Transurban Group (TCL) Earnings Call Transcript & Summary

Right. Well, good morning, everyone, and thank you for joining us for Transurban's Investor Day for 2023. And obviously, welcome to those of you who are online and on the webcast. We're broadcasting today here in Sydney, where we're meeting on the lands of the Gadigal people of the Eora Nation. And one of the ways that we acknowledge and celebrate the continuing connection of first people to the land is artwork. We do this with local indigenous people on our newer assets and our assets under construction. And I encourage you, when you drive on our assets, to look out for these artwork. And also you can check it out on our website and see the local artists in the meeting behind the artwork. Okay. Starting with the agenda. We're going to cover a couple of topics, as you can see on this slide. Michelle is going to provide an update on some of our recent traffic trends and a financial update. Hugh will give us some insights into what we're seeing happening in the construction sector and how we're tracking on our delivery pipeline. And then to round out for the first half of the day, Henry will present -- or who's Head of Victoria and our group strategy executive, will present some insights, which I know you're all interested in what's actually happening in Melbourne, what we're seeing in traffic as well as some of our latest innovation initiatives. And then the first session will conclude with Q&A session with the whole executive team, so please prepare your questions. We're then going to take a quick break, and then we're going to have an ESG -- a separate ESG session. Now obviously, we incorporate safety, ESG into everything and all we do in all aspects of our business. But we know and we know some of you are very interested in what we're doing, so we're going to cover some of our key initiatives during that time. Now just quickly, well, I'm obviously very excited to be here today. It's my 10th Investor Day for Transurban. I think it has grown a level in sophistication as well as the business. This will be my last Investor Day after 11 years with Transurban. And I just want to say the point to that end that the Board's succession process is going well, and we will keep you updated, Peter, but there is no announcements today. But you'll be updated in due course. You know all of our executive team who are in the room today, again, and they will answer questions up on stage. So to kick off the day on the results, I'm very pleased to announce that the Board has agreed to upgrade our distribution guidance again for FY '23 to the $0.58 per security. This follows our upgraded guidance at the half year of $0.57 per security and represents 41% growth on FY '22. Now as many of you would have seen from our traffic results released last month, we had what was a record result for the third quarter. And we continue to have confidence in the ongoing traffic momentum, and we'll talk a little bit about that later in the day. And we've also seen better than average results on financing costs than we had forecast. In fact, the Eurobond issue we recently announced was 4x oversubscribed. So it was the most volume we've ever seen at a 10 years' duration. And when fully hedged back to Australian dollars, it was well under 6%. And these factors have offset a higher investment in strategic development costs, which Michelle will talk to. But I think most importantly, looking beyond FY '23, we continue to benefit from what is a very supportive macro environment in all of our markets, including accelerated net migration. I think when even we started to write this or talk about this Investor Day a couple of months ago, we were looking at migration in around 300,000 to 350,000. And obviously, that number is going to be closer to 400,000. The recent higher inflation that will flow through over the next sort of 18 months, and our operating costs returning to more normalized levels of growth in the near term, gives us a lot of momentum going forward for distributions. Now moving on, I'd like to spend some time talking about WestConnex. I know we've talked about WestConnex as an asset for a long time. And there have been many highlights for me at Transurban, but the process of acquiring WestConnex obviously was a huge milestone for the business and this asset will continue to shape our company for decades to come. But I think what's important about WestConnex and what I want to convey today is that it's not just about this project of this asset, which we'll spend some time on, but it's how we operate. It's how we look at the insights, it's how we look at data, it's how we're patient and disciplined and how we work closely with government and other stakeholders to create value over time. And this is how we apply the approach across all our markets on transformative projects like WestConnex as well as asset enhancements, such as the M7, M12 or through some M&A like the potential EastLink opportunity in Melbourne, which we'll speak to. Now WestConnex, as anyone from Sydney will recognize, has transformed the city's network. CityLink did the same in Melbourne in the 2000 and the TransApex toll roads did the same in Brisbane over the last decade. Now it also has transformed our business. From the time that the New South Wales government announced the siege of this project in 2012, we recognized this would be a world-class asset with the potential to generate cash flow enhancement opportunities for decades. But the transaction like this was never going to happen overnight. Again, a great example of our patient and disciplined approach that we take on every investment opportunity. It also demonstrated our competitive competencies and our very focused strategy. And it highlighted the need to be responsive to changing priorities of government and being ready for solutions. Again, this was a decade in the making. You may or may not know that at different times, we proposed 3 alternative unsolicited proposals for various components. When government first started this project, they were looking at 3 separate greenfield PPPs and all kinds of different funding structures. But the government finalized their plans to deliver and own this network themselves. As I said, they looked at various funding and financial structures over the years, including an IPO, having initially excluded the private sector from ownership. But over the time, as the realities of delivery and funding became apparent, the government turned to the private sector. Obviously, we were ready and waiting, having already done the work on how to add value to this network. Then after selling the first stake of 51% of WestConnex to ourselves and our partners, I don't know if you remember, but the government at the time said it had no plans to sell down the remaining stake. But clearly, priorities change. Now during different economic and political cycles, governments may have different priorities, prefer different structures, but ultimately, to deliver the infrastructure needs for our growing cities, they will continue to need the help of the private sector. And I think that was played out today on the front page of the newspapers with the federal government is talking about reviewing their infrastructure pipeline and going to need the private sector to supplement that because they don't have the budget to fulfill the obligations that they have in their forward pipeline. Now we at Transurban, in myself and my career, I've seen this time and time again through these various economic and political cycles and from all colors of government. Now as a 100% owner of WestConnex and with our partners, we have the privilege of operating this asset for the next 40 years. But this is no different from the opportunities that we still see in places like Maryland, which will still produce investment options over time or EastLink, where we have waited a decade for potentially the right conditions for us before looking to make an acquisition. We remain a patient and responsive partner continually offering solutions and creating value, not only for our investors, but our government partners, customers and the communities where we operate. Now I'm going to outline again some more of the benefits of WestConnex and what we see over the next few years. But first, I would like to acknowledge Andrew Head in his time and contribution to Transurban after almost 20 years, including delivering the WestConnex investment for Transurban and our partners. You may have seen in the presentation that Andrew will be finishing up with Transurban this year. Andrew has been an exceptional executive and colleague of mine since I joined Transurban, and we've been through some incredibly challenging times together with our teams, and most of them are in this room. I believe we've always delivered the right outcome for our stakeholders, including projects such as NorthConnex, the M2 Upgrade, the M5 widening and we've always actually had a lot of fun in doing it. Well, I've had a lot of fun. I think it's time that Andrew has been stressed, but I've had a lot of fun. So thank you, Andrew, for your valued contribution and mostly thank you for your friendship and all the best with the next phase of your career. Well done. So just like it's impossible to imagine getting around Melbourne without CityLink, WestConnex has fundamentally changed the way people and freight move around Sydney. It is the largest single road project in Australia's history and one of the largest road infrastructure projects in the world. WestConnex has around close to 400 lane kilometers that is twice the lane kilometers of CityLink, and as a single lane, it would run halfway from Melbourne to Canberra. Getting close to 300,000 people a day travel on WestConnex. And on the right of the slide, you can see what that means in terms of total trips on global scale with WestConnex exceeding both our Queensland roads, all of them, as well as CityLink, as well as major international toll roads like the 407, Autema in Spain and far exceeding traffic volumes on, say, Chicago Skyways. With WestConnex now substantially completed as a business overall, we are managing approximately 60% more trips compared to 2018. So in 5 years, we're managing 60% more trips than we used to. And the importance of WestConnex is providing an efficient transport network to support livability and economic benefits. It's only going to grow in Sydney. Western Sydney is the third largest economy in Australia behind the CBD of Sydney and Melbourne and one of the largest growing urban populations in Australia. Its population is projected to reach 3 million people by 2036, and absorb 2/3 of the population growth in the Sydney region. And the new city of Bradfield or the city named Bradfield, which will be home to the new Western Sydney Airport, is planned to be the center of advanced innovation and industry for a region that will be home to now 2 million people by 2056, which is 5x the size of Canberra. And together, the growth areas around Bradfield into the north around Marsden Park, are expected to grow by more than 75% by 2042. Again, the macroeconomics look good for Transurban in Sydney. WestConnex will also provide a central transport connection for a number of other government road projects, including its final element being the Rozelle Interchange, which transport for New South Wales, expects to be completed later this year. We think it may go into the first half of the next calendar year, but hopefully completed later this year. Then along with the Western Harbour Tunnel, the M6 and the Sydney Gateway, this represents a $15 billion road infrastructure investment by the state of New South Wales, all connecting to WestConnex that are all scheduled to open over the next 5 years. And the chart on the bottom of the screen gives an indication of anticipated revenue impacts on those projects on WestConnex [ out to due '28 ] when the Western Harbour Tunnel is now due for completion. And even after today, with the opening of the M4-M8 link in January, which was early and on budget, motorists are saving up to 40 minutes and skipping more than 50 sets of traffic lights on a trip from Parramatta to Mascot. And those benefits in terms of safer, faster and more reliable travel are going to keep on growing as additional infrastructure is completed and connecting into that asset. As I mentioned earlier, WestConnex has been transformative for Sydney and for this business, and we expect that it will continue to deliver results and create value for decades to come. And with that, I would like to now hand over to Michelle for an overview on the business and how we're positioned to deliver what's always been our investment thesis on growing distributions, long-term growth and creating value. Michelle?

