Full Year 2026 Transurban Group Ltd Earnings Call

August 13, 2026

Speaker #1: Now being recorded.

Operator: Being recorded. Thank you for standing by, and welcome to the Transurban Group FY26 results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Craig Stafford, General Manager, Strategy and Investor Relations. Please go ahead.

Speaker #2: Thank you for standing by, and welcome to the Transurban Group FY26 Results Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session.

Operator: Thank you for standing by, and welcome to the Transurban Group FY26 results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Craig Stafford, General Manager of Strategy and Investor Relations. Please go ahead.

Speaker #2: If you wish to ask a question, you will need to press the star key, followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Craig Stafford, General Manager, Strategy and Investor Relations.

Speaker #2: Please go ahead.

Speaker #3: Good morning, everyone, and thank you for joining us for Transurban's 2026 full-year results briefing. Transurban acknowledges the Traditional Owners of the lands throughout Australia, and we pay respect to Elders past and present.

Craig Stafford: Good morning, everyone, and thank you for joining us for Transurban's 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 deep respect, we incorporate the voices of First Nations people in our approach, supporting access to mobility across communities. We are joined today by our CEO, Michelle Jablko, and CFO, Henry Byrne, and together they will take you through the presentation that we lodged with the ASX this morning. We realize it is a busy day today. The presentation should take around 20 minutes, and then we will have plenty of time for Q&A. I will now hand over to Michelle to get us started.

Speaker #3: We acknowledge our roads and infrastructure are built on Country, and with deep respect we incorporate the voices of First Nations people in our approach, supporting access to mobility across communities.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: I'll now hand over to Michelle to get us started.

Speaker #4: 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.

Michelle Jablko: Thanks, Craig, and good morning to everyone on the call. Let us start with the outcomes we have delivered this year. We adapted quickly to the shifting environment. You have seen in our monthly updates since April that traffic faced some headwinds from broader macro conditions and geopolitical impacts on fuel. Despite that, our roads show good resilience, especially commercial traffic. Importantly, we did not sit back and wait for conditions to improve. We leaned 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. We are continuing to strike the right balance by finding smarter, more efficient ways to run the business and grow distribution sustainably. Most importantly, invest in our customers and longer-term growth prospects.

Speaker #4: You've seen in our monthly updates since April that traffic faced some headwinds from broader macro conditions and geopolitical impacts on fuel. Despite that, our roads show good resilience, especially in commercial traffic.

Speaker #4: Importantly, we didn't sit back and wait for conditions to improve. We leaned in and controlled what we could control, driving better cost performance, strengthening margins, and growing distributions in line with guidance by 6.2%.

Speaker #4: Ninety-eight percent 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 distributions sustainably.

Speaker #4: And most importantly, invest in our customers and longer-term growth prospects. This has given us the confidence to announce FY27 distribution guidance of 72 cents per security, which I'll comment on more later.

Michelle Jablko: This has given us the confidence to announce FY27 distribution guidance of AUD 0.72 per security, which I will comment more on later. Let us 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%, notwithstanding concerns around fuel security in March and April. As you will see in today's numbers, we have 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.

Speaker #4: 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%, notwithstanding concerns around fuel security in March and April.

Speaker #4: 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.

Speaker #4: 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.

Michelle Jablko: 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 in our express lanes. Let me now shift to our performance against our strategic priorities. We have 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 stall 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. We did what we said we were going to do.

Speaker #4: North America continues to outperform this year, with traffic up 3.5% and revenue up 14%, driven by the clear value customers see in our express lanes.

Speaker #4: 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 a number of challenges.

Speaker #4: You were concerned about New South Wales toll reform—that it could end in dispute, destroy value, and stall any growth in our existing assets.

Speaker #4: 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.

Speaker #4: 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.

Michelle Jablko: 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 three major projects connecting new people and 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 US in line with customer value, which drove a double-digit step change in earnings and a 26% increase in free cash flow.

Speaker #4: Alongside this, we delivered three major projects, connecting new people and 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.

Speaker #4: 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.

Speaker #4: 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 US in line with customer value.

Speaker #4: This drove a double-digit step change in earnings and a 26% increase in free cash flow. We also demonstrated strong cost discipline for the third consecutive year.

Michelle Jablko: We demonstrated strong cost discipline for the third consecutive year. There is 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. Some of these improvements are already in place, like switching off late fees and moving to digital toll notices. We have demonstrated we can work constructively with governments to improve customer outcomes, and that is the broader lesson from toll reform.

Speaker #4: 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.

Speaker #4: We supported the New South Wales Government to reach a solution that is a genuine win for motorists, a win for the state, and enables a proposed new road widening.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: 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.

Michelle Jablko: 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 are seeing now are two 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 are putting our effort where it will deliver the most value. We are investing on the road for safer journeys, and we are 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 has reduced escalations to our team by more than 60%.

Speaker #4: What you're seeing now are two 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.

Speaker #4: 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.

Speaker #4: 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%.

Speaker #4: And our rewards program is going from strength to strength, with more than 2 million members and growing at a rate of 50 new members an hour.

Michelle Jablko: 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 is delivering real value, like our AUD 0.26 per liter fuel offer for regular travelers. At the same time, we are 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 have delivered three 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. 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.

Speaker #4: It's delivering real value, like our 26 cents per litre fuel offer for regular travellers. 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.

Speaker #4: We've delivered three 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.

Michelle Jablko: We have delivered three 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. 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.

Speaker #4: 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.

Speaker #4: 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 streets.

Michelle Jablko: 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 streets. As we have 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. Ultimately, these three projects will continue to deliver for decades. Some of our strongest growth opportunities sit within our existing portfolio. That is things like capacity enhancements, which help relieve congestion pinch points. We are able to identify opportunities to create more value for customers and communities. For example, with around 120 lane miles, our proposed bi-directional project will more than double the existing capacity of the 95 Express Lanes, allowing us to address congestion on one of the country's busiest corridors.

Speaker #4: 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.

Speaker #4: And ultimately, these three 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.

Speaker #4: 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 one of the country's busiest corridors.

Speaker #4: 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.

Michelle Jablko: Along with the active discussions we are 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 are approaching growth with discipline and patience, 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's population is expected to grow to around 6 million people over the next two decades. We are 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.

Speaker #4: We're approaching growth with discipline and patience, 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.

Speaker #4: Population growth in our existing markets will support new opportunities over time. For example, Southeast Queensland's population is expected to grow to around 6 million people over the next two decades.

Speaker #4: 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.

Speaker #4: 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 truck technology.

Michelle Jablko: 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 are 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 motorists. As always, we are continuing to monitor government's infrastructure priorities. We know not everything will be on the table, and even investments we are not directly involved in can support growth on our assets. In the US, we are focused on disciplined capital allocation and active portfolio management. We have a growing set of opportunities in Virginia, and we have also been exploring new partnerships elsewhere to build longer-term optionality where it makes sense for us.

Speaker #4: Our goal is to work with governments to make sure any new system is simple and seamless for motorists. And, as always, we're continuing to monitor governments' infrastructure priorities.

Speaker #4: 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 US, we're focused on disciplined capital allocation and active portfolio management.

Speaker #4: 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.

Speaker #4: 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.

Michelle Jablko: That is 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. The opportunity ahead is significant, but our approach remains disciplined and customer-focused. With that, I will hand over to Henry to take you through the financial results.

Speaker #4: 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.

Speaker #2: Thanks, Michelle, and good morning, everyone. We've set out our statutory results on slide 14, showing a profit after tax of $432 million. I'll move to the next slide, where we've set out our proportional results.

