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9
ANNUAL
REPORT
2019
ATLAS ARTERIA IS A GLOBAL OWNER,
OPERATOR AND DEVELOPER OF TOLL
ROADS, WITH A PORTFOLIO OF FOUR
TOLL ROADS IN FRANCE, GERMANY
AND THE UNITED STATES. WE ARE
FOCUSED ON ENSURING OUR
CUSTOMERS, AND THE COMMUNITIES
IN WHICH WE OPERATE, ARE WELL
SERVED BY THE TRANSPORT
LINKS WE PROVIDE.
Contents
2019 at a Glance
Chairpersons’ Review
From the CEO and Managing Director
The Atlas Arteria Business
Vision and Values
Portfolio and Performance
2
3
5
8
9
Sustainability
Risk Management
Governance
Financial Report
Securityholder Information
10
Corporate Directory
18
28
29
33
116
IBC
Stapling
Atlas Arteria comprises Atlas Arteria Limited (ACN 141 075 201) (ATLAX) and
Atlas Arteria International Limited (Registration No. 43828) (ATLIX). In accordance
with its requirements in respect of stapled securities, ASX reserves the right to
remove either or both of ATLAX and ATLIX from the offi cial list of ASX if, while the
stapling arrangements apply, the securities in one of the entities ceases to be
stapled to the securities in the other entity.
Takeover provisions
Unlike ATLAX, ATLIX is not subject to takeover provisions of Chapters 6, 6A, 6B
and 6C of the Corporations Act. However, as the takeover provisions of the
Corporations Act apply to ATLAX and its shareholders, by virtue of the stapling
arrangements, the takeover provisions will apply to the holders of Atlas Arteria
stapled securities. This is notwithstanding that ATLIX and its shareholders are not
subject to the takeover provisions of the Corporations Act.
US ownership restrictions
Atlas Arteria’s stapled securities (Stapled Securities) are subject to ownership
restrictions applying to residents of the United States.
The Stapled Securities have not been registered under the US Securities Act of
1933 or the securities laws of any state or other jurisdiction of the United States.
In addition, no Atlas Arteria entity has been registered under the US Investment
Company Act of 1940 in reliance on an exemption from registration.
Accordingly, the Stapled Securities may not be offered or sold in the United States
or to, or for the account or benefi t of US Persons except in accordance with
an available exemption from, or a transaction not subject to, the registration
requirements of the US Securities Act, the US Investment Company Act and
applicable US state securities laws.
In order to qualify for an exemption under the US Investment Company Act,
the provisions of the constitutions of the Atlas Arteria entities provide that where
a holder is an Excluded US Person:
− Atlas Arteria may refuse to register a transfer of Stapled Securities to that
Excluded US Person; and
− the Excluded US Person may be requested to sell their Stapled Securities and
be advised that, if the Excluded US Person fails to do so within 30 Business
Days, they will be divested of such Stapled Securities and receive the proceeds
of sale (net of transaction costs including any applicable brokerage, taxes and
charges) as soon as practicable after the sale.
In addition, the provisions in the constitutions provide that a holder may be
required to complete a statutory declaration in relation to whether they (or any
person on whose account or benefi t it holds Atlas Arteria securities) are an
Excluded US Person. Any holder who does not comply with such a request will
be deemed to be an Excluded US Person.
The Stapled Securities are issued on terms under which each holder who is
or becomes an Excluded US Person agrees to the above terms and irrevocably
appoints Atlas Arteria as that holder’s agent and attorney to do all acts and things
and execute all documents which Atlas Arteria considers necessary, desirable
or reasonably incidental to effect the above actions.
Defi nitions:
An “Excluded US Person” means a holder of Stapled Securities (or a person who
seeks to be registered as a holder of Stapled Securities) whom the directors of
Atlas Arteria have determined is a US Person who is not a Qualifi ed Purchaser
or holds or will hold Stapled Securities for the account or benefi t of any US Person
who is not a Qualifi ed Purchaser.
A “Qualifi ed Purchaser” has the meaning given in Section 2(a)(51) of the
US Investment Company Act of 1940 and the rules and regulations of the
US Securities and Exchange Commission.
A “US Person” has the meaning given in Rule 902(k) of Regulation S under
the US Securities Act of 1933.
Disclaimer
Investments in Atlas Arteria are subject to investment risk, including possible
delays in repayment and loss of income and capital invested.
Forward looking statements
This report may contain forward-looking statements including statements with
respect to Atlas Arteria’s future performance. Due care and attention have been
exercised in the preparation of forward-looking statements, however actual
results may vary as a result of various factors.
Advice warning
The information in this annual report is given in good faith and derived from
sources believed to be accurate at this date but no representation or warranty
of accuracy, completeness or reliability is given and no responsibility or liability
arising in any other way, including by reason of fraud or negligence for errors
or omission herein, is accepted by Atlas Arteria or its offi cers.
This annual report is not an offer or invitation for subscription or purchase of,
or a recommendation of, securities. It does not take into account the investment
objectives, fi nancial situation and particular needs of the investor. Before making
an investment in Atlas Arteria, the investor or prospective investor should
consider whether such an investment is appropriate to their particular
investment needs, objectives and fi nancial circumstances and consult an
investment adviser if appropriate.
Atlas Arteria’s ongoing commitment to your privacy
We understand the importance you place on your privacy and are committed
to protecting and maintaining the confi dentiality of the personal information
you provide to us. Atlas Arteria’s privacy policy is available on the Atlas Arteria
website at www.atlasarteria.com, or you can contact our investor relations team
on 1800 621 694.
SAVING TIME
FOR THE THINGS
IN LIFE THAT
MATTER MOST
ATLAS ARTERIA ANNUAL REPORT 2019 | 1
2019 AT A GLANCE
THE YEAR 2019 WAS A YEAR OF SIGNIFICANT ACHIEVEMENT.
2019 highlights
− Successful internalisation of management on 1 April
− Executed a transaction to:
− acquire a further 6.14% interest in APRR, increasing our
total interest to 31.14%; and
− remove Macquarie as manager, resulting in Atlas Arteria
becoming a truly independent toll road owner and operator
− Lodged the SCC rate case for the Dulles Greenway
in December
0.7%
increase in weighted
average traffic
2.5%
increase in weighted
average revenue
3.1%
increase in weighted
average EBITDA
A$67m
saving in management costs
No.1 APRR voted “best employer” five years in a row
2 | ATLAS ARTERIA ANNUAL REPORT 2019
CHAIRPERSONS’ REVIEW
Dear shareholder
At the time of writing this report, the world is undergoing
substantial disruption as a result of the COVID-19 pandemic.
While as a business we are not impervious to the impacts of
this crisis, we believe that our achievements during 2019 have
positioned Atlas Arteria well to face the challenges of the coming
months and to stay focused on our key strategic priorities.
To recap on 2019, we seamlessly achieved the full internalisation
of management at Atlas Arteria, first at a corporate level and,
more recently, by taking over from Macquarie as manager
of our interest in APRR and ADELAC. The APRR transaction,
which completed early in 2020, also increased our ownership
to 31.14% of APRR and 31.17% of ADELAC. At the same time,
we continued our focus on sound, active day-to-day operational
management, which delivered a strong financial performance
for the year.
Delivery of internalisation
Our CEO and Managing Director, Graeme Bevans, an
international infrastructure specialist with a strong track record
in managing complex businesses, has established a team of
highly experienced executives who are all driven to successfully
develop the business in a sustainable way. They bring a diverse
and complementary set of operational and financial capabilities
and are strongly aligned to the interests of shareholders.
The internalisation of management has lowered our cost
base, successfully delivering A$67 million of management
cost savings in 2019 compared to the previous year. It allows
us to have more control as a strategic owner and operator of
our businesses, provides greater transparency and alignment
of the management team to shareholders and broadens the
appeal of Atlas Arteria to a wider range of investors.
The APRR transaction, which was completed at the beginning
of March 2020, now gives us direct influence over the
operational management and the future of APRR and ADELAC.
The transaction was also immediately cash flow and value
accretive for shareholders.
Distribution growth and outlook
Our strong operating and financial performance was reflected
in continued growth in distributions to shareholders. In 2019,
Atlas Arteria paid a total distribution of 30 cents per security
(cps), compared with 24 cps in 2018.
As announced on 23 March 2020, the COVID-19 pandemic is
impacting traffic due to lockdowns. We remain in a strong
position, but given the uncertainty, the Atlas Arteria Boards
resolved to defer any announcement of a distribution reflecting
the performance in the second half of 2019, and to suspend the
guidance for any distribution reflecting the performance of the
first half of 2020.
Depending on the duration of the lockdowns, stay-at-home
and reduced public gathering orders across Europe, the Boards
will consider using the funds that would have been distributed
to shareholders, to either repay debt or alternatively to pay
the second half 2019 distribution at a later time in 2020. We
wish to reiterate that Atlas Arteria remains in a strong position
with significant cash on hand following receipt of a second
half 2019 dividend from APRR and funds remaining from the
recent capital raising for the APRR transaction. Our underlying
businesses also hold strong liquidity positions to support them
through the coming months. This is a time to be prudent and
we remain focused on the continued development of a strong
and sustainable business with an appropriate capital structure
that brings long-term value to shareholders.
Culture and values driving good governance
Atlas Arteria’s values of safety, transparency, engagement,
environmental responsibility and respect are more important
than ever during the COVID-19 pandemic.
Similarly, we are committed to ensuring that Atlas Arteria is
led by diverse, appropriately qualified people who, as a group,
balance an in-depth understanding of our businesses with
fresh and innovative thinking. This approach applies to our
management teams and Boards.
To this end, we continued our process of Board renewal, with
Christopher Leslie resigning in 2019 from the Atlas Arteria
International Limited (ATLIX) Board and Ms Fiona Beck
appointed as a Non-Executive Director on 13 September 2019.
Fiona brings a breadth of business experience and strong
understanding of governance and audit practices. Fiona is
also a member of the ATLIX Audit & Risk Committee, People
& Remuneration Committee and Nomination & Governance
Committee. We will continue with renewal of the ATLIX Board
in the year ahead.
Graeme Bevans was also appointed to the Atlas Arteria Limited
(ATLAX) Board on 1 April 2019 as an Executive Director, after
assuming the role of CEO and Managing Director of Atlas Arteria.
ATLAS ARTERIA ANNUAL REPORT 2019 | 3
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE CHAIRPERSONS’ REVIEW
New sustainability framework
We are committed to understanding how sustainability
challenges may impact our operations and portfolio. In 2019,
with the new management team in place, we undertook an
assessment to understand the crucial sustainability issues
for Atlas Arteria, incorporating views from a broad range of
stakeholders. As a result, we launched our Sustainability
Framework and Strategy with four clear priorities around:
safety; customers and community; our people; and
environmental stewardship.
These were identified through a process involving external
advisers, and through extensive consultation with stakeholders
under leadership from the Atlas Arteria Boards. This framework
will be enabled through good business fundamentals and
represents the start of our journey to embed these priorities
operationally and in all our decision making. Our Sustainability
Report can be found on page 18 of this report.
A strong strategic focus
Our strategic framework is clear. We continue to streamline
the existing portfolio and current structure, we have adopted
a disciplined capital management approach to build sustainable
distributions, and we undertake active operational management.
We will seek to lengthen our weighted average concession life
and diversify and manage risk.
The establishment of our new corporate team, and managing
the seamless transfer of management, was a key foundational
step. Increasing Atlas Arteria’s interest in APRR with direct
oversight and influence over our key asset was a further
significant milestone.
The reality is that COVID-19 will continue to disrupt our
operations during 2020 but we believe Atlas Arteria has a
sound balance sheet enabling it to withstand the months ahead
and a management team with the capability, cohesiveness and
leadership skills to deliver on our strategy.
Thank you for your continued support of Atlas Arteria.
Dr Nora Scheinkestel
Chairman
Atlas Arteria Limited
Jeffrey Conyers
Chairman
Atlas Arteria International Limited
4 | ATLAS ARTERIA ANNUAL REPORT 2019
AREA
Aerial views of the Moirans broadcaster n ° 11 from the A48
and put into service on Friday, September 26, 2014
FROM THE CEO AND
MANAGING DIRECTOR
Dear shareholder
What a significant year of achievement 2019 was for Atlas Arteria.
Full internalisation of our management team and completion
of the transaction to acquire a further indirect interest in APRR
and ADELAC has created significant value for shareholders.
We achieved this against the backdrop of strong financial
results and a 32% total shareholder return for the year.
To achieve internalisation, we had to build the right team.
Following the appointment of our senior executives in 2018,
we worked hard in 2019 to build the broader team, ensuring
we had the right skills, capabilities and mindsets to set us
up for sustained success.
Of course, right now, the world faces unprecedented and
uncertain times in the midst of the COVID-19 pandemic.
While at the time of publication our business has seen
significant loss of traffic as a result of the crisis, we remain
confident that our successes over 2019 have positioned us
well to face the challenges of the coming months. In particular,
the refinancing of the Eiffarie debt has placed us in a stronger
financial position, and our newly established independence has
given us more operational influence, which is important in the
context of this current crisis.
A transformational year: from investor to independent
owner and operator
Along with the A$67 million management cost saving in 2019,
internalisation of management allows us to be the masters
of our own destiny when it comes to positioning the business
for long-term, sustainable growth.
The APRR transaction finalises the removal of Macquarie as
a manager from the Atlas Arteria business, establishing us
as a fully independent group able to actively and responsibly
manage our businesses. It also allows us to have better visibility
and alignment of interests with our partner Eiffage, which will
positively impact operational performance and growth.
Performance highlights for 2019
Operationally, our business continued to perform well during
2019. Our overall weighted average group traffic was up
0.7%, with revenue up by 2.5%. We reported weighted average
proportionate earnings before interest, taxation, depreciation
and amortisation (EBITDA) of A$923 million, up 3.1%.
On a normalised basis, we saw net profit after tax (NPAT)
of A$178.2 million, up 9% from 2018; a strong result.
APRR & ADELAC
APRR contributed nearly 86% of our proportional revenue and
its strong performance continues to underpin our cashflows.
APRR revenue increased by 2.9% on the back of increases in
traffic and tolls and a continued focus on operating efficiencies
saw a 3.6% increase in EBITDA and 5.5% increase in NPAT.
The APRR network continued to benefit from strong underlying
fundamentals driven by French household income and French
manufacturing growth trends. Light vehicle traffic grew at just
over 1%, which was a positive result given the very strong 2018
traffic performance influenced by train strikes early in the year.
Heavy vehicle traffic continued to grow through 2019, in line
with historic trends.
In addition, APRR continued to manage a strong balance
sheet in 2019. Since year end APRR has repaid over €1 billion
of debt and successfully raised another €1 billion under its
Euro medium-term note program. In addition, in February,
APRR refinanced its lines of credit such that it now also has
an additional €2.0 billion committed undrawn line of credit.
After completion of its most recent bond issue, APRR will have
around €3.2 billion in liquidity against €1 billion of outstanding
debt. At Eiffarie, the holding company for APRR, there is no
amortisation on a new five-year debt facility until 2023 which
increases free cash flows for Atlas Arteria.
ATLAS ARTERIA ANNUAL REPORT 2019 | 5
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE FROM THE CEO AND
MANAGING DIRECTOR
Dulles Greenway
Overall traffic was down 2.9%, with revenue down 1.2%.
A number of factors led to this. Substantial price rises on the
Dulles Toll Road (DTR) on 1 January 2019 contributed to lower
traffic on the combined Greenway/DTR corridor throughout
2019. Upgrades to the DTR main toll plaza in the third quarter
of 2019 also resulted in major disruptions to the Greenway/
DTR corridor and increased travel times. The removal of traffic
lights on competing Route 7 at the start of October 2019 also
impacted traffic.
Warnow Tunnel
The Warnow Tunnel continued its strong traffic growth during
2019, delivering 4.6% growth due, in part, to the continued
roadworks on competing routes during the year. Revenue
increased by 8.8% with an increase of 6.7% in EBITDA and
€1.5 million increase in NPAT.
Building a sustainable business
Our focus is on creating long-term value for all of our
stakeholders: from shareholders through to our customers,
employees and communities. Our Sustainability Framework
and Strategy ensures that responsible and sustainable
business practices are embedded in our day-to-day operations.
Safety is central to everything we do. We work hard to manage
and maintain our networks so our customers can travel
safely and with confidence. Our lost time injury frequency
rate (LTIFR) for APRR was 4.6, down on the previous year.
Dulles Greenway had no injuries while Warnow had one injury,
up from zero in 2018.
I am saddened to report that a contractor died working on an
APRR motorway widening project in France during the year.
The worker was employed by a sub-contractor, and as such
was under the control and responsibility of that business.
However, we take any incident on our roads very seriously
and were proactive in working to understand the cause of
the incident, identify learnings and share them to help reduce
the potential for similar events recurring.
A commitment to the environment and care for our communities
is one of our core values. Reducing greenhouse gas emissions
and protecting the natural environment are a particular focus
for us. During 2019, APRR added 16 high power charging
stations for electric vehicles and at year end had 4,135
carparks alongside the APRR roads to support carpooling.
APRR also completed the restoration of 2.6 hectares of
wetlands, plantations and woodlands and continued work
on 19 wildlife crossings across the network.
At Dulles Greenway, the 2019 Charity Drive Day raised almost
US$327,000 to benefit local charities and student scholarships,
bringing the total raised over the last 14 years to more than
US$3.7 million. We will continue to prioritise developing close
relationships with our communities and our partners.
Our response to the COVID-19 pandemic
Our operational response to the COVID-19 crisis has been swift.
Each business has been working with key stakeholders to
ensure we are continuing to offer our services in the safest
way possible for our people, our customers and the community.
Whenever possible, staff are working remotely limiting their
risk of exposure. Where operationally we are required to have
interaction with the public or fellow team members, we have
created autonomous teams within each of our businesses
to ensure we maintain operational viability should a member
of a team contract COVID-19. In addition, we are endeavouring
to maintain distance and are focused on observing appropriate
hygiene practices.
The APRR network is a fundamental and essential part of the
logistics network in France and remains open to support all
essential traffic movements during this difficult time. As an
important part of the community, APRR continues to work with
government stakeholders and is a part of the national effort
to support the healthcare system. As part of this effort, at the
end of March 2020, APRR donated 25,000 masks to hospitals,
public authorities and regional health agencies and displays
messages of support across the network.
While our businesses have seen significant loss of traffic
as a result of the crisis, with continued prudent financial
and operational management, we remain well positioned
to continue delivering on our priorities.
6 | ATLAS ARTERIA ANNUAL REPORT 2019
Looking forward
While the immediate focus in 2020 will be on safely maintaining
our operations through the COVID-19 crisis, delivering against
our strategy will remain a priority.
We will also continue to explore and take advantage of
opportunities within our existing networks to increase growth.
For example, in APRR, RCEA is a project that is expected
to deliver free flow tolling and will set the stage for future
improvements across the network. At Dulles Greenway,
projects to ease congestion are ongoing and, in December
2019, we lodged the rate case with the Virginia State
Corporation Commission (SCC) which will determine the toll
increases over the next five years. We are also working on
a long-term strategy to increase the value of the business,
reduce risk and improve cash flows.
Our approach to investment opportunities, and the criteria
we use to assess them, has not changed. This rigorous
and disciplined approach ensures that we are looking after
shareholders and creating long-term value. We have recruited
a well credentialed team with strong experience in considering
the merits of opportunities, be it traffic forecasting, operations
and maintenance, or finance.
Our people are the key to unlocking further value and delivering
on our strategic priorities. I am incredibly proud of the team we
have built, and of what our people have accomplished this year.
Their talent, commitment and capability are the reason for our
standout achievements in 2019 and will serve us well as we
face the challenges of 2020.
I feel privileged to lead this team as we work together to
continue to create value for our shareholders and communities.
Graeme Bevans
CEO and Managing Director
Atlas Arteria
Key Management Personnel
Graeme Bevans
CEO and Managing Director
A CEO and Managing Director with deep
experience in complex infrastructure
investments in Australia, Europe and North
America. Passionate about driving the
strategic direction and culture of Atlas Arteria
to ensure a strong, successful and sustainable
business now and for the long term.
Nadine Lennie
Chief Financial Officer
An experienced CFO with a strong track
record in disciplined infrastructure
investment, strategic financial management
and risk. Passionate about making strategic
and financial decisions that add value for
customers and shareholders.
Vincent Portal-Barrault
Chief Operating Officer
A COO with extensive experience in
operational monitoring and the improvement
of infrastructure businesses. Passionate
about improving the customer experience
on Atlas Arteria’s roads and giving people
more time for what’s important to them.
Clayton McCormack
General Counsel and Company Secretary
A highly experienced lawyer and company
secretary with strong transactional, legal
governance and risk advisory experience.
Passionate about embedding a governance
framework and culture that sustains Atlas
Arteria now and into the future.
Nadine Lennie
Chief Financial Officer
Vincent Portal-Barrault
Chief Operating Officer
Clayton McCormack
General Counsel & Company Secretary
ATLAS ARTERIA ANNUAL REPORT 2019 | 7
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE THE ATLAS ARTERIA BUSINESS
Virginia, United States
Dulles Greenway
France
APRR / ADELAC
Rostock, Germany
Warnow Tunnel
ATLAS ARTERIA PORTFOLIO
APRR
31.14%1
ADELAC
31.17%1
Dulles Greenway
100%3
Warnow Tunnel
100%
2,318km motorway
network in Eastern
France
20km commuter road
connecting Annecy to
Geneva
22km commuter
route into the greater
Washington DC area
2.1km road and tunnel
in Rostock, Germany
2035 concession expiry2
2060 concession expiry
2056 concession expiry
2053 concession expiry
1 On 2 March 2020, Atlas Arteria completed a transaction to acquire an additional 6.14% in APRR and ADELAC, increasing our interest from 25.00% in APRR
to 31.14% and from 25.03% in ADELAC to 31.17%.
2 APRR concession expires in November 2035, AREA concession expires in September 2036.
3 100% economic ownership.
8 | ATLAS ARTERIA ANNUAL REPORT 2019
VISION AND VALUES
WHO WE ARE AND WHAT WE DO
We are Atlas Arteria. We are a global owner, operator and
developer of toll roads.
OUR VALUES
Our values guide the decisions we make and the way we
behave as we work together towards our vision.
We work to create long-term value for our investors through
considered and disciplined management and sustainable
business practices.
In living our values, we can create strong growth for
shareholders and better outcomes for our customers,
our communities and our people.
To us, great performance is as much about the way we
get there as it is about the result. That’s why our people’s
success is evaluated against our five values, along with their
role responsibilities.
OUR VISION
To provide the communities in which we operate with high
quality, well maintained infrastructure and associated
amenities that:
− enhance safety;
− provide economic benefits through reduced travel time
and greater time certainty;
− improve environmental outcomes through reduced fuel
consumption and carbon emissions; and
− provide a positive customer experience.
When we are steered by these values, we are acting in the best interests of one another, our shareholders,
our customers and our communities. In this way, together, we’re driving better outcomes.
OUR GUIDING VALUES
SAFETY IS AT
OUR HEART
We are always focused on delivering safe outcomes for our employees,
contractors, customers and visitors to our offices and roads; because
nothing is so important that we cannot take the time to do it safely.
TRANSPARENCY
IN ALL WE DO
We are honest about what we do and how we do it. We are accountable
for our actions. If we make a mistake, we will be open about it, learn
and improve from it.
ENGAGE FOR
BETTER OUTCOMES
We engage with one another and our stakeholders with a spirit of curiosity
and with a learning mindset. We seek to understand people’s needs so we
can deliver better outcomes. We are open and adaptable to change and
committed to continuous improvement.
ENVIRONMENTALLY
AND SOCIALLY
RESPONSIBLE
We care for our communities and the environment. We are committed to
enhancing our communities and are proactive in reducing environmental
impacts by embedding responsible and sustainable business practices.
RESPECT IN EVERY
INTERACTION
We are respectful of everyone in every situation. We celebrate diversity.
We know that a culture of inclusion and diversity breeds success. We
respect the rules and the spirit of the law and will always act ethically,
lawfully and responsibly.
ATLAS ARTERIA ANNUAL REPORT 2019 | 9
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE Adele and her family are
returning home to Paris
from visiting her parents
who live in Lyon. Adele
and her husband have
tickets to a soccer match.
They pay € 35.40 to use
the APRR network, saving
them around two hours of
travel time.* This allows
time for the family to have
lunch with Adele’s parents
in Lyon, before getting
back to Paris in time
to enjoy the game.
APRR AND
ADELAC
FRANCE
APRR IS A 2,318 KILOMETRE
MOTORWAY NETWORK
IN THE SOUTH-EAST OF
FRANCE, INCLUDING
ADELAC’S 20 KILOMETRES.
IT IS THE SECOND-LARGEST
MOTORWAY NETWORK IN
FRANCE AND THE FOURTH
LARGEST IN EUROPE.
10 | ATLAS ARTERIA ANNUAL REPORT 2019
Paris
Orléans
Troyes
Toul
Stuttgart
Germany
Mulhouse
Cosne-Cours-sur-Loire
Dijon
Bourges
France
Besançon
Zurich
Switzerland
Vichy
Geneva
Clermont-Ferrand
Lyon
Chambéry
Grenoble
Italy
Milan
Bordeaux
Valence
APRR
AREA/ADELAC
The APRR business owns two
separate concessions, the
APRR Concession and the AREA
Concession. It also owns a minority
interest in the ADELAC Concession.
It is a vital transportation corridor
for major Western European and
intra-France trade and tourism,
and provides essential connectivity
between Paris and Lyon, France’s
two largest metropolitan areas.
Atlas Arteria interest**
in APRR and
31.14%
31.17%
in ADLEAC
Concession term
30 November 2035
APPR:
30 September 2036
AREA:
ADELAC: 31 December 2060
APRR (including AREA)
up 1.1% on pcp
Traffic:
Revenue: up 2.9% on pcp
EBITDA: up 3.6% on pcp
ADELAC
Traffic:
Revenue: up 1.3% on pcp
EBITDA: up 1.8% on pcp
down 0.5% on pcp
The year that was
It was another strong year for APRR,
with traffic up by 1.1%, revenue
up by 2.9% and EBITDA up 3.6%.
This was a good result, particularly
given the unusually strong 2018 traffic
that benefitted from a better than usual
European ski season as well as rail and
air strikes. The revenue growth was
driven by traffic growth as well as toll
increases (1.81% for APRR and 2.01%
for AREA).
APRR provides customers with an
efficient, safe and cost effective road
network. Over 2019, we continued to
focus on initiatives that will increase
customer satisfaction, including:
− improved communication with
530 variable message signs
at key locations;
− an increase in the number of electric
charging stations to 152 across
52 locations;
− wi-fi availability at 85% of rest
stops; and
− the provision of 4,135 carpool parking
spots to help our customers lower
their overall environmental impact.
An overall focus on efficiency also
continues to reduce congestion
and improve customer satisfaction.
Increased automation of toll collection
and increased numbers of customers
using electronic toll tags are examples
of these initiatives.
We also continue to invest in capital
projects to grow the APRR footprint
and improve the customer experience.
In 2019, €522 million was spent
on capital projects compared with
€471 million in 2018. This includes
the execution of investments from
the current plans agreed with the
French State, which are the 2014-2018
management contract, the 2015
Stimulus package and 2018 New
Motorway investment plan. The 2015
Stimulus provided concession extensions
by two years and one month for APRR
and three years and nine months for
AREA. The other two programs were
compensated via tariff increases.
