Transurban Group Ltd. · ASX:TCL
Transurban — H1 FY2017 Earnings Presentation
72 slides from Transurban's earnings presentation, Feb 7, 2017
Slide 1: ASX release: Investor Presentation
asx release 7 February 2017 For personal use only Investor Presentation Please find attached the Investor Presentation that will be given to analysts this morning. Amanda Street Company Secretary Investor enquiries Jessica O’Brien Investor Relations Manager +61 3 8656 8364 Classification Transurban
Slide 2: Results for six months to 31 December 2016
Results for six months For personal use only to 31 December 2016 7 February 2017
Slide 3: Disclaimer and basis of preparation
Disclaimer and basis of preparation For personal use only This publication is prepared by the Transurban Group comprising Transurban Holdings Limited (ACN 098 143 429), Transurban Holding Trust (ARSN 098 807 419) and Transurban International Limited (ACN 121 746 825). The responsible entity of Trans
Slide 4: Highlights
Highlights For personal use only • FY17 distribution guidance upgraded to 51.5 cps; growth of TOLL REVENUE 13.2% over FY16 GROWTH EBITDA GROWTH • Networks delivered average traffic growth of 4.8% • Focus on network efficiencies and customer experience ̶ Minimising traffic disruption during construct
Slide 5: Strategy
Strategy For personal use only To be the partner of choice with governments providing effective and innovative urban road infrastructure utilising core capabilities Network Community Development Technology Operations Customer planning / engagement / delivery management forecasting TRANSURBAN 1H17 RE
Slide 6: Transurban delivers network benefits (customers)
Transurban delivers network benefits For personal use only Transurban’s networks create a unique ability to deliver whole-of-market outcomes to benefit our government partners, customers, investors and the community CUSTOMER BENEFITS • $31 billion1 of investment to date to upgrade capacity, ease con
Slide 7: Transurban delivers network benefits (community)
Transurban delivers network benefits For personal use only Transurban’s networks create a unique ability to deliver whole-of-market outcomes to benefit our government partners, customers, investors and the community COMMUNITY BENEFITS • Whole-of-city traffic flow benefits from Transurban’s network m
Slide 8: Core earnings growth drivers
Core earnings growth drivers Consistent growth in earnings driven by four Compound annual growth excluding acquisitions of greater For personal use only than 10% since FY09 key factors 16.0% • Traffic – historically, mature toll roads 14.0% have delivered on average 2 - 4% annual traffic growth 12.0
Slide 9: 1H17 network performance
1H17 network performance NETWORK HIGHLIGHTS TOLL REVENUE ADT GROWTH TOLL REVENUE EBITDA For personal use only CONTRIBUTION GROWTH GROWTH Sydney • Network enhancements continuing to deliver traffic growth • M2 impacted by NCX construction 40.7% 3.4% 8.8% 10.4% • Large vehicle multipliers now at 3 tim
Slide 10: $9 billion development pipeline
$9 billion development pipeline For personal use only 7 FY17 FY18 FY19 FY20 FY21 FY22 COMMITTED CITYLINK TULLA WIDENING Melbourne ($1.0 billion) PROJECTS UNDER CONSTRUCTION1 WEBB DOCK ACCESS6 Melbourne 95 EXPRESS LANES SOUTHERN EXTENSION GWA (US$25 million) MONASH FREEWAY UPGRADE6 Melbourne LOGAN EN
Slide 11: Potential opportunities in government transport plans
