Transurban Aktie

Thank you for standing by, and welcome to the Transurban Group FY '26 Results Call. [Operator Instructions]

I would now like to hand the conference over to Craig Stafford, General Manager, Strategy and Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for the Transurban 2026 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. And with respect, we incorporate the voices of First Nations people in our approach supporting access to Mobi 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 this morning. We realize it's a busy day today. The presentation should take around 20 minutes, and then we'll have plenty of time for Q&A.

I will now hand over to Michelle to get us started.

Thanks, Craig, and good morning to everyone on the call. Let's start with the outcomes we've delivered this year. We adapted quickly to the shifting environment. You've seen in our monthly update since April, the traffic faced some headwinds from broader macro conditions and geopolitical impacts on fuel. Despite that, our road show good resilience, especially commercial traffic.

Importantly, we didn't sit back and wait for conditions to improve. We lent in and controlled what we could control. driving better cost performance, strengthening margins and growing distributions in line with guidance by 6.2%, 98% covered by free cash. And we're continuing to strike the right balance by finding smarter, more efficient ways to run the business and grow distribution sustainably and most importantly, invest in our customers and longer-term growth prospects. This has given us the confidence to announce FY '27 distribution guidance of $0.72 per security, which I'll comment more on later.

Let's move on to traffic. Our assets are holding up relatively well with overall traffic growing 2.2% to 2.6 million daily trips and commercial traffic grew by 6.6% and notwithstanding concerns around fuel security in March and April. And as you'll see in today's numbers, we've seen a broader improvement in June and July.

Looking briefly at traffic across our markets. In Sydney, construction impacts are abating, and we expect this to continue to improve as other new roads open over the next couple of years. In Melbourne, freight traffic grew 3.9% on CityLink supported by an almost 5% increase in port container movements. And in Brisbane, strong economic activity is showing up on our roads, with freight growing 4.9% in line with container growth. North America continued to outperform this year with traffic up 3.5% and revenue up 14%, driven by the clear value customers see our Express Funds.

Let me now shift to our performance against our strategic priorities. We've achieved a lot this year. If we look back only a few years, we were facing into a number of challenges. You were concerned about New South Wales toll reform that it could end in dispute, destroy value and store any growth in our existing assets. We had a cost base that was too high and rising interest rates meant both customers and investors were demanding more from us.

So we did what we said we were going to do. It started with a fundamental shift, taking a customer-first approach. The outcomes on New South Wales toll reform are the best example of that in action. Alongside this, we delivered 3 major projects connecting new people in places and adding over 144 lane kilometers of new roads for our customers. We had to be patient.

We deliberately took time to reset our relationships. Now we have new growth opportunities emerging, and there is still significant value to unlock from our existing assets and the nearly 12 million customers we serve. In the meantime, we got to work delivering as much value as possible from the business we have today. We improved our dynamic pricing in the U.S. in line with customer value, which drove a double-digit step change in earnings and a 26% increase in free cash flow. And we demonstrated strong cost discipline for the third consecutive year. There's more opportunity and more to do on all these fronts, but our approach is creating a new blueprint for the future.

I want to touch briefly on toll reform because it was a significant milestone. We supported the New South Wales government to reach a solution that is a genuine win for motorists, a win for the state and is enabling a proposed new road widening, all while protecting the value of your investment. The proposed solution includes a range of measures that deliver meaningful cost of living relief for drivers, especially those in Western Sydney. And some of these improvements are already in place. like switching off late fees and moving to digital toll notices. We've demonstrated we can work constructively with governments to improve customer outcomes. And that's the broader lesson from toll reform.

When industry and government work together with a shared focus on customers and where contracts are respected, we can deliver better outcomes for all parties. What you're seeing now are 2 big cultural shifts inside Transurban, and both of these are right for the times. The first is putting the customer at the heart of our strategy for long-term growth. The second is reallocating our capital and our efforts from within to invest where it matters towards our customers' digital innovation and further efficiency. We're putting our effort where it will deliver the most value. We're investing on the road for safer journeys, and we're being deliberate about where we invest in technology like AI. For example, our AI-driven chatbot now handles the majority of chat queries Customer satisfaction is 4.5 out of 5, and it's reduced escalations to our team by more than 60%.

And our rewards program is going from strength to strength with more than 2 million members growing at a rate of 50 new members an hour. It's delivering real value like our $0.26 per liter fuel offer for regular travelers. At the same time, we're driving productivity across the business, and seeing more and more opportunity to do so, continuing to free up capital to reinvest in our customers and support distribution growth.

We've delivered 3 major projects this year, saving drivers an additional 40,000 hours every workday. The Northern Extension project on the 495 is delivering faster, more reliable journeys in Greater Washington. And in Australia, the M7 M12 integration project is already making it easier for freight heading to the new Western Sydney Airport. Customers have taken to the M7 and the 495 quickly with traffic up 11% and 22%, respectively, for July compared to the prior year.

In Melbourne, truck volumes on the West Gate Tunnel are responding to the strong value proposition. And importantly, there are 90% fewer trucks on local Street. As we've mentioned before, the ramp-up profile of the West Gate Tunnel has remained flat since February, but the fundamentals remain solid with population growth in Melbourne's West, well placed to support the project over the longer term. And ultimately, these 3 projects will continue to deliver for decades.

Some of our strongest growth opportunities sit within our existing portfolio. That's things like capacity enhancements, which help relieve congestion pinch points. We're able to identify opportunities to create more value for customers and communities. For example, with around 120 lane miles, our proposed bidirectional project will more than double the existing capacity of the 95 Express Lanes, allowing us to address congestion on 1 of the country's busiest corridors.

So along with the active discussions we're having about projects in Brisbane and Sydney, we have a very tangible pipeline of growth ahead. I acknowledge that these projects can take some time to work through, to get them right, and we always respect government processes. We're approaching growth with discipline and patients, and these are exactly the kinds of projects that deliver long-term value for everyone.

Looking further ahead, we know our underlying growth drivers are strong. Population in our existing markets will support new opportunities over time. For example, Southeast Queensland population is expected to grow to around 6 million people over the next 2 decades. We're also keeping a close eye on shifts in government policy that may create long-term opportunities, including road user charging in Australia and New Zealand.

In New Zealand, we participated in their market sounding process to help explore what a modern customer-focused system could look like. In Australia, we're partnering with major freight operators to test real-world RUC technology. Our goal is to work with governments to make sure any new system is simple and seamless for motors. And as always, we're continuing to monitor government's infrastructure priorities. We know not everything will be on the table and even investments we're not directly involved in can support growth on our assets.

In the U.S., we're focused on disciplined capital allocation and active portfolio management. We have a growing set of opportunities in Virginia, and we've also been exploring new partnerships elsewhere to build longer-term optionality where it makes sense for us. That's why we made the strategic decision to bid in Nashville, while choosing to pass on bidding in Atlanta and to sell the A25 in Montreal. So the opportunity ahead is significant, but our approach remains disciplined and customer-focused.

With that, I'll hand over to Henry to take you through the financial results.

Thanks, Michelle, and good morning, everyone. We've set out our statutory results on Slide 14, showing profit after tax of $432 million. I'll move to the next slide where we've set out our proportional results. The business has delivered another strong result in FY '26, supported by continued growth on all key metrics. Free cash increased to $2.1 billion, up 5.1% on FY '25, which enabled distributions of $0.69 per security that were 98% free cash covered. Proportional toll revenue increased 6.7% to almost $4 billion and that was supported by resilient traffic growth and inflation-linked pricing in our Australian markets and also strong revenue growth in our U.S. business, where we continue to see strong customer demand for the Express Lanes there.

Good cost discipline was once again a feature of our result with proportional operating costs, including new assets growing below inflation at 3.3%. This contributed to operating EBITDA growth of 7.5% and an 80 basis point improvement in operating EBITDA margin to 75.7%.

In relation to costs, as Michelle outlined a moment ago, we continue to see opportunities to drive further efficiency into the business while continuing to invest in our assets and customer offerings, and I'll talk more about the cost outlook shortly.

Looking at the balance sheet. Corporate liquidity remains strong at $3.7 billion, and our weighted average cost of debt only marginally increased to 4.8% despite approximately $8 billion in new issuance and refinancing during the period at both the corporate and the asset level.

Taken together in a year marked by macroeconomic volatility, these outcomes demonstrate the resilience of the portfolio and they position us well to support future growth opportunities while continuing to deliver long-term security holder value.

Turning to Slide 16, we've set out the movement in free cash from FY '21 to FY '26. You can see the EBITDA growth translating into approximately $215 million of additional free cash generation during the year. This outcome reflects the strong operating leverage where revenue growth has again outpaced cost growth.

Higher finance costs offset some of that benefit with proportional net finance costs up by $113 million, driven primarily by West Gate Tunnel moving into its operational phase and the funding cost of that project ceasing to capitalize. And this increase in interest costs also reflects the refinancing activity and the additional debt funding of growth initiatives across the portfolio as well.

Interest income was also lower as average cash balances reduced compared to the prior period, while tax payments increased modestly.

As we've discussed over recent years, we've been working particularly hard on the U.S. business, which is delivering strong operational and financial performance. We're seeing that flow through meaningfully to the bottom line with its EBITDA contribution growing approximately 100% over the past 3 years, which is equivalent to a 26% compound annual growth rate. And I think it's worth noting that these are our longer-stated concessions going out to 2087, which points to the significant value that's been created here. Overall, free cash flow for the year grew 5.1% to more than $2.1 billion.

Turning to the proportional results. Operating EBITDA increased from $2.85 billion to $3.06 billion, delivering growth of 7.5% for the year. And you can see the operational performance translating into EBITDA in the waterfall we presented here. Beyond the growth within the existing portfolio, you can see the marginal growth being delivered by the new assets and capacity brought online, including West Gate Tunnel, the 415 extension and the M7 widening.

Looking at costs in more detail on Slide 18, the results again demonstrates our focus on discipline and cost management. We guided you to an FY '26 cost growth below inflation, excluding new assets, and have delivered total proportional operating cost growth of 0.7% on that basis. This is the third year in a row we've delivered this kind of cost discipline, and we've been able to do this while continuing to invest in targeted ways into the business.

Road operating costs were higher during the year, reflecting volume-related tolling costs an escalation in the incident response and maintenance contracts. Maintenance costs also increased as we undertook additional payment works across a number of the assets in line with our asset life cycle models. And more broadly, we continue to invest in maintenance across the portfolio and look for opportunities to optimize how we're delivering this across the group. Additionally, we continue to invest in development activities in a targeted way, which supports the emerging growth pipeline that Michelle has mentioned.

And then offsetting some of these areas where costs increased was our active management of the corporate cost base and overheads, which reduced by 6%. And this is allowing us to reinvest into the areas that Michelle spoke to earlier, and we continue to see opportunities to refine how we're allocating the capital and resources within the business to drive more value. By way of example, we continue to refine the mapping of core business processes and identified pain points which we're looking to address. We're also continuing to benefit from having consolidated our operational teams at an enterprise level, and there's more we can do to leverage this for better outcomes, including streamlining our customer-facing processes, technology systems and corporate processes.

Turning to our funding summary. We finished the year with approximately $3.7 billion of corporate liquidity, providing substantial flexibility to support both distributions and future growth opportunities. As you can see from the maturity profile, we have a well-diversified debt book with no material concentration of refinancing risk in any single year. The balance sheet continues to provide capacity to support investments, both within our existing portfolio and in future growth opportunities as they emerge. And importantly, we've demonstrated consistent access to debt capital markets through a range of market conditions, reflecting the quality of the portfolio and the strength of our credit profile.

Turning to Slide 20, we highlight the great outcomes our treasury team have delivered over a number of years. We also provided a bridge to net finance cost for FY '26 and some considerations for FY '27. The chart on the left shows how stable our funding costs have been during a period of significant volatility in the interest rate environment. Over the last 6 years, Australian 10-year swap rates have increased by around 400 basis points, as you can see. Yet the weighted average cost of debt across our business has only increased by around 40 basis points. That outcome reflects the disciplined execution of our long-term funding strategy. The fact that approximately 88% of the debt book remains interest rate hedged, we don't take currency risk, and the maturity profile is staggered has helped limit exposure to short-term interest rate movements.

Looking at FY '26, finance costs increased as the interest on the debt associated with the West Gate Tunnel ceased to capitalize. You can also see the finance costs from new debt issuance and refinancing activity here as well. And for FY '27, we do expect a continuation of higher funding costs as debt matures over time. You've heard us speak to approximately 20 basis points increasing every 6 months, and we still believe that, that rule of thumb holds in relation to our weighted average cost of funding as we look out over the next year.

Finally, Slide 21 sets out our capital allocation framework. And this is a framework that has remained unchanged for a number of years now and shows how we think about distribution growth and investment in the portfolio. The starting point is growth from the existing portfolio through traffic growth, pricing outcomes and operational performance, driving growth in EBITDA and free cash, which in turn supports sustainable distribution growth to security holders. At the same time, the growth in earnings expands balance sheet capacity, enabling us to reinvest in attractive opportunities where we can create long-term value.

During FY '26, growth in traffic revenue, EBITDA and free cash contributed to a 6.2% increase in distributions per security, as we've mentioned, and we continue to enhance portfolio flexibility through active capital management, including the divestment of our remaining interest in the A25. And we also turned off the DRP, which is a further reflection of the capital discipline we've sought to achieve.

Looking forward, we see a good pipeline of opportunities emerging across our markets. The strength of our balance sheet, combined with disciplined capital allocation gives us flexibility to pursue those opportunities.

In summary, the business continues to generate strong underlying earnings growth, expand margins, grow free cash and maintain a strong funding position, and those foundations leave us well positioned to grow distributions and invest in the growth opportunities that we see emerging.

I'll now hand back to Michelle for closing remarks.

Thanks, Henry. So to wrap up, this year has been about turning strategy into outcomes. We've delivered 3 major projects arrived at a positive solution for New South Wales toll reform and strengthen customer value, all while keeping costs below inflation for the third year in a row. And we continue to build fresh opportunities for future growth.

That's why we're pleased to provide FY '27 distribution guidance of $0.72 per security, with free cash coverage of the distribution expected to be slightly less than 95%. We're not changing our overall distribution approach, but we think it is right for this year.

FY '27 is a transitional year as we adjust to the M5 West ownership changes, with capacity on other new Sydney roads still a year or 2 away. We've been leaning into that for some time, driving better performance in the business, and we see more opportunities ahead. The work we're doing and our strong fundamentals gives us confidence in the outlook, and we're committed to delivering sustainable value for our customers and security holders.

I'd like to thank our people for their commitment and contribution over the past year and thank our securityholders for your continued support. We will now open up for questions.

[Operator Instructions] The first question today comes from Matt Ryan from Barrenjoey.

Just had a question on the free cash coverage and the movements that you're thinking about, I guess, the 105 change should be pretty well understood, but I'm just more tested in what you baked in for traffic movements as well as anything else that you is worth calling out?

We don't get Henry to start, and then I'll jump in as well.

Yes, you'll see in the presentation materials today, we have pointed the fact that we've observed reasonably good traffic on the network in recent times. And so there's an expectation that if we continue to hold that then you'll see sort of coverage in line with where we're guiding to today, and that sort of reflects the underlying performance of the business.

And then I think, as Michelle has sort of indicated a number of times in her comments a moment ago, we remain is confident in the broader outlook of the business because of everything that we have going on within the business, including how we are continuing to work on the broader efficiency within the business. And we've obviously given some pretty clear cost guidance for the year ahead as well, which would again be the fourth year in a row where we've delivered that kind of outcome.

And so in broad terms, I think, Matt, we would see this as a year where if we continue to see the kind of volumes we're seeing, then we'll have a reasonably well-covered distribution. And then as we look out beyond that, we remain reasonably confident.

And maybe just circling back to the volatility that you highlighted a few months ago. Do you have any sense of what was driving that? And I guess, again, interested in have gone forecasting the next 12 months in light of that and whether there's any data that you might be able to point to that might be able to suggest that, that was a little bit of an anomaly.

Maybe if I start and then Henry, you jump in. So what we've done over recent months has been very transparent and give you monthly traffic data. So you could see it real time as essentially as we we're seeing it. We definitely saw around Easter with fuel security being a concern. You saw the impact of that then. June and July have been better than that. And -- so that's sort of the current basis of trajectory, if you like.

I think to Henry's point, we've been leaning into all of this and controlling what we can control, and we remain confident in the outlook because if you sort of take together the underlying fundamentals, whether that's Western Harbour Tunnel opening in 2028, whether that's contracted price increases as they come through all the work we're doing on the business when you take all of that into account, we're confident in the outlook.

And maybe Henry will add.

Yes. Just a brief comment, maybe the broader observation that Michelle and I have been making is we have a broad portfolio, and you can see parts of the portfolio are actually doing really well. We've obviously called out the U.S. business again. And you can see some very strong growth that we continue to observe there. So we'll see the benefits of a large diversified portfolio underpinning the kind of resilience that we see as we look out in terms of volumes.

The next question comes from Rob from Morgan Stanley.

Apologies if you've covered this, I've joined your call late. But just looking at your opportunity set here, and I noticed NZ is still in there. I guess, I think Axio win that Northland corridor PPP. Can you just maybe update us on how you're thinking about the NZ toll market?

