected as we've hedged almost all of our interest rate exposure. We've also worked hard to build a strong balance sheet with significant liquidity. This will be supported by future capital releases and gives us the flexibility to internally fund our near-term projects under development. So we've taken a prudent and through-the-cycle approach, which will support both distributions and growth. So I set out some of the detail over the next 2 slides. If you turn to Slide 20, you can see here how we prepared ourselves for higher inflation and interest rates. We've been planning for this for some time. Given our 30-year weighted average concession life, we've prudently taken a view to longer-term trends and the cost of capital returning to long-term averages. This through-the-cycle view also applies to our investment decisions where we take a disciplined and longer-term view on hurdle requirements. So to call out a few key data points. 68% our tolls are CPI-linked. 99% of our existing debt book is hedged. Our average debt tenor is 7 years. Our average cost of debt is 4% and most of our upcoming debt maturities have a cost above this average. Actually, as of today, all of our debt financing activity this year has been at or below our average cost of debt. As Scott highlighted, all of this together means that if inflation and interest rates both increase, there is likely a near-term debt benefit. Now that sensitivity analysis assumed around 4% inflation across the period, which is lower than recent inflation outcomes. The way in which this flows through to toll pricing will vary. Our concessions have different arrangements based on their own specific metrics and different timing with some quarterly and others annually. So we put some data on Slide 43 at the back of today's pack to help you understand this on an asset-by-asset basis. Most will next increase on 1 July with the exception of WestConnex and AirportLink, which escalate from 1 January. And so the combination of our CPI-linked toll escalation and prudent balance sheet management means we're really well placed. The next slide illustrates our capacity to internally fund near-term projects. These include committed CapEx as we complete WestConnex Stage 3, the West Gate Tunnel Project, FredEx and NEXT; and is also expected to include projects under development, Phase 1 of the Maryland Express Lanes and the M7-M12 widening and interchange. You can see on this slide that corporate liquidity and expected capital releases, around $5.7 billion in total, more than cover our share of these projects. Before I hand back to Scott, I've set out over the next 2 slides some near-term financial considerations that I want to take a moment just to take you through. The first year is on Slide 22 and relates to the timing of distributions from non-100%-owned entities. Following recent transactions, these are a growing part of our group. Distributions from these assets form part of our free cash, but there can be some timing differences. So for example, sometimes it can take a quarter or 2 before the free cash that has been generated at the asset level will flow through to distributions. What I've done here is set out on this slide the usual schedule with distribution decisions then made at the discretion of the relevant Board. We've also noted here on this slide that the Eastern Distributor has used all its available tax losses and has transitioned to paying cash tax. Moving to the next slide. Here, we've repeated some comments on financial considerations that we made at the first half result, particularly relating to cost drivers into the second half of the year. And we've reiterated our expectations around capital releases, which are unchanged as in excess of $2.3 billion from this year to FY '25. As part of this, WestConnex recently raised $540 million in new finance and we expect our 50% share of this as a capital release before the end of the year. As I mentioned a minute ago, these capital releases provide funding capacity to support our growth pipeline with a small amount also available to minimize dilution in free cash per security over the next couple of years, following the WestConnex acquisition and capital raising. And so in closing, our business is in good shape. Pleasingly, our March quarter results showed a clear trend of recovery on our roads with multiple assets recording their highest traffic numbers in March since the start of the pandemic. Our cash-generating assets are on track to support distribution growth. We're well positioned in a rising inflation and interest rate environment. We built a strong balance sheet with forecast capital releases providing further funding support, all creating capacity to internally fund near-term projects under development. And we continue to take a disciplined and prudent approach to capital management and our investment decisions. So thank you, and I'll now hand back to Scott.

Great. Thank you, Michelle, and thank you, Henry. As I talked about in our strategy statement, creating as much value as possible for all our stakeholders means, for us, listening and understanding their needs so we can respond in ways that matter to them. This, in turn, allows us to fulfill what is our purpose: to strengthen communities through transport. And before continuing and going into some of this in a little bit more detail, I'd like to play a short video that shows the way we create value for our stakeholders and particularly our government partners and the community. [Presentation]

