Transurban Group Ltd. · ASX:TCL
Transurban — H1 FY2017 Earnings Presentation
71 slides from Transurban's earnings presentation, Feb 7, 2017
Slide 1: Results for six months to 31 December 2016
Results for six months to 31 December 2016 7 February 2017
Slide 2: Disclaimer and basis of preparation
Disclaimer and basis of preparation 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 Transurban Holding Trust is
Slide 3: Highlights
Highlights • 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 construction projects ̶ Technol
Slide 4: Strategy
Strategy 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 RESULTS | 7 FEBRUARY 201
Slide 5: Transurban delivers network benefits
Transurban delivers network benefits 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 congestion and provide tr
Slide 6: Transurban delivers network benefits
Transurban delivers network benefits 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 management • Reduced go
Slide 7: Core earnings growth drivers
Core earnings growth drivers Consistent growth in earnings driven by four Compound annual growth excluding acquisitions of greater 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% 10.0% • Prices – def
Slide 8: 1H17 network performance
1H17 network performance NETWORK HIGHLIGHTS TOLL REVENUE ADT GROWTH TOLL REVENUE EBITDA 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 times cars on M2, LCT, M5
Slide 9: $9 billion development pipeline
$9 billion development pipeline 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$25 million) MONASH FREEWAY UPGRADE6 Melbourne LOGAN ENHANCEMENT PROJECT Bris
Slide 10: Potential opportunities in government transport plans
Potential opportunities in government transport plans FY17-FY19 FY20-FY22 FY23-FY25 FY26-FY28 FY29+ UNDER WESTCONNEX STAGE 1A Sydney CONSTRUCTION/PROCUREMENT2 WESTCONNEX STAGE 1B Sydney WESTCONNEX STAGE 2 Sydney SYDNEY GATEWAY Sydney WESTCONNEX STAGE 3 Sydney POTENTIAL CENTENARY/WESTERN MOTORWAY WID
Slide 11: North American market opportunities
North American market opportunities NETWORK POTENTIAL IN NORTH AMERICA’S MOST CONGESTED CITIES1 FAVOURABLE 50% DEMOGRAPHICS GOVERNMENT READINESS/ WILLINGNESS FOR PPP 40% Los Angeles San Francisco Vancouver Toronto Congestion level Greater Washington Area Seattle Miami 30% TIME SAVINGS Orlando NETWOR
Slide 12: Disciplined approach to investment
Disciplined approach to investment INVESTMENT APPROACH TRANSURBAN TRAFFIC FORECASTING CAPABILITY Vendor/third party forecast Actual Transurban Bid • Long-term owner-operator model – aligned with government partners • Pursue sustainable policy • Internal due diligence capability – traffic forecasting
Slide 13: Balance sheet capacity to fund investments
Balance sheet capacity to fund investments • Earnings growth underpins balance sheet BUSINESS GROWTH SUPPORTS GREATER expansion INVESTMENT1 • Commitment to strong investment grade credit 40,000 metrics 35,000 30,000 ̶ Targeting strong investment grade credit A$ MILLION 25,000 metrics and minimum FFO
Slide 14: Financial results
Transurban Financial results
Slide 15: Statutory results
Statutory results 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 • $56 million contribution from AirportlinkM7 Net profit 62 88 EBITDA 1H17 distribution Interim distribu
Slide 16: Proportional results
Proportional results 1H16 ($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 (261) (276) 5.7% • $7 mil
Slide 17: EBITDA movement
EBITDA movement +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 18: Network EBITDA margins
Network EBITDA margins 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% works disrupting traff
Slide 19: Cost movement
Cost movement • O&M has increased in-line with business activities • 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 Maintenance Strategic TQ int
Slide 20: Free cash flow
Free cash flow +47.5% (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 as per NCX 133.3% 461 d
Slide 21: Balance sheet positioned for macro environment
Balance sheet positioned for macro environment 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 debt reduced from 30% to
Slide 22: Hedging profile
Hedging profile TRANSURBAN INTEREST RATE HEDGING PROFILE1 • 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 12,000 in 1H17 was swa