Thanks, Rob. We didn't bid on that one. So the focus on New Zealand has been very much about how we bring the customer focus and digital focus in alongside the infrastructure. So we're focused on things that make sense for us. What we did focus on this year in New Zealand was around road user charging. So there were some market soundings around that, which we participated in thinking about it through the digital tools that would be available for customers. So that's very much been the focus.

And then, I guess, just following on from the last question about traffic. I think you said June, July is looking a little better. Can you maybe comment on the Victorian total data and for young players like us, if there's any kind of cautionary tails or any interpretation nuance we should be aware of with that data?

Maybe we'll come back to you on the data itself and if there are any nuances. But what I'd say more broadly on Melbourne is there has been a change in traffic patterns in Melbourne, I think you've seen that on CityLink as well as Westgate. And some of that's the broader macro and some of that's just changed. Yes. I'll pass to Henry. I think he's going to add something.

Yes. I think you might be referring to the data being released by the Victorian government on broader parts of the network, that does show exactly what Michelle is describing, brought back around networks, network volumes have been down as we look out over a longer-term horizon going back a number of years. And that debt is a factor that has played out not just on CityLink, but obviously, as a factor playing into the numbers that we've seen on West Gate Tunnel.

Look, it's a continued watch point for us. Obviously, over time, we would expect these kind of network volumes to grow, but it's just a question of timing here in terms of broader background recovery and the drivers that go into that around population and employment in particular.

And other parts of the portfolio probably performed a bit better than we would have expected for reasons going the other way in those cities. Yes. Yes.

Okay. Cool. All right. And then I have to ask about Slide 55. If I'm comparing your cash tax kind of expectations versus this time last year, I guess, correct me if I'm wrong, TQs come forward a little bit, which I presume is because of the good traffic you're seeing there. And then THL has -- you've kind of pushed that out like 3 or 4 years. Is that a function of the New South Wales agreement? Or what's driven the cash tax at THL and TQ, please?

Yes. TQ is really just a marginal movement, but THC is a more significant movement, Rob. That's something we've been flagging now for a while. It just reflects the West Gate Tunnel and the capital expenditure there. So we've worked through that now and we're at a point where we've got clarity on the kind of impact to the timing for that broader THL consolidated group. And we've reflected that in the diagram there. So we're saying that's pushed out by a few years, I guess, from where we were previously projecting that.

The next question comes from Andre Fromyhr from UBS.

Probably 1 for Henry. Just wondering if you could help us bridge the finance costs into next year in sort of a similar structure to what you've shown in your slides today. So if I'm understanding correctly, it looks like sort of 130-odd mills stepping up from the Westgate funnel full year run rate. There's also going to be an impact on assuming from 712 completion and then you've got sort of the general drift in your average rates. I think you called out 20 bps per half, so is the likely step-up in your cash finance costs going to be materially higher, even closer to 180 million per annum or something once you pull those things into FY '27.

Look, it is correct to say there will be an increase in cost and the West Gate Tunnel is the lion's share of that, and you've correctly called out the number we've highlighted today. So we've obviously been talking about that -- sorry, $180 million number for a while. So I think there's been quite a bit of transparency on that, and we will see that full amount flow through to the P&L next year and hit that finance cost line. And then the other elements will also continue to have a more marginal impact, but they will increase. So in aggregate, you will see that sort of quantum of increase that will be in the dimensions you're describing there.

Okay. And then just a follow-up on the growth opportunities. I guess the pack indicates that you didn't participate in the I-285. I'm curious to understand if there are any particular dynamics around that assets or the tender process itself as to what made that not attractive?

Thanks, Andre. So probably the most important point is the emerging opportunity in Virginia, and particularly the growing size of the bidirectional project, which is much bigger than initially envisaged and emerging opportunity there. And clearly, that's right in our wheelhouse and will always be our first focus. As we look further afield, it was about creating optionality where it makes sense for us. And we decided that National was probably a bit more aligned with us than Atlanta.

Okay. And then 1 more, if you don't mind, coming back to the question about the payout ratio for next year. I understand you sell the points you made around FY '27 being, I guess, a transition year. Is the intention though, with the target range of 95 to 105, that you would sort of going to have some years below some years over 100% and sort of smooth it out through the cycle? Or is this year in particular 1 where you absorb that as you transition, but then you sort of come back to more mid-range.

Yes. As I mentioned in my speech, we set the range for a reason if you go back a couple of years, so that some years might be a bit better than 100%, in which case we put a bit of way for the future. Some years could be a bit less. As you've highlighted, Andre, this is a bit of a transition year. And given how we feel about the outlook we felt this was the right approach. But you should sort of expect through the cycle, you'd be in and around the middle of the range. It just might vary year-on-year.

The next question comes from Anthony Moulder from Jefferies.

Focus on growth, and we took back to growth, the timing of some of these projects Virginias an example, financial plays and then considerably a few years to build that project? And should we start thinking about more in 2033 contribution to cash flows from some of these projects, the bigger projects within the pipeline, please?

Yes, I'll take that, Anthony. Yes, look, that is the right way to be thinking about it if we're putting in place these agreements around the end of this decade, and then it will take a few years to build. It becomes more of an early 2030s prospect in terms of when the earnings will start to hit the free cash. Obviously, the kind of value creation is there at the time we win these deals. And so that's an important part of the equation, which is why we then lay out the capital allocation framework the way we do.

And gives us the right ability to balance the distribution and the growth in the near term as well.

Which is appreciate of cost growth or lack of, I guess, so that has remained a very strong component of the free cash flow. -- you've said that I think you're further closer to the start of that process as far as further cost reductions or efficiencies. How much further can they go as far as lowering the cost base of the business, please?

It's something we're working on quite hard, but I'll get Henry to answer.

Yes. You've heard us, Michelle and I say, for a number of years. Now we think this is a multiyear story in our view remains unchanged on that. So notwithstanding the fact that we've delivered a third year of clear cost discipline within the business as we look out over the next couple of years, we still see significant further opportunities.

And maybe just to add to that, something I mentioned in my -- when I was speaking a few moments ago is we're continuing to invest in the business, whether that's some of those longer-term growth prospects or investing in our customers today because we think that's the right thing to do for these times. But we're doing that within a cost base that we're managing very well.

Understood. And lastly, if I could on Westeel, obviously, the ramp-up profile is slower than expected slower than you would have forecast. It looks like truck traffic has continued to improve on that road? Is it really just the cars that aren't deviating away from West Gate Bridge into the West Gate tunnel that is causing the concern as far as what the delay as far as the ramp-up profile?

Do you want to start, Henry?

Sure. No, look, that is right. In terms of the vehicle mix profile, trucks have been reasonably strong, whereas the car traffic hasn't been there and the volumes that we'd anticipated the broader observation, which Michelle made earlier is background network volumes in Victoria have been weaker. And that has obviously flowed through to our West Gate Tunnel. But I think your observation is also correct in terms of 1 of the kind of use cases for road users, which is an alternative to the West Gate Bridge. It's -- we've always seen it as a bit of a pressure release valve to the West Gate Bridge. But with background network volumes down, the pressure on the bridge hasn't been as great as perhaps it would have been.

The next question comes from Justin Barratt from CLSA.

I just wanted to come back and look at your operational cost base on Slide 18. I appreciate your guidance for FY '27. I guess is it fair to assume, based on your prepared comments that most of the efficiencies in the '27 will come from that overhead bucket again?

Henry, why don't you start and I'll...

Yes. Look, we -- it is fair to say that the maintenance costs are increasing within the business. We've been saying that for a number of years. And the work we're doing there is not to reduce maintenance costs, but to look to optimize our practices to moderate the pace of the increase. And so that is an area where we think it's important to continue to invest in the networks, and we will continue to do that. road operating costs, when you look at that segment, there are some different things going on. We have naturally escalating incident response and maintenance contracts. These are large multiyear contracts. We do see opportunities to drive efficiency when we come to renegotiate those, but they happen on a multiyear horizon. So it's a little longer dated in terms of our ability to get after those, but we absolutely are when they become available.

But then within that line, you will see some of the benefit of toll reform come through the toll notice type costs, which we've been able to take out. So there will be some moderation that comes to that line as a result of the toll reform that we've agreed in principle with the New South Wales government.

Then the overhead line is the 1 here where clearly we see further opportunities. And that goes to the point Michelle made a moment ago, which is that we -- this is about looking for ways to drive further efficiency in how the business is being run, but continue to ensure that as we do that, we're allocating the capital and resources into the areas which are going to continue to drive value. And we do think about it more in terms of efficiency and resource allocation for value rather than just cost out.

Yes. And maybe just to add to that, road operate -- in terms of road operating costs, as I said, we're investing more into our customers. But we're trying to be more efficient in the way we do it. The digitization of toll notices is a good example of that, and we're continuing to look at ways to make those processes more efficient. Maintenance, I think will continue to go up for some time. And then it's a matter of finding the people and the resource and the cost from elsewhere in the business to put into those areas.

The 1 other comment I might make is the numbers we're presenting here have a new asset costs in there. So we've been able to effectively absorb the new assets and still stay within the below CPI guidance, which was obviously a little ahead of where we thought we were going to be when we gave that guidance. And so that remains the case in terms of how we've been positioned it for next year.

And continuing to invest in ongoing development costs. So that has -- as well. So it is very much invest in the growth, but be really disciplined and thoughtful about how we use our resources to do that. Great.

And then just 1 other 1 for me. I just wanted to check, can you highlighted some of the issues around the worst gate tunnel, and that it will take longer to get to free cash neutral. Is achieving free cash flow neutral something achievable over, I don't know, I guess, the near term, i.e. the next couple of years? Or do you think it's now looking like it may be more long dated than that?

We've always said the ramp-up on this asset is a long-dated prospects. So it's a ramp-up that was always going to take a number of years in our view. And if you remember, the data point that was out there that we've spoken to previously was a 2031 ADT number. So it told you that we always expected this to -- expected it to take a number of years for the city to fully learn its way into the kind of value in this asset, and that remains the case. I think we would be a little more circumspect about being specific at this point just in light of the observed traffic trends, but still hold to the view that over the longer term, the value on this asset should present itself.

And maybe if you just sort of step back and take a portfolio view, the U.S., as I mentioned before, has outperformed our expectation. I think free cash has grown $80 million, $90 million over the last 3 years there. So you've always got swings and roundabouts in the business from a portfolio perspective.

The next question comes from Owen Birrell from RBC Capital Markets.

Look, I just wanted to drill into the free cash flow coverage a little bit more. I know you said you're slightly below the 95% coverage level. Can I just get a sense relative to, I think, what you would sort of argue as sort of a normal period where you would be at 100%, where the biggest deltas are? Is it operating performance or the finance costs or is there a year impact from, say, the 25 coming out of the M5 reduction next year, maybe the proportionality of where the deltas are coming from versus normal?

Yes. And maybe I'll start on and Henry can go into some of the detail -- when we set the policy 2, 3 years ago, we were always mindful of the M5 West transitioning from 150% and the Western Harbour Tunnel in particular, taking a couple of years beyond that to open. Our expectation at the time was that we would use part of the range through that transition. I think that's probably gotten a little bit harder at the margin, just with some of the factors we're talking about today, but we're leaning into it and we're probably leaning into it harder in terms of the cost growth. And that's why when we talk about $0.72 for the coming year, we're doing that because we're confident in the outlook because -- partly because of the fundamentals in the business, whether that's contracted price escalations, whether that's the timing of some of that Sydney capacity to come online or it's the work we're doing.

Maybe the only additional point I'd add is we do take a longer view on this as well. And it's really important. You've heard Michelle talk about the fact that we remain confident in the outlook beyond FY '27 for a range of reasons that we've been describing, and that obviously takes into account our view of how we would expect networks to perform over that period. But in the current period, in addition to the fact, as Michelle has described, we've obviously observed some weakness in different parts of the portfolio, which we've outlined in Victoria, in particular, hasn't been particularly strong. And then that's flowed through to Westgate. So I think if you're looking for a sort of marginal factor that's probably just tipped slightly below -- within the range this year. That would be 1 of the factors.

But I'd say it's a small.

How much of impact the -- I guess, the increase in the finance costs has made to that number? And also, the A25 is give us a sense of proportionality, I mean because I don't imagine when you said this in the past, you would have assumed that you would have been divesting....

Yes, we made a decision to divest a 25. So we saw that as the sensible thing to do in the context of broader portfolio optimization, understanding that it probably would have a marginal sort of impact in here, but that's only marginal. The real answer is if I take the different components, finance, we have good visibility on our funding costs, and we managed that, and we've factored that into our view of sustainable distributions in the outlook. So there's no surprises in that for us. But if you then tie that back into the thematic, I described a moment ago around Victoria and West Gate Tunnel, we have a significant amount of funding that is now -- or finance costs associated with funding from Westgate that is now hitting the interest cost line, and we haven't seen the commensurate earnings come through on that, so that's the marginal piece that we've just been managing.

And just a second final question for me, if I may, just on capital release potential. You've highlighted $172 million of releases in FY '26. Now historically, Transurban used to give us I guess, a capital release potential as how much you had available to you. Just wondering if you can give us a sense of where that stands at the moment. And how much of that is actually within assets controlled by Transurban versus assets that have their own separate Board?

Look, firstly, I would steer you away from capital releases specifically. We do look at those opportunity sets on a case-by-case basis in the context of the funding plan and probably importantly, in the context of the external funding environment and the cost of funding. And then the kind of funding requirements we have as a business. When we -- if you remember, we decoupled capital releases from our discussions around distributions a couple of years back on and started to more broadly give people a dimension of the incremental leverage that we have available based on the incremental earnings of the business, staying within the credit metrics that we currently sit, which is that investment-grade BBB+, Baa1 sort of range, which is where we think is the sort of sweet spot for us.

And based on that, we see in broad terms, there's a very broad brush rule of thumb for every $100 million of additional EBITDA that we're able to bring in. There is about -- somewhere between $750 million and $1 billion of additional leverage that we would have access to stay within those credit metrics.

The conversations when these opportunities are sitting at the partner level is 1 that we have with our partners, and that's a kind of case-by-case discussion.

And maybe just to round out your question on the opportunities for capital release are mostly in joint venture assets. So predominantly Transurban Chesapeake, by way of example, we work through that with our partners looking at the reinvestment profile there, but the capacity is there in the way Henry has spoken about.

The next question comes from Suraj Nebhani from Citi.

Just on that -- on the free cash sort of build up. I'm looking at 1 of the slides in the presentation. Can you talk to the -- I think, Henry, you've had some comments around the tax in response to 1 of the questions. Can you talk to a potential step up into FY '27 there? We have a pretty good idea on the financial side. But I guess on the tax side, if you can give us some near-term guidance?

Yes. No, I think the broader observation is that we had -- previously -- we had reflected the expectation that the large consolidated tax group would enter a tax paying phase in FY '27, and we have moved that out by a couple of years, which is something we have been flagging for a little while that we're expecting would be the results of the capital expenditure on the Westgate Tunnel being taken into account. We now have better visibility on that, and we've reflected that in the materials at the back. So that's the material kind of point to observe around our tax profile that there is a kind of delay in the period upon which that large consolidated tax group will become tax paying as we take into account the capital expenditure, and we'll work through that. In terms of the existing tax payers, they're more at the margins. And you can see Northwest Rose Group is probably the kind of main taxpayer within the group, and that's still sort of relatively small in the context of the broader Transurban footprint. And that is worked through its tax losses. So effectively, that has entered tax paying phase.

Got it. And maybe just the other 1 was just around broader sort of EBITDA growth into next year and free cash flow -- if I back out the comments from the distribution guidance and free cash, slightly less than 5%. It seems like the free cash is broadly neutral at a headline level into FY '27 versus FY '26. And N5 West, you're getting half year impact this year, it's the of December. So I'm just wondering how you're thinking about growth into FY '28 as well as you get the total reforms coming through in FY '28.

Yes. So would you start, Henry, and then I'll add.

Yes. Look, Obviously, you can do the numbers. I mean we are managing -- we've been very transparently managing the step down in the West ownership position. So in broad terms, if that contributed I think just under $320 million of free cash in FY '26, we're going to have 100% of that for half the year and then 50% of that for the second half of the year. So in broad terms, it tells you that there'll be about 3/4 of that come through. So -- but again, we're managing that impact through the portfolio and sitting just slightly below the range in terms of where that ultimately lands in free cash coverage, it will be dependent on network volumes land for us. And that will be the swing factor on the growth numbers you're describing there.

And Suraj, specifically on toll reform, I think we were quite specific last week that there is no negative impact on distributions in the near term from toll reform.

And just 1 final 1 on the U.S. business, some very impressive numbers there. What -- do we see similar sort of growth? Or is it reaching to a point where you can't raise holds a lot more in the dynamic tons?

So maybe I'll start on this one, Suraj. So we've been -- I think when we spoke about this last time and probably the time before, we mentioned -- we talked about this as a bit more of a step change in the business. I think as you say, the growth has been very impressive as we've realigned our pricing to the value our customers see. We haven't -- we're not expecting that growth trajectory to continue. Having said that, we still see more and more opportunity for customers. Customers are showing that they value the road, particularly the 495. So exactly what that means, hard to guide precisely, but we still see pretty good performance in the U.S. But I think about a bit more as a step change than a growth rate.

Is there some natural sort of cap in the dynamic sort of pricing you -- but with respect to electricity and the fuel prices in the U.S.