Great. Thanks for that. There's a lot of video talent there, most of it in the front row, and you'll be able to ask them questions in a little bit. Now with our first stakeholder groups, in government, it is critically -- it's critical to us to deliver on what matters to them. Otherwise, they always have a choice to do it themselves. Specifically, we believe we can help bring forward projects by providing capital which will position cities for future growth and increased economic activity. But with that, we also believe we have specific expertise in devising innovative road solutions and operating assets at a very high standard. And we keep striving in these areas to prove our continued value to our government partners. Now with our community stakeholders, it is critical that we are there in the early days of design and construction, and of course, also through the life of the concession. But for example, from the outset, stakeholder engagement played a very important role in the development of the West Gate Tunnel Project. The design was developed in consultation with a wide range of experts, advisers, and of course, the community and the objectives focused on meeting Melbourne's alignment with its long-term transport policy for integrated rail, public and active transport options. Consultation resulted in a range of enhancements to the project design. If people remember, we have a longer tunnel because we moved the westbound exit further away from existing homes. And while this may have had some cost impact, it minimized the impact to the local community. We're adding more than 14 kilometers of new and upgraded cycleways and walking paths. And we've included a 2.5-kilometer Veloway above Footscray Road, which some of you will see where that will be placed today. The project is creating about 9 hectares of new community open space, including parkland and wetlands, planting more than 17,000 trees and I think over 1 million plants. And we are reducing noise, protecting privacy and allowing natural life for residents by introducing at the time, which was selling new project-specific noise standard and high-quality and noise walls. And the 9 kilometers of these walls along the West Gate Freeway are now more than 80% complete. And if you haven't seen them already, they're very impressive structures. Another example of government stakeholder engagement and something that Henry talked about and something that we've been advocating for, for a very long time is to look at the opportunities for a fair and more efficient operation of the road networks. Now the road pricing system has, for a long time, been an opportunity for major policy reform, which we appreciate is very hard. But the New South Wales government has last week released a document outlining some early ideas they may have for this space. We're encouraged by this progress and ready and willing to work with the government partners to find a more efficient and transparent approach to road pricing. And this is not just New South Wales, whether it be Queensland, Victoria or the U.S. as well. Turning to our customers and our workforce. Over the past decade, our customer base has more than quadrupled to 9 million customers under our different brands, including Linkt, Express Lanes and GoToll and the A25 in Canada. And just like with our government and community stakeholders groups, it's vital that we're listening and responding to our customer needs. And customers tell us, again, that what matters to them most is the reliability, travel time savings and the safety benefits that you see on our roads. We use this feedback to enhance our products and services, and we recently launched road and instant notifications on our Linkt app. And this was one of the most requested features to be included in our app, which allows them more power in their decision-making process for transport. We also extended specific support to our customers suffering vulnerabilities most recently through our partnership with Good Shepherd here in Australia. And to create value for our employees, it is critical that we acknowledge the changes that have occurred to our workforce over the last decade with around half of our direct workforce now compromises roles focused on technology, customers and innovation. And these changes are vital to our ongoing success and ability to innovate in a digital future. And our final 2 stakeholder groups are our suppliers and our investment partners. We have more than 1,600 direct suppliers, from big multinational contractors to small local businesses and social enterprises, who work closely with us to ensure we have leading industry innovation and best practice in every aspect of our business with such initiatives around sustainable procurement, carbon emissions and the prevention of modern slavery. Our sustainable procurement program also aims to direct our purchasing power to support small and underrepresented businesses such as those that are owned by or supporting women, people with disabilities, the long-term unemployed and other social enterprises. And to date, the West Gate Tunnel Project has so far spent over $12 million on social enterprises and Aboriginal and Torres Strait Islander businesses. And as far as our major contractors go, the sector is under pressure with unprecedented pipeline of large-scale construction projects. Current constraints on Tier 1 contractors mean we continue to work with our business partners to evolve our approach to project delivery. And opportunities exist to split projects to attract a broader pool of participants, particularly for what we're seeing is our new enhancement projects of more moderate scale. And of course, our investment partners who are among the world's leading pension funds and infrastructure investors, they're providing direct funding support, which allows us to continue to pursue growth opportunities with less reliance specifically and solely on our own balance sheet. And by understanding their needs, we've been able to attract quality investment partners who get back to us as well. We now have 7 investment partners across 14 assets. And between them, they own and operate assets in more than 50 countries and manage collectively more than $1.5 trillion of funds. So finally, today, as I mentioned already, we have growth -- grown our business through disciplined investment to a position where we have both significant opportunities ahead of us and a market-leading weighted average concession life of around 30 years. Our assets go through various stages as we take them from an initial concept, refined through consultation with our government and community stakeholders, through construction to eventually becoming a fully mature asset. And our assets become integrated into the way our customers move around the cities, or as they do, they provide ongoing growth in free cash for distribution. And as congestion builds over time, we have the opportunity to further improve our assets through enhancements, but also as Henry outlined, some of the advancements in technology that will occur over the next decade. Our current portfolio is centered around a core group of mature assets with further uplift to come from our pipeline of recently opened assets and the new opportunities currently in development, providing long-term growth in free cash flow and distributions. So on Slide 33, you'll see a focused list of the opportunities in some of our markets. Again, this won't be new to anyone. And as we know, in our industry things don't happen all that quick. But pleasingly, a number of the opportunities on this list relate to the assets that we already own and operate, including the Gateway and Logan Motorway widenings and the Capital Beltway Accord. And the pipeline is largely focused on asset enhancements, and we continue to work on progressing these projects with each of our stakeholders in the region. I'm pleased to provide some detail or an update on some of the opportunities we previously flagged, which includes the widening of the M7 and the M7-12 interchange. I think we've -- on the next slide, we've given some -- a little bit of detail and we'll continue to flesh that out. But our proposal, as we know, integrates the widening of the M7 basically from the north from the turn with the planned M12 motorway interchange and that will lead to the Western Sydney Airport forecast to open in 2026. We actually opened the M7 in 2005 and we originally designed it with the capacity to cater for future growth and development in the corridor, which allows us to continue to deliver safe and efficient journeys for our customers during the widening. And our traffic analysis already shows congestion building, particularly for freight, but it shows by 2026, without the proposed widening of the M7, there'll be significant capacity constraints and the M7 will not be able to effectively cater for the additional traffic demands for the M12. So in summary, let me just sort of wrap it up in this room before we get to Q&A. The business is probably in the best shape that I've seen it since I joined the organization. We have a fantastic network of projects right across the -- our markets. Traffic is growing and we expect that momentum to continue. We've reinforced the balance sheet, and we have the capacity to internally fund our near growth -- near-term growth opportunities. We do have the benefit of inflation-linked tolls against a hedged debt portfolio. Management is very much focused on our core fundamentals of our business and executing on what has been a consistent and long-term strategy. And all these factors, again, go back to supporting our investment proposition of building value over the long term while, as we understand, very importantly, delivering distribution growth to our security holders. So now with that, we are going to take a short break, and I'll ask my Exco colleagues to join me on stage for Q&A. Thank you. [Break]