Thanks, Scott, and good morning, everyone. I love that story of WestConnex. It symbolizes to me everything that I love about Transurban. Being able to find a solution for the government and community, watching the M4-M8 link as it came together and now seeing the very real benefits being brought to Sydney. And about a week ago, I was down at the West Gate Tunnel project in Melbourne. And I was up on the launching gantry that many of you saw last year. And I was just watching the trucks drive in and out of the port. And it was such a good reminder of how important that project will be for Melbourne when it opens in a couple of years. And both of these are perfect examples of what I want to talk about today, which is how our business is set up to create value over the short, medium and long term. And there are 4 key themes that I'll step through, as you can see on the screen. So naturally for our business, it starts with traffic. And ongoing traffic growth in our cities is well supported by some very positive macro trends. Our assets actually follow the needs of our cities, and those cities are continuing to grow. So for example, here in Sydney, as Scott touched on, more than 60% of the population lives within 5 kilometers of our roads. And that population is forecast to grow by more than 20% by 2042. And then Brisbane and Melbourne are growing at even stronger rates, almost double, and there is anecdotal evidence recently that suggests that even this could be understating the growth. Now Scott touched on, we're seeing this in the short term, too, with reports of net migration into Australia of 400,000 people this year. That's significantly higher than the net migration in 2019, and most of it is going into Melbourne and Sydney. So population growth is strong, and that should support traffic growth. And then traffic growth is also underpinned by the diversity of our assets and the broad range of reasons that our customers have for using our roads. So for example, less than 20% of customers use our roads for commuting. You can see on the screen that CBD traffic while improving, still not quite back at historical levels. But that has been more than offset by exceptionally strong orbital traffic of people moving around the city and freight traffic growth. And we're also seeing stronger traffic on weekends. So take NorthConnex, for example, at NorthConnex, weekend car traffic has grown at more than twice the rate of that during the week since 2019. And traffic actually peaks on a Friday, late on a Friday, as people head out of the city for the weekend. And then in terms of freight, more than 80% of households shopped online last year. That's more than during the COVID peak. So if you step back and you look at the way in which we follow the needs of our cities, including the population growth that I spoke about on the prior slide, and the different reasons that customers see value in our roads that we've set out here, all of this supports continuing traffic growth across our portfolio. Now we've also been talking to you for a while about how we're positioned in a higher inflation and interest rate environment. And so far, this has played out better than we expected. Starting at Transurban a couple of years ago, the cash rate was 10 basis points, hard to imagine. And so we stress test the balance sheet for an increase in interest rates. I remember vividly talking to you about it at the 2021 Investor Day. We knew then there would be some protection because we had inflation coming through the revenue line and also because of our long-dated debt, which is almost all hedged. Since then, the inflation spike has been much more significant than we'd anticipated, up to 7.8% in December and still 7% last Wednesday. This will continue to adjust our revenue base and compound into future years. And to date, our average cost of debt has only moved a fraction from 4% to 4.1%. That is better than we'd expected because in addition to our hedging and refinancing profile, we've had flexibility to choose our timing, and we've been able to execute well with exceptional support from our banks and investors. A great example here is a $1 billion 10-year bond that we completed about a week ago, that Scott touched on. It was our biggest demand book ever and the outcome was probably around 100 basis points better than that we would have achieved if we've done it a few months ago. So of course, our cost of debt will go up over time. But it's happening slower than we'd anticipated. And in the meantime, the revenue base will continue to grow. So as you can see, our business is supported by strong fundamentals, and that gives us a strong base to continue to grow and support the future needs of customers and communities. Here, we focus on opportunities where we think we can add value. And we take a long-term view. We definitely don't say yes to everything. Now this can be hard at times like the recent decision not to continue with the Maryland Express Lanes project, and that was a hard decision. But ultimately, it was the right decision for Maryland and for our investors. We're disciplined and patient through cycles. That includes financial cycles, changing government priorities and construction cycles, as Hugh will talk to. We can be long term in our thinking and patient and disciplined because of the strength of our balance sheet and also because we're constantly assessing the needs of our cities with a broad number of possible opportunities that we're thinking about at any one time. A good example here is the A25. We felt that the best way to enhance the value of that asset was to bring in the best possible partner we could in Montreal. And so we've brought in CDPQ. That released capital back into the business, about $400 million. At the same time, we've also been working for a number of years on the M7-M12 enhancement project here in Sydney, and that's now moving to delivery. So being able to redeploy the capital we received from the A25 transaction to the M7-M12, giving us extra liquidity. That's a really good position to be in right now and makes room for future initiatives like EastLink. My point here is that we're constantly taking a portfolio view of how best to maximize value with all of these examples, adding cash flow to the business over time. So in the near term, there is natural growth in our existing portfolio. In the medium term, we have a pipeline of opportunities to fundamentally improve our cities and generate cash flows for years to come. And then in the long term, we're more than the sum of our concessions. We know there will be opportunity to deepen the value we provide to our 10 million customers and to the communities in which we operate. And you'll hear about some of these over the course of the day. So whether you take a 5-, 10- or 15-year view, we feel we're well positioned to create value. Thank you, and I'll now hand to Hugh.

Thanks, Michelle. Good morning, everyone. Great to see you all. I'm going to, as Michelle mentioned, talk about the project delivery market today. So firstly, the macro market; secondly, the Transurban portfolio view; and then finally, a little bit of a deep dive into a couple of the major projects we've got going on at the moment. But I think it's worth noting that core to the delivery of all these projects is 1 consistent theme, and that's safety. Safety for our employees, safety for our contractors, safety for our customers and the communities in which we operate. And I'm really proud of the progress we're making, thanks to the data-driven insights that come from all the teams around Transurban. So a couple of key statistics here. Our contractor recordable injury frequency rate for this year is the lowest on record. And CityLink, congratulations to Henry and the team, has had its first ever 2 months of zero serious crashes. And so some of those insights are really driving step changes in performance and I think it's worth calling out as part of our project delivery. But if we move to Slide 17 and particularly the chart on the right-hand side of the screen, shows the current macro market conditions on the East Coast of Australia. And what it tells us, consistent with the theme on the front of the paper today, is that there's an unprecedented level of road and rail projects happening from government. They're going to need private sector involvement and we see this as a really material opportunity to keep playing a great part in the infrastructure delivery pipeline in our existing markets. It also comes with challenges around cost escalation. And when combined with the recent geopolitical impacts on the supply chains, we have seen upward pressure on pricing and some push out of timing. However, if you look at the left hand -- sorry, the right-hand side of the chart -- of the slide, you can see that a couple of those key metrics are starting to move more favorably. So particularly iron ore and steel, we've seen drop through FY '23 and it's forecast to stabilize in the next number of years. And thanks to the net migration that both Scott and Michelle have talked about, the RBA is now forecasting materially lower wage inflation. So both those should help drive more manageable escalations in the major project space. We then move down to a Transurban portfolio view. What this chart shows you is that our committed capital has halved since FY 2018. So those projects that we've got on foot right now total less than half of what they did in 2018. But as well as a volume benefit, we're seeing a mix benefit. So we've got a much higher proportion of lower risk brownfield projects, a much lower proportion of the high-risk greenfield items. In that 1H '23 column, the only greenfield project is, in fact, the West Gate Tunnel. And Scott quite rightly stole my thunder. But in the next couple of days, we are going to see Bella, our TBM #2, emerging from the ground at the end of its journey. That's really important because it represents one of the high-risk components of that greenfield project, and it's great to be through that. I'll come back to West Gate Tunnel a little bit in a minute. So from a portfolio perspective, we see the risk coming down, but we're also trying to manage risk at a project-by-project perspective. And on the other side of the slide, you can actually see some of the risk mitigations we're taking upfront in the early phases of our project. This isn't about materially increasing the risk we're taking on and it's not about changing the contract structure. It's actually about listening to our market participants, about being flexible with key terms and about augmenting the way in which we engage on a personal and corporate level. So in recent projects, I'm going to give some examples of what we've done. We've undertaken material early works on site so that we can both identify and quantify the risks that are sitting in the ground before we go to tender. We've engaged with both Tier 1 and Tier 2 contractor markets pre-procurement phase to get their feedback on risk allocation and contract structure. And we've established collaborative procurement processes where we are just handing documents out and asking for responses, we're actually augmenting them as we go through the process. So that's really enabled more participation and a better environment with which to negotiate. But there's no escaping the fact that the scale you saw on the previous slide, the complexity of projects and the size of projects is all creating additional pressure on a very small pool of Tier 1 contractors in the Australian market. We've got 3 or 4 depending how you define Tier 1 contractors in the civil space. So recognizing this, we're really making additional efforts to bring Tier 2 and Tier 3 contractors into the mix. We're doing that in a few ways, in particular, where it makes sense, looking where you can split large projects into multiple deliverable bundles with good interfaces. We actually provide that interactive support through the bidding process, and we have actually looked at partially reimbursing bid costs because they have been known to be a significant impediment to Tier 2 and Tier 3 participation in major processes. So the benefits of these changes are really twofold. One, you actually gradually help Tier 2s and Tier 3s grow and be able to deliver bigger and better projects. But secondly, you reduce some of the pressure on the Tier 1s and enable them to do a better job on the projects they're doing for us today. So if we move now to the West Gate Tunnel, as mentioned, Bella breaks through in the next couple of days. I was going to say tomorrow, but [indiscernible] said the next couple of days. So you can ask her about that later. But that's just the start of the story. In the coming months, what we'll see is the Sunbury facility at Hi-Quality, the spoil disposal site wrap up. Benalla, where we've done all our precast in construction is now complete in the precasting and will close as soon as all the segments have been transported to site over the next couple of months. And steel production and delivery, which was a high-risk item for the key East zone construction, is progressing really smoothly. Both our international and domestic suppliers are providing high-quality inputs with increasingly resilient supply chains. Over the coming months, as the TBMs finish their journey, we'll now see 250 workers into the tunnel to do critical ITS mechanical and electrical works. They'll all ultimately be operated out of the freeway control center, which is also under construction. So you can see there's a lot of elements to this project, but we are getting to the point end of the delivery, and it's getting very exciting. Just to dwell very briefly on the commercial reset from early last year. As part of that reset, Transurban, the state and the contractor, all reset their senior project delivery teams, and we are seeing the benefit of that reset. We're seeing true collaboration. We're seeing key issues being escalated early and frequently. And we're seeing a steering group that's not just managing downside risk. They're actually looking for upside and trying to seek ways to deliver this project earlier and better. So the project overall is now ahead of our revised targets. It's got wonderful momentum and the team is very focused on driving it towards completion. So many of you were out there last year, but for those of you who weren't or for those of you who want the update, we've got a brief video now showing TBM 1 or Vida's breakthrough as well as some drone footage of the site. And much like WestConnex in Sydney, you can see how much it's fundamentally going to change the profile of how Melbournians move around their city. So over to the video. [Presentation]