Projects completed in 2019, include:
− the Mâcon-Sud intersection project,
connecting the A6 (APRR) to the A406
West (eastern continuation of RCEA)
in the south-west of the city of Macon
in the Burgundy region of France;
− the Sevenans intersection, which
connects the A36 (APRR) with two
major adjacent public roads in the
south of Belfort city (Bourgogne-
Franche-Comté region); and
− the widening on A6 near Auxerre,
which involved adding a third lane
in the southbound direction on the
A6 for 12 kilometres around the
city of Auxerre.
We are also pleased to report that APRR
has been ranked the Best Employer
in the Transport and Logistics sector
for the fifth year in a row in France,
by Capital Magazine.
* References to all time savings in this document have been sourced from calculations derived from
Google Maps.
** On 2 March 2020, Atlas Arteria completed a transaction to acquire an additional 6.14% in APRR and
ADELAC, increasing our interest from 25.00% in APRR to 31.14% and from 25.03% in ADELAC to 31.17%.
ATLAS ARTERIA ANNUAL REPORT 2019 | 11
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APRR AND
ADELAC
FRANCE
Adding future value
Our initiatives
− The RCEA project, for which APRR
submitted a joint proposal with
Eiffage, will be the first free flowing
toll concession in France and will
raise the bar for customer experience
improvements across the APRR
network and beyond. The RCEA project
will take around two-and-a-half years
to complete.
− APRR also has a number of other
projects due for completion over the
coming years, with the road widening
between Clermont-Ferrand to Le Crest
expected for completion in mid 2021.
The creation of the A71 Montmarault
intersection is also expected to be
completed in the second half of 2021.
These initiatives will further enhance
the overall customer experience across
the APRR network.
− Various capital expenditure activities
are underway within the APRR and
ADELAC network, as part of the
government’s Motorway Investment
Plan, including interchange development,
wildlife passages, water treatment
and protection and parking lots
for carpooling. The plan includes
€187 million of investments by APRR,
of which around 10% will be financed
by local authorities. APRR’s capital
expenditure is being offset by agreed
additional toll increases for APRR
and AREA between 2019 and 2021.
− We continue our ongoing dialogue
with the French State to improve
the network and achieve their road
development objectives. We see many
opportunities to continue to expand the
APRR network and provide solutions
to the French Government at both the
national and regional level.
Macroeconomic environment
APRR closely reflects underlying
economic fundamentals with light
vehicle traffic driven by French
household income and heavy vehicle
traffic correlated to French
manufacturing growth trends.
12 | ATLAS ARTERIA ANNUAL REPORT 2019
Josephine and her young
family live in Annecy,
France. Josephine works
in Geneva. On her work
days, she drops off her
son to pre-school and her
husband at his office
before heading to work
herself. She uses the
ADELAC network to travel,
saving her around
18 minutes at a cost of
€8.40. This gives her
valuable time to manage
her family drop-offs and
pick-ups and ensures
she still makes it to
work on time.
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ATLAS ARTERIA ANNUAL REPORT 2019 | 13
Ann lives in Leesburg
and works in Reston.
Her daughter Charlotte
attends day care near
home. She needs to
be collected every day
by 6.00pm. Ann pays
US$5.80 to use the Dulles
Greenway, saving around
10 minutes every day.
Ann feels relieved that she
avoids a US$30 day care
late fee and happy to get
Charlotte home in time
for dinner and more
bedtime cuddles.
DULLES
GREENWAY
VIRGINIA,
USA
THE DULLES GREENWAY IS A
22 KILOMETRE TOLL ROAD IN
LOUDOUN COUNTY, VIRGINIA
IN THE USA. IT OFFERS
CUSTOMERS A COST-
EFFECTIVE WAY TO TRAVEL
BETWEEN NORTHERN
VIRGINIA AND THE GREATER
WASHINGTON AREA.
14 | ATLAS ARTERIA ANNUAL REPORT 2019
Leesburg
Dulles
Greenway
Loudoun
County
Dulles
International
Airport
Rockville
Bethesda
Maryland
Silver
Spring
Tysons Corner
Falls
Church
Washington DC
Arlington
Reagan
National
Airport
Fairfax
Virginia
The Dulles Greenway is located
in one of the fastest growing and
more affluent counties in the
United States, providing customers
with access to connector roads
and Washington DC.
Atlas Arteria economic interest
100%
Certificate of Authority
expiry: 2056
Traffic:
down 2.9% on pcp
Revenue: down 1.2% on pcp
EBITDA: down 0.8% on pcp
Population and economic
growth potential
We are positioning our operations
to take advantage of predicted
residential and economic growth
in the Loudoun County area.
Low, medium and high-density
developments are planned along
the corridor. These residential,
commercial and retail developments
present good growth opportunities
for the Dulles Greenway in the
medium to long term.
The year that was
It was another challenging year for the
Dulles Greenway, however we remain
committed to establishing the Dulles
Greenway as a valued and integral part
of the road network in Virginia.
The downturn in overall traffic of 2.9%
was driven by price rises on the Dulles
Toll Road (DTR) and surrounding road
network improvements during the
year. This downturn in traffic translated
to a 1.2% reduction in revenue and a
0.8% reduction in EBITDA. The impact
of reduced traffic was offset by toll
growth and cost management initiatives
throughout the year.
We expect to see the following factors
continue to influence traffic in the
coming years:
− we are working towards completion of
congestion easing projects at both the
east and west ends of the road;
− the realisation of population and
economic growth in the area as a
result of Loudoun County’s pro-growth
economic development strategy;
− network impacts associated with
upgrades to the free road alternatives
which saw a set of traffic lights
removed in 2019, with two more sets to
be removed in the coming years on a
section of Route 7 that competes with
the Dulles Greenway.
Adding future value
We are committed to fully optimising the
value of the Dulles Greenway business. In
2020 and beyond, we will work closely with
our communities and key stakeholders
to ensure we are meeting their needs
and delivering on their objectives.
Projects to ease congestion are ongoing
and the SCC rate case for a potential toll
increase is in progress. We are working
on a long-term strategy to increase the
value of the business, reduce risk and
improve cash flows.
Our initiatives
− New leadership skills to deliver our
plans, including the appointment of
a new Board member, Pierce Homer
(former Secretary of Transport
in Virginia) in mid 2019 and the
appointment of a new CEO is
expected in 2020.
− The Dulles Toll Road Connector project
(at the eastern end of the Dulles
Greenway) will address morning peak
congestion at the DTR merge. Phase
one was completed in late 2019 and the
second phase has started, with expected
completion in second half 2020.
− We have started two projects at the
western end of the Dulles Greenway
to alleviate afternoon congestion at the
merge onto the Leesburg Bypass. The
first project is reconfiguring the Dulles
Greenway off-ramp and the second
is widening the Leesburg Bypass.
− Technological improvements creating
network efficiencies, including new
violation cameras, receipt printers,
new transformers and an upgrade
of power supplies.
− A new contract with the Virginia State
Police, which took effect in 2019, will
result in greater cost savings, while
still maintaining appropriate trooper
coverage during peak periods.
− Changes to the existing toll setting
administration will start from January
2020. We lodged our rate case with the
SCC in December 2019, seeking peak
toll increases of 6-7% per annum and
off-peak increases of 5-6% per annum.
We anticipate an outcome towards the
end of 2020.
ATLAS ARTERIA ANNUAL REPORT 2019 | 15
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Oskar lives in Rostock.
He visits his customers
every day on the other
side of the Warnow River.
He chooses to take the
Warnow Tunnel at a cost
of € 4.20. This saves him
around 16 minutes each
way. That gives him an
extra half-an-hour a day
to catch up with friends
or go for a run along
the river.
WARNOW
TUNNEL
ROSTOCK,
GERMANY
THE WARNOW TUNNEL IS
A 2.1 KILOMETRE TOLL ROAD,
INCLUDING A 0.8 KILOMETRE
TUNNEL UNDER THE
WARNOW RIVER. IT OFFERS
CUSTOMERS A RELIABLE,
COST-EFFECTIVE WAY TO
TRAVEL ACROSS THE RIVER.
16 | ATLAS ARTERIA ANNUAL REPORT 2019
Warnemünde
Warnow Tunnel
Rostock
Hamburg
Berlin
The Warnow Tunnel is located
in Rostock in North Eastern
Germany. The Port of Rostock
is the fourth largest port in
Germany. The Warnow Tunnel
offers an alternative to catching
the ferry across the river, or
using 19km of untolled roads
through the shopping precinct of
Rostock which often suffers from
congestion during peak periods.
Atlas Arteria interest
100%
Concession expiry: 2053
Traffic:
up 4.6% on pcp
Revenue: up 8.8% on pcp
EBITDA: up 6.7% on pcp
The year that was
This smaller business in our portfolio
is performing well. The Warnow Tunnel
continued to enjoy another strong year
of traffic growth, with traffic up 4.6%.
This resulted in an increase in revenue
of 8.8% which translated to an increase
in EBITDA of 6.7%.
This strong traffic growth is the result
of roadworks taking place on competing
roads over the course of the year. Once
roadworks are complete, we expect
longer-term traffic growth may reduce.
During 2019, the toll plaza was
completely refurbished with LED
lights. Along with other factors, this
has lowered total energy usage of the
Warnow Tunnel by 3.8%.
Also in 2019, 3.7 million trips were
completed using automated/non-cash
tolling (RFID/Tags and SmartCards),
accounting for 75.5% of all trips.
This is 6.0% higher than 2018.
Adding future value
− Ensuring the safety of our employees,
contractors and customers is
paramount to us. That’s why we’re
implementing further initiatives in 2020
to promote safe driver behaviour at the
Warnow Tunnel toll plaza.
− We are standardising near-miss
reporting to help identify and mitigate
risks. This was rolled out on the
Dulles Greenway in 2019 and will
be introduced to the Warnow Tunnel
in 2020.
− The Warnow Tunnel also supports
social and cultural activities around
Rostock, including German language
training for refugees and a holiday
camp for socially disadvantaged
students. It is also a sponsor of
the Rostock Zoo. Supporting social
programs is an important driver of
community support for the business.
Macroeconomic environment
Rostock is an important port city
in Germany. It has benefitted
from an overall growth in exports,
population, tourism and a stronger
economy since the Warnow Tunnel
opened in 2003.
The unemployment rate in Rostock
has continued to improve over the
last decade.
Germany has seen a continued
economic recovery since 2013,
with 2.0% average annual GDP
growth between 2014-2019.*
* Statistisches Bundesamt, January 2019.
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ATLAS ARTERIA ANNUAL REPORT 2019 | 17
SUSTAINABILITY
AT ATLAS ARTERIA, WE FOCUS ON CREATING
LONG-TERM VALUE FOR OUR STAKEHOLDERS,
FROM INVESTORS AND CUSTOMERS TO
EMPLOYEES AND COMMUNITIES. AS AN INTEGRAL
PART OF THIS, WE EMBED RESPONSIBLE AND
SUSTAINABLE BUSINESS PRACTICES.
Our Sustainability Framework
SUSTAINABILITY PRIORITIES
SAFETY
Whether working or
travelling with us, safety
is our primary focus.
CUSTOMERS
AND COMMUNITY
We connect people and
communities through
safer and faster
transport options
that make life easier.
OUR
PEOPLE
We foster an engaged,
collaborative and
diverse workforce,
and together deliver
business success.
GOVERNANCE
We are accountable and
transparent in all our
business dealings.
BUSINESS FUNDAMENTALS
ETHICS, VALUES
AND CULTURE
We act ethically and
promote a culture
founded on our five values:
Safety, Transparency,
Engagement,
Environment, Respect.
SUSTAINABLE
GROWTH
We focus on growing
our business and
returns for the long
term while delivering
positive social benefit.
ENVIRONMENTAL
STEWARDSHIP
We actively manage
our impact on the
environment and
provide solutions that
enable customers to
minimise their footprint.
INNOVATION
AND TECHNOLOGY
We monitor innovations
and technology and
proactively respond
to changing needs
and expectations.
Implemented through policies and programs. Will be monitored through KPIs and targets.
18 | ATLAS ARTERIA ANNUAL REPORT 2019
Our approach to sustainability
The global understanding of sustainability and the growing
challenges around sustainability are changing at an
unprecedented rate. Disruptive forces such as the threat of
climate change are reshaping every industry. At the same time,
we recognise that there are rising stakeholder expectations for
businesses to play a positive role, reduce negative impacts and
create value for society.
As a global infrastructure developer, owner and operator,
we manage our business for the long term. Understanding
how sustainability challenges may impact our operations
and portfolio is important in order for us to build a resilient
strategy. It also means understanding the changing needs
and expectations of our stakeholders, to stay responsive and
relevant to these.
With the new management team in place, this year we
undertook an assessment to understand the issues important
to our stakeholders (see ‘Determining materiality’ section
below for more information). As a result, we have developed
a new Sustainability Framework to focus and guide our efforts
in order to create lasting value and sustainable returns for
our investors.
Our Sustainability Framework has been refocused into four
priority areas that inform our strategy and approach: safety;
customers and community; our people; and the environment.
These represent the most significant environmental, social
and governance (ESG) risks and opportunities now facing our
business, as well as the topics of greatest importance to our
stakeholders. Focusing on these priority areas supports us
in securing a growing and resilient business.
The priorities are underpinned by a set of four business
fundamentals that enable us to fulfil our future growth
potential. These are: good governance; an ethical culture;
an emphasis on sustainable growth; and keeping abreast
of technology and other innovations.
We expand upon each of our sustainability priority areas in this
report, identifying issues faced, our actions to address them
and our commitments into the future. We will continually look
for opportunities to improve, as we move forward.
Determining materiality
Stakeholder views formed an important part of the development
of our Sustainability Framework. We appointed an independent,
external advisor to undertake a materiality assessment,
identifying the sustainability issues facing our business that are
most important to our stakeholders. They spoke directly with
investors, business partners, suppliers and employees through
a series of surveys, interviews and roundtables.
An ESG workshop was held for the Atlas Arteria Boards and
senior leadership team to review the insights gained and identify
those areas imperative to sustainable business success. From
this, our Sustainability Framework was established.
We have clear structures in place for the management and
oversight of sustainability. Our governance approach and
supporting policies drive integration through the business,
and clear dialogue with stakeholders enables us to understand
and address changing expectations.
Sustainability governance
Sustainability at Atlas Arteria is overseen by our Boards. Our
Sustainability Framework has been recently defined and we are
developing a set of KPIs and targets to underpin the framework
and help focus our actions. Performance is regularly monitored
by the senior leadership team.
Each of our portfolio businesses is responsible for adopting and
maintaining its own environmental and social risk management
framework appropriate to the country in which it operates.
Our ability to control or influence the ongoing management
of these issues differs for each business.
At APRR (including ADELAC), Atlas Arteria has a non-
controlling interest and accordingly we appoint Board
representatives to promote and support the implementation
of good practices, to the extent that they are able to, under the
co-ownership arrangements.
For Dulles Greenway and Warnow Tunnel, where Atlas
Arteria holds a 100% economic interest, we work with the
management of the companies to ensure that policies and
procedures are in line with our standards and expectations.
The ESG performance of each business is reported to the
Atlas Arteria Boards regularly. Major safety incidents are
reportable as soon as possible after occurrence, and other
major environmental and social incidents are reportable
within 48 hours.
New investments
Atlas Arteria aims to invest in businesses that regard
environmental and social issues as a high priority, or in
businesses where there is capability to create a strong
environmental and social focus.
Accordingly, all potential investments are screened for
environmental and social risks, including safety and climate
change, before presentation to the Atlas Arteria Boards for
consideration.
Sustainability policies
With the establishment of the new management team, we
have developed a suite of corporate policies that set out our
expectations for responsible business. Our ESG risks are
managed through our risk management framework, with
supporting policies covering: anti-bribery and corruption, risk
management, workplace health and safety, environmental and
social responsibility, diversity and employee conduct.
These policies are available on the Atlas Arteria website at
https://www.atlasarteria.com/sustainability/framework-
policies-stakeholders?scroll=policy.
We have trained both the head office team and management
at our wholly-owned businesses on the policies and copies are
available to all staff.
Stakeholder engagement
We are open and transparent about how we do business. Clear
dialogue with our stakeholders is important to building strong
relationships, maintaining trust and enhancing our business
performance for the long term.
Our key stakeholders include our co-investors, portfolio
company employees, governments and regulators, suppliers,
securityholders and the wider communities in which we operate.
ATLAS ARTERIA ANNUAL REPORT 2019 | 19
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE OUR SUSTAINABILITY PRIORITIES
SAFETY
Safety on our motorway networks is our top priority. We seek to ensure that all people who work for us and
use our roads return home safely.
− 11.5% reduction in APRR’s lost time injury frequency rate compared to 2018
− Virtual reality experiences at service areas on the APRR network promote customer
Key statistics/
achievements
safety awareness
− No customer injuries at Warnow Tunnel in 2019
− 81% of our people believe we live our safety commitments (source: Employee Engagement
Survey for corporate employees)
Number of lost time injuries
Lost time injury frequency rate
2016
2017
2018
2019
Head office
APRR
Warnow
Dulles Greenway
NA
23
0
0
NA
29
0
1
NA
26
0
0
0
23
1
0
Head office
APRR
Warnow
Dulles Greenway
2016
NA
4.2
0
0
2017
NA
5.7
0
11.3
2018
2019
NA
5.2
0
0
0
4.6
14.9
0
Worker safety
APRR is currently working on increasing worker safety
through technology. It is trialling work boots that vibrate
when the employee comes close to dangerous areas, large
equipment, or when divider cones are hit by traffic. An alarm
is also sent to operational headquarters alerting them to the
danger. The focus of this technology is to increase the safety
of workers next to live traffic or in construction zones.
Safety of our people
The safety of our people and contractors is a top, and enduring
priority for us. We focus on a safety first culture while having
the right equipment and the right training to do the job.
We are standardising reporting across our businesses.
Alongside lost time injury reporting, we are introducing
near-miss reporting to help identify and mitigate risks. Safety
progress and performance is reviewed regularly by the Boards.
Motorway employees undertake regular safety training. This
has included topics such as: implementation of traffic closures,
training for use of equipment/vehicles and occupational safety
training. At Warnow Tunnel alone, employees have undertaken
an average of nine hours’ safety training each over the course
of the year.
In France, SafeStart training has been run for APRR employees
since 2016, offering practical tips to keep workers alert to risks
and reduce injuries resulting from human error.
APRR also introduced safety software, NumA (Numérique
Autoroute or Digital Motorway) Prévention in 2019. Functioning
across platforms (mobile, tablet or PC), the software can
be used to better inform employees of safety hazards
and accidents on motorways. Furthermore, it facilitates
collaboration for safety briefings and inspections.
We pursue opportunities to share learnings. Over 2019, Dulles
Greenway held 504 combined safety meetings with contractors,
reviewing performance, risks and mitigating activities.
APRR hosted a Safety Break day in September 2019 for all
employees, facilitating discussions between employees,
management, and brainstorming on future safety initiatives.
20 | ATLAS ARTERIA ANNUAL REPORT 2019
Promoting safety awareness amongst customers
In the summer of 2019, APRR introduced a virtual reality
experience at a selected service area on the A6. Aimed at
improving road user safety and awareness, the system
simulated a vehicle breakdown, highlighting the necessary
actions to reduce risks when stopping in the emergency lane
on a motorway. It also educated drivers on the risks faced by
motorway staff when responding to incidents.
In addition, APRR periodically hosts events raising
awareness around the most common causes of accidents
and injuries. This includes driver fatigue, incorrectly inflated
tyres, speeding and not wearing a seatbelt.
Fatalities
With sadness, we report that a contractor died working on an
APRR motorway widening project in France during the year.
The worker was employed by a sub-contractor, and as such
was under the control and responsibility of that business.
However, we take any incident on our roads very seriously
and were proactive in working to understand the root cause
and identify learnings to help reduce the potential for similar
events occurring. These details are shared in safety briefings
across our businesses and with our contractors. Through
procurement processes and contractual provisions, we seek
to ensure that our contractors have a safe system of work.
Road user safety
We work hard to ensure the safety of our roads, with immediate
response to dangerous incidents, regular cleaning and
maintenance sweeps, maintaining black roads in winter and
ensuring safe traffic lane closures.
Between 2014 and 2018, Dulles Greenway experienced less
than one tenth the rate of injury occurring on other Virginia
and Loudoun County roads* and in 2019, the accident rate
continues to reduce.
To ensure that we maintain strong oversight of accidents on our
roads, we are introducing reporting on customer accident and
injury rates. This will assist in clearly tracking incidents and
support management improvement.
The management of each business regularly reviews potential
risks, accident causes and locations to identify any areas of
improvement.
Priorities for 2020
− Continue to embed a safety first culture amongst our people
and across our businesses
− Proactively share safety best practices between our businesses
− Implement further initiatives to minimise dangerous driver
behaviour on our roads
− Continue standardisation of safety reporting, including
near-miss reporting, across our businesses
− Implement specialised operational software as appropriate
* On average there were 7.2 accidents with injuries per 100 million vehicle miles travelled (VMT) on the Greenway between 2014 and 2018,
compared with 80 accidents with injuries per 100 million VMT on Loudoun County Roads (WSP 2019). In 2019 the accident rate for Dulles Greenway
was 4.4 accidents with injuries per 100 million VMT.
ATLAS ARTERIA ANNUAL REPORT 2019 | 21
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE OUR SUSTAINABILITY PRIORITIES
CUSTOMERS AND COMMUNITY
Connecting customers and communities is what we do. We are proud that our roads improve safety,
reduce travel times and enhance mobility. Our core business operations help relieve traffic congestion
and have a direct positive economic impact. Our sustainable success relies on us being recognised
as a valuable addition to communities.
Key statistics/
achievements
− 16 very high power electric vehicle charging stations installed. These have capacity to reduce
charging time from 30 minutes to 10 minutes, depending on vehicle charging capability
− Customers can save around two hours of travel time between Paris and Lyon on APRR,
compared to untolled roads
Connected communities
In 2019, customers travelled 24.6 billion kilometres across
APRR alone. We’re proud to help strengthen communities by
providing improved access to jobs, businesses and workplaces,
family and friends and other travel needs. We look to deliver
customer value through faster travel times, safer roads and
environmentally and user-friendly initiatives.
APRR regularly adapts its offering to include more user-
friendly means of transport. These include non-stop
electronic tolling, parking for carpooling, electric vehicle
charging stations, discounted Electronic Toll Collection tags
for carpooling and electric vehicle users, a dedicated radio
station and other safety measures, including APRR’s mobile
safety app, from which you can call emergency services and
be geolocated. Dedicated carpooling lanes are also currently
being implemented.
For added convenience and seamless transport, the electronic
payment tags used on APRR can now be used on all toll roads
in France, Spain, Portugal and Italy. They can also be used
to pay for 450 parking areas in France and 150 parking areas
in Spain and Italy.
Fast charging stations
Barrier-free tolling
In late 2019, 16 very high power electric charging stations
were added to the APRR and AREA network. Powered
entirely by electricity from renewable energy, these can
reduce the charging time of vehicles to about 10 minutes,
compared to 30 minutes on the existing high power
terminals, or nine hours via a home outlet.
With a focus on customer convenience, the stations
promote the flow of vehicles, offer places for waiting
and provide a 24-hour multilingual hotline in case of
problems. From 2020, the website will provide real-time
status of the terminals (occupied/free/out of service)
to enable drivers to plan their next stop.
APRR is France’s first motorway operator to offer such
a dense network of fast charging stations.
22 | ATLAS ARTERIA ANNUAL REPORT 2019
With a commitment to improved mobility, APRR is testing
barrier-free tolling on its network. The free flow system
allows a vehicle to be recognised by its badge or licence
plate, without having to reduce its speed. This streamlines
toll traffic, limits greenhouse gas emissions and improves
the customer experience. The testing is being undertaken
between October 2019 and April 2020 in Dijon Sud and
Fontaine.
Fair pricing and value
Each day, our network provides customers with substantial
savings on their travel time. For example, a trip from Paris
to Lyon on the APRR network can save around two hours
of travel at a cost of €35.40, when compared to the untolled
roads. Dulles Greenway can provide an approximate 10 minute
saving in peak hour at a cost of US$5.80.
These time savings result in an environmental benefit
compared to standard roads, with reduced fuel consumption
and greenhouse gas (GHG) emissions.
We are negotiating a pathway for future toll increases on the
Dulles Greenway. This will enable continued investment in
improvements to reduce congestion and improve travel times
and experience for our customers.
We seek to improve our communications on pricing, providing
clarity to customers on what they pay, options for payment and
the value they receive in return.
Community contributions
We make a positive economic contribution to our communities,
both through our core business operations and voluntary
contributions (see examples listed below).
− In 2019, Dulles Greenway paid US$4.2 million in property
taxes – the second largest property tax payer in the County
− As part of our toll road obligations, free passage is provided
on our roads for specific groups (e.g. for local police,
firefighters, school buses and ambulance services).
Since 2005, Dulles Greenway has accommodated over
two million non-revenue trips, worth over US$10 million
in revenue foregone
− At Warnow Tunnel, over 37,000 non-revenue trips were made
in 2019, equivalent to €184,400
Supporting our communities
Healthy, prosperous communities benefit everyone. That’s
why we are focused on supporting community wellbeing,
above and beyond the provision of infrastructure.
Warnow Tunnel supports social and cultural activities
around Rostock, including German language training for
refugees and a holiday camp for socially disadvantaged
students. It is also a sponsor of the Rostock Zoo.
Dulles Greenway’s annual Drive for Charity Day raised
almost US$327,000 in 2019, benefiting local charities and
student scholarships. Over US$3.7 million has been
distributed in the last 14 years.
In France, APRR renewed its partnership with the Society
for the Protection of Animals with a €40,000 donation.
Employees mentor young people and those looking for jobs
through NGO-associations such as Article 1 and Capital
Filles. APRR also organises the donation of goods, such as
used computers and telephones to community groups and
in 2019 donated a modified van to Athena Animal Rescue,
for the care of wild mammals.
Art on the highway
Road signs pointing out cultural and tourist attractions along
APRR and AREA are undergoing a facelift. Over 600 signs are
gradually being replaced with the new panels designed by
internationally recognised artists including Floc’h, Jacques
de Loustal and Fred van Deelen.
Due to be completed by 2021, the signs help break the
monotony of journeys while highlighting the rich cultural
heritage of the regions.
Priorities for 2020
− Improve customer experience and keep customers better
informed on: pricing; payment options; our business activity;
and the value our motorways provide
− Review Dulles Greenway’s community initiatives to deliver
increased value to the community and the business
− Continue to develop the opportunities to improve
infrastructure and ease of travel
ATLAS ARTERIA ANNUAL REPORT 2019 | 23
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE OUR SUSTAINABILITY PRIORITIES
OUR PEOPLE
Our people are essential to our success. Their hard work over this past year has ensured that we have
successfully transitioned to a fully independent company. We are focused on creating a diverse, engaged
and collaborative workplace that delivers on our business strategy.
− 86% of employees say they are proud to work for Atlas Arteria (source: Employee Engagement
Key statistics/
achievements
Survey of corporate employees)
− Female representation on each of our Boards at 40%
− APRR ranked Best Employer in its sector by Capital Magazine
Listening to our people
During 2019, when most employees in the recently formed
internal management team had been employed for less than
12 months, we launched our inaugural Employee Engagement
and Culture Review Survey to identify our strengths and
opportunities for improvement.