Good morning, everyone. I'm Hannah Higgins, Transurban's Acting Head of Investor Relations, and I'm very pleased to welcome those in the room and online to our live question-and-answer session. Here on stage, we have Scott, Michelle and Henry, who you've heard from already this morning. And they're joined by the other members of our Transurban executive team, including our President of the North American business, Pierce Coffee, who is joining us via web link. We'll be taking questions from the floor today as well as via the teleconference. If you're here today and would like to ask a question, please raise your hand. We have Justine and [ Stuart ] from our Transurban Investor Relations team, who will bring you a microphone. For the benefit of those joining online, please do wait for the microphone before asking your question. We also ask that you state your name before you ask your question. [Operator Instructions] We'll try to get through as many questions as we can in the time that we have. But I do ask that we start with just one question per person and we will try and come back to you if you have a second question. We'll now take our first question from the room. I've got a question from Ian. Justine, thank you.

Ian Myles from Macquarie. Just you pointed out in your presentation $2.3 billion of refinancing capacity in the business. We're in a rising interest rate in sort of environment, and I guess how do you think about when you sort of refinance those assets that you're not putting yourself in future stress as rates actually increase? And are we seeing that amount shrink?

So we've taken that into account, Ian, in that analysis. So we didn't assume rates would stay at close to 0 when we did that analysis. So we've baked in a fair amount of uplift and we put that through our stress testing. And clearly, we have to determine it at the time, but as I sit here today I think we've taken into account a rising rate environment.

Thanks, Michelle. I've got a question from Rob. [ Stu ]?

Rob Koh from Morgan Stanley. Maybe can I ask a question going around each geography, if you could give us an update on the construction contracting conditions. Here in Melbourne, the government has done an alliance pricing deal. Would be interested in North America, how conditions are there? And if there's labor shortages, which are impacting everybody and just if you could give us some color along those kinds of fronts, please.

Well, I might start. Thanks, Rob. So I think your one question actually would then be 5 questions, wouldn't it? So good try. What I will do is go to -- maybe I'll go to Hugh because I mean the construction issues that we're dealing with are very global. So I might just ask Hugh, given Hugh's dealing in all the markets to maybe comment at a high level. Hugh?

Thanks, Scott, and thanks, Rob. Yes, very consistent themes across all the markets. So I wouldn't need to narrow them down market by market, to Scott's point, one answer out of 5. I think the different styles of contractual engagement that we're seeing across the 3 states in Australia is having varying levels of success. We're certainly still seeing a traction on the PPP model and a real focus on early and collaborative addressing of risks as part of that model. And so that's probably the biggest change we're seeing there. Scott touched on it, but looking at the ability to bring in other market participants. So not just the traditional Tier 1, but in those projects that can be naturally split or are smaller, because they're expansion projects, looking at the Tier 2 optionality. And look, it's worth saying that in the recent times, we've actually entered new contracts in North America with Project NEXT with laying constructions, and we've resolved 2 big disputes. So certainly challenges, supply chain playing into that, but our PPP model is standing the test and we're really focused on adjusting those risks early and collaboratively with both the state and the contractor.

Thanks very much, Hugh. Further questions, Andre?

Andre from UBS. A question for Michelle. The $270 million that you expect to receive from WestConnex in this period, could you talk through the proposed uses of that? Is it all in the bucket of offsetting dilution? Or is some of it going to be retained for the growth investment?

Yes. So I mean it's all in the bucket of capital. So the $5.7 billion I spoke about, the Board will make a decision when we get to June in terms of mix, how much of it they use to offset dilution. But it's in the whole scheme of things of the $5.7 billion or the $2.3 billion of capital releases, the offsetting dilution is a small component.

Yes. I think to follow up, the dilution component would be smaller, much smaller than that amount -- that would be smaller than that amount.

We've got a question from Owen in the front row.

It's Owen Birrell from RBC. Just a question for Henry. Just drawing on some of the comments you made about the average user on the road network and the impact of, I guess, some of the inflationary cost pressures on household budgets. You mentioned that most users are casual, 80% of your retail customers spend less than $10 a week and 16% are actually commuters. It sounds like an incredibly discretionary cost for most of the users. Do you expect the traffic volumes to become a little bit more volatile as we start to see more of those sort of cost pressure shocks coming into the system? And how confident are you that you'll be able to, I guess, retain the sort of pre-COVID levels of traffic volumes as their household budgets get strained.