Henry Byrne: Thanks, Michelle, and good morning, everyone. We have set out our statutory results on slide 14, showing profit after tax of AUD 432 million. I will move to the next slide where we have set out our proportional results. The business has delivered another strong result in FY26, supported by continued growth on all key metrics. Free cash increased to AUD 2.1 billion, up 5.1% on FY25, which enabled distributions of AUD 0.69 per security that were 98% free cash covered. Proportional toll revenue increased 6.7% to almost AUD 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 US 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%.

Speaker #2: The business has delivered another strong result in FY26, supported by continued growth across all key metrics. Free cash increased to $2.1 billion, up 5.1% on FY25, which enabled distributions of 69 cents per security that were 98% free cash covered.

Speaker #2: Proportional total 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 US business, where we continue to see strong customer demand for the express lanes there.

Henry Byrne: Proportional toll revenue increased 6.7% to almost AUD 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 US 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%.

Speaker #2: 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%.

Henry Byrne: This contributed to operating EBITDA growth of 7.5% and an 80 basis point improvement in operating EBITDA margins of 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. I will talk more about the cost outlook shortly. Looking at the balance sheet, corporate liquidity remains strong at AUD 3.7 billion, and our weighted average cost of debt only marginally increased to 4.8%, despite approximately AUD 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.

Speaker #2: In relation to cost, 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.

Speaker #2: 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.

Speaker #2: Taken together, in a year marked by macroeconomic volatility, these outcomes demonstrate the resilience of the portfolio and position us well to support future growth opportunities, while continuing to deliver long-term security holder value.

Speaker #2: Turning to slide 16, we've set out the movement in free cash from FY25 to FY26. You can see the EBITDA growth translating into approximately $215 million of additional free cash generation during the year here.

Henry Byrne: Turning to slide 16, we have set out the movement in free cash from FY25 to FY26. You can see the EBITDA growth translating into approximately AUD 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 AUD 113 million, driven primarily by West Gate Tunnel moving into its operational phase and the funding cost of that project ceasing to capitalize. 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.

Speaker #2: 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 Westgate Tunnel moving into its operational phase and the funding costs of that project ceasing to capitalize.

Speaker #2: 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.

Speaker #2: As we've discussed over recent years, we've been working particularly hard on the US 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 three years, which is equivalent to a 26% compound annual growth rate.

Henry Byrne: As we have discussed over recent years, we have been working particularly hard on the US business, which is delivering strong operational and financial performance. We are 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. I think it is worth noting that these are our longest dated concessions going out to 2087, which points to the significant value that has been created here. Overall free cash flow for the year grew 5.1% to more than AUD 2.1 billion. Turning to the proportional results, operating EBITDA increased from AUD 2.85 billion to AUD 3.06 billion, delivering growth of 7.5% for the year. You can see the operational performance translating into EBITDA in the waterfall we presented here.

Speaker #2: And I think it's worth noting that these are our longest-dated concessions, going out to 2087, which points to the significant value that's been created here.

Speaker #2: 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.

Speaker #2: And you can see the operational performance translating into EBITDA and 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 495 Extension, and the M7 Widening.

Henry Byrne: 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 495 Express Lanes Northern Extension, and the M7 widening. Looking at costs in more detail on slide 18, the results again demonstrate how focused on disciplined cost management. We guided you to an FY26 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 have delivered this kind of cost discipline, and we have 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 and escalation in the incident response and maintenance contracts.

Speaker #2: Looking at costs in more detail on slide 18, the results again demonstrate our focus on disciplined cost management. We guided you to an FY26 cost growth below inflation, excluding new assets, and have delivered total proportional operating cost growth of 0.7% on that basis.

Speaker #2: 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.

Speaker #2: Road operating costs were higher during the year, reflecting volume-related tolling costs and escalation in the incident response and maintenance contracts. Maintenance costs also increased as we undertook additional pavement work across a number of the assets, in line with our asset lifecycle models. 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.

Henry Byrne: Maintenance costs also increased as we undertook additional pavement works across a number of the assets in line with our asset lifecycle models. More broadly, we continue to invest in maintenance across the portfolio and look for opportunities to optimize how we are 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. Offsetting some of these areas where costs increased was our active management of the corporate cost base and overheads, which reduced by 6%. This is allowing us to reinvest into the areas that Michelle spoke to earlier, and we continue to see opportunities to refine how we are allocating the capital and resources within the business to drive more value.

Speaker #2: Additionally, we continue to invest in development activities in a targeted way, which supports the emerging growth pipeline that Michelle's mentioned. Offsetting some of these areas where costs increased was our active management of the corporate cost base and overheads.

Speaker #2: Which reduced by 6%. 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 identify pain points, which we're looking to address.

Henry Byrne: By way of example, we continue to refine the mapping of core business processes and identify pain points which we are looking to address. We are also continuing to benefit from having consolidated our operational teams at an enterprise level, and there is 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 AUD 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: The balance sheet continues to provide capacity to support investments, both within our existing portfolio and in future growth opportunities as they emerge. 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.

Henry Byrne: 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 provide a bridge to net finance costs for FY26 and some considerations for FY27. 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.

Speaker #2: Turning to slide 20, we highlight the great outcomes our Treasury team have delivered over a number of years. We also provide a bridge to net finance costs for FY26 and some considerations for FY27.

Speaker #2: 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 six years, Australian 10-year swap rates have increased by around 400 basis points, as you can see.

Speaker #2: 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 staggered maturity profile has helped limit exposure to short-term interest rate movements.

Henry Byrne: 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 FY26, finance costs increased as the interest on the debt associated with the West Gate Tunnel ceased to capitalized. You can also see the finance costs from new debt issuance and refinancing activity here as well. For FY27, 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.

Speaker #2: Looking at FY26, finance costs increased as the interest on the debt associated with the Westgate Tunnel ceased to capitalize. You can also see the finance costs from new debt issuance and refinancing activity here as well.

Speaker #2: And for FY27, 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 six 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.

Speaker #2: Finally, slide 21 sets out our capital allocation framework. This framework has remained unchanged for a number of years now and shows how we think about distribution growth and investment in the portfolio.

Henry Byrne: 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 FY26, growth in traffic, revenue, EBITDA, and free cash contributed to a 6.2% increase in distributions per security, as we've mentioned. We continued to enhance portfolio flexibility through active capital management, including the divestment of our remaining interest in the A25.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: During FY26, 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.

Speaker #2: 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.

Henry Byrne: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #1: Thanks, Henry. So, to wrap up, this year has been about turning strategy into outcomes. We've delivered three major projects, arrived at a positive solution for New South Wales toll reform, and strengthened customer value—all while keeping costs below inflation for the third year in a row.

Michelle Jablko: Thanks, Henry. To wrap up, this year has been about turning strategy into outcomes. We have delivered three major projects, arrived at a positive solution for New South Wales toll reform, and strengthened customer value, all while keeping costs below inflation for the third year in a row. We continue to build fresh opportunities for future growth. That is why we are pleased to provide FY27 distribution guidance of AUD 0.72 per security, with free cash coverage of the distribution expected to be slightly less than 95%. We are not changing our overall distribution approach, but we think it is right for this year. FY27 is a transitional year as we adjust to the M5 West ownership changes, with capacity on other new Sydney roads still a year or two away. We have been leaning into that for some time, driving better performance in the business, and we see more opportunities ahead.

Speaker #1: And we continue to build fresh opportunities for future growth. That's why we're pleased to provide FY27 distribution guidance of $0.72 per security, with free cash coverage of the distribution expected to be slightly less than 95%.

Speaker #1: We're not changing our overall distribution approach, but we think it is right for this year. FY27 is a transitional year as we adjust to the M5 West ownership changes, with capacity on other new Sydney roads still a year or two away.