So our commitment is to guarantee a minimum speed, and that's what we do. So pricing adjusts to demand, and we're probably just been more fine-tuned on how we approach that. That part of the U.S. is still showing strong congestion and good demand. So as we sit here, clearly, the macro will be what it will be. as we sit here today, there's still good congestion and we've sort of seen that month on month on month in the numbers.

And it's a good example of where targeted investment into our roads can unlock quite a strong value proposition for customers. And in the case of the U.S., then that supports the kind of pricing growth that we've been able to achieve. So if you go back to the recent major investments in our network around the Greater Washington area. We invested into the 95 corridor through the Freiburg extension and the 495 corridors through the northern extension, and both of those have then supported a very strong value proposition that has then supported the kind of price growth we've been able to achieve.

The next question comes from Richard Jones from JPMorgan.

Michelle, you called out the bid '24 was made in July. Just wondering if you can outline what are the steps from here and when we make years you're successful or not.

So that's a government process. So it's hard for us to be definitive. But I expect it's not that far away, but we just -- it's -- we don't control it.

Okay. And then just further on the West Gate Tunnel, -- do you expect the stabilized margin will be in line with the broader network?

I think you've got to -- maybe I'll get Henry just comment specifically. I think you've got to remember with the West Gate tunnel that the value sources were broad on that. And some of those were in CityLink as well. So you have to think about it holistically, but I'll get Henry to comment specifically.

Yes, that's right. That's a really important call out. There were funding components of that or value components of that we have already realized. But then if you take the Westgate Tunnel stand-alone in terms of the kind of EBITDA margin, which is 1 of the ways in which we assess the kind of efficient performance of these assets. There's a few things to take into account. Firstly, it's a tunnel, and tunnels typically run at a slightly lower margin. The second point is through the early life cycle of an asset, they take a while to ramp up, and that's where you see a lower margin typically improve. And so then, I guess, Richard, that's probably where you overlay your judgment on the sort of anticipated traffic profile on the Victorian network and how that will flow through to the ramp-up on the West Gate Tunnel and our comments saying this is probably a multiyear story from where we see things right now.

Next question comes from Nathan Lead from Morgans.

Just 2 or 3 questions for me, if you don't mind. So Slide 51, where we're looking at the net interest paid split by asset. If we look across to the right and the capitalized interest at the facility, that's the -- my understanding, that's the Westgate -- sorry, the West Connect Australian government concession alone. You're not paying any interest on that at the moment. The interest is getting capitalized into the balance. I believe that that's actually coming up to being an interest-paying facility relatively soon. So can you just talk through the timing on that and what your strategy is when that event occurs.

Look, what I'd say about that is that's a facility where we probably will look at our refinancing options around that over the next 2 to 3 years. we have -- it's got a slightly longer dated maturity on it, but then there are some sort of elements to that, that probably mean we'll look at refinancing that earlier. So that's the real consideration there. And then in terms of how the interest costs flow through, that will probably be caught in that refinancing event when we take it on.

Okay. The actual paying in that interest that before the refinancing, when is that actually going to hit the free cash.

I think it's -- FY '29 is the year that, that starts to come online. But as I said, that's also the window in which we're probably looking at refinancing options around that as well.

Yes. Okay. Slide 15, you've got a footnote there. Footnote 12, it's pretty interesting in terms of Standard & Poor's with the FFO to debt. what a meaningful increase in the cover there, but also, it looks like the downgrade triggers lower. So what does that mean in terms of -- I suppose the way you think about the constraints on your balance sheet capacity going forward?

Look, it doesn't really impact -- we've obviously had very good engagement with Standard & Poor's through this process. And they're just adjusting the methodology by which they calculate the FFO to debt. So they've gone to a proportional basis of calculation, which is the same as Moody's. But they have also then adjusted the downgrade thresholds. And when we've engaged with them, the dimensions of capacity don't sort of shift in any material way for us.

Yes. Okay. And then just final 1 for me is Slide 12, you've got population growth expectations there for each of your key markets. So when you work at CAGRs on that, it's like 1.2% CAGR for Sydney and sort of like 1.4% or so for Melbourne and for Brisbane. I mean, do you guys expect that your traffic growth is going to be able to grow meaningfully above those sort of long-term population growth expectations?

I think you've got a look, Nathan, at where our roads are relative to the population. And in many of our cities, like if I take some of the growth here, for example, we've got in Sydney in the North and the West. That's why the M2 M7 project was announced as a proposed project last week as part of toll reform. Queensland, we're in a very, very congested part of Brisbane with very significant growth in Southeast Queensland and a lot of congestion on Logan and Gateway as we sit today.

And Melbourne, we've spoken about the West Gate, but the long-term fundamentals in Melbourne with growth in the West is still very strong. So I think when you look at it quite specific to our assets. I think we continue to see strong fundamentals out over the medium and longer term.

Okay. If I could just sneak 1 more in. You've got a chart there with the debt in each of the different currencies. You still got some Canadian debt there's $650 million that's no longer got a natural hedge from the Canadian revenues. What's the intent on that?

So we paid down some of the proceeds, about $300 million of the proceeds as a result of the divestment of the A25 stake. So we just saw that was a prudent use of capital. So you'll see that shift in future reporting.

Okay. Is there still going to be like a full in dollar exposure there?

The balance is hedged.

At this time, we're showing no further questions. I'll hand the conference back to Michelle for closing remarks.

Look, thanks, everyone, for joining -- the IR team is available if you've got any questions through the day. And yes, thank you again.

Good morning, everyone, and thank you for joining us for an update on New South Wales toll reform and June traffic. We appreciate we're at the start of reporting season, and we have given you a lot of information at short notice. We're joined today by our CEO, Michelle Jablko; and our CFO, Henry Byrne, who will take you through the presentation that we lodged with the ASX this morning. Today's presentation should take around 15 minutes, and then we'll have plenty of time for questions.

So I'll now hand you over to Michelle to get us started.

Thank you, Craig, and good morning to everyone. I'm very pleased to be speaking with you about New South Wales toll reform. From the outset of this process, the New South Wales government was clear about its objectives, and we've listened. We approach this as a long-term investor in Sydney. And we've worked constructively from day 1 to deliver cost of living relief and system reform for Sydney motorists. We know that agreements that only work for one side simply don't hold, and this one had to work for motorists, the state and the people whose investment built the roads. That's why it took time.

The result is a pragmatic solution that delivers meaningful changes and improves the customer experience. The proposed M2 and M7 upgrade means we can ease traffic pressure in one of Sydney's most important growth corridors. And importantly, for you, our security holders, the outcome is value neutral and does not negatively impact near-term distributions. In essence, there are different equalization payments happening between concessions, but they net out to 0 with the government funding the proposed M2, M7 widenings. The next steps are for final documentation and a range of approvals to be completed.

Today's milestone is the culmination of a huge amount of work from many people across numerous parties. And I want to thank each of them for their incredible efforts throughout this process. Before we go through the detail, I want to take a step back and remind you of what was involved. This was a highly complex process requiring a careful balance of 10 concessions, 11 assets and 8 distinct investors. Our job was to help find solutions that work for customers without breaking down the system that helped build these roads and to protect the $36 billion that Transurban and our partners have invested into Sydney over more than 2 decades.

We also have different levels of congestion in different parts of the city, and motorists had to come first. So price is one thing, but the ability to move around Sydney efficiently is equally important. The solution needed to take all of this into account, and the outcome is a tailored approach. The reform recognize the unique characteristics of each road rather than applying a one-size-fits-all model. So we appreciate it took some time, but it was an iterative process, and it led to better outcomes for all parties.

Let me now step through the key components, starting with the price changes for motorists. Tolls are coming down on 4 roads, the M7, the M2, the Lane Cove Tunnel and the Cross City Tunnel. The package proposes 2-way tolling on the Eastern distributor with each direction charged at 53% of the current one-way toll. The M7 toll cap will kick in at 18 kilometers instead of 20. There will be a new motorcycle class at half the standard car toll and a modest increase in truck tolls.

Motorists will benefit from price changes on key routes as well as the toll cap. And the reason we could make these changes is that the value of our investment was protected, one made the other possible. These reforms translate into real savings, especially for drivers in Western Sydney. We know the average Sydney customer spends around $12.45 per week on tolls and the government's $60 weekly toll cap is in place for more frequent drivers. So these pricing changes are targeted at delivering meaningful savings where they matter most.

Take a customer traveling from Kellyville to North Sydney. By 2029, they're expected to save around 9% a trip. While trips across the city will also come down, thanks to the reduction in Cross City Tunnel tolls. So these aren't theoretical savings. It's money back in the hip pocket for many households. When we talk about reform, we also have to think about Sydney's growth. That's why we're focusing on unlocking more capacity in the city's Northwest. The M7 and M2 are the lifeblood of this region, connecting some of the city's fastest-growing communities.

I'm particularly excited about this proposed project that will enhance two of Sydney's busiest motorways. Once the final agreements are completed and the necessary approvals are in place, we'll be working alongside the New South Wales government to widen 17 kilometers of this corridor to improve traffic flow and provide more value for our customers. And importantly, motorists will receive the benefits of these upgrades without additional toll increases linked to the widening project. During this process, we heard loud and clear from Sydneysiders about what frustrates them most, things like fees and the confusion that comes from receiving multiple paper toll notices very late after the trip was taken. That's what got fixed first.

We've moved away from paper notices to digital notifications and switched off late fees. And I'm pleased to say this all went live in July. This means we can now get in touch with customers earlier, helping them fix unpaid tolls before debt builds up. So this will make the system fairer and easier to navigate.

I'm going to pass to Henry to take you through some of the detail around the various concession adjustments. Then we'll make some brief comments on June traffic and have plenty of time for questions.

Thanks, Michelle, and good morning, everyone. I'm going to talk to some of the specific concession adjustments that underpin the announcement today. And then after Michelle's wrap up, as Michelle just said, I'll come back and speak briefly to the traffic data we've also put out with this announcement. Firstly, on the New South Wales toll reform. As Michelle has noted, we've engaged constructively with the New South Wales government to achieve a broadly neutral outcome on both cash flow and a net present value basis with an appropriate adjustment for risk. This outcome is designed to maintain the integrity and value of our existing contractual agreements and provide investors confidence on a go-forward basis.

Value and cash flow neutrality is achieved through 3 core elements. The first are price adjustments and associated traffic impacts. The second relates to equalization payments and associated funding and the third stems from a proposed new enhancement project of the M7 and M2 that Michelle just referenced.

So let me step through these elements one by one in a little more detail. We're implementing pricing adjustments across 5 of our assets in the New South Wales portfolio, and these changes are expected to take effect at different times. The first changes are expected to come through in July 2027 for the M2 and Lane Cove Tunnel. The next changes on the Eastern Distributor and Cross City Tunnel will align with the Western Harbour Tunnel opening around 2028. And the final toll price changes on the M7 will be aligned with the M7-M2 and the timing of this will be dependent on the government approvals of the widening project, as previously mentioned.

In terms of what changes will occur, the Eastern Distributor will introduce 2-way tolling at 53% of the status quo price, leading to an expected increase in aggregate average daily traffic in both directions and making it value positive. Hills M2 will see a 10% price decrease at the Main Toll Plaza and NorthConnex ramp, and these changes alongside the widening project are anticipated to improve traffic volumes.

Upon the proposed widening of the M7-M2, Westlink M7 will reduce the toll cap by 10% and this change, alongside the benefit from the proposed widening project, will improve traffic volumes as well. Lane Cove Tunnel and Cross City Tunnel will have 10% and 20% price reductions, respectively, that are expected to improve volumes as well. And we've estimated the traffic impacts from the price changes on a risk-adjusted basis. And as a broad rule of thumb, we've observed historically that a 10% change in price should have around a 2% change in traffic. Finally, while they only represent a very small percentage of our customers, you'll see, on toll price multipliers, a new motorcycle category has been introduced at half the cost of a car. And the heavy vehicle multiplier is also being standardized at 3.15x across the majority of the portfolio.

These price adjustments and expected changes to our traffic flow on a given asset create a delta to our status quo modeling. That delta is bridged through the asset equalization payments between the government and the relevant concessionaires, which will be paid over a 5-year period. These payments offset the net financial impacts of the price changes, traffic adjustments and enhanced traffic flow from projects like the proposed M7-M2 widening. We will assist the government in funding these equalization payments through the early payment of the M2 promissory notes and the Eastern distributor concession notes by settling them early. And so by settling them early, the government will gain immediate funds allowing it to make the equalization payments without using its own balance sheet.

Finally, as Michelle mentioned, a proposed widening of the M7-M2, if approved, will be government funded. The project is expected to widen approximately 17 kilometers between Richmond Road and the Windsor Road Bridge, enhancing traffic flow through a heavily congested northern corridor that is expected to experience high population growth over the next couple of decades. Importantly, these arrangements in aggregate do not negatively impact near-term distributions. From a financial reporting perspective and to assist with the modeling, we intend for these equalization payments to form part of our free cash flow. And we've received positive initial engagement from credit ratings agencies and expect to finalize any required financier consents in the coming months.

Operationally, the reform process also delivers tangible benefits. We anticipate savings from enforcement reforms, which offsets the toll notice administration fees that customers will no longer pay. Crucially, the net equalization payments for all assets effectively offset the value foregone from toll price and traffic changes with the proposed early repayment of promissory notes and concession notes assisting the government from a funding perspective. This value source helps protect taxpayers from funding the equalization payments while reaffirming a value neutral outcome for concessionaires on a risk-adjusted basis. Included in the equalization payments we're making is a $75 million contribution to support the monthly toll cap, the government has announced, and that's factored into our calculations to ensure value neutrality.

I'll now hand back to Michelle for some final comments on the toll reform announcement.

Thanks, Henry. I just want to pause for a moment to reflect on the importance of today's milestone. We're really pleased to reach a solution that works for motorist, the government and for our security holders. We've also taken an opportunity today to provide you with a traffic update. As we've been in a period of macroeconomic and geopolitical uncertainty, we've been giving you more regular updates. And what I'm going to do is get Henry just to step through the details there, and then we'll go straight to questions.

We just wanted to call out a couple of things on the traffic data we put out with this release before we go to questions. So as outlined in our monthly traffic updates, uncertainty in the macroeconomic and geopolitical environment remains a feature of the operating landscape. June was a better month for traffic, and that trend has continued in July, but we're not reading too much into that yet. We saw in March and April, what can happen when people get nervous about fuel, particularly around its availability. And so with that in mind, we continue to monitor the macroeconomic environment, noting that there are renewed hostilities in the Middle East. The end of the fuel excise subsidy is also a factor we're watching closely.

Positively, commercial vehicle traffic has remained resilient across our Australian markets, providing a degree of stability despite softer conditions in parts of the passenger vehicle segment. In North America, our assets continue to perform strongly. Traffic on the I-95 and the I-495 corridors increased by 2.6% and 10%, respectively, for FY '26, which reflects the ongoing strength of these markets and the value of our diversified portfolio. And obviously, the strong value proposition continues to support the pricing outcomes we've achieved in that market.

We've also highlighted the West Gate Tunnel weekly traffic data in the material today and the trends observed on that asset. You can see average daily traffic on that asset since opening to June 30 was approximately 37,000 vehicles per day. And you can see on the chart here that, that's remained broadly flat for a number of months now. The M7 is a different story. Since the completion of the M7-M12 widening project, we've seen -- and the June data shows an 8.3% growth year-on-year, which is broadly consistent with our expectations of the uplift from that project.

So there's some brief comments. I'll now hand back to the operator to moderate our Q&A section of the webcast.

[Operator Instructions] The first question comes from Rob Koh from Morgan Stanley.

Congratulations on what I can imagine is a really long deal for you all. I hope you're pleased. I guess my first question is around risk allocation on the M2-M7 widening, if it's delayed or if there's cost overrun. Is that all, I guess, for the state?

Rob, thank you. I would think of it in a very similar way to the M7-M12 widening that we just completed and opened. So we've got a pretty good template there, and we'll just work through it in a similar way.

Okay. And then I guess my next question, I guess, looking at completing the deal is financier consents. And I guess you've had a positive signing with the rating agencies. I think the biggest change in revenue mix is at the M1 where you'll be tolling both ways. Can you give us a sense of are you changing the debt amortization profile there? And what kind of -- maybe you could give us a steer on what kind of traffic elasticities you'd be thinking about there?

Yes, sure. I'll take that, Rob. So maybe if I start with the traffic elasticities, we've deliberately, again, guided everyone to a rule of thumb that we've used historically around the elasticities of demand that we see around price changes, and that's effectively to say for every 10% movement in price, you should see around a 2% movement in volume either way. And so then if you think about the Eastern distributor here, we're talking about effectively a halving of the price. It's a little bit over. We said 53% of status quo.

But if you think about in broad terms, halving of price, you start to get the dimensions of the traffic volume increase that we would expect as a result of that. And indeed, that principle sort of broadly holds when you look across all the other price increases or adjustments that we've -- sorry, decreases, I should say, that we've announced on the other concessions.

In terms of the Eastern distributor specifically, well, we've got concession buybacks on the Eastern distributor and promissory note buybacks on the M2. The ED, we'd expect to fund those with project level debt. So that will then be factored in. All adjustments to debt amortization on the Eastern Distributor need to be agreed with the state. There's an agreed amortization profile. And so that's a process that we'll go through. And then the Hills M2, the buyback there, we would expect to fund that given it's a 100% owned asset with corporate level debt. So that sort of gives you a sense of how we're thinking about the funding.