I don't know if you caught it there at the end, but I was there 3 weeks ago, and it was the first time I was able to work from one bank of the [ Melbourne ] onto the other on one of our roads, really exciting milestone as well. If we move now to the M7-M12 integration project. Just a reminder, that's the widening of our existing M7 road and the connection from the M7 to the M12. The M12 is a government-delivered road, which will ultimately connect through to the Western Sydney International Airport when that opens in FY '26. So the need for the project was identified by our wonderful group of in-house traffic teams. Thanks, Darryn, somewhere in the room, a number of years ago and is now being delivered under the New South Wales government's unsolicited proposal process. It's really providing that access to the extremely rapidly growing commercial and residential areas in Western Sydney. But what the chart on the slide shows you, and particularly in the red highlighted area is the Westlink M7 corridor, represents some of the most congested roads in Sydney. This means that upon opening, the project will deliver an immediate uplift in traffic and it will deliver immediate congestion relief to our users. And given there was insight to create room in the medium for the M7 to be wider in the future upon initial construction, most of the work can be done without impacting our existing users and disrupting traffic throughout. So I've already sought to derisk this delivery project in line with the early stage project strategies I mentioned earlier, but thanks to Andrew and the WestConnex team, we're also derisking it from a staff perspective. We're taking some of our wonderful people from the WestConnex project with the M4-M8 being completed and moving them immediately on the M7-M12 project to give us an accelerated start-up with major project work to commence on site later this calendar year. I think that I'm over time here, it's flashing. So I'm going to move through the North America update very briefly before I hand over to Henry. I've been on the ground at these project sites many times in the last few months. And it was great to see that through the winter months, we got extremely supportive weather and both the contractor and Transurban were able to quickly ramp up works and get more done than we expected over those winter months. So the Fredericksburg Extension, which extends our 95 Express Lanes 16 kilometers to the south, is due for completion now in August this year. That's some months ahead of the revised schedule that we set last year. In terms of Project NEXT or Northern Extension, which extends our 495 Express Lanes towards the Maryland border, that's about 20% complete now and is progressing on schedule. And as Michelle spoke about, we've embedded that A25 partnership with our wonderful local partner, CDPQ, extending the partnership we created in the second stage of the WestConnex acquisition. And we're really excited to work with them to enhance the Montreal network. So with that, let me hand over to Henry for an update on what's happening in Melbourne. Thank you very much.

As Michelle mentioned earlier, we are seeing a more gradual return to pre-COVID traffic conditions on CityLink. But having said that, we do remain confident in the core fundamentals that are going to support growth over the longer term. And I think that's a really important theme in recurrence through what we're talking about today. CityLink is arguably Melbourne's most significant transport corridor, so it links 3 of the city's busiest freeways, which means it's exposed to a very broad range of trips. That's CBD-related travel, airport-related travel and then obviously, freight as well. And it also links to all the major travel routes into and out of the city, which is then playing through to some of the data points that we're observing. Right now, we are seeing some short-term disruption on the network from some of the construction activities. So that's particularly the West Gate Tunnel, which Hugh have spoken to there. But having said that, we do see that dissipating as that project moves towards completion. More positively, we are seeing some strong numbers, particularly for travel to the CBD on weekends and in the evening. So that stems in part from a number of major events. We're all aware of the Grand Prix. There have been some very well attended. AFL matches. I think also, interestingly, we're seeing a resurgence in nightlife in the CBD as well, which is feeding through to some of the numbers. In particular, we're seeing high growth on Friday nights and Sunday afternoons, which have exceeded 2019 levels on multiple weekends this calendar year, and that's borne out in the numbers. So average weekend and public holiday traffic is up 11% for the March quarter year-on-year. Another important trend that's playing out is workday and travel peaks are returning, and that's particularly for Thursdays and Fridays which have been strong. So that's getting back to 2019 levels. And you can see evidence of that on the chart that we've got up here on this slide. If we look at some of the other factors that are supporting travel on CityLink, airline passenger numbers continue to grow. But having said that, they're still around 12% below what we saw pre-COVID. So from that, we do see some potential upside there, particularly for that Western Link section of CityLink, which connects into the airport. Freight traffic is another element that we're watching closely. It's been well documented that held up well during the years of the COVID pandemic. And I think importantly, as we emerge into a more normalized environment, we're still seeing growth in those heavy commercial vehicles and light commercial vehicles, which is really important. Population growth is also supportive thematic for our Melbourne numbers. Michelle mentioned earlier, Melbourne's back on track to becoming Australia's most popular city. And I'm sure most of you are aware of the current projections that have Greater Melbourne overtaking Greater Sydney as Australia's largest city over the next decade. So that's going to be driven by, I think, predominantly overseas arrivals, and that will include things like international students as well. Just on population concentration. Population around the CBD, I think Scott had a slide up on this. That's also going to be a factor that plays out into the longer-term growth numbers for CityLink. So 20% of Melbourne's population is located within 5 kilometers of the CBD. If you think about the alignment of our asset to the CBD, it's very well positioned to play a key role, moving people in and around the city well into the future. That's all I want to say on traffic. I now want to touch on some of the innovation activity that we've been undertaking with a particular focus on what we've been doing in Melbourne. It's been a really active period for us. We've been trialing some technologies to drive both immediate benefits onto the network in the here and the now, but also to prepare for the future with some major shifts in vehicle technology that we all see coming. We've operated CityLink, obviously, for more than 2 decades. And over that time, we've invested really heavily into it. So it remains one of the most technologically advanced roads in the world. And that's given us the opportunity really to use it as a test bed for emerging technologies. A great example of this was actually late last year when we conducted what really was an Australian-first trial of an automated truck on CityLink in a live traffic environment. And that's really the next step for us in terms of testing connected and automated vehicles and how they're going to operate with the road infrastructure and technology. The benefits of automated vehicles are obviously very well documented. That includes getting more out of the infrastructure that we've built. There are obvious safety benefits that hopefully we'll be able to get to longer term as well. But I think it's also becoming apparent that early real-world applications of this technology at scale are going to happen around the movement of freight on defined high-value routes with highly instrumented infrastructure. And it's not hard to think about how we play into that equation. This latest trial tested some of this in practice. So it included how CityLink's road sensors and other embedded road technology shares data with an automated truck. So in this case, it was real-time data from CityLink's systems fed directly into the truck and that really gave it the ability to understand road and traffic conditions up to a kilometer in advance of its own sensors. We're going to release the report on the findings of that study in the coming weeks. But I think in addition to building on some of the previous findings that we've had around how automated vehicles interact with the physical road infrastructure, there are a number of learnings around the infrastructure-to-vehicle communications, which is going to be really important as we look to implement real-world solutions here. And I think, importantly, we're now investigating more broad-based applications of this technology on our networks. Another thing that we've been preparing for is how we develop the systems to effectively manage the increasing scale of our roads. So as West Gate moves towards completion, which Hugh has spoken to just a moment ago, we're preparing to integrate those operations with CityLink. And as a part of that, we're going to be building a new freeway control center at the northern portal of West Gate Tunnel. That's going to give us a centralized facility for all of our Melbourne operations and maintenance and also the incident response and the facility is going to have the ability to manage both CityLink and the West Gate Tunnel. And then I think importantly, it's going to give us the ability to scale into the future as the need arises as well. Another more recent operational initiative, which I think many of you have seen, in fact, I think we've adorned our investor presentation front cover with this today, is the pacemaker lighting in the Burnley Tunnel and that's obviously aimed at improving flow on one of the most congested aspects of our network. That tunnel is one of the busiest in the country. It had more than 20 million trips through it last year alone. But obviously, the geometry doesn't help with flow. So those of you who have been through it, will know it's much steeper and deeper than many drivers are aware. In fact, I think at its lowest point, it's 65 meters below the Yarra River, and that causes very significant speed reductions as people move through it. So the pacemaker lighting really is just a nudge designed to give drivers a visual cue to maintain their speed, particularly as they head up hill and out of the tunnel. And it's early days so we're going to need to gather more data to get a complete picture, but we're already seeing real benefits in terms of speed and flow from this. So speeds through the tunnel have been 10% faster on average during the day, but we're seeing much more significant speed increases through that inter-peak period and on the weekends as well. That's translated through the volume increases around 4% against the reference period which was the 6-week period prior to us turning the system on. And obviously, some of that volume uplifts attributable to the natural recovery that we've been seeing on the network. But I think it's clear that part of the volume uplift has been driven by this pacemaker lighting, the speed increases support that hypothesis. The fact that the domain tunnels only increased by about half that volume over the equivalent period is another data point that I think reinforces that. So we're going to show, I think, just a quick video to show the lighting in action. [Presentation]

Just a couple of things to call out from that video. You might have noticed that as a part of the project, we've improved the visual amenity of the tunnel. So we painted the tunnel walls wide, and we've -- into the roofing cavity. That's giving the tunnel a much more open expansive field, which has been proven to reduce driver anxiety, which obviously plays through to some of the driving habits as well. And then we've also taken the opportunity to install LED lighting, which is obviously more energy efficient, helping us meet our energy reduction targets as well. If I turn just finally to other opportunities in Melbourne, you'd be aware we've indicated our interest in the potential acquisition of EastLink, which is Melbourne's other toll road. At this stage, indications are that a majority interest is going to be put up for sale, and the formal sale process is set to begin in the middle of this calendar year. The ACCC have also begun their review of our potential involvement in this, and that's consistent with similar processes that we've been involved with in the past. Melbourne is obviously a market we know and understand really well. That's from operations to traffic forecasting to customer expectations. And I think we've shown how we can bring value for a range of stakeholders when we've made equivalent acquisitions in our other markets. And so we'd expect that if we're successful here, this will be no different. And that includes things like the experience that customers have through personalized traffic notifications. We obviously have a very well-developed program to support customers experiencing hardship and I think importantly also, we've got a track record of working with government agencies to improve the performance of the broader network. And we think there are opportunities in that space here as well. So we have a team looking at this opportunity in detail at the moment. And we'll continue to keep the market updated as that process unfolds. Having said that, I'm going to hand back to Scott.

