Transurban Group Ltd. · ASX:TCL
Transurban — Investor Day (May 2017)
63 slides from Transurban's investor day presentation, May 4, 2017
Slide 1: Investor Day 2017
Transurban Investor Day 2017 4 May 2017
Slide 2: Investor Day overview
Investor Day overview Position, growth and enhancing Melbourne: outcome focused for social licence stakeholders Scott Charlton Vin Vassallo Capital positioning for growth Brisbane: network benefits Adam Watson Wesley Ballantine Panel Q&A Sydney: data-driven excellence Andrew Head Morni
Slide 3: Our Executive Committee
Our Executive Committee Scott Charlton Adam Watson Tony Adams Jennifer Aument Wesley Ballantine Chief Executive Officer Chief Financial Officer GGM, Project Delivery and GGM, North America GGM, Queensland Operational Excellence Andrew Head Michele Huey Sue Johnson Lisa Tobin Vin Vassallo GGM, New So
Slide 4: Position, growth and enhancing social licence
Scott Charlton Position, growth and enhancing social licence
Slide 5: Our strategy
Our strategy Network planning Community Development & forecasting engagement & delivery To be the partner of choice with governments providing effective and innovative urban road infrastructure and services utilising core capabilities Technology Operations Customer management 5
Slide 6: Strategy remains constant but continued success requires agility
Strategy remains constant but continued success requires agility Small, considered shifts in applications of strategy Transurban’s IP in services and operations Development pipeline in Australia and potentially deployed to 3rd party assets North America an opportunity for associated with our network
Slide 7: Macro environment shifting—economic, community, political & technology
Macro environment shifting— economic, community, political & technology Economic Community Political Technology Australia: Trust has become a Australia: Pace and magnitude of critical issue for change creates Eastern states, particularly corporates to manage Infrastructure funding opportunit
Slide 8: Macro environment shifting—risk appetite
Macro environment shifting— risk appetite Pre-GFC (2004-2008) Post-GFC (2009-2015) 2016 to present Traffic risk Financial & structuring risk Risk appetite1 Operational risk Construction risk 1. Transurban view. 8
Slide 9: Investment dynamics—different drivers underpinning models
Investment dynamics— different drivers underpinning models Financial adviser / Pension funds Owner / operators Contractor / operators asset manager Core skills / Investment Network planning Traffic forecasting Financial structuring Corporate governance Construction procurement Construc
Slide 10: Macro environment shifting: Transurban will remain disciplined
Macro environment shifting Transurban will remain disciplined Pre-GFC (2004-2008) Post-GFC (2009-2015) 2016 to present Potential for higher Consortiums led by risk models led by financial advisors / financial advisors / asset managers and asset managers and contractors Significant investment contrac
Slide 11: Portfolio growth not reliant on M&A
Portfolio growth not reliant on M&A All projects in $9 billion pipeline are in exclusive negotiations Transurban’s networks provide opportunities to expand development pipeline Portfolio growth is not reliant on M&A 1,800 1,600 Transurban capital contribution 1,400 1,200 (A$ million) 1,000 800
Slide 12: Continued growth is reliant on maintaining and enhancing social licence
Continued growth is reliant on maintaining and enhancing social licence Community Employees Transurban’s stakeholder map Government Customers Business partners Investors 12
Slide 13: Capital positioning for growth
Adam Watson Capital positioning for growth
Slide 14: Capital strategy
14 Capital strategy Maintain strong investment grade credit metrics Cost efficient funding through market cycles Efficiently fund growth Consistently growing distributions while creating long term value 14
Slide 15: Observations capital markets
Observations capital markets Global demand for high- Liquidity to support Rising interest rate quality infrastructure investment requirements outlook from a Infrastructure remains Diversified sources of capital historically low base attractive to global investors available both domestically and
Slide 16: Strong investment grade credit metrics
Strong investment grade credit metrics Prudent management of funding to ensure Expansion of balance sheet over time1 strong investment grade credit metrics are S&P / Moody’s credit rating maintained, using equity as required A / A2 Transurban’s business model creates a FFO/Debt progressive expan
