Transurban Group Ltd. · ASX:TCL
Transurban — Investor Day (March 2009)
60 slides from Transurban's investor day presentation, Mar 20, 2009
Slide 1: Transurban investor day
Transurban investor day 20 March 2009
Slide 2: Disclaimer
Disclaimer This publication is prepared by the Transurban Group comprising Transurban Holding Limited (ACN 098 143 429), Transurban Holding Trust (ARSN 098 807 419) and Transurban International Limited (ARBN 121 746 825). The responsible entity of Transurban Holding Trust is Transurban Infrastructur
Slide 3: Agenda
Agenda Time Presentation Speaker Tom Honan 10:00am Introduction Chief Financial Officer Brendan Bourke 10:30am Transurban operations Chief Operating Officer Andrew Head 11:30am Australian development Group General Manager Strategy and Corporate Development Michael Kulper 12:15pm North America Presid
Slide 4: Introduction
Introduction Chief Financial Officer Tom Honan
Slide 5: Transurban investment proposition
Transurban investment proposition 5
Slide 6: Debt facilities – refinancing progress
Debt facilities – refinancing progress
Slide 7: Refinancings on target
Refinancings on target Corporate debt Non-recourse debt Amount Amount Debt Maturity Debt Maturity $M $M FY09 Undrawn Facility $85 Jun 2009 FY09 Hills M2 Non-recourse $459 Jun 2009 Unwrapped Bonds $150 Dec 2009 M1 – Term Bank Debt $516 Nov 2009 FY10 FY10 Undrawn Facility $195 Jun 2010 M5 Bank Debt $5
Slide 8: Non-recourse debt refinancing
Non-recourse debt refinancing Debt backed by strong cash flows at asset level Refinancing requirements - 5 year forward view at half yearly intervals 600 AUD $ million (equivalent if USD) 500 M1 M5 M7 M7 400 M2 300 $500m $459m $515.5m $500m $500m 200 100 ICR ICR ICR ICR ICR 1.6 4.2 2.8 3.7 1.6 0 Jun
Slide 9: Corporate debt refinancing
Corporate debt refinancing No major near term refinancing Refinancing requirements - 5 year forward view at half yearly intervals $320m $300m $375m $85m $150m $195m Existing facilities • Retiring $85m of working capital maturing in June 2009 9
Slide 10: Transurban operations
Transurban operations Chief Operating Officer Brendan Bourke
Slide 11: Transurban Operations
Transurban Operations Maximise revenue Optimise cost Reduce risk 11
Slide 12: Tolling & Customer Management
Tolling & Customer Management No Payment b. Violation and Enforcement 1. “Asset” Services Arrangement •Toll notices a. Revenue capture •Penalty notices •Court proceedings •Roadside Equipment monitoring •Trip reconstruction •Image processing •Trip rating / pricing •Interoperability •Exception managem
Slide 13: Key competencies
Key competencies • Scale and Complex Tolling operations – – End to end view – – Leverage across Australian footprint • Electronic tolling and traffic management (ETTM) • Concession management • Construction oversight • Traffic modelling 13
Slide 14: Competency – examples
Competency – examples • Scale and Complex Tolling operations Use of imaging technology to progressively address imaging underperformance (versus – – Large scale interoperability processing by ideal) led to reduced image deletion CityLink - 2.5 million trips per month – – Improved revenue recovery on
Slide 15: Monash-CityLink-West Gate upgrade project
Monash-CityLink-West Gate upgrade project Optimising throughput on the State’s busiest and most strategically important freeway route Project objectives CityLink upgrade an integral component Project scope Upgrading Monash-CityLink-West Gate freeways State of the art freeway management system CityLi
Slide 16: MCW project scope
MCW project scope Additional lanes to reduce congestion on West Gate freeway and bridge Widening of Southern Link from CityLink Tunnels to Monash Froeway Widening of Monash Freeway trom Southern Link to Heatherton Road Freeway Management System ade + AUG 2010 ca vi 9 , + DEC 2010 Panels AUG 2010 7 f
Slide 17: Southern Link Upgrade
Southern Link Upgrade Intelligent Transportation Systems Advanced Traffic Monitoring = Rapid Incident Detection Full CCTV camera surveillance of road Automatic incident detection (video based) Coordinated Corridor Response = Motorist Safety / Minimised Impact of Congestion Central monitoring & contr