Okay. Just so that I understand, for the M1 where you're dropping [indiscernible] what is it, northbound tolls then we should just multiply that 20% kind of elasticity. I guess the other way where you're introducing a toll, is it the same kind of thinking?

Yes, Rob. And you can see that's why with the equalization payments on the Eastern distributor, there's essentially a net payment to the state, which reflects the increase in volume and the change in price.

Your next question comes from Justin Barratt from CLSA.

Just wanted to ask a couple of these arrangements rely on the opening of the Western Harbour Tunnel, which is [indiscernible] 2028. I just wanted to understand a little bit like Rob's question on the M7, where does the risk lie in the event that for any unforeseen circumstances, the Western Harbour Tunnel opening is delayed?

So it may -- if I sort of step back, it made sense for a number of the changes to happen around the same time as the Western Harbour Tunnel opening because it helps manage the traffic flow across the network. We've given you the dates for the price changes. I don't think it materially changes if the Western Harbour Tunnel is a bit earlier or a bit later.

Okay. Great. And then in relation to the widening of the M7 M2, I appreciate some of the timing that you've given us. But how should we think about the traffic impact, whether that be during the construction phase and then thereafter, how [indiscernible] on a normalized basis once it's completed?

Yes. Let me take that. So there's 2 dimensions around the traffic impacts that we're going to see on both the M2 and the M7. The first is the reaction to the pricing adjustments. And as I was just saying a moment ago, use the broad rule of thumb around demand elasticities there to gauge those. And then over and above that, there will be an incremental benefit from the widening. And what we would counsel you to look at is the previous examples of widenings where you've typically seen mid-single-digit declines during construction period.

And then as we're observing currently on the M7 from the M7-M12 widening, you see that bounce back into a ramp-up period where you get the recovery against a depressed base, which can take you into the high single digit, low double digit for a brief period of time and ramp up and then dropping down into mid-single-digit profile as a sort of an actual increase to volume. And so that's a long way of saying, use the existing widenings that we have done on the corridors, including the most recent one as a rule of thumb for this one.

Your next question comes from Matt Ryan from Barrenjoey.

I'm interested in the way that you landed on the pricing adjustments for the [indiscernible] assets. And I guess just any metrics that you were looking at when deciding what adjustments needed to be made?

Thanks, Matt. So it was a very iterative process. It really -- it started with the independent review that was done and then we built on it and iterated. And what we worked through was we looked at various price adjustments across the network. We looked at the traffic implications of that, including some of them could cause congestion on the network, which wouldn't have been a good outcome. And the government had to weigh up the cost to taxpayers of those.

The government also put in place a permanent weekly cap. So that had to be taken into account. And then we just worked through an iterative process to sort of get the balance right between motorists and taxpayers against the backdrop of protecting the value of the assets. So it very much was an iterative process looking at both traffic implications for motorists and price benefits for motorists.

And [indiscernible] to value neutral, are there any sort of mechanisms in place to protect you if that doesn't end up being the case? And can you talk about the equalization payments and whether there's any adjustment in those as time goes on? And I guess you realize whether that price elasticity assumption is correct or not?

So what we worked through, and I think Henry mentioned that the equalization payments were determined on a risk-adjusted basis because we were conscious that we were changing price for traffic in a number of instances. And so we took that into account, not dissimilar to the way we would on a road widening is the way I think about it.

Your next question comes from Anthony Moulder from Jefferies.

If I can go back to the M2-M7. Is this a new way that the government will progress widenings within your network? Is it something that you think will continue as far as them funding it, there been no price increase and no concession extension?

It's a bit hard to comment on hypotheticals into the future, Anthony. What I can say here is it worked in the context of the toll reform broader transaction. It made sense because by reducing pricing, whether that's on the M2 or the change in the M7 cap, we were changing congestion in that part of the network.

And so that essentially brought forward the need for the widening and it made sense in the broader toll reform negotiation that, that would get funded in that way. I think future widenings will always be a question for government. I think what it does show is we're able to work together with government to find something that, as I said, works for motorists, works for taxpayers and is good for the investment as well.

Wouldn't you have preferred to have done that widening yourselves?

I think it all gets taken into account in the overall deal economics. So I don't think it ultimately makes a difference. We took into account not dissimilar things than we took into account on the M7-M12 widening. Yes. So I don't think it makes a difference, Anthony.

And just coming back to that question on -- I thought the reform wanted standardization that wanted simplicity as far as the pricing of the toll network. Obviously, that hasn't occurred, and it was difficult, I get from the outset to achieve that. But how did you land on these 5 roads that should get the discounts, whereas others don't?

Yes. Look, we worked through that. And I think as I mentioned, it was quite an iterative process that had to take into account the cost to taxpayers and the benefit to motorists. So that all had to be worked through. Different parts of the city are quite different in terms of congestion and maturity of assets. And so to try and come up with a standardized price across the whole network would have had negative consequences either for motorist or taxpayers. And so we essentially looked at it in terms of what I'd say is corridors and then individual assets.

I do think quite a lot of things are simplified and standardized, whether that's the multipliers, whether that's the way where payments work and certainly, the 2-way tolling of the ED is matching what's happening on the government roads as well.

Yes. No, that's fair. And a quick question for Henry. Just how should we think about the timing in these cash flow payments? Is this more FY '27 that you have most of them? How much of this legs into '28, please?

No, you should think about the concession note -- promissory note buyback in 2028 and then our equalization payment then as well on the Eastern distributor and then the government's equalization payments to us, which follow happening over a 5-year period from 2028 to 2032.

Uniform over that period.

Yes, they're spread evenly over that -- sorry, we show you by concession. On Slide 10 of the deck, you can see the quantity for each concession and then it's spread evenly over that period.

Your next question comes from Owen Birrell from RBC.

I just -- I guess my 2 questions. Firstly, just on the -- this is a restructure of those 5 concession agreements. Is that correct as opposed to some sort of synthetic overlay?

Correct. Yes. The concession agreements essentially are being amended. Yes.

Okay. And in terms of the amendments to those concession agreements, so it's fair to say that the toll structure is going to be reduced, but there's an equalization payment that's going to be included within that agreement?

Yes. Yes, exactly.

And then finally, in terms of -- does that need any sort of parliamentary adjustment or something to go through parliament? Or is it literally just a commercial agreement between the current government and the concession holders?

It's a commercial agreement with a couple of caveats. So there's still some process to go, and there are a few approvals that need to be put in place. Henry spoke about financier approvals. There are planning approvals that will be needed for the widening and the 2-way tolling on the ED. So there are still some approvals to come, but it doesn't require parliamentary approval.

Okay. And just, I guess, a final one for me. Just on the Sydney Harbour Bridge and the Tunnels, those toll regimes are excluded from all of this restructuring. Is that correct?

They're a matter for government. So that's a separate matter. They're not part of our negotiation.

Okay. And just one final one for me. The repayment of the promissory notes, are you going to, I guess, raise some debt funding at the group level or elsewhere to fund those repayments?

Yes. As I was saying a moment ago, we'll fund -- we anticipate funding the Eastern distributor promissory notes at the asset level and also the equalization payment that we will make to the state for the value uplift there. And then for the Hills M2, which is obviously 100% owned, we would probably look to fund that or we will look to fund that at corporate level.

Your next question comes from Cameron McDonald from E&P.

Just a couple of questions from me, if I can. Are there any tax implications around the early repayment of the concession notes? And then secondly, then how are the equalization payments actually treated? Are they treated as income or they're going to be treated as a capital payment?

Maybe I'll start and then Henry can jump in. To the extent there are any tax payments, they're taken into account in the value neutrality. And then in terms of the equalization payments, I think Henry mentioned that the payments from us to the government or from concessionaires to the government are essentially funded with debt at the start of 2028. And the equalization payments coming from the state to concessionaires will happen progressively over 5 years, and they will -- because they're compensating for price changes, they'll be taken as income.

Yes. And maybe the only thing I'd add is -- so we would expect to treat the payments to us, Cam, as free cash, but it will still be a discussion with our Board around how we then formulate the distribution. So that's a discussion that we yet to sort of have. And that will obviously be from 2028 onwards when we're looking at that incoming equalization payments to us.

But they're adjusting price changes down. So sort of net -- from a distribution perspective, we don't expect any negative impact.

No.

And then just on the M 2 -- sorry, why pay the earlier -- and I understand the repayment of the promissory notes of $600 million to help fund all of the other equalization payments, et cetera. But on the M2, why pay $500 million and then receive $400 million over a couple of years? Why not just make a $100 million payment upfront and then be done with it?

They're quite separate in terms of how the mechanics worked around them. And so it was just the way it all got put together, and it was the most efficient way for the state and effective for us.

Right. Okay. Okay. No problem. And then just in terms of West Gate Tunnel, you've said that it's now flat for the last 4 months. Is there any other comments you can make about what's impacting that, and what you think is actually stopping people from using it?

Maybe I'll add a couple -- I'll start with a couple of comments, Cam, and then Henry might add. So as we've been saying probably since February, the truck usage has been really positive and trucks are really seeing the value. Cars are taking a little longer. There's a little bit of a macro sitting over that. And also, I'd say travel patterns in Melbourne have changed over recent years and certainly since the project was devised. So it is taking longer for cars.

Long term, we still see the growth in that part of Melbourne and the population growth, they will support the project over the longer term. But in the near term, it's taking a little bit of time. There is some work we're doing on things -- we continue to work on communication and signage and things like that, but it's just taking a bit longer for cars. I don't know, Henry, if you want to add anything?

The only thing I'd add is probably emphasize that point on the background growth is a factor that really has played into the car volumes that we've seen there, which have obviously been behind expectations and driven that kind of flat period that we've seen. The commercial vehicle use has been a real positive though. So at least that -- which we all know has a very strong value proposition with the connection of the port, and that has played out. So at the moment, it's sort of in part, it's a background network story for us there in Victoria, which has been accentuated on this new asset.

Okay. And then final question, just in terms of the 3.15x multiplier for trucks in New South Wales, have you engaged with the commercial transport players, et cetera, as part of this process? Because on average, that looks to be sort of a 5% uplift just straight off the bat on the multiplier before you start putting through the escalations over time. And then also, do those price reductions that you've spoken about, I'm assuming they apply to the trucks as well -- getting the reduction, but the multiplier kicks in not fully somewhat offset that.

Correct, Cam. I think that's the way to think about it. So the trucks will benefit from most of the savings. I mean if you take the M7 as an example, you've got currently the number of trucks that benefit from the cap would be sort of just a bit over 20%, and that's going to more than double to over 40% that will benefit from the cap. So there's going to be -- and that, as you know, is a very, very important freight route. So all of that got taken into account. The other thing I'd add is the reason for the multiplier increase is the government is proposing to use it for some -- to fund some benefits for the freight industry as well. And so again, all of that got taken into account.

Your next question comes from Andre Fromyhr from UBS.

Can I just confirm the changes in the concession toll levels that are being made here, that's just a step change reset. You're not going back and changing the escalation drivers.

Correct. That's correct, Andre.

Okay. And so then I guess, somewhat related, but also relating to the -- one of the questions earlier about the sort of approvals and finalization of this. Have you got any level of commitment from the government that we're done that this is the last time that these contracts will be reopened? Or is there a chance that in 5, 10 years' time after more escalation that affordability becomes a political topic again and you're back at the negotiating [indiscernible]?

The question a bit, Andre, to say that I think by working constructively with the government, we were able to deal into what was important to them today and protect the value of the contracts. So one made the other possible. The fact that contracts were binding enabled us to make changes to -- that work for the government.

I think things like digitization is a real big plus for motorists turning off admin fees. And as Henry said, we were very happy with that as well. So I don't see it as a bad thing that we sit down and work with governments. We're long-term investors in these in Sydney. We approach this as a long-term investor and you've seen what's come out of it, contracts protected, benefits for motorists, widening project. So I don't necessarily see that as a bad thing, Andre.

Okay. And then just a follow-up on Henry's comment about the monthly traffic update. I understand something like the M7-M12 completion is an unlock to traffic growth, but we're not used to seeing the month-to-month data. So how much volatility is there normally in monthly traffic? And what would that have looked like a year ago that could explain some of the improvement into June?

Yes. You can sense the caution in our comments. We have seen some improvement in volumes in recent months, and that's unambiguously the case when we look at the June and July numbers, aided in our largest network in Sydney, obviously, with the benefits that we expected to see from a major enhancement project delivering in line with expectations, which is a good thing.

But we remain -- as I said in my comments earlier on the call, we remain cautious, and we're certainly monitoring the broader geopolitical and macroeconomic environment, noting that the conflict in the Gulf is now sort of appear to be sort of heading in the wrong direction. And then we have some other more kind of near-term factors around the fuel subsidy here in Australia, which is going to -- we're just watching to see how that plays out in our numbers. So look, the direction of travel is positive, to be honest, in recent months, but we just remain cautious is the reality, Andre.

And maybe just to add to what Henry said is I think what the numbers show is some quite good resilience in the traffic when things normalize, particularly if you compare June, July to March, April. I would call out the commercial traffic, which was particularly soft in May and then stronger in June. So sometimes you will get changes in timing of when people -- when commercial customers move things around the network. So that's just one to take into account as well.

Your next question comes from Ian Myles from Macquarie.

Congratulations. Firstly, just WestConnex specifically, that was probably one of the more expensive roads going through more of the Labor electorates and didn't get any change. I was sort of wondering the thought process why that may have been the case?

Yes. Thanks, Ian. So maybe if I sort of step through WestConnex, we and our partners paid $21 billion for WestConnex in recent years. And if you combine that with the fact that most people spend $12.45 a week or less, a significant -- even a small change in WestConnex could cost taxpayers quite a lot and not have that much impact on people's [indiscernible] pockets.

The cap -- and if you look at -- I can't remember what slide it was in the presentation, the weekly cap is quite well used in those suburbs along WestConnex. And so for people doing the more regular trips. And then you've got the trip cap on WestConnex as well that already exists.

Okay. And just for clarity, does the M5 West cash back subsidy continue post the concession converting to WestConnex?

It does, yes. Yes. And I think that was confirmed today.

Okay. In terms of the ED, with the repurchase of the concession notes, I assume the IRR caps are removed on those 2 rights in terms of sharing with government.

I may need to come back to you on that, Ian. Can we take that one on notice?

Sure. Then the second question is those 2 roads carry a credit ratings versus the rest of the group is BBB+. Have you got intentions to regear those roads to BBB+ credit ratings and release the capital to the broader group?

Look, that's not been part of our current thinking. So not as we sit here today. But again, we still have a number of years to play out on those concessions. So whether our strategy or capital strategy around those assets evolves is something that I reserve judgment on.

Okay. And then on the truck tolling, that sort of 5%, is it fair to say on trucks that 5% toll increase will have 2 parts of [indiscernible] movement on traffic, but we're pretty inelastic in that [indiscernible].

I think that's a fair assessment, yes.

Your next question comes from Suraj Nebhani from Citi.

[indiscernible] That's been going on for a while [indiscernible] have been asked [indiscernible].

Maybe I just couldn't quite hear, Suraj. I think your 2 questions were around the widening and traffic sensitivity and what we should assume? And then secondly, the risk profile of that traffic. Is that what are your 2 questions?

One is the value principle around that [indiscernible] with respect to outcomes of M7 and what those outcomes are?

Yes. Okay. So maybe let me break it apart. If I deal with the second part of the question first in terms of the kind of risk adjustment that we've taken through this, as Michelle said earlier, our approach has been broadly consistent with how we would approach all our other widenings, and it's generally a consistent kind of discount rate we're applying there. So it's entirely consistent with what we've done here in this negotiation. And that's how we're thinking about that widening going forward. In terms of then the traffic impacts that you should expect to see on the M2 and the M7, as I said earlier on the call, there's 2 components. There's a reaction to the price adjustments. So there will be a positive reaction to the reduction in the prices on those assets, and that's broadly consistent with our rule of thumb of 2% movement in traffic volume for every 10% movement in price. So there's a way to dimension that.

And then secondly, in terms of how you think about the overlay over and above that movement from the widening project on those assets, I would guide you to the historical examples that we have, and there are a number of them, including the most recent one on the M7-M12, which had a period of traffic decline during the build of disruption, and that's typically we observed mid-single digit. And then you see a benefit flow through in a ramp-up period trending back into a mid-single-digit uplift is what you typically expect from these projects. And in broad terms, that's the best rule of thumb you have to guide your thinking on this uplift as well.

Just one more question with respect to [indiscernible] Is there any sort of [indiscernible].

I think what happens into the future will depend upon government priorities at that point in time. But I think what we've demonstrated is that we've listened, we've shown up and we've tried to find a solution with patience and with working sort of constructively through the complexity to find a solution that's good for motorists, works for taxpayers and protects the investment. And what government wants to do in the future is always going to be a question for them, but it was really important for us to show up in the right way.

Your next question comes from Nathan Lead from Morgans.

Congrats on getting what is a pretty complex negotiation tided away. My question to you comes to the comment about the rule of thumb about a 10% change in price, 2% change in traffic. How do you get confidence in that estimate given as far as I know, we've never really had a 10% change in price coming through. So how do you unpick that? Because it's obviously a pretty important part of the value equation. That's my first question. How do you isolate that?