Overall results were strong and the review showed a fast paced
and high achieving team with strong levels of engagement
and with an emphasis on values-based leadership from the
Executive Team. Specific results included:
− more than 90% of employees say they feel a sense of purpose
in their work; and
− 86% indicated they are proud to work for Atlas Arteria.
Improvement opportunities are centred around work life
balance, flexibility, review processes, communication and
investment in development.
We are developing an action plan to address key challenges
highlighted in the survey, including the activities outlined below:
− Providing development opportunities. As a small
organisation with a relatively flat structure, it is imperative
that we provide structured growth and development
opportunities for employees to progress in their careers.
− Promoting work life balance. We seek to create flexibility
in how we work and build a culture that promotes balance.
Key to this is ensuring we are appropriately resourced as the
company grows.
− Improving communication. Our employee base is
geographically dispersed. Clear, two-way communication
is necessary for effective teamwork and to deliver our
business strategy.
Our businesses aim to foster a strong and engaged workforce
focused on safety and customer service. Communication
between and to our businesses is a recognised priority.
We look to ensure we effectively communicate our strategy,
promote two-way communication and bring the teams with
us on the journey. Investment in technology has facilitated
this approach.
24 | ATLAS ARTERIA ANNUAL REPORT 2019
APRR named Best Employer
We are pleased to report that for the fifth year in a row,
APRR has been ranked the Best Employer in the Transport
and Logistics sector in France by Capital Magazine.
The classification is based on an anonymous employee
survey. The result provides recognition for APRR’s
commitment towards employee support, training, diversity
and inclusion and professional equality.
Supporting and developing our people
Our people are our most valuable asset. At all times, we
remain focused on their wellbeing, ensuring that they are
safe and feel supported.
The current COVID-19 pandemic presents a challenging
environment for all employers and employees as we all adapt
to new ways of working, and living, during the current crisis. We
have been clear with our people that they have our support, and
that we understand their need to balance work commitments
with their own personal commitments and needs during such
trying times. We are also working with an external independent
professional to offer a confidential, employee assistance and
support service for anyone who wishes to access it.
We are always committed to the ongoing development and
training of our people, ensuring they remain positively challenged,
and can see their career paths grow within the business.
In 2019, we established a strong corporate team, trained
and engaged in our policies and procedures. We will build on
this in 2020, by investing in HR support to drive development
opportunities and programs for our people, along with prudent
succession planning.
Diversity and inclusion
We recognise diversity as a driver of success: strengthening
the business with different perspectives and experiences and
supporting the attraction and retention of talent. Our Diversity
and Inclusion Policy (on our website) sets out our approach and
commitments in this regard.
Human rights and modern slavery
Respecting human rights and eliminating modern slavery is
crucial to being a responsible business. We are committed
to developing and maintaining processes to identify, prevent,
mitigate and account for adverse human rights impacts, including
modern slavery, throughout our operations and value chain.
Our Boards each comprise 40% female members. We
are seeking to increase female representation across the
organisation and are developing initiatives to support this.
Besides gender, our small head office team is highly diverse
in nationality, language and culture.
The recent engagement and culture survey also showed strong
results on questions relating to diversity and inclusion.
Looking ahead, diversity and inclusion remains a focus as we
grow our team. We will continue to implement practices to
support diversity.
Supporting diversity
At APRR, the promotion of equal opportunities is wide-
ranging. Training schemes and apprenticeships are offered
to help young people into the job market. An action plan is in
place to better enable integration of people with disabilities,
support is provided to retain seniors in employment and a
focus on gender equality differences in pay for men and
women with equivalent skill levels and jobs.
Actions are supported by the APRR Diversity Committee,
which brings together representatives from all levels of the
business. This year, an employee barometer was
undertaken, in which 84% of APRR employees said they felt
management was committed to equal opportunity. Other
initiatives included training on prejudices and stereotypes,
and work towards renewal of the Diversity Label from
Association Française de Normalisation (AFNOR) was
successfully achieved in February 2020.
We have undertaken a review of our exposure to human rights
and modern slavery risks in our operations and supply chains
and have implemented a number of initiatives to help identify
and manage these risks in the future. These include:
− providing an anonymous Whistleblower Service as
a means to report concerns of wrongdoing available
at www.atlasarteriaspeakup.deloitte.com.au;
− supplier risk assessment/reviews and auditing procedures;
− the inclusion of contract clauses which address modern
slavery and human rights concerns in our supplier contracts;
− the inclusion of modern slavery and human rights
considerations into our investment due diligence processes;
− integrated modern slavery and human rights issues into our
annual compliance training sessions, delivered both to head
office employees and our portfolio organisations.
We will release a Modern Slavery Statement which outlines the
risks identified in this review and how they are being addressed
in 2021 in accordance with the Modern Slavery Act, 2018.
Priorities for 2020
− Continue to support the health and wellbeing of our people
through the COVID-19 pandemic
− Maintain strong employee engagement levels
− Partner with recruiters to improve candidate diversity
− Roll out unconscious bias training to all managers
− Pursue and maintain a gender balance on our Boards, within
senior management and across all employees of at least 40%
of each gender
− Implement measures to improve the effectiveness and
efficiency of communications between employees and
our businesses
Corporate team
Male
Female
% Male % Female
Board (Australian)
Board (Bermudian)
Executive team
Other employees
All employees
Portfolio organisations
Male
Female
Total
% Male
% Female
3
3
3
12
15
2
2
1
12
13
60%
60%
75%
50%
54%
40%
40%
25%
50%
46%
Dulles
Greenway
Warnow
Tunnel
APRR
2,026
1,257
3,283
62%
38%
10
3
13
77%
23%
12
24
36
33%
67%
ATLAS ARTERIA ANNUAL REPORT 2019 | 25
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
OUR SUSTAINABILITY PRIORITIES
ENVIRONMENTAL STEWARDSHIP
Management of natural resources is a commercial and social imperative, as well as an environmental one.
Efficient use of resources reduces costs; enabling nature corridors supports the health of our ecosystems;
and responsible management can help us to more effectively engage our people, customers and communities.
Key statistics/
achievements
− APRR GHG emission reduction of 1.4%*
− 20% of electricity used in APRR is from renewable sources
− Electric charging stations every 80 kilometres along APRR’s 2,318 kilometre network
− APRR group ISO14001 certified for motorway operation activity
*based on Scope 1 and 2 emissions, not including customer traffic emissions.
A motorway’s primary areas of environmental impact lie in
road construction activities, in running and maintaining the
road, and in customers’ use of the road.
At Atlas Arteria, we aim to effectively manage and minimise
associated impacts, with a particular focus on reducing
greenhouse gas emissions and protecting the natural
environment.
Greenhouse gas emissions
Each of our portfolio roads proactively works on reducing its
energy use and therefore its associated carbon footprint. For
APRR specifically, management of GHG emission forms a key
part of its ESG strategy, alongside a focus on safety.
Initiatives include: the installation of solar panels on 23
buildings and structures at service stations to power operating
equipment; solar hot water production present at 35 service
areas; LED lighting widely deployed in motorway tunnels to
reduce energy consumption; recycling of pavement materials;
and reduced own-emissions through action on business travel,
building use and server consumption.
APRR has analysed its energy use and GHG emissions since
2011 and this year saw a reduction of 1.4% across its Scope 1
and 2 emissions.
GHG emissions, tonnes CO2e (APRR only)*
2016
2017
2018
2019
At Warnow Tunnel, the toll plaza was completely refurbished
with LED lights in 2019. This has contributed to a 3.8% reduction
in energy use across the Warnow Tunnel business compared
to 2018 (797,077 kWh in 2019 compared to 828,792kWh in 2018).
Customer emissions
As a road operator, one of the biggest impact areas lies in the
carbon footprint associated with customers’ use of our roads.
As climate change continues to grow on the global agenda,
customers will increasingly make changes to living habits to
minimise their own footprint. Our ability to enable customers
to reduce their footprint is therefore a priority for us.
Compared to standard roads, the nature of motorways
generally offers improved efficiencies: allowing for faster and
more consistent driving speeds, reduced traffic congestion
and improved travel time. These efficiencies should translate
to reduced fuel consumption and emissions.
In addition, we continue to seek options that proactively
facilitate a reduced customer footprint. For example, electric
charging stations are provided every 80 kilometres along
APRR’s 2,318 kilometre network, enabling customers to
transition to electric vehicles. An additional 16 very high power
charging stations were added this year, providing further
improvements to charge times (see case study on page 22).
Carpooling is also encouraged, with 4,135 carparks now
installed alongside APRR’s network in support of this.
Scope 1
Scope 2
6,182
1,291
6,541
1,244
5,942
957
6,027
773
Scope 3**
1,913,208
2,135,936
2,212,963
2,230,582
We keep abreast of new technology to ensure that we can
provide a timely response to developing needs, for example
in being prepared to support autonomous vehicles on our
road networks.
* GHG emissions are calculated based on the GHG Protocol’s equity share
approach. Atlas Arteria holds a 31.14% interest in APRR. In accordance with
this, data represents 31.14% of APRR’s calculated GHG emissions.
** Scope 3 data presented here is limited to customer traffic emissions. Scope 1
and 2 emissions are therefore more reflective of APRR’s own GHG emissions.
26 | ATLAS ARTERIA ANNUAL REPORT 2019
Protecting the natural environment
Our impact on the natural environment is an important
consideration as we assess both the day-to-day operations
of our businesses and construction projects.
The flow of roads can interrupt wildlife crossings, disrupt
habitats and carry pollutants into waterways.
Initiatives were implemented in the original design and
construction of the roads to minimise and offset
adverse impacts.
Environmentally focused initiatives include:
− 10,500 hectares of green space maintained adjacent
to APRR motorways;
− 175 wildlife crossings throughout the APRR network;
− support for a park area and educational nature trail An der
Hundsburg, located beside Warnow Tunnel;
− 149 acres of wetlands established around Dulles Greenway,
offsetting wetlands affected in the road’s construction.
Supporting conservation
Dulles Greenway has a strong partnership with Loudoun
County Wildlife Conservancy and has supported the group
since 2005 through its annual Drive for Charity Day.
To date, Loudoun Wildlife has received US$535,561 from
the annual fundraiser, with US$42,000 donated in 2019.
The funds support habitat restoration projects, wildlife
monitoring programs, educational activities and field trips.
Restoration and protection
In construction works, APRR follows the hierarchy of ‘avoid,
reduce, compensate’ for impacts on the environment.
For example, on the Sévenans interchange on the A36,
environmental compensatory measures included restoration
of 2.6 hectares of wetlands, woodland plantation, grassland
management for protection of the large copper butterfly and
conservation of 3.6 hectares of forest allowing for natural
regeneration. Ecological monitoring of these habitats will
continue until 2035.
On an A41 widening, five new water retention basins capturing
runoff from the motorway are planned for completion in 2021.
These will prevent risk of flooding, clean up water from roads
and contain pollutants in the event of spills, preventing them
from entering the natural environment.
In day-to-day operation, surrounding waterways may be
impacted through spillages on roads, or through pollutants
carried in runoff. Basins, dikes and vegetative barriers are used
to minimise the potential threat to surrounding environments.
As part of runoff considerations, we are conscious of the use
of chemicals and salt in maintaining black roads in winter and
managing grasses and other vegetation on the verge. APRR
has a strict management framework for the application of
chemicals and salt to minimise impact on the surrounding
environment. We look to replicate this for Dulles Greenway.
Climate change adaptation
We are aware of the potential effects of climate change on
our assets and integrate risk analysis into our assessment
of existing and new investment opportunities.
For example, an increased frequency of significant snow storms
or heat waves may influence maintenance requirements, safety
considerations and traffic volumes and patterns.
We are committed to ensuring that identified scenarios are
assessed and appropriate measures identified to mitigate
or manage effects.
Priorities for 2020
− Implement an improved management framework at
Dulles Greenway for use of salts and other chemicals
in road management
− Further improve waste management, water and electricity
consumption for our businesses
− By 2023, construct 19 additional wildlife crossings along
APRR as part of the Motorway Investment Plan
ATLAS ARTERIA ANNUAL REPORT 2019 | 27
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE RISK MANAGEMENT
Risk appetite statement
The Boards have endorsed a risk appetite statement for the
purposes of establishing the nature and amount of risk Atlas
Arteria is willing to accept in pursuit of its strategy, the risks
it is not willing to accept and the limits and policies in place
to ensure risks are accepted within this risk appetite.
The Boards and ARCs receive regular reports on the key
financial and non-financial risks facing the organisation,
including an assessment of whether the risks are within
appetite, and the key mitigations that management has
put in place, or is progressing, to manage the risks.
Atlas Arteria’s material environmental
and social risks
Atlas Arteria has prepared a Sustainability Report which
outlines its material environmental and social priorities to
address long-term challenges in sustainability, and case
studies of how Atlas Arteria is managing sustainability risks.
Atlas Arteria’s Sustainability Report focuses on four
priorities: Safety, Customers and Community, Our People and
Environmental Stewardship. Atlas Arteria’s risk framework
supports the identification of material sustainability risks.
The determination of these priority areas by the Boards
followed the appointment of an independent, external advisor
who undertook a materiality assessment to identify the most
significant sustainability issues facing the organisation. This
assessment included direct communication with investors,
business partners, suppliers and employees through a series
of surveys, interviews and roundtables.
Internal audit
Atlas Arteria does not have an internal audit function due
to the nature and size of the company, however management
has engaged the services of a third-party internal audit provider
to support management on an ad hoc basis.
Oversight by management, and the ATLAX and ATLIX Audit
and Risk Committees and Boards also support compliance
with the Risk Management Policy.
Role of the Board and Audit and Risk Committees
in risk management
Proactively identifying and managing risk is a core driver for
the execution of our strategy. Each ATLAX and ATLIX entity
maintains a separate Board and Audit and Risk Committee,
with oversight of the businesses within their control. The
charter for each Audit and Risk Committee (ARC) is available
on the Atlas Arteria website.
Both the ATLAX and ATLIX Boards are responsible for reviewing
strategic risks, approving the risk management policy and
risk appetite statement and overseeing and monitoring the
adequacy of the risk management framework. The ARCs
assist by overseeing the design and implementation of, and
the monitoring and compliance with, the risk management
framework. Following internalisation of the management
of Atlas Arteria in April 2019, the new management team
is revising and enhancing Atlas Arteria’s approach to risk
management. Atlas Arteria will continue to develop its risk
management to ensure it remains current, fit for purpose and
assists in protecting Atlas Arteria from unacceptable risks.
Each ARC is chaired by an independent director and meets
at least four times per year. The ARCs, together with
management, routinely monitor and review the effectiveness
of the internal control environment, and risk management
framework. This includes processes for identifying, assessing
and responding to risks in accordance with the organisation’s
risk appetite.
Further details of the membership and attendance of Audit and
Risk Committees can be found in the Directors’ Reports and
Financial Reports for the year ended 31 December 2019, page 44.
For more information go to atlasarteria.com
Atlas Arteria’s risk management framework
Atlas Arteria has a clear risk strategy, supported by a positive
and proactive risk culture. A robust risk management
framework is supported by a clear risk appetite statement that
enables Atlas Arteria to capture opportunities while effectively
managing risk. Risk is an inherent part of Atlas Arteria’s
business and management of risk is therefore critical to
continuing sustainable growth and financial strength.
The Boards have endorsed the risk management policy, and
have a risk management framework which establishes a
‘three lines of Defence’ model. Within this model Atlas Arteria
staff, (including in its businesses) act as the first line and
have primary responsibility for managing risk. Atlas Arteria
management, supported by the risk management function
act as the second line, with ad hoc internal audits, compliance
and peer reviews as the third line. The risk management
framework applies to all Atlas Arteria staff. Where an entity
is not operated by Atlas Arteria, Atlas Arteria management
seeks to influence the risk management framework that
is in place.
28 | ATLAS ARTERIA ANNUAL REPORT 2019
GOVERNANCE
Legal framework and management arrangements
Atlas Arteria comprises Atlas Arteria Limited (ACN 141 075 201)
(ATLAX), an Australian public company, and Atlas Arteria
International Limited (Registration No. 43828) (ATLIX), an
exempted mutual fund company incorporated in Bermuda.
Atlas Arteria is listed as a stapled structure on the Australian
Securities Exchange (ASX). The securities of ATLAX and ATLIX
are stapled and must trade and otherwise be dealt with together.
ATLAX and ATLIX have entered into a cooperation deed
which provides for sharing of information, adoption of
consistent accounting policies and coordination of reporting
to securityholders (ALX Cooperation Deed).
Management arrangements
On 15 May 2018, Atlas Arteria securityholders approved
an internalisation proposal at the Annual General Meeting
whereby Atlas Arteria would cease to be externally managed
by the Macquarie Group no later than 15 May 2019.
The Atlas Arteria Management and Advisory Agreements
with the Macquarie Group ended on 31 March 2019. Under
the transition arrangements these agreements could have
continued until 15 May 2019, however, the Boards were satisfied
in March that the internal team was ready for transition
on 1 April 2019. The appointment of the new internal team
became effective 1 April 2019, being Graeme Bevans as Chief
Executive Officer and Managing Director, Nadine Lennie
as Chief Financial Officer, Vincent Portal-Barrault as Chief
Operating Officer, and Clayton McCormack as General Counsel
and Company Secretary.
Governance disclosures
We recommend that you also read the following documents
on the Atlas Arteria website:
− Overview of Legal Framework
− ATLIX Bye-Laws
− ATLAX Constitution
− ALX Cooperation Deed
− ATLAX and ATLIX Board & Committee Charters
− ALX Corporate Policies.
More detail about our operational and governance
arrangements can also be found in the ASIC Regulatory
Guide 231 disclosure on the Atlas Arteria website.
This disclosure is required by ASIC and seeks to improve
disclosure for retail investors in infrastructure entities.
For more information go to atlasarteria.com
Corporate Governance Statement
The Atlas Arteria Boards determine the corporate governance
arrangements for Atlas Arteria with regard to what they consider
to be in the long term interests of the business and its investors,
and consistent with its responsibilities to other stakeholders.
Atlas Arteria’s corporate governance arrangements conform
to the Corporate Governance Principles and Recommendations
(4th edition) issued by the ASX Corporate Governance Council.
Atlas Arteria’s Corporate Governance Statement has been
approved by the Boards and outlines our main corporate
governance practices for the year ended 31 December 2019
and up to the date of issue of this 2019 Annual Report. Included
in the statement are details relating to:
− Board composition, skills matrix and performance;
− structure and Role of Board Committees;
− Director independence;
− diversity;
− key governance documents including Vision and Values
Statement, Code of Conduct, Whistleblower Policy
and Anti-Bribery & Corruption Policy;
− market disclosures;
− risk management;
− auditor independence;
− securities trading restrictions.
Atlas Arteria’s Corporate Governance Statement, as well as
other governance documents referred to within the statement,
can be viewed on Atlas Arteria’s website at www.atlasarteria.
com/about. These governance documents are regularly
reviewed and updated to ensure that they remain consistent
with the objectives of the Boards.
For more information go to atlasarteria.com
ATLAS ARTERIA ANNUAL REPORT 2019 | 29
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
GOVERNANCE
Board of Directors
Debra (Debbie) Goodin
BEc (AU), FCA
ATLAX Non-Executive,
Independent Director
ATLAX Audit and Risk
Committee, Chairman
Director from 1 September 2017
Age: 53
Debbie Goodin is a Non-Executive Independent
Director of ATLAX, and Chairman of the ATLAX
Audit and Risk Committee.
Debbie is also a Non-Executive Director and
Chair of the Audit and Risk Committees for
ASX-listed companies APA Group and Senex
Energy Limited.
In addition to her non-executive career,
Debbie has 20 plus years of senior executive
experience spanning professional services
firms, government authorities and ASX-
listed companies across various sectors.
She is experienced in the areas of finance,
operations, corporate strategy, mergers
and acquisitions.
Debbie was formerly a Director of Ten
Network Holdings Limited and Ooh Media
Limited and is also a fellow of Chartered
Accountants Australia and New Zealand.
Debbie is also a Non-Executive Director
and Chair of the Audit and Risk Committees
for ASX-listed companies APA Group and
Senex Energy Limited, and a Non-Executive
Director of Australian Pacific Airports
Corporation Limited.
David Bartholomew
BEc (Hons) (AU),
MBA (AGSM)
ATLAX Non-Executive,
Independent Director
ATLAX People and
Remuneration Committee,
Chairman
Director from 1 October 2018
Age: 59
David Bartholomew is a Non-Executive
Independent Director and Chairman of
the People and Remuneration Committee
of ATLAX. He also serves on the Boards
of Endeavour Energy (the NSW electricity
distributor), Power & Water Corporation (the
multi-utility owned by the NT Government)
and Dussur (the Saudi Arabia Industrial
Investment Company).
David’s extensive management background
includes the role of CEO of DUET Group,
where he oversaw the ASX listed company’s
transition to a fully internalised management
and governance structure. He also held
executive roles at Hastings Funds Management,
Lend Lease, The Boston Consulting Group
and BHP Minerals. David has also served on
the Boards of Interlink Roads (Sydney’s M5
Motorway) and Statewide Roads (Sydney’s
M4 Motorway) representing investors
managed by Hasting Funds Management.
He is also a Director of The Helmsman Project,
a not-for-profit organisation that provides
coaching and development programs for Year 9
students, predominantly in western Sydney.
Nora Scheinkestel
LLB (Hons) (Melb), PhD, FAICD,
Centenary Medal
ATLAX Non-Executive,
Independent Chairman
ATLIX Non-Executive,
Independent Director
ATLAX Nomination and
Governance Committee,
Chairman
Chairman of ATLAX from 17 April 2015,
Director from 28 August 2014
Director of ATLIX since 17 April 2015
Age: 59
Dr Nora Scheinkestel is currently Chairman
of ATLAX and the ATLAX Nomination and
Governance Committee and is a Director
of the ATLIX Board.
Nora holds a number of external Board
positions, including Director of Telstra
Corporation Limited and Director of AusNet
Services Limited. She is also a Trustee of the
Victorian Arts Centre Trust.
Nora has a long track record in the
infrastructure sector. As a senior banking
executive in international and project
financing, she took responsibility for the
financing of major mining and infrastructure
projects. She currently consults to
government, corporate and institutional
clients in areas such as corporate governance,
strategy and finance. She is an Associate
Professor in the Melbourne Business School
at Melbourne University and is a former
member of the Takeovers Panel. Nora
is also a published author of Rethinking
Project Finance – Allocating and Mitigating
Risk in Australasian Projects.
In 2003, Nora was awarded a Centenary
Medal for services to Australian society
in business leadership.
30 | ATLAS ARTERIA ANNUAL REPORT 2019
Jean-Georges Malcor
Ecole Centrale de Paris (Eng),
MSc (Stanford)
ATLAX Non-Executive,
Independent Director
Director from 1 November 2018
Age: 63
Jean-Georges Malcor is an ATLAX Non-
Executive Independent Director. He also
serves on the Board and Audit and Risk
Committee of STMicroelectronics (NYSE:
STM) and is a Non-Executive Director on the
Boards of ORTEC and Fives (a construction
and engineering company and global
industrial engineering group respectively).
His executive experience includes eight years
as CEO at CGG (EPA: CGG), a Euronext-listed
French geoscience company in the global oil
and gas industry. Prior to this, he spent 25
years at Thales Group (EPA: HO) in France
and Australia. In 1999 Jean-Georges became
the first Managing Director of ADI (Australian
Defence Industry). Jean-Georges has
developed a high level of expertise in areas
such as organisation, corporate governance,
risk mitigation, strategy, technology, financing
and restructuring.
He is also an officer of the French Légion
d’Honneur Order and National Order of Merit.
Graeme Bevans
Jeffrey Conyers
BA (Toronto)
ATLAX Executive Director
Director from 1 April 2019 following
appointment as CEO and Managing Director
of Atlas Arteria
Age: 61
Graeme Bevans is an Executive Director
of ATLAX following his appointment as CEO
and Managing Director.
Graeme has more than 25 years’ experience in
the global infrastructure sector, where he has
completed the acquisition, development and
management of 17 infrastructure businesses
with a total enterprise value of over A$40 billion.
Prior to joining Atlas Arteria, Graeme was
Founder and CEO of Annuity Infrastructure in
the UK. He has also held senior roles globally,
including as Head of Infrastructure at CPPIB
in Canada, Partner at Alinda Capital Partners
in the USA, and Head of Infrastructure
Investment at IFM Investors in Australia.
Graeme has overseen very complex joint
venture arrangements in global infrastructure
both in Australia and abroad, particularly
in Europe and the Americas. He has served
as an active Director of 10 of those investee
companies in Europe, Australia, North and
South America.
ATLIX Non-Executive,
Independent Chairman
ATLIX Nomination
and Governance
Committee, Chairman
Bermuda-based Director since
establishment on 16 December 2009
Age: 66
Jeffrey Conyers is the Chairman of the
Board of ATLIX and Chairman of the ATLIX
Nomination and Governance Committee.
He is also a Director of numerous companies
in Bermuda and is the former Chief Executive
Officer of First Bermuda Securities Limited,
which provides advisory and execution
services on worldwide offshore mutual
funds to individuals and local companies
based in Bermuda.
Jeffrey began his professional career
as a stockbroker in Toronto and returned
to Bermuda in 1985 to join the Bank of
Bermuda, where his focus was investments
and trusts. He is a Founding Executive
Council Member and Deputy Chairman
of the Bermuda Stock Exchange.
Jeffrey has previously served on the Boards of
MAp Airports International Limited and Intoll
International Limited, parts of the previously
Macquarie-managed and ASX-listed vehicles
MAp Group and Intoll Group respectively.
ATLAS ARTERIA ANNUAL REPORT 2019 | 31
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE GOVERNANCE
Board of Directors
Derek Stapley
BA (Glas Cal) CA
James Keyes
MA (Oxon)
ATLIX Non-Executive,
Independent Director
ATLIX Audit and Risk
Committee, Chairman
Bermuda-based Director from
1 June 2010
Age: 59
Derek Stapley is a Non-Executive, Independent
Director of ATLIX as well as Chairman of
the ATLIX Audit and Risk Committee. Derek
also holds positions on a number of other
Boards, including The Cambridge Group, the
Brown Advisory Group and Lancashire Capital
Management Limited. He also chairs other
Audit and Risk Committees and is a member
of Investment Advisory Committees.
Derek is a Chartered Accountant with more
than 30 years’ experience. He was formerly
a Partner with Ernst & Young. He brings a
deep and current understanding of public
company reporting and evolving trends in
corporate governance and risk management
to ATLIX due to his extensive experience as
an Independent Director of several public
and private investment funds, insurance
companies and private client structures.
Derek also works with a diverse range of
global retail and institutional investors in
undertaking capital raising and charity work.
ATLIX Non-Executive,
Independent Director
ATLIX People and
Remuneration Committee,
Chairman
Bermuda-based Director from
21 February 2013
Age: 56
James Keyes is a Non-Executive Independent
Director as well as Chairman of the People and
Remuneration Committee of ATLIX.
He also sits on the Boards of a number of
private and listed companies including Catco
Reinsurance Opportunities Fund Ltd (LSE:CAT).
James is a Bermudan solicitor and barrister
who began his career with Freshfields in
London and New York, then moved to the
Funds and Investment Services team at
Appleby, one of the largest offshore law firms
in Bermuda. James retired as a Partner from
Appleby in 2008, and held a part-time position
as Managing Director of Renaissance Capital
and related entities until December 2012.