Potential opportunities in government transport plans For personal use only FY17-FY19 FY20-FY22 FY23-FY25 FY26-FY28 FY29+ UNDER WESTCONNEX STAGE 1A Sydney CONSTRUCTION/PROCUREMENT2 WESTCONNEX STAGE 1B Sydney WESTCONNEX STAGE 2 Sydney SYDNEY GATEWAY Sydney WESTCONNEX STAGE 3 Sydney POTENTIAL CENTENAR
Slide 12: North American market opportunities
North American market opportunities NETWORK POTENTIAL IN NORTH AMERICA’S MOST CONGESTED CITIES1 For personal use only FAVOURABLE 50% DEMOGRAPHICS GOVERNMENT READINESS/ WILLINGNESS FOR PPP 40% Los Angeles San Francisco Vancouver Toronto Congestion level Greater Washington Area Seattle Miami 30% TIME
Slide 13: Disciplined approach to investment
Disciplined approach to investment For personal use only INVESTMENT APPROACH TRANSURBAN TRAFFIC FORECASTING CAPABILITY Vendor/third party forecast Actual Transurban Bid • Long-term owner-operator model – aligned with government partners • Pursue sustainable policy • Internal due diligence capability
Slide 14: Balance sheet capacity to fund investments
Balance sheet capacity to fund investments For personal use only • Earnings growth underpins balance sheet BUSINESS GROWTH SUPPORTS GREATER expansion INVESTMENT1 • Commitment to strong investment grade credit 40,000 metrics 35,000 30,000 ̶ Targeting strong investment grade credit A$ MILLION 25,000 m
Slide 15: Financial results
For personal use only Financial results
Slide 16: Statutory results
Statutory results For personal use only 1H16 ($M) 1H17 ($M) KEY DRIVERS Toll revenue 919 1,032 Toll revenue • $57 million increase from existing assets driven by traffic growth and toll price escalation EBITDA 676 769 • $56 million contribution from AirportlinkM7 Net profit 62 88 EBITDA 1H17 distrib
Slide 17: Proportional results
Proportional results For personal use only 1H16 ($M) 1H17 ($M) % CHANGE KEY DRIVERS Toll revenue 960 1,065 10.9% Toll revenue • $70 million increase from existing assets Other revenue 30 28 (6.7%) • $35 million contribution from AirportlinkM7 Total revenue 990 1,093 10.4% Total costs Total costs (26
Slide 18: EBITDA movement
EBITDA movement For personal use only +12.1% 817 +8.4% 27 790 4 (2) 59 729 1H16 EBITDA Existing TQ integration costs Foreign exchange 1H17 existing AirportlinkM7 1H17 EBITDA business growth business EBITDA TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 17
Slide 19: Network EBITDA margins
Network EBITDA margins For personal use only EBITDA MARGINS1 1H16 FY16 1H17 Sydney 79.7% 79.7% 80.9% • Increase in Group margin Melbourne 86.2% 85.5% 86.0% • 1H17 EBITDA margin growth across Sydney, Brisbane and GWA Brisbane 70.2% 69.6% 71.1% • Melbourne margin impacted by CTW GWA 46.1% 49.5% 58.3%
Slide 20: Cost movement
Cost movement • O&M has increased in-line with business activities For personal use only • Continuation of strategic growth projects including technology initiatives and bid costs associated with new development opportunities +5.7% 276 +2.7% 5 (4) 8 (2) 268 4 4 261 1H16 total costs Operations Mainte
Slide 21: Free cash flow
Free cash flow +47.5% For personal use only (39) (20) 680 (3) 174 Net finance costs $35 million decrease due timing of interest payments from recent debt refinancings FCF Coverage 80 FCF NWRG 510 coverage for $174 million increase due to distributions from 1H17 is 27 NWRG. Capital release proceeds a
Slide 22: Balance sheet positioned for macro environment
Balance sheet positioned for macro environment For personal use only FUNDING ACTIVITIES 1H17 CAPITAL MARKETS ISSUANCES (TOTAL A$2.5B) • Continued to successfully refinance existing term bank debt Market Tenor into long term debt capital markets NOK NOTES 15 Years • Proportion of drawn Group bank deb