Yes. Thanks, Owen. Look, there's a few ways that we can answer that. We do see very low sort of elasticity in terms of reaction to price increases, which I think is one way you might think about how people might then react to broader pressures that come in. So generally, I mean, particularly for commercial traffic, we've seen very low shifts or we see very inelastic demand. And then it's actually not a very significant step-up when you get to cars. So you're talking in the order of negative 0.1 and then negative 0.25 for those who understand how that works. We're very confident in terms of where we sit in this cost of living discussion. And again, before I go down that path, I want to emphasize it doesn't negate the fact that this business has a task to do around how we manage hardship. And you've heard Scott speak about it, you heard me speak about it. We're very focused on that. We understand it notwithstanding the fact that the vast majority of customers might not fall into this bracket. There can still be some very significant instances that we do need to address and we've strengthened that up very significantly in recent years through that Linkt Assist program. But coming back to the idea of where do we sit. The actual data suggests that it's less than 1% of household expenditure that goes towards tolls. And then so if you overlay that with the idea that you're talking about, the vast majority of customers spending in that order of less than $10 a week, you sort of see that it sort of further bolsters our confidence. So coming back to sort of summarize, I'd say there's 2 components. We're not a high percentage of household, spend and all the data suggest that we have relatively inelastic demand around the product.

And I think, Owen, going to -- following through that, to Henry's point, we're very aware of the issue and cost of living is very important, but I also have more gray hair than everyone in the room. So if you go back to the history of the '70s and the '80s and the '90s, this cost of living is not -- it's always been an issue. And at different cycles and different times, whether there was the oil crisis or whether there was the GFC or whether -- cost of living has always been an issue through the different cycles. We're investing for an average concession life of 30 years. So we're investing -- as Michelle said, whether it's interest rates, inflation, cost of living, we're investing through the cycle. So we will do what we can to manage, particularly our customers that are vulnerable, and it is an issue and we're not trying to say it's not. But it is not a new issue. It is something that has been around for a very long time.

Question from Paul.

It's Paul Butler from Credit Suisse. I was just wondering if I could ask about the New South Wales tolling reform. Now obviously, in Sydney, you've got number of assets, some with direct CPI linkages, some with the higher of 4% in CPI. So it strikes to me this is an opportunity to sort of rethink what makes sense there. I was just wondering if you could talk about what structure of tolling sort of makes sense? Obviously, with CPI maybe being high, that's only going to be for a short period of time. But I just want to understand how you think about it. Do we end up with something that's uniform across the whole network and it's sort of higher of 3% of CPI or something along those lines?

Yes. No. Thanks, Paul. So look, it's something, again, we've been advocating for a very long time. So you can take policy reform to the nth degree to make the network perform most efficiently as possible or you can take policy reform to deal with maybe community and more a user-based issues around fairness, equitability where people live, how the government wants to affect their transport policy. So what we need is for government, and they're going through the work out in New South Wales, to give us a direction on which way they want to head and how they want to balance all those issues. So I'm not trying to be evasive to your question. For us, everything is on the table as long as it leads to better outcomes, either both the combination for the users and for the efficiency of the network. Obviously, we're not going to go backwards for either parties. And then obviously, we have to protect all our stakeholders, including our investors. So I guess we are open to, but we really need to be led by government. So the problem is us putting our ideas out there without the government first advocating for what they really want and how they want to deal with it is probably not helping the debate. We're open to trying to marry what is the best, most efficient thing for the network performance and congestion so it gives our users the best road experience. But we're also very conscious that we've got to deal with community and the vulnerable and society and how that may work out. So if it's a 3% escalator or it's just CPI or it's 4% or it's network-wide tolling or it's distance, we're open for all the discussions. But we really need government to set parameters as they have said all the parameters in the concession and then we just need to marry that with to make sure that all the stakeholders are protected.

Thanks, Scott. We haven't had any questions come through via the conference call yet. [Operator Instructions] So we can take questions from the room. We've got one at the back from Justin.

It's Justin Barratt from CLSA. I just wanted to ask about -- or whether you can make any comments about how we should think about distributions longer term and the potential support from capital releases. Obviously, pre-COVID capital releases were being used to support your distributions. But you obviously have a significant development and opportunity pipeline as we look at it right now. So can you make any comments there about how we should think about those distributions longer term?

I may start and then Michelle can add the color. I think, one, distribution is, again, it's something the Board makes a decision on something, not management. I think right now where the Board is, is obviously distributing free cash flow. And we've got a good balance between capital releases and our development pipeline and we can pay for that internally. Over time, if, for whatever reason, the development pipeline were to slow, we're going to be generating a lot of cash and a lot of capability in the balance sheet. And as we know, as we all go through the cycles at some point, the analysts will tell us we have a lazy balance sheet. At other points, they will say we have a too aggressive balance sheet and you've got swing whatever. We just look at the long term and head for the long term. So -- but I think the answer is it's -- certainly for the near to medium term, it's free cash flow. And again, we have a lot of assets coming online. It just depends on how the development platform plays out. But I don't know, Michelle, if you want to add any comment.

Yes. I think you've covered it. Right now, it makes absolute sense to say capital releases goes into the pipeline. And we apply very disciplined criteria to sure the returns on that are better than the returns of that capital being in the hands of our investors.

[ Peter ].

[ Peter ]. Given Pierce dialed in from North America, she deserves a question. Just an update on the Maryland project, the, I guess, the relationship with Maryland and talk at Macquarie looking to exit part of their position. Does that change in any way the partnership there?