Slide 23: Market update
Transurban Market update
Slide 24: Sydney network
Sydney network TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 24
Slide 25: Sydney network
Sydney network 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 Widening • Funding sou
Slide 26: WestConnex
WestConnex TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 26
Slide 27: WestConnex
WestConnex • 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-market outcomes from
Slide 28: Melbourne network
Melbourne network TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 28
Slide 29: Melbourne network
Melbourne network 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 • Construction on the MFU • Minim
Slide 30: Brisbane network
Brisbane network TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 30
Slide 31: Brisbane network
Brisbane network 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 the ICB benefits flowi
Slide 32: Greater Washington Area network
Greater Washington Area network TRANSURBAN 1H17 RESULTS | 7 FEBRUARY 2017 32
Slide 33: Greater Washington Area network
Greater Washington Area network 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 operations and maintenance co
Slide 34: Safety highlights
Safety highlights 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 people ̶ Roadside sign
Slide 35: Commitment to sustainability
Commitment to sustainability INFRASTRUCTURE SUSTAINABILITY COUNCIL RECOGNITION 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 evaluate sustainability at t
Slide 36: Transurban technology initiatives
Transurban technology initiatives Technology to drive improvements in customer experience 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 • Initial focus on interactio
Slide 37: Outlook
Outlook 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 progressing efficiency acr
Slide 38: Supplementary information
Supplementary information 1 DETAILED FINANCIALS 2 TREASURY 3 CORPORATE OVERVIEW 4 GLOSSARY
Slide 39: Detailed financials
Detailed financials
Slide 40: Traffic and revenue performance
Traffic and revenue performance 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. Compared to pcp. TRANSURB
Slide 41: Traffic and revenue data
Traffic and revenue data 1 DEC 15 DEC 16 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) 87 90 3.7% 86 89 3.3% C
Slide 42: Traffic and revenue data
Traffic and revenue data 1 DEC 15 DEC 16 ASSET QUARTER QUARTER % CHANGE 1H16 1H17 % CHANGE 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% Average Daily Trips (‘0
Slide 43: Proportional toll revenue by asset
Proportional toll revenue by asset OWNERSHIP DEC 16 QUARTER 1H17 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% $170 $170 $340 $340 Gat
Slide 44: Statutory results
Statutory results 1H16 ($M) 1H17 ($M) % CHANGE Toll revenue 919 1,032 12.3% Construction revenue 107 274 156.1% Other revenue 30 28 (6.7%) Total revenue 1,056 1,334 26.3% Employee benefit expense (71) (78) 9.9% Road operating costs (148) (166) 12.2% Construction costs (107) (274) 156.1% Transaction
Slide 45: Proportional results
Proportional results PROPORTIONAL EARNINGS 1H16 ($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) 1H17 ($M) % CHANGE Statu
Slide 46: 1H17 proportional result by asset
1H17 proportional result by asset NET FINANCE INCOME TAX TOLL OTHER COST (EXP) / 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) 1 - 1 75.1% ED 50 1 3
Slide 47: 1H16 proportional result by asset
1H16 proportional result by asset NET FINANCE INCOME TAX TOLL OTHER COST (EXP) / REVENUE REVENUE EBITDA D&A EXPENSE NPBT BENEFIT NPAT OWNERSHIP ASSET $M $M $M $M $M $M $M $M 100.0% M2 129 1 108 (36) (21) 51 8 59 100.0% LCT 45 - 28 (8) (6) 14 1 15 100.0% CCT 30 - 20 (12) (7) 1 (1) - 75.1% ED 48 - 34
Slide 48: 1H17 Net finance costs paid
1H17 Net finance costs paid NON-CASH ITEMS CONCESSION STATUTORY PAYMENTS & NET PROPORTIONAL OWNERSHIP NET DEBT MAINTENANCE INTEREST INTEREST INTEREST NET INTEREST CONTROLLED ENTITIES FEES CAPITALISATION ACCRUALS1 INTEREST PROVISION PAID PAID UNWIND CityLink 100.00% (13) (3) 3 - - (13) (13) M2 100.00
Slide 49: 1H16 Net finance costs paid