Slide 17: Hedged against rising interest rates and protected against low inflation
Hedged against rising interest rates and protected against low inflation Transurban interest rate hedging profile1 Inflation-linked toll pricing, with upside4,5 18,000 GWA Sydney Brisbane Corporate Fixed amount 16,000 99.6% interest rate hedged at 14,000 31 March 2017 9% Hedge tenor is matched t
Slide 18: Longer tenor low cost of funding
Longer tenor low cost of funding Weighted average maturity (Group) 1 9.1 years 9.3 years 9.3 years A key component of our capital 7.8 years 8.7 years 7.5 years 7.6 years strategy has been to increase the weighted average tenor of debt Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Mar 17 Weighted average
Slide 19: Diversification of funding sources
Diversification of funding sources June 2014 Group debt1 March 2017 Group debt1 Refinancing bank debt into capital markets debt provides diversity and enables extension of average tenor of debt — a key component of our capital strategy ─ Reduced dependency on bank debt (from 48% at Jun 14 to 20% a
Slide 20: Balance sheet to fund growth
Balance sheet to fund growth June 2016 maturity profile2,3,4 Large refinancing completed to provide significant bank debt Debt refinanced during the period capacity for new issuances to support development pipeline 5,000 4,000 Earnings growth underpins balance sheet expansion A$ million 3,000
Slide 21: Capital management
Capital management DPS Compound annual growth of greater than 10% since FY09 51.5c 45.5c 40.0c 31.0c 35.0c 27.0c 29.5c 22.0c 24.0c Actual Guidance FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Supported by the four pillars of earnings growth: traffic, price, operational efficiencies and devel
Slide 22: Growth potential in North America
Jennifer Aument Growth potential in North America
Slide 23: North America strategy
North America strategy Maintain focus on heavily-congested, urban areas with strong demographics Continue to leverage core capabilities and apply a long-term partnership approach Prepare to effectively respond to changing market conditions and availability of distressed assets Limit risk, ex
Slide 24: North America macro environment
North America macro environment Economic Community Political Increasing household Increasing customer Virginia elections in 2017 will income levels driving demands for service, appoint key leadership consumer purchasing information and choices positions including a new power governor Long-te
Slide 25: Growing adoption of P3s across sectors
Growing adoption of P3s across sectors Total equity value of all transactions All non-highway P3 projects since January 2015 USA and Canada Airports Car parks Education Facilities Healthcare Highway Housing Ports Transit Water Post financial / Waste close Procurement 0 1 2 3 4 5 6 7 8 Airports Car p
Slide 26: Long-term market potential: USA private toll road mileage exceeds Australia
Long-term market potential USA private toll road mileage exceeds Australia Total toll mileage, Australia versus USA 6,000 5,000 Policy changes and Road miles 4,000 other dynamics could open up 3,000 market for private investment 2,000 1,000 Public toll 0 Private toll1 2005 AU 2005 US 2007 AU 2007 US
Slide 27: Appetite for innovation among public toll agencies
Appetite for innovation among public toll agencies Notable public sector tolling developments since January 2015 Public tolling agencies continue to advance traditional and innovative projects including: converting to fully-electronic tolling advancing interoperability opening new managed lane
Slide 28: Strategic implications for Transurban
Strategic implications for Transurban Market fundamentals remain Maintain focus on key markets with demographics aligned to Transurban’s Project pipeline slow to develop due to regulatory and political barriers strategy Public funding through municipal bond market Continue existing network e
Slide 29: Outcome focused for stakeholders
Vin Vassallo Outcome focused for stakeholders
Slide 30: Melbourne strategy
Melbourne strategy Increase network capacity and efficiency through development of existing infrastructure Enhance the liveability of local communities Further explore opportunities to provide managed motorway services to assets adjacent to Transurban’s Victorian network Work with partners t