Michelle Jablko: FY27 is a transitional year as we adjust to the M5 West ownership changes, with capacity on other new Sydney roads still a year or two away. We have been leaning into that for some time, driving better performance in the business, and we see more opportunities ahead.

Speaker #1: 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 give us confidence in the outlook.

Michelle Jablko: The work we are doing and our strong fundamentals gives us confidence in the outlook, and we are committed to delivering sustainable value for our customers and security holders. I would like to thank our people for their commitment and contribution over the past year and thank our security holders for your continued support. We will now open up for questions.

Speaker #1: 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.

Speaker #1: And thank our security holders for your continued support. We'll now open up for questions.

Speaker #2: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two.

Operator: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star, then 2. If you are using a speakerphone, please pick up the handset to ask your question. The first question today comes from Matt Ryan from Barrenjoey. Please go ahead.

Speaker #2: If you're using a speakerphone, please pick up the handset to ask your question. The first question today comes from Matt Ryan from Barrenjoey.

Speaker #2: Please go ahead.

Speaker #3: Oh, thank you. Just had a question on the free cash coverage and the movements that you're thinking about. I guess the M5 change should be pretty well understood, but I'm just more interested in what you've baked in for traffic movements, as well as anything else that you think is worth calling out.

Matt Ryan: Well, thank you. Just had a question on the free cash coverage, and the movements that you are thinking about. I guess the M5 change should be pretty well understood, but I am just more interested in what you have baked into traffic movements as well as anything else that you think is worth calling out.

Speaker #1: Why don't I get Henry to start, and then I'll jump in as well.

Michelle Jablko: Why do I get Henry to start, and then I will jump in as well.

Speaker #3: Yeah, you'll see in the presentation materials today, we have pointed to the fact that we've observed reasonably good traffic on the network in recent times.

Henry Byrne: You will see in the presentation materials today, we have pointed to the fact that we have observed reasonably good traffic on the network in recent times. There is an expectation that if we continue to hold that, then you will see coverage in line with where we are guiding to today, and that reflects the underlying performance of the business. Then I think as Michelle has indicated a number of times in her comments a moment ago, we remain reasonably 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 have 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 have delivered that kind of outcome.

Speaker #3: 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.

Speaker #3: And that sort of reflects the underlying performance of the business. And then I think as Michelle's sort of indicated a number of times in her comments a moment ago, we remain reasonably confident in the broader outlook of the business because of everything that we have going on within the business, including how we're continuing to work on the broader efficiency within the business.

Speaker #3: 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.

Speaker #3: 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.

Henry Byrne: In broad terms, I think, Matt, we would see this as a year where, if we continue to see the kind of volumes we are seeing, then we will have a reasonably well-covered distribution, and then as we look out beyond that, we remain reasonably confident.

Speaker #3: And then, as we look out beyond that, we remain reasonably confident.

Speaker #4: Thank you. And then, maybe just circling back to that volatility that you highlighted a few months ago—do you have any sense of what was driving that?

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

Speaker #4: And I guess, again, I'm interested in how you've gone about forecasting the next 12 months in light of that, and whether there's any data you might be able to point to that would suggest that was a bit of an anomaly.

Speaker #1: Maybe if I start, and then Henry, you jump in. So, what we've done over recent months has been very transparent and we've given you monthly traffic data.

Michelle Jablko: Maybe if I start, then Henry, you jump in. What we have done over recent months is be very transparent and give you monthly traffic data so you could see it real-time, as essentially as we were 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. That is sort of the current basis of trajectory, if you like.

Speaker #1: So you could see it in real time. Essentially, as we were seeing it, we definitely saw around Easter, with fuel security being a concern.

Speaker #1: 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.

Speaker #1: 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 the Western Harbour Tunnel opening in 2028, whether that's contracted price increases as they come through, or the work we're doing on the business—when you take all of that into account, we're confident in the outlook.

Michelle Jablko: I think to Henry's point, we have 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 is Western Harbour Tunnel opening in 2028, whether that is contracted price increases as they come through, all the work we are doing on the business, when you take all of that into account, we are confident in the outlook.

Speaker #3: Yeah, maybe I'd add.

Henry Byrne: Yeah, maybe I would add.

Henry Byrne: Yeah, maybe I would add. Matt.

Speaker #4: Michelle.

Matt Ryan: Michelle?

Speaker #1: And maybe Henry will add a comment.

Michelle Jablko: Maybe Henry will add.

Speaker #3: Yeah, just a brief comment. Maybe the broader observation that Michelle and I have been making is that we have a broad portfolio, and you can see parts of the portfolio are actually doing really well.

Henry Byrne: Yeah

Michelle Jablko: something to that.

Henry Byrne: 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 have obviously called out the US business again, and you can see some very strong growth that we continue to observe there. So we will see the benefits of a large diversified portfolio underpinning the kind of resilience that we see as we look out in terms of volumes.

Speaker #3: We've obviously called out the US 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.

Speaker #4: Thanks, Henry. Thank you.

Matt Ryan: Thanks, Henry. Thank you.

Speaker #1: Thanks, Matt.

Michelle Jablko: Thanks, Matt.

Speaker #2: Thank you. The next question comes from Rob Poe from Morgan Stanley. Please go ahead.

Operator: Thank you. The next question comes from Rob Koh from Morgan Stanley. Please go ahead.

Speaker #4: Good morning. Apologies if you’ve covered this—I’ve joined your call late. I’m just looking at your opportunity set here, and I noticed NZ is still in there.

Rob Koh: Good morning. Apologies if you have covered this. I have joined your call late. I am just looking at your opportunity set here, and I notice NZ is still in there. I guess, I think Acciona won that Northland Corridor PPP. Can you just maybe update us on how you are thinking about the NZ toll market?

Speaker #4: I guess, I think Acciona were in that Northland corridor PPP. Can you just maybe update us on how you're thinking about the NZ toll market?

Speaker #1: 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.

Michelle Jablko: Thanks, Rob. We did not bid on that one. 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 are 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 has very much been the focus.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: So, that's very much been the focus.

Rob Koh: Thank you. I guess just following on from the last question about traffic. I think you said June, July is looking a little better. Could you maybe comment on the Victorian SCATS data and for young players like us, if there is any kind of cautionary tales or any interpretation nuance we should be aware of with that data?

Speaker #4: Thank you. And then, yeah, I guess just following on from the last question about traffic, I think you said June, July is looking a little better.

Speaker #4: Could you maybe comment on the Victorian Turtle data and, for young players like us, if there's any kind of cautionary tales or any interpretation nuance we should be aware of with that data?

Speaker #1: 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.

Michelle Jablko: Maybe we will come back to you on the data itself and if there are any nuances. What I would say more broadly on Melbourne is there has been a change in traffic patterns in Melbourne. I think you have seen that on CityLink as well as West Gate, and some of that is the broader macro and some of that is just change. I will pass to Henry. I think he was going to add something.

Speaker #1: 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 change. I'll pass to Henry.

Speaker #1: I think he was going to add something.

Speaker #3: Yeah, and 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's describing: broader background networks have been—network volumes have been down as we look out over a longer-term horizon.

Henry Byrne: Yeah, and 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, broader background network volumes have been down as we look out over a longer term horizon, going back a number of years. That then is a factor that has played out not just on CityLink, but obviously as a factor playing into the numbers that we have seen on West Gate Tunnel. Look, it is a continued watch point for us. Obviously, over time, we would expect these kind of network volumes to grow, but it is 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.

Speaker #3: Going back a number of years, and that then 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.

Speaker #3: Look, it's a continued watch point for us. Obviously, over time, we would expect these kinds 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.

Speaker #1: Other parts of the portfolio probably performed a bit better than we would have expected, for reasons going the other way, in those cities. Yeah.