Slide 23: Hedging profile
Hedging profile TRANSURBAN INTEREST RATE HEDGING PROFILE1 For personal use only • 99.8% interest rate hedged at 18,000 31 December 2016 GWA Sydney Brisbane Corporate Fixed amount • Hedge tenor is matched to the 16,000 tenor of the debt on 97%2 of drawn debt 14,000 • All foreign currency debt issued
Slide 24: Market update
For personal use only Market update
Slide 25: Sydney network
Sydney network For personal use only TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 24
Slide 26: Sydney network
Sydney network For personal use only NorthConnex Update OPERATIONS POTENTIAL FUTURE DEVELOPMENT • Project currently on time and on budget • FMS roll out via variable • Opportunities identified by speed limits installed on ED government: • 15 road headers in operation • Transurban and RMS joint ̶ M7
Slide 27: WestConnex
WestConnex For personal use only TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 26
Slide 28: WestConnex
WestConnex For personal use only • Transurban continues to prepare for a potential WCX TRANSURBAN’S APPROACH sell-down. Scope of sale (if any) to be determined • Track record of working with industry • Competitive process with and government partners to deliver significant interest expected whole-of
Slide 29: Melbourne network
Melbourne network For personal use only TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 28
Slide 30: Melbourne network
Melbourne network For personal use only WESTERN DISTRIBUTOR CITYLINK TULLA CITYLINK OPERATIONS PROJECT WIDENING • Total project cost • Total project cost is • ‘Safe clearance’ incident approximately $5.5 billion approximately $1.3 billion response model achieved 50% reduction in customer • Construct
Slide 31: Brisbane network
Brisbane network For personal use only TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 30
Slide 32: Brisbane network
Brisbane network For personal use only LOGAN ENHANCEMENT OPERATIONS AND INNER CITY BYPASS PROJECT UPGRADES • Queensland Government • Brisbane City Council • GLIDe tolling system roll out approved the $512 million announced the $60 million to commence late 2017, with LEP in November 2016 widening of
Slide 33: Greater Washington Area network
Greater Washington Area network For personal use only TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 32
Slide 34: Greater Washington Area network
Greater Washington Area network For personal use only OPERATIONS 395 EXPRESS LANES SOUTHERN EXTENSIONS TO 95 EXPRESS LANES • Completed insourcing of back • 13 km extension to the 95 • Construction commenced in office tolling system and road Express Lanes, which will July 2016 on the three km operati
Slide 35: Safety highlights
Safety highlights For personal use only Transurban continues to focus on improving safety for our employees, contractors and customers • Supporting state governments in their “Towards Zero” campaigns ̶ Adoption of the Safe System “four pillars” of safer roads, safer speeds, safer vehicles and safer
Slide 36: Commitment to sustainability
Commitment to sustainability INFRASTRUCTURE SUSTAINABILITY COUNCIL RECOGNITION For personal use only OF AUSTRALIA • Dow Jones Sustainability Index (DJSI): • ISCA is the peak sustainability body for Australia’s infrastructure Recognised in World Leadership Index • IS rating scheme developed to evalua
Slide 37: Transurban technology initiatives
