Transurban Group (TU9.SG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Transurban Group FY '25 Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Craig Stafford, General Manager, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for Transurban's 2025 Full Year Results Briefing. Transurban acknowledges the traditional owners of the lands throughout Australia, and we pay respect to elders past and present. We acknowledge our roads and infrastructure are built on country. With deep respect, we incorporate the voices of First Nation peoples in our approach, supporting equitable access to mobility across communities. We're joined today by our CEO, Michelle Jablko; and CFO, Henry Byrne. And together, they'll take you through the presentation that we lodged with the ASX earlier this morning. We realize it's a very busy day today. The presentation should take about 20 minutes, which will leave us plenty of time for Q&A and maybe an early finish. I'll now hand over to Michelle to get us started.

Thanks, Craig, and good morning to everyone on the call. This year, we worked hard to deliver and to set ourselves up for next year and beyond. We did what we said we were going to do. And today's strong results shows that. We increased distributions by around 5% and outperformed our cost guidance. We increased revenue by 5.6%. Traffic grew across all markets, and we achieved 7.4% EBITDA growth, keeping our costs flat. We also took decisive action to be a more efficient growth-ready business. This has given us a platform to increase our distributions by 6% next year, creating longer-term value for our stakeholders. Over the past year, we've spoken about some of the complexities we had to work through in our business. We needed to reset our cost base. We needed to demonstrate more value to our customers, and we needed to reset some of our relationships. We have strong momentum on all fronts with some important milestones coming up in the year ahead. We're well progressed on New South Wales toll reform and closer to outcomes that are positive for all. We have 3 major projects opening in the next year, each offering significant benefits to road users. In Australia alone, these new roads are expected to save over 28,000 hours of travel time each day, bringing relief to fast-growing communities. And we're exploring new ways to grow using both traditional and innovative approaches. We've realized efficiencies across every part of our business, making us more agile with a sharper focus. And we've reallocated investment into our customers, bringing together our physical and digital infrastructure as a point of differentiation. With these foundations coming together, we're in a strong position to act on new growth opportunities and keep the momentum going. With traffic, we're seeing resilient growth across all markets. North America performed strongly this year with traffic up 6.4%. Sydney and Brisbane delivered solid underlying growth even with the impact of Cyclone Alfred in Brisbane. Large vehicle traffic grew strongly in Brisbane, up 4.1% for the year. WestConnex saw a boost from the opening of the government's Sydney Gateway cutting travel times to the airport by up to 17 minutes for a round trip. And as we've touched on before, construction projects impacted traffic growth in Sydney. These should start to ease in FY '26. In Melbourne, traffic growth grew 1.2% with more airport-related trips and weekend traffic. Construction impact started to abate through the year and office occupancy remains at around 60%. So let's now look at our markets a bit more closely, starting with Sydney. One of our biggest near-term priorities has been finding an outcome on toll reform that works for everyone, and we're optimistic we're getting closer to a solution. You would have seen recent commentary from the New South Wales government stating discussions are collaborative and constructive. We're continuing to work positively with government to deliver solutions that meet their priorities while protecting the significant investment we've made in Sydney's road network. As part of these discussions, we're making good progress on initiatives like toll notice simplification. All of this has taken time. The network is complex, and there are many stakeholders involved. And we expect that the government will have more to say later this year. Also in Sydney, our M7-M12 integration project remains on track to open mid next year. And looking ahead, growing congestion in the Northwest presents further opportunities to enhance our network as the city grows. In Melbourne, our longer-term fundamentals remain strong, and we're well positioned to benefit from macro trends like population growth. We've also made significant progress