Slide 31: Melbourne macro environment
Melbourne macro environment Economic Community Political Fastest growing state economy Network-wide road congestion Political focus will increasingly with nation-leading growth in and public transport services shift to next election due in population and jobs remain a key issue in face of Nove
Slide 32: Outcome focused for stakeholders
Outcome focused for stakeholders Ability to apply and deploy learnings from across the business: ̶ Operations excellence ̶ Design, construction and project management ̶ Community and stakeholder engagement Active period for Victoria with: ̶ Two live construction projects—CTW and Webb Dock Access
Slide 33: Preparing for enhanced operations
Preparing for enhanced operations O&M planning for WGTP drawing on successes from across the business O&M team members integrated into CTW, WGTP project Significant improvement in incident delivery teams response time – Ensuring long-term considerations embedded in planning phase ‘Safe clearance’
Slide 34: Design, construction and project management
Design, construction and project management Applying lessons from current projects to WGTP High-quality urban design solution – Flatter, longer gradient design allowing vehicles to maintain travel speed, improving safety and reducing emissions – Sustainability features from NCX – Targeting ISCA ra
Slide 35: Community engagement
Community engagement West Gate Tunnel Project Five Phase Community Engagement WGTP builds on successful NCX program 2015 Five-phase community engagement 1 Proposal design (complete) – Increased transparency from project outset about opportunities for feedback and how it informs project outcomes –
Slide 36: Network benefits
Wesley Ballantine Network benefits
Slide 37: Brisbane strategy
Brisbane strategy Complete integration—final O&M arrangements and technology Improve processes and deploy technology across the network to enhance the customer experience Explore options to add capacity during peak periods and remain open to non-traditional roles 37
Slide 38: Brisbane macro environment
Brisbane macro environment Economic Community Political Returning to trend growth Industry support for alignment Government willingness to following latest resources cycle: of tolls in return for productivity partner with private sector for − Population benefits improved customer outcomes In
Slide 39: Network benefits
Network benefits Network position enables Transurban to deliver optimal outcomes for Brisbane Transurban asset Managed upgrade Construction works/upgrade Integration Organisational O&M “Steady state” restructure restructure GLIDe operations across all Acquisition complete announced operational QLD a
Slide 40: Network-wide operations and maintenance driving enhanced outcomes
Network-wide operations and maintenance driving enhanced outcomes O&M tunnel cost Holistic O&M approach forecast savings Routine Asset Tunnel network incident response and maintenance strategy & condition >25% saving maintenance contracts awarded to Egis Network Intelligent Improved and consiste
Slide 41: Customer benefits from continued network investments
Customer benefits from continued network investments Material improvements in customer service 95% of customer issues − Call handling times and quality resolved at first point of − More than 1,000 in-person retail outlets contact Process improvements resulting in material fee reduction Substanti
Slide 42: Leveraging position for growth
Leveraging position for growth 3 Network remains in need of significant investment in highly congested corridors: 1. Centenary / Western Freeway 2. Pacific Motorway 4 3. Bruce Highway 4. CBD accessibility Ability to apply core competencies for network benefits: − ICB O&M − Toowoomba Second Range
Slide 43: Data-driven excellence
Andrew Head Data-driven excellence
Slide 44: Sydney strategy
Sydney strategy Work with government partners to provide transport solutions Engage and strengthen relationships with local communities Demonstrate outstanding project management on current / future construction projects Prepare to participate in network growth opportunities Continue to in
Slide 45: Sydney macro environment
Sydney macro environment Economic Community Political Low interest rates have Population and economic Largest program of supported significant growth justify the recent and Government infrastructure housing investment continuing investment in spending in NSW since infrastructure Sydney Olympic