Thanks for the North American question, Peter. I think broadly speaking, we're in the predevelopment agreement phase with Maryland. So working across multiple stakeholders within the Maryland government as well as the local community and the stakeholders in the businesses to work to develop the best possible project for all of our stakeholders. So that's a lot of work, but going well, working through all of those things, and we'll remain disciplined to deliver a project -- to be able to develop and deliver a project that's really going to meet the needs of all of our stakeholders. And then to your second question on Macquarie. I can't speak on behalf of Macquarie, but certainly we are talking to them every day about this project focused on getting to commercial and financial close. That said, happy to have discussions with them on what the best structure is for the partnership to ensure the most successful outcome for the Maryland project and our stakeholders.

I think maybe -- I mean, a bit more color. I mean we have the option to bring in our Transurban Chesapeake partners and they have the option to bring in family and friends and other funds as well. But we continue to talk to support that project.

Thanks, Scott.

Matt Spence. Scott, I'm pretty sure you said we had till quarter past 11, so I'm going to push my luck. Henry one for you. Just I think the Liberal opposition in Victoria has talked about bringing back East West or whatever it's called, and just if you could say what they're thinking there. And may just whether the recent Atlantia offer and bid, going back a bit further Sydney Airport, just does that give cause for exec co or the Board to think about those sort of transactions and maybe defense takeover strategies? Or just what sort of discussions you're having around those transactions?

Yes. I'll start with East West. Yes, look, you're right, Matt. The opposition here, the Liberal party for some time have championed that project and they've signaled an intent, if they win offers, to make that one of their infrastructure priorities. So I don't think it will be any surprise to anyone if they did win offers that we see that back on the agenda. In terms of our views on that project, look, there is -- there will be a need for that in Melbourne at a point in time. And so if we do find ourselves in a situation where there's change of government is back on agenda, it can certainly be -- I think you can make sense and you can make a case for us. In terms of where we would be around it and whether we would play a role, that's going to be a matter for the government of the day. It will be a matter for the delivery model that they pick because we've seen governments choose models that don't always work for us as well like availability payments. But in terms of the overall sense of the infrastructure project in itself, yes, there is some sense to it.

In relation to the bigger question, I mean, that's -- for us, we internally believe we know the value of the business. We've got all the data. We can run and be prepared if anyone were to approach a company. That's really up to the Board, obviously, to decide. But we feel that the data are the things that we would need to run a process are certainly in train. I think what we see with Atlantia and Sydney Airport and others is when the differentiation between the private sector and the public sector becomes too large, the private sector steps in and realizes the long-term value of the assets as I guess the people approaching Atlantia have as well that there are a lot of value in these assets. And sometimes the public markets for whatever reason, the differential becomes too great, the profit guys step in. But for us, we just execute the strategy. Again, our -- we have to deliver the best outcome for the security holders, taking in mind all the stakeholders and the longevity and sustainability of the business. We don't worry about that on a daily basis, but we have all the tools and information in place. If something were to happen, we can very quickly react, but it's not something we think about on a regular basis. But I do agree that in this current world, there's almost nothing that's too big. I mean we're no Twitter and we don't expect Elon to be making a, I don't know, maybe you'll -- I don't know. Maybe he will, I don't know. He does like, I don't know there may be some integration there, I don't know. But that's not something we worry about. We just delivered on our strategy. I think as I said sort of on our wrap-up, it's been an interesting process as we kind of talked about and people were raising about capital releases. And we've gone through this period of a high development program to actually now as a percentage of the portfolio under construction is about the lowest it's been since I've been at Transurban when you look at the construction level. So we've got this high development delivery phase that as we're coming out of the end got interrupted by COVID, picked up a couple of unbelievable fantastic assets coming through the other phase. So management is very much focused on the core business, getting back to that distribution growth and take advantage of the point which is largely just sitting inside our network, which is a great place to be.

Thanks, Scott. We do have a question that's come through online in relation to funding. You flagged $5.7 billion of funding sources, $4.5 billion to $5 billion in uses. You pay out 100% of available cash for distributions. This leaves only $700 million to $1.3 billion of headroom. Is this enough given the size of your business?

So I think that's a great question. And certainly, when we've talked about our numbers, we've talked about in excess of $2.3 billion. So we know -- and we've talked about the funding out to the end of 2025, which will clearly continue to increase beyond that as our cash flows continue to increase and support further liquidity. So yes, we're comfortable with that.

Thanks, Michelle. Further questions from the room.

[indiscernible] infrastructure. Just a quick one back on the tolling reform. Depending on, I guess, what the government, you'll obviously been in discussions with the government all through this and I'm not going to do [indiscernible] without you guys. But what sort of contractual protections do you have in the various New South Wales frameworks existing? Is it just through a change of law? Or is it kind of other specific regimes? Just if something is, I guess, rolled out that is potentially optimal for Transurban?

Thanks. And look, I'll also let Michelle or Andrew particularly in relation to New South Wales talk before. But obviously, we have contractual protections in the concession agreements around everything. And then on top of that is the change of law and the other protections that you would expect. I think the history of New South Wales even going back to the Bob Carr days or whatever going to be the history of New South Wales, it's all been done in discussion and it's all been done commercially. And Andrew, you might want to talk about when we were doing the M2 that we froze the tolls for a period of time at the request of the New South Wales government, but then we caught up and got back to the long line, so we were NPV no different and those purely are discussions. And I think it's not as if we're in a position that we want the same outcome as the New South Wales government. We want a more efficient network, we want a better experience for customers and we want a fair system. We just need to make sure that's fair for our stakeholders as well. So -- but I think it will be in very productive and commercial discussions that we've always had with all of our government partners, I don't know. But we do have the contract to rely on. We've never had to. And hopefully, in that case we won't and I don't expect to. But don't know, Andrew, you want to make -- you've been dealing with New South Wales for a long time.