on the West Gate Tunnel Project. As you can see on the slide, we're more than 95% complete, which is a big move from even a few months ago. As we've noted before, projects like these are naturally complex and not done until we're done, but we're now firmly in the final stages. We're planning with the state for a successful opening and looking forward to easing congestion in Melbourne's West. There have been a number of reports that the contractor has had some challenges, none of which are new or have slowed the project down, and work continues at pace. Claims are not unusual at the end of a project, and if any claims are made, we'll assess them in the ordinary course. Our Brisbane market continues to show great potential. It has the fastest population growth of all our markets with congestion being a key concern. And there's also a sense of excitement as we get closer to the 2032 Olympics. The Logan West upgrade is progressing as we undertake investigative works and engage with the community. While there's still work to do, we're planning to submit the binding upgrade proposal in 2026, which is a key milestone. And more recently, we welcomed the government's 2032 delivery plan, which includes upgrades on the Gateway Motorway. We're working through the details of this with the state with our roads being central to connecting sporting venues, tourism hubs and the broader city for the games and supporting Brisbane's growing population. As I mentioned, North America was a real standout this year. For a business that makes up around 7% of our traffic, it's having an outsized impact, delivering nearly 25% of overall revenue growth. Drivers are clearly seeing the value in our Express Lanes and not just during the peak. We're seeing traffic grow even outside congested periods, and our pricing reflects that value. While everyone is watching the U.S. economy closely, we know that the need for infrastructure is very local. Today, North America contributes more revenue than it did 5 years ago, and we own 50% less. We're confident there's a lot more upside to come from our assets, particularly with the Northern Extension project opening this year. And more broadly, our partnerships in the U.S. are enabling us to explore new cities in fresh ways, striking the right balance between risk and returns and creating optionality for longer-term growth. Delivering clear value to customers really matters. It's an important differentiator, both as governments consider new projects and as new policies like road user charging emerge. This year, we've continued to take clear targeted steps to enhance the entire customer experience. With the new travel time savings feature in the Linkt app, customers can now see exactly how much time they're saving, bringing the benefits of our roads to life. And we're expanding our Linkt Rewards program with good feedback from customers and our rewards partners. So we know there is substantial value to -- able to be unlocked in this space. You'll be aware of the significant organizational change we made this year. It was a hard decision and not one we took lightly. So when we announced the change, we acted quickly, decisively and with care for those impacted. It was hard, but we're confident it was the right decision. And we're already starting to see the benefits. We're operating with greater focus, becoming more nimble and dynamic. And importantly, the capital release is being reinvested for our future. This means improved outcomes for security holders direct benefits for our customers and more efficient operations, making work easier for our people and strengthening the safety and performance of our roads for our customers. It's a big year ahead. We have nearly $13 billion worth of projects opening in the next year. These are significant milestones that will drive growth and unlock new value. Beyond that and with a strong balance sheet behind us, we're engaged with partners in more than $10 billion of new project discussions across existing and new markets. And the initiatives I've outlined today like our digital investments and our focus on customer personalization are opening doors to new types of opportunities. Take road user charging for example. We're encouraged to see the federal government considering this as part of the productivity summit. And the New Zealand government also announced they'll be taking a modern approach to road user charging. With our customer focus and mobility expertise, we're examining ways to support these initiatives. So I feel really pleased with the progress we've made, and I'm excited about the opportunities ahead. Let me now pass to Henry to take you through some more details on the results, and then we'll come back and go through questions.