Transurban technology initiatives Technology to drive improvements in customer experience For personal use only CITYLINK CAV TRIAL MOBILE TOLL TRIAL • CAV testing on Monash-CityLink-Tullamarine • CityLink has completed a mobile toll trial corridor from early 2017 using a mobile GPS based app • Initi
Slide 38: Outlook
Outlook For personal use only Distribution Initiatives to drive Consultation Existing Operating Working with guidance improved focus around development technologies to partners to upgraded to 51.5 customer major projects pipeline drive greater progress cps – represents experience to ensure best prog
Slide 39: Supplementary information
Supplementary information For personal use only 1 DETAILED FINANCIALS 2 TREASURY 3 CORPORATE OVERVIEW 4 GLOSSARY
Slide 40: Detailed financials
For personal use only Detailed financials
Slide 41: Traffic and revenue performance
Traffic and revenue performance For personal use only DEC 16 QUARTER1 1H171 PROPORTIONAL PROPORTIONAL TOLL REVENUE % ADT % CHANGE TOLL REVENUE % ADT % CHANGE CHANGE CHANGE Sydney 9.7% 3.5% 8.8% 3.4% Melbourne 2.9% (0.9%) 2.7% (0.7%) Brisbane 32.6% 19.4% 31.6% 19.4% GWA 18.3% 11.4% 21.2% 11.5% 1. Com
Slide 42: Traffic and revenue data
Traffic and revenue data 1 DEC 15 DEC 16 For personal use only ASSET QUARTER QUARTER % CHANGE 1H16 1H17 % CHANGE Sydney M2 Total Toll Revenue $65 $71 8.5% $129 $138 7.2% Average Daily Trips (‘000) 126 131 3.6% 125 129 3.4% LCT Total Toll Revenue $23 $24 3.6% $45 $46 3.6% Average Daily Trips (‘000) 8
Slide 43: Traffic and revenue data
Traffic and revenue data 1 DEC 15 DEC 16 ASSET QUARTER QUARTER % CHANGE 1H16 1H17 % CHANGE For personal use only Brisbane Gateway Motorway Total Toll Revenue $53 $55 5.1% $106 $110 3.9% Average Daily Trips (‘000) 115 116 1.1% 115 116 1.2% Logan Motorway Total Toll Revenue $43 $47 8.2% $87 $92 6.0% A
Slide 44: Proportional toll revenue by asset
Proportional toll revenue by asset OWNERSHIP DEC 16 QUARTER 1H17 For personal use only 100% PROPORTIONAL 100% PROPORTIONAL M2 100.0% $71 $71 $138 $138 LCT 100.0% $24 $24 $46 $46 CCT 100.0% $17 $17 $32 $32 ED 75.1% $34 $26 $67 $50 M7 50.0% $100 $50 $196 $98 M5 50.0% $68 $34 $135 $68 CityLink 100.0% $
Slide 45: Statutory results
Statutory results For personal use only 1H16 ($M) 1H17 ($M) % CHANGE Toll revenue 919 1,032 12.3% Construction revenue 107 274 156.1% Other revenue 30 28 (6.7%) Total revenue 1,056 1,334 26.3% Employee benefit expense (71) (78) 9.9% Road operating costs (148) (166) 12.2% Construction costs (107) (27
Slide 46: Proportional results
Proportional results For personal use only PROPORTIONAL EARNINGS 1H16 ($M) 1H17 ($M) % CHANGE Toll revenue 960 1,065 10.9% Other revenue 30 28 (6.7%) Total revenue 990 1,093 10.4% Total costs (261) (276) 5.7% EBITDA 729 817 12.1% RECONCILIATION OF STATUTORY EBITDA TO PROPORTIONAL EBITDA 1H16 ($M) 1H
Slide 47: 1H17 proportional result by asset
1H17 proportional result by asset NET FINANCE INCOME TAX TOLL OTHER COST (EXP) / For personal use only REVENUE REVENUE EBITDA D&A EXPENSE NPBT BENEFIT NPAT OWNERSHIP ASSET $M $M $M $M $M $M $M $M 100.0% M2 138 1 118 (37) (19) 62 6 68 100.0% LCT 46 - 29 (11) (14) 4 (6) (2) 100.0% CCT 32 - 20 (12) (7)
Slide 48: 1H16 proportional result by asset
1H16 proportional result by asset NET FINANCE INCOME TAX TOLL OTHER COST (EXP) / For personal use only REVENUE REVENUE EBITDA D&A EXPENSE NPBT BENEFIT NPAT OWNERSHIP ASSET $M $M $M $M $M $M $M $M 100.0% M2 129 1 108 (36) (21) 51 8 59 100.0% LCT 45 - 28 (8) (6) 14 1 15 100.0% CCT 30 - 20 (12) (7) 1 (