Slide 46: Data-driven excellence
Data-driven excellence Real-time network management ̶ Understanding how motorists use our roads Toll gantries to benefit the network as a whole Asset development Road sensors ̶ Monitoring emerging network friction points to implement solutions earlier New project application TomTom GPS ̶ Apply
Slide 47: Network management
Network management Data-driven initiatives that improve the performance of our networks day-to-day Inputs Components Benefits Time and operational savings Real-time data Demand Asset optimisation − Speed − Ramp metering − Increased throughput − Volume (flow) − Dynamic pricing by avoiding flow
Slide 48: Asset development
Asset development (Under Construction) Our in-house traffic modelling team uses proprietary systems to understand network friction points and determine the optimal time to deploy capital M2 integration Analysis of M2 travel speeds highlighted delays at Pennant Hills Road intersection as part of in
Slide 49: New project application
New project application Data-driven IP drawn from across the business and network operations informs bidding and new project decision making Knowledge of urban transport characteristics In-house traffic modelling team comprises 35 specialists Traffic models informed by land use, employment drive
Slide 50: Analyst data pack
—Transurban Analyst data pack
Slide 51: Transurban history
Transurban history 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 CityLink M1-CityLink Upgrade CityLink-Tulla Widening Hills M2 Hills M2 Upgrade M7 ED & M51 M5 Widening Lane Cove Tunnel Cross City Tunnel Gateway, Logan, Clem7 & Go Between Bridge2 Legacy Way2 Air
Slide 52: 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 53: Asset portfolio March 2017
Asset portfolio 31 March 2017 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 period 18 years 10 years 31 years 31 years 31 years 28 years1 31 years 19 years Concession end
Slide 54: Asset portfolio March 2017
Asset portfolio 31 March 2017 BRISBANE GREATER WASHINGTON AREA GATEWAY LOGAN GO BETWEEN LEGACY 495 EXPRESS 95 EXPRESS OVERVIEW CLEM7 AIRPORTLINK M7 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 concession per
Slide 55: Tolling escalation
Tolling escalation 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 exceeded. M2 Escalated quarterly by t
Slide 56: Traffic mix March quarter 2017
Traffic mix March quarter 2017 Proportion of vehicle class by ADT 100% Cars Large vehicles 50% 0% M2 LCT CCT ED M7 M5 CityLink Gateway Logan ALM7 Clem7 Legacy Go Between Bridge 56
Slide 57: Funding structure March 2017
Funding structure 31 March 2017 Transurban Non-Recourse Corporate Debt Sydney Brisbane GWA AMTN Working A$0.3B Capital2 Airportlink 495 Express 95 Express M2 LCT CCT ED M7 M5 TQ M7 Lanes Lanes A$0.9B EMTN €1.6B LCT ED M7 Airportlink M2 CCT M5 AMTN PABs PABs A$0.8B Term Debt A$0.3B AMTN AMTN A$0.7B M
Slide 58: Corporate debt maturities March 2017
Corporate debt maturities 31 March 2017 2,000 Working capital facilities Term bank deposit USPP AMTN EMTN 144A Letters of credit 1,800 1,600 1,400 1,200 A$ million 725 1,000 800 233 600 300 798 254 296 733 400 165 833 706 200 219 213 375 300 206 100 125 94 117 - FY17 FY18 FY19 FY20 FY2
Slide 59: Non-recourse debt maturities March 2017
Non-recourse debt maturities 31 March 2017 2,200 TQ (incl ALM7) ED M2 M7 CCT M5 LCT 495 95 2,000 80 1,800 278 1,600 421 1,400 369 294 A$ million 1,200 1,000 350 160 800 85 77 535 300 108 1299 600 225 90 200 75 317 400 845 400 40 225 98 60 100 495 475 116 440 200 405 406 250 279 302 293 277 200 200 2
Slide 60: WestConnex project map
WestConnex project map Transurban asset Potential network opportunity Motorway Tunnel 60
Slide 61: WestConnex project details
WestConnex project details Transurban continues to prepare for a WCX sell- down. Scope of sale to Transurban’s approach be determined Track record of working with industry and government partners to deliver Competitive process with whole-of-market outcomes significant interest expected from mu
Slide 62: Glossary
—Transurban Glossary
Slide 63: Glossary
Glossary ADT Average daily traffic ISCA Infrastructure Sustainability Council of Australia ALM7 AirportlinkM7 KGRIU King Georges Road Interchange Upgrade AUD Australian Dollars KPI Key performance indicator CAD Canadian Dollars KM Kilometre CAV Connected and autonomous vehicle KM/H Kilometres per ho