James gained experience in the toll road
sector, holding a position as Director of the
Bermudan entity within Transurban Group for
six years. He was also a Director of a company
in the Moto group which operated road service
stations in the UK.
Fiona Beck
BMS (Hons)
Waikato (NZ) CA
ATLIX Non-Executive,
Independent Director
Bermuda-based Director from
13 September 2019
Age: 54
Fiona Beck is a Non-Executive Independent
Director of ATLIX, appointed in September
2019. She is also a Director of One
Communications Ltd (a publicly listed
Bermuda Company) and also serves on its
Audit Committee. She is a Director of the
Bermuda Business Development Agency
working in the FinTech and technology
space and a Director of Twilio IP Holding Ltd
(a subsidiary of Twilio Inc, NYSE: TWLO),
a cloud based communications platform.
Fiona is a Chartered Accountant and
her wealth of business and governance
experience comes from holding senior
executive and governance positions in large
infrastructure companies focused in the
telecommunication and technology space.
She was the President and CEO for 14 years
of Southern Cross Cable Network, a submarine
fibreoptic cable company connecting New
Zealand and Australia to the USA.
She also led the telecommunications and
technology team for the 35th Americas Cup.
32 | ATLAS ARTERIA ANNUAL REPORT 2019
FINANCIAL REPORT
for the year ended 31 December 2019
This report comprises:
Atlas Arteria International Limited and its controlled entities
Atlas Arteria Limited and its controlled entities
ATLAS ARTERIA ANNUAL REPORT 2019 | 33
DIRECTORS’ REPORTS
The directors of Atlas Arteria International Limited (‘ATLIX’) and the directors of Atlas Arteria Limited (‘ATLAX’) submit the
following reports, together with the Financial Report for Atlas Arteria and the Financial Report for ATLAX and its controlled
entities (‘ATLAX Group’), for the year ended 31 December 2019.
An Atlas Arteria stapled security comprises one ATLIX share ‘stapled’ to one ATLAX share to create a single listed security
traded on the Australian Securities Exchange (‘ASX’). The stapled securities cannot be traded or dealt with separately.
AASB 3 Business Combinations and AASB 10 Consolidated Financial Statements require one of the stapled entities of a stapled
structure to be identified as the parent entity for the purpose of preparing a consolidated Financial Report. In accordance with this
requirement, and consistent with previous reporting periods, ATLIX has been identified as the parent entity of the consolidated
group comprising ATLIX and its controlled entities (‘ATLIX Group’) and ATLAX Group, together comprising ‘Atlas Arteria’, ‘ALX’
or ‘the Groups’.
All values are in Australian Dollars unless otherwise indicated.
Directors
The following persons were directors of ATLIX during the year and up to the date of this report (unless otherwise stated):
− Jeffrey Conyers
− Fiona Beck
− James Keyes
− Christopher Leslie
− Nora Scheinkestel
− Derek Stapley
(Chairman)
(Appointed on 13 September 2019)
(Resigned on 1 April 2019)
The following persons were directors of ATLAX during the year and up to the date of this report (unless otherwise stated):
− Nora Scheinkestel
− David Bartholomew
− Graeme Bevans
− Debra Goodin
− Jean-Georges Malcor
(Chairman)
(Appointed on 1 April 2019)
34 | ATLAS ARTERIA ANNUAL REPORT 2019
DIRECTORS’ REPORTS
Operating and financial review
Principal activities
The principal activities of Atlas Arteria are to own, operate and develop toll roads globally, creating value for investors over the
long term through considered and disciplined management. The roads developed, operated or managed by Atlas Arteria benefit
communities through reduced travel times, greater time certainty, reduced fuel consumption and reduced carbon emissions.
As of the date of this report, Atlas Arteria owns four businesses. The ATLIX Group currently has a 25% interest in the Autoroute
Paris-Rhin-Rhone (‘APRR’) toll road group in France. Adjacent to the APRR business is the smaller Autoroute des deux lacs
(‘ADELAC’) business which connects to APRR in south-east France. Together APRR and ADELAC comprise a 2,338km motorway
network located in the East and South East of France. The ATLIX Group has executed agreements to acquire a further net
6.14% indirect interest in APRR and ADELAC (‘the APRR Transaction’) increasing the total indirect interest in APRR to 31.14%
(31.17% in ADELAC). In the US, Atlas Arteria has 100% of the economic interest in the Dulles Greenway, a 22km toll road in the
Commonwealth of Virginia. In Germany, the ATLIX Group owns 100% of Warnowquerung GmbH & Co. KG and its general partner
Warnowquerung Verwaltungsgesellschaft mbH (collectively ‘Warnow Tunnel’) in the north-east city of Rostock.
Distributions
Distributions paid to securityholders were as follows:
Dividend of 15.0 cents per stapled security (‘cps’) paid on 4 October 2019 (a)
Distribution of 15.0 cps paid on 5 April 2019 (b)
Distribution of 12.0 cps paid on 5 October 2018 (c)
Dividend of 12.0 cps paid on 13 April 2018 (d)
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
102,505
102,491
81,992
80,375
204,996
162,367
(a) The dividend paid on 4 October 2019 comprised of an ordinary dividend of 15.0 cps. The dividend was paid in full by ATLIX.
(b) The distribution paid on 5 April 2019 comprised a capital return of 7.8 cps and an unfranked Australian ordinary dividend of 0.2 cps paid by ATLAX and an ordinary
dividend of 7.0 cps paid by ATLIX.
(c) The distribution paid on 5 October 2018 comprised of a capital return of 11.3 cps and an unfranked Australian ordinary dividend of 0.7 cps. The distribution was paid
in full by ATLAX.
(d) The dividend paid on 13 April 2018 comprised an ordinary dividend 12.0 cps. The dividend was paid in full by ATLIX.
Review and results of operations
The Atlas Arteria Management and Advisory Agreements with Macquarie Fund Advisers Pty Ltd (‘Macquarie Advisers’) ended
on 31 March 2019. Under the transition arrangements these agreements could have continued until 15 May 2019, however, the
Boards were satisfied in March that the internal team was ready for transition on 1 April 2019. The appointment of the new internal
team became effective 1 April 2019, being Graeme Bevans as Managing Director and Chief Executive Officer, Nadine Lennie as
Chief Financial Officer, Vincent Portal-Barrault as Chief Operating Officer, and Clayton McCormack as General Counsel and
Company Secretary.
Macquarie Advisers received the base management fees under their Atlas Arteria Management and Advisory Agreements until
15 May 2019. This equated to $15.1 million from 1 January to 15 May. Atlas Arteria did not pay any further base or performance
management fees to Macquarie Advisers for the general management of Atlas Arteria after 15 May. Macquarie Advisers provided
specific services under the Transition Services Agreement for a fee of $750,000 per month from 15 May until 31 December 2019.
Total fees under this agreement were $5.6 million for the year ended 31 December 2019. Macquarie management fees in 2018
included $70.6 million in performance fees, which reflects the full 2018 performance fee of $54.7 million and the second and third
instalments of the 2017 performance fee of $16.0 million and these reflected Atlas Arteria’s performance against the S&P/ASX300
Industrials Accumulation Index.
As at 31 December 2019, Macquarie Infrastructure and Real Assets (Europe) Limited (‘MIRAEL’) continues to act as manager of
Atlas Arteria’s indirect interest in APRR and from 15 May 2019, MIRAEL is entitled to receive fees of € 7.4 million ($11.9 million)
per annum. The fee will continue to be payable until termination of this agreement as part of completion of the APRR Transaction,
expected in early March 2020 (refer below).
On 20 November 2019, Atlas Arteria executed agreements to acquire a further 6.14% indirect interest in APRR and ADELAC, and
to secure direct governance rights in respect of its total indirect interest in APRR and ADELAC. New shareholder agreements were
negotiated with Atlas Arteria’s co-investors in the APRR structure, and it was agreed to terminate all remaining management
agreements with the Macquarie Group Ltd (‘Macquarie Group‘) other than a new short term transition services agreement,
in respect of which no fees are payable (‘the APRR Transaction’).
ATLAS ARTERIA ANNUAL REPORT 2019 | 35
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE DIRECTORS’ REPORTS
The APRR Transaction is expected to complete in early March 2020 having received anti-trust clearance from the European
Commission and foreign investment control clearance from the French Ministry of the Economy.
Once completed, it will provide four key strategic and value accretive benefits to Atlas Arteria securityholders:
− It will increase Atlas Arteria’s exposure to APRR by 6.14% to a total 31.14% indirect interest, a quality infrastructure business
that is performing well, has a strong correlation to the French economy and access to growth opportunities.
− It will simplify and streamline Atlas Arteria’s ownership and governance of APRR producing direct governance rights with
participation on the board of directors of each company within the APRR structure.
− Modernised shareholder agreements will remove the call option held by Eiffage SA (‘Eiffage’) over Macquarie Autoroutes
de France SAS’s (‘MAF’) shareholding in APRR.
− The APRR Transaction will also finalise the removal of the Macquarie Group as a manager from the Atlas Arteria corporate
structure and terminate all associated management and performance fees.
The APRR Transaction will be funded via the proceeds of the equity raising that was undertaken in the second half of 2019.
Atlas Arteria raised $1,350 million with the issue of 195.7 million new ordinary stapled securities with settlement for final funds
occurring on 16 December 2019.
Financial results have been presented below to show the performance of Atlas Arteria adjusted for notable items, to provide
further clarity around the underlying operational performance of the business.
ALX
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
% change
Revenue and other income from operations
− Toll Revenue
− Other Revenue
Operating expenses
− Business operations
− Corporate costs
− Macquarie MAF/MAF2 management fees
Finance costs
Depreciation and amortisation
Share of net profits/(losses) of investments accounted for using the equity method
Income tax (expense)/benefit
Net Profit/(loss) from operations after tax (excluding notable items)
Notable items
− Transition costs to internalised management
− Macquarie management fees
− Impairments
− Hedge ineffectiveness of the swap for the APRR Transaction
− Income tax (expense)/benefit of notable items
Net (Loss)/profit from operations after tax
150,368
24,824
126,811
5,706
(51,974)
(18,562)
(7,488)
(36,031)
(6,625)
–
(107,017)
(108,920)
(70,283)
254,874
3,485
(62,118)
246,141
(898)
178,227
164,066
(2,297)
(20,748)
(165,429)
(5,294)
5,720
(9,821)
(10,300)
(107,384)
13,470
–
–
19%
335%
(44%)
(180%)
–
2%
(13%)
4%
488%
9%
78%
81%
(1328%)
–
–
59,852
(116%)
The statutory results for the year ended 31 December 2019 show a loss for Atlas Arteria of $9.8 million (2018: profit after tax of
$59.9 million). As part of the half year reporting for 30 June 2019, the Boards of ATLIX and ATLAX decided to impair their respective
investments in Dulles Greenway by a total of US$115.0 million ($165.4 million). These decisions took into account the operating
performance of Dulles Greenway, combined with a more conservative outlook for traffic growth than that taken in prior periods.
The impairment was a point in time assessment for 30 June 2019 (refer to notes 4.1 and 4.2), and an assessment conducted
for 31 December 2019 has concluded that no further impairment is necessary.
In addition to the fees paid to Macquarie Advisers and transition costs, notable items included the cost of the hedge ineffectiveness
of the swap entered into to support the APRR Transaction. In order to mitigate the foreign exchange risk that arises from the APRR
Transaction raising equity in Australian dollars and making payments on settlement in Euro, a deal contingent deliverable foreign
exchange forward contract (‘the FX Forward Contract’) was entered into on 20 November 2019 with an end date contingent on the
settlement completion date to fund the APRR Transaction. Accounting for the FX Forward Contract saw a $5.3 million expense
recorded in the 2019 year.
36 | ATLAS ARTERIA ANNUAL REPORT 2019
DIRECTORS’ REPORTS
Adjusting for the notable items, Atlas Arteria showed strong performance for the year underpinned by its investment in APRR.
Atlas Arteria’s investment in APRR is reflected in the share of net profit of investments and is accounted for using the equity
method of accounting. Share of net profit of investments increased to $254.9 million (2018: $246.1 million) reflecting a 5.5%
increase in net profit after tax at APRR offset by a derivative and foreign exchange movements in holding entities. Underlying
revenue at APRR increased by 2.9% (in local currency) off the back of a 1.1% increase in traffic and 1.8% average increase in tolls
effective 1 February 2019. A decrease in financing costs also affected the net profit outcome.
Other items that impacted performance were as follows:
− Application of AASB Interpretation 12 Service Concession Agreements (‘IFRIC 12’) resulted in a revenue increase of $16.6 million
and relates to the Dulles Toll Road (‘DTR’) connector project currently under construction at the Dulles Greenway. This project
is a US$17.5 million project that commenced in December 2018 and is expected to complete in the second half of 2020. The
increase in revenue is offset by a corresponding increase in Business Operation expenses.
− Toll revenue at Dulles Greenway increased by 6% reflecting foreign currency movements and a 2.9% decrease in traffic offset
by a 2.9% increase in tolls which occurred on 10 April 2019.
− 2019 was the first full year of consolidated results for Warnow Tunnel following the acquisition of the remaining 30% interest
on 20 September 2018. Up to the date of acquisition, Warnow Tunnel’s profit was accounted for under the equity method of
accounting, through the share of profit/(loss) in associates. Post-acquisition results are consolidated into the Atlas Arteria results
with toll revenue of $21.9 million (2018: $5.7 million), operating expenses $14.5 million (2018: $3.8 million) and $11.0 million
(2018: $4.0 million) financing costs.
− Atlas Arteria operated with a fully internalised management team for nine months of the 2019 year, which saw corporate costs
increase from $6.6 million in 2018 to $18.6 million in 2019. The increase in costs reflects the staged employment of the new
internalised management team over 2019.
Risk Management
In the months preceding internalisation of the management of Atlas Arteria, the incoming management team took the opportunity
to revise Atlas Arteria’s approach to risk management. That new approach is set out in the Risk Management Policy. Atlas Arteria
will continue to develop and refine the approach to ensure it remains current and continues to focus the business on delivering
against its strategic objectives as well as protect the business from unacceptable risk.
Atlas Arteria has a clear risk strategy, supported by a positive and proactive risk culture. A robust risk management framework
is supported by clear risk appetite statements that enables Atlas Arteria to capture opportunities while effectively managing risk.
Risk is an inherent part of Atlas Arteria’s business and management of risk is therefore critical to continuing sustainable growth
and financial strength. The Boards reviewed the risk framework as it was established leading up to management internalisation.
Since then they have reviewed the framework, risk tolerance levels and internal approach to risk management to ensure they
remain appropriate.
Two of the more material risks faced by the business during the year related to the internalisation of management. Risks
associated with the transfer of management responsibility were carefully documented, allocated to individual risk owners,
managed and monitored by the Boards. On 1 April 2019, the Boards were comfortable that all risks had either been mitigated
or could be adequately managed by the internal management team.
The second risk related to the ongoing management of APRR as the most material business for Atlas Arteria. Notwithstanding
internalisation, as at 31 December 2019, the Macquarie Group continues to manage Atlas Arteria’s investment in APRR. Activity
during the year focused on execution of the APRR Transaction which will deliver the benefits as outlined earlier in this Report. In
particular it will result in Atlas Arteria gaining director representation on the boards of each company within the APRR structure
as well as modernised shareholder agreements removing the call option held by Eiffage over MAF’s shareholding in APRR.
Strategic Outlook
Atlas Arteria management will continue to actively manage the businesses, pursue initiatives that drive enhanced operational
performance and grow distributions. Developing the long term value of the business, lengthening the tenure of our average
concession term and diversifying risk are priorities in this regard.
The APRR business continues to perform well with both heavy vehicle and light vehicle traffic growing on average in line with long
term trends. Results from APRR will continue to be reflected in the financial statements using the equity accounting method. A
priority for management in the near term will be operations at the Dulles Greenway. Traffic growth remains challenged by network
effects and management remains focused on the future toll path as well as the customer value proposition with implementation of
congestion easing projects.
Underpinned by the strength of the APRR business, and the new independent management team, the business remains well
positioned for the future.
ATLAS ARTERIA ANNUAL REPORT 2019 | 37
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE DIRECTORS’ REPORTS
Significant changes in state of affairs
Change in management arrangements
Following the announcement of the Boards’ intention to internalise the management of Atlas Arteria in November 2017, Atlas
Arteria reached an agreement with Macquarie Advisers on the terms of the internalisation of management. This agreement
was approved by the shareholders at the 2018 Annual General Meeting. The terms of the internalisation of management
became effective on 1 April 2019 including the appointment of the senior executive team.
Acquisition of a further 6.14% interest in APRR and ADELAC funded by a $1,350 million equity raise
On 20 November 2019 the ATLIX Group executed agreements to acquire a further 6.14% indirect interest in APRR and ADELAC,
and secure direct governance rights in respect of its total indirect interest in APRR and ADELAC. New shareholder agreements
were negotiated with the ATLIX Group’s co-investors in the APRR structure, and it was agreed to terminate all remaining
management agreements with the Macquarie Group other than a new short term transition services agreement, in respect
of which no fees are payable.
As part of this APRR Transaction, the ATLIX Group agreed with its co-investors in the APRR and ADELAC structure, including
Eiffage, to make payments to relevant parties enabling improved governance rights including the ability to appoint nominees
to the various boards of directors at each company within the APRR corporate holding structure. The ATLIX Group agreed to pay
a one-off fee to Macquarie Group of $100.0 million and a one-off fee of € 60.8 million ($97.2 million) to Eiffage. There will be no
further management fees, and no performance fees payable by Atlas Arteria following completion. The existing services provided
by Eiffage to APRR (including treasury, human resources, internal audit and government relations) will, however, be formalised
into a services agreement between Eiffage and APRR for an annual fee payable by APRR of € 14.3 million ($23.0 million) in 2020.
Post completion the ATLIX Group will have a 31.14% indirect interest in APRR and 31.17% indirect interest in ADELAC via a 62.29%
interest in Macquarie Autoroutes de France 2 SA (‘MAF2’) and direct governance rights with participation on the board of directors
of each company within the APRR structure. Macquarie Group will be removed as a manager from the Atlas Arteria corporate
structure and there will be no further management and performance fees.
In conjunction with the APRR Transaction, Atlas Arteria announced an equity raise of $1,350.0 million comprising an institutional
placement of $451.9 million and a 4 for 21 pro-rata accelerated non-renounceable entitlement offer of $898.1 million (‘the Equity
Raise’). The Equity Raise resulted in the issuance of 195.7 million new ordinary stapled securities representing 28.6% of existing
securities on issue. The placement and entitlement offer were conducted at an offer price of $6.90 per security with settlement
of final funds on 16 December 2019.
The proceeds of the Equity Raise will be used to fund the APRR Transaction.
Likely developments and expected results of operations
No change is contemplated to the principal activities outlined on page 35. Significant changes in state of affairs above discusses
the likely developments of Atlas Arteria and the ATLAX Group.
Events occurring after balance sheet date
The APRR Transaction was granted foreign investment control clearance from the French Ministry of the Economy and anti-trust
clearance from the European Commission in mid-February 2020. Completion of the APRR Transaction is expected to take place
in early March 2020.
Completion of the APRR Transaction will be funded by the ATLIX Group from the proceeds of the Equity Raise. In conjunction
with the APRR Transaction, Eiffage agreed to work with the Atlas Arteria and the other MAF2 Shareholders to refinance
a € 1,070.0 million term loan at Eiffarie SAS (‘Eiffarie’) which matured in February 2022. This term loan was refinanced on
20 February with a new maturity date of February 2025 with amortisation commencing in June 2023. Atlas Arteria’s investment
in Eiffarie is reflected in the share of net profit of investments and is accounted for using the equity method of accounting.
The FX Forward Contract settled on 24 February 2020 with the payment of $1,167.9 million in exchange for € 710.0 million at
a EUR/AUD exchange rate of 1.6449. A transaction premium of $4.9 million is embedded in the settlement of the FX Forward
Contract. The net loss on cash flow hedge ineffectiveness recognised at 31 December 2019 was $5.3 million. A reversal
of $0.4 million on the cash flow hedge ineffectiveness will be recorded in 2020.
The directors of ATLIX and ATLAX are not aware of any other matter or circumstance not otherwise dealt with in the Directors’
Reports that has significantly affected or may significantly affect the operations of the Groups, the results of those operations
or the state of affairs of the Groups in years subsequent to the year ended 31 December 2019.
38 | ATLAS ARTERIA ANNUAL REPORT 2019
DIRECTORS’ REPORTS
Indemnification and insurance of officers and auditors
During the year, ATLAX paid premiums of $211,425 and ATLIX paid premiums of $239,996 to insure the directors and officers
of the ATLAX Group and the ATLIX Group. The liabilities insured are legal and defence costs that may be incurred in defending
civil or criminal proceedings that may be brought against the directors and officers in their capacity as directors and officers of
the ATLAX Group and the ATLIX Group, and any other payments arising from liabilities incurred by the directors and officers in
connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty
by the directors and officers or the improper use by the directors and officers of their position or of information to gain advantage
for themselves or someone else or to cause detriment to the ATLAX Group or the ATLIX Group. It is not possible to apportion the
premium between amounts relating to the insurance against legal costs and those relating to other liabilities. So long as the
directors and officers of the ATLAX Group and the ATLIX Group act in accordance with the constitutions and the law, the directors
and officers remain indemnified out of the assets of the Groups against any losses incurred while acting on behalf of the Groups.
The auditors of the Groups are in no way indemnified out of the assets of the Groups.
Environmental regulation
The operations of the underlying businesses in which the Groups invest are subject to environmental regulations particular to the
countries in which they are located.
Each of our companies is responsible for adopting and maintaining its own environmental and social risk management framework
that seeks to ensure compliance with the relevant regulation and standards for environmental and social responsibility matters in
the country and industry in which the business operates.
Our ability to control or influence the ongoing management of these issues will differ for each business based on the extent of our
control/governance rights at each business through the level of ownership influence, board representation and regulatory environment.
Rounding of amounts in the Directors’ Reports and the Financial Reports
The Groups are of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 issued
by the Australian Securities and Investments Commission relating to the ‘rounding off’ of amounts in the Directors’ Reports and
Financial Reports. Amounts in the Directors’ Reports and Financial Reports have been rounded to the nearest thousand dollars
in accordance with that instrument, unless otherwise indicated.
Application of class order
The Directors’ Reports and Financial Reports for Atlas Arteria and the ATLAX Group have been presented in the one report,
as permitted by ASIC Class Order 13/1050 and ASIC Corporations (Stapled Group Reports) instrument 2015/838.
ATLAS ARTERIA ANNUAL REPORT 2019 | 39
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE Current
ALX role
Current Listed
company
directorship
Former Listed
company
directorships
in last 3 years
None
None
Chairman
of Board and
Nomination
and
Governance
Committee
Chairman of
People and
Remuneration
Committee
Catco
Reinsurance
Opportunities
Fund Ltd
(LSE:CAT).
Oakley
Capital
Investments
Ltd (LSE:OCI)
(retired
July 2019)
Chairman of
Audit and Risk
Committee
None
None
DIRECTORS’ REPORTS
Information on ATLIX directors
Name
Experience
Jeffrey Conyers
BA (Toronto)
ATLIX Non-Executive,
Independent
Chairman
ATLIX Nomination
and Governance
Committee, Chairman
Bermuda-based
Director since
establishment on
16 December 2009
Age: 66
James Keyes
MA (Oxon)
ATLIX Non-Executive,
Independent Director
ATLIX People and
Remuneration
Committee, Chairman
Bermuda-based
Director from
21 February 2013
Age: 56
Derek Stapley
BA (Glas Cal) CA
ATLIX Non-Executive,
Independent Director
ATLIX Audit and Risk
Committee, Chairman
Bermuda-based
Director from
1 June 2010
Age: 59
Jeffrey Conyers is the Chairman of the Board of ATLIX
and Chairman of the ATLIX Nomination and Governance
Committee. He is also a Director of numerous companies
in Bermuda and is the former Chief Executive Officer of First
Bermuda Securities Limited, which provides advisory and
execution services on worldwide offshore mutual funds to
individuals and local companies based in Bermuda.
Jeffrey began his professional career as a stockbroker in
Toronto and returned to Bermuda in 1985 to join the Bank
of Bermuda, where his focus was investments and trusts.
He is a Founding Executive Council Member and Deputy
Chairman of the Bermuda Stock Exchange.
Jeffrey has previously served on the boards of MAp Airports
International Limited and Intoll International Limited, parts
of the previously Macquarie-managed and ASX-listed vehicles
MAp Group and Intoll Group respectively.
James Keyes is a Non-Executive Independent Director
as well as Chairman of the People and Remuneration
Committee of ATLIX.
He also sits on the Boards of a number of private and listed
companies including Catco Reinsurance Opportunities Fund
Ltd (LSE:CAT).
James is a Bermudan solicitor and barrister who began his
career with Freshfields in London and New York, then moved
to the Funds and Investment Services team at Appleby, one of
the largest offshore law firms in Bermuda. James retired as a
Partner from Appleby in 2008, and held a part-time position as
Managing Director of Renaissance Capital and related entities
until December 2012.
James gained experience in the toll road sector, holding a
position as Director of the Bermudan entity within Transurban
Group for six years. He was also a Director of a company in the
Moto group which operated road service stations in the UK.
Derek Stapley is a Non-Executive, Independent Director
of ATLIX as well as Chairman of the ATLIX Audit and Risk
Committee. Derek also holds positions on a number of other
Boards, including The Cambridge Group, the Brown Advisory
Group and Lancashire Capital Management Limited. He also
Chairs other Audit and Risk Committees and is a member
of Investment Advisory Committees.
Derek is a Chartered Accountant with more than 30 years’
experience. He was formerly a Partner with Ernst & Young.
He brings a deep and current understanding of public company
reporting and evolving trends in corporate governance and risk
management to ATLIX due to his extensive experience as an
Independent Director of several public and private investment
funds, insurance companies and private client structures.
Derek also works with a diverse range of global retail and
institutional investors in undertaking capital raising and
charity work.
40 | ATLAS ARTERIA ANNUAL REPORT 2019
DIRECTORS’ REPORTS
Information on ATLIX directors continued
Name
Experience
Current
ALX role
Current Listed
company
directorship
Former Listed
company
directorships
in last 3 years
–
–
Fiona Beck
BMS (Hons) Waikato
(NZ) CA
ATLIX Non-Executive,
Independent Director
Bermuda-based
Director from
13 September 2019
Age: 54
Fiona Beck is a Non-Executive Independent Director of ATLIX,
appointed in September 2019. She is also a Director of One
Communications Ltd (a publicly listed Bermuda Company)
and also serves on its Audit Committee. She is a Director
of the Bermuda Business Development Agency working in
the FinTech and technology space and a Director of Twilio IP
Holding Ltd (a subsidiary of Twilio Inc, NYSE: TWLO), a cloud
based communications platform.
Fiona is a Chartered Accountant and her wealth of business and
governance experience comes from holding senior executive
and governance positions in large infrastructure companies
focused in the telecommunication and technology space. She
was the President and CEO for 14 years of Southern Cross Cable
Network, a submarine fibreoptic cable company connecting
New Zealand and Australia to the USA.
She also led the telecommunications and technology team for
the 35th Americas Cup.