Slide 49: 1H17 Net finance costs paid
1H17 Net finance costs paid NON-CASH ITEMS CONCESSION For personal use only STATUTORY PAYMENTS & NET PROPORTIONAL OWNERSHIP NET DEBT MAINTENANCE INTEREST INTEREST INTEREST NET INTEREST CONTROLLED ENTITIES FEES CAPITALISATION ACCRUALS1 INTEREST PROVISION PAID PAID UNWIND CityLink 100.00% (13) (3) 3 -
Slide 50: 1H16 Net finance costs paid
1H16 Net finance costs paid NON-CASH ITEMS For personal use only CONCESSION STATUTORY PAYMENTS & NET PROPORTIONAL CONTROLLED ENTITIES DEBT INTEREST INTEREST OWNERSHIP NET MAINTENANCE INTEREST NET INTEREST FEES CAPITALISATION ACCRUALS2 INTEREST PROVISION PAID PAID UNWIND CityLink 100.00% (13) 1 3 - 1
Slide 51: Maintenance provision
Maintenance provision 1 MAINTENANCE EXPENSE MAINTENANCE CASH For personal use only 2 RECOGNISED SPEND 1H16 ($M) 1H17 ($M) 1H16 ($M) 1H17 ($M) CityLink (7) (7) (7) (5) M2 (3) (1) (2) (2) LCT (3) (4) (6) (3) CCT (2) (4) (1) (2) ED (4) (3) (4) (5) M7 (4) (6) (1) (2) M5 (3) (2) - - Gateway Motorway (6)
Slide 52: Free cash calculation
Free cash calculation FREE CASH CALCULATION SOURCE OF INFORMATION/EXPLANATION For personal use only Cash flows from operating activities Statutory Transurban Holdings Limited operating cash flow (includes cash inflow from M5 TLNs). (refer Group Statutory accounts) Add back transaction and integratio
Slide 53: Free cash flow
Free cash flow RECONCILIATION OF STATUTORY CASH FLOW FROM OPERATING ACTIVITIES TO FREE CASH For personal use only 1H16 ($M) 1H17 ($M) FREE CASH FLOW 1H16 1H17 % CHANGE Cash flows from operating activities 430 292 Free cash $461M $680M 47.5% Add back transaction and integration costs related to 7 104
Slide 54: Reconciliation of proportional EBITDA to free cash
Reconciliation of proportional EBITDA to free cash For personal use only 1H17 Comments Proportional EBITDA 817 Refer to slide 45 for further detail Proportional net finance costs paid (cash) (355) Refer to slides 48 and 49 for further detail Add back proportional maintenance expense (non-100% owned
Slide 55: Treasury
For personal use only Treasury
Slide 56: Funding structure at December 2016
Funding structure at 31 December 2016 For personal use only Transurban Bank Debt1 Capital Markets Debt1 Government Debt1 Non-Recourse Corporate Debt Sydney Brisbane GWA Capital Markets Bank Debt Working M5 M2 CCT AMTN 495 Express Lanes 95 Express Lanes AMTN Capital2 A$0.7B A$0.8B A$0.3B A$0.7B A$0.3
Slide 57: Group debt at December 2016
Group debt at 31 December 2016 FACILITY FACILITY TOTAL FACILITY TOTAL DRAWN PROPORTIONAL STATUTORY (US$M)1 (A$M)1 (A$M) (A$M) DRAWN (A$M) DRAWN (A$M) For personal use only CORPORATE DEBT2 Working capital facilities3 - 900 900 14 14 14 USPP 162 940 1,164 1,164 1,164 1,180 AMTN - 300 300 300 300 300 E
Slide 58: Drawn debt
Drawn debt PROPORTIONAL BASIS For personal use only 30 JUN 16 31 DEC 16 MOVEMENT AUD1 ($M) ($M) ($M) EXPLANATION3 A$733 million 144A issuance, A$117 million NOK issuance, A$133 million USPP matured, A$55 million Corporate 3,668 4,330 662 working capital repayment Net A$56 million increase in TQ debt
Slide 59: Key debt metrics
Key debt metrics 30 JUNE 2016 31 DECEMBER 2016 TRANSURBAN NON- TRANSURBAN NON- For personal use only GROUP CORPORATE RECOURSE GROUP CORPORATE RECOURSE Weighted average maturity (years)1 8.7 yrs 5.8 yrs 10.2 yrs3 9.3 yrs 6.3 yrs 10.8 yrs2 Weighted average cost of AUD debt4 5.2% 5.7% 4.9% 4.9% 5.5% 4.