I think we should hold our Investor Day later in the afternoon, we got -- certainly have a night club vibe on the music. So well done on the music. It keeps everyone awake. I did note Hugh's comment about me stealing his thunder in relation to the West Gate tunnel just to say, I don't remember how much you've actually dug yourself. So all credit to Zoe and the team that has actually done the work. Most of the other executives in the room who actually do the work. So we appreciate you being here. And please, if you get a chance to speak to the people who actually deliver and then we get to take all the credit. So thank you for making us look so good. To recap the business, it's performing extremely well. We have some of the best road assets in the world. But more importantly, through good investment or good luck. We are located in urban centers that have some incredibly strong growth demographics. Not only growth but low unemployment. We continue to gain significant traffic momentum in all of our markets. This is our second upgrade in distribution in the past 3 months. As Michelle talked about, we have a strong balance sheet capacity to support our near-term development pipeline, which has the lowest risk profile that I've seen with the group over the last 10 years. And our mid- to long-term pipeline still represents a decade of growth in our core markets. But with that now, I'm going to invite the rest of the executive team to join me, and we're going to open up some questions that's going to be led by Head of Investor Relations, Hanna is going to lead this, and I'm not sure how the logistics are going to work from here. So we're just going to wing it. Yes. Okay. Let's go. Everyone come up where the chairs.

Investor relations here at Transurban. We'll be taking questions from the audience today as well as from online. For those of you online, please submit your question via the box on your screen. For those in the room, we will have Stu and Justine from my team. They have some roving mics. Steve, do you want to give us a wave? Thank you. And Justin is over here. We do ask that you wait for the mics before asking your question. Otherwise, those on the webcast won't be able to hear. So shall we get started? Who has a question? Should we start in the room? Reinhardt?

Reinhardt van der Walt here from Bank of America. Just a quick question on WestConnex, maybe for Michelle. So at the half year result, you mentioned that M4 is most likely going to be cash flow neutral for some time. That obviously being contingent on the M6 and maybe gateway opening to traffic. Yes, Rozelle as well being a contributor. But I'm conscious that at the time of that comment, you probably had just about a week of data on that link, maybe a little bit more. It looks like from the quarterly, the traffic numbers were pretty strong. As you're thinking on cash flow neutrality changed at all, the pace of that maybe?

[indiscernible]

Yes. Got you. right. We can wing it. Maybe just one quick follow-up question. Just obviously, you've had to sort of tango with the ACCC before in the Sydney market. Understand that if there are any issues, it might be surmountable in Victoria with EastLink. But what are you thinking some of the pinch points are going to be with the ACCC if you do actually move forward with that bid for EastLink?

[indiscernible] Look at the issue statement [indiscernible] new road, development with the customer. So we think we are dealing with same issue. [indiscernible]

A question from Ian?

Couple of questions. Firstly, just on change of government in New South Wales and their policy around tolling. You made the call WestConnex has been very successful, but already the government is trying to sort of think about that tolling rate and feeling it's not successful. I guess how do you go about that negotiation of sort of getting a win-win for both parties?

Well, I'll let Michele talk about it as well. But I think government by anyway means would say WestConnex has been successful in including the current government who I think there was recently some discussions about comments that we've made in opposition by the weather road minister that now and government suggests that they really support WestConnex and think it's a great -- think it's a great project. I think actually, West Connects in to some extent, the M7, when you look at flag falls, distance-based, cap-type regimes is something that the new South Wales government would like to entertain obviously, in wider context. But I mean, Michelle has had as many interactions with John and Daniel and others as I have. You may want to make some comments.

So if we look at the network, in Sydney of motorways that have been built over the last 30-plus years. That's been done in partnership and collaboration with politicians and stakeholders from both sides of politics, coalition and labor as well. And so we don't see a change to how we're going to continue to build those relationships. And as Scott mentioned, during the election campaign earlier this year, the now labor government has signaled the interest in looking at an entire reform of the network, and that's also similar to some of the former coalition government perspectives on that. So from a Transurban's perspective, any opportunity for us to look at improving the way that we can better serve our customers improving equity fairness, we've committed to and we continue to commit to having those dialogues with the government. We don't go into this thinking that this is a simple and easy topic. And so we support the government in thinking about this in a multiyear journey. So I think for those of you that have been following the Sydney market, you'll be familiar, the incoming government has announced some short-term subsidies and toll caps that will help relieve and address them on the current cost of living pressures for semi siders and travelers with a view that over the next few years, they will continue to work with the industry to find a longer-term reform sort of solutions. The other thing that the labor government has also announced is not just looking at the tolling regime, which is, as Scott mentioned, the distance space and some of the other levers around tolling regime, but also some of the other points around administration processes, toll notices that will actually make a big difference to customer experience as well. So we continue to have those conversations, impact with both sides of politics and look forward to doing that. It's not just a Transurban issue. All of our concessions have different types of ownership structures, a lot of them in partnership with active and also more passive shareholders. And so we need to make sure that those are also -- have their interest or taken into account.

And I think largely, Ian, we still see this as an opportunity to make that network perform more efficiently to provide benefit to customers. There is, as Michelle said, there are subsidies being provided. There is cash flow from other assets that government owns. So there is a way we think through this over the medium to long term. It's going to be complicated. But in the short term, there's a lot of things we can do to help the customers just through information, digitization, other initiatives, even little things like both parties took into government increasing the speed on WestConnex to 90 km. It's a simple solution, something we've proposed for a long time. And so hopefully, we can get some quick wins and then build to the longer-term reform.

Just a minor one on M2. I got to write it yesterday and I think it's truly the most bumpy road in [indiscernible] city. Actually wondering, are you in compliance with the construction requirements of the original contract -- and what do you have to do to actually possibly make it right?

Yes. So I will answer the first part, and then I will get the person responsible for delivering the second part. Yes, we're in compliance. And unfortunately, I'll let Michelle talk about how we're going to fix it and I'll talk about what the problem is. It was the way the road was constructed at the time and is not different from how a lot of roads were constructed around New South Wales at the time, which instead of having one continuous pavement is in effect, there are concrete slabs with gaps in between them. So the road base underneath moves over time and causes that deflection in those gaps in which we then have to treat. So unfortunately, that is the nature of the base of the road. To change that would mean completely taking up the road, which would be much, much more disruptive to Sydney than fixing the road. And we've been trialing a lot of interesting products and other things, but let Michelle talk about how she's going to fix it.

Thank you for the engineering.

I'll give you the problem. Now -- your job is to come up with a solution.

And we have a great team. And as Scott mentioned, safety continues to be the top priority for us in everything that we do. And the road remains compliant with the obligations that we have. Given the situation that we have and keeping in mind we don't want to rip up the road from a disruption perspective, that would be a very significant impact on our customers. We're finding a way to actually bring forward some of the remediation, some of the rebuild in very localized areas where we need to continue to work on upgrading so that we can actually keep operating and using the road at the same time, address some of the experience and ride issues Ian, that you've mentioned.

With trollies and new materials, we're working with overseas and local experts on doing some as we replace the ash fell, we can minimize the deflection, but there is always going to be some level of deflection. And I think for full disclosure, we should let everyone know that Ian bikes on the M2. So this is specific entries.

[indiscernible] Anthony.

Anthony Longo, JPMorgan. Just a quick one on capital allocation. So you brought in partners for the American assets and ultimately, you've sought to redeploy capital across the network. I mean how are you thinking about the Australian opportunities that was in light of that development pipeline that we've got on after now and potentially looking at sort of crystallizing or releasing capital for some of those projects?

I'm going to answer the first half, and I'll let Michelle answer the second half on the capital. But bringing in partners, both for the A25 and for the American business was first about strategy. So we want to grow the business in North America, having partners looking at bigger opportunities and they're saying in the A25, looking at the opportunity we wanted to take forward, having a local partner, we think can accelerate that. So first, they were looking through this strategic lens. But they do satisfy some of the issues we have around capital which Michelle, you want to comment on?

Yes. I think -- I mean, I think you sort of covered it, Scott. The reason we went into those transactions, whether it was the Chesapeake transaction or the A25 was because strategically, we thought it. It enhanced our ability to grow those assets and maximize value. The benefit from that was that they released capital. So the timing was with Chesapeake, we're able to redeploy capital towards the WestConnex acquisition and then with the A25 and the M7. But that wasn't why -- we did them for reasons that they -- they're the right partners to maximize the value of the assets and it freed up capital at the same time. And as we sit here today, we feel we sort of got $2-plus billion of liquidity over and above the committed pipeline. So we feel from a balance sheet perspective, we've got flexibility, and it will just depend on particular opportunities.

Great. And I guess, back on the Americas as well. I mean thinking about -- take your point on Maryland and then what ultimately happened there. But -- just want a bit of a primer as to how you're still seeing the opportunity set within that market and potentially maybe with a slowing consumer in the U.S., I mean, is there more pressure on some of those municipalities to get some of those things done? And is there still an appetite for that public-private partnership funding in that area?

Yes. Look, and Mike is not here, but -- and Hugh may want to make some comments as well. But as I said through the political cycles, and we've been through the economic and political cycles. We've been through cycles in New South Wales, where nothing is happening for 1 or even 2 terms of government, but then the reality set in of needing the private sector, needing things to happen, creating opportunities. We have in the U.S., some public -- some unpublic looking at opportunities that exceed $4 billion in those 2 markets. Whether it come off or not, it depends on all those issues that you talk about. But we're always sitting there prepared with opportunities in any one market. We'll have 3 or 4 things that we think will add value to the network. Now whether government crises pursue them at that time or they want -- they wait. Anyway, we're always seeing there ready to help increase the network. But there certainly still is a lot of opportunities. Right now, with the changes in the economic conditions, we're very focused on delivering for Transurban Chesapeake dose, Frederiksberg next. There's a few other things happening as well. I don't know if you want to make -- Hugh has been spending a lot of time in the U.S. over the last sort of few months. I don't know if you want to make a comment?