Well, we've got a wealth of data underpinning this going back decades, Nathan. So I'd say -- and there are examples where there have been more exaggerated price movements on the network historically going back in time when you had more lumpy movements in price. I can think of examples on Eastern distributor back in the day where you would have quite significant price movements because they weren't necessarily happening on a quarterly basis the way they do today.

So there's a number of examples we can point to even in our current portfolio where you have more exaggerated movements. But I think the broader point we'd go to is that this is a central kind of -- central facet to the traffic modeling that we do. So we have, I would say, a reasonably high degree of confidence based on a very, very deep fact set that we're looking into here.

And also, Nathan, to reiterate something Henry said earlier about the way the math worked through this was taking into account a risk-adjusted outcomes. So it was all part and parcel of the analysis that was done.

Okay. And then the second question is just through the approvals process, et cetera, is there anything out there that could derail the deal? I'm just assuming you've negotiated with pretty much everybody involved. But is there anything out there that you're concerned about?

Thanks, Nathan. There are some things that are already in place, like, for example, the toll notice changes, they're done in place and happening. Some of these changes, we've still got some formal documents to sign. There's nothing I'm aware of, I think, that would stop those. We've got financier approvals. We're not expecting anything of note there. And to Henry's point, we've been engaging with rating agencies, et cetera. And then the widening in the 2-way tolling need planning approval, and there are mechanisms to adjust if they don't happen.

Your next question comes from Rob Koh from Morgan Stanley.

I guess if I'm looking at Slide 10, you're kind of roughly indicating value neutrality here with the cash flows. If I do that on a proportional basis, it kind of looks like I think UniSuper and IFM have to pay a little net and then QIC and CPP get a little benefit. Is that the right way to think about it? Or are they all -- are all your partners being treated with economic neutrality?

So all is value neutral. The payments get you to value neutrality, Rob. So for example, with the Eastern distributor, there would be value upside from the 2-way tolling. And so that's why the Eastern distributor is a net payer to the state and the opposite happens in Northwestern Roads Group given the price changes net of the widening in traffic implications. But all concessions -- we had to negotiate every concession on its own and every concession had to be value neutral.

So everybody get [indiscernible].

Correct.

Yes. Okay. And then just a little bit more on the M1. I guess I'm asking because that's one of your roads that I use the most on the way in from the airport. Is there any CapEx involved in 2-way tolling? And then with the expected bump up in traffic, does that bring capacity on the road getting to full capacity on the road, does that bring that earlier?

Thanks, Rob. So there is a little bit of CapEx like it's gantries, et cetera, rather than -- but it's pretty small in the whole scheme of everything. And sorry, I missed your second question.

I guess you're expecting an uplift in traffic. And then I think the road expires -- the concession expires in '48. Does that reach capacity materially earlier with the traffic uplift?

You've got to take into account that Western Harbour Tunnel opening as well, which will take -- essentially takes traffic is another -- essentially another route for people to travel on. So without the Western Harbour Tunnel, I think your answer would have been yes. But with Western Harbour Tunnel opening, that gets taken into account as well.

Your next question comes from Owen Birrell from RBC.

I just want to confirm, equalization payments all essentially end around 2032, '33, and that's to line up with the timing of the widening project to bring additional traffic on.

Correct.

Equalization payments into the tail of any of these concessions?

That's correct. Yes.

Okay. And just the other one is the $75 million contribution to the toll cap that Transurban is essentially paying. I think you mentioned that's on a 100% proportional basis. Are you able to give us a sense of what the contribution from Transurban's share of that will be?

It's probably -- it's most of it, but not all of it. And I can't remember the exact number, Owen, but it's probably like roughly 2/3 of it.

And that's just a one-off payment that's not ongoing.

It will happen in increments. So it's $75 million increments over 5 years. So it's -- so that $75 million is spread over 5 years.

Okay. So I guess the way I sort of come back to this and say the toll cap cost in aggregate should be around about $675 million is the way that you guys have kind of estimated that.

Yes. I mean the cost is a matter for government in terms of -- what we've done is as part of the overall equalization payments allocated part of that to the toll cap.

I wouldn't add $75 million on to the -- the sort of approximately $600 million here. What we're saying is that the $75 million is embedded within those payments.

Okay. So $600 million is roughly the cost of the offset over the whole concession.

Correct. You've got equalization payments and part of those is an allocation to the toll cap, the weekly cap.

That does conclude our time for questions. I now hand back to Mr. Craig Stafford for any closing remarks.

Thank you, operator. As I said at the start of the call, we appreciate we're at the start of reporting season, and we've given you a lot of information at short notice. And just to remind everybody, the Investor Relations team will be available today and over the coming days to help you with any questions that you might have. So thank you again for your time today.

Thank you for standing by, and welcome to the Transurban First Half 2026 Results Call. [Operator Instructions].

I would now like to hand the conference over to Craig Stafford, General Manager, Strategy and Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for Transurban's First Half '26 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 and built on country. And with deep respect, we incorporate the voices of First Nation peoples in our approach, supporting 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've lodged with the ASX this morning. We realize it's a really busy day today. The presentation should take about 20 minutes. That will leave us plenty of time for Q&A, and we'll do our best to get you to your next obligations.

I'll now hand over to Michelle to get us started.

Thanks, Craig, and good morning to everyone on the call. Over the past 2 years, we've been very deliberate in strengthening our foundations to set ourselves up for the next phase of growth, strongly focused on long-term value creation. We adapted our formula to reflect a world of higher interest rates and cost of living. And we've looked to reset our position as a partner of choice for government.

We've had 3 big opportunities to do this: New South Wales toll reform, delivering the West Gate Tunnel project and by investing in our 11.3 million customers, our most important asset, all while delivering the strong organic growth our security holders expect from their significant capital investments. And I'm really pleased with the momentum on all fronts.

Starting with our numbers. We grew revenue by 6% with traffic growing in all markets. We've worked hard to generate more value from the business we have. We have a much stronger top line in North America, our longest concession assets, and we're much more efficient across the board. Through our hard work, our costs are only 1.5% more than the first half of '24, well below cumulative inflation. We've grown half year distributions by 6.3%, 102% covered by free cash and maintained our guidance of 6.2% growth for the year. Henry will go through the details shortly, including a couple of timing impacts in the half-on-half comparisons that understate our performance and will normalize over the full year.

We're a great business, and I believe our strategic advantage will be further strengthened by combining our physical and digital assets, underpinned by our customer focus and our strong relationships. It's about getting the important things right in the right order. We've delivered very tangible outcomes this half. We opened the West Gate Tunnel and the 495 Northern extension, delivering real benefits to motorists and local communities. We've approached toll reform as a collaborative and long-term partner of New South Wales. We've continued to make significant investments in more personalized and transparent customer experiences. And we've taken decisive action to drive the top line and bottom line success of the business, knowing that our investors needed to see returns on the significant CapEx investments made in recent years. These have been our biggest priorities. And importantly, we've achieved these things in tandem.

Looking at traffic, we're seeing good growth across all markets, hitting 2.6 million trips a day. North America continued to perform strongly, up 3.6% for the half, even with the impact of the federal government shutdown. We saw traffic rebound quickly after the shutdown, and this was also helped by the opening of our 495 Northern Extension project in November. Brisbane continues to perform well with strong growth across both weekdays and weekends. And Sydney also delivered underlying growth despite heavy rain throughout Q1.

We're seeing an improvement on CBD assets in Sydney as we start to see traffic distribution normalize across our assets. In Melbourne, traffic grew 3%, bolstered by growth in airport passenger volumes and port movements. And West Gate Tunnel traffic continues to build with more than 1 million trips taken since opening, 20% of which have been heavy vehicles in the tunnels.

We're now firmly focused on the final outcomes of toll reform. We're building on solutions proposed by the New South Wales government in December, which will deliver clear benefits for motorists in the state and protect the $36 billion that Transurban and our partners have invested in Sydney's road network. These reforms include the government making the $60 a week toll cap permanent from 1 July this year, efficiently providing support to car-reliant areas like Western Sydney.

We've also indicated a willingness to remove administration fees for toll notices in New South Wales by mid-2026 as part of a comprehensive overhaul of the enforcement process, making payments simpler for motorists and the compliance process more effective. This has been a collaborative and constructive process throughout with the New South Wales government respecting the value of existing contracts. Working to the government's timetable, we expect the process to be finalized by the middle of the year.

It was a really exciting moment to open the West Gate Tunnel in December. From inception, the vision was clear: to deliver benefits for Melbourne that extended well beyond the tunnel itself. That means improving freight connections, taking trucks off local roads, returning neighborhood streets to the people who live there and opening up new capacity for Melbourne's West. That experience has been felt from day 1, not just on the West Gate Tunnel, but across the broader road network. It was good to open at a quieter time of year and initial traffic volumes are largely as expected given the early stage of ramp-up.

Based on historic trends we've seen on our other assets, new roads can take 18 to 24 months to ramp up. And with populations projected to boom in Melbourne's West, we've built the West Gate Tunnel to benefit the city for the next 50 to 100 years, the same way CityLink still benefits Melbourne drivers today. The West Gate Tunnel is 1 of 3 major projects to open in FY '26. In Northern Virginia, the new 495 Northern extension has also opened very well with good customer uptake. The new lanes are already improving travel times through one of the most heavily congested parts of the Washington, D.C. metro area.

And in Sydney, our M7-M12 integration project is nearing completion, on track to start opening to traffic from next month. Together with the West Gate Tunnel, these new projects are delivering 144 kilometers of new lane capacity, bringing relief to fast-growing communities.

Our North American business is continuing to have an outsized positive impact with a step change in the top line. To put things in perspective, it contributed around the same amount of free cash this half as it did for all of FY '23. Our investment in new assets like the Fredericksburg extension, the Opitz Boulevard ramp and the 495 Northern Extension has opened up more capacity and cut travel times in the region. Drivers are clearly seeing value in time savings and reliability. And with that, we're seeing traffic grow even outside of peak periods. We've also taken an active approach to our pricing to better reflect the strong demand for our assets and value proposition. This has bolstered our underlying earnings, which is real value, especially when you consider the longevity of our North American concessions.

We take a long-term view on growth, firmly focused on value creation for our customers, our communities and investors. It's about opportunities in the right places at the right time and on the right terms to deliver long-term value. Enhancements and new connections in our existing markets continue to be an important part of our value proposition, building on our global experience and continuing to deepen our understanding of customers' needs. There's a growing suite of possible enhancements to our existing networks, particularly in North America and Queensland. And in Victoria and New South Wales, we're positioning for medium-term opportunities that we anticipate will come in time as we continue to focus on our customers.

More broadly, we are exploring new strategic markets with optionality for the future, working with new partners for the right risk and return trade-off today, creating new options for decades to come. For example, we're assessing Atlanta and Nashville and engaging in market sounding processes with the New Zealand government who are keen to build new roads and are taking a modern approach to road user charging. We're also looking at further road user charging trials in Australia, where these reforms will play an important role in driving productivity.

The work we've done over the last 2 years, along with the quality and longevity of our portfolio allows us to approach new growth opportunities in a fresh and disciplined way, starting with the needs of our customers. I say this because our right to grow starts with our 11.3 million customers. Our customers' experience is twofold. It's both physical on our assets and digital. That's why we're investing in new features like transparency tools that bring to life the value customers get from using our roads. This includes personalized travel time savings in the Linked app, allowing customers to quickly see the value of their choices. This dual focus on infrastructure and technology for our customers is an important differentiator, making us a go-to partner and positioning us to take advantage of future mobility trends.

Let me now pass to Henry to take you through some more details on the results, and then we'll come back and go to questions.

Thanks, Michelle, and good morning, everyone. We've set out our statutory results on Slide 14, 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 laid the foundations for growth, and this includes ensuring that we're continuing to run the business efficiently. Proportional toll revenue grew 6.4% to almost $2 billion, and that was supported by good underlying traffic and new capacity coming online from recent investments, as Michelle outlined.

Proportional operating costs increased during the period to $474 million, which is a 4.6% increase on the first half of FY '25. That's a low base of comparison as the costs in that prior comparable period were down 3%. And it's important to call out that we expect full year cost growth to remain below inflation, excluding the new asset costs. In fact, when you compare first half of FY '26 costs to the cost base 2 years earlier in the first half of FY '24, total costs rose only 1.5%. We show this on the cost slide that we'll come to in a minute.

This cost position contributed to proportional operating EBITDA growth of 6.4% and a margin improvement of 30 basis points. Free cash increased 2.4% for the period, which reflects the fact that we brought some financing costs from the second half into this half as part of our refinancing activities. We anticipate that the impact of this timing will normalize in the second half, which supports the free cash position underpinning the 6.2% growth in distributions we're guiding to for FY '26. You'll see we've continued to show proportional operating EBITDA this half, which focuses on the performance of the business and excludes a favorable $47 million third-party settlement in connection with finalizing some construction projects we've undertaken in Queensland.

Looking at our funding position and the performance of our debt book, we're very pleased with how the half year concluded. Our weighted average cost of Australian dollar debt rose 9 basis points to 4.6%, while we were able to extend the maturity profile of the debt book marginally to 6.9 years on a weighted average basis. As at December 2025, our debt book was 88.6% hedged, which was slightly lower than the 92.5% hedging position at June 2025, and that reflects a modest increase in floating rate exposure that we intend to progressively hedge.

Looking ahead, despite the higher interest rate environment, we're only expecting marginal increases in the cost of funding given the staggered maturity profile where no more than 10% of the debt book matures in any given year. I'll provide more detail on our liquidity position shortly, but the headline is that it remains strong with $3 billion in corporate liquidity and additional balance sheet capacity available to support the opportunity pipeline that Michelle just outlined.

Slide 16 presents the free cash bridge showing a 2.4% increase, as I said a moment ago. And this growth has been affected by the timing of some finance costs that we brought forward that will normalize in the second half. Free cash in FY '25 was also weighted to the first half with the distribution in the prior comparable period 107% covered by free cash, which is also driving the lower headline growth number this half. So we expect this will normalize in the second half to support the distribution guidance of $0.69 for the full year, comfortably within our cash coverage range of 95% to 105%.

While the weighted average cost of debt rose marginally half-on-half, underlying finance costs, excluding those costs brought forward, increased $11 million. And that will increase in the second half with a reduction in interest capitalization since the opening of West Gate Tunnel, although free cash impact of West Gate is expected to be neutral this year. Interest income also declined slightly, reflecting lower average cash balances over the period. And in addition, tax paid increased modestly across parts of the group.

Turning to the proportional results on Slide 17. Our half-on-half operating EBITDA growth was underpinned by the strong performance from our Transurban Chesapeake business in Virginia, which we've called out for a number of halves now. Combined with the ongoing cost control across the group, our EBITDA operating margin continued to expand by an additional 30 basis points.

Looking at costs in more detail, you can see the continued stability of proportional operating costs across multiple periods on Slide 18. Costs increased 4.6% this half. But as I've mentioned earlier and Michelle has mentioned, that really reflects the fact that the first half of FY '25 was low due to the timing of maintenance costs last year. And as I said earlier, when you look back over 2 years, you can see that we're only 1.5% above the first half of FY '24 number.

Maintenance is an area that we're continuing to see some cost escalation in the coming years as several assets move into their next major maintenance cycle, and that includes WestConnex, which is entering its first major cycle. That's something we're focused on, and we continue to identify meaningful opportunities to enhance our maintenance program and refine our asset life cycle models. With the new enterprise operating model now in place, we're better equipped, we think, to manage maintenance costs, helping to drive efficiencies and support long-term portfolio optimization. Road operating costs were also up for the half, which relates to escalation in large incident response and maintenance contracts that we have in place as well as the tolling expenses associated with things like toll notice costs. Both of those are areas where we see opportunities to contain the cost growth going forward.

I think importantly, we still see opportunities for further efficiency across our cost base, and we expect FY '26 cost growth to remain below inflation for the year, excluding new assets. As we've said previously, that's also subject to the level of development activity, which can vary with the opportunity set in front of us.

Turning to our balance sheet and funding summary. After accounting for the committed project spend and distributions, our corporate liquidity is $3 billion with a further $2.5 billion of balance sheet capacity that positions us well to support further growth. As you can see on the right-hand side of the slide, our treasury team have completed our FY '26 funding task and through a liability management exercise undertaken in December last year, we've progressed the funding task for FY '27, '28 and '30. And finally, despite periods of volatility in debt capital markets, we continue to achieve strong outcomes in our funding activity, and this demonstrates the depth of our financing relationships and the strength of our balance sheet and credit profile.

If I turn to Slide 20, you can see how we're well positioned in the current macroeconomic environment. Despite ongoing volatility in the interest rates and inflation globally, our portfolio structure continues to provide strong insulation and predictability. Over the past 6 years, our weighted average cost of debt has increased by only 30 basis points despite significant market volatility, which we've shown here. In that same time, we've had consistent access to liquidity, refinancing $45 billion in debt, and this reflects consistency and execution of our refinancing strategy and disciplined management of the debt book. Just under 90% of our proportional drawn debt is hedged, substantially limiting exposure to short-term rate movements.

Our 6.9-year weighted average tenor and staggered maturity profile avoids concentrated refinancing risk, giving us flexibility to approach refinancing strategically rather than reactively. Importantly, over 90% of our revenue base benefits from contracted CPI-linked or fixed pricing escalation, which helps provide a natural hedge at the top line, and we've shown that here. This helps offset the impacts of inflation on our cost base and supports earnings growth through the cycle. So when you bring this together, our hedging program, debt maturity profile and inflation-linked escalators, we're well positioned for a higher inflation environment.