Slide 60: Extension of Group debt maturity profile
Extension of Group debt maturity profile JUNE 2016 MATURITY PROFILE For personal use only 4,000 DEBT REFINANCED DURING THE PERIOD 3,000 A$ MILLION 2,000 1,000 - FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 - 29 FY30 - 34 FY35+ DECEMBER 2016 MATURITY PROFILE 4,000 DEBT REFINANCED DURING THE PERI
Slide 61: Corporate debt maturities at December 2016
Corporate debt maturities at 31 December 2016 For personal use only Working Capital Facilities USPP A$ notes EMTN 144A Letters of Credit 2,000 1,800 1,600 1,400 A$ MILLION 1,200 761 1,000 800 233 600 300 820 254 296 733 400 165 833 706 200 219 224 300 375 206 125 100 94 117 - FY17 FY18 FY19 FY20 FY2
Slide 62: Non-recourse debt maturities at December 2016
Non-recourse debt maturities at 31 December 2016 For personal use only 2,400 TQ (incl ALM7) ED M2 M7 CCT M5 LCT 495 Express Lanes 95 Express Lanes 2,200 80 2,000 278 1,800 1,600 444 525 1,400 A$ MILLION 310 1,200 350 1,000 160 75 85 800 77 108 1,369 600 373 225 300 90 100 945 400 400 200 40 225 98 6
Slide 63: Diversification of funding sources
Diversification of funding sources For personal use only FUNDING ACTIVITIES JUN 16 GROUP DEBT1 DEC 16 GROUP DEBT1 BANK DEBT Major issuances during 1H17: AUD NOTES AUD PRIVATE PLACEMENT • A$733 million corporate USD 144A notes CAD NOTES • A$117 million corporate NOK notes EUR NOTES • A$500 million M7
Slide 64: Corporate overview
For personal use only Corporate overview
Slide 65: Summarised Group structure
Summarised Group structure For personal use only TRANSURBAN HOLDINGS LIMITED TRANSURBAN HOLDING TRUST TRANSURBAN INTERNATIONAL LIMITED CORPORATE ENTITIES ROAD/OPERATING ENTITIES OTHER ENTITIES ROAD/OPERATING ENTITIES CORPORATE ENTITIES Including: Companies operating and maintaining roads Trusts hold
Slide 66: Asset portfolio at December 2016
Asset portfolio at 31 December 2016 For personal use only MELBOURNE SYDNEY OVERVIEW CITYLINK M5 M2 ED M7 NCX LCT CCT Under Opening date Dec 2000 Aug 1992 May 1997 Dec 1999 Dec 2005 Mar 2007 Aug 2005 Construction Remaining concession 18 years 10 years 32 years 32 years 32 years 28 years1 32 years 19
Slide 67: Asset portfolio at December 2016
Asset portfolio at 31 December 2016 BRISBANE GREATER WASHINGTON AREA For personal use only GATEWAY LOGAN GO BETWEEN LEGACY 495 EXPRESS 95 EXPRESS OVERVIEW CLEM7 AIRPORTLINKM7 MOTORWAY MOTORWAY BRIDGE WAY LANES2 LANES2 Opening date Dec 1986 Dec 1988 Mar 2010 Jul 2010 Jun 2015 Jul 2012 Nov 2012 Dec 20
Slide 68: Tolling escalation
Tolling escalation EMBEDDED INFLATION PROTECTION For personal use only MOTORWAY ESCALATION CityLink Escalated quarterly by the greater of quarterly CPI or 1.011065% per quarter for the first 16 years (until 31 December 2016), then quarterly by CPI. This is subject to a cap of annual CPI plus 2.5%, w
Slide 69: Safety
Safety For personal use only Results TRANSURBAN RICI • RICI continues to trend down – this measures the 7.0 number of serious road injuries (an individual transported from, or receives medical treatment, at 6.0 scene) and crashes per 100 million vehicle km travelled on Transurban’s networks 5.0 • Ze
Slide 70: Glossary
For personal use only Glossary
Slide 71: Glossary
Glossary TERM DEFINITION TERM DEFINITION 1H/2H First or second half of a financial year FREE CASH/FCF Free cash is calculated as statutory cash flows from operating activities from 100% owned subsidiaries plus distributions and interest received from non-100% owned subsidiaries, adjusted For persona
Slide 72: Glossary
Glossary TERM DEFINITION TERM DEFINITION M7 Westlink M7 TIFIA Transportation Infrastructure Finance and Innovation Act For personal use only MFU Monash Freeway Upgrade TLN Term Loan Note. An interest bearing shareholder loan. Currently Transurban has TLNs in place on NWRG and M5 NCX NorthConnex TMC