Slide 18: Conclusion
Conclusion • Unlocking value in Transurban network • Leveraging owner-operator competencies • Delivery of Monash-CityLink-Westgate upgrade on track – Asset tour as a part of today’s activities to show: • Construction progress • Operational activities at CityLink control centre 18
Slide 19: Australian development
Australian development Group General Manager Strategy and Corporate Development Andrew Head
Slide 20: Prioritising Australian growth opportunities
Prioritising Australian growth opportunities Current TCL assets Other opportunities • Understand value drivers & opportunities • Evaluate & prioritise utilising clear investment – Growth in asset corridors criteria – Asset enhancements – Greenfield – VIC, NSW, QLD – Increase portfolio stakes – minor
Slide 21: The filtering process
The filtering process Strategic fit Likelihood project will proceed Competitive advantage / likelihood of success Strategy and Prioritisation Risks – transaction, project etc Resource requirement Valuation ExCo strategy ExCo Strategy Team team review 21
Slide 22: Sydney network enhancements
Sydney network enhancements 22
Slide 23: M2 upgrade project
M2 upgrade project 5 3 2 4 6 1 Pennant Hills Rd to Herring Rd Ramps 1 Windsor Rd Ramps 3 5 Terrys Ck Eastbound and Park and Ride Windsor Road to Lane Cove Road to Terrys Creek to Lane 2 Pennant Hills Rd 4 Pennant Hills Road 6 Cove Rd Eastbound Eastbound Westbound T2 / Bus Lane 23
Slide 24: Process and milestones
Process and milestones M2 upgrade first project in NSW to be assessed according to the Government’s Working With Government Guidelines Future steps: • In principle agreement (confirm scope, financial parameters) Dec 07 Jun 08 Sep 08 Feb 09 Proposal Project announcement First Letter of Intent Part 3A
Slide 25: M2 upgrade – remaining hurdles
M2 upgrade – remaining hurdles • Value drivers – Additional toll points attracting new trips to the motorway – Additional traffic by removing capacity constraints • Government options for the funding shortfall? – Concession extension – Roll forward a scheduled toll increase – Government contribution
Slide 26: M5 widening proposal
M5 • M5 widening – another enhancement proposal being considered by the NSW Government • Preliminary proposal submitted to the Government • Project further developed following greater certainty on M2 process 26
Slide 27: Conclusion
Conclusion • MCW upgrade underway in Melbourne – on time and on budget • Will evaluate opportunities in Australian market • Focus on enhancement projects in Sydney • M2 upgrade the primary focus • M5 upgrade to be progressed after more tangible progress on M2 – not willing to invest in development c
Slide 28: North America
North America President Transurban North America Michael Kulper
Slide 29: US political environment
US political environment • Demand for road transport solutions remains – $34 billion annual unmet need to maintain existing roads and infrastructure • Economic stimulus package not a silver bullet – Expected to support basic maintenance and projects already under construction • Eroding revenue sourc
Slide 30: Growth strategy
Growth strategy • Applies filtering process • Targeted approach – 2 markets with potential for multiple (network) project opportunities – Current focus is Virginia • HOT lanes – Leverage market leadership position in managed lane projects • Owner-operator approach – Differentiated skill set – Work w
Slide 31: Pocahontas 895
Pocahontas 895 • Generates circa 2% of Transurban Group proportional toll and fee revenue • Traffic declined in 2008 amid deterioration in US economy – Recession in Virginia and US more broadly • Toll price increases • Investment case built around land use change – Anticipated development in corrido
Slide 32: Virginia HOT Lanes projects
Virginia HOT Lanes projects A video showing details of HOT lanes projects can be found on the Transurban website under the North American tab: www.transurban.com 32