Yes, sure. Thanks, Scott. The only thing I'd add is with Maryland, there's an inevitability about the requirement to fix the American Legion Bridge which is, in particular, the connection between Virginia and Maryland. And so the project hasn't been dropped. We have dropped out of this process. But the benefit to the wider toll road network around the Greater Washington area has been preserved by that government. It's more of a timing issue. I think some of the opportunities, as Scott mentioned, that we see within our existing market of Virginia are fantastic, both brownfield and private to private. And so we'll continue to pursue those. And the team is really right now focused on about the $1.3 billion of Next and FedEx, which is getting towards a point end. So lots of excitement over there. And Montreal is now a big piece of that puzzle as well with our new partner.

It's Paul Butler, still at Credit Suisse.

That's -- is that a new moustache? Is that because of -- Well done.

That is a new moustache. In the presentation, there was a comment about government investment plans in both road and rail. I just wonder if you could sort of comment about how you would see investing in rail infrastructure is different to toll roads and whether that could ever be an area of interest for Transurban.

I think we can take this one to be short. I don't think there's an interest certainly while I'm CEO, and that's not very long. So -- but I think the Board -- there is no change in the Board and the strategy and there's a tremendous amount of opportunity in the road space. I mean there's the adjacencies around mobility as a service and the things that we do with our customers and adding value, which I know there's a panel later, and Simon can talk about the rewards programs that we're doing and stuff, but it's all going to be based around roads.

And just one other question on WestConnex. In the chart you've shown us on Page 8 around the revenue impact from the opening of additional sections. It seems to indicate that the Rozelle Interchange is going to have a more positive impact on revenue than the opening of the M4-M8 link?-- is that -- that's what that's intended to show?

I'll let Andrew answer the question because he's the expert. But I would suggest, again, it's a graphical representation. So don't get out your ruler and try to calculate the exact numbers. So it's not a forecast. But I just want to just give an indication that's $15 billion of new government assets going to add value. But Andrew, you might want to talk about the consequences of the new assets?

Yes. So Stage 3 represents 2 parts, Rozelle Interchange being the second. The M4-M8 is doing a fabulous job. And as I think has already been mentioned, it's performing ahead of forecast and certainly ahead of my own personal expectations. But the real power of WestConnex and also the M4-M8 is unleashed by Rozelle Interchange in particular. If you use the assets as they're currently configured, and you imagine what Rozelle Interchange is going to do, the impact it's going to have on the value proposition for the customer not to mention when the local area is returned to the community and that fabulous park is put in place. The last part of WestConnex is really going to be a very exciting unveil.

But I think you'll find as well because the people that are using the M4 and M5 or the M8 now hit the cap on the M4-M8 link. But when Rozelle, there is a lot of traffic then starts doing the north-south movement, which will not hit the cap. So that's why it's a bigger revenue contribution.

Thanks, Paul. We have a question from Owen Birrel, in the front [indiscernible].

Owen Birrell from RBC Capital. The one asset that sort of hasn't really had a huge amount of exposure in this Investor Day is Brisbane. And I'm just wondering to get a bit of an update on what's happening there. We're sort of hearing in the press that the Queensland government is kind of dragging its heels ahead of the upcoming Olympics. Just wanting to get a sense on what interactions you've had and whether there's any opportunities that are rising?

Sure. Well, we have Brisbane but it's the best-performing traffic market. So it's performing well ahead of the market. And yes, there's some fabulous opportunities. How much do you want to go into detail, so.

Yes. Happy to -- thank you for the question. So definitely getting the house in order ahead of the decade to come. It's a pretty exciting place to be, whether you're there today or planning to be there for what's coming ahead. So from our perspective, always talking to states or looking at what congestion is occurring and what's going to come our way as the population continues to grow, kind of great year. Obviously, everybody has watched the traffic grow on our assets. And the foundation of Logan Enhancement Project, which we delivered a few years ago is really coming to the fore. So I think that the proof is there to say there are things that we can do to help a growing city and I would suggest we've got lots of levels of government looking at what is needed for the decade ahead with both population growth and then, obviously, the pinnacle being that 2032 Olympic City status. So always looking to find opportunities to help with congestion.

I think, Owen, that's -- so they're always very careful because of the government partners, but CEO prerogative. We hope over the short to near term, there's some real opportunities to do around the enhancement if you look at Logan was always going to need widening pipes of gateway, you just have the Pacific Motorway connected -- so there is some opportunities, but it's up to government whether they want to take those opportunities or not.

Thanks, Owen. We might go to a question from the webcast. We'll then go to Rob and then to Andre. So from the webcast, with lower wage growth forecast, especially in Western Sydney, are you concerned about impacted individuals opting not to use toll roads. How would this affect shareholders?

I'm not sure who the -- I'll do it overall. I mean, the value proposition is obviously very strong and continues, and we see it every day. And again, the average toll road user in New South Wales is spending around $10, $11 a week or whatever the number is at currently at the time it's around that number. So again, some perception that there is quite a large number of people that use the toll roads, both directions either way, every day is not the average user. True, there are users and cost of living is an issue, but that's why -- we're trying to do other things, which Simon can talk about reward programs and others to mitigate that cost or for those vulnerable customers. We provide financial assistance. But we still think there's a big value in the proposition to continue to use our toll roads. I'm not sure who is the best to throw to because we all deal with it every day either through the customer side of the business, the operations side of the business. I don't know, Simon, if you want to talk about some of the things that you're doing in the customer side to...

So -- can you hear me? Is mic on? Yes, good. So we have a rewards program through our linked app. And anyone we've given them basically the provided or enabled $5 million worth of fuel savings for that for our customers. Later this month with the first of May now, we're going to be launching 2 more rewards partners that you'll be able to redeem value through our app. Then it all goes to this concept of building upon the value that customers are receiving not only through the travel time savings or offsetting our carbon footprint because our roads are more effective in that regard. But now you're also going to get more value through being a Transurban customer or linked customer through our mobility services and reward system. So it's an exciting time for our customers, I think, going forward.

Thanks. Rob?

It's Rob Koh from Morgan Stanley here. So just want to draw together a couple of different threads, things like toll caps and the high CPI prints that are still coming through. Is there an opportunity for Transurban to wrap those variables into concession renegotiations? Is there win-wins that can be had with smoothing the costs for your customers and obviously, increasing the value of the assets?

Well, I think with any transaction that we do or any investment that we make, there's always those discussions with government. So on the M7, M12, there was an extension to the concession, but there was no uplift in the toll in that case, but there's a media uplift in traffic, which will mean an immediate uplift in distribution from those assets. So we are open to any of those issues and discussions with government. It depends on what their priorities are and what they want to achieve, Rob, levels of toll and where. I think the main thing when we always look at it is always, as we've said, balancing, creating long-term value, but obviously, understanding how important the distribution is. So we're never going to say, okay, we will have a concession life of 100 years. And by the way, that means our distribution is going to be flat for 100 years or 30 years or whatever the number is. So we're always going to balance those out and that's how our portfolio is set up, but all those discussions are on the table. And it's important that we continue to invest in the business to create long-term value. We're not trying to -- we could very much not look at the long term and just drive it in the short term for distribution, which I know there are probably a few shareholders that would like that. But we need a sustainable business to create value over time and create more than just the concession, as Michelle said, through our customers, through the other things that Henry and the guys are doing and the team is doing an innovation how we can create value for the security holders that is above and beyond the concession life. But we're always balancing creating long-term value and distribution growth.

And I thought I'd ask the question, Harvey, to make sure that everyone gets a chance to answer a question on stage. I think the only person who might not have had an opportunity is miss Corr. And I guess I note that there's a couple of transitions within the leadership, not just Mr. Charlton, but WestConnex and looks like North America as well. Just if we could get your thoughts on people and culture at this point, miss Corr?

Sorry, Rob, I missed that. Thank you for the question, what the end of the question was?

Well, I guess I'm not trying to suggest there's a pattern or anything going on there. But if you could just give us your current thoughts on where you're at with people and culture.

With paper and culture. I think -- if I think about what we've been through Rob over the last few years with COVID, we're definitely coming through at exit. And that's a really good thing. We're seeing things like turnover more broadly engagement is stabilizing, and that's a very, very good thing for our business. We've spent a lot of time as an executive thinking about the leadership of the organization. There are natural points of change that emerge, but we think we're really well prepared. And you'll see today here, not just the executive but you'll meet the broader group of senior managers and some very, very talented people in our organization. So I think we we're coming through that very well.

I think, Rob, as well, I mean, we've just had our voice survey come back, which is one of the strongest it's ever been coming through a very difficult time and with a lot of leadership transition that they know are happening internally, which is really positive to see. And I think that goes to the stability and the strength of the group. I mean when I joined the group and we reset Exco and Andre was a big part of that. It was all left to Exco to lead the group. But the leadership team now is in this room and the level below that. So the leadership, the culture, the way we work, that is embedded right across Transurban. So I'm very comfortable that -- that won't change after I leave. And I always think of the Jerry McGuire movie when he walks out the office and the elevator close and everyone will forget about me. So don't -- I mean there's a mass of leadership talent and capability within this group. And not only that, you'll hear from our new Head of Sustainability, Amy's in the room, you'll hear about later. If I think back to when I started Transurban, it was hard to get talented executives to come to Transurban because it's this toll road business, that looks pretty boring. But you see some of the stuff that Henry and the innovation team and TNT and others are doing. It's a place that we get things done. We do things. We make things happen. We create value, create opportunity and make a difference to people. And it's attracted a lot of talent and developed a lot of talent. So I'm very, very proud of everyone on the stage and everyone in the room, so the company is in very good shape. But there is just a natural rhythm that it's time go, whether it's me or others that there's a time to make room and go on and so the next generation could create additional value.

Andre?