Michelle Jablko: Other parts of the portfolio probably performed a bit better than we would have expected for reasons going the other way in those cities.

Henry Byrne: Yeah.

Rob Koh: Yeah.

Michelle Jablko: Yeah.

Speaker #4: Yeah, yeah. 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.

Rob Koh: Yeah. Okay, cool. All right. I have to ask about slide 55. If I am comparing your cash tax kind of expectations versus this time last year, I guess, correct me if I am wrong, Transurban Queensland has come forward a little bit, which I presume is because of the good traffic you are seeing there. Transurban Holdings Limited, you have kind of pushed that out like three or four years. Is that a function of the New South Wales agreement or what has driven the cash tax at Transurban Holdings Limited and Transurban Queensland, please?

Speaker #4: And then THL, you've kind of pushed that out like three or four years. Is that a function of the New South Wales agreement, or what's driven the cash tax at THL and TQ, please?

Speaker #3: Yeah, TQ is really just a marginal movement, but THL is a more significant movement, Rob. That's something we've been flagging now for a while.

Henry Byrne: Yeah, Transurban Queensland is really just a marginal movement, but Transurban Holdings Limited is a more significant movement, Rob. That is something we have been flagging now for a while. It just reflects the West Gate Tunnel and the capital expenditure there. We have worked through that now and we are at a point where we have got clarity on the kind of impact to the timing for that broader Transurban Holdings Limited consolidated group, and we have reflected that in the diagram there. We are saying that is pushed out by a few years, I guess, from where we were previously projecting that.

Speaker #3: It just reflects the 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.

Speaker #3: 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.

Speaker #4: Yeah, okay, great. Thank you so much.

Rob Koh: Yeah. Okay, great. Thank you so much.

Speaker #1: Thanks, Rob.

Michelle Jablko: Thanks, Rob.

Speaker #2: Thank you. The next question comes from Andre Fromer from UBS. Please go ahead.

Operator: Thank you. The next question comes from Andre Fromyhr from UBS. Please go ahead.

Speaker #4: Thank you. Good morning. Probably one for Henry. I'm wondering if you could help us bridge the finance costs into next year in a similar structure to what you've shown in your slides today.

Andre Fromyhr: Thank you. Good morning. Probably one for Henry. Just wondering if you could help us bridge the finance costs into next year in a similar structure to what you've shown in your slides today. If I'm understanding correctly, it looks like 130 odd million stepping up from the West Gate Tunnel full year run rate. There's also going to be an impact, I'm assuming, from M7-M12 completion, and then you've got the general drift in your average rates. I think you pulled out 20 basis points per half. 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 put all those things into FY27?

Speaker #4: So, if I'm understanding correctly, it looks like there's about $130 million stepping up from the Westgate Tunnel full-year run rate. There's also going to be an impact, I'm assuming, from M7, M12 completion, and then you've got the general drift in your average rates.

Speaker #4: I think you pulled 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 put all those things into FY27?

Speaker #3: Look, it is correct to say there will be an increase in costs, and the Westgate Tunnel is the lion's share of that. And you've correctly called out the number we've highlighted today.

Henry Byrne: Look, it is correct to say there will be an increase in costs, and the West Gate Tunnel is the lion's share of that. You've correctly called out the number we've highlighted today. We've obviously been talking about that 180 million number for a while. 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. The other elements will also continue to have a more marginal impact, but they'll increase. In aggregate, you will see that quantum of increase that will be in the dimensions you're describing there.

Speaker #3: So we've obviously been talking about that $180 million number for a while, so I think there's been quite a bit of transparency on that.

Speaker #3: And we will see that full amount flow through to the P&L next year and hit that finance cost line. The other elements will also continue to have a more marginal impact, but they'll increase.

Speaker #3: So, in aggregate, you will see that sort of quantum of increase that will be in the dimensions you're describing there.

Speaker #4: Okay, thanks. 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 asset or the tender process itself as to what made that not attractive.

Andre Fromyhr: Okay, thanks. 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, are there any particular dynamics around that asset or the tender process itself, as to what made that not attractive?

Speaker #1: 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.

Michelle Jablko: Thanks, Andre. 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. 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 Nashville was probably a bit more aligned with us than Atlanta.

Speaker #1: An 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.

Speaker #1: For us, we decided that Nashville was probably a bit more aligned with us than Atlanta.

Speaker #4: Okay. And then one more, if you don't mind. Coming back to the question about the payout ratio for next year, I understand, Michelle, the points you made around FY27 being, I guess, a transition year.

Andre Fromyhr: Okay. One more, if you do not mind, coming back to the question about the payout ratio for next year. I understand, Michelle, the points you made around FY27 being, I guess, a transition year. Is the intention, though, with the target range of 95% to 105%, that you would sort of have some years below, some years over 100% and sort of smooth it out through the cycle. Or is this year in particular one where you absorb that as you transition, but then you sort of come back to more mid-range?

Speaker #4: Is the intention, though, with the target range of 95 to 105, that you would have some years below, some years over 100%, and sort of smooth it out through the cycle?

Speaker #4: Or is this year in particular one where you absorb that as you transition, but then you sort of come back to more mid-range?

Speaker #1: Yeah. As I mentioned in my speech, we set the range for a reason. If you go back a couple of years, some years might be a bit better than 100%, in which case we'd put a bit away for the future.

Michelle Jablko: Yeah. 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 would put a bit away for the future. Some years could be a bit less. As you have 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 no, you should sort of expect through the cycle, you would be in and around the middle of the range. It just might vary year on year.

Speaker #1: 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.

Speaker #1: But no, you should sort of expect that, through the cycle, you'd be in and around the middle of the range; it just might vary year on year.

Speaker #4: Okay. Thank you.

Andre Fromyhr: Okay. Thank you.

Speaker #1: Thanks, Andre.

Michelle Jablko: Thanks, Andre.

Speaker #2: Thank you. The next question comes from Anthony Mulder from Jefferies. Please go ahead.

Operator: Thank you. The next question comes from Anthony Moulder from Jefferies. Please go ahead.

Speaker #4: Good morning, all. Focus on growth, and we'll talk back to growth. The timing of some of these projects—so, Virginia as an example—financial close by 2029.

Anthony Moulder: Good morning, all. To focus on growth, I want to talk back to growth, the timing of some of these projects. Virginia as an example, financial close by 2029, and then conceivably a few years to build that project. Should we start thinking about more 2033 contribution cash flows from some of these projects, the bigger projects within the pipeline, please?

Speaker #4: And then, considerably, a few years to build that project. And should we start thinking about more at 2033 contribution to cash flows from some of these projects?

Speaker #4: The bigger projects within the pipeline, please.

Speaker #3: Yeah, I'll take that, Anthony. 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.

Henry Byrne: Yeah, I will take that, Anthony. Yeah, look, that is the right way to be thinking about it. If we are putting in place these agreements around the end of this decade, and then it will take a few years to build, it becomes a 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 ink these deals, and so that is an important part of the equation, which is why we then lay out the capital allocation framework the way we do.

Speaker #3: Obviously, the kind of value creation is there at the time we make 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.

Speaker #1: And gives us the right ability to balance the distribution and the growth in the near term as well.

Michelle Jablko: It gives us the right ability to balance the distribution and the growth in the near term as well.

Anthony Moulder: Which is a function of cost growth or lack of, I guess. That has remained a very strong component of the free cash flow. You have said that I think you are further or 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?

Speaker #4: Which is a function of cost growth—or lack thereof, I guess. So that has remained a very strong component of the free cash flow.

Speaker #4: You've said that—I think you've either furthered or are closer to the start of that process—as far as further cost reductions or efficiencies. How much further can that go in terms of lowering the cost base of the business, please?