I think everything you've said is spot on. So we've always aimed to have a productive, open and transparent dialogue with government. I've never -- I can't recall a situation where we've had to rely on the contract. Hopefully, that remains the case. But as Scott very clearly points out that there are those contractual protections that sit in the background. Michelle and I have had the opportunity to participate in the tolling inquiry recently, which has allowed us to articulate all the benefits of the existing business, but also to have conversations and explore opportunities for further improvement. And Michelle might want to buy in here. I mean I should see it as a great opportunity for us to continue to have that dialogue with both sides of government, and I think the business and the understanding of our business in the community is better for those sorts of discussions.

I think with all these things, both sides of the government, they're not saying toll roads are a problem or bad, but they just think how do we make it work better for parts of the community. And we would agree with that, but we just need to sit down. And I do have a lot of sympathy for policy reform with politicians because particularly in these types of areas, very difficult for them. But we're happy to have those discussions when they're ready.

Thanks, Scott. I think we had a question from Nathan at the back.

Nathan Lead from Morgans. Just wanted to ask a question in terms of medium- to long-term traffic growth compared to what we're seeing pre-COVID, particularly as we've got these forecasts of slowing population growth and changing demographics, too, where we've got a lot less additions to that sort of workforce age at 15- to 64-year-old sort of coming into the population forward. So yes, how are you guys thinking about your longer term traffic growth in that context?

All right. Henry, you want to comment or...

Yes. I mean, Nathan, it very much depends on where you look network to network and what the characteristics are. So where we -- we tend to think in terms of maturity of roads. So where roads are less mature, you're going to see more of a ramp-up profile. You're going to see higher levels of growth. Whereas when roads move into that more mature phase where there are established corridors, there are established usage patterns, you'll generally start to see the growth rates come down into those low single-digit percentage ranges. And the reason I say that is you need to look at the specific corridors to understand the growth dynamics at play. You can't take a rule of thumb for a city and say we will see this growth rate on all these roads because some corridors will have very different dynamics. And you can go to any one of our networks and see that at play. The other factor is then how we're investing into them, and you saw me refer to the fact that one of the things that's supporting the growth in the numbers that we're seeing at the moment where we've hit pre-pandemic levels across all of our networks for the first time. One of the factors that's driving that is the fact we've invested into them. We've enhanced assets in Brisbane. We've opened new assets in Sydney. That obviously augments the growth at a headline level for the business in an obvious way. But what it will also do is over time, it will give us that elevated growth rate out of those mature levels because we've effectively unlocked growth and we created more reason for people to come into these corridors because there's more of a value proposition there.

Thanks, Henry. I think Andrew had a question.

Yes. Andre Fromyhr. Scott, in the updated strategy statement that you pointed out at the beginning, how broad is your definition of solutions? You could have said concessions or toll roads. But are you sort of giving yourself the space depending on those future Mobility Trends to play a different role.

Yes. No. It's a good question. We're very specific on saying road transport solutions. So it's very much road based. But when we're delivering road transport solutions, if you look at West Gate, it's the cycleways. It's -- when we're in the U.S., it's public transport that we're supporting and facilitating. So yes, it's all based around road transport, but that could include user charging and all the stuff that we're doing with the database. I mean, Simon's got and his team on the technology side and customer side an amazing amount of data. Some of the stuff that we're doing around our apps and what we can do going forward with our technology can really help, I think, potentially more long term. As Henry was looking at, some of those trends could be different business models and different business opportunities for Transurban. We'll get to that, then timing is everything. It's a bit early for that. But still always based on roads. You won't see us buying an airport or going into rail or doing something. I mean we have, we think, are unique set of skills and capability, particularly in this sector, where we bring everything together, again, from planning, getting the data to say what does the city need to delivering it and working with the customer on the other side. So it's quite a diverse set of capabilities when you go through the whole spectrum, which I think is one of the interesting things about working at Transurban. Every day is quite different, and it's a lot of fun. But yes, so I think we specifically left that broad because there's so much in delivering road transport solutions now that's not just about concrete and steel.

Thanks, Scott. We do have another question from online. Could you comment on the budgeted CapEx of $4.5 billion to $5 billion in the presentation? This seems higher than the budgeted CapEx at the first half '22.

I think the difference will be what the committed CapEx is, which is the CapEx that's always in the investor presentation. So that would have included finishing WestConnex, West Gate, et cetera, and some of the pipelines. I think that's the difference. Yes. I think the committed CapEx is about $5 billion to $3.9 billion now that project mix has reached financial close.

It was putting Project NEXT, which is USD 500 million or whatever. Yes.

Yes. Yes.

Thank you, Scott. You touched on fuel excise and road charging. Maybe if you could give us some insights into policy reform there and the acceleration of how they're thinking about that in terms of that solution of funding into the future.