Nora Scheinkestel
LLB (Hons) (Melb),
PhD, FAICD,
Centenary Medal
ATLAX Non-Executive,
Independent
Chairman
ATLIX Non-Executive,
Independent Director
ATLAX Nomination
and Governance
Committee, Chairman
Chairman of ATLAX
from 17 April 2015,
Director from
28 August 2014
Director of ATLIX
since 17 April 2015
Age: 59
Dr Nora Scheinkestel is currently Chairman of ATLAX and
the ATLAX Nomination and Governance Committee and
is a Director of the ATLIX Board.
Nora holds a number of external Board positions, including
Director of Telstra Corporation Limited and Director of AusNet
Services Limited. She is also a Trustee of the Victorian Arts
Centre Trust.
Nora has a long track record in the infrastructure sector. As a
senior banking executive in international and project financing,
she took responsibility for the financing of major mining and
infrastructure projects. She currently consults to government,
corporate and institutional clients in areas such as corporate
governance, strategy and finance. She is an Associate
Professor in the Melbourne Business School at Melbourne
University and is a former member of the Takeovers Panel.
Nora is also a published author of Rethinking Project Finance –
Allocating and Mitigating Risk in Australasian Projects.
In 2003, Nora was awarded a Centenary Medal for services
to Australian society in business leadership.
One
Communications
Ltd (BSE:ONE.BH).
None
Telstra
Corporation
Limited (ASX:TLS)
and AusNet
Services Limited
(ASX:AST).
Stockland
Corporation
Limited
(ASX:SGP)
(retired
March
2018) and
OceanaGold
Corporation
(ASX/
TSX:OGC)
(retired
19 December
2019).
ATLAS ARTERIA ANNUAL REPORT 2019 | 41
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE Current ALX
role
Current Listed
company
directorship
Chairman of
Board and
Nomination
and
Governance
Committee
Telstra
Corporation
Limited (ASX:TLS)
and AusNet
Services Limited
(ASX:AST).
Chairman of
Audit and Risk
Committee
APA Group
(ASX:APA) and
Senex Energy
Limited (ASX:SXY).
None
Chairman of
People and
Remuneration
Committee
Former Listed
company
directorships
in last 3 years
Stockland
Corporation
Limited
(ASX:SGP)
(retired
March
2018) and
OceanaGold
Corporation
(ASX/
TSX:OGC)
(retired 19
December
2019).
Ten Network
Holdings
Limited
(ASX:TEN)
(de-listed
November
2017).
Ooh Media
Limited
(ASX:OML)
(resigned
24 February
2020)
Vector
Limited
(NZE:VCT)
(retired
November
2018).
DIRECTORS’ REPORTS
Information on ATLAX directors
Name
Experience
Nora Scheinkestel
LLB (Hons) (Melb),
PhD, FAICD,
Centenary Medal
ATLAX Non-Executive,
Independent
Chairman
ATLIX Non-Executive,
Independent Director
ATLAX Nomination
and Governance
Committee, Chairman
Chairman of ATLAX
from 17 April 2015,
Director from
28 August 2014
Director of ATLIX
since 17 April 2015
Age: 59
Debra (Debbie)
Goodin
BEc (AU), FCA
ATLAX Non-Executive,
Independent Director
ATLAX Audit and Risk
Committee, Chairman
Director from
1 September 2017
Age: 53
David Bartholomew
BEc (Hons) (AU),
MBA (AGSM)
ATLAX Non-Executive,
Independent Director
ATLAX People and
Remuneration
Committee, Chairman
Director from
1 October 2018
Age: 59
Dr Nora Scheinkestel is currently Chairman of ATLAX and
the ATLAX Nomination and Governance Committee and
is a Director of the ATLIX Board.
Nora holds a number of external Board positions, including
Director of Telstra Corporation Limited and Director of AusNet
Services Limited. She is also a Trustee of the Victorian Arts
Centre Trust.
Nora has a long track record in the infrastructure sector. As a
senior banking executive in international and project financing,
she took responsibility for the financing of major mining and
infrastructure projects. She currently consults to government,
corporate and institutional clients in areas such as corporate
governance, strategy and finance. She is an Associate
Professor in the Melbourne Business School at Melbourne
University and is a former member of the Takeovers Panel.
Nora is also a published author of Rethinking Project Finance –
Allocating and Mitigating Risk in Australasian Projects.
In 2003, Nora was awarded a Centenary Medal for services
to Australian society in business leadership.
Debbie Goodin is a Non-Executive Independent Director of
ATLAX, and Chairman of the ATLAX Audit and Risk Committee.
Debbie is also a Non-Executive Director and Chair of the
Audit and Risk Committees for ASX-listed companies APA
Group and Senex Energy Limited.
In addition to her non-executive career, Debbie has 20 plus
years of senior executive experience spanning professional
services firms, government authorities and ASX-listed
companies across various sectors. She is experienced in
the areas of finance, operations, corporate strategy, mergers
and acquisitions.
Debbie was formerly a Director of Ten Network Holdings
Limited and Ooh Media Limited and is also a fellow of Chartered
Accountants Australia and New Zealand.
David Bartholomew is a Non-Executive Independent Director
and Chairman of the People and Remuneration Committee
of ATLAX. He also serves on the Boards of Endeavour Energy
(the NSW electricity distributor), Power & Water Corporation
(the multi-utility owned by the NT Government) and Dussur
(the Saudi Arabia Industrial Investment Company).
David’s extensive management background includes the
role of CEO of DUET Group, where he oversaw the ASX listed
company’s transition to a fully internalised management and
governance structure. He also held executive roles at Hastings
Funds Management, Lend Lease, The Boston Consulting Group
and BHP Minerals. David has also served on the Boards of
Interlink Roads (Sydney’s M5 Motorway) and Statewide Roads
(Sydney’s M4 Motorway) representing investors managed by
Hasting Funds Management.
He is also a Director of The Helmsman Project, a not-for-
profit organisation that provides coaching and development
programs for Year 9 students, predominantly in western Sydney.
42 | ATLAS ARTERIA ANNUAL REPORT 2019
Current ALX
role
Current Listed
company
directorship
–
STMicroelectronics
(NYSE:STM).
Former Listed
company
directorships
in last 3 years
CGG
(EPA:CGG)
(retired
April 2018).
DIRECTORS’ REPORTS
Information on ATLAX directors continued
Name
Experience
Jean-Georges Malcor is an ATLAX Non-Executive Independent
Director. He also serves on the Board and Audit and Risk
Committee of STMicroelectronics (NYSE: STM) and is a
Non-Executive Director on the Boards of ORTEC and Fives
(a construction and engineering company and global industrial
engineering group respectively).
His executive experience includes eight years as CEO at CGG
(EPA: CGG), a Euronext-listed French geoscience company
in the global oil and gas industry. Prior to this, he spent
25 years at Thales Group (EPA: HO) in France and Australia.
In 1999 Jean-Georges became the first Managing Director
of ADI (Australian Defence Industry). Jean-Georges
has developed a high level of expertise in areas such as
organisation, corporate governance, risk mitigation, strategy,
technology, financing and restructuring.
He is also an officer of the French Légion d’Honneur Order and
National Order of Merit.
Jean-Georges Malcor
Ecole Centrale de
Paris (Eng), MSc
(Stanford)
ATLAX Non-Executive,
Independent Director
Director from
1 November 2018
Age: 63
Graeme Bevans
ATLAX Executive
Director
Director from
1 April 2019 following
appointment as CEO
of Atlas Arteria
Age: 61
–
None
None
Graeme Bevans is an Executive Director of ATLAX following his
appointment as CEO.
Graeme has more than 25 years’ experience in the global
infrastructure sector, where he has completed the acquisition,
development and management of 17 infrastructure businesses
with a total enterprise value of over $40 billion.
Prior to joining Atlas Arteria, Graeme was Founder and CEO
of Annuity Infrastructure in the UK. He has also held senior
roles globally, including as Head of Infrastructure at CPPIB
in Canada, Partner at Alinda Capital Partners in the USA, and
Head of Infrastructure Investment at IFM Investors in Australia.
Graeme has overseen very complex joint venture arrangements
in global infrastructure both in Australia and abroad, particularly
in Europe and the Americas. He has served as an active
Director of 10 of those investee companies in Europe, Australia,
North and South America.
ATLAS ARTERIA ANNUAL REPORT 2019 | 43
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
DIRECTORS’ REPORTS
Company Secretaries
Andrew Davidson was the company secretary of ATLIX for the whole of the year ended 31 December 2019. He has over 15 years
of governance and company secretarial experience.
Clayton McCormack was appointed as the company secretary of ATLAX on 1 April 2019. He has over 15 years of governance and
company secretarial experience. Prior to 1 April 2019, Christine Williams and Lyndal Coates were dual company secretaries of
ATLAX. Christine Williams has over 27 years of Company Secretarial experience. Lyndal Coates has over 18 years of governance
and company secretarial experience.
Meetings of directors
The number of meetings of the ATLIX Board, Audit and Risk Committee, Nomination and Governance Committee and People and
Remuneration Committee held during the year ended 31 December 2019, and the numbers of meetings attended by each director
are shown below. In addition, ad-hoc committees were also held as required for transactional activities.
Board
Audit and Risk
Committee
Nomination
and Governance
Committee
People and
Remuneration
Committee
Ad-Hoc
Committees (a)
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
18
7
18
6
18
18
17
7
16
5
17
17
6
1
6
1
N/A
N/A
2
6
6
2
6
6
4
1
4
1
4
4
4
1
4
1
4
4
5
2
5
N/A
5
N/A
5
2
5
N/A
5
N/A
6
4
1
6
4
1
N//A
N/A
6
1
6
1
ATLIX Directors
Jeffrey Conyers
Fiona Beck (c)
James Keyes
Christopher Leslie (b)
Nora Scheinkestel
Derek Stapley
(a) Ad-hoc committee meetings were held in relation to working groups relating to the internalisation of the Groups’ management, the APRR Transaction, as well as
special project meetings.
(b) Resigned as a director of ATLIX on 1 April 2019.
(c) Appointed as a director of ATLIX on 13 September 2019.
The number of meetings of the ATLAX Board, Audit and Risk Committee, Nomination and Governance Committee and People and
Remuneration Committee held during the year ended 31 December 2019, and the numbers of meetings attended by each director
are shown below. In addition, ad-hoc committees were also held as required for transactional activities.
Board
Audit and Risk
Committee
Nomination
and Governance
Committee
People and
Remuneration
Committee
Ad-Hoc
Committees (a)
ATLAX Directors
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Nora Scheinkestel
David Bartholomew
Graeme Bevans (b)
Debra Goodin
Jean-Georges Malcor
18
18
12
18
18
18
18
12
18
17
6
N/A
N/A
6
6
6
N/A
N/A
6
6
4
4
4
4
N/A
N/A
4
4
4
4
6
6
N/A
6
N/A
6
6
N/A
6
N/A
6
5
6
5
N/A
N/A
5
1
5
1
(a) Ad-hoc committee meetings were held in relation to working groups relating to the internalisation of the Groups’ management, the Equity Raise as well as special
project meetings.
(b) Appointed as a director of ATLAX on 1 April 2019.
44 | ATLAS ARTERIA ANNUAL REPORT 2019
DIRECTORS’ REPORTS
Remuneration Report (audited)
Introduction
On behalf of the ATLAX and ATLIX People and Remuneration Committees (‘PRCs’) and Boards, we are pleased to present the
Remuneration Report for the 2019 financial year.
The past year has been one of delivery against strategy and a year of significant achievement:
− Following the approval by securityholders for the internalisation of management at the 2018 AGM, the newly appointed internal
executive team established the infrastructure, systems and processes to provide the Groups with independent governance and
management from 1 April 2019 (6 weeks in advance of the date required under the transition arrangements with Macquarie Fund
Advisors Pty Ltd (‘Macquarie Advisers’)). The transition has been seamless and positions us well to execute our strategy and
deliver strong and growing returns to securityholders.
− The removal of Macquarie Advisers as Manager of Atlas Arteria and the internalisation of management resulted in a reduction
in management fees from $114m in 2018 to $47m in 2019 (covering all management fees payable to the Macquarie Group in that
year as well as internal management costs).
− On 20 November 2019, Atlas Arteria executed agreements to acquire a further 6.14% indirect interest in APRR and ADELAC,
and to secure direct governance rights in respect of its total indirect interests in APRR and ADELAC. New shareholder
agreements were negotiated with Atlas Arteria’s co-investors in the APRR structure, and it was agreed to terminate all remaining
management agreements with the Macquarie Group (‘the APRR Transaction’).
− In December 2019, a $1.35 billion equity capital raising was completed to fund the APRR Transaction and the market
capitalisation increased from $4.28 billion at the end of 2018 to $6.88 billion at the end of 2019.
− A rate case submission was lodged to support the future toll path at the Dulles Greenway.
In addition, Atlas Arteria experienced a year of positive performance in 2019, with the portfolio continuing to deliver growth
in securityholder value and distributions for securityholders. Notable achievements considered further in this Remuneration
Report include:
− Total Securityholder Return (‘TSR’) of 32.2%.
− Continued distribution growth with distributions paid in 2019 of 30 cents per security, an increase of 25% compared to those
paid in 2018.
− An increase in Proportionate EBITDA from the underlying investments of 3.1% compared to FY2018.
The FY2019 Short Term Incentive (‘STI’) Plan comprised two components – one for successful delivery of the internalisation
programme from the date of the individual’s employment through until the date of internalisation and the second for performance
outcomes delivered in the period following internalisation, each proportional to the period of employment in the particular period.
Overall awards under the FY2019 STI Plan are between Target and Stretch and are reflective of the performance of the business and
management during the year. The outcomes are considered further in the Remuneration Report.
The Boards are continuously looking for opportunities to improve the remuneration structure. We take investor feedback seriously
and we will continue to engage with investors in relation to developing the remuneration structure.
During the year the Boards reviewed a number of aspects of the Long Term Incentive Plan (‘LTIP’). The review concluded that use
of relative TSR as the sole performance hurdle remains appropriate. However, given the location of the Groups’ businesses and its
business strategy, for future awards under the LTIP, the Boards have adopted a new peer group of OECD-domiciled companies in
the Global Listed Infrastructure Organisation (‘GLIO’) group as a more relevant basis for assessing performance. No changes have
been made to the basis of assessing relative TSR under existing LTIP awards. Further information on the review is set out in the
Remuneration Report.
We trust you, our securityholders, find the 2019 Remuneration Report provides clear and informative insights into our executive
remuneration policies, practices and outcomes.
David Bartholomew
Atlas Arteria Limited
People & Remuneration Committee Chair
James Keyes
Atlas Arteria International Limited
People & Remuneration Committee Chair
ATLAS ARTERIA ANNUAL REPORT 2019 | 45
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
DIRECTORS’ REPORTS
This Remuneration Report contains the following sections:
1 Introduction
2 Who is covered by this Report
3 Key questions
4 FY2019 performance highlights
5 Remuneration framework for management
6 Remuneration outcomes for FY2019
7 Non-Executive Director fees
8 Remuneration Governance
9 Statutory Disclosures
1 Introduction
The Directors of the Groups present the Remuneration Report for the Groups for the year ended 31 December 2019 prepared in
accordance with section 300A of the Corporations Act 2001. The information provided in this Remuneration Report has been audited
as required by section 308(3C) of the Corporations Act 2001. This Remuneration Report forms part of the Directors’ Reports.
2 Who is covered by this Report
This Remuneration Report outlines the remuneration framework and outcomes for the ATLAX Group and Atlas Arteria Key
Management Personnel (‘KMP’). The obligation under the Corporations Act 2001 to provide a remuneration report only applies to
ATLAX as an Australian listed Group. However, given the stapled security holding structure, the Boards and PRCs of both ATLAX
and ATLIX have worked together on the Remuneration Report with the disclosures extended to cover all of the Atlas Arteria KMP.
For the purposes of this report, KMP are those persons having authority and responsibility for planning, directing and controlling
the major activities of the Groups. Although taking up their positions on 1 April 2019, the remuneration outcomes of the Managing
Director and Chief Executive Officer (‘MD & CEO’) and the KMP Executives have been disclosed as though they were KMP for the
entire year. Information on the management fees paid to Macquarie Group under previous management agreements is provided
at Note 6.4.4 to the Financial Reports.
The individuals covered by this Remuneration Report are:
Name
Role
Date of appointment
Management
Graeme Bevans
Nadine Lennie
Managing Director & Chief Executive Officer
1 April 2019. Appointed CEO – elect 1 May 2018
Chief Financial Officer
1 April 2019. Appointed CFO – elect 16 July 2018
Vincent Portal-Barrault
Chief Operating Officer
1 April 2019. Appointed COO – elect 28 December 2018
Non-Executive Directors
Nora Scheinkestel
Independent Non-Executive Chairman (ATLAX)
and Independent Non-Executive Director (ATLIX)
17 April 2015 (Director of ATLAX from 28 August 2014)
David Bartholomew
Independent Non-Executive Director (ATLAX)
1 October 2018
Debbie Goodin
Independent Non-Executive Director (ATLAX)
1 September 2017
Jean-Georges Malcor
Independent Non-Executive Director (ATLAX)
1 November 2018
Jeffrey Conyers
Independent Non-Executive Chairman (ATLIX)
16 December 2009
James Keyes
Derek Stapley
Fiona Beck
Independent Non-Executive Director (ATLIX)
21 February 2013
Independent Non-Executive Director (ATLIX)
1 June 2010
Independent Non-Executive Director (ATLIX)
13 September 2019
Christopher Leslie
Non-Executive Director (ATLIX)
1 September 2017 (Retired with effect 1 April 2019)
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3 Key questions
Securityholders gave approval in May 2018 to internalise management and to terminate the management arrangements between
Macquarie Advisers and Atlas Arteria. Included below is a summary of the remuneration arrangements for the new management
team that apply following internalisation on 1 April 2019. Further details regarding our remuneration arrangements are provided
in the remainder of this Remuneration Report.
What remuneration principles guided the design of the remuneration framework post internalisation?
We developed the following six principles to underpin the management of the remuneration framework post internalisation. The
remuneration principles provide guidance on how remuneration decisions are made and how remuneration outcomes are determined.
The executive remuneration framework should be:
Description
1. Simple
Be simple to understand, implement and communicate
2. Balance short and long-term needs
3. Reflect role complexity
4. Reflect our values and behaviours
5. Specific and differentiated performance
outcomes
6. Securityholder alignment
Support the delivery of the annual business plans, whilst also reflecting the
long-term needs of the business
Reflect the experience of the executive, complexity/nature of the role and the
business compared to the market
Encourage appropriate behaviours and actions which are aligned to Atlas Arteria’s
business strategy, performance and securityholders
Reflect specific performance measures which executives have the ability to influence,
and allow for differentiation of executive incentive outcomes
Encourage executive equity ownership so that executives have ‘skin in the game’,
aligning executives to securityholder returns
What changes have been made to the remuneration structure during FY2019 and why?
During the FY2019 year, the Boards and the PRCs reviewed a number of aspects of the long term incentive plan and concluded that
the following would apply for awards made under the 2020 LTIP award (no changes have been made to the terms of the awards
made for previous years):
− We will continue to use relative TSR as a sole performance hurdle given the current strategic focus of the business on longer term
value creation and business optimisation. The Boards concluded that measures such as EBITDA or cash flow are not currently
the most appropriate performance measures. The Boards acknowledge as the business evolves it may be more appropriate
to introduce a suitable further measure/s in addition to relative TSR for assessing LTIP performance;
− We will adopt a new peer group for assessment of relative TSR comprising OECD-domiciled companies in the Global
Infrastructure Listed Organisation (GLIO) in respect of future LTIP awards. The GLIO is a relatively new organisation that provides
a global platform for information on listed infrastructure companies and includes approximately 125 OECD-domiciled members
that represent approximately $3,765bn in market capitalisation. The GLIO has been selected as it is a larger and less volatile
measure than the current peer group and is specific to the infrastructure sector rather than being a mix of infrastructure and
property organisations;
− We will use a volume weighted average security price (‘VWAP’) over a 40 business day period at the start and the end of the
performance period for the calculation of TSR performance in place of the current point to point calculation. A 40 business day
averaging period for calculating the security price for TSR performance helps to eliminate the impact of short term security price
movements on vesting outcomes; and
− We will continue to use a 10 business day VWAP for the period following release of the Groups’ annual results for calculating
the security price on which to base the number of securities to be issued for each LTIP Award.
How are executives remunerated and how is this aligned with Atlas Arteria performance?
The Boards recognise that to build sustainable long-term growth in securityholder wealth, Atlas Arteria must attract and retain
talented people and align their interests and behaviours with securityholders’ interests.
To do so, the Groups have developed a remuneration framework that aligns executive remuneration and the Groups’ performance.
The framework aims to achieve a balance between fixed and performance based remuneration and between short and
long-term performance incentives. To ensure our remuneration quantum and structure is market competitive, consideration
has been given to the market median remuneration of companies of a similar size and complexity to Atlas Arteria.
MD & CEO
KMP Executives
33%
67%
57%
43%
■ Fixed remuneration
■ Variable remuneration
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Performance based remuneration comprises both short and long term performance components:
− The FY2019 short term incentive component comprised two separate performance periods with different KPIs. The first related
to the period from commencement of employment to internalisation (1 April 2019) and the second related to the period following
internalisation. The pre-internalisation component was assessed and paid during the year based on achieving key milestones
for a successful internalisation ahead of plan. The STI for the period following internalisation was based on an assessment of
performance against a balanced scorecard of financial measures (weighted 70%) and non-financial measures (weighted 30%)
linked to key financial and business objectives. For further information regarding the performance outcomes and STI structure
for the MD & CEO and the KMP Executives, see section 6.
− For the long-term incentive component, Atlas Arteria’s TSR performance is assessed relative to selected local and international
companies with similar characteristics to ensure there is alignment between the financial interests of executives and
securityholders. For further information regarding the LTIP structure (including the changes being introduced for 2020),
performance measure, relative TSR comparator group constituents and vesting schedule, see section 5.4.
Information on governance provisions such as clawback, malus, treatment of awards on cessation of employment and change
of control are provided in section 8.3.
What happens to variable remuneration awards in the event there is a change of control?
In the event of a change of control, the Boards have absolute discretion to determine the treatment of STI and LTIP awards.
However, if the Boards do not exercise their discretion, the following default treatments will apply:
− STI: Cash based STI will be assessed on a pro rata basis and paid at that time based on performance, and deferred STI will vest
in full on the basis that it relates to performance targets which have already been achieved.
− LTIP: Vesting based on performance to the end of the most recent period and pro-rated for time.
What did the MD & CEO and KMP Executives receive during FY2019?
The MD & CEO and KMP Executives received fixed remuneration, STI awards delivered in cash and deferred equity and awards
under the Groups’ LTIP during FY2019.
The STI was awarded in two parts for FY2019 – one part based on successful internalisation of management and the other part
based on achievements in operating the business following internalisation.
An LTIP grant was made for FY2019. This LTIP grant will be assessed against the LTIP performance targets and, if the targets are
met, will vest following the conclusion of the performance period ending 31 December 2021. For further information regarding the
LTIP performance targets, see section 5.4.
4 FY2019 performance highlights
During 2019, Atlas Arteria continued to deliver solid operational performance resulting in growth of distributions for securityholders
and strong growth in the security price.
4.1 Overview of business performance
− TSR of 32.2%.
− Continued distribution growth with distributions paid in 2019 of 30 cents per security, an increase of 25% compared to those
paid in 2018.
− Weighted average traffic growth across the network during 2019 increased by 0.7% with weighted average revenue increasing
by 2.5%.
− An increase in Proportionate EBITDA from the underlying investments of 3.1% compared to FY2018 as a result of revenue growth
and implementation of operational efficiencies.
− Operational efficiencies were implemented across the portfolio to improve customer satisfaction and margins. These include
increasing automation of toll collections, improvements to the network such as interchange upgrades, the addition new lanes
and operational cost efficiencies.
− The removal of Macquarie Advisers as Manager of Atlas Arteria and the internalisation of management resulted in a reduction
in management fees from $114m in 2018 to $47m in 2019 (covering all management fees payable to the Macquarie Group in that
year as well as internal management costs).
− The APRR Transaction will see Atlas Arteria acquire a further 6.14% indirect interest in APRR and ADELAC, and secure direct
governance rights in respect of its total indirect interest in APRR and ADELAC. It will simplify and streamline Atlas Arteria’s
ownership and governance of APRR and finalise the removal of the Macquarie Group as a manager within the structure, reducing
operating costs and complexity.
− A rate case submission was lodged to support the future toll path at the Dulles Greenway.
− A sustainability framework and strategy has been developed with four clear priorities, Safety, Customers & Community,
Our People and Environmental Stewardship.
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4.2 Atlas Arteria’s performance
The following table outlines the key financial metrics over the past five financial years up to and including 2019 that underpin the
STI and LTI plans.
Distribution Payments ($)
EBITDA proportionate ($m) 1
Share price (at year end) ($)
Total Security Return
2015
0.16
523.7
3.97
21.4%
2016
0.18
562.4
4.92
28.8%
2017
0.20
652.8
6.19
30.6%
2018
0.24
869.4
6.16
3.4%
2019
0.30
922.9
7.83
32.2%
1. Proportionate EBITDA from the underlying investments as reported for each financial year
ALX security price (2010-2019)
$10.00
$9.00
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
5 Remuneration framework for management post internalisation
The remuneration framework for the executive team aims to achieve balance between fixed and performance-based remuneration,
between short and long-term performance incentives, and between financial, non-financial and strategic outcomes as well as
providing a balance of remuneration received in cash and in securities.
Our objectives for the executive remuneration framework are to ensure that it:
− Is simple to understand, implement and communicate;
− Supports the delivery of the annual business plans whilst also reflecting the long-term needs of the business;
− Reflects the experience of the executive and complexity of the role and business compared to the market;
− Encourages behaviours that are aligned to our business strategy, performance and securityholders;
− Reflects performance measures which our executives have the ability to influence and allows differentiation of executive
incentive outcomes; and
− Encourages executive equity ownership so that executives have ‘skin in the game’ thus aligning executives to securityholders.
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5.1 Positioning and mix of executive remuneration
To ensure our remuneration quantum and structure is market competitive, reference is made to the median of a group of
comparator companies of similar size and complexity to Atlas Arteria. The primary reference point for market comparisons are
the companies with a market capitalisation between 50% to 200% of Atlas Arteria. The remuneration arrangements of selected
industry comparators are also considered for each role.
The target and maximum remuneration framework for the MD & CEO and the KMP Executives comprises fixed remuneration,
STI and LTI as in the graphs below.
Remuneration mix based on achieving ‘target’ performance
MD & CEO
KMP Executives
33%
33%
44%
30%
13%
■ Fixed remuneration
■ Target STI – cash
■ Target STI – deferred
■ Maximum LTI
17%
17%
13%
Remuneration mix based on achieving ‘maximum’ performance
MD & CEO
KMP Executives
29%
29%
21%
21%
27%
17%
17%
39%
■ Fixed remuneration
■ Target STI – cash
■ Target STI – deferred
■ Maximum LTI
Outlined below is further detail regarding the STI and LTI plans for the 2019 financial year.
5.2 Fixed pay
Fixed pay recognises the market value of an individual’s skills, experience, accountability and their contribution in delivering the
requirements of their roles. Fixed pay includes base pay and superannuation.
Following the successful internalisation of management on 1 April 2019 and the subsequent increased scale of Atlas Arteria’s
operations resulting from the APRR Transaction, the Boards have commenced a review of executive remuneration to ensure our
remuneration levels are competitive with companies of similar size and complexity. This review is ongoing and further information
on the outcomes of the review will be provided to securityholders in the 2020 Remuneration Report.