Slide 33: Capital Beltway Investment Proposition
Capital Beltway Investment Proposition Traffic and revenue – Heavy current congestion – Limited ability to build out within existing corridor – Limited competing routes – Demographic characteristics Contractual arrangements / risk sharing – Strong contractual arrangements with the State – Fixed pric
Slide 34: Capital Beltway
Capital Beltway • One year into five-year construction period • Experienced management team • Business, functional and technical requirements in development • Traffic in Beltway corridor remains strong during peak periods 34
Slide 35: Capital Beltway
Capital Beltway 2006-2008 Volume Comparison (Weekday Average) (South Bound between Dulles Toll Road and Georgetown Pike) Capital Beltway traffic remains in line with pre-recessionary levels* *This trend is also seen on other sections of the road 35
Slide 36: I-95 / 395 negotiations
I-95 / 395 negotiations • Initial environmental clearance for the Northern section achieved January 2009 • Major activities to financial close: – Contract negotiations – Finalise scope definition and pricing – Finalise other regulatory approvals – Project funding 36
Slide 37: Conclusion
Conclusion • Activities focused on Virginia market • Highest priority is Capital Beltway delivery • I-95 negotiations in process • No other near term opportunities currently being pursued • Market evolution likely to present opportunities in medium to longer term 37
Slide 38: Transurban investor day
Transurban investor day 20 March 2009
Slide 39: Appendix: Reporting methodology
Appendix 1 Reporting methodology
Slide 40: Statutory reporting
Statutory reporting • Includes 100% of the results of Transurban controlled assets: – CityLink – Hills M2 – M1 Eastern Distributor – M4 • The after-tax results of non-controlled assets are “equity accounted”1: – M5 (50%) – DRIVe (75%) – Drive holds investments in Pocahontas 895 (100%) and Capital Be
Slide 41: Other matters to note
Other matters to note • Limitation of individual statutory accounts – Do not include fair value acquisition adjustments – Include intercompany transactions and financing that eliminates on group consolidation • Business development revenue – Statutory ‘Other revenue’ includes BD revenues derived fro
Slide 42: Proportional result
Proportional result • This provides a better reflection of operating performance of business • Proportional reporting is based on Transurban’s ownership of assets – Aggregates individual P&L from each asset (multiplied by Transurban’s percentage ownership) and Transurban Corporate • Reconciliation o
Slide 43: Underlying proportional result
Underlying proportional result • EBITDA adjusted for one off items (if present) to reflect underlying business performance • Adjustments in FY08 include: – Gain on asset sales (Pocahontas in FY08) – Mark-to-market positions eg. CEU gain/(loss) – Restructuring costs – CEO transition costs • One-off i
Slide 44: Free cash
Free cash 31 Dec 08 $M Source of information/Explanation Cashflow from Operating 1 168.4 Statutory cash flow (includes cash inflow from M7 TLNs ) Activities Cashflow from Operating (84.6) Individual asset statutory cash flow (100% consolidated for statutory reporting) Activities – M1 and M4 Controll
Slide 45: AASB-I 12 – Key issues summary
AASB-I 12 – Key issues summary • AASB Interpretation 12 application mandatory for the year ended 30 June 2009 • Applied retrospectively – from first period presented – 1 July 2007 • Major impacts – A. Classification of assets – B. Treatment of construction and upgrade services – C. Maintenance provi
Slide 46: AASB-I 12 – Classification of assets
A. AASB-I 12 – Classification of assets • All assets to be handed back to the grantor (State Governments) are classified as intangibles as they represent Transurban’s right to collect tolls • All assets retained by Transurban remain as Property, Plant & Equipment • Concession assets (intangibles) ar
Slide 47: AASB-I 12 – Construction and upgrade services