Yes. No. It's interesting. I mean for those -- when I started at Transurban 10 years ago, I remember I talked about road user charging and I was quickly told not to talk about it because it's a very difficult subject for politicians and the wider market to address. It was very much let's -- this is going to take some time. I think at least it's something that's being discussed now. You see through the electric vehicle charges in Victoria, New South Wales, ACT, South Australia where it's progressing and understanding that everyone needs to pay for their fair share of the road. I drive electric vehicles, it does seem a bit strange that I don't have to pay for the road. So that is coming in, and that is part of, I think, the discussion. And interesting that the fuel excise tax discussion on what has happened has actually educated a lot of more people on what actually is being paid. But up until then, when we do all our surveys, people -- you ask them what the fuel excise tax was and they'd say, $0.10 or $0.05 or I'm not really sure. Now everyone, because of what's happened, understands and maybe better understands how the system is working and it's not fair for those people who drive older vehicles or potentially longer distances and how the system works. So I think it's coming. As I said -- I'll say to a lot of people, hopefully, we can do it in a methodical and planned approach to a transition. I mean, unfortunately, a lot of times, it takes a crisis and then it moves very quickly. But it is something now that everyone is openly discussing. It is something that's being, I guess, put through the electric vehicles. You can see it starting to come in. There is a heavy vehicle road using charging system that the federal government is trying to implement. So I think it's happening, a lot of work in the U.S. that peers can talk about across a variety of states. It will be slow, but it is something that I believe will come in over time because there's not really a real alternative.

Thanks, Scott. We will take further questions from the room shortly. But in the meantime, we do have a question that's come through on the teleconference. Our question on the teleconference comes from Ben Brayshaw from Barrenjoey. Go ahead, Ben.

I was wondering if you could just comment on traffic across the network that is associated with people traveling to and from a CBD workplace. Just insofar as your comments in the presentation go, you're highlighting that there is to web-based attendance, but at the same time there's a version of public transport and a greater propensity to travel by private transport. So just interested in your thoughts as to how you think about the composition of traffic and the percentage of traffic traveling to and from a CBD workplace?

Yes. Thanks, Ben. And good, we've tested all the different technologies and they all work. Well done, Hannah. We're all here on Saturday and not a whole lot of work. So well done. Thanks, Ben. Look, I might ask -- get Sue ready because she hasn't spoken and make a comment maybe on Brisbane. I think, in general, remembering that largely our toll roads are delivering people around the city, not to the city. I know of everyone because everyone largely in this room would work in an office, the things that everyone is doing exactly what they're doing. But largely, our toll roads are moving people around the city. But you do see those roads more directly into the city, whether it's sort of Airport Link or the Eastern Distributor or the maybe the western side of CityLink being more affected by office occupancy. But we have the opposite. As you said, with public transport being down with those people who are not commuting as much, but then choose to drive because they have less on the transport budget because of the commute. So there are other benefits there. But I don't know, Sue, if you want to specifically talk about the CBD traffic in Brisbane network as an example.

Yes. We would say we've had the most normality, although not that normal because we had a flood recently off the back of the changes with COVID. But the flood, I think, showed April and we've seen a great return from a traffic perspective. And we do see the other markets mirroring that as we go through and come back to normality. So from our perspective, and Henry talked about it earlier, when you combine all of the trends that we're seeing, we're actually seeing positive growth overall, certainly in the Brisbane market. The one that we're still waiting on is that last piece of the puzzle, which is airport traffic. So that is the last piece certainly that I see. And again, you can look at all of our assets and how they're performing individually, but they're all going really well now when we see some normality and just that last piece being the airport. I think from a CBD perspective, as you say, certainly from a Brisbane market, we're around the CBD and so we've actually been not seeing great impact from that. We do assist there. Again, we're seeing it bounce back really strong -- we're in a really strong position.

Thanks, Sue. [ Peter? ]

Sorry. Technology. Can we go a bit deeper and kind of put Simon on the spot? Can you give us a couple of practical examples how much did you spend on a technology project and what was the benefit of that?

And rather than go into the specifics of individual project spend, but the benefits that we see, we're upgrading currently our customer and billing platforms today. And what we expect to see there is just an improved experience for our customers, more frictionless billing process, the ability then to advance our digital app usage and extend our products and services there. But also through these upgrades, hopefully simplify some of our products to make it, again, a little bit easier for our customers to interact with us, which just overall provides a nice, cleaner, frictionless experience.

As a link to customer, I agree.

Yes. We're still working. I mean there's always to do more in customer. But again, you have to come back to what is our core business. I mean we're -- people just want a frictionless and easy service, and that's what we're trying to provide. We think we do a pretty good job, but there's a lot of room to improve. I don't know, Sue, do you want to talk about any specific?

I was talking, I think, to Ian earlier or some of the audience. Certainly, in Brisbane, we're consolidating our control rooms. And so that's a big investment and a big change and hopefully seamless to everybody here and on the call. But it is a massive change for us. So we're moving from 4 different locations, 4 systems as well to 1. And so that transition is underway. We now have of our 3 control rooms on 1 site and we've got our fourth one coming by the end of this financial year. So with that, we're at the end of life cycle for the technology, which is great for us. So smart to actually reassess and say, how can we do this better? We'll now be able to run it as a full network. We've also brought in future capabilities. So being ready for connected autonomous vehicles now, also to look at machine learning, artificial intelligence so that we can respond faster and smarter to things that happen on the road. So pretty excited about that. And I think there's a video and then also very happy with some more show-and-tell as we finalize that project. It will be wrapped by the end of the year. So big investment, but certainly, the benefits are extraordinary.