Speaker #1: There's something we're working on quite hard, but I'll get Henry to answer.

Michelle Jablko: It is something we are working on quite hard, but I will get Henry to answer.

Speaker #3: Yeah, you've heard us—Michelle and I—say for a number of years now, we think this is a multi-year story, and our view remains unchanged on that.

Henry Byrne: Yeah. You have heard us, Michelle and I say for a number of years now, we think this is a multi-year story and our view remains unchanged on that. So notwithstanding the fact that we have 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.

Speaker #3: 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.

Speaker #1: And maybe just to add to that, something I mentioned 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.

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

Speaker #1: But we're doing that within a cost base that we're managing very well.

Speaker #4: Understood. And lastly, if I could on West Gate Tunnel, obviously the ramp-up profile is slower than expected, slower than you would have forecast. It looks like truck traffic continues to improve on that road.

Anthony Moulder: Understood. Lastly, if I could, on West Gate Tunnel, 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 diverting away from West Gate Bridge into the West Gate Tunnel that is causing the concerns as far as, or the delay as far as the ramp-up profile?

Speaker #4: Is it really just the cars that aren't diverting away from West Gate Bridge into the West Gate Tunnel that is causing the concern as far as the delay, as far as the ramp-up profile?

Speaker #1: Yeah. Do you want to start, Henry, or no?

Michelle Jablko: Yeah. Do you want to start, Henry? I'll-

Speaker #3: 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.

Henry Byrne: 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 in 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. I think your observation is also correct in terms of one of the use cases for road users, which is an alternative to the West Gate Bridge. 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.

Speaker #3: The broader observation, which Michelle made earlier, is that background network volumes in Victoria have been weaker. And that has obviously flowed through to West Gate Tunnel.

Speaker #3: But I think your observation is also correct in terms of one of the kinds of use cases for road users, which is as an alternative to the West Gate Bridge. We've always seen it as a bit of a pressure release valve for the West Gate Bridge.

Speaker #3: But with background network volumes down, the pressure on the bridge hasn't been as great as perhaps it would have been.

Speaker #1: Yeah.

Michelle Jablko: Yeah.

Speaker #4: That makes sense. Thank you very much.

Anthony Moulder: Yeah, makes sense. Thank you very much.

Speaker #1: Thanks, Anthony.

Michelle Jablko: Thanks, Adrian.

Speaker #2: Thank you. The next question comes from Justin Barrett from CLSA. Please go ahead.

Operator: Thank you. The next question comes from Justin Barrett from CLSA. Please go ahead.

Speaker #3: Morning, Michelle. Good morning, Henry. I just wanted to come back and look at your operational cost base. On slide 18, I appreciate your guidance for FY27.

Justin Barrett: Good morning, Michelle. Good morning, Henry. Just wanted to come back and look at your operational cost base on slide 18, and appreciate your guidance for FY27. I guess, is it fair to assume, based on your prepared comments, that most of the efficiencies in 2027 will come from that overhead bucket again?

Justin Barratt: Good morning, Michelle. Good morning, Henry. Just wanted to come back and look at your operational cost base on slide 18, and appreciate your guidance for FY27. I guess, is it fair to assume, based on your prepared comments, that most of the efficiencies in 2027 will come from that overhead bucket again?

Speaker #3: I guess, is it fair to assume, based on your prepared comments, that most of the efficiencies into '27 will come from that overhead bucket again?

Speaker #1: Henry, why don't you start, and I'll.

Michelle Jablko: Henry, why don't you start, and I'll-

Speaker #3: Yeah. Look, it is fair to say that the maintenance costs are increasing within the business. We've been saying that for a number of years.

Henry Byrne: Yeah.

Michelle Jablko: Yeah.

Henry Byrne: Look, it is fair to say that the maintenance costs are increasing within the business. We have been saying that for a number of years, and the work we are doing there is not to reduce maintenance costs, but to look to optimize our practices to moderate the pace of the increase. That is an area where we think it is 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 multi-year contracts. We do see opportunities to drive efficiency when we come to renegotiate those, but they happen on a multi-year horizon. It is a little longer dated in terms of our ability to get after those, but we absolutely are when they become available.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: These are large, multi-year contracts. We do see opportunities to drive efficiency when we come to renegotiate those, but they happen on a multi-year horizon.

Speaker #3: 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.

Henry Byrne: But then within that line, you will see some of the benefit of toll reform come through the toll notice type costs, which we have 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 have agreed in principle with the New South Wales government. The overhead line is the one here where clearly we see further opportunities, and that goes to the point Michelle made a moment ago, which is that 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 are allocating the capital and resources into the areas which are going to continue to drive value. We do think about it more in terms of efficiency and resource allocation for value rather than just cost out.

Speaker #3: So there'll 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.

Speaker #3: Then the overhead line is the one here where, clearly, we see further opportunities. And that goes to the point Michelle made a moment ago.

Speaker #3: This is about looking for ways to drive further efficiency in how the business is being run, but continuing 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.

Henry Byrne: But continue to ensure that as we do that, we are allocating the capital and resources into the areas which are going to continue to drive value. We do think about it more in terms of efficiency and resource allocation for value rather than just cost out.

Speaker #3: And we do think about it more in terms of efficiency and resource allocation for value, rather than just cost out.

Speaker #1: Yeah. And maybe just to add to that, in terms of road operating costs, as I said, we're investing more into our customers.

Michelle Jablko: Yeah. Maybe just to add to that, in terms of road operating costs, as I said, we are investing more into our customers, but we are trying to be more efficient in the way we do it. The digitization of toll notices is a good example of that, and we are 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 is a matter of finding the people and the resource and the costs from elsewhere in the business to put into those areas.

Speaker #1: 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.

Speaker #1: Maintenance, I think, will continue to go up for some time. Then it's a matter of finding the people, the resources, and the costs from elsewhere in the business to put into those areas.

Speaker #3: The one other comment I might make is that the numbers we're presenting here have 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.

Henry Byrne: The one other comment I might make is, the numbers we are presenting here have new asset costs in there. So we have been able to effectively absorb the new asset 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. That remains the case in terms of how we have then positioned it for next year.

Speaker #3: And so that remains the case in terms of how we've then positioned it for next year.

Speaker #1: And continuing to invest in ongoing development costs, so that has as well. So it is very much investing in growth, but being really disciplined and thoughtful about how we use our resources to do that.

Michelle Jablko: 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.

Speaker #3: Great, thanks very much for that. And then just one other one for me. I just wanted to check—I mean, again, you've highlighted some of the issues around the Westgate Tunnel.

Justin Barrett: Great. Thanks very much for that. Just one other one for me. I just wanted to check, I mean, I think you've highlighted some of the issues around the West Gate Tunnel, and that it will take longer to get to free cash neutral. Is achieving free cash flow neutral something achievable over, 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?

Justin Barratt: Great. Thanks very much for that. Just one other one for me. I just wanted to check, I mean, I think you've highlighted some of the issues around the West Gate Tunnel, and that it will take longer to get to free cash neutral. Is achieving free cash flow neutral something achievable over, 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?

Speaker #3: And that it will take longer to get to free cash neutral. Is achieving free cash flow neutral something achievable over, 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?

Speaker #3: We've always said the ramp-up on this asset is a long-dated prospect, so it's a ramp-up that was always going to take a number of years, in our view.

Henry Byrne: We've always said the ramp-up on this asset is a long-dated prospect. So it's a ramp-up that was always going to take a number of years in our view. 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 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.

Speaker #3: 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 take a number of years for the city to fully learn its way into the kind of value in this asset.

Speaker #3: 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 we still hold to the view that, over the longer term, the value of this asset should present itself.