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5.3 Short-term incentive
Executives, middle management and additional participants as determined by the Boards are eligible to participate in the annual
STI plan. Details regarding the STI arrangements of the MD & CEO and KMP Executives are set out below. The size of each STI
award is capped at an agreed percentage of fixed remuneration for each executive. The value of the STI payment made at the end
of the performance period is a function of performance against a balance of financial and non-financial performance measures
aligned with Atlas Arteria’s annual business plans.
Element
Description
Opportunity
The STI is subject to achievement of defined performance targets, which is delivered 50% in cash and 50%
in restricted securities.
The target STI opportunity represents an opportunity to earn 100% of fixed remuneration for the MD & CEO
and 60% of fixed remuneration for the KMP Executives. When assessing performance, the Boards have
discretion to increase or decrease an STI Award subject to an overall cap of 150% of Target.
Performance period
Performance is normally measured over a one year performance period, from 1 January to 31 December.
Due to the internalisation of management in FY2019, performance has been measured over two performance
periods this year.
STI deferral
STI objectives
− The performance period for the pre internalisation component of the FY2019 Award is from the date each
KMP commenced employment (being 1 May 2018 for the MD & CEO, 16 July 2018 for the CFO, and
28 December 2018 for the COO) to 1 April 2019, the date of internalisation.
− The performance period for the post internalisation component of the FY2019 STI is from 1 April 2019
to 31 December 2019.
To assist in creating alignment with securityholders and in achieving the minimum shareholding
requirement, 50% of the STI outcome is deferred into restricted securities for a one year period following
the conclusion of the performance period, subject to ongoing service and the discretion of the Boards.
STI objectives were set for FY2019 for the period prior to internalisation based on objectives related to
the successful implementation of internalisation and for the period following internalisation based on a
combination of financial measures and non-financial measures relating to specific strategic outcomes and
taking account of culture and behaviours.
FY2020 STI objectives will be set based on a combination of financial measures and non-financial measures
relating to specific strategic outcomes and taking account of culture and behaviours.
5.4 Long-term incentive
To align with the interests of securityholders, executives and other participants as determined by the Boards are eligible to
participate in the LTIP. Details of the LTIP arrangements of the MD & CEO and KMP Executives are set out below. The size of each
year’s grant is capped at an agreed percentage of fixed remuneration for each executive. The value of the LTIP award made at the
end of the vesting period is a function of:
− Atlas Arteria TSR performance relative to a group of Australian and international peer companies (which determines the number
of securities granted that vest);
− The change in the price per Atlas Arteria stapled security (which determines the value of each stapled security that vests); and
− The value of distributions that would have been made during the vesting period for the number of securities that vest
(Distribution Equivalents).
As a result, management incentives are aligned with the long term interests of securityholders to achieve strong performance
relative to peers and to generate an appropriate balance of security price performance and distributions.
During 2019, the Boards and the PRCs reviewed a number of aspects of the LTIP and concluded that the following would apply for
awards under the LTIP in 2020 (no changes have been made to the terms of the awards made for previous years):
1 We will continue to use relative TSR as the sole performance hurdle given the current strategic focus of the business on longer
term value creation and business optimisation. The Boards considered other measures including EBITDA and cash flow and
concluded that they are not currently the most appropriate performance measures. The Boards acknowledge as the business
evolves it may be appropriate to introduce a suitable further measure/s in addition to relative TSR for assessing LTIP performance;
2 We will adopt a new peer group for assessment of relative TSR comprising OECD-domiciled companies in the GLIO.
The GLIO is a relatively new organisation that provides a global platform for information on listed infrastructure companies
and includes approximately 125 OECD-domiciled members that represent approximately $3,765bn in market capitalisation.
The GLIO has created the GLIO Index of core infrastructure companies which has been selected as it is a larger and less
volatile group than the current peer group and is specific to the infrastructure sector rather than being a mix of infrastructure
and property organisations;
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3 We will use a volume weighted average security price (VWAP) over a 40 business day period at the start and the end of the
performance period for the calculation of TSR performance in place of the current point to point calculation. A 40 business
day averaging period for calculating the security price for TSR performance helps to eliminate the impact of short term
security price movements on vesting outcomes; and
4 We will continue to use a 10 business day VWAP for the period following release of the Groups’ annual results for calculating
the security price used to determine the number of securities to be issued for each LTIP Award.
Element
Description
Opportunity
The maximum grant value of LTIP opportunities represents 100% of fixed remuneration for the MD & CEO
and 70% of fixed remuneration for the KMP Executives. The number of awards is based on face value.
For FY2018, the number of instruments granted was determined based on the 10 day VWAP immediately
following the 2019 Annual General Meeting (which was held on 15 May 2019).
For FY2019 and subsequent years, the number of instruments to be granted is determined based on the
10 day VWAP immediately following the announcement by Atlas Arteria of its annual results.
For the MD & CEO, the 2018 and 2019 grants were made in 2019 following approval from securityholders
at the 2019 AGM.
Vehicle
Awards are delivered in the form of performance rights. A performance right is a right to acquire one fully
paid Atlas Arteria security, subject to meeting pre-determined performance measures.
Performance measure
LTIP performance is assessed against relative TSR. Relative TSR was selected as the sole performance
measure as it measures security holding value creation objectively, can be used for comparing performance
across different jurisdictions and is widely understood and accepted by stakeholders.
For the FY2018 and FY2019 grants, Atlas Arteria’s TSR performance was assessed against a local and global
industry comparator group, comprising Abacus Property Group, APA Group, Aurizon Holdings Limited,
AusNet Services, Charter Hall Group, Growthpoint Properties Australia, Qube Holdings Limited, Spark
Infrastructure Group, Sydney Airport, Transurban Group, 3i Infrastructure, Cogent Communications Holdings
Limited, Eiffage SA, Genesee & Wyoming Inc., Getlink, Macquarie Group Infrastructure Corporation and Zayo
Group Holdings, Inc. These companies were selected as they operate in comparable industries, with asset
size, market capitalisation, jurisdiction of assets and operational control, in relevant ranges.
The comparator group may, at the discretion of the Boards, be adjusted to take into account events during
the Performance Period including, but not limited to takeovers, mergers, de-mergers or de-listings, so that
the outcome appropriately reflects the circumstances. An adjustment will be made to the peer group to
reflect the change of ownership of Genesee & Wyoming which is now in private ownership.
Vesting schedule
Relative TSR performance is assessed on a sliding scale, with vesting determined as follows:
The changes to apply for the 2020 LTIP awards are noted above.
Atlas Arteria’s TSR performance
Below the 51st percentile
At the 51st percentile
% vesting
0%
50%
Between the 51st percentile & 75th percentile
Pro rata between 50% & 100%
At the 75th percentile
100%
The Boards retain discretion to adjust the relative TSR measure in exceptional circumstances if
considered appropriate so that participants are neither advantaged nor disadvantaged by matters outside
management’s control.
Performance period
Performance is measured over a three year performance period, from 1 January to 31 December.
The performance for 2019 grant will be measured from 1 January 2019 to 31 December 2021.
Vesting and allocation
of securities
If and when the Boards determine that the relative TSR performance measure has been achieved, the
performance rights will automatically be exercised and the relevant number of securities will be allocated.
Distribution equivalents Distribution equivalents will be payable (via a grant of securities or a cash payment, at the Boards’ discretion)
on performance rights that have vested, to the value of any distributions paid during the performance period
in respect of an equivalent number of Atlas Arteria securities.
In 2020, the Groups are introducing an employee equity plan to enable all corporate employees to become securityholders
of the Groups. The plan is being introduced to support employee retention, develop the team with a common purpose, share
in the success of the business and for employees to become equity holders and thus increase alignment with securityholders.
All corporate employees other than members of the Executive Team who participate in the LTIP Scheme will participate in the
plan. Awards to the value of $5,000 will be made in the form of share rights to corporate employees and vesting will be subject
to a 3 year service condition. It is expected the total value of the equity to be awarded annually will be in the order of $125,000.
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6 FY2019 Remuneration Outcomes
As noted above, STI performance in respect of FY2019 was assessed based on two performance periods:
− For the period prior to internalisation of management from the date of commencement of employment of each KMP
to 31 March 2019, against objectives and targets related to the successful implementation of internalisation; and
− For the period following internalisation from 1 April 2019 to 31 December 2019, based on a combination of financial and
non-financial measures.
The performance periods assessed during FY2019 related to performance achievements referable to and expensed over the two
financial years – FY2018 and FY2019.
− For the MD & CEO, the Remuneration Report includes STI Awards for the period from 1 May 2018 to 31 March 2019 (8 months
applicable to FY2018 and 3 months applicable to FY19) and for the period from 1 April 2019 to 31 December 2019 (9 months
applicable to FY2019).
− For the CFO, the Remuneration Report includes STI Awards for the period from 16 July 2018 to 31 March 2019 (5½ months
applicable to FY2018 and 3 months applicable to FY19) and for the period from 1 April 2019 to 31 December 2019 (9 months
applicable to FY2019).
− For the COO, the Remuneration Report includes STI Awards for the period from 28 December 2018 to 31 March 2019 (3 months
applicable to FY2019) and for the period from 1 April 2019 to 31 December 2019 (9 months applicable to FY2019).
The annual assessment process also includes consideration of both what is achieved and how it is achieved taking into account
behaviours and by reference to our values. The actual STI outcomes can be adjusted where these expectations are deemed not
to have been met. No such adjustments were made for FY2019.
The terms of STI Awards for the MD & CEO and the KMP Executives provide for 50% to be paid in cash and 50% to be withheld
and awarded in Restricted Atlas Arteria Securities.
Details of the FY2019 STI Awards for the MD & CEO and KMP Executives are set out below.
6.1 Pre internalisation STI Awards
The Pre Internalisation KPI’s were established to align the efforts of the executive team with the objective of achieving
internalisation of Atlas Arteria management in a manner which ensured a high quality team with systems and processes
which enabled a seamless transition and the ongoing effective management of the business at the standard expected
of an ASX 100 business.
This objective was achieved by 1 April 2019 without compromise to the standards the Boards set for the successful independent
management of the business on a stand-alone basis. The focus during the period prior to internalisation was on building the
business to allow for growth and development of strategic opportunities.
Performance for the pre internalisation period has been assessed from the date each of the KMP Executives commenced
employment to the date of internalisation, 1 April 2019.
Performance was assessed against the following measures:
6.1.1 MD & CEO
Performance area
Weighting
Performance
outcomes
to target
Achievements
Transition activities
30%
Above Target Key achievements included recruitment of a high
Performance
measures pre
internalisation
Transition budget
Stakeholder engagement
25%
15%
Target
Target
Strategic
30%
Target
Total
100%
105.5%
quality Executive Team by 31 December 2018,
implementation of all management, financial
and administration systems, processes and
procedures to enable the Groups to operate
as successful stand-alone businesses.
Internalisation was achieved ahead of plan and
within budget.
Good relationships established with key
stakeholders including securityholders, joint
investors and business partners.
Review of the capital structure of the Groups, a
risk analysis of the business was undertaken and
development of a proposed business strategy for
the period immediately following internalisation
was developed.
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6.1.2 KMP Executives
The MD & CEO’s STI objectives for the pre internalisation period were cascaded to the KMP Executives and assessed
on a consistent basis with the MD & CEO.
6.1.3 Executive STI Outcomes
Based on the performance achievement assessments described above, the following STI Awards were made in respect
of achievements relating to the internalisation of management on 1 April 2019.
Name
Graeme Bevans
Nadine Lennie
Vincent Portal-Barrault
% of maximum
achieved
70%
79%
57%
Value
pro rata
– cash
532,558
145,049
39,378
Value
pro rata –
restricted
securities
532,558
145,049
39,378
STI
forfeited
447,384
76,465
61,554
6.2 Post Internalisation STI Awards
Performance for the post internalisation period has been assessed from the date of internalisation 1 April 2019 to 31 December
2019 against a range of financial and individual measures linked to achieving meaningful business and operational outcomes.
In view of the exceptional performance across both financial and non-financial metrics, the Boards exercised discretion to award
the capped amount of 150% of Target.
The Performance outcomes assessed for the Post Internalisation period were as follows:
6.2.1 MD & CEO
Performance area
Comprises a combination
of the following:
− Proportional adjusted EBITDA
(reflecting proportional
performance of each business
adjusted for items determined
by the Boards).
− Distributions per security
− Cashflow available for
distribution
− Corporate operational
expenditure
Conduct a review of OH&S policies
and implement best practice policies
in each business by 31 December 2019
Restructure APRR including
reaching agreement with
Macquarie Group, EIffage, ADIA
and AORR to end Macquarie
Adviser’s management of MAF2
Corporate development activity
which achieves accretive value
for Atlas Arteria
Performance
measures post
internalisation
Weighting
70%
Performance
outcomes to
target
Between
Target and
Stretch
Achievements
Overall financial outcomes were between Target
and Stretch. EBITDA was above Target, cash flow
available for distribution was between Target
and Stretch, Distributions per Security were at
Target and Corporate Operational Expenditure
was at Stretch
30%
Stretch
Overall performance was at full stretch for
achievements including:
− Process improvements to provide an immediate
improvement to OH&S systems at Dulles
Greenway – the outcome was between
Threshold and Target
− Agreement reached with all parties for
the APRR transaction on terms which were
mutually beneficial to all parties – the outcome
was at Stretch.
− The transaction was accretive with significant
future value to be captured – the outcome was
at Stretch.
Total awarded
100%
150%
These STI awards have been pro-rated to reflect the period from the date of internalisation (1 April 2019)
to 31 December 2019.
54 | ATLAS ARTERIA ANNUAL REPORT 2019
DIRECTORS’ REPORTS
6.2.2 KMP Executives
As was the position for the STI for the pre internalisation period, the MD & CEO’s STI objectives, both financial and non-financial,
for the period following internalisation on 1 April 2019 were cascaded to the KMP Executives. Their STI outcomes were assessed
on a consistent basis with that of the MD & CEO.
6.2.3 Executive STI outcomes
Based on the performance achievement assessments described above, the following STI Awards were made in respect
of achievements relating to the performance period following internalisation from 1 April 2019 to 31 December 2019.
Name
Graeme Bevans
Nadine Lennie
Vincent Portal-Barrault
7 Non-Executive Director fees
% of maximum
achieved
100%
100%
100%
Value
pro rata
– cash
618,750
194,063
202,370
Value
pro rata –
restricted
securities
618,750
194,063
202,370
STI
forfeited
0
0
0
7.1 Determination of Non-Executive Director fees
In order to attract and retain high calibre Non-Executive Directors (‘NED’), fees are reviewed periodically by the PRCs and set with
reference to the market.
A market review of Non-Executive Director fees was undertaken in 2018, which included a review of market benchmarking
information for companies of a similar size and complexity to Atlas Arteria (being companies with a market capitalisation between
50% to 200% of Atlas Arteria). The fees for 2019 are set out below:
Fees
Board
Audit and Risk Committee
Remuneration Committee
Nominations and Governance Committee
Travel fee 3
Additional ad hoc committee fee
ATLAX
ATLIX
Chair (AUD) Member (AUD)
Chair (USD) Member (USD) Member (AUD) 1
$280,000 2
$140,000
$160,0002
$80,000
$30,000
$30,000
Nil
$15,000
$15,000
Nil
$10,000
$2,500 per day
$18,000
$18,000
Nil
$9,000
$9,000
Nil
$10,000
$80,000
$9,000
$9,000
Nil
N/A
$1,750 per day
$1,750 per day
1. For Australian based director.
2. Committee fees are not payable to the Chairs of the ATLAX or ATLIX Boards.
3.
Non-Executive Directors are also be entitled to receive a travel fee of AUD$10,000 for each occasion where they are required to travel over 8 hours to attend
a Board meeting or strategy session.
During 2019, the Boards resolved that there would be no increase in Non-Executive Director fees for 2020.
ATLAX and ATLIX directors are not entitled to Atlas Arteria options or securities or to retirement benefits as part of their
remuneration package.
7.2 Aggregate fee pool
As approved by securityholders at the 2019 AGM, the aggregate ATLAX Non-Executive Director fee pool is capped at AU$1,100,000
and the ATLIX Non-Executive Director fee pool is capped at US$700,000.
ATLAS ARTERIA ANNUAL REPORT 2019 | 55
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DIRECTORS’ REPORTS
8 Remuneration Governance
8.1 Roles and responsibilities
The table below outlines the roles and responsibilities of the Boards, PRCs, Management and external advisors in relation to the
remuneration arrangements of Directors, MD & CEO and the KMP Executives.
The Boards
People & Remuneration Committees Management
External advisors
Approve remuneration
strategy and approves
recommendations from
the PRCs
Make recommendations
to the Boards regarding the
remuneration framework,
policies and practices for Atlas
Arteria as well as remuneration
for KMP
Makes recommendations to
the PRCs on Atlas Arteria’s
remuneration framework,
policies and practices
Provide independent advice to
the PRCs and/or Management on
remuneration market data, market
practice and other remuneration
related matters
The requirement for external remuneration advisor services is assessed in the context of matters the PRCs need to address.
External advice is used as a guide but does not serve as a substitute for directors’ consideration of the relevant matters. Therefore,
no remuneration recommendations, as defined by the Corporations Act 2001, were made by external remuneration advisors.
8.2 Executive Contracts
The remuneration and other terms of employment for the MD & CEO and KMP Executives are formalised in executive contracts.
Key contractual terms in place for FY2019 are outlined below.
Contract type
Termination notice
by either party
Termination notice
with cause
MD & CEO
Ongoing
KMP Executives
Ongoing
12 months
6 months
Immediate without
notice period
Immediate without
notice period
Termination notice
by KMP for fundamental
change in role
30 days within 21 days
of fundamental change
30 days within 21 days
of fundamental change
8.3 Additional provisions as related to STI and LTIP arrangements
The table below summarises additional arrangements as they relate to the MD & CEO and other KMP Executives.
Provision
STI
LTI
Clawback / Malus
In the event of:
− Material non-compliance with any financial reporting requirement or other policies and operating procedures
of the Groups;
Cessation of
employment
Change of control
− Fraudulent or dishonest behaviour; or
− Misconduct.
The Boards have discretion to determine that some or all deferred STI restricted security awards and unvested
LTIP awards are forfeited.
If a participant resigns or is terminated for cause
(including gross misconduct), any deferred securities
are forfeited and the participant is not entitled to any
further payment of cash STI. If a participant leaves
for any other reason, subject to Board discretion,
the participant will be entitled to a pro rata payment
of cash STI subject to performance and deferred
securities will normally stay ‘on foot’ until the end
of the deferred period.
Upon a change of control:
− The Boards will determine in their absolute
discretion the treatment of the STI opportunity.
− Subject to the Boards determining otherwise,
cash based STI will be assessed on a pro rata
basis and paid at that time based on performance,
and deferred STI will vest in full.
If a participant resigns or is terminated for cause (including
gross misconduct), unvested performance rights will
automatically lapse. If a participant leaves for any other
reason, subject to Board discretion, a pro-rata number
of unvested performance rights (reflecting the portion of
performance period served) will normally stay ‘on-foot’
to be tested against the performance condition at the end
of the original performance period.
Where a change of control occurs or is likely to
occur, the Boards have discretion to determine the
treatment of unvested equity awards and the timing
of such treatment. In the event the Boards do not
exercise their discretion, the LTIP will vest pro rata for
time and performance.
56 | ATLAS ARTERIA ANNUAL REPORT 2019
DIRECTORS’ REPORTS
8.4 Minimum securityholding requirements
Minimum securityholding requirements help ensure there is alignment between the interests of the Directors, KMP and
securityholders.
Role
Minimum shareholding
Timing to meet requirement
Non-Executive Directors
100% of annual director base fees
3 years from the later of July 2017
(when the policy was implemented)
or from the date of their appointment
MD & CEO
KMP Executives
100% of fixed remuneration
50% of fixed remuneration
5 years from appointment
5 years from appointment
9 Statutory disclosures
9.1 Executive statutory remuneration disclosures for FY2019
The following table shows the total remuneration for the MD & CEO and KMP Executives for FY2019.
Short term benefits
Long term
benefits
Share based payments
Name
Financial
year
Cash
salary
Annual
leave
accrual
movement
Cash STI
Superannuation
contributions
Value of LTI
Value of STI
Total
remuneration
Performance
based pay %
Graeme Bevans
2019 $1,079,231
($21,992)
$783,637
$20,767
$342,505
$543,035
$2,747,183
Nadine Lennie
Vincent Portal-
Barrault
Total
Total
2018
2019
2018
2019
2018
$696,356
$60,889
$367,671
$33,554
$109,857
$185,238
$1,453,565
$554,228
$25,078
$259,714
$20,767
$126,860
$166,055
$1,152,702
$256,619
$21,549
$79,398
$9,501
$28,384
$41,443
$436,894
$583,601
$4,595
$241,712
$16,015
$141,903
$116,886
$1,104,712
$6,315
$0
$1,502
$170
$789
$7,274
$16,050
2019 $2,217,060
$7,681 $1,285,063
$57,549
$611,268
$825,976 $5,004,597
2018
$959,290
$82,438
$448,571
$43,225
$139,030
$233,955 $1,906,509
60.8%
45.6%
47.9%
34.2%
45.3%
59.6%
54.4%
43.1%
1.
Share based expenses included the FV of equity awards. External valuation advice has been used to determine the value of performance rights awarded in the year
ended 31 December 2019. The valuation has been made using the Black Scholes Option Pricing Model that includes a Monte Carlo simulation analysis. Details
of the fair values of equity awards granted during the year are contained in the foot notes in the table titled Performance rights held during the year at 9.3 below.
2. The number of performance rights allocated to each participant is determined based on face value.
3. The reported amounts for cash STI and value of STI share based payments includes the STI awards for two performance periods as noted above at section 6.
4.
The FY2018 disclosures were included on a voluntary basis as the named individuals were not KMP for that year. Given they are now KMP for FY2019, comparative
information for all remuneration elements have been included.
ATLAS ARTERIA ANNUAL REPORT 2019 | 57
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE DIRECTORS’ REPORTS
9.2 Non-Executive Director statutory remuneration disclosures for FY2019
The following table shows the fees paid to Non-Executive Directors of ATLAX and ATLIX for FY2019.
Name
Financial year
and fees Superannuation
Total
and fees Superannuation
Total
ATLAX fees (AUD)
ATLIX fees
Cash salary
Cash salary
$290,000
90,736 (AUD)
7,264 (AUD)
98,000 (AUD)
$210,000
83,750 (AUD)
Nora Scheinkestel
David Bartholomew 1, 4
Debbie Goodin 1, 3
Jean-Georges Malcor 5
Jeffrey Conyers 2
Fiona Beck 2, 6
James Keyes
Derek Stapley
Richard England 8
Christopher Leslie 7
John Roberts 9
Totals
Totals
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
$269,233
$189,710
$172,100
$32,380
$190,365
$162,864
$184,340
$24,583
–
–
–
–
–
–
–
–
–
$20,767
$20,290
$15,400
$3,037
$17,135
$15,261
$660
–
–
–
–
–
–
–
–
–
–
$187,500
$35,417
$207,500
$178,125
$185,000
$24,583
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
179,250 (USD)
120,000 (USD)
41,292 (USD)
–
116,000 (USD)
85,000 (USD)
111,762 (USD)
92,500 (USD)
–
–
24,500 (USD)
85,000 (USD)
–
–
$136,826
$14,424
$151,250
–
–
–
$105,000
$816,038
$651,363
–
–
–
–
$53,962
$53,012
–
–
–
$105,000
$870,000
$704,375
$764,749
$598,461
$7,264
–
$772,013
$598,461
–
–
–
–
–
–
–
83,750 (AUD)
–
–
–
–
–
–
– 179,250 (USD)
– 120,000 (USD)
–
–
41,292 (USD)
–
– 116,000 (USD)
–
85,000 (USD)
– 111,762 (USD)
–
–
–
–
–
–
–
92,500 (USD)
–
–
24,500 (USD)
85,000 (USD)
–
–
1. Additional fees for duties performed as a member of the due diligence committee in respect of the Equity Raise.
2. Additional fees for duties performed as a member of the due diligence committee in respect of the APRR Transaction and the Equity Raise.
3. One off fee in FY2018 of AUD$20,000 for additional duties performed for internalisation.
4. Commenced as a Non-Executive Director, effective 1 October 2018.
5. Commenced as Non-Executive Director, effective 1 November 2018.
6. Commenced as a Non-Executive Director, effective 13 September 2019.
7. Ceased to be a Non-Executive Director 1 April 2019.
8. Ceased to be a Non-Executive Director on 30 November 2018.
9. Ceased as a Non-Executive Director on 28 September 2018.
58 | ATLAS ARTERIA ANNUAL REPORT 2019
DIRECTORS’ REPORTS
9.3 Equity instrument disclosures relating to KMP
Securityholdings
The table below outlines the number of ordinary securities held by each KMP including their personally related parties, as
at 31 December 2019, and the minimum security holding requirements. Non-Executive Directors have acquired their security
holdings from their personal resources on market and in accordance with Atlas Arteria’s trading policy. Executives acquire
their security holdings from awards that vest under the Groups’ equity plans. All Directors and Executives are tracking to meet
their security holding requirement. All Directors took up their direct entitlements in full, to the extent that they were eligible
to participate, in the Entitlement Offer dated 21 November 2019.
Non-Executive Directors
Name
Nora Scheinkestel
Debbie Goodin
David Bartholomew
Jean-Georges Malcor
Jeffrey Conyers 4
James Keyes
Derek Stapley
Fiona Beck
Christopher Leslie 5
Balance at
1 January
2019
78,431
5,671
0
0
40,000
5,000
5,000
0
Changes
25,393
20,908
20,506
20,238
2,381
952
21,666
8,333
Balance at
31 December
2019 3
Value at
31 December
2019 1
Minimum
security
holding
requirement 2
Date security
holding to be
attained
103,824
26,579
20,506
20,238
42,381
5,952
26,666
8,333
$812,942
$208,114
$160,562
$158,464
$331,843
$46,604
$208,795
$65,247
$220,000
$140,000
$140,000
$140,000
$114,188
$114,188
$114,188
$114,188
Jul-20
Sep-20
Oct-21
Nov-21
Jul-20
Jul-20
Jul-20
Sep-22
N/A
1.
Based on the closing price of Atlas Arteria securities on 31 December 2019 of $7.83. The requirement is assessed at the higher of the purchase price or market
value of the securities.
Includes securities acquired in the Entitlement Offer.
2. The minimum security holding requirement for ATLIX Board members has been converted to AUD at 31 December 2019 exchange rate of AUD$1 = USD$0.7006.
3.
4. Due to regulatory constraints, unable to participate in the Entitlement Offer.
5. Ceased to be a Non-Executive Director 1 April 2019.
MD & CEO and KMP Executives
Name
Graeme Bevans
Nadine Lennie
Vincent Portal-Barrault
Balance at
1 January
2019
0
0
0
Changes
90,731
20,758
5,636
Balance at
31 December
2019
Value at
31 December
2019 1
Minimum
security
holding
requirement 2
Date security
holding to be
attained
90,731
20,758
5,636
$710,424
$1,100,000
$162,535
$287,500
$44,130
$299,808
May-23
Jul-23
Dec-23
1.
Based on the closing price of Atlas Arteria securities on 31 December 2019 of $7.83. The requirement is assessed at the higher of the purchase price or market
value of the securities.