But the ability to do wondrous things as well, I think that's one of the things we've always invested in technology. And sometimes there's not a cost savings in the short term, [ Peter ]. I know when I got here and we put on our first asset on to GLIDe on the tolling system, it took like almost 9 months or a year to put it on. And then the last asset took, I think, 40 days or something. So the ability then in systems to integrate to marginal cost, and as Sue said, now the ability to use that center to run much more than even just our network creates some big opportunities because that's, that was a 3- or 4-year process and investment.

Four years.

You can't then say if something comes along, we'd like you to do this go, okay, just wait 5 years till we do this. But now we're in a position and we're using those learnings to integrate CityLink into West Gate, working with the North American team with the NEXT sort of billing platform on how we look at tolling. So it's always -- and I think we've talked about it before, a lot of infrastructure companies in the past have run their systems for a period of time until they basically are end of life or falling apart. And then they'll invest a lot and they'll run that for 8 to 10 years, invest a lot. We're constantly trying to -- and we look at it on an NPV basis, it's the same outcome because you end up spending a lot when you replace a system. We're just constantly trying to innovate and integrate. So as the new systems, new assets and new opportunities come along, we're immediately ready rather than having to wait. And we think it's going to create potentially more opportunities for us going forward.

Thanks, Scott. We have a final question online. You've said that you will achieve net zero by 2050. What are some of the tangible actions today you're taking to achieve this?

Almost everyone on the stage can talk about what they're doing. I think I might talk about what the team -- let some of the team talk about what they're doing in the short term in relation to Scope 1 and 2 and Scope 3 is the more difficult one for us, which is dealing with the contractors. But we're dealing with a lot of different suppliers. We're dealing with Boral and looking at low emissions. Cement, we're dealing with. Some other parties looking at green steel. So the biggest issue on our Scope 3 emissions is our journey and we're doing specific things to get to zero emissions, particularly on our suppliers. Now we all know -- so maybe you don't know that our customers under the definition don't actually fit into our Scope 3 emissions. They fit with the vehicle manufacturers. That's just the way the science has determined that it will be calculated. But with that as well, as Henry talked about, we are big advocates for zero-emission vehicles. We're doing things to support moving to much more fuel-efficient vehicles. But there are a tremendous amount of things being done, particularly Scope 1 and 2, which we think will hit well below 0 below -- before 2030. But I might let maybe just like quick fire, let everyone in the [ marquee ] talk about a couple of things they're doing. So Michele, I don't think you've spoken. So do you want to talk about some of the stuff in New South Wales?

Sure. New South Wales, a little while ago, announced a power purchase agreement that we've put in place. I think it's the same in Queensland as well as in Victoria, about to be, that effectively depending on asset we'll see from 80% to 100% of the assets' existing energy consumption from renewable resources. So that will be a huge impact on the renewable and the net zero progress that we have. And then for all the existing assets, we're going through a pretty significant program of looking at how we retrofit the existing energy consumers such as lighting, ventilation to reduce the amount of energy that we consume as well as move to more sustainable sources.

So Henry, do you want to do -- I just approved the LED program for you. So I know how much...

on the Scope 1 and 2, we've just joined a club that IFM put together to sign a PPA, so we're going to effectively move to I think, 80% renewable by 2024 and then it will go up. And I think as Michele just said a moment ago, that helps the group get to basically our Scope 1 or 2 targets 5 years early. But then we are doing other interesting things. Some of you might have been in the Burnley Tunnel recently and you will have seen we've painted part of one of the tunnel walls white. That's a very first step towards some quite significant changes we're going to make to the infrastructure there, where we've actually taken some ideas that have come out of Japan where they've used some really interesting technology to put pacemaker lighting into effectively prompt driver behavior to maintain speed limits because anyone who's been in the Burnley knows that there's a significant problem with speed reduction, which reduces throughput and capacity. So we'll invest in the tunnel. We're going to change the whole visual amenity of the tunnel, so it'll look a lot more open. We're going to have lighting technology, which effectively give drivers a line to follow as they drive through it. And all the data that we've done in pretesting, including quite a bit of data on VR simulators, says that we're going to get a capacity uplift and speed uplift in the tunnel on that. So that's something which, as a part of it, Scott says, there's an ancillary benefit where we'll use very -- LED lighting, which effectively will help reduce the Scope 1 and 2 as a part of the tunnel.

I don't know, Pierce, I know you've only had one question. I don't know if you have -- you want to make any comment?

Yes. I think just if you think about Montreal, we've been working with our government partners there to increase electric vehicles. We're actually up to almost 10% of the traffic on A25 being done by electric vehicles. And then here in the U.S., we're working both in our operations and in our delivery to look at working with partners on our operations to actually look at how we can reduce our energy consumption and reduce emissions as well.

Thanks, Pierce. That's all the questions we have time for today, unfortunately. Some really great discussion. I'll now hand back to Scott Charlton, our CEO, for some closing remarks.

That was very, very official, Hannah. Thank you for that. And thanks for everyone who's watched online, and appreciate your time. Thanks for everyone who's joined us in the room. You're going to see a fantastic project this afternoon. I want to particularly thank Hannah and the Investor Relations team for putting this all together. Again, encourage you to go to our website and look at our investment, our Insight hub, and a lot of the data where we use that to make our decisions and provide feedback to our clients. And I thank the whole Exco team for showing up on the day, and we look forward to the tour. And hopefully, we'll see some of you online shortly. Thank you.