Speaker #1: And maybe if you just sort of step back and take a portfolio view, the US, as I mentioned before, has outperformed our expectations. Free cash has grown $80–90 million over the last three years there.

Michelle Jablko: Maybe if you just sort of step back and take a portfolio view. The US, as I mentioned before, has outperformed our expectation. I think free cash has grown AUD 80 million, AUD 90 million over the last three years there. So you've always got swings and roundabouts in the business from a portfolio perspective.

Speaker #1: So you've always got swings and roundabouts in the business from a portfolio perspective.

Speaker #3: Understood. Thanks a lot.

Justin Barrett: Understood. Thanks a lot.

Justin Barratt: Understood. Thanks a lot.

Speaker #1: Thanks, Justin.

Michelle Jablko: Thanks, Justin.

Speaker #2: Thank you. The next question comes from Owen Beryl from RBC Capital Markets. Please go ahead.

Operator: Thank you. The next question comes from Owen Birrell from RBC Capital Markets. Please go ahead.

Speaker #4: Yeah, good morning, guys. Look, I just wanted to drill into the free cash flow coverage a little bit more. I know you sort of said you're slightly below the 95% coverage level.

Owen Birrell: Yeah. Good morning, guys. 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 it a bigger impact from, say, the A25 coming out or the M5 reduction next year?

Speaker #4: Can I just get a sense, relative to what you would sort of argue as a normal period where you would be at 100%, where the biggest deltas are?

Speaker #4: Is it operating performance, or the finance costs, or is it a bigger impact from, say, the A25 coming out, or the implied reduction next year?

Speaker #1: Maybe I'll just.

Michelle Jablko: Maybe I'll

Speaker #4: I think you just said the proportionality of where the deltas are coming from versus normal.

Owen Birrell: Can you maybe give a sense of the proportionality of where the deltas are coming from versus normal?

Speaker #1: Yeah. And maybe I'll start, and Henrik can go into some of the detail. When we set the policy two, three years ago, we were always mindful of the M5 West transitioning from 100% to 50%.

Michelle Jablko: Yeah. I'll start, Owen, 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 100% to 50% 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. We're leaning into it and we're probably leaning into it harder in terms of the cost growth. That's why when we talk about AUD 0.72 for the coming year, we're doing that because we're confident in the outlook.

Speaker #1: And the Western Harbor Tunnel in particular is 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.

Speaker #1: I think that's probably gone 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.

Speaker #1: And that's why, when we talk about 72 cents for the coming year, we're doing that because we're confident in the outlook. That's partly because of the fundamentals in the business—whether that's contracted price escalations, whether that's the timing of some of that Sydney to capacity coming online, or it's the work we're doing.

Michelle Jablko: 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.

Speaker #3: Yeah, 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 FY27 for a range of reasons that we've been describing.

Henry Byrne: Yeah. Maybe the only additional point I would add is, we do take a longer view on this as well, and it is really important. You heard Michelle talk about the fact that we remain confident in the outlook beyond FY27 for a range of reasons that we have 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 factors Michelle has described, we have obviously observed some weakness in different parts of the portfolio which we have outlined, and Victoria in particular, has not been particularly strong, and then that has flowed through to West Gate Tunnel. I think if you are looking for a sort of marginal factor that has probably just tipped it slightly below within the range this year, that would be one of the factors.

Speaker #3: 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 factors Michelle's described, we've obviously observed some weakness in different parts of the portfolio, which we've outlined.

Speaker #3: And Victoria, in particular, hasn't been particularly strong, and then that's flowed through to West Gate. So I think if you're looking for a sort of marginal factor that's probably just tipped it slightly below within the range this year, that would be one of the factors.

Speaker #1: Yeah, but I'd say it's a small.

Michelle Jablko: Yeah. But I would say it is a small tipping. Yeah.

Speaker #4: How much of an impact, I guess, has the increase in finance costs had on that number? And also, the A25—give us a sense of proportionality.

Owen Birrell: How much of impact the increase in the finance costs has made to that number and also the A25, give us a sense of proportionality. Because I do not imagine when you set this path you would have assumed that you would have been divesting the A25 at that point.

Speaker #4: I mean, because I don't imagine when you set this path, you would have assumed that you would have been divesting the A25 at that point.

Speaker #3: Yeah, we made a decision to divest A25. 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.

Henry Byrne: Yeah. We made a decision to divest A25. 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 year, but that is only marginal. The real answer is, if I take the different components, the finance, we have good visibility on our funding costs and we managed to that and we factored that into our view of sustainable distributions and the outlook. So, there are 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 West Gate Tunnel that is now hitting the interest cost line and we have not seen the commensurate earnings come through on that.

Speaker #3: But that's only marginal. The real answer is, if I take the different components—the finance—we have good visibility on our funding costs, and we manage to that.

Speaker #3: And we've factored that into our view of sustainable distributions and 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 the West Gate Tunnel, we have a significant amount of funding—or finance costs associated with the funding for West Gate—that is now hitting the interest cost line.

Speaker #3: And we haven't seen the commensurate earnings come through on that, so that's the marginal piece that we've just been managing.

Henry Byrne: So that is the marginal piece that we have just been managing.

Speaker #4: Sure. And just as a second, just one more question from me, if I may—just on capital release potential. You've highlighted $172 million of releases in FY26.

Owen Birrell: Sure.

Michelle Jablko: Thanks.

Owen Birrell: And just a final question for me, if I may. Just on capital release potential. You have highlighted AUD 172 million of releases in FY26. Historically, Transurban used to give us a capital release potential of 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.

Speaker #4: Now, historically, Transurban used to give us, I guess, a capital release potential of how much you had available to you. Just wanting you to give us a sense of where that stands at the moment.

Speaker #4: And how much of that is actually within assets controlled by Transurban, versus assets that have their own separate board?

Speaker #3: 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.

Henry Byrne: Well, 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. If you remember, we decoupled capital releases from our discussions around distributions a couple of years back, Owen, 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.

Speaker #3: 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.

Speaker #3: When we, if you remember, we decoupled capital releases from our discussions around distributions a couple of years back, Owen, 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 sweet spot for us.

Speaker #3: And based on that, we see in broad terms, as a very broad-brush rule of thumb, that for every $100 million of additional EBITDA that we're able to bring in, there is somewhere between $750 million and $1 billion of additional leverage that we would have access to, to stay within those credit metrics.

Henry Byrne: Based on that, we see in broad terms, as a very broad brush rule of thumb, that for every AUD 100 million of additional EBITDA that we are able to bring in, there is about somewhere between AUD 750 million and AUD 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 one that we have with our partners, and that is a kind of case-by-case discussion.

Speaker #3: The conversations when these opportunities are sitting at the partner level are ones that we have with our partners, and that's a kind of case-by-case discussion.

Speaker #1: And maybe just to round out your question, the opportunities for capital release are mostly in joint venture assets, so predominantly Transurban Chesapeake, by way of example.

Michelle Jablko: 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 will work through that with our partners looking at the reinvestment profile there. But the capacity is there in the way Henry has spoken about.

Speaker #1: We'll work through that with our partners, looking at the reinvestment profile there. But the capacity is there in the way Henry has spoken about.

Speaker #4: Understood. Thank you.

Owen Birrell: Understood. Thank you.

Speaker #1: Thanks, Owen.

Michelle Jablko: Thanks, Owen.

Speaker #3: Thank you. The next question comes from Suraj Nabhani from Citi. Please go ahead.

Operator: Thank you. The next question comes from Suraj Nebhani from Citi. Please go ahead.

Speaker #4: Thank you. Morning, Michelle, Henry, and team. Just on that, on the free cash sort of build-up, I'm looking at one of the slides in the presentation.