Thanks, Michelle, and good morning, everyone. We've set out our statutory results on Slide 15, but I'll move to the next slide where we've set out our proportional results. Michelle has outlined a number of key areas where we've made good progress, and this is showing through, again, in the operating leverage in our numbers. Proportional toll revenue grew 5.6% to $3.7 billion, and that was supported by resilient underlying traffic. Proportional operating costs remained flat year-on-year at $947 million, which was ahead of the guidance that we provided at the half year and below inflation, and that contributed to proportional operating EBITDA growth of 7.4% and a margin improvement of 140 basis points. Free cash increased 7.6% with distributions 99.5% covered by free cash. And we did -- as we did in the first half results, you'll see we've shown proportional operating EBITDA this half to highlight the performance of the business, excluding the first half litigation impacts that we announced in late December last year. And just to refresh your memory, this litigation relates to the roaming fees payable by ConnectEast to Transurban. As we flagged in December, we had an initial judgment against us in that matter, which found we'd overcharge fees. The amount claimed by ConnectEast is in the order of $10 million a year since 2009. But I think it's important to stress that this is an issue specific to CityLink that does not impact customers, and we're currently appealing this matter. When we look at our funding outcome and the position of the debt book, we're really pleased where the year has landed. Our weighted average cost of Australian dollar debt remained flat year-on-year at 4.5%. And this was mainly due to some well-timed hedging and some of our floating rate exposure that we carried over the financial year end. And you can see as at June 2025, our debt book is hedged at 92.5%, which is up from 88.2% in June last year. Looking ahead, despite the higher interest rate environment, we're only expecting marginal increases in the cost of funding given the staggered maturity profile with no more than 10% of the debt book matures in any given year. I'll discuss our liquidity position in more detail shortly, but the headline is that it remains strong with $3.7 billion of corporate liquidity and in excess of $1.7 billion in balance sheet capacity, which can be utilized to fund some of the opportunity pipeline that Michelle spoke to a moment ago. Slide 17 presents the free cash bridge, and that shows a 7.6% or $141 million increase, and that's mainly driven by higher EBITDA, which was partially offset by some higher proportional net finance costs. While the weighted average cost of debt remains steady year-on-year, finance costs increased by $35 million, and this was driven by approximately $1 billion of additional drawn debt to fund current projects, and that's really an investment in future growth. Interest income also declined slightly, which reflected lower average cash balances over the period. In addition, tax paid increased marginally across pockets of the group, and we also saw the commencement of debt amortization at Cross City Tunnel. So overall, the result reflects strong operational leverage and disciplined cost control, which has flowed through to free cash growth. If you move to Slide 18, you'll see a clear illustration of the operational performance I touched on earlier. The year-on-year operating EBITDA improvement was supported by particularly strong results from our Transurban Chesapeake business in Virginia, as Michelle just mentioned. And when you couple that with flat cost growth across the group, this contributed to the margin expansion of 140 basis points that I spoke to earlier. A key feature of the result was the flat proportional operating costs, and we've set out some more detail of that on Slide 19. Over the past year, we've remained focused on driving efficiency across the business, and we've now been able to achieve this for the past couple of years. We've strengthened our supplier engagement to drive better value, streamlined our systems to unlock technology efficiencies and refined our asset life cycle planning to ensure we're managing resources as effectively as possible. And we believe there's more opportunity in front of us in relation to this. At the half year, you may recall, we noted that part of the cost outperformance was timing related with maintenance spend expected to be more heavily weighted to the second half, and that did play out as anticipated, with approximately $80 million of the spend in the second half compared to $50 million in the first half on maintenance. Going forward, we anticipate the proportional group spend for maintenance to increase over the coming years as a number of the assets enter their new cyclical phase or their next cyclical phase, notably with WestConnex entering its first major cycle. We do see meaningful opportunities to refine our maintenance program and asset life cycle models with the new enterprise operating model now in place, we're better positioned to manage maintenance costs, unlocking efficiencies and supporting long-term portfolio optimization. Looking ahead, we expect cost growth to remain below inflation in FY '26, excluding new assets, and that's also subject to the level of development activity, which can vary with the opportunity set in front of us. If I turn to our balance sheet and funding summary, after accounting for committed project spend and distributions, we estimate balance sheet capacity in excess of $1.7 billion, and that positions us well to support further growth. And we expect additional capacity to emerge over time on the basis that EBITDA is expected to grow. As you can see on the right-hand side of the slide, our treasury team already progressed on the funding task for FY '26, refinancing $700 million of the corporate debt early in June. And finally, despite some volatility in debt capital markets through FY '25, we were able to consistently secure strong outcomes when accessing debt markets. And this really reflects the depth of our funding relationships and the quality of our credit profile. Slide 21 brings together our capital allocation framework, and this is one that we presented previously. It provides a clear lens into how we think about the portfolio, delivering consistent growth in distributions while creating capacity to reinvest in the business and support future growth. The framework illustrates how we think about funding of distributions and growth opportunities. And in FY '25, we delivered 4.8% growth in distributions per security, which was underpinned by 7% free cash per security growth and 7.4% operating EBITDA growth, and that demonstrates the strength of our model and the momentum within the portfolio. We invested $700 million in CapEx during FY '25 and have $600 million committed for FY '26 to finish out those projects. Our balance sheet remains well positioned to support growth opportunities, and we're actively assessing opportunities across the portfolio and in new markets. So I'll wrap by saying we're very pleased with the financial performance this year. We've seen resilient traffic growth, disciplined cost control and margin expansion, all underpinned by a clear focus on operational efficiency. These outcomes are setting a strong foundation for sustainable growth that's going to drive returns. From a funding perspective, we're in a robust position. Our balance sheet continues to support delivery of committed projects, and we're actively evaluating new opportunities, both within the existing portfolio and in adjacent markets where we see potential to unlock further value. I'll now hand back to Michelle for some concluding comments.