Slide 21 highlights our capital allocation framework, an approach we've used consistently and one that continues to guide disciplined value-accretive decision-making. It provides a clear view of how we manage the portfolio to deliver reliable distribution growth while creating the balance sheet capacity to reinvest for the future. In the first half of FY '26, we delivered 6.3% growth in distributions per security, supported by 6.4% operating EBITDA growth, demonstrating the strength of our model and the momentum across the portfolio.

We invested $300 million in CapEx during the period with a similar level expected in the second half, ensuring that we continue to deliver key projects. And our balance sheet remains in a strong position to support further opportunities, and we continue to actively assess potential investments, both within our existing portfolio and in new markets where we see long-term value.

So stepping back, we're very pleased with the business performance this half marked by good traffic volumes, disciplined cost management and continued margin expansion. This provides the foundation for further growth opportunities. From a funding perspective, our position remains robust. We're well placed to pursue new opportunities, both within the core business and in new markets where we see further potential to create security holder value.

I'll now hand back to Michelle for closing remarks.

Thanks, Henry. So we're entering Transurban's 30th year in a strong position. We simplified, reset critical relationships, continue to deliver our major projects, generated more value from the assets we have and enhanced the customer experience. We've done all of this with future growth in mind. I'd like to thank the Transurban team for their contributions this half. We're excited to continue to build on this momentum in the years ahead.

And I'll now pass back to Craig and go to questions.

[Operator Instructions] The first question today comes from Andre Fromyhr from UBS.

Firstly, I just wanted to ask about West Gate Tunnel. Obviously, the contribution today in the pack is very small based on only opening very recently. But are we right in understanding that by saying it will be free cash flow neutral this year, covering $180 million of financing costs over the year that, that implies roughly $90 million of EBITDA in the second half. Is that what's sort of baked into the business case? And from what you've seen so far, is it consistent with that case?

So I'll take the high level, which is, yes, so far consistent with business case, and I'll get Henry to confirm the numbers.

Yes. And so in broad terms, we have guided to that $180 million of capitalizing interest that's going to start to hit the P&L, and you'll see that in the back of the pack. It's not a straight line in terms of how that then falls through this year. So yes, we do expect it to be broadly neutral. You will still see a little bit of residual capitalizing interest come through in the second half. There's still a little bit of spend on that project, which is wrapped up in the kind of residual CapEx that we'll spend this half. So I wouldn't guide to a number as high as where you're landing to, but obviously, we're not putting specific guidance out on this, Andre.

Right. No, that's helpful to understand that it's not just switching on the whole amount straight away. Maybe more broadly around the domestic traffic outlook. Is it reasonable -- I mean we're seeing reasonable ADT across all 3 markets, but we're still in a period of disruption, at least historically from West Gate Tunnel impacting Melbourne and then M7, M12 in Sydney, Warringah Freeway in Sydney. So can you help us understand what the profile of traffic would look like as you start to see those projects completed? Is it sort of an above average outlook to see the recovery from those projects?

Yes. So maybe I'll start and then Henry can sort of go a bit more into the precise details. So I think the momentum across all markets was good, particularly as we're coming through the second quarter because in the first quarter, we had some rain in Sydney, which was about 1% in terms of its overall impact.

From a construction perspective, yes, Melbourne has really abated now. Clearly, with West Gate opened that happened really late in the half. And the underlying trend in Melbourne was pretty good, port traffic, airport traffic. So that's performed well. In Sydney, construction impacts have started to abate and will do so over the course of the year. So the M7 will open -- be fully opened by June. But -- so that -- those impacts will go away. And I think in the past, we spoke about that having about a 5% impact on the M7.

And then some of the government projects will continue to abate over time. But I think we'll be at the peak of those impacts starting to ease into the second half. And then North America, we did have a government shutdown, but the momentum outside of that was really, really strong. And Brisbane sort of continued its normal trajectory.

I don't know, Henry, if you want to add to that.

Yes. Maybe the only thing I'd add is Melbourne has, we think, reached a bit of a turning point. So we were quite buoyed by the numbers we saw this half. We saw growth across all categories Southern Link, Western Link both grew well. Typically, it's been a little more weighted to the toll trips, and we've seen a little bit more balancing on the network, which is a positive. Large vehicle volumes were up nearly 5%. Weekends are still growing strongly. So we're seeing that good discretionary sort of growth. So it was about 3.5% growth on weekend and public holiday traffic.

I frame that picture just to say there is, we think, something happening in Melbourne and the addition of West Gate Tunnel to the network has been a real positive. So that's a watch point. And then I think Michelle has outlined well just the expectations around the dissipation of disruption in New South Wales, which is the other big watch point.

So it feels sort of -- we've had a couple of years, 2, 3 years of quite a lot of construction going on, particularly in Melbourne and Sydney, and we're coming out of that now, which is -- we're seeing the momentum of that.

If you don't mind me asking one more, specifically on the U.S., you called out the strength of the existing assets and the opening of NEXT. But there's also a couple of dot points around potential new market opportunities. Am I right in understanding that's part of the partnership with Ferrovial? And is there anything more detail you can share about the nature of that agreement on those projects?

Yes. So in terms of North America, we've got a whole lot of opportunity still in Virginia. I think we're well engaged on the bidirectional. There's other opportunities that are starting to emerge there, and we do those with our existing partners in Transurban Chesapeake. We're exploring a couple of other markets, as you say, Andre, with Ferrovial. Those processes are underway. So there's not much more we can say about them. There will be more to say later in the year on those. But -- so those are processes that are underway that we're currently assessing.

The next question comes from Owen Birrell from RBC.

Just a quick question just on margins for Melbourne and Brisbane. Melbourne margins were up to about 88%. Just asking what the primary driver of that was and whether it's sustainable in the context of West Gate Tunnel opening. And secondly, a similar question on the Queensland margins up to about 79%. And what was -- was that like a volume or cost control or one-offs?

Thanks, Owen. So again, I'll just sort of make a high-level remark, and I'll get Henry to go through it. Very much our overall approach has been to deliver more value from the assets we have. And you've seen sort of continual margin expansion being a core part of what we've been doing. We've been doing that by investing more into the road itself. So for example, resheeting of the M2 in Sydney, et cetera, and reinvesting in our customers and then looking for opportunities for efficiency everywhere, as Henry has outlined.

So I'll get Henry to comment on sort of Melbourne and Brisbane specifically, but it is a core part of what we've been focused on.

Yes, it is. And if you look, we obviously provide the maintenance spend numbers. Melbourne is a little bit down. So that just reflects some of the timing around some resurfacing works, I think, there. And so we have -- we would expect that to probably unwind a little bit, which goes to your question around sustainability of the pace of the improvement there, Owen. I wouldn't necessarily say that, that won't unwind a little bit. Brisbane, probably a little more sustainable in terms of that is a part of our business that is just performing well and is very resilient in terms of volumes.

The broader observation is also that if you remember, we went through a major restructuring in the business last year. We have moved a little bit of resource into the center operating under the enterprise model, and it goes a little bit to then the allocations as well and how they've run this half. So there's a little bit of that playing out in some of those numbers, too.

Yes. And not to labor the point we sort of made through the presentation, but we run the business on a yearly basis rather than a 6-monthly basis. So there's a little bit coming through the 6-month sort of half-on-half comparisons. But if you compare to the second half of last year, you can actually see the costs coming down, and that's the hard work we did, particularly with the organizational changes we made last year.

The next question comes from Rob Koh from Morgan Stanley.

So apologies if this has been covered, I had to dial in late to your call. Just a couple of items in the proportional EBITDA. I noticed the M7 paid a little bit more tax this year. I'm just wondering if there's any background on that. And then also, there's a nonoperating item, which is a positive in your Transurban Queensland result. Just wondering to the extent you can, what color you can provide on that, please?

Thanks, Rob. And I'll get Henry to cover both of those.

So the NorthWest Roads Group, which the M7 is a part of, has moved into a taxpaying profile. So it's through -- it's utilized its tax losses. So you are going to see a progressive ramp on the tax payment in that group, and that reflects what we saw last period and this period. So that is a trend line that will continue.

And then the second question just relating to the one-off item just relates to the settlement of a matter around one of the projects that we had in Queensland. We can't talk in detail to it just because it was tied up with some confidentiality, but it was a positive in terms of a receipt that we had as a result of that, which was an improvement to the result, but we didn't think it was appropriate to take through. So we made the adjustment to the operating EBITDA.

Yes. And so that's not part of your free cash on that basis.

Yes. through some amounts we will spend in the future. So net-net, it will sort of wash through.

Yes, yes. No, that makes sense. All right. Just a question on your North American results. So that's in Virginia performing very strongly. I guess, average tolls increasing in quite good terms. Just wondering if that's kind of consistent with your understanding with VDOT because I guess there is such a thing as charging too much on these things, isn't that?

Yes. So we've very much followed the value our customers see in that, Rob. The way I'd explain it is over the last couple of years, we've added quite a bit of new capacity and FredEx being a really good example, where if you use FredEx, you can save an hour on a daily commute. So it's a very significant time saving. for people. And what we've seen on the back of that is motorists valuing not just the time savings, but the reliability of the roads. And therefore, traffic has remained really strong even in off-peak periods. And so our pricing has been adjusted with that in mind, of course, very conscious of our broader standing, but it really is following the value our customers see.

Yes. Okay. Sounds good. Final question for me. Have you -- is there any update you can give us on a potential cost claim at the West Gate Tunnel?

So no, as we've said, one, it's brilliant to have the road open. I mean that's a big deal to get it open. As we've said, there could be claims that come at the end of a project. If they do, we'll assess them in the ordinary course. Claims don't necessarily mean liability. If they come, we'll assess them in the ordinary course.

The next question comes from Adam West from JPMorgan.

I'm just wondering, I'm not sure if you could provide any color around this, but just on the I-285 opportunity, I guess we've heard that the East Peach Partners did quite aggressively on the adjacent S400. I'm just wondering if you're factoring, I guess, aggressive bidders into that and whether or not it'd just be focused on the 285 or you guys would be considering other opportunities in that Georgia region.

So it's too early to comment on approach, and it's something we can talk about later. Clearly, discipline is really important to us and everything we assess is with long-term value creation in mind, and we'll do that work thoroughly and thoughtfully as you'd expect of us. Both Atlanta and Nashville have longer-term growth options in them beyond the current processes that are running, and that's part -- again, part of what's being factored in. But for us, it's not about growth for growth's sake. It is about discipline. It is about long-term value creation, and we'll -- we take that very seriously, and we'll assess those bids in the fullness of time.

Great. I guess my second question would just be on the Maryland and American Legion Bridge. If you could just provide any color around timing or size of that opportunity?

Yes. It's a little early days. I mean, so with our Northern Extension project opening, that really leads right up to the American Legion Bridge. So that's, in a sense, highlighting the need to improve the capacity on the bridge, which is quite congested today. There has been a recent call for expressions of interest to which us and others put in an expression. Timing is not clear at this stage, but it is now on the agenda, which we knew it would be at some time, and it's now sort of coming on the agenda.

Great. That's clear. I guess final one for me is just probably on the M6 in Sydney Stage 1. I guess, do you have any early indications on what the traffic impact would be on the MA and WestConnex when that opens?

I'm just looking at Henry on that if we've disclosed anything along those lines.

We haven't made any specific disclosures. I think there was an expectation that it would have a marginal benefit to the WestConnex, but it was a little further out.

Yes. It was always a bit further out, and it was relatively small in the context of WestConnex. What's been really good on WestConnex is post gateway opening, we're certainly seeing the benefits of that coming through. And then the Western Harbour Tunnel will open in the next little while as well.

[Operator Instructions] The next question comes from Ian Myles from Macquarie.

Just on the U.S. still, can you maybe give some talk on what you see the long-run price growth might be around the hot lanes -- because we're seeing a fair bit of discussion people starting to reconsider that CPI plus or a nominal GDP for the road is the right sort of assumption?

Yes. I think -- thanks, Ian. I think long term, sort of normal growth rates is the way to think about it. What we've done, I think, is take an opportunity to step change the base, if you like, by getting -- and as I answered in response to Rob's question, customers have seen the value, so we've step changed. The managed lanes, particularly around Virginia where we are, the acceptance of those and the value customers see has grown over time, and that's what's driven the price increase, and we continue to look for ways to optimize that in the future. But yes, I think you're sort of in the right ballpark in terms of thinking about it long term.

Okay. Can I refine that then? The step change, has the step been enough or we got further steps to go before you reach than the GDP -- normal GDP number?

My sense is there's still a bit more to do. But sort of going back to Rob's question, we want to make sure whatever we do, we do in the right way and at the right time. So we do it to follow value. So as there are opportunities to do that, and we see the elasticity and we see how roads are performing, particularly outside of congested periods, we'll take those opportunities. So I think there's a bit more would be my sense.

Okay. In the [ Simmone Harold ], there sort of the discovery of the state's communications, they sort of implied M2 might be required to get some compensation. I'm just sort of intrigued, is there any claims you might have against government for terms like ED would obviously have a claim on bidirectional. Are there any other claims you may have?

So I'm not going to comment on -- because we're in the middle of a confidential process. Maybe in a macro sense, what I would say is the way toll reform has been approached is that the value of contracts is being respected and upheld. And as we look at all sorts of options and the government is considering options, there would be ups and downs in those that would be -- some roads could have compensation, some could go the other way. So we're working through all of that, but it's through the lens of value being upheld.

And that lens of value is the yield from those roads is collectively going to be unchanged.

So it's both value, NPV, real value. And also, we've been really clear that the timing of cash flows is important, and that's been a big part of how we've been looking at it as well.

That's good. And just what's actually left to spend in the current pipeline? Is it just some residual spend on the M7?

No, Ian, I'll take that. There's a little bit more. So we pointed to about $300 million of residual CapEx. It's split roughly half still remaining on West Gate. There is still a little bit to do around the margins of West Gate, which is typical of a project of that size. And then the residual -- the majority of the residual is with the M7-M12, about $120-odd million. And then there's a little bit on NEXT as well, much in the residual amounts NEXT, which is akin to the kind of work we're doing on West Gate just to close the project out post opening.

Okay. Henry, because you're responding, it's a good segue to the balance sheet. How much capacity is now sort of sitting in the balance sheet? And I guess you've got this trade-off of do you start becoming more aggressive in capital management over containing or retaining money for future growth. I'm sort of trying to understand how long before you go before you pull that those decisions or have to make those decisions.

Henry, why don't you answer the financial part of it, and I can give -- add a bit to it as well.

Yes, sure. So just to clarify your question is, are we -- at what point do we consider capital management as a deployment for balance sheet capacity?

Yes. Just because you're building -- I think you'd say you should be at circa 10x net debt to EBITDA and you're building capacity every year.

Yes. No. And so maybe the first point is we're not at that point presently because we do see the pipeline of opportunities in front of us. And that's a combination of what Michelle described earlier, the enhancement projects on the existing networks and the new project opportunities in new markets that we're also looking at. Those, we think, actually match quite nicely against the balance sheet capacity that we see, not just currently, but emerging as we look out over the remainder of this decade and into the next because the funding profile of those projects will extend into the early 2030s.

In absolute numbers at the moment, as it stands here today, we see circa $2.5 billion of capacity that we could access fairly comfortably and stay within the credit risk profile we are. And that's obviously one of the key parameters we sort of measure our capacity by. And then as we dimension the kind of incremental available capacity as we look out over that time frame I described, you're right. It's still consistent with that rule of thumb that we've given previously of for every $100 million of EBITDA circa 700 -- of additional EBITDA, I should say, circa $750 million to $1 billion of debt capacity should emerge.

One of the things just to think about in the context is we are about to have a significant amount of sort of debt that you might associate with West Gate Tunnel that is about to start to move from accreting interest or capitalizing interest into P&L. So that should be treated almost in a way as absorbing some of that capacity as well.

And maybe just -- sorry, Ian, I was just going to add just from a philosophical perspective, my view is it's not our money, it's our owners' money. And so question one is, do you have value creative, value-accretive opportunity within the business to spend that money. We still think there is. If that doesn't turn out to be the case for whatever reason or it takes a lot longer, of course, we'll look at capital management.

Okay. In the presentation, maybe I misread it, but you mentioned the U.S. assets are moving to tax paid or starting to pay tax. I was just sort of wanting to understand that profiling and what might occur?

No. It's -- the U.S. assets are still in a -- so at the margins, I think there was some minor tax movements. But if you just go -- I'm trying to find the slide in the back of the pack.

If it's minor, that's fine.

It's minor. Slide 55 just gives you a sense. We're really looking towards the end of this decade where they may start to tax payment profile.

And the other one is, I was curious to understand why is the U.S. cost of financing jumped by 30 basis points given a very long-dated debt?

Yes. We have been out in the market. So we've done some 144A funding late last year. And even though it was well received and well priced in the current market, when we go into the market presently, when you think about our weighted average cost of funding being somewhere in the mid-4s and when you get into the market and hedge for interest rates and currency, which we will always hedge for currency. And then at the moment, there's a bit of a judgment call on how much we're hedging for interest rates, just given where we're at in the rate cycle, but you typically will have a 6 handle on it. So you're talking about 150 basis points to 200 basis point premium.

Okay. So that U.S. dollar debt when you say average cost not just looking at the U.S. dollar-denominated amounts, which are unhedged.