2. The minimum security holding requirement for Luxembourg executives has been converted to AUD at 31 December 2019 exchange rate of AUD$1 = Euro 0.6254.
ATLAS ARTERIA ANNUAL REPORT 2019 | 59
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Options
No options over unissued ordinary securities of Atlas Arteria existed or were granted to KMP during FY2019.
Performance rights held during the year
The numbers of rights over ordinary securities in the Groups held during the financial year by each KMP Executive, including their
related parties, as well as the value of performance rights granted or exercised are set out in the tables which follow. Vesting is
subject to achieving challenging performance targets over the performance period.
Balance at
31 December
2018
#
Name
Graeme Bevans
Nadine Lennie
Vincent Portal-Barrault
Granted in the
year ended
31 December
2019 1
Exercised in
the year ended
31 December
2019
Lapsed in the
year ended
31 December
2019
Balance at
31 December
2019
Unvested at
31 December
2019
#
276,758
101,268
104,458
#
0
0
0
#
0
0
0
#
276,758
101,268
104,458
Value of share
rights granted
during the
year 2
$
#
276,758
1,029,694
101,268
104,458
368,478
376,520
1. The number of Performance Rights granted during the year includes rights awarded under the FY2018 and the FY2019 Long Term Incentive Awards which are subject
to performance hurdles.
2. External valuation advice has been used to determine the value of the Performance Rights awarded during year ended 31 December 2019. The valuation was made
using the Black Scholes Option Pricing Model that includes a Monte Carlo simulation analysis. The value per instrument of the Share Rights granted during the year
were $3.84 (1 May 2018), $3.65 (16 July 2018) and $3.57 (28 December 2018), for the Performance Rights granted in respect of FY18 and $3.63 (1 January 2019) in
respect of Performance Rights granted for FY19.
Unvested STI Equity Awards during FY2019
During FY2019 deferred securities equal to 50% of their Awards under the Groups’ STI Plan were granted to the MD & CEO and the
KMP Executives. The securities are restricted for 12 months. Details of the Awards are as follows:
Name
Graeme Bevans
Nadine Lennie
Vincent Portal-Barrault
Balance at
31 December
2018
#
Granted in the
year ended
31 December
2019
Vested in the
year ended
31 December
2019
Lapsed in the
year ended
31 December
2019
Balance at
31 December
2019
Unvested at
31 December
2019
#
76,214
20,758
5,636
#
0
0
0
#
0
0
0
#
76,214
20,758
5,636
#
76,214
20,758
5,636
Value of
restricted
securities
granted during
the year
$
532,558
145,049
59,395
9.4 Loans to directors or related parties
There were no loans to directors or related parties during FY2019.
9.5 Other transactions with KMP
There were no other transactions with KMP.
60 | ATLAS ARTERIA ANNUAL REPORT 2019
DIRECTORS’ REPORTS
Auditor services
Atlas Arteria has an auditor independence policy which precludes the auditors from performing certain services. This ensures that
the audit firm does not review or audit their own work, act in a management or a decision-making capacity for Atlas Arteria, act as
advocate for Atlas Arteria or jointly share economic risks and rewards. When permissible by this policy, Atlas Arteria may decide
to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with
Atlas Arteria are important.
Details of the amounts paid or payable to Atlas Arteria’s auditor (PricewaterhouseCoopers) as well as the non-
PricewaterhouseCoopers audit firms for services provided during the year are set out below.
The Boards have considered the position and, in accordance with the advice received from the Audit and Risk Committee, are
satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below,
did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
− All non-audit services have been reviewed by the Audit and Risk Committees to ensure they do not impact the impartiality
and objectivity of the auditor; and
− None of the services undermine the general principles relating to auditor independence as set out in APES 110: Code of
Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a
decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards.
Amounts paid or payable to PricewaterhouseCoopers Australia for:
Audit services
Other assurance services (a)
Amounts paid or payable to Network firms
of PricewaterhouseCoopers for:
Audit services
Taxation services (b)
Amounts paid or payable to PricewaterhouseCoopers for:
Audit and other assurance services
Other services
Amounts paid or payable to non PricewaterhouseCoopers
audit firms for:
Audit services provided by CERTIS GmbH
Wirtschaftsprüfungsgesellschaft (‘CERTIS’)
Non-audit services provided by CERTIS
ALX
ATLAX Group
Year ended
31 Dec 2019
$
Year ended
31 Dec 2018
$
Year ended
31 Dec 2019
$
Year ended
31 Dec 2018
$
503,200
213,771
716,971
479,130
60,680
539,810
251,600
10,043
261,643
239,565
30,340
269,905
357,779
219,785
577,564
314,211
155,974
470,185
38,101
32,745
–
–
38,101
32,745
1,074,750
219,785
854,021
155,974
299,744
302,650
–
–
1,294,535
1,009,995
299,744
302,650
100,256
64,866
–
–
100,256
64,866
–
–
–
–
–
–
(a) Other assurance services in 2019 relates to the Equity Raise due diligence and a one off review of performance rights allocation. Other assurance services in 2018
related to management internalisation.
(b) Taxation services provided by network firms of the auditor relates to the filing of corporate income tax returns for the Groups’ entities domiciled outside of Australia.
ATLAS ARTERIA ANNUAL REPORT 2019 | 61
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Auditor’s Independence Declaration
A copy of the auditor’s independence declaration for ATLAX and its controlled entities during the period, as required under
section 307C of the Corporations Act 2001 and an independence declaration for ATLIX and its controlled entities during the
period, is set out on page 63.
Signed in accordance with a resolution of the directors of Atlas Arteria International Limited:
Jeffrey Conyers
Chairman
Atlas Arteria International Limited
Hamilton, Bermuda
26 February 2020
Derek Stapley
Director
Atlas Arteria International Limited
Hamilton, Bermuda
26 February 2020
Signed in accordance with a resolution of the directors of Atlas Arteria Limited:
Nora Scheinkestel
Chairman
Atlas Arteria Limited
Melbourne, Australia
27 February 2020
Debra Goodin
Director
Atlas Arteria Limited
Melbourne, Australia
27 February 2020
62 | ATLAS ARTERIA ANNUAL REPORT 2019
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audits of Atlas Arteria International Limited and Atlas Arteria Limited for the year ended 31 December 2019,
I declare that to the best of my knowledge and belief there have been:
1
no contraventions of the auditor independence requirements of the Corporations Act 2001 (as applicable) in relation to the
audits; and
2 no contraventions of any applicable code of professional conduct in relation to the audits.
This declaration is in respect of Atlas Arteria International Limited and the entities it controlled during the period and Atlas Arteria
Limited and the entities it controlled during the period.
SJ Smith
Partner
PricewaterhouseCoopers
Sydney
27 February 2020
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
ATLAS ARTERIA ANNUAL REPORT 2019 | 63
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Revenue and other income from operations
Revenue from operations
Other income from operations
Total revenue and other income from operations
Operating expenses
Finance costs
Share of net profits/(losses) of investments accounted for
using the equity method
(Loss)/profit from operations before income tax
Income tax benefit/(expense)
(Loss)/profit for the year
(Loss)/profit attributable to:
Equity holders of the parent entity – ATLIX
Equity holders of other stapled entity – ATLAX
(as non-controlling interest/parent entity)
Stapled securityholders
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss:
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Note
175,192
–
175,192
(336,781)
(112,311)
254,874
(19,026)
9,205
(9,821)
132,378
13,609
145,987
(222,458)
(108,920)
246,141
60,750
(898)
59,852
2.1.1
2.1.2
2.1.3
3.2.2
2.4.1
9,977
118
10,095
(16,053)
(37)
(20,907)
(26,902)
–
5,540
224
5,764
(17,795)
–
(4,801)
(16,832)
1
(26,902)
(16,831)
17,081
76,683
–
–
(26,902)
(9,821)
(16,831)
59,852
(26,902)
(26,902)
(16,831)
(16,831)
Exchange differences on translation of foreign operations
(8,328)
178,502
981
16,547
Items that will not be reclassified to profit or loss:
(Loss)/gain on cash flow hedges
Other comprehensive (loss)/income
Total comprehensive (loss)/income
Total comprehensive (loss)/income attributable to:
Equity holders of the parent entity – ATLIX
Equity holders of other stapled entity – ATLAX
(as non-controlling interest/parent entity)
Stapled securityholders
(Loss)/profit per share attributable to ATLIX/ATLAX
shareholders
Basic (loss)/profit per share attributable to:
ATLIX (as parent entity)
ATLAX (as non-controlling interest)
Basic (loss)/profit per ALX stapled security
Diluted (loss)/profit per share attributable to:
ATLIX (as parent entity)
ATLAX (as non-controlling interest)
Diluted (loss)/profit per ALX stapled security
5.4.2
(25,287)
(33,615)
(43,436)
–
178,502
238,354
–
981
(25,921)
(17,515)
238,638
–
(25,921)
(43,436)
(284)
238,354
(25,921)
(25,921)
–
16,547
(284)
–
(284)
(284)
Cents
Cents
Cents
Cents
2.3
2.3
2.3
2.3
2.5
–
(1.4)
2.5
–
(1.4)
11.3
–
8.8
11.3
–
8.8
–
(3.9)
(3.9)
–
(3.9)
(3.9)
–
(2.5)
(2.5)
–
(2.5)
(2.5)
The above Consolidated Statements of Comprehensive Income should be read in conjunction with the accompanying notes.
64 | ATLAS ARTERIA ANNUAL REPORT 2019
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Current assets
Cash and cash equivalents
Other assets
Total current assets
Non-current assets
Intangible assets – Tolling Concessions
Investments accounted for using the equity method
Restricted cash
Goodwill
Property plant and equipment
Derivative financial instruments
Other assets
Total non-current assets
Total assets
Current liabilities
Debt at amortised cost
Other liabilities
Derivative financial instruments
Total current liabilities
Non-current liabilities
Debt at amortised cost
Deferred tax liabilities
Other liabilities
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity attributable to securityholders of the parent – ATLIX
Contributed equity
Reserves
Accumulated losses
ATLIX securityholders’ interest
Equity attributable to other stapled securityholders – ATLAX
Contributed equity
Reserves
Accumulated Income
Other stapled securityholders’ interest
Total equity
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
Note
3.1
4.3
4.1
3.2
3.1
4.2
5.4
4.3
5.1
4.4
5.4
5.1
2.4
4.4
5.4
5.2
5.3
5.2
5.3
1,450,221
186,468
143,390
2,495
1,593,611
188,963
48,612
2,094
50,706
12,461
47,337
59,798
2,438,598
2,578,434
–
–
1,423,265
1,569,970
144,589
164,644
253,904
14,054
11,249
–
248
203,961
79,390
4,595
2,900
319
–
–
2,323
–
51
4,141,318
4,439,569
5,734,929
4,628,532
146,963
197,669
–
–
561
–
8,274
173,479
233,277
(45,181)
(25,927)
(33,768)
(77,322)
(34,859)
(3,108)
–
–
(3,377)
(3,398)
–
–
(104,876)
(115,289)
(3,377)
(3,398)
(2,129,328)
(2,101,962)
(50,541)
(34,350)
(12,803)
(57,709)
(11,571)
(13,495)
(2,227,022)
(2,184,737)
(2,331,898)
(2,300,026)
–
–
(1,756)
–
(1,756)
(5,133)
3,403,031
2,328,506
192,536
3,275,591
1,995,994
156,898
(221,994)
190,155
(87,522)
3,210,495
2,098,627
–
–
–
–
–
–
–
–
–
(3,398)
229,879
–
–
–
–
187,571
197,311
187,571
197,311
(6,642)
11,607
(7,528)
40,096
192,536
229,879
3,403,031
2,328,506
(6,642)
11,607
192,536
192,536
(7,528)
40,096
229,879
229,879
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes.
The financial information was approved by the ATLIX Board of Directors on 26 February 2020 and as required by Bermuda
regulations was signed on its behalf by:
Jeffrey Conyers
Atlas Arteria International Limited
Hamilton, Bermuda
Derek Stapley
Atlas Arteria International Limited
Hamilton, Bermuda
ATLAS ARTERIA ANNUAL REPORT 2019 | 65
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
ALX
Attributable to ATLIX securityholders
Contributed
equity
$’000
Reserves
$’000
Accumulated
Losses
$’000
Attributable to
ATLAX
securityholders
$’000
Total
$’000
Total
ALX equity
$’000
Total equity at 31 December 2018
1,995,994
190,155
(87,522)
2,098,627
229,879
2,328,506
Adjustment on adoption of AASB 16
(refer note 7.5.5)
–
–
(1,219)
(1,219)
(220)
(1,439)
Total equity at 1 January 2019 (restated)
1,995,994
190,155
(88,741)
2,097,408
229,659
2,327,067
Profit/(loss) for the year
Exchange differences on translation
of foreign operations
Change in fair value of the hedging
instrument
Total comprehensive income/(expense)
Transactions with equity holders in their
capacity as equity holders:
Issue of securities during the year
(refer note 5.2)
Transaction costs associated with issue
of securities (refer note 5.2)
Employee performance rights
(refer notes 5.2 and 5.3)
Capital return (refer note 2.2)
Dividends paid (refer note 2.2)
Total equity at 31 December 2019
–
–
–
1,304,255
(25,449)
791
–
–
1,279,597
3,275,591
–
17,081
17,081
(26,902)
(9,821)
(9,309)
(25,287)
(34,596)
–
–
17,081
(9,309)
981
(8,328)
(25,287)
(17,515)
–
(25,921)
(25,287)
(43,436)
1,304,255
45,745
1,350,000
(25,449)
(2,217)
(27,666)
–
–
1,339
–
–
–
–
–
–
2,130
–
(68)
(53,295)
(1,367)
2,062
(53,295)
(151,701)
(150,334)
(150,334)
1,339
(150,334)
1,130,602
(11,202)
1,119,400
156,898
(221,994)
3,210,495
192,536
3,403,031
ALX
Attributable to ATLIX securityholders
Contributed
equity
$’000
Reserves
$’000
Accumulated
Losses
$’000
Attributable to
ATLAX
securityholders
$’000
Total
$’000
Total
ALX equity
$’000
Total equity at 1 January 2018
1,911,877
28,122
(84,040)
1,855,959
306,116
2,162,075
Adjustment to retained earnings from
adoption of AASB 9 on 1 January 2018
–
–
288
288
(288)
–
Total equity at 1 January 2018 (restated)
1,911,877
28,122
(83,752)
1,856,247
305,828
2,162,075
Profit/(loss) for the year
Exchange differences on translation
of foreign operations
Transfer from foreign currency translation
reserve to accumulated losses
Total comprehensive income
Transactions with equity holders in their
capacity as equity holders:
Application of performance fees
to subscription for new securities
Employee performance rights
(refer note 5.3)
Capital return (refer note 2.2)
Dividends paid (refer note 2.2)
–
–
–
84,117
–
–
–
84,117
–
76,683
76,683
(16,831)
59,852
161,955
–
161,955
16,547
178,502
78
(78)
–
–
–
162,033
76,605
238,638
(284)
238,354
–
–
–
–
–
–
–
(80,375)
(80,375)
(87,522)
84,117
6,186
90,303
–
–
(80,375)
3,742
141
(77,209)
(4,783)
(75,665)
141
(77,209)
(85,158)
(71,923)
2,098,627
229,879
2,328,506
Total equity at 31 December 2018
1,995,994
190,155
The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.
66 | ATLAS ARTERIA ANNUAL REPORT 2019
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
ATLAX Group
Attributable to ATLAX securityholders
Contributed
equity
$’000
Reserves
$’000
Accumulated
Income
$’000
Total
$’000
Total equity at 31 December 2018
197,311
(7,528)
40,096
229,879
Adjustment on adoption of AASB 16 (refer note 7.5.5)
Total equity at 1 January 2019 (restated)
Loss for the year
Exchange differences on translation of foreign operations
Total comprehensive income
Transactions with equity holders in their capacity as equity holders:
Issue of securities during the year
Transaction costs associated with issue of securities
Employee performance rights (refer notes 5.2 and 5.3)
Capital return (refer note 2.2)
Dividends paid (refer note 2.2)
Total equity at 31 December 2019
ATLAX Group
–
–
197,311
(7,528)
–
–
–
45,745
(2,217)
27
(53,295)
–
(9,740)
187,571
–
981
981
–
–
(95)
–
–
(95)
(6,642)
(220)
39,876
(26,902)
–
(220)
229,659
(26,902)
981
(26,902)
(25,921)
–
–
–
–
(1,367)
(1,367)
11,607
45,745
(2,217)
(68)
(53,295)
(1,367)
(11,202)
192,536
Attributable to ATLAX securityholders
Contributed
equity
$’000
Reserves
$’000
Accumulated
Income
$’000
Total
$’000
Total equity at 1 January 2018
268,334
(24,216)
61,998
306,116
Adjustment to retained earnings from adoption of AASB 9
on 1 January 2018
Total equity at 1 January 2018 (restated)
Loss for the year
Exchange differences on translation of foreign operations
Total comprehensive income
Transactions with equity holders in their capacity as equity holders:
Application of performance fees to subscription for new securities
Employee performance rights (refer note 5.3)
Capital return (refer note 2.2)
Dividends paid (refer note 2.2)
Total equity at 31 December 2018
–
–
268,334
(24,216)
–
–
–
6,186
–
(77,209)
–
(71,023)
197,311
–
16,547
16,547
–
141
–
–
141
(7,528)
(288)
61,710
(16,831)
–
(16,831)
–
–
–
(4,783)
(4,783)
40,096
(288)
305,828
(16,831)
16,547
(284)
6,186
141
(77,209)
(4,783)
(75,665)
229,879
The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.
ATLAS ARTERIA ANNUAL REPORT 2019 | 67
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE CONSOLIDATED STATEMENTS OF CASH FLOWS
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Cash flows from operating activities
Toll revenue received (net of transaction fees)
Interest received
Other income received
Net indirect taxes received
Property taxes paid
Manager’s and adviser’s base fees paid
Manager’s and adviser’s performance fees paid
Payments to suppliers and employees (inclusive of GST/VAT)
Net income taxes paid/received
Net cash flows from operating activities
Cash flows from investing activities
Return on preferred equity certificates and shares issued
by Macquarie Autoroutes de France 2 SA (‘MAF2’)
Payment for purchase of investments, net of cash acquired
Payments to suppliers associated with the purchase of investments
Additions to tolling concessions (IFRIC 12)
Purchase of fixed assets
Sale of fixed assets
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings (net of transaction costs)
Repayment of debt and interest (including transaction costs)
Proceeds from issue of securities (net of transaction costs)
Transfer to restricted cash
Capital return
Dividends paid
Loan repayment from related parties
Loans advanced to related parties
Payment for purchase of derivative financial instrument
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate movements on cash and cash equivalents
Cash and cash equivalents at the end of the year
146,332
123,174
6,824
675
570
(6,091)
(31,009)
–
(40,942)
22
2,001
634
430
(5,889)
(36,874)
(25,000)
(35,328)
(8)
76,381
23,140
238,247
249,417
–
(54)
(15,424)
(328)
16
1,890
–
–
(1,102)
4
–
1,652
5,949
570
–
(1,164)
–
(14,800)
22
(7,771)
–
–
(50)
–
(76)
–
222,457
250,209
(126)
534,699
(555,834)
–
–
–
44,854
–
(105,291)
1,324,176
(50,054)
(53,295)
(151,701)
–
–
–
(25,702)
(77,209)
(85,158)
–
–
(4,818)
963,835
(214,022)
1,262,673
186,468
1,080
59,327
122,690
4,451
1,450,221
186,468
–
(53,295)
(1,367)
53,633
–
–
43,825
35,928
12,461
223
48,612
–
4,977
–
430
–
(2,711)
(1,713)
(9,673)
–
(8,690)
–
–
–
–
(548)
–
(548)
–
–
–
–
(77,209)
(4,783)
77,411
(8,232)
–
(12,813)
(22,051)
34,304
208
12,461
The above Consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes.
68 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS
Introduction
Atlas Arteria – Stapled security
An Atlas Arteria (‘ALX’) stapled security comprises one Atlas Arteria International Limited (‘ATLIX’) share ‘stapled’ to one Atlas
Arteria Limited (‘ATLAX’) share to create a single listed security traded on the Australian Securities Exchange (‘ASX’). The stapled
securities cannot be traded or dealt with separately.
AASB 3 Business Combinations and AASB 10 Consolidated Financial Statements require one of the stapled entities of a stapled
structure to be identified as the parent entity for the purpose of preparing a consolidated Financial Report. In accordance with this
requirement, ATLIX has been identified as the parent entity of the consolidated group comprising ATLIX and its controlled entities
(‘ATLIX Group’) and ATLAX and its controlled entities (‘ATLAX Group’), together comprising ‘Atlas Arteria’, ‘ALX’ or ‘the Groups’.
As permitted by ASIC Class Order 13/1050 and ASIC Corporations (Stapled Group Reports) Instrument 2015/838, these reports
consist of the Financial Report of ATLIX Group at the end of and during the year and separately the Financial Report of the ATLAX
Group at the end of and during the year.
The Financial Report of Atlas Arteria should be read in conjunction with the separate Financial Report of the ATLAX Group
presented in these reports for the year ended 31 December 2019.
Basis of preparation
Both ATLIX and ATLAX are for-profit entities for the purpose of preparing the Financial Reports.
The Financial Reports were authorised for issue by the directors of the ATLIX Board and the ATLAX Board (together, the ‘Boards’)
on 26 February 2020 and 27 February 2020 respectively. The Boards have the power to amend and reissue the Financial Reports.
The Financial Reports are general purpose financial reports that:
− have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) and the Corporations Act 2001 (where applicable).
− have also been prepared in accordance with and comply with International Financial Reporting Standards (‘IFRS’) as issued by
the International Accounting Standards Board (‘IASB’).
− include the assets and liabilities of all subsidiaries as at 31 December 2019 and the results of the subsidiaries for the year then
ended. Inter-entity transactions with, or between, subsidiaries are eliminated in full on consolidation.
− have been prepared under the historical cost conventions except for certain assets and liabilities, which have been measured
at fair value.
− are presented in Australian dollars with all values rounded to the nearest thousand dollars unless otherwise stated,
in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191.
Significant accounting policies and key judgements and estimates are contained in shaded text and included in the relevant
note. These policies have been consistently applied to all periods presented, unless otherwise stated. Refer to note 7.5 for other
accounting policies which have not been presented along with their respective notes.
Critical accounting estimates and judgements
The preparation of the Financial Reports in accordance with Australian Accounting Standards requires the use of certain critical
accounting estimates. It also requires the directors to exercise judgement in the process of applying the accounting policies.
Estimates and judgements are continually evaluated and are based on historic experience and other factors, including reasonable
expectations of future events. The directors believe the estimates used in the preparation of the Financial Reports are reasonable.
Actual results in the future may differ from those reported.
Significant judgments made in applying accounting policies, estimates and assumptions that have a risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next year are discussed in the following notes:
− Control assessment (Note 3.2 and 6.2)
− Impairment of assets and associates (Note 3.2)
− Intangible assets – Tolling concessions (Note 4.1)
ATLAS ARTERIA ANNUAL REPORT 2019 | 69
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 2 Financial performance
2.1 (Loss)/profit for the year
Revenue recognition
Revenue and other income is recognised as follows:
Toll revenue
Toll revenue from customers is earned as performance obligations are satisfied. A singular performance obligation has been
assessed as the use of the road, and the transaction price, which is calculated based on passing through toll points, is fully
allocated to this performance obligation. Toll revenue is recognised at the time the customers use the road.
Other revenue
Other revenue from customers consists of revenue earned in respect to rental income from cell towers and income from
advertising hoardings on the toll road. Other revenue is recognised over the period of the contract in accordance with the
contracts governing these services as performance obligations are satisfied.
Interest income
Interest income is brought to account on an accruals basis.
Construction revenue
Revenue for the construction of service concession infrastructure assets is recognised in accordance with the percentage
of completion method, which is measured by reference to costs incurred to date as a percentage of total forecast costs
for each project.
2.1.1 Revenue and other income
The (loss)/profit from operations before income tax includes the following specific items of income and expense:
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Revenue from operations:
Toll revenue
Other revenue
Construction revenue from road development activities
Interest income:
Related parties
Other persons and corporations
Total interest income
Total revenue from operations
Other income from operations:
Gain on revaluation (a)
Other income
Reversal of impairment on financial assets (b)
Net foreign exchange gain
Total other income from operations
150,368
126,811
838
16,557
368
7,061
7,429
769
–
877
3,921
4,798
–
9,453
–
410
114
524
175,192
132,378
9,977
–
–
–
–
–
13,470
139
–
–
13,609
145,987
–
–
118
–
118
–
1,678
–
3,862
–
3,862
5,540
–
–
161
63
224
Total revenue and other income from operations
175,192
10,095
5,764
(a) The prior year includes a gain on revaluation of the original investment as a result of acquiring an additional 30% investment in Warnowquerung GmbH & Co KG,
the concessionaire of the Warnow Tunnel and its general partner Warnowquerung Verwaltungsgesellschaft mbH.
(b) Refer to note 4.3 for details.
70 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS
2.1.2 Operating expenses
Operating expenses
Amortisation of tolling concession
Cost of operations:
Toll road maintenance expenses
Other operating expenses
Employment costs
Total cost of operations
Consulting and administration fees
Manager’s and adviser’s base fees (refer to note 6.4.4)
Manager's and adviser's performance fees (refer to note 6.4.4)
Net foreign exchange loss
Impairment loss on goodwill (refer to note 4.2)
Impairment loss on tolling concession (refer to note 4.1)
Construction costs from road development activities
Other expenses
Depreciation and amortisation
Total operating expenses
2.1.3 Finance costs
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
69,273
61,768
11,737
9,838
20,209
41,784
5,655
28,236
–
994
66,028
99,401
16,557
7,843
1,010
10,597
12,042
9,487
32,126
11,920
36,759
70,625
3,483
–
–
–
5,427
350
336,781
222,458
–
–
134
7,705
7,839
3,304
792
–
30
–
–
–
3,777
311
16,053
–
–
172
3,236
3,408
6,104
2,236
4,984
–
–
–
–
1,024
39
17,795
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Interest on debt
Mark to market loss on derivatives
Net loss on cash flow hedge ineffectiveness
Fee on early repayment of borrowings from financial institutions
Issue costs written off on loans repaid during the year
Amortisation of issue cost on borrowings from financial institutions
(refer note 5.1)
Other interest
Total finance costs
100,398
2,458
5,294
–
–
2,821
1,340
89,975
2,055
–
4,576
6,688
5,626
–
112,311
108,920
–
–
–
–
–
–
37
37
–
–
–
–
–
–
–
–
ATLAS ARTERIA ANNUAL REPORT 2019 | 71
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 2.2 Distributions
A distribution payable is recognised for the amount of any distribution declared, or publicly recommended by the directors
on or before the end of the year but not distributed at balance date.