Thanks, Henry. Today's result reflects the tremendous progress we've made over the year and the tangible outcomes we're delivering. We've moved the dial on some of our biggest opportunities from progressing toll reform to becoming a more customer-focused business and resetting our cost base. And we have emerged a more nimble and efficient business positioned for growth. We're entering FY '26 with momentum, a solid foundation and a clear ambition to continue driving value. Let us now open up for questions.

[Operator Instructions] Your first question comes from Andre Fromyhr with UBS.

Firstly, I just wanted to ask about the guidance for distributions at $0.69 per share and recognizing that we're in the sort of new distribution policy settings of the 95% to 105% power ratio. I mean should we be interpreting the $0.69 as a point estimate at 100% and then the uncertainty around traffic and performance is the wiggle room around that? Or are you somehow sort of preparing your cash flow coverage at an alternative level for FY '26?

Henry to answer that. Thanks, Andre.

Yes, sure. Look, we don't provide guidance on where we think we'll sit within the 95% to 105% range, but clearly, the Board wouldn't put guidance out unless we were comfortable in terms of our ability to meet that subject to a number of variables. So that's probably how I'd answer that, Andre, in terms of where the coverage range sits. We do obviously contemplate different scenarios around traffic. We do have an ongoing focus around cost discipline within the business, and that's going to remain into FY '26. And you can hear from the cost guidance I've just given around an objective or guidance to come in below CPI growth again this year. Obviously, excluding new assets, it tells you that, that obviously will be an ongoing effort that will then support the distribution outcomes.

Yes. Maybe what I'd add to what Henry said is when we think about the distribution, 1 of the reasons we changed the policy to 95% to 105% was just being conscious of the glide path of distributions as well. So it all sort of gets taken into account.

I guess a related question. There is a comment in the pack around the expected contribution from West Gate Tunnel to be broadly neutral to free cash flow. Is that a comment specifically about FY '26? Or is that sort of -- is that true for a longer period of time? And maybe you could remind us what is the run rate of cash finance costs that switch on once you start operating the asset.

Yes. So this is a comment -- this is consistent with comments we've made for some time, but I'll get Henry to go through the detail of that.

Yes. So there's 2 components to it. The comment around being broadly neutral to free cash is a comment we've been making now for a number of periods, and that does relate to FY '26, Andre. You would expect as traffic and revenue ramp up on that asset over time that it would start to make a positive contribution in the years beyond FY '26. In terms of the quantum of capitalizing interest costs, you'll see it in the back of the deck. I can't recall which slide, but it's $171 million capitalized in FY '25. Slide 51, someone's just pointed out for me now.

Great. And if I can just follow up on your comment just then, Henry, about the efforts on costs, if I understand the context here, the focus from the org structure changes has primarily been on head count. So I'm curious to understand how much remaining opportunity there is on costs when you move across to sort of, let's say, the non-head count part of the cost base.

Yes, sure. Look, the first thing to note is the changes we made to the organizational structure don't flow through into the outcome in FY '25. That's an FY '26 prospect, and it tells you that we've been doing a lot of things inside of this business beyond just looking at the composition of the workforce. A big focus is around the corporate costs, and we have been able to have quite a bit of success around rationalizing third-party costs within the business. I'm thinking about how we can get some technology rationalization going, simplifying some of our systems. But it is quite a broad-based effort going on across that corporate cost because we are continuing to invest in other areas. And notwithstanding the fact that the maintenance -- the actual maintenance spend was a little down year-on-year in FY '25, that will increase in FY '26. That's certainly our expectation, and that reflects the intention for us to continue to invest in areas where we think we'll add value. For instance, you will see us undertake some maintenance on assets like the M2, where we'll do some resurfacing works in FY '26. So there'll be some swings and roundabouts in terms of where we achieve some savings and where we make some investments. But it's a very broad-based effort across a range of areas, probably with a focus more on corporate in other areas in terms of where we've been able to have success to date.