Suraj Nebhani: Thank you. Morning, Michelle, Henry, and team. Just on the free cash build-up, I am looking at one of the slides in the presentation. I think, Henry, you made some comments around the tax, basically in response to one of the questions. Can you talk to potential step-up in FY27 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.

Speaker #4: Can you talk to—I think, Henry, you made some comments around the tax base in response to one of the questions. Can you talk to the potential step-up into FY27 there?

Speaker #4: We have a pretty good idea on the finance cost side. But I guess on the tax side, if you can give us some near-term curves.

Speaker #3: Yeah. No, I think the broader observation is that previously we had reflected the expectation that the large consolidated tax group would enter a tax-paying phase in FY27.

Henry Byrne: Yeah. No, I think the broader observation is that previously we had reflected the expectation that the large consolidated tax group would enter a tax-paying phase in FY27, and we have moved that out by a couple of years, which is something we have been flagging for a little while, that we are expecting would be the result of the capital expenditure on the West Gate Tunnel being taken into account. We now have better visibility on that, and we have reflected that in the materials at the back. So that is the material point to observe around our tax profile, that there is a 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 will work through that. In terms of the existing taxpayers, they are more at the margins.

Speaker #3: And we have moved that out a couple of years, which is something we have been flagging for a little while. That, we're expecting, would be the result of the capital expenditure on the Westgate Tunnel being taken into account.

Speaker #3: We now have better visibility on that, and we've reflected that in the materials at the back. So that's the material 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.

Speaker #3: In terms of the existing taxpayers, they're more at the margins. And you can see Northwest Roads Group is probably the main taxpayer within the group.

Henry Byrne: You can see NorthWestern Roads Group is probably the main taxpayer within the group, and that is still relatively small in the context of the broader Transurban footprint, and that is worked through its tax losses, so effectively that has entered a tax-paying phase.

Speaker #3: And that's still relatively small in the context of the broader Transurban footprint. And that is an asset that has worked through its tax losses.

Speaker #3: So, effectively, that has entered a tax-paying phase.

Speaker #4: Got it. And maybe just the other one 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 95%, it seems like the free cash is broadly neutral at a headline level into FY27 versus FY26.

Suraj Nebhani: Correct. Maybe just, the other one was just around broader EBITDA growth into next year and free cash growth. If I back out the comments from the distribution guidance and free cash, slightly less than 95%, it seems like the free cash is broadly neutral at a headline level into FY27 versus FY26. Empire West, you are getting half a year impact this year, it is 11 December. So I am just wondering how you are thinking about growth into FY28 as well, as you get the toll reforms coming through in FY28.

Speaker #4: And N5 West, you're getting half of your impact this year. It's 11th of December, so I'm just wondering how you're thinking about growth into FY28 as well, as you get the toll reforms coming through in FY28.

Speaker #1: Yes. So would you start, Henry, and then I'll add.

Michelle Jablko: Yeah. Will you start, Henry, then I will add.

Speaker #3: Yeah. Look, obviously, you can do the numbers. I mean, we are managing—we've been very transparently managing—the step-down in the M5 West ownership position.

Henry Byrne: Yeah. Look, obviously you can do the numbers. I mean, we have been very transparently managing the step down in the M5 West ownership position. So in broad terms, if that contributed, I think, just under AUD 320 million of free cash in FY26, we are 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 will be about three-quarters of that come through. But again, we are 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 where network volumes land for us, and that will be the swing factor on the growth numbers you are describing there.

Speaker #3: So in broad terms, if that contributed, I think, just under $320 million of free cash in FY26, we're going to have 100% of that for half the year, and then 50% of that for the second half of the year.

Speaker #3: So, in broad terms, it tells you that there will be about three-quarters of that come through. But again, we're managing that impact through the portfolio and sitting just slightly below the range.

Speaker #3: In terms of where that ultimately lands in free cash coverage, it'll be dependent on where network volumes land for us. That will be the swing factor on the growth numbers you're describing there.

Speaker #1: 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.

Michelle Jablko: 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.

Speaker #4: Thank you, Michelle. And just one final one on the US business. Very impressive numbers there. Will we see similar sorts of growth, or is it reaching a point where you can't raise tolls much more in the dynamic tolls?

Suraj Nebhani: Thank you, Michelle. Just one final one on the US business. Some very impressive numbers there. Do we see similar sort of growth, or is it reaching to a point where you cannot raise tolls a lot more in the dynamic tolls?

Speaker #1: So maybe I'll start on this one, Suraj. 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.

Michelle Jablko: So maybe I will start on this one, Suraj. I think when we spoke about this last time, and probably the time before, 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 have realigned our pricing to the value our customers see. We are 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 Express Lanes. So exactly what that means, it is hard to guide precisely, but we still see pretty good performance in the US. But I think of that a bit more as a step change than a growth rate.

Speaker #1: I think, as you say, the growth has been very impressive as we've realigned our pricing to the value our customers see. We weren't expecting that growth trajectory to continue.

Speaker #1: 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.

Speaker #1: It's hard to guide precisely, but we still see pretty good performance in the US. I think about it a bit more as a step change than a growth rate.

Suraj Nebhani: Is there some natural sort of cap in the dynamic sort of pricing, you reckon, Michelle? Particularly with respect to elasticity and the fuel prices in the US?

Speaker #4: Is there some natural sort of gap in the dynamic sort of pricing, you reckon, Michelle, particularly with respect to elasticity and the fuel prices in the US?

Speaker #1: So our commitment is to guarantee a minimum speed, and that's what we do. Pricing adjusts to demand, and we're probably just being more fine-tuned in how we approach that.

Michelle Jablko: Our commitment is to guarantee a minimum speed, and that is what we do. Pricing adjusts to demand, and we have probably just been more fine-tuned on how we approach that. That part of the US is still showing strong congestion and good demand. As we sit here, clearly the macro will be what it will be. But as we sit here today, there is still good congestion, and we have sort of seen that month on month on month in the numbers.

Speaker #1: That part of the US is still showing strong congestion and good demand. So as we sit here today, clearly, the macro will be—it will be.

Speaker #1: But 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.

Speaker #3: 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 US, then, that supports the kind of pricing growth that we've been able to achieve.

Henry Byrne: It is a good example of where targeted investment into our roads can unlock quite a strong value proposition for customers. In the case of the US then that supports the kind of pricing growth that we have been able to achieve. If you go back to the recent major investments in our network around the Greater Washington Area, we invested into the 95 Express Lanes corridor through the Fredericksburg extension and the 495 Express Lanes corridor through the Northern Extension. Both of those have then supported a very strong value proposition that has then supported the kind of price growth we have been able to achieve.

Speaker #3: So if you go back to the recent major investments in our network around the Greater Washington area, we invested in the I-95 corridor through the Fredericksburg extension, and the I-495 corridor through the northern extension.

Speaker #3: 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.

Speaker #4: Thank you.

Suraj Nebhani: Thank you.

Speaker #1: Thanks, Suraj.

Michelle Jablko: Thanks, Suraj.

Speaker #2: Thank you. The next question comes from Richard Jones from JPMorgan. Please go ahead.

Operator: Thank you. The next question comes from Richard Jones from JPMorgan. Please go ahead.

Speaker #4: Oh, thanks. Michelle, you called out that the bid for the I-24 was submitted in July. I'm just wondering if you can outline one of the steps from here and when we may hear if you're successful or not.

Richard Jones: Hey. Michelle, you called out the bid for the I-24 was submitted in July. Just wondering if you can outline what are the steps from here and when we may hear if you are successful or not.

Speaker #1: 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.