Sorry, I missed that say that again.

So when you weighted average cost of U.S. dollar debt, that's including hedged amounts as well as unhedged amounts.

Yes. Yes. That's right. We have -- we did leave some of the U.S. dollar debt unhedged for currency if it has a natural match to the U.S. funding requirements. So that sometimes will play around with the exact hedging profile.

The next question comes from Nathan Lead from Morgans.

Just 3 questions, if you don't mind. So first, West Gate Tunnel project, look, I realize it's really early days. But if we go to the back of the pack where it's got the traffic data, sort of talking about half of the traffic coming from heavy vehicles. Could you just give us a sense about where you guys think the traffic mix will sort of go to at a steady state?

Nathan, in terms of West Gate Tunnel, yes, a big part of the design was actually to get trucks off local streets and off the bridge. So that is a big reason for the project. It started exceptionally strongly with trucks and on expectations across the board. Over time, that mix will shift a bit. And I think the answer is in the tunnel itself, about 20% of its heavy vehicle traffic right now. And we're taking -- yes, so -- but that mix will shift a little bit over time as it ramps up and smaller vehicles get used to the new infrastructure.

Yes. Okay. Second question is, and I suppose a bit of a follow-on from Ian's question about capital management. But if you look back over the last 4 years with the DRP running, I think you raised something like $600 million in capital. It's about $150 million in the last 12 months. Balance sheet is strong, post CapEx hump. Why not consider neutralizing the DRP, if not turning it off instead of diluting shares on issue?

Yes, it is something under active consideration, Nathan. Yes. Just given our triple staple, there's a little bit of complexity from a timing perspective for when we announce dividends and how the DRP operates, but it is something under active consideration.

Okay. So you don't need it to continue to keep on adding equity into the capital structure to set you up for the growth spend down the track?

No. I think neutralizing it, depending on all sorts of factors at any one point in time is something that arguably makes some sense, but we've just got -- there's a bit you have to work through on that.

Okay. And then final question for me. You made a guidance once again about you wanting to bring your cost of your existing business, the growth of it being below CPI. What should we expect about the new assets? What are they going to add in? You've given a steer on that before. I just wanted to get an update on it.

Yes. So we previously said think about those as a sort of 3% to 4% sort of increment on the cost base. So that would take the sort of headline cost growth to kind of mid-single digit in terms of where it will land post those new assets. And when we say new asset, it's really mainly West Gate Tunnel. As we all know, there's a little bit of Northern extension cost, but it's not a lot in the mix.

Yes. And so that's just growth just for FY '26, right? So we've got to annualize the impact of those new assets, the costs of it.

Yes, that's right.

And then even with new assets into the future, we'll continue to look at ways to get efficiency across the board as they become part of the overall portfolio.

There are no further questions at this time. I'll hand the conference back to Michelle for any closing remarks.

Thanks, everyone. As Craig said at the start, we know it's a really busy day for all of you, but the IR team is available and will be available through the day if you need anything. So thanks, everyone.

Good morning, everyone. My name is Craig Drummond, and I'm Chair of the Transurban Group. Welcome to the 2025 Annual General Meetings. This morning, we are holding 3 meetings concurrently. These are the Annual General Meetings for Transurban Holdings Limited, Transurban International Limited and Transurban Holding Trust.

We have a quorum, so I declare the meetings open. I'm chairing today's meetings in Melbourne, and on behalf of Transurban, we acknowledge the traditional owners of the lands throughout Australia, and we pay our respect to elders past and present. We acknowledge our roads and infrastructure are built on country and with deep respect we incorporate the voices of First Nation's people in our approach, supporting access to mobility across communities.

An example of how we do this is through our First Nation's driver programs delivered by the KARI Foundation in Sydney and the [ Art ] Academy in Brisbane. In FY '25, these programs helped over 60 students gain their driver's license. The Board and I are pleased to be meeting with security holders in person and online today as well as providing our security holders with an update on our opportunity for Board members to hear directly from security holders.

For those joining us online, we have worked diligently to ensure that the broadcast runs smoothly. But should you experience any technical difficulties, a recording of the meetings will be available on our website later today. As outlined in the notice of meeting, security holders will have an opportunity to vote and ask questions of the Board in real time.

To provide everyone with an opportunity to vote, and in case anyone cannot stay for the duration of the meetings. I will now formally open the poll on all resolutions.

The notice of meetings was made available to all of you. With your consent, I will take that document as read.

I'd now like to introduce the directors and our company secretary. On my right are our company's Secretary, Fiona Last, our Chief Executive Officer, Michelle Jablko, and independent nonexecutive directors, Gary Lennon, Patricia Cross, Rob Whitfield, Marina Go, Mark Birrell, Sarah Ryan and Tim Reed. Marina Go and Sarah Ryan are standing for reelection. You'll hear from them both later in the meeting.

As part of the Board's active succession activities, we recently announced the appointment of Michael Wright as a Non-Executive Director. Michael will join the Board at the start of November and it is intended that he will stand for election at next year's AGM. I'd also like to acknowledge Peter Scott, who unfortunately is unable to be here today due to a medical condition. As previously announced, Peter will be retiring from the Board at the conclusion of today's meetings. Peter was appointed to the Board in March 2016 and has been an invaluable contributor during a period of growth and success for Transurban.

On behalf of your Board, to Peter, thank you for what has been truly a significant contribution and great service to our company. This year saw us deliver real and sustainable value to all of our stakeholders through new initiatives and continuous improvement both on and off the road. At its core, our customer value proposition is simple. We strive to deliver safer, faster and easier journeys, saving our customers time fuel and carbon emissions every day. With this in mind, we set out with a clear goal to communicate our value proposition to our more than 11 million customers. We wanted our customers to see and feel the value they receive when choosing our roads. This included launching a new travel time savings feature in the Linked app. And partnering with breakfast radio to give peak hour motorist real-time traffic reports, helping customers to make informed travel decisions.

We continue to invest in digital upgrades across our app and website to further improve the end-to-end customer experience. As part of these efforts, we introduced a customer service chatbot, which uses generative AI to respond to customers within the linked app and website. The technology is handled around 420,000 customer inquiries since it launched with most customers rating the experience is helpful. Cyber security measures were also enhanced with new generative AI-powered fraud detection technology, helping us to identify fake customer accounts faster. Together, these efforts are building trust and loyalty from our customers, and we are pleased to have achieved a Net Promoter Score of positive 12 up from negative 2 just 5 years ago. We saw resilient traffic growth across all markets in FY '25. There was underlying growth in Sydney and Brisbane over the year with traffic up 2.7% and 1.5%, respectively.

In Melbourne, traffic grew by 1.2% in FY '25 and helped by increased airport trips and weekend traffic. North America was a standout performer this year, contributing nearly 25% of overall revenue growth despite representing only around 7% of total trips. Drivers are consistently choosing our express lanes even outside of peak house, and our pricing reflects that value. We're also looking forward to the 495 Express Lanes Northern Extension project opening in the region later this year. Today, we released our September quarter traffic results with average daily traffic increasing by 2.7% on the same period last year, averaging 2.6 million trips per day. The result was supported by growth across all markets, with North America continuing to perform particularly well, up 6.8% for the quarter.

In Melbourne, traffic growth was supported by increased airport trips on Western Link and easing construction impacts across the network. And we saw continued growth in Sydney and Brisbane with both workday and weekend trips increasing. The result demonstrates the value customers place on our roads and the quality and diversity of our portfolio.

Let me now turn to our key financial results for the year ended June 2025. Proportional toll revenue grew 5.6% to $3.7 billion, supported by resilient underlying traffic. And proportional operating EBITDA grew by 7.4%, with a margin improvement of 140 basis points. Our continued focus on managing costs as well as maximizing the performance and efficiency of our operations, saw proportional operating costs hold flat year-on-year at $947 million. We have used proportional operating EBITDA this financial year to highlight the performance of the business, excluding the one-off impacts of both the Connect East litigation of $143 million and restructuring costs of $29 million. Free cash, excluding capital releases, increased by 7.6% to more than $2 billion. This allowed us to deliver more than $2 billion in gross distributions to securityholders.

Our full year distribution of $0.65 per stapled security, which was in line with guidance was 99.5% covered by free cash and represented a 4.8% increase on FY '24. Despite some volatility in debt capital markets throughout FY '25, we were able to consistently secure strong outcomes when accessing debt markets. We raised $3.8 billion of debt across bank and debt capital markets to support funding initiatives and project delivery. Our weighted average cost of Australian dollar debt remained flat year-on-year at 4.5%. This was mainly due to some well-timed hedging of some of our floating rate exposure that we carried over the financial year-end. Weighted average maturity for group debt is marginally lower than the prior year at a comfortable 6.6 years.

In September, we returned to the U.S. public debt market, where we successfully priced a USD 550 million bond at attractive rates with strong demand for our paper. So our balance sheet remains in a strong position, and we are well funded to take advantage of future organic growth opportunities with balance sheet capacity in excess of $1.7 billion. Each year, we conduct a listening survey to understand the expectations of the community. This year, our community engagement survey heard from more than 5,000 Australians giving us valuable insight into what matters most and where we can have the greatest impact.

Safety was again rated the most important focus area and expectations continue to rise around our road safety initiatives. These initiatives center on road safety for all ages and stages from babies and car seats to teens getting their learners permit to older drivers. We hit a milestone of 10,000 free car seats checked through our partnership with Kids Safe, which operates in Brisbane, Sydney and Melbourne. We also conducted free car seat checks in Virginia and Montreal. Our roads continue to perform well against relevant Australian and international safety standards. All of our Australian and U.S. rates have been assessed by the International Road assessment program. with North Connects becoming our first asset to earn a 5-star rating safety rating. And Monish University's Accident Research Center's latest analysis has again found that our Australian roads are, on average, at least twice as safe compared to like roads, such as freeways or motorways with similar traffic volumes.

We continue to work towards our goal of net 0 emissions by 2050, achieving a 24% year-on-year reduction in Scope 1 and 2 emissions. And we're working closely with our suppliers and delivery partners to reduce Scope 3 emissions across our supply chain. We also remain focused on supporting the demands of our growing cities and helping prepare our customers for the future. This year, that included showcasing electric vehicles at our EV Drive Day in Sydney, giving the community a chance to test drive and EV and learn about cost-friendly ways to own and charge them.

As we usher in Transurban's 30th year, we look forward to a new era of growth. Transurban was listed on the ASX in 1996 and the strong macro trends that enabled our business then, population growth, freight growth and increasing urban congestion remains strong today. In the next year, we'll open 3 major projects. And beyond that, we're actively exploring another $10 billion pipeline of potential opportunities. Michelle will share more about our projects and the opportunities ahead.

Before I conclude, I'd like to recognize Michelle and the broader executive team for their hard work this year and the way they have guided the business through significant change. And on behalf of the Board, I'd like to thank you, our securityholders for your support of Transurban. As populations grow and demand for our roads continues to rise, our quality assets offer stable opportunities for investment and growth -- sorry, the offer opportunities for investment and growth.

Looking ahead to FY '26, we're excited about the project milestones on the horizon as well as the pipeline of opportunities being evaluated. These opportunities will continue to drive long-term value and distributions for you, our security holders. With this in mind and on the back of good traffic results today for the September quarter, the Board today reaffirms our FY '26 distribution guidance. We expect the FY '26 distribution to be $0.69 per security, representing 6.2% growth on FY '25 with expected free cash coverage of 95% to 105%. On that note, we have a short video of key highlights for the year.

[Presentation]

Thanks, Craig, and good morning. Every day, customers take more than 2.5 million trips on our roads. And as populations grow, the need for high-quality infrastructure is clear. The opportunity for growth is real. How we realize it will come from bringing exceptional value to customers and from the results we deliver for our investors. That's why we've been focused on bringing together our physical and digital infrastructure to deepen the customer experience and get even more value out of our infrastructure.

By delivering tangible value and unlocking efficiencies, we're strengthening stakeholder support and driving sustainable returns for you, our security holders. Our roads are more than infrastructure. They underpin the livability of our cities and connect people to jobs, recreation and each other. By relieving the burden of upfront spending, we enable government budgets to be directed to other critical areas and still deliver broader community benefits like reduced congestion, improve safety and better connectivity.

Taking New South Wales, where Transurban and our partners have invested over $36 billion in the state since 2005. This is equivalent to building over 51 hospitals or 1,300 schools. For individuals, our road and people choice, helping our 11.3 million customers get to where they need to go faster, safer and with less fuel. And by bringing together our physical and digital assets, we're helping our customers have the digital tools that help them make that choice and connect them to the value they get from using our roads.

The new travel time savings feature in the Linked app is a great example. It lets customers quickly see the money spent versus time saved, putting the choice in their hands. In August, for example, linked customers collectively saved an estimated 5.9 million hours by traveling on Transurban roads. And our Linked Rewards program continues to expand with new partners coming on board this year, including our new fuel discount partner, 7-Eleven. Our focus on customer value extends to other priority areas for the business, including reaching a positive outcome on toll reform in New South Wales. We're continuing to work constructively with government to deliver solutions that meet their priorities and a positive for Sydney, while protecting the significant investment that Transurban and our partners have made in Sydney's road network. And we're optimistic we're getting closer to a solution in the coming months.

Alongside these efforts, we've continued delivering real outcomes for our government and community partners this year. We supported the New South Wales government to open Sydney Gateway with its connection into WestConnex. Today, Motor has saved nearly 40 minutes on a trip from Parramatta to the airport compared to a decade ago and Sydney has 1 million more people. And as freight demand increases, we're working with the Victorian government to trial livestock vehicles and EV trucks on CityLink, opening up new journeys for the freight industry.

Off the road, we've continued to invest in community infrastructure, creating 14 kilometers of new walking and cycling paths that will be delivered as part of the West Gate Tunnel project later this year. Delivering this clear and tangible value is a real differentiator, underpinning the opportunities ahead for us. We've also worked hard to become a more nimble and efficient business working smarter and streamlining the way we operate. This year, that included a comprehensive organizational review and the difficult decision to reduce our workforce. The decision was not made lightly. And when it was announced, we acted quickly, decisively and with care for those impacted. It was hard, but we're confident it was the right decision. With our new operating model now in place, we're starting to achieve sustainable efficiencies in many areas of the business.

We've engaged suppliers to drive better value, streamlined our technology platforms to make work easier for our people and refined our asset life cycle planning to ensure we're managing resources as effectively as possible. And it's still early days. We continue to look for opportunities for efficiency ahead for us. Importantly, the capital being released is being invested for our future. This means improved outcomes for security holders, more efficient operations and direct benefits for our customers. The proactive resheeting of the M2 in Sydney, which is currently underway, is 1 such example. We have an exciting year ahead of us. with nearly $13 billion worth of projects opening in the next 12 months.

In Virginia, the 495 Northern Extension project is nearing completion with new lanes set to open to motorist shortly. In Sydney, the M7 M12 integration project will improve connections to the new Western Sydney Airport and the surrounding development precinct when it opens next year. And here in Melbourne, we're firmly in the final stages of the West Gate Tunnel project. As we've noted before, projects like these are naturally complex and not done until we're done. But we're looking forward to easing congestion in Melbourne's west, and we're planning with the state for a successful opening later this year.

Looking ahead, we have over $10 billion of potential new project discussions in the pipeline. In Brisbane, the Logan West upgrade is in progress. And with the Olympics fast approaching, we welcomed the Queensland government's 2032 delivery plan, which includes upgrades on the gateway motorway. On the back of strong performance in the North American business, we're also in the planning stages of our bidirectional project on the 95 Express Lanes. And we're part of a consortium exploring new projects in Atlanta and Nashville.

Taking a partnership approach helps us enter new markets in a disciplined and lower risk way where we can build our presence over time and support long-term value and distribution growth. More importantly, our deep mobility expertise and customer-first mindset is opening the door to new kinds of opportunities. We're encouraged to see both the Australian and New Zealand governments commit to finding solutions on road user charging. We firmly believe that the customer needs to be at the heart of any road user charging system. And we're exploring how we can support and help shape these important developments. So we're thinking broadly about the strengths we bring to the table and where we can add value through our physical and digital assets.

To finish, I'd like to thank my fellow Board members and my executive committee colleagues for their continued support. And I'd like to recognize the whole Transurban team for your dedication and hard work in what has been a year of great effort. Thank you also to our securityholders for your ongoing support of Transurban. We're entering FY '26 with momentum, a solid foundation and a clear ambition to continue driving value. We look forward to another successful year. Thank you.

Thank you, Michelle, and transcripts of my address and that of the CEO are available on the Transurban website and on the ASX.

Before we move to the formalities, I'll begin by outlining the procedures for today's meetings. These are security holder meetings. As in past years, only security holder holders, their attorneys, proxies and corporate representatives are permitted to vote and ask questions.

With the hybrid meeting format, there are 3 ways questions may be asked. As attending in person, you may ask a question if you hold a blue or red card. When I invite questions later in the meeting, please make your way to a fixed microphone point and provide your name to the microphone attendant. If you're unable to make your way to the microphone, please raise your hand, and we'll bring a microphone to you. We'll take questions following the introduction of all items of business.

For those attending online, you may submit written questions through the online platform by clicking on the Q&A icon and following the prompts. Written questions can be submitted at any time. To help with the smooth running of the meeting, we ask online participants to submit your questions now. If you are attending online and wish to ask a question verbally, you'll need to follow the instructions below the broadcast window. We recommend that you wait until the question time begins before connecting to the audio line to minimize the time queuing to ask your question.