Your next question comes from Adam West with JPMorgan.

I'm just wondering, so EBITDA margins look to be down in Sydney and North America this year. Is there anything specific to call out there?

I think -- and Henry can sort of jump in. When you look at EBITDA margins, because of some of the structural change we've made in the business, you're probably better off looking across the group. But it's essentially reflective of what Henry said. We've been focusing on costs, particularly in corporate, and that's where the bulk of the changes we've made have taken place and investing more into the roads. And you've got some of the roads increasing in maintenance cost, for example, and we're offsetting that with savings in corporate.

Yes, I think that covers it well. We did see an increase in road operating costs, for instance, which you will see in the breakdown, and some of that is obviously centered on the New South Wales business in terms of where some of that cost has come through. But the broader piece, I think the step back is to look -- that's why we have a broader portfolio, so that we can balance some of the swings and roundabouts in the movements like that.

Yes, that's clear. Just looking at the opportunities, I'm just wondering, have you got a sense of how competitive the bidding process for the, I guess, the I-285 East and the I-24 in America would be?

Look, it's probably a bit early to comment on that. There's -- there are a number of parties that have been shortlisted, of which we're one. We think it's a region where there is lots of potential for longer-term growth, but it's probably a little early to comment on that, Adam. But one of the reasons we thought partnering made sense is as we go into that kind of process, it makes sense to sort of appropriately sort of balance risk and return early and then if we're successful, give us optionality to build a bigger presence over time. So that's why we've taken that approach.

Yes. No, that's clear. And just a final one for me. There's been a couple of reports in the media in the last couple of weeks is that Canberra motorists are set to get a refund. I'm just wondering, do you have any indication on how large it would be? Or is it just largely immaterial?

From a financial perspective, we're not expecting it to be material. It was something -- the issue was around duplicated plates affecting not just us, affecting others. We shouldn't -- we did get it wrong. We shouldn't have gotten it wrong. We're putting customers right, and we're working with both New South Wales and ACT governments to get the data we need to be able to put in place sort of longer-term fixes on the issue.

Our next question comes from Ian Myles with Macquarie.

A Quick one. Your West Gate Tunnel, the -- just the dealer asking for some more money, et cetera, can you just confirm when you signed the sort of the updated contract, it was fixed price, fixed time? And are you comfortable to say that you don't carry any liability associated with that?

So what I'd say is like, firstly, this project is going to be amazing when it opens, and we're certainly getting closer to the end. We can see the end in sight. The -- as I noted in my remarks and in the presentation, the contractors had some challenges. A lot of those have been reported on. And if a claim comes, we'll have to assess it. As we sit here today, we're not aware that it would give rise to any material liability for us. But if a claim comes, which is normal at this end of a project, we'll just have to assess it.

Yes. But you're not saying you had a fixed price, fixed time contract then and you...

No, we did. No, we absolutely did, Ian. But what I'm saying is if a claim comes, we'll have to assess it in the ordinary course. As we sit here today, we're not aware of any material liability.

Okay. You sort of hinted about the M7 needing another widening in the northern section. You went through that consideration when you probably negotiated with government on the broader widening of the road. Why -- what's changed at least to move that? And can we -- should we be thinking that this might be also part of a wholesale settlement around toll -- the toll reform?

So congestion has continued to build in that part of Sydney, and clearly, there's been a lot of economic growth, a lot of new businesses being formed, job growth. And it made sense to do the existing widening of the M7 first but over time, congestion in the -- in that sort of M2, M7 part of the corridor has continued to grow. And it's more the M2 than the M7. So we'll see. It's probably a bit early to say when and if there's going to be anything there, but we want to call it out as an increasingly congested corridor.

Have you put a proposal to government for it already?