B. AASB-I 12 – Construction and upgrade services • Account for construction and upgrade as a construction contract (recognising contract revenue and expenses on a gross basis) • Transurban has not recognised a margin on construction services i.e. there is no net impact to the profit & loss Impact Co
Slide 48: AASB-I 12 – Maintenance provision and expense
C. AASB-I 12 – Maintenance provision and expense • A provision is built up on a usage basis – Based on time lapse to when works undertaken • Provision represents Transurban’s obligation to maintain the assets as a result of past use • Two types: – Requirement to hand back assets in a specified state
Slide 49: AASB-I 12 – Maintenance provision and expense
C. AASB-I 12 – Maintenance provision and expense • Recorded at present value of the provision • P&L charge each year effectively represents average annual maintenance capex over the life of the provision i.e. provision is built up on a usage basis Impact Transurban’s obligation to maintain concessio
Slide 50: AASB-I 12 – Maintenance provision and expense
C. AASB-I 12 – Maintenance provision and expense • The following is an example of the building up of the provision for ongoing major maintenance expenditure over the life of the concession • Examples: 1. Resurfacing obligation (assumes road is used from year 3 and works performed in year 8)* Resurfa
Slide 51: Appendix: Asset snapshots
Appendix 2 Asset snapshots
Slide 52: CityLink
CityLink CityLink Melbourne Location Location Melbourne, Australia Ownership Transurban 100% Concession length 34 years, expires January 2034 and expiry Description CityLink is the key connector between Melbourne’s airport, port, CBD and manufacturing hubs. It consists of two separate sections known
Slide 53: Hills M2
Hills M2 Hills M2 Location Location Sydney, Australia Ownership Transurban 100% Concession length 45 years, expires May 2042 and expiry Description Hills M2 services both westbound and eastbound traffic between the Sydney suburbs of North Ryde and Seven Hills. The majority of the motorway (from Beec
Slide 54: Westlink M7
Westlink M7 Westlink M7 Location Location Sydney, Australia Ownership Transurban 50% Concession length 31 years, expires February 2037 and expiry Description Westlink M7 connects to the M2, M4 and M5 motorways and the Hume Highway. It is the only arterial through Western Sydney, Australia’s fastest
Slide 55: M1 Eastern Distributor
M1 Eastern Distributor M1 Eastern Distributor Location Location Sydney, Australia Ownership Transurban 75.1% Concession length 48 years, expires July 2048 and expiry Description The Eastern Distributor links the CBD, Harbour Tunnel, Harbour Bridge and the Cross City Tunnel (CCT) with Sydney’s southe
Slide 56: M5 Motorway
M5 Motorway M5 Motorway Location Location Sydney, Australia Ownership Transurban 50% Concession length 31 years (initially 30 years, the concession was extended and expiry by 1.11 years after M5 Road Improvements), expires September 2023 Description The M5 connects Sydney’s CBD with the city’s rapid
Slide 57: M4 Motorway
M4 Motorway M4 Motorway Location Location Sydney, Australia Ownership Transurban 50.61% Concession length 18 years, expires February 2010 and expiry Description The M4 Motorway links Western Sydney to the inner west. There are three lanes in both directions for the majority of its length (four lanes
Slide 58: Pocahontas 895
Pocahontas 895 Pocahontas 895 Location Location Virginia, United States Ownership DRIVe co-investment vehicle holds 100% of Pocahontas Transurban holds a 75% interest in DRIVe Concession length 99 years, expires 2105 and expiry Description Pocahontas 895 comprises two lanes in each direction, It lin
Slide 59: Capital Beltway
Capital Beltway Capital Beltway Location Location Northern Virginia, United States Ownership DRIVe co-investment vehicle holds 90% of Capital Beltway Transurban holds a 75% interest in DRIVe Concession length 80 years, expires 2087 and expiry 5 year construction, 75 years of operations Description T
Slide 60: transurban
transurban