Questions which may be moderated grouped or summarized will come through to me as chair of the meetings, and I'll either answer it myself or I'll pass it on to the most appropriate person to answer it. That's if it's a hard question. If a security holder has a question that relates to the online meeting technology, please contact the helpline detailed in our AGM online participation guide published on our website.

To enable all security holders a reasonable opportunity to ask questions you are requested to ask no more than 2 questions at a time. Please keep your questions short and to the point so that as many people as possible have the chance to ask a question. Please ensure your question is relevant to security holders as a whole. If you are an eligible security holder, a representative or attorney of an eligible security holder or a proxy for an eligible security holder, you are entitled to vote.

For those attending the meeting in person at registration, you should have been issued with a blue admission card and voting card. If you are representing if you are representing or are a proxy for more than 1 security holder, you will have been provided with a separate admission and voting card for each separate capacity in which you are attending the meetings. Relevant voting instructions are printed on the reverse of your blue card. When you complete your card, please indicate the manner in which the votes are to be cast by placing a mark in the for, against or abstain box for each resolution.

If you have difficulty in completing your voting card, please raise your hand and a representative from Computershare will assist you. You do not need to put the percentage or number of votes you are voting unless you wish to do so. Before placing your voting card in the collection box, please ensure that you print your name on the bottom of the card. At the conclusion of the meetings, please place your voting card in 1 of the collection boxes located near the exit. If you are attending the meeting online and you are eligible to vote, a vote icon will appear on your screen. Selecting this icon will bring up the list of resolutions present you with voting options.

To cast your vote, simply select 1 of the options, for, against or abstain for each resolution. A tick will appear to confirm receipt of your vote. You can change your vote at any time up until the poll is closed by selecting Click Here to change your vote. Proxy holders are reminded that you must vote in accordance with the proxy holders' directions. Any directed proxies that are not voted at the meeting will automatically defer to the chair of the meetings. And as Chair, I'm required to vote those proxies as directed. All proxies that are open and available to the Chair of the meetings will be voted in favor of the relevant resolutions.

Again, if you require any assistance, please contact our securities registry, Computershare Investor Services. Doris Grave of Computershare will act as returning officer. And I appoint you and Barron of PwC the group's independent external auditor, to be the scrutineer for all resolutions.

The results of today's meetings will be announced following the meeting on the ASX and on Transurban's website. I now turn to the formal items of business at today's meetings. The notice of meetings set out information regarding items for consideration at today's meetings. I'll introduce each item of business separately and then invite questions on all items of business together after the items have been introduced.

We have 4 items of business today. Items 2 to 4 include resolutions that require a vote. Item 1 is the receipt and consideration of the Transurban Group financial report for the year ended June 30, 2025. This has been approved by your Board and provided to you with Transurban's 2025 corporate report also available on Transurban's website. There is no need to pass a resolution on the financial report. However, securityholders and proxyholders are welcome to ask questions in relation to this following the introduction of all items of business. Security holders and proxy holders will also be given a reasonable opportunity to ask you Barron of PwC, relevant questions relevant to the conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted in preparation of the financial statements and the auditor's independence. All questions to the auditor should, in first instance, be addressed to me as Chair. And if appropriate, I will ask Mr. Barron to address the meetings.

Item 2 of business on the agenda concerns the election and reelection of directors. Marina Go was appointed as an independent Non-Executive Director in December 2021. Marina is currently a member of the Remuneration, People and Culture Committee and the Nomination Committee. Marina has worked in executive roles across a range of listed and private companies and in nonexecutive director roles across a diverse range of sectors.

Her executive career included over 25 years' experience in branding, marketing, digital technologies and change leadership in the media industry. A copy of Marinas bio is set out in the notice of meetings. In accordance with the constitutions of Transurban Holdings Limited and Transurban International Limited, Marina Go offers herself for election. I confirm and reconfirm the Board's view that Marina's contribution as an experienced executive with deep expertise in brand customer and community interactions with a focus on innovation are highly regarded by the Board.

In recommending her reelection, the Board notes Marina's contributions as a valued member of the Remuneration, People and Culture Committee and the Nomination Committee. The directors other than Marina unanimously recommends her reelection. I'll now ask Marina to address the meetings.

Thank you, Craig, and good morning, fellow security holders. It's a privilege to serve on the Board of Transurban, an organization that plays a critical role in our communities. Our role in connecting people, families and communities and enabling them to travel safely and in less time between their homes and the workplaces is what excites me about the importance of Transurban's mission.

We operate with a social license from the communities and stakeholders we serve, and that requires continued earning. I have significant and relevant executive and nonexecutive experience in understanding the customer perspective, and it is through that lens that are well placed to provide meaningful contribution to this critical area. As Craig said, I joined the Transurban Board on December 1, 2021, and I'm a member of the Remuneration, People and Culture and Nomination Committees. My executive roles and nonexecutive roles have included leading organizations through headwinds, which is increasingly important in globally uncertain times.

I've served as a Chairman and Non-Executive Director on ASX-listed companies, private companies and not-for-profit organizations across a range of sectors, including energy, retail, technology and government. Also an experienced People and Remuneration Committee Chair, Sustainability Committee Chair and Audit and Risk Committee member. I'm passionate about innovation, convenience and mobility, and that has shaped my board portfolio. I also have considerable experience in the areas of digital technology, reputational risk and stakeholder engagement as well as diversity and inclusion.

I lead a full and rewarding career as a Nonexecutive Director. I have the time to devote to my role as an independent Nonexecutive Director of Transurban, which I've demonstrated since joining. I hope that you reelect me to the Board for a second term as it's an organization that I'm honored to serve. Thank you.

Thank you, Marina. I'll now move to the proposed reelection of Dr. Sarah Ryan as a Non-Executive Director. Sarah was appointed as an independent Non-Executive Director in September 2023. She is a member of the Remuneration, People and Culture Committee and the Nomination Committee. Dr. Ryan is an experienced Non-Executive Director and former Energy executive with more than 30 years of international experience in the oil and gas industry, including holding various technical, operational and leadership roles both in Australia and overseas. A copy of Sara's bio is set out in the notice of meetings.

In accordance with the constitutions of Transurban Holdings Limited and Transurban International. Sarah offers herself for reelection. I reconfirm the Board's view that Sarah continues to bring a deep understanding of large infrastructure projects across various industries. -- and her expertise and experience working with large global companies involved in complex, capital-intensive projects is highly valued by the Board. In recommending her reelection, the Board notes Sara's contribution as a member of the Remuneration, People and Culture Committee and the Nominations Committee. The directors other than Sara unanimously recommend her reelection. I'll now ask Sara to address the meetings.

Thank you, Craig, and good morning, everyone. So I was delighted when I was invited to join the Board of Transurban in 2023. As I believed I could make a real contribution to this company. And I'm delighted to learn that this is true and I'm here again today. So my executive background is in the energy industry with more than 30 years experience worldwide mostly around operations, engineering and contracting as well as technology development and innovation.

I have also spent 10 years in investment management focusing on the global energy and natural resources industries. I'm an elected fellow of the Australian Academy of Technology and Engineering, where I currently chair their energy forum, and I hold a PhD in geology and geophysics I'm currently a Non-Executive Director of 3 other ASX-listed companies, being Horizon, [ Vive Energy and Calix ], and I'm a former Director of Outside Energy, [ OS Minerals and AXSolutions ] from Norway.

My nonexecutive experience covers various roles in energy, rail transport, fuel and retail, pipeline construction, mining, defense, all field technology and decarbonization of heavy industry. Many of the issues I've had to deal with over that time in both my executive and nonexecutive roles are very relevant to Transurban's business today and in the future. For example, large and complex construction projects with high levels of interest from a broad group of stakeholders, including the community and government, the emphasis on safety and risk management. the opportunities and challenges of new technology and innovation in infrastructure and the nature of the business as a provider of key infrastructure for broader communities. I confirm I continue to have the time to devote to this role. I believe my background and experience leave me well placed to continue to contribute to the company's future, and I'll be delighted to be elected as a director by securityholders today. Thank you.

Thank you, Sarah. I'd like to remind attendees that we will take questions following the introduction of the remaining items of business.

Item 3 of business on the agenda is the adoption of the remuneration report of Transurban Holdings Limited and Transurban International Limited for the financial year ending 30 June 2025. Voting on this resolution is as an item of business is advisory only. Transurban's remuneration strategy is designed to enable and drive our business strategy and sustainable long-term growth. The report aims to provide you with an understanding of the links between Transurban's strategy, its performance and executive remuneration as well as the framework we have in place to ensure effective governance of remuneration matters.

The report also details the FY '25 remuneration arrangements and outcomes for your directors and senior executives. In determining the remuneration outcomes for FY '25, the Board assessed Transurban's performance in terms of financial and nonfinancial measures set out in the group performance scorecard and took into consideration the alignment with securityholder experiences. The group FY '25 short-term incentive outcome was 105% of target with a year-on-year increase in proportional operating EBITDA of 7.4% and a distribution growth of 4.8% aligning STI outcomes with the experience of securityholders.

In determining the STI outcomes of the CEO and executive key management personnel, the Board considered both individual performance and all factors that have contributed to the overall group result. The Board considers the resulting STI outcomes to be aligned with the experience and expectations of securityholders. I now turn to the final items of business. Item 4 on the agenda is the approval of proposed grants of deferred securities and performance awards to the CEO and Managing Director, Michelle Jablko under the Transurban Group's deferred short-term incentive plan and long-term incentive plan. The terms of the proposed grants are set out in the explanatory notes in the notice of meetings. If securityholder approval is obtained, 2 grants of equity will be made to Michelle.

The first grant represents 50% of Michelle's FY '25 STI, approximately $1.1 million. This amount will be deferred into Transurban stapled securities which will vest if Michelle remains employed with Transurban for a period of 2 years. This creates a strong retention proposition for the CEO and ensures that half of her STI award remains subject to Transurban security price, which is intended to support increased alignment between the CEO and security holders.

The second grant consists of performance awards, which will be granted to Michelle as the long-term incentive portion of her FY '25 remuneration package. Each performance award entitles her to 1 fully paid ordinary Transurban stapled security at the end of the 4-year performance period. subject to satisfaction of 2 equally weighted performance measures. The first measure is relative total shareholder return, or TSR, measured against the bespoke comparator group.

The second measure is free cash flow per security, which reflects the Transurban Group focused on maximizing free cash to drive security holder return. Approval is being sought to grant a total number of performance awards to the CEO not exceeding 217,816.

In a moment, I'll invite questions on all items of business. But before I do, details of the proxies received for each item of business are being shown on the screen. We encourage security holders to submit questions in advance of the meeting. We'll now address a question received from a number of security holders prior to the meetings before turning to questions in the room and any questions online. If you have a question, please make your way to the microphone now.

Fiona, can you please read the question?

Chair. We received the following question ahead of the meeting. Transurban's pipeline of work appears to be drying up. Major projects in Sydney and Melbourne effectively finished a bit of road widening in Brisbane but what else is going to happen?

Well, I think that question was probably answered in Michele's speech. We've got $13 billion of projects delivering in the current year and we have a pipeline currently of conversations around a pipeline of in excess of $10 billion of projects across multiple jurisdictions from Queensland, New South Wales, the U.S. and potentially in New Zealand. So I think the chap that asked that question, I think that's the response that we're actually very optimistic about the opportunities that sit in front of us. because all of the criteria and the reason for being for Transurban today, as I indicated in my speech, are, in fact, even stronger than they were when we listed in 1996.

So any questions in the room? Do you have a question from Michael from the Australian Shareholders Association.

Good morning. My name is Mike Muntisov, and I'm a volunteer representing the Australian Shareholders Association. Today, I hold proxies from 277 securityholders accounting for approximately 1.9 million votes. And thank you to those security holders who appointed us as their proxy. I have a couple of questions to start.

You've mentioned, in fact, just now several projects due to open shortly. And I'm sure people in the room are very looking forward to the opening of the West Gate Tunnel after several years. But something you haven't discussed is the impact of the Western Sydney Airport, which is due to open next year. What does your modeling suggest will be the impact on revenues of this airport opening.

I'll pass that to Michelle. I think she's the appropriate 1 to answer. Thanks, Mike.

Thanks, Michael. So that part of Sydney is experiencing very significant growth, a quite significant population growth, new business formation. So it's quite a -- it's quite a growing part of Sydney. When we announced the project, what we explained to the market was during construction, we probably have about a 5% impact on traffic. And then from that lower base, it would increase about 10% on opening because the congestion was already in that corridor. So we're expecting quite a quick ramp up.

Yes. I was more referring to the airport itself. When the airport opens. In terms of what do you expect would happen with revenues, toll revenues in your network?

So we'll get -- not much of that project was actually dependent on the airport. It provides a very important connection into the airport. But for us, the real value in that project is actually the congestion that already exists in that corridor.

But what about diversion from the current airport. I mean how does that all play out.

It was very small component. Yes, very small component.

Okay. You flagged some development opportunities in the U.S. That doesn't necessarily mean you'll need to raise capital if you're successful. But should a capital raise be required for any reason, the ASA advocates for the fairest method of raising for all existing security holders, and that is a renounceable entitlement offer, such as the [ Petrio ]. And we note that Transurban has been an exemplary user of [ Petro ] in the past, and we thank you for that. What's Transurban's current view on methods of capital raising?

Mike, look, you're absolutely right. We have been -- and we are always very focused on all shareholders and not just 1 group of shareholders. So that is always a conversation between the executive and the Board. And we have favored Patrio and renounceable rights issues in the past. And all things being equal, if we were to come to market at some point. But I can tell you now there are no current plans or expectations that we will be [ go ] to market in the foreseeable future. But if that changed, that would be the starting point. But it would be contingent on the size of the capital raising if we were able to go for a smaller capital raising or a larger capital raising.

So I think we need to have retain flexibility, but your premise of making sure that we are fair to all shareholders is the premise that we obviously start with.

We do have quite a lot of organic capacity as well that you commented on the strength of the balance sheet. And as we continue to drive performance of the business that will create more and more organic capacity as well.

Thank you, Mike. Are there any more questions in the room? No.

Any questions online, Fiona?

Chair, we've received no further questions online.

Okay. Thank you. Excellent. So if -- as they are -- oh, Mike, you come me back for a second.

I thought there might be some other questions, but seeing there isn't I seem to have a monopoly on the questions here.

That's okay.

I have a question for Sarah Ryan. Sarah. The company policy is for directors to purchase Transurban shares to the equivalent value of 1 year's fees over 5 years, which works out at about 15,000 shares. Sarah's shareholding in the company is lagging on a pro rata basis. And last financial year, she purchased 1,000 shares. So we'd like to understand what Sarah's plans are going forward in terms of purchase of shares.

So Mike, I might take that question because we do discuss this in the board room. At periods of time through any particular year, and that's certainly been relevant for us when we're in negotiations with, for example, the New South Wales government. We have blackout periods because we're uncertain as to what -- the exact outcome may be at the exact point in time.

As Michele said, we're very confident and very happy with the progress and the relationship with the government and also the progress that we're making. But we take -- at a board level, we take a fairly cautious approach to directors engaging in either by selling shares or management buying or selling shares. So I think it is fair to say that our blackout periods in the period of time that Sarah has been on the Board have constrained her ability to purchase. But 1 thing I can guarantee is that Sarah, like all directors will meet their obligation as is currently stated over a 5-year period. They will have a minimum of shareholding to cover their fees. So I can guarantee that.

We have 1 more question in the room, I think. Yes.

Chair, can I introduce John O'Leary.

Morning, John.

Morning. Looking at the report, I think it was early August, I was I was actually pleased with what I read. And I read the newspapers and my question is Melbourne is 1 approximately 1.1% growth, and you refer to mainly airport traffic and we can travel. There's talk of legislation for working from home in Melbourne. So I was curious to know your opinion on proposed legislation from working from home. I want whether it would impact Melbourne's traffic. I can't have a feeling it might not, but [ should have stayed here ].

John, it's a very good question and 1 that we have talked about inside the boardroom. And what I can say to you is currently in Melbourne CBD, the -- on average, people are coming -- currently coming to work at about 3 days of the 5-day week. And what is being proposed, there's clearly a lot of water still to pass under the bridge on that potential legislation is -- wouldn't make any material change to that outcome. And I do note that the September quarter of this current financial year, we've just reported today that traffic growth in Victoria was up 3.1%. So it has recovered. I would say the lower number you referred to, which is absolutely spot on was fairly heavily affected and impacted by construction activity in and around the West Gate and CityLink projects. That is now beginning to clear.

So from our point of view, I think having flexibility, always having flexibility both for the employer and the employee is the ideal circumstances, but we're not expecting if there was legislation, and I'll pass to Michelle for an additional comment. But if there was legislation, we're not expecting a material impact.

Maybe the only other thing I'd add, Chair is with the new West Gate Tunnel project opening, that's in a real growth part of Melbourne in the West and it has a whole different reason for being. And so just to add that to the Chair's comments as well.

Fiona, any other questions online?

Sir, we have no further questions online.

Okay. As there are no more questions, that concludes our discussion of each of the items of business. Security holders and guests that concludes the business of the meetings, and all that remains now is to complete the poll by submitting your votes. If you have not already done so, please complete your voting now. And once again, we have displayed on the screen the proxy instructions for each item of business.

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