We talked to government about a lot of things around the road network, so you could imagine we have constructive discussions on the performance of the road network all the time.

Okay. And in terms of the settlement with the government, is it fair to assume that this whole thing is small or not grander than what it started as?

It's probably premature until -- because it's going to be up to the government to announce what the outcomes are. I think as I sort of said in my remarks, it is a whole road network and every change has a -- it's not just about price, there's a network efficiency and network impact of any change. And so all of that's been taken into account. The positive, the government has been very clear publicly and with us that they respect the value of contracts, that they respect revenue. And we know that's been -- something that's been really important to our investors. And within all of that, we're iterating around solutions. And hopefully, there's a bit more to say on that over the coming months.

Okay. One final question, M5 West, the maintenance provision really does look like it's being drawn down pretty hard. And I think you hinted that you're trying to negotiate that to be deferred with conversion. I was sort of wondering where that's occurred or where that's progressed to?

Do you want to take that, Henry?

Yes. Look, that's still our intention, Ian, but we haven't actually got to that agreement yet. So we just had to take it through this set of results. But I think when we look forward to future periods, we still have an intention and I'd assume, likelihood that we will get to that position.

But either way, we're going to -- we've got to do -- we will do the maintenance over the right time frame. And it is -- because we have new partners coming into that asset, it will still be our responsibility to undertake that maintenance.

[Operator Instructions] Your next question comes from Rob Koh with Morgan Stanley.

Congrats on the result. Apologies if I'm asking a question that's covered in your preso. I had to join your call a bit late. Apologies. I just want to ask about the -- I just wanted to ask a question about the Tennessee Choice Lanes possibility, and I know that it's early days, but my understanding is that these are going to be raised lanes. And will they also be a variable toll and 3-passenger free kind of thing? Is there any technological developments that we should be thinking about for that project?

So they will be Express Lanes or Choice Lanes as they call them. All of the details are just being worked through at the moment, so it's a bit premature to say much more than that in terms of how they'll operate. Like we're literally going through that process. And -- but over the next period of time, there'll be more detail emerge. But yes, they'll definitely be Express Lanes.

Yes. Yes. Okay. All right. Well, from the big picture growth to a more detailed modeling style question, I just wanted to do my best to understand how I should think about your proportional costs for FY '26. The guidance is to be below CPI for the year of, I guess, a $947 million base. And is that, I guess, inclusive of the $50 million cost target announced previously? So that would get me to my number and then I should add on some OpEx for West Gate Tunnel. Is that the right way to think about the bridge?

Yes, that's a pretty good way to think about it. And maybe to just help people dimension the new assets, we'd expect that to be about 3% to 4% growth on that FY '25 base in terms of the volume of costs that would come through associated with West Gate Tunnel and a tiny bit of [ NEXT ].

And of course, you get the revenue on the other side. Yes.

And you get revenue associated with that cost, yes.

Yes. Okay. Cool. All right. And then this is possibly a question for offline. But just looking at Slide 56, which is the timing of the tax, it looks like Transurban Chesapeake's tax has pushed out a year? Anything in particular driving that one?

No, I don't think so. There's a little bit of movement at the margins, but Chesapeake doesn't really come online for a few years as a taxpayer. So I think that's more an anomaly in the current year.

Your next question comes from Justin Barratt with CLSA.

I just wanted to check. Obviously, you have mentioned New Zealand as a new market opportunity in the past and you reflected it again in your opportunity set today. Just wanted to see if we could get an update there on, I guess, broader conversations with the broader New Zealand market there.

Yes. So the New Zealand government's working through market soundings in relation to what the structure is going to look like, particularly the tolling structure around opportunities. We participated. We gave them some ideas and thoughts including some thoughts around road user charging, some of which they picked up in their recent announcements. So they're just working through that process. And then subject to where they get to and what the structure is, we'll make an assessment about which, if any, of those projects sort of make sense. I think what we were quite encouraged about was the modern approach they're taking to road user charging with it replacing excise tax pretty quickly and a digital approach. And we think some of the investments we've been making in terms of mobility and digitization, we may be ought to be part of a solution there, but it's too early to say.