Andre Fromyhr from UBS. There's been a lot of talk about project pipeline and Scott will take your point about having to invest in network growth and thinking about the long term. But there's also a chart in Hugh's section about a declining development intensity, the amount of work that you've got in your pipeline relative to the value of the company. And I wonder, is that a bit of signal about what the next year for Transurban will be, the post-Charlton era of focusing more on extracting the value out of the network that you have as opposed to growing it. Or is it more about where we are in the cycle and high cost of construction, high cost of capital?

I think it's in the high cost of construction and high cost of capital. I think partly it's where we are in the cycle, and we were an extraordinary cycle sort of 5 years ago. So when you go back to those charts that you had, I mean, roads were -- everything was being built on roads and maybe a bit of rail. Now we're in a cycle where a lot of stuff is going to happen in the energy transition phase, and a lot of that focus is going to get moved to energy. So it is extraordinary that you had Queensland, New South Wales, Victoria and North America, all doing deals, all doing mega billion dollar deals at the same time, which normally again, the politics economic run in cycle. I think the different thing that will occur now is we had a lot of Greenfield's projects like NorthConnex and West Gate and WestConnex once we got involved. But I think what you'll see in the cycle and Queensland should produce some opportunities, North America still will long-term Melbourne, I think you just see more that the network that we currently own and the assets we currently own, will generate the opportunities because of the size of the assets that we own. So I think more of it will come from internally generated projects because of the position that we currently hold. But I think the strategy hasn't changed at all from the Board when they look forward, and we just had Strategy Day not too long ago, which Michelle and Henry and Hugh and others were leading. So I don't -- that's not going to change. But I think the other thing is coming back to WestConnex, One thing we know is when the time -- when the opportunity presents itself, you just have to be ready. We don't pick the timing with government. We don't pick the timing for people who want to sell assets that meet our strategy. So again, all these things are sitting there. So we could say that -- I don't know if I look at the pipeline of opportunities that we have in our pocket would be $20 billion of things that we could go to government right now and say boom, boom, boom, but there's timing in place for all that. And it tends to roll out sequentially because there's only so much they can handle and there's like so much the market can handle. So I don't think there's a lack of opportunity. It's just that part of that extraordinary cycle we had 5 years ago for investment.

We might take another question from online.

Sorry, some point, Anthony has had his hand up every time. I don't know if you hand on the thing back there.

Anthony, we'll come to you straight away after this. Michelle, what should the market expect on cost growth in the second half of the year?

Probably the way I think about it -- so we've been working really hard on our costs, and we spoke about that the first half and sort of making quite good inroads into being as efficient as we can across our operations. We -- when we're at the first half result, probably the best way to best thing to do is take that result, double it for the second half. So you've got a full year picture. And then there will be some natural volume growth that comes through, including from the opening of Stage 3A of WestConnex. And then on top of that, we also said we're going to invest a bit more in strategic development, particularly around Maryland. So add $30 million for strategic development costs and a little bit for volume growth, sort of how I think about it. But the operations, actually, we're running pretty efficiently half-on-half.

Anthony Moulder from Jefferies. I wanted to ask about concessions or the next wave of concessions that you expect or hope to sign with state governments. Obviously, a look here in New South Wales, we've moved from a the user pays model to more of a subsidized model. I appreciate that's been more recent. But how do you -- when looking at that, think about how state governments are going to react to another wave of concessions? Does it mean that the 4% CPI kind of idea was simply high or 4% is a way is in the bygone era, state governments are going to be more conditioned to a lower rate of CPI increases, a smaller price for concessions, et cetera? How are you thinking about how this model changes looking forward?

Yes. Look, the models are constantly changing, and we're always looking at it. A lot of times, which this group knows we try to stop government from doing -- I mean, sometimes government says, let's do like a 10% a year increase in tolls or vice versa, let's do like -- let's do a 100-year concession life and we're like, well, we can't really value the last half of that much. So there's parameters that we can play in, and we're happy to do whatever government wants to do. We know the current government and New South Whales has talked about if they do tolls that they would want to do inflation only that had been their policy preelection. Now I don't know if they talk about concessions going forward, they just want to do linked inflation, which is what the M7 is. So we're happy to value whatever they want to value. But a lot of times when we have these discussions, and Andrew and I've had many discussions in New South Wales, where you're talking to different government officials and bureaucracies and you just line up all the value drivers on one side for financial and all the tolls and the outcomes on the other side, and you match which ones work from a political point of view and also from an economic point of view. And so it's a little bit of an art work in working to satisfy every stakeholder's objective, which is why it's so important to listen to our customers community to make sure that we can thread that needle of satisfying everyone's objective. I don't think the concessions necessarily will change unless they may not have fixed escalators, but may be based to CPI. But then if we talk to Victoria is very different because I -- we just recently did that not too long ago. So on West Gate with a fixed escalator and then Queensland has its own nuances. So it's just [indiscernible] for courses and that's the -- I think the skill set of this group is just threading the needle to make sure we satisfy each of the stakeholders because Australia is not one market each market has its own particular issues that we have to deal with.

Thanks Anthony. Justin.

It's Justin Barratt from CLSA. Maybe for my first question, it might be best for Hugh. Hugh, you spoke about, I guess, the potential for projects splitting to access some of the lower-tier constructors in the space. I was just wondering if you would believe that, that actually increases the requirement for Transurban's oversight or management of projects and the pros and cons of that? And then, I guess, the potential for, I guess, your next big greenfield project to actually look at importing or including this kind of structure in the construction?

Yes, sure. The interface risk is the key consideration when looking at splitting the projects. So absolutely requires additional consideration, additional oversight, additional management. The satisfaction that we would have to give ourselves is that the incremental benefit of having spread the risk between different contractors drove both a price and a delivery improvement on a net basis. So we're always looking at it on a net basis, I guess, is the summary. And to date, as you well know, we haven't gone down the path of splitting any of the projects we've done. But it's still on the agenda. When you talk future greenfield or brownfield, I don't think it's any different. So it could easily be done in a brownfield environment as well. What we tend to look for are pieces of projects that are geographically separable. So I don't necessarily have physical interfaces, and that potentially have different stakeholders impacted from the different geographical sections. So that's the sort of thing we're looking for. We achieved a single contractor on the M7-M12 interface and most of the -- sorry, M7-M12 tender. Most of the contractors didn't want to partner in that. So that further pushed us towards having to generate competition and generate partnerships potentially in the future. So again, brownfield greenfield, I wouldn't see that as a differentiation. It's the size and the separability of the elements of the project.

Fantastic. And then maybe for Henry. I really appreciate your further detail on the CityLink traffic and by hour. But I think you gave a couple of examples as to why, I guess, the recovery in traffic in PM has been okay, but -- or largely back to COVID. But the morning still looks a little bit weak. So I was just wondering if you could sort of differentiate or provide any further examples as to as to why the PM is looking pretty good, but the morning a little bit weaker, please?

Yes. Look, it's difficult to isolate sort of specific variables when you're getting under that level of detail. We spent quite a lot of time going through CityLink's numbers and all the various inputs that go into which you try and isolate is there was a particular sort of segment that's driving the kind of underperformance on the network at a headline level at the moment, I'm sure you're all aware, we're sort of low single-digit percentages below pre-COVID numbers across the entirety of the network. And things have configured a little differently. The PM peak numbers might in some way be tied to that activity we're seeing coming to the city as well. But that's a hypothesis at this point. It's difficult for me to give you any more detail in terms of why that might be playing out the way it is. I think the broader observation, if I come back to the point I was making earlier is that we are, for whatever reasons, activity on the weekends higher, and we're seeing activity in those more discretionary period [indiscernible], that's an unambiguous shift that we've seen on the network. You'd all be across office occupancy numbers in the same way [indiscernible]. They're not back to where they were. So that's in some way, playing through in the numbers we see sort of weekday as a whole, and then that sort of plays out a little bit in terms of morning peaks as well, I think.

Thanks, Justin. We have a question from Nathan at the back.

Nathan Lead from Morgans. Just 2 questions, if I could, please. One for Scott and then one for Michelle. So Scott, first up, you led the development of this asset portfolio to the point now where it's quite significant in each of its different markets. Has Transurban done the work in terms of looking at whether there's further value uplift if that portfolio was to be split apart and keeping it as it is?

Yes. I mean, look, we've always said that the -- I mean, everything is for sale, every asset is for sale. But if you look at the ability to, I guess, get value out of the assets, the assets standing alone when we think about the customer base or what we might be able to do in working with our partners, we think it makes more sense the way the portfolio sits, but nothing is -- no asset is sacred. But it would be hard to see how splitting up the assets in the individual geographies would make sense. I mean if you wanted to spin off a whole geography, and there's someone who has said, look, buy Queensland for whatever the number is, and it's more than we think it's worth. And of course, anything is for sale. But having the relationship with the partners and our government clients and understanding the market has its benefits we believe. And I think we've shown that over the last -- certainly over the last decade, but everything is for sale. It's more value than we think it is to ourselves. But it would be hard to -- I think it would be hard to just pick one asset out of a market, that probably wouldn't make much sense to us.

Yes. I was thinking whole of markets. So Michelle, a question to you. Could you just talk through how much borrowing capacity do you think the balance sheet has now, noting that key credit metrics are well above where the downgrade triggers are. And the portfolio has got through a pretty tough credit test. And I suppose entering that in the context of the EastLink bid and whether you'll need new capital for that?

Yes. It's a very good question. And we continue to watch and as I said earlier, it's probably gone a bit better than we thought. So if you sort of go back, we talked about -- we had existing liquidity, and then we had $1.9 billion of capital releases. The corporate bond is -- of $1 billion is sort of in addition to that, but you would think would replace some of those capital releases. As I look at it today, you'd still have the ability to generate close to that $1.9 billion, maybe it's $1.5 billion plus of capital releases. So there is still -- there is definitely more capacity than we thought. How and when we choose to use it depends partly on our partners and working through it with our partners, and also the specific opportunity because different assets have different profiles as well. So then if you go to your more specific question around EastLink, we don't know yet how much is for sale or how big it is. It is possible there's an amount of equity that's needed, particularly if it's a bigger amount, but we just don't know enough yet. Yes.