Michelle Jablko: That is a government process, so it is hard for us to be definitive. I expect it is not that far away, but we do not control it.

Speaker #4: Okay. And then, just further on the Westgate Tunnel, do you expect the stabilized margin will be in line with the broader network?

Richard Jones: Okay. Just further on the West Gate Tunnel, do you expect that the stabilized margin will be in line with the broader network?

Speaker #1: I think you've got to—maybe I'll get Henry to comment specifically. I think you've got to remember with the Westgate Tunnel that the value sources were broad.

Michelle Jablko: Maybe I will get Henry to comment specifically. I think you have 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 will get Henry to comment specifically.

Speaker #1: 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.

Speaker #3: Yeah, that's right. That's a really important callout. There were funding components of that, or value components of that, that we have already realized.

Henry Byrne: Yeah. That is right. That is a really important call-out. There were funding components of that or value components of that that we have already realized. If you take the West Gate Tunnel standalone in terms of the kind of EBITDA margin, which is one of the ways in which we assess the kind of efficient performance of these assets, there are a few things to take into account. Firstly, it is 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 is where you see a lower margin typically improve.

Speaker #3: But then, if you take the WestGate Tunnel standalone, in terms of the kind of EBITDA margin, which is one of the ways in which we assess the efficient performance of these assets, there are a few things to take into account.

Speaker #3: 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.

Speaker #3: 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.

Henry Byrne: Then, I guess, Richard, that is 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 multi-year story from where we see things right now.

Speaker #3: Work and how that will flow through to the ramp-up on the Westgate Tunnel. And our comments are that this is probably a multi-year story from where we see things right now.

Speaker #4: Thanks, Henry.

Richard Jones: Thanks, Henry.

Speaker #1: Thanks, Richard.

Michelle Jablko: Thanks, Richard.

Speaker #2: Thank you. The next question comes from Nathan Lead from Morgans. Please go ahead.

Operator: Thank you. The next question comes from Nathan Lead from Morgans. Please go ahead.

Speaker #4: Hello Michelle. Good day, Henry. Thanks for your presentation. Just two or three questions from me, if you don't mind. So, it's slide 51 where we're looking at the net interest paid split by asset.

Nathan Lead: G'day, Michelle. G'day, Henry. Thanks for your presentation. Just two or three questions from me, if you don't mind. At 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 of the facility, my understanding, that's the WestConnex Australian government concession loan. 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. Can you just talk through the timing on that and what your strategy is when that event occurs?

Speaker #4: If we look across to the right and the capitalized interest to the facility, that's—my understanding, that's the WestConnex, sorry, the WestConnex Australian Government concession loan.

Speaker #4: You're not paying any interest on that at the moment. The interest is being capitalized into the balance. I believe that that's actually coming up to being an interest-paying facility relatively soon.

Speaker #4: Can you just talk through the timing on that, and what your strategy is when that event occurs?

Speaker #3: Look, what I'd say about that is, that's a facility where we probably will look at our refinancing options over the next two to three years.

Henry Byrne: 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 two to three years. It's got a slightly longer date of maturity on it, but then there are some elements to that that probably mean we'll look at refinancing that earlier. That's the real consideration there. Then in terms of how the interest costs flow through, that'll probably be caught in that refinancing event when we take it on.

Speaker #3: We have it—it's got a slightly longer date of maturity on it. But then there are some elements to that that probably mean we'll look at refinancing that earlier.

Speaker #3: So that's the real consideration there. And then in terms of how the interest cost flows through, that'll probably be caught in that refinancing event when we take it on.

Speaker #4: Okay. The actual paying of that interest there before the refinancing, when is that actually going to hit the free cash?

Nathan Lead: Okay. The actual paying of that interest, though, before the refinancing, when is that actually going to hit the free cash?

Speaker #3: I think it's FY29 that's the year 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.

Henry Byrne: I think it's FY29 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.

Speaker #4: Yeah. 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.

Nathan Lead: Yeah. Okay. Slide 15, you've got a footnote there, footnote 12, which is pretty interesting, in terms of Standard & Poor's with the FFO to debt. Quite a meaningful increase in the cover there. Also, it looks like the downgrade trigger's lower. What does that mean in terms of, I suppose, the way you think about the constraints on your balance sheet capacity going forwards?

Speaker #4: 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?

Speaker #3: Look, it doesn't really impact us. We've obviously had very good engagement with Standard and Poor's through this process, and they're just adjusting the methodology by which they calculate the FFO to debt.

Henry Byrne: 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. They've gone to a proportional basis of calculation, which is the same as Moody's. 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.

Speaker #3: 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.

Speaker #4: Yeah, okay. And then this final one for me, I suppose—slide 12, you've got population growth expectations there for each of your key markets.

Nathan Lead: Yeah. Okay. This final one from me, I suppose. Slide 12, you've got population growth expectations there for each of your key markets. I suppose when you work out CAGRs on that, it's like 1.2% CAGR for Sydney and something like 1.4% or so for Melbourne and for Brisbane. 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?

Speaker #4: I suppose when you work out CAGRs on that, it's like 1.2% CAGR for Sydney, and sort of like 1.4% or so for Melbourne and for Brisbane.

Speaker #4: 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?

Speaker #1: I think you've got to look, Nathan, at where our roads are relative to the population. And in many of our cities—for example, if I take some of the growth we've got in Sydney in the north and the west—

Michelle Jablko: I think you've got to look, Nathan, at where our roads are relative to the population. In many of our cities, if I take some of the growth, for example, we've got in Sydney, in the north and the west, that's why the M2-M7 project was announced as proposed project last week as part of toll reform. Queensland, we're in a 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. Melbourne, we've spoken about the West Gate, but the long-term fundamentals in Melbourne with growth in the west is still very strong. 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.

Speaker #1: That's why the M2/M7 project was announced as a proposed project last week as part of toll reform. In Queensland, we're in a very, very congested part of Brisbane with very significant growth in Southeast Queensland.

Speaker #1: And a lot of congestion on Logan and Gateway. As we sit today in Melbourne, we've spoken about the West Gate, but the long-term fundamentals in Melbourne, with growth in the West, are still very strong.

Speaker #1: So I think, when you look at it quite specifically to our assets, we continue to see strong fundamentals over the medium and longer term.

Speaker #4: Okay. If I could just sneak one more in, you've got a chart there with the debt in each of the different currencies. You've still got some Canadian debt there—$650 million.

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

Speaker #4: That's no longer got a natural hedge from the Canadian revenues. What's the intent on that?

Speaker #3: So we've paid down some of the proceeds, about $300 million of the proceeds, as a result of the divestment of the A25 stakes. So we just thought that was a prudent use of capital, so you'll see that shift in future reporting.

Henry Byrne: We paid down some of the proceeds, about AUD 300 million of the proceeds as a result of the divestment of the A25 stake. We just thought that was a prudent use of capital. You'll see that shift in future reporting.

Speaker #4: Okay. Is there still going to be, like, a full Canadian dollar exposure there?

Nathan Lead: Okay. Is there still going to be a full Canadian dollar exposure, though?

Speaker #3: The balance is hedged. Yeah.

Henry Byrne: The balance is hedged. Yep.

Speaker #4: Okay. Thank you. Excellent. Thanks.

Nathan Lead: Okay.

Michelle Jablko: Two over.

Henry Byrne: Two over.

Nathan Lead: Thank you. Excellent. Thanks.

Speaker #2: Thank you. At this time, we're showing no further questions. I'll hand the conference back to Michelle for closing remarks.

Operator: Thank you. At this time, we are showing no further questions. I will hand the conference back to Michelle for closing remarks.

Michelle Jablko: Look, thanks everyone for joining. The IR team is available if you have any questions through the day, and thank you again.

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