Yes. Fantastic. Fantastic. And then another one I just wanted to double check on. Any, I guess, broader commentary on how we should think about capital releases going forward and the likelihood of those in the next few years?

Yes. We -- you'd recall, when we shifted the definition of free cash as the basis for supporting distributions, we moved away from capital release as being part of that. And then we stopped providing guidance on that. So there is assumptions that we have internally around our ability to access capital releases, which in the current debt market environment, we test quite carefully in terms of when we access the timing of them and the quantum of those. But the broader -- so we've moved away from giving a profile of capital releases to rather thinking about how you might dimension the debt capacity that comes on to the balance sheet or the incremental debt capacity that comes online with the increased earnings. And that is obviously dimensioned by the credit metrics that we have in place, which keep us within our current ratings band, principally with Moody's and S&P. And previously, I think we've spoken about in the order of $1 billion for every -- $1 billion of additional debt for every $100 million. It does move around a little bit depending -- it's a little bit less at the moment than where that was when I've previously given it. But in broad terms, that gives you a ballpark of the quantum of additional funding capacity that we see available to us on the balance sheet associated with the earnings increases.

Yes, fantastic. And then, Henry, just while I've got you, it's very clear that you have, I guess, a lot of cost efficiency from, I guess, that broader corporate part of your business, as you mentioned in response to a previous question. But I was curious to understand a little bit more about going forward. Again, getting cost growth below inflation is obviously going to be a very good effort. Where should we think about those cost efficiencies going forward coming from? Is it, again, more from that corporate part of your business again?

Look, certainly, that remains a focus. I think the step back is we -- Michelle and I certainly see this as a multiyear journey that we're on. So we've already, I think, delivered 2 years of fairly consistent cost discipline within the business, and we've projected towards the third year now. And we are looking beyond that in terms of what we think is achievable in managing this business in a disciplined way, and that should flow through to the cost line. So when you get to the specifics of where that is coming from, obviously, we made the organizational changes in FY '25, which will flow through to support that cost position in FY '26, but there are other areas. So the increasing maintenance costs, which are coming through as reflected in the provisioning are still an area that we're quite focused in on controlling and managing. And we think there's opportunity there to optimize our practices. We obviously moved to an enterprise-based model, and we're seeing some benefit in bringing those teams together to take more of an enterprise lens across the business. And then we think there's further opportunities when we look into the corporate space, particularly around ongoing technology rationalization and working to simplify systems and working to just manage that broader third-party spend that comes in.

Your next question comes from Nathan Lead with Morgans.

Just 2 or 3 questions from me. So just first up, when I'm looking at the traffic growth versus revenue growth, what really stands out is what's happening in North America. So question to you is, first up, how much further can the strength in the dynamic pricing on the Express Lanes go. And then secondly, I just noticed there's quite a disconnect between traffic growth and revenue decline on the A25. Maybe if you can just explain those 2 things, please.

Yes. So why don't I take the first and then Henry can cover the A25? So certainly, what we saw over the last year or 2 but very much this year was as new capacities come online, the way in which drivers are seeing the value of the Express Lanes has been really positive. And outside of congested periods, we've seen pretty big pickup in both volume and price. We think there is more to be done there. Clearly, we're all going to -- everyone is watching the U.S. economy, and we'll go through whatever cycles that goes through. But from a pricing perspective, yes, we do see more potential there, Nathan.

And then maybe if I pick up the A25, look, this is an asset that has been disrupted for some time. There's obviously some adjacent works going on around the La Fontaine tunnel bridge repairs, and that continues to be an issue here on this asset, which is limiting the full recovery from those COVID years, and that's really going to carry through -- forward for a little while yet. So it's not until the back end of calendar '26 that we see that issue dissipating. So I think that's probably the key issue we'd call out there.

Okay. Great. And then secondly, Slide 26, you note that you're expecting the impact from construction projects in Sydney to dissipate. Can you -- are you able to give us some sort of steer about what sort of impact you think that will be on traffic, something we can actually work with, quantify?