We might take a final question from online, and then we'll come back to Owen before we break from morning tea. So you have given a great presentation on the physical assets of Transurban. One of your strengths is also the relationships with the funding partners. Can you give a discussion on the management of these relationships and how you manage any changes in the priorities of your partners that could impact the management of future funding of your physical assets?

I think at a high level, and particularly over the last few years, we've been working very hard to strengthen the relationships. And it doesn't apply just for our financial partners, but all of our partners across whole different levels of the working groups and the company. One of the reasons why we brought in Hugh was to lead up partnerships as well. So those relationships didn't just sit at the geography levels or sit with me or whatever it might be. So we've worked very hard to depth and strengthen the relationships. And everyone in here from Transurban, we'll have relationship with their counterparts at our investment partners or with our financial partners, including our political partners. So I think that is one of the strengths of Transurban as we understand the importance and the long-term nature of the relationships that we've been in. And that's why we pick partners like Aussie Super and CDPQ and CPPIB and Audi and others. Because on the other side for us is they understand the importance of partnerships in the long term. And one of the things I'm very proud about and we speak about is in the 10 years of having these partnerships, we've never had to pull out the shareholders' agreement and talk about what actually the shareholders agreement says. We've always been aligned. We're here for the long term. We worked really well. But those partnerships are spread deep and wide across the organization because I can remember the first time when Jason Peasley, who was with AusSuper when we bought QML. And one of the first things we said after we bought QML, is he said to me, we won't be here in 10 years, and we certainly won't be here at the end of these concessions. So we have to make sure these relationships hold that we keep aligned. And one of the things that they -- like John Massey, who was our first independent Chair of QML, used to say, what John was always very proud of is he would always say, at the Board meeting, let's remember why we're here. let's remember why this partnership started, let's remember what we try to achieve. And that's, I think about it right across our relationships and our partnerships. But I don't know. I mean, Hugh, you've -- you spent a lot of time with all of the partners challenges. There's always challenges. But yes.

I think you've covered it well, Scott. And I think we've seen strategies changing and we've seen the WestConnex consortium for the second phase be different to the first phase that we managed to work through that with both the existing partner and the incoming partner. And when our strategy changed in Montreal, we quickly sought to capitalize on the new partner that we had in WestConnex. So I think been pretty dynamic about it as well and realistic. And we -- to Scott's point, we don't just engage with existing partners. We engage with possible future partners as well. So we kept available flexible. But that point that Scott made about not referring to the shareholders' agreement couldn't be reinforced more often at every level of both our organization and the ones we work with. So it's a great dynamic to be working with it.

Owen?

Owen Birrell from RBC Capital. Just one final follow-up question for me. You talked about the portfolio approach to the business. But I do note that the portfolio is skewing fairly mature and fairly low risk. Is there any appetite from Board to look at greenfield opportunities, particularly in new markets that you're not currently in?

Yes. So look, we're in the risk-taking business, so it's always a risk or reward occasion. But if we go back to -- and I think it's not on the slides, but we talk about it from an executive point of view or we talk about the leadership. Again, the things that I always look through is, is it on strategy? First of all, do we have the right people to do it. So if it's not on strategy, obviously, it doesn't make sense. If we don't have the people to do it, it doesn't really matter. If you can fund it then we look at, do we have any competitive advantages because we don't have competitive advantages. We're just wasting our time. And then can we fund it and then what does it do to the distribution. So if there was a greenfield project, that would fit that criteria. Certainly, we'd look at it. But it's hard to see a greenfield project sometimes that would meet that criteria. We recently or a year ago didn't participate in some express lanes that were being developed around Atlanta in Georgia. Some of our team wanted to do it. We looked at it and said, "Well, this is the second time Atlanta just try to do it." it was really being construction-led. So there's 5 sections, PPP sections, really construction-led. We couldn't see then if you had 5 different sections, how you make the Express Lanes work kind of as a network. We had no competitive advantages, so we walked away. Now if one of our partners said, "Hey, CPPIB's got a concession to develop a toll road in Vancouver." It looks like a great asset. They want us to come in and help us help them. It's a greenfield asset, sure. We would look at something like that. But it has to really meet that criteria. It's pretty tough criteria, but obviously, our networks are going to produce quite a lot of opportunities in themselves. And when you say we have a lot of mature assets, and we go back to Michelle's slide, the thing about mature assets and lesser tunnels is the mature assets then lead to widenings. So eventually, the M4 is going to need widening again. The M5 West is going to be widening again. We're only widening 3/4 of the M7, it's going to need widening Gateway Logan. So the mature assets lead to congestion growth, which leads to widening, which again, growth covers a lot -- it creates a lot of opportunities to maybe coverage a lot of sense. And we've got some of the best growth markets in the world.

Thanks, Scott. Unfortunately, that's all the questions we have time follow, but some great questions. We'll now have a short break before we kick off our ESG session at around 11:25. [Break]

Great. And good morning again to everyone, and welcome to the next part of our Investor Day for 2023. We're now going to move to the ESG presentation, which will take us through to launch. I'm going to quickly run through the agenda, which the session will run for about 45 minutes. Now the topics you'll hear about today give a small snapshot of where we currently are on our ongoing ESG journey. And obviously, if you got our corporate report, there's some fantastic analysis of all the work if you get a chance to review that. Now the needs of all our stakeholders, including our customers and communities, are going to continue to evolve as they have over the last decade, and we will continue to strive to take a considered disciplined and responsive approach to those needs. And today, we'll hear from Jessica O'Brien, who has the longest title in Transurban, who is General Manager of Corporate Affairs, Investor Relations and Sustainability. And she's going to talk about Transurban from a trust and a reputation perspective, which I know. We had some discussions actually during the break of what's happening there with our customers. And I think you'll find it very interesting where we are on that journey. And why, of course, that's very important to us and to you, our investors, our new Head of Sustainability, Amy Hogan, who is one of those great talented individuals that has chosen to join Transurban very recently will take you through a detailed look at our commitment to net-zero and the progress we're making to reach our targets. After that, we'll have a panel discussion, which will be led by Michelle and she'll be speaking to some of the senior leaders within the business about the issues that are facing our customers and communities and some of the initiatives and strategies that we're implementing to insist them. Then there'll be some time for questions from you and the whole team will be available to take some answers. But just a quick reflection in relation to my time at Transurban and our ESG journey. So one of the things that we have done during that time it has been a very disciplined and data-driven approach. And we've done that in a way that reduces risk. It brings greater stability and longevity to the business, and most importantly, without sacrificing returns. I think you'll see almost every initiative that we've done has added value to the community, to the customers. But more importantly, it's actually added value to returns as well. And some of those examples you'll hear about are our vulnerable customers. A lot of energy efficiency, which I know the time when we made our investment in renewable energy and made some big commitments like 5 years ago, it was on the cusp of is this going to add value or not? And then with the current spikes in pricing last year, I think Michelle wherever Michelle is, we made a little bit of money on the renewable side, which is nice and continue to do the right thing, both on returns and our journey to net zero. Obviously, promoting road safety, which provides a lot of benefit to our customers, another reason to use our roads and makes our roads perform more efficiently as well. Again, we think these are all the right decisions for our business. They help continue to generate opportunities. And again, they continue to deliver great returns. So with that, I would like to invite Jess to the stage, and I think they have to move [indiscernible], and then we'll hear from Jess.