1H16 Net finance costs paid NON-CASH ITEMS CONCESSION STATUTORY PAYMENTS & NET PROPORTIONAL CONTROLLED ENTITIES DEBT INTEREST INTEREST OWNERSHIP NET MAINTENANCE INTEREST NET INTEREST FEES CAPITALISATION ACCRUALS2 INTEREST PROVISION PAID PAID UNWIND CityLink 100.00% (13) 1 3 - 1 (8) (8) M2 100.00% (2
Slide 50: Maintenance provision
Maintenance provision 1 MAINTENANCE EXPENSE MAINTENANCE CASH 2 RECOGNISED SPEND 1H16 ($M) 1H17 ($M) 1H16 ($M) 1H17 ($M) CityLink (7) (7) (7) (5) M2 (3) (1) (2) (2) LCT (3) (4) (6) (3) CCT (2) (4) (1) (2) ED (4) (3) (4) (5) M7 (4) (6) (1) (2) M5 (3) (2) - - Gateway Motorway (6) (5) (2) (2) Logan Moto
Slide 51: Free cash calculation
Free cash calculation FREE CASH CALCULATION SOURCE OF INFORMATION/EXPLANATION Cash flows from operating activities Statutory Transurban Holdings Limited operating cash flow (includes cash inflow from M5 TLNs). (refer Group Statutory accounts) Add back transaction and integration costs related Transa
Slide 52: Free cash flow
Free cash flow RECONCILIATION OF STATUTORY CASH FLOW FROM OPERATING ACTIVITIES TO FREE CASH 1H16 ($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 Weighted average secu
Slide 53: Reconciliation of proportional EBITDA to free cash
Reconciliation of proportional EBITDA to free cash 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 assets) 20 Refer to sl
Slide 54: Treasury
Transurban Treasury
Slide 55: Funding structure at 31 December 2016
Funding structure at 31 December 2016 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$0.3B A$0.9B LCT USPP PABs
Slide 56: Group debt at December 2016
Group debt at 31 December 2016 FACILITY FACILITY TOTAL FACILITY TOTAL DRAWN PROPORTIONAL STATUTORY (US$M)1 (A$M)1 (A$M) (A$M) DRAWN (A$M) DRAWN (A$M) CORPORATE DEBT2 Working capital facilities3 - 900 900 14 14 14 USPP 162 940 1,164 1,164 1,164 1,180 AMTN - 300 300 300 300 300 EMTN (CAD, NOK and EUR
Slide 57: Drawn debt
Drawn debt PROPORTIONAL BASIS 30 JUN 16 31 DEC 16 MOVEMENT AUD1 ($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$56 million increase in TQ debt as a result of capita
Slide 58: Key debt metrics
Key debt metrics 30 JUNE 2016 31 DECEMBER 2016 TRANSURBAN NON- TRANSURBAN NON- GROUP CORPORATE RECOURSE GROUP CORPORATE RECOURSE Weighted average maturity (years)1 8.7 yrs 5.8 yrs 10.2 yrs3 9.3 yrs 6.3 yrs 10.8 yrs2 Weighted average cost of AUD debt4 5.2% 5.7% 4.9% 4.9% 5.5% 4.5% Weighted average co
Slide 59: Extension of Group debt maturity profile
Extension of Group debt maturity profile JUNE 2016 MATURITY PROFILE 4,000 DEBT REFINANCED DURING THE PERIOD 3,000 A$ 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 PERIOD 3,000 A$ MILLION 2,
Slide 60: Corporate debt maturities at December 2016
Corporate debt maturities at 31 December 2016 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 FY21 FY22 FY23 FY24 FY25
Slide 61: Non-recourse debt maturities at December 2016
Non-recourse debt maturities at 31 December 2016 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 60 334 495 475 116 440
Slide 62: Diversification of funding sources
Diversification of funding sources 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 AMTN CHF NOTES A$12,4
Slide 63: Corporate overview
Corporate overview
Slide 64: Summarised Group structure
Summarised Group structure 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 holding asset and financin
Slide 65: Asset portfolio at 31 December 2016
Asset portfolio at 31 December 2016 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 years period Concessio
Slide 66: Asset portfolio at 31 December 2016
Asset portfolio at 31 December 2016 BRISBANE GREATER WASHINGTON AREA 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 2014 Remaining concessio
Slide 67: Tolling escalation
Tolling escalation EMBEDDED INFLATION PROTECTION 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%, which cannot be exceede
Slide 68: Safety
Safety 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 • Zero LTIs for employees
Slide 69: Glossary
Transurban Glossary
Slide 70: 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 ADT Average
Slide 71: Glossary
Glossary TERM DEFINITION TERM DEFINITION M7 Westlink M7 TIFIA Transportation Infrastructure Finance and Innovation Act 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 Traffic Management Cen