So maybe if I can give you kind of the macro and then Henry can step through some more of the details. So you've got Warringah Freeway that will start to dissipate over the next year in terms of the construction impacts; clearly, M7, as we open that sort of in the middle of next calendar year and we've spoken in the past about both the traffic impact from construction and then the pretty strong uplift when it opens. And then, yes, the M6 is a bit unknown when that's going to open. In terms of dimensioning the impacts, Henry, did you want to add anything to that?

Yes. Well, maybe to call out where it's impacting most the CBD-related assets, so when we talk about those, generally, we're talking Cross City Tunnel, Lane Cove Tunnel, Eastern Distributor are the most impacted, and their numbers were down year-on-year. And so -- and that is a construction impact compounding a sort of redistribution issue that came with WestConnex on those assets. We do think we're past the peak of construction. So we do start to see a recovery in those numbers on those assets, but that is probably where the most accentuated impact has come through on the network. In terms of timing, it's calendar '26 for Warringah and M7. So that's why we talk about passing the peak of construction.

Our next question comes from Anthony Moulder with Jefferies.

If I can start with West Gate tunnel, you're saying that it won't add a lot. But obviously, the capitalized interest starts to be expensed, but you've received a lot of the benefits of West Gate Tunnel upfront in CityLink. But how should we think about the impact across the broader network in Melbourne from West Gate Tunnel?

Yes, I'll pass that to Henry.

Yes, sure. And Michelle made the observation earlier. This is an incredible project. It's the most significant addition to the Melbourne road network in many, many years. And it will have a transformational impact on the network here. The key -- and we put some of this detail in the presentation, is it goes to the catchment zones that it's going to serve. So it's alleviating the single biggest pinch point on the network for those coming in from the west, which is the growth part of the city -- or the highest growth part of the city, I should say. You have 200,000 vehicles a day going over West Gate bridge currently with no other option. This effectively provides a pressure release valve for that and then provides a way of distributing traffic to the north of the city. In addition to that, it will take thousands of trucks off local streets and provide them with direct port access. So it's quite transformational when we step back and look at it in terms of what that will then do for the broader value proposition on the network. It will strengthen it significantly or restore it in some respects for those who have been weathering quite significant construction impacts now for a couple of years. And the precedent example we'd point to for the kind of uplift you see or reaction you see from road users when that value is presented is what happened in Sydney with the delivery of the final pieces of the WestConnex project and particularly that M8 tunnel that gave that incredible value proposition for those commuters coming in from the West. We see something akin to that emerging on the Melbourne network for us as we look out into next year.

Very good. But the impact that you're talking to is a flat impact in FY '26 once it's opened, and that's across the broader network as a consequence to that capitalized interest becoming expensed effectively.

Yes, that's right. We're bearing in mind that the value on this project was tied to more than just the traffic and revenue of the tunnel. So this is sort of the final piece in the value puzzle for this project. I mean it has been delayed for us obviously. But when it comes online, it will be broadly neutral as a stand-alone piece, and it will ramp from there to kind of add sort of incremental free cash in future years, as I referred to earlier.

Very good. And if I could switch further north to Brisbane, now that the Olympics is a bit closer, is more of a plan -- some would argue not a plan but more of a plan from the state government of Queensland. Where are you as far as some of the expansions that you would have hoped to have signed by now in Brisbane, please?

Yes. So we talk about 2 things in the presentation. So one is the Logan West upgrade, which we announced a little while ago. We're just working through the next stage of that. We've been doing some investigative works. We've been engaging with community, and the next milestone on that is to get to a binding proposal sometime next year, mid next year, I think it is. In the 2032 delivery plan that the government put out a few months ago, they included there a couple of interchange enhancements on the gateway, and we're at the early stages of just working through that. Longer term, clearly, for our business, it's about way more than the Olympics. It's about just a very strong population and economic growth that we've been seeing in Brisbane generally. And so we continue to remain pretty optimistic about Brisbane over the longer term.

There are no further questions at this time. I'll now hand back to Ms. Jablko for closing remarks.

And I'm going to hand straight to Craig to close it.

Thanks, Michelle. Thank you for your time this morning. Please come through to the IR team if you've got any questions and queries over the course of the day and enjoy what looks to be a pretty busy day ahead. Thank you.

Thanks, everyone.