Thanks Scott. And good morning, everyone. I was very restrained [ if you ] about my title. When we were looking at potential discussion points for this ESG session, we have a lot of interest from our investors in social license to operate. But if I was to ask everyone in this room, what does social license to operate mean, I'd probably get 100 different views. It's fast becoming one of those corporate buzz raisers, that means different things to different people. But at Transurban, it's about building trust and reputation with our stakeholders. Now when I say stakeholders, it's really just shorthand for the 6 groups that are critical to our business. Our investors, the government our customers, the community, our employees and our business partners. Now we approach this area from both a risk mitigation perspective and from a value creation perspective. And today, I'm going to talk to you about why this is such an important area for our investors. What I really want to impart on you today is that this is not a fringe exercise to Transurban. It's right at the center of our business, as you'll be able to see from our company purpose to strengthen communities through transport. And incidentally, this is not new either. Scott led the development of this purpose back at the start of his term over 10 years ago. And you can see it in our strategy statement, too. By understanding what matters to our stakeholders, we create road transport solutions that make us a partner of choice. And over the past 10 years, the views of these 6 groups have become embedded in our thinking as an organization. As I just said, this is not a new space for Transurban. And 2016 was when we really began to augment our efforts in this space. Back then, Transurban's positioning the community was changing. As an organization, we're long flowing below the radar, but we are growing fast. We've launched Linkt a national customer brand. And this is all at a time when the public was expecting more from business. Now as you know, we love data at Transurban. So as an organization, we sought to understand our stakeholders' view for an independent survey. And on a scale of 1 to 100, our baseline score was in the mid-30s, with anything below 50, indicating that you're not trusted. So to understand the issues, we conducted an extensive listing program, and I know a number of you in the audience participated in that. One of the key findings was that we needed to grow our relationship with our customers. So in response, we developed initiatives like our Trip Compare app and our decision point signage pilot. But one of the responses that we're most proud of is Linkt Assist, our customer hardship support service which has helped tens of thousands of customers. Now pleasing on the back of these initiatives, we did start to see some early signs of trust building in 2018 and 2019. But then COVID and everything changed. We had next to 0 cars on our roads, but our customers needed our support. And I remember it clearly, rather than reacting to the situation, we took a step back and really tried to consider how we could be most impactful while keeping our investors front of mind. We implemented a number of new initiatives that were designed for the times to support our customers. A toll credit program, which would help those who have been financially impacted by COVID and also our essential workers who are keeping our community safe. This is as well as incentives to help get the public vaccinated so we could get our cities moving again. Now this time, we saw trust in Transurban rising significantly, and you can see the step change that occurred pre-2020 and post-2020. The pandemic taught us a lot about how to build trust in Transurban. And that score is now consistently sitting above 50. And from 2016 to where we are today, we've seen an increase of almost 60%. But if someone who watches this score closely, I understand that we only get trust credit for initiatives that are authentic to our business. And because we're a toll road company, we have to work harder than a lot of others, even just to maintain these scores. But we know as we seek to continue to grow the value of our business, our government partners will be watching closely what their constituents think of us. But we're encouraged that as part of our research, around 40% of respondents think that Transurban makes a net positive contribution to the communities in which we operate. And almost half of the respondents are undecided. So to me, that actually represents a significant opportunity if we remain focused on what matters. So at any particular point in time, there are stakeholder issues that we need to respond to. And currently, as we all know, cost of living is #1. Now research indicates that when it comes to concerns in this space, tolls are actually a fair way down the list well below food, housing, utilities, et cetera. But when every dollar counts, our customers expect our health. So we've been doing things, like Simon mentioned earlier, ramping up our rewards program to make sure that we've got fuel discounts available for all of our customers. And we've been adding resources and upscaling the team at Linkt Assist. Should we see an increase in demand from customer hardship, and we've been engaging with governments on toll reform too, but I'll come back to that shortly. In addition, as we continue to own our public profile, no longer flying under the radar by developing our community brands, and you'll hopefully have noticed us doing more to show our support for customers and the value that we offer. This includes a new competition that we'll be launching in the coming days. So we've all had those text messages that pretend that there's an unclaimed package or there's some kind of problem with the ITO or in our case, that there's unpaid tolls. So to respond to this issue, we've been encouraging customers to report these scam tech, and we're trying to educate people on what to look out for. But in addition, we thought we try something a little bit different. So we're launching our competition called dob in a scammer, where literally, you dob in a scammer and you go in the draw to win an electric vehicle, thereby incentivizing people to report the scams, so the telcos can shut them down faster. In addition, with traffic strongly the kind of roads, we've launched ad campaigns such as the Choice is Yours to show the benefits of using our roads. Whether that be making a home in time from the airport to see the kids before beds or making it to a fully game before the first bounce. But to ensure that we keep building our standing with customers and the community, we the biggest thing that we can do is to keep listening and keep responding to those issues of the day. Now when it comes to working with our government stakeholders, our business is built on long-term nonpartisan relationships, the last be on the political cycle. And this reflects the fact that the delivery of motorways often stands multiple governments. In all, we've partnered with more than 15 governments on out of 16 projects, but our engagement isn't just limited to projects. Our customer initiatives, our mobility trends research and our road safety data, all provide government and local MPs with valuable and unique insights that can assist in policy development. Now that corporation continues at the moment as the New South Wales government begins its work control reform. Now this is something that we have long advocated for, including during the 2021 parliamentary inquiry into tolling. In our submission, in the media, directly with the government and the opposition, we made our position clear. We want to remove inconsistencies while making the system more efficient, and we want to make sure that we're part of the reform process. Then at the New South Wales election in March this year, the Coalition and Labor are both promised that they would work with the private sector on toll reform, while honoring existing contracts. We're committed to finding a solution to this important area that meets the needs of all of our stakeholders. So to summarize, to continue to grow the value of our business for you and our investors, it's critical that we remain a partner of choice to government. And if you follow the linkages and this means we need to continue to deliver for customers and the community. So I'd like to finish by just showing you a short video with some examples of things we're doing to try and to better serve our stakeholders as we prepare for our next speaker, Amy Hogan, our Head of Sustainability, who's going to take you through our pathway to net-zero. Thank you. [Presentation]

Good morning, everyone. Sustainability is something Transurban have been thinking about and acting upon for many years, going back to the company's first sustainability report in 2016. This ambition demonstrated leadership and ability to walk the talk on what has attracted me to this business. And what has already struck me over the last 2 months is that sheer scale, capability and opportunity that we have to drive positive environmental and social change. Now while our sustainability strategy covers many aspects of the business, today, I will focus on our pathway to net-zero. Committing to net-zero emissions by 2050 is vitally important. And having a pathway to achieving those net-zero commitments is critical. In 2020, we became the first ASX 20 company to have our net-zero 2030 target validated by SBTi. These interim targets covering scope 1, 2 and 3 are critical in the milestones in our pathway to achieving net-zero. Now our emissions footprint is defined by the greenhouse gas reporting protocol, which is recognized as the international standard for greenhouse accounting and reporting. As Scope 1 emissions relate mostly to fuel use and make up just 1% of our total emissions profile. As Scope 2 initiatives account for around 20% of our footprint and relate to electricity use in our roads, tunnels and operations. These are the emissions we have control over. Scope 3, on the other hand, are the emissions we influence and not surprisingly, are the most significant. They mostly include emissions associated with materials using our major projects and along the supply chain. And then there are our customer emissions, the people who travel on the road. These fall outside of our scope 3 reporting boundary. Reducing these emissions is a really important part of our strategy and I will talk to that shortly. So let's take a closer look at Scope 1 and 2. For Scope 1, our focus is on fuel efficiency and switching our and our contracted fleet to electric vehicles. For Scope 2, we're focused on reducing energy use through optimizing ventilation systems, upgrading lighting and transitioning to renewable energy. Last year, as Scope 1 and 2 emissions were 13% below 2019 levels, even following a period of significant business growth. And the graph shows that we are on track to meet our 2030 target well ahead of schedule. Let's take a look at how we are reducing Scope 2 with some real world examples. The first is our transition to renewable energy, which has been supported through a series of power purchase agreements with a number of wind farms across the country. And in the first half of FY '23, 80% of our entire electricity consumption was generated by these projects. Not only have these PPAs deliver significant environmental benefits, they've also acted as an important financial hedge for our regular electricity contracts during periods of high energy pricing. Ventilation Systems accounted 70% of the energy needed to operate road tunnels. Using 3D modeling and simulation, we've been able to optimize and fine-tune our ventilation performance by ensuring that fans are only on when they need to be, while making sure that strict air quality controls and standards unmet. And this delivers considerable energy and cost savings to the business. Scope 3 emissions are missions that include upstream and downstream activities of an organization. And for most, including Transurban, they are far greater than our Scope about 1 and 2 footprints combined. And quite frankly, they're the most challenging. We don't directly control them. There are missions and activities that we can influence like purchasing goods and services for our major projects, future emissions, business travel, waste management. Now to drive decarbonization of -- sorry, across our supply chain, we do several important things. We ensure all major projects are required to achieve an excellent infrastructure sustainability rating as a minimum standard. We're continually increasing contract-specific sustainability requirements in our projects. We're also a founding member of a materials embodied carbon leaders alliance. We finally refer to it as MECLA to drive forward demand for low-carbon materials. And we work really closely with our delivery partners to source these materials, such as those with high recycled content like crushed glass, cement replacement and warm mix asphalt. Now last year, we achieved a 24% reduction in the carbon intensity of our major development projects compared to 2019. And to date, we've saved over 644,000 tonnes of CO2 across our 9 projects. We're also engaging with top 100 suppliers through CDP supply chain to improve supply chain data quality and to encourage our suppliers to set their own carbon reduction targets and to switch to renewable energy. Two of our most recent Australian projects provide really excellent examples as to how we are tackling Scope 3. Both the WestConnex M4-M8 link and West Gate Tunnel Project received leading design ratings. Now these are the highest rating possible from the Infrastructure Sustainability Council here in Australia. On the M4-M8 Link, we saw a 57% reduction in embodied emissions in material against the initial design base case. This was achieved by developing high-performance shotcrete, reducing the amount of materials required to align the tunnels by about 20%, 15% reclaimed asphalt pavement was used in asphalt mix and a contractor was able to reduce steel volumes by reducing the amount used for steel fibre reinforcement. And on the West Gate Tunnel, the reduction in embodied emissions in materials is around 21%. Here, we were able to make some design changes that extended the tunnel length and reduce the need for ramp structures that would have acquired larger quantities of carbon-intensive materials. So let's talk about emissions from our customers, those people who travel on our roads. As I said previously, while these emissions don't fit within our Scope 3 reporting boundary, and it's really earned days, there is still a lot we can do to influence and advocate for positive customer outcomes. This graph shows how significant vehicle emissions are in relation to Scope 1, 2 and 3 footprint. It's more than double. And we know that what we do to help our customers reduce their emissions on our network can have the potential to have a much greater environmental impact when stayed across the broader road system, which is illustrated in these pie charts. So when we think about customer emissions in 3 ways. This might design of our roads, education around sustainable driving techniques and the uptake of zero emission vehicles like electric vehicles. So when we look at smart design, we can make a really big difference to viable fuel consumption by reducing the inclines and declines on tunnels such as the NorthConnex. And education is a really important part of our strategy. We regularly promote Eco driving tips such as minimizing accelerating and breaking and keeping tyre pressure up in our vehicles. Our Eco driving trial in 2021 found that drivers could save 5.5% on our use if they adopted such behaviors. Now the savings might sound small to you, but it is quite significant, if potentially rolled out across the whole road network. Finally, we're exploring ways we can encourage the uptake of electric vehicles, looking at both our own fleet and our customers. So you can see some examples on this slide. However, I really wanted to call out our first EV drive day, which was held in February this year to inform our major fleet buyers around the benefits and financial incentives to switching fleets over to electric. 48% attendees from that day said that they are now more likely to convert their entire fleet of EVs in the next 5 years. And keep in mind, fleet managers buy nearly half of all brand-new cars sold in Australia each year. So while it is early days, there is so much opportunity in this space, and we will continue to encourage and support our customers in their own decarbonization journey. So I would like to end my presentation before we move to the customer and community panel by showing you a video on NorthConnex, which was -- which has achieved an excellent infrastructure sustainability as built rating in 2020. At Transurban, we strongly believe that external rating tools, like those governed by the Infrastructure Sustainability Council are important to provide you for benchmark and third-party assurance at which we can measure our performance, giving confidence to our stakeholders at our words are back by tangible action. Thank you.