Distributions paid
Dividend paid on 4 October 2019 (a)
Distribution paid on 5 April 2019 (b)
Distribution paid on 5 October 2018 (c)
Dividend paid on 13 April 2018 (d)
Total distributions paid
Distributions paid
Dividend per security paid on 4 October 2019 (a)
Distribution per security paid on 5 April 2019 (b)
Distribution per security paid on 5 October 2018 (c)
Dividend per security paid on 13 April 2018 (d)
Total distributions paid
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
102,505
102,491
–
–
–
–
81,992
80,375
–
54,662
–
–
–
–
81,992
–
204,996
162,367
54,662
81,992
Cents per
stapled
security
Cents per
stapled
security
Cents per
stapled
security
Cents per
stapled
security
15.0
15.0
–
–
30.0
–
–
12.0
12.0
24.0
–
8.0
–
–
8.0
–
–
12.0
–
12.0
(a) The dividend paid on 4 October 2019 comprised an ordinary dividend of 15.0 cps. The dividend was paid in full by ATLIX.
(b) The distribution paid on 5 April 2019 comprised a capital return of 7.8 cps and an unfranked Australian ordinary dividend of 0.2 cps paid by ATLAX and ordinary
dividend of 7.0 cps paid by ATLIX.
(c) The distribution paid on 5 October 2018 comprised of a capital return of 11.3 cps and an unfranked Australian ordinary dividend of 0.7 cps. The distribution was paid
in full by ATLAX.
(d) The dividend paid on 13 April 2018 comprised an ordinary dividend of 12.0 cps. The dividend was paid in full by ATLIX.
72 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 2.3 Earnings per stapled security
Basic earnings per stapled security
Basic earnings per stapled security is determined by dividing the profit attributable to securityholders by the weighted average
number of securities on issue during the year.
Diluted earnings per stapled security
Diluted earnings per stapled security is calculated by adjusting basic earnings per stapled security for the effects of all dilutive
potential ordinary stapled securities.
Basic earnings/(loss) per ATLIX/ATLAX share
Diluted earnings/(loss) per ATLIX/ATLAX share
Earnings/(loss) used in the calculation of basic and diluted
profit/(loss) per ATLIX/ATLAX share
Attributable to ATLIX
equity holders
Attributable to ATLAX
equity holders
Year ended
31 Dec 2019
cps
Year ended
31 Dec 2018
cps
Year ended
31 Dec 2019
cps
Year ended
31 Dec 2018
cps
2.45
2.44
$’000
11.33
11.33
$’000
(3.85)
(3.85)
$’000
(2.49)
(2.49)
$’000
17,081
76,683
(26,902)
(16,831)
Number
Number
Number
Number
Weighted average number of shares used in calculation of basic
earnings/(loss) per ATLIX/ATLAX share
698,100,080
676,545,113
698,100,080
676,545,113
Adjustment for employee performance rights (a)
590,615
101,974
590,615
101,974
Weighted average number of shares used in calculation of diluted
earnings/(loss) per ATLIX/ATLAX share
698,690,695
676,647,087
698,690,695
676,647,087
(a) Diluted earnings per ATLIX/ATLAX share is adjusted for employee performance rights. Refer to note 7.4 for details.
The basic (loss)/profit per ALX stapled security for the year ended 31 December 2019 was (1.40) cps (2018: 8.84 cps) and the diluted
(loss)/profit per ALX stapled security for the year ended 31 December 2019 was (1.41) cps (2018: 8.84cps), using ALX (loss)/profit
attributable to ALX stapled securityholders of ($9.8) million (2018: $59.9 million).
2.4 Income Tax
The income tax expense or benefit for the year is the tax payable on the current year’s taxable income based on the national
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences between the tax bases of assets and liabilities and their carrying amounts in the Financial Reports, and to unused
tax losses.
Deferred income tax is determined using the balance sheet method, being the temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the Financial Reports. Deferred tax assets are recognised for
deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to
utilise those temporary differences and losses. However, the deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time of transaction affects
neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is settled. Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same
taxation authority.
Under current Bermudan law, ATLIX will not be subject to any income, withholding or capital gains taxes in Bermuda.
Controlled entities of ATLIX that are subject to taxes in their jurisdictions recognise income tax using the balance sheet
approach of tax effect accounting.
ATLAS ARTERIA ANNUAL REPORT 2019 | 73
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
2.4.1 Income tax (benefit)/expense
This note provides an analysis of the Groups’ income tax (benefit)/expense, shows what amounts are recognised directly in equity
and how the tax (benefit)/expense is affected by non-assessable and non-deductible items. It also explains significant estimates
made in relation to the Groups’ tax position.
(a) Income tax (benefit)/expense
Income Tax (benefit)/expense
Current tax
Deferred tax
Total income tax (benefit)/expense
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
(1,972)
(7,233)
(9,205)
2,118
(1,220)
898
–
–
–
(1)
–
(1)
(b) Reconciliation of income tax (benefit)/expense to prima facie tax payable
(Loss)/profit from operations before income tax
Prima facie income tax on (loss)/profit at the Australian tax rate of 30%
(19,026)
(5,707)
60,750
18,225
(26,902)
(8,071)
(16,832)
(5,050)
Impact of different tax rates of operations in jurisdictions
other than Australia
Tax effect of amounts that are not deductible/(taxable)
in calculating taxable income:
Non-assessable income
Non-deductible expenditure
Share of net (profits)/losses of investments accounted for using
the equity method
Temporary differences not brought to account
Deferred tax assets on taxable losses not brought to account
Aggregate income tax (benefit)/expense
(c) Tax losses
18,683
141,010
19
50
(37)
50,029
(76,462)
(596)
4,885
(9,205)
(4,088)
1,405
(73,842)
7,152
(88,964)
898
(37)
351
6,272
109
1,357
–
(47)
1,354
1,440
(990)
3,242
(1)
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit of unused tax losses
285,589
75,120
274,589
72,140
284,636
74,939
274,056
72,039
Neither ALX nor the ATLAX Group recognised any current or deferred tax that was debited or credited directly to equity.
2.4.2 Deferred tax assets and liabilities
The Groups have no deferred tax assets. The movement in the balance of deferred tax liabilities (‘DTL’) is as follows:
Deferred tax liabilities
Opening balance at 1 January
Acquisition of subsidiary
Amortisation of deferred tax liabilities
Impairment impact on deferred tax liabilities
Foreign exchange movement
Closing balance at 31 December
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
(57,709)
–
1,558
5,675
(65)
(50,541)
(40,333)
(14,193)
1,220
–
(4,403)
(57,709)
–
–
–
–
–
–
–
–
–
–
–
–
During 2019 the impairment recognised on Dulles Greenway of $165.4 million resulted in a $5.7 million decrease in the DTL.
In the prior year, a DTL of $14.2 million was recognised on intangible assets resulting from acquisition of the remaining
30% equity interest in Warnow Tunnel.
74 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS
2.5 Segment information
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
makers. The chief operating decision makers are responsible for allocating resources and assessing performance of the
operating segments.
2.5.1 Description of segments
Management has determined the operating segments based on the reports reviewed by the Boards. The Boards do not manage
the day-to-day activities of the business. The directors have appointed a management team to run and manage the ongoing
operations of the business.
Management considers the business from the aspect of each of the businesses and have identified four operating segments
for Atlas Arteria and one operating segment for the ATLAX Group. The segments of Atlas Arteria are the investments in APRR,
ADELAC, Dulles Greenway and Warnow Tunnel. The only segment for the ATLAX Group is the investment in Dulles Greenway.
2.5.2 Segment information
The proportionally consolidated segment information for the reportable segments for the year ended 31 December 2019, based
on Atlas Arteria’s economic ownership interest is as follows:
ALX
Year ended
APRR
$’000
ADELAC
$’000
Dulles
Greenway
$’000
Warnow
Tunnel
$’000
Total ALX
$’000
Total ATLAX
$’000
Segment revenue
31-Dec-19
1,051,601
Segment expenses
Segment EBITDA
EBITDA margin
31-Dec-18
1,002,663
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
31-Dec-19
31-Dec-18
(276,836)
(262,489)
774,765
740,174
74%
74%
22,901
22,184
(4,164)
(3,874)
18,737
18,310
82%
83%
129,088
121,800
(24,556)
(22,772)
104,532
99,028
81%
81%
22,063
1,225,653
15,618
1,162,265
(5,441)
(3,697)
16,622
11,921
75%
76%
(310,997)
(292,832)
914,656
869,433
75%
75%
17,340
16,361
(3,299)
(3,059)
14,041
13,302
81%
81%
The segment revenue disclosed in the table above primarily relates to toll revenue generated by the businesses from external customers.
The segment expenses disclosed in the table above relate directly to costs associated with the operation of that segment. The
segment assets and liabilities are disclosed in note 3.2.3 with the exception of Warnow Tunnel whose assets are $212.5 million
(2018: $221.0 million) and liabilities are $219.4 million (2018: $225.0 million).
A reconciliation of the Groups’ segment revenue and EBITDA to its total revenue and profit from operations before income tax
is provided as follows:
Reconciliation of segment revenue to revenue
Segment revenue
Revenue attributable to non-consolidated investments
Construction revenue from road development activities
Unallocated revenue and other income
Total revenue and other income from operations
Reconciliation of segment EBITDA to profit/(loss) from operations
before income tax
Segment EBITDA
EBITDA attributable to non-consolidated investments
Construction expense from road development activities
Impairment of Dulles Greenway expense
Unallocated revenue
Unallocated expenses
Finance costs
Share of net profits/(losses) of investments accounted for using
the equity method
(Loss)/profit from operations before income tax
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
1,225,653
1,162,265
(1,074,502)
(1,036,064)
16,557
7,484
–
19,786
175,192
145,987
17,340
(17,340)
–
10,095
10,095
16,361
(16,361)
–
5,764
5,764
914,656
(793,502)
(16,557)
(165,429)
7,484
(108,241)
(112,311)
254,874
(19,026)
869,433
(766,738)
14,041
(14,041)
13,302
(13,302)
–
–
19,786
(198,952)
(108,920)
246,141
60,750
–
–
10,095
(16,053)
(37)
(20,907)
(26,902)
–
–
5,764
(17,795)
–
(4,801)
(16,832)
ATLAS ARTERIA ANNUAL REPORT 2019 | 75
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3 Cash and investments
3.1 Cash, cash equivalents and restricted cash
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short term
and highly liquid investments that are readily convertible to cash with insignificant risk of changes in value. Restricted
cash includes funds held in escrow, funds backing guarantees or amounts otherwise not available to meet short term
commitments of the Groups and is classified as a non-current asset.
Current
Cash and cash equivalents (a)
Non-current
Restricted cash
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
1,450,221
1,450,221
186,468
186,468
48,612
48,612
12,461
12,461
253,904
253,904
203,961
203,961
–
–
–
–
(a) At 31 December 2019, cash on hand includes $1,324.2 million of proceeds from the Equity Raise which will be used to fund the APRR Transaction which
is expected to complete in early March 2020.
3.1.1 Cash and cash equivalents
During the year cash on hand was held in bank accounts earning money market rates of interest between nil and 2.51%
(2018: nil to 2.52%) per annum.
Cash equivalents include TRIP II’s money market deposits which mature within 30 days and paid interest between 1.37% and
2.44% (2018: 2.32% to 2.56%) per annum.
3.1.2 Restricted cash
This comprises funds held in escrow pursuant to the TRIP II bond indenture agreements, Warnow Tunnel loan agreements and
cash-backed guarantees provided in relation to Warnow Tunnel. Discussion of the Groups’ policies concerning the management
of credit risk can be found in Note 5.4.4.
76 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS
3.2 Investments accounted for using the equity method
Associates
Associates are entities over which the Groups have significant influence but not control. Investments in associates are
accounted for using the equity method of accounting, after initially being recognised at cost. The Groups’ investment
in associates includes the fair value of goodwill (net of any accumulated impairment loss) identified on acquisition.
The Groups’ share of their associates’ post-acquisition profits or losses is recognised in profit or loss. The cumulative
post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from
associates reduce the carrying amount of the investment.
When the Groups’ share of losses in an associate equals or exceeds its interest in the associate, including any long term
interests that, in substance, form part of the Groups’ net investment in the associate, the Groups do not recognise further
losses, unless they have incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Groups and their associates are eliminated to the extent of the Groups’
interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with
the policies adopted by the Groups.
Joint arrangements
Investments in joint arrangements are classified as either joint operations or joint ventures depending upon the contractual
rights and obligations each investor has, and the legal structure of the joint arrangement. The Groups have no joint
operations in the current year and have previously accounted for joint ventures using the equity method.
Impairment of assets and reversal of impairment
An investment accounted for using the equity method is assessed for impairment whenever there are indications that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount.
The recoverable amount of the asset is determined as the higher of the fair value less costs of disposal and the value in use.
If it is not possible to determine a recoverable amount for the individual assets, the assets are assessed together in the smallest
group of assets which generate cash inflows that are largely independent of those from other assets or groups of assets.
Discounted cash flow analysis is the methodology applied in determining recoverable amount. Discounted cash flow analysis
is the process of estimating future cash flows that are expected to be generated by an asset and discounting these to their
present value by applying an appropriate discount rate. The discount rate applied to the cash flows of a particular asset
is reflective of the uncertainty associated with the future cash flows. Periodically, independent traffic forecasting experts
provide a view on the most likely level of traffic to use the toll road having regard to a wide range of factors including
development of the surrounding road network and economic growth in the traffic corridor.
Assets (other than goodwill) that have suffered an impairment are reviewed for possible reversal of the impairment at the
end of each reporting period. An impairment loss is reversed if the recoverable amount of an asset is more than its carrying
value. AASB 136 Impairment of Assets states that impairment losses shall be reversed if, and only if, there has been a change
in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised and the
estimated service potential of the asset has increased. The impairment loss is not reversed just because of the passage
of time, even if the recoverable amount of the asset becomes higher than its carrying value.
Investment in associates and joint venture – equity method
1,423,265
1,569,970
144,589
164,644
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
ATLAS ARTERIA ANNUAL REPORT 2019 | 77
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
Information relating to associates and joint arrangements is set out below:
3.2.1 Carrying amounts
Country of
Incorporation/
Principal Place
of Business
Name of Entity (a)
MAF2 (b), (c)
Luxembourg
TRIP II (d), (e)
USA
USA
USA
Chicago
Skyway
Partnership
(‘CSP’) (f)
Indiana
Toll Road
Partnership
(‘ITRP’) (g)
Principal Activity
Investment in
toll road network
located in the
east of France
(APRR)
Investment in toll
road located in
northern Virginia,
USA
Former owner of
an investment in
toll road located
south of Chicago,
USA
Former owner of
an investment in
toll road located
in northern
Indiana, USA
ALX Economic
interest
As at
31 Dec 2019
and
31 Dec 2018
%
ALX
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
ATLAX
Economic
Interest
As at
31 Dec 2019
and
31 Dec 2018
%
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
50.0/50.0
1,423,248
1,569,953
-/-
–
–
-/-
–
–
13.4/13.4
144,572
164,627
50.0/50.0
14
14
50.0/50.0
14
14
49.0/49.0
3
3
49.0/49.0
3
3
1,423,265
1,569,970
144,589
164,644
(a) All associates and joint arrangements have 31 December year end reporting requirements except for MAF2 which has a 31 March year end.
(b) Atlas Arteria’s investment in MAF2 is classified as an associate as any decision made with regard to the relevant activities requires 85% of the voting members
to proceed.
(c) The ATLIX Group has executed agreements to acquire a further 12.28% economic interest in MAF2 as a result of the APRR Transaction.
(d) The ATLAX Group has a 13.4% interest in TRIP II, the concessionaire for Dulles Greenway is accounted for as an equity accounted associate. Atlas Arteria has a 100%
estimated economic interest in TRIP II after combining ATLAX Group’s 13.4% equity interest with ATLIX Group’s 86.6% economic interest. Accordingly, TRIP II is
accounted for as subsidiary of Atlas Arteria.
(e) TRIP II is in ‘lockup’ under its debt documents, meaning that it is currently unable to make distributions to Atlas Arteria or the ATLAX Group.
(f)
At 31 December 2019, Atlas Arteria legally owned a 50% equity interest in CSP, the former owner of the Chicago Skyway Toll Road, but was no longer exposed to any
variable returns from the ongoing operation of the toll road. The small residual investment balance represents cash left in CSP for payment of expenses.
(g) At 31 December 2019, Atlas Arteria legally owned a 49% equity interest in ITRP, the former owner of the Indiana Toll Road, but was no longer exposed to any variable
returns from the ongoing operations of the toll road. The small residual investment balance represents cash left in ITRP for payment of expenses.
78 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 3.2.2 Movement in carrying amounts
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Carrying amount at the beginning of the year
1,569,970
1,483,337
164,644
153,110
Adjustment on adoption of AASB 16 (refer note 7.5.5)
Share of profits/(losses) after income tax
Distributions received/receivable
Gain on revaluation of joint venture/associate
Derecognition of joint venture/associate
Foreign exchange movement
Impairment of asset (a)
–
254,874
(375,722)
–
–
(25,857)
–
–
246,141
(249,417)
13,470
(13,470)
89,909
–
Carrying amount at the end of the year
1,423,265
1,569,970
(220)
(4,401)
–
(4,801)
–
–
–
–
–
–
941
16,335
(16,375)
144,589
–
164,644
(a) Impairment of Dulles Greenway includes an impairment of $22.1 million (refer to notes 4.1 & 4.2) offset by the impact of the deferred tax liability $5.7 million
3.2.3 Summarised financial information for material associates
The following tables summarise financial information for those associates that are material to the Atlas Arteria and ATLAX Group.
The information disclosed reflects the amounts presented in the Financial Reports of those relevant entities and not Atlas Arteria’s
or ATLAX Group’s share of those amounts. Additional disclosures at the end of the tables reflect the adjustments required for
relevant disclosure in the Atlas Arteria or ATLAX Group accounts.
Summarised Statement of Financial Position
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Net assets
Reconciliation to carrying amounts:
Opening net assets
Profit/(loss) for the year
Distributions paid
Foreign exchange and other equity movements
Closing net assets
Atlas Arteria’s share in %
Atlas Arteria’s share of net assets in $
ATLAX Group’s share in %
ATLAX Group’s share of net assets in $
Atlas Arteria’s carrying amount
Impairment of asset (b)
ATLAX Group’s carrying amount
MAF2 (a)
TRIP II
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
1,683,670
1,098,238
79,173
117,034
9,420,390
9,721,036
2,631,409
2,603,485
(2,843,063)
(1,870,916)
(72,243)
(83,568)
(6,378,327)
(7,064,727)
(1,440,195)
(1,411,403)
1,882,670
1,883,631
1,198,144
1,225,548
1,883,631
1,778,233
1,225,548
1,139,729
509,666
(751,322)
240,695
492,192
(498,753)
111,959
(32,763)
(35,774)
–
–
5,359
121,593
1,882,670
1,883,631
1,198,144
1,225,548
50.0%
50.0%
941,487
941,967
–
–
–
–
–
–
–
–
13.4%
13.4%
160,947
164,627
1,423,248
1,569,953
–
–
–
–
–
(16,375)
144,572
–
–
164,627
(a) MAF2 proportionately consolidates the results of APRR.
(b) Impairment of Dulles Greenway includes an impairment of $22.1 million (refer to notes 4.1 & 4.2) offset by the impact of the deferred tax liability $5.7 million.
ATLAS ARTERIA ANNUAL REPORT 2019 | 79
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE Summarised Statement of Comprehensive Income
Revenue
Profit/(loss) for the year
Atlas Arteria’s share
ATLAX Group’s share
Atlas Arteria’s distributions received
ATLAX Group’s distributions received
(a) MAF2 proportionately consolidates the results of APRR.
MAF2 (a)
TRIP II
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
2,451,248
2,313,925
509,666
254,874
–
492,192
246,136
145,645
(32,763)
–
121,736
(35,774)
–
–
(4,401)
(4,806)
375,722
249,417
–
–
–
–
–
–
3.2.4 Share of losses not brought to account attributable to immaterial associate
Share of losses not brought to account attributable to immaterial
associate and joint venture
Balance at the beginning of the year
Derecognition of joint venture
Share of profits/(losses) brought to account
Share of profits/(losses) not brought to account
Balance at the end of the year
ALX (a)
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
–
–
–
–
–
(24,816)
24,376
2
438
–
–
–
–
–
–
(2)
–
2
–
–
(a) Includes Chicago Skyway Partnership and Indiana Toll Road Partnership. Residual investment balance represents cash left in these structures for the
payment of expenses.
80 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 4 Other balance sheet assets and liabilities
4.1 Intangible assets – Tolling concessions
Intangible assets – Tolling concessions
Tolling concessions are intangible assets and represent the right to levy tolls in respect of controlled motorways. Tolling
concessions relating to the non-controlled investments are recognised as a component of the investments accounted for
using the equity method.
Tolling concessions have a finite useful life by the terms of the concession arrangement and are carried at cost which
represents the fair value of the consideration paid on acquisition less accumulated amortisation. Amortisation is calculated
using the straight line method to allocate the cost of tolling concessions over their estimated useful lives which are as follows:
Dulles Greenway
Warnow Tunnel
APRR
ADELAC
Estimated useful life
Amortisation basis
Period to February 2056
Period to September 2053
Period to November 2035
Period to December 2060
Straight line basis
Straight line basis
Straight line basis
Straight line basis
There has been no change to the estimated useful life during the year.
In relation to APRR and ADELAC, the tolling concessions in relation to these non-controlled investments are not recognised
on the statement of financial position but instead form part of investments accounted for using the equity method. The
amortisation of tolling concessions in relation to these non-controlled investments is included in the share of net profit
of investments accounted for using the equity method.
Impairment
Tolling concessions with a finite useful life are assessed for impairment whenever there are indications that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. Refer to note 3.2 for additional detail on the accounting policy for impairment of assets
and reversal of impairment.
Balance at the beginning of the year
Acquisition cost (a)
Amortisation of tolling concession
Impairment of tolling concession (b)
Foreign exchange movement
Balance at the end of the year
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
2,578,434
2,189,724
16,557
(69,273)
(99,401)
12,281
214,772
(61,768)
–
235,706
2,438,598
2,578,434
–
–
–
–
–
–
–
–
–
–
–
–
(a) In the current year, $16.6 million was recognised on the DTR connector project (refer also to note 2.1 for the construction revenue policy). In the prior year,
a tolling concession of $214.8 million was recognised following the acquisition of the remaining 30% equity interest in Warnow Tunnel.
(b) An impairment charge of $165.4 million was taken as an expense on Dulles Greenway, comprising $99.4 million tolling concession impairment expense
and $66.0 million goodwill impairment expense (refer to note 4.2).
ATLAS ARTERIA ANNUAL REPORT 2019 | 81
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 4.2 Goodwill
Goodwill
Goodwill represents the excess of the consideration paid over the fair value of the identifiable net assets of the acquired entity
at the date of acquisition. Goodwill arising from business combinations is included on the face of the statement of financial
position. Goodwill arising from acquisitions of associates is included in the carrying amount of investments in associates.
Impairment
Goodwill is not subject to amortisation but is tested annually for impairment, or more frequently if events or changes in
circumstances indicate that the carrying amount may not be recoverable. The recoverable amount of a cash generating
unit (‘CGU’) is determined based on fair value less costs of disposal calculations which require the use of assumptions.
The calculations use detailed cash flow projections covering the remaining concession life of the CGU.
Refer to note 3.2 for additional detail on the accounting policy for impairment
Balance at the beginning of the year
Acquisition cost (b)
Impairment on Goodwill in Dulles Greenway (a)
Foreign exchange movement
Balance at the end of the year
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
79,390
–
(66,028)
692
14,054
58,726
14,193
–
6,471
79,390
–
–
–
–
–
–
–
–
–
–
(a) An impairment charge taken over Dulles Greenway of $165.4 million has been recognised as an expense, comprising $99.4 million tolling concession impairment
expense (refer to note 4.1) and $66.0 million goodwill impairment expense.
(b) In the prior year, goodwill of $14.2 million was recognised as a result of the deferred tax liability calculated on concession rights value following the acquisition
of the remaining 30% equity interest in Warnow Tunnel.
Key assumptions used for fair value less costs of disposal calculations at 31 December 2019 – Dulles Greenway
Assumption
Approach used to determine values
Traffic volume
Based on historic trends and the Groups’ internal long-term traffic forecasting models.
Long term CPI
(% annual growth)
Average toll
(% annual growth)
Traffic forecasts for Dulles Greenway are based on assumptions of long-term traffic growth broadly in line
with economic development and population growth within its catchment area.
Based on the Groups’ long-term internal forecasts and independent third-party projections, long term CPI
rates are forecast to grow by between 2.2% and 2.3%.
Based on current regulation and the Groups’ long-term internal forecasts.
Toll rates for Dulles Greenway were determined by decisions of the State Corporations Commission (SCC)
from the road’s inception until 31 December 2012.
From 1 January 2013 to 1 January 2020, toll rates for Dulles Greenway were determined by a legislated
formula that specified that rates would increase annually at the highest of CPI+1%, real GDP or 2.8%. From
2020, the SCC will again determine the rates under the legislative framework that was used pre-2013. A rate
new case was submitted to the SCC on 19 December 2019.
The Groups’ long-term assumption forecasts toll rates to escalate in a range within the historical experience
from inception to 1 January 2020. However, historical results provide no guarantee as new legislation or
regulatory decisions could impact future outcomes.
Post-tax discount rate
Detailed cash flows were discounted using an equity discount rate of 8.5%. The discount rate is based on
a number of factors including, but not limited to, the asset’s nature of operations, regulatory environment,
macroeconomic conditions, risk profile and observed market prices for similar transactions.
The assets and liabilities associated with the CGU were initially recognised in Atlas Arteria’s balance sheet at their fair values on
the dates on which Atlas Arteria achieved control of the CGU. As part of the half year reporting for 30 June 2019, the Boards of
ATLIX and ATLAX decided to impair their respective investments in Dulles Greenway by a total of US$115.0 million ($165.4 million).
These decisions took into account the operating performance of Dulles Greenway combined with a more conservative outlook
for traffic growth than that taken in prior periods. With upgrades to surrounding roads, traffic has taken longer than previously
expected to reflect the population growth and economic development in the area and in the first half of the year the Dulles
Greenway saw the impact on its traffic from toll increases at the DTR. The impairment was a point in time assessment for
30 June 2019 (refer to notes 4.1 and 4.2), and an impairment test conducted for 31 December 2019 has concluded that no further
impairment is necessary as the recoverable amount approximates the carrying amount.
The assumptions used in the fair value less costs of disposal calculation are measured at Level 3 in the fair value hierarchy (refer
to note 5.4 for additional detail on the fair value hierarchy).
82 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 4.3 Other assets
Receivables
Receivables are initially recognised at fair value and subsequently measured at amortised cost because their cash flows
represent solely payments of principal and interest. Interest income from loans and receivables is recognised on an
accruals basis.
Receivables are generally received within 30 days of becoming due and receivable. A provision is raised for any doubtful debts
based on a review of all outstanding amounts at year end. Bad debts are written off in the year in which they are identified.
Impairment
Atlas Arteria and the ATLAX Group assess, on a forward-looking basis, the expected credit losses associated with their loan
assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant
increase in credit risk.
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. Atlas Arteria
and the ATLAX Group use judgement in making these assumptions and selecting the inputs to the impairment calculation,
based on the Groups’ past history, existing market conditions as well as forward looking estimates at the end of each
reporting period.
Current
Receivables from related parties
Less: Loss allowance
Prepayments
Tax receivable
Trade Receivables and other assets (a)
Total current other assets
Non-current
Receivables from related parties
Less: Loss allowance
Prepayments
Other assets
Total non-current other assets
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
–
–
987
129
142,274
143,390
–
–
103
145
248
–
–
723
279
1,493
2,495
–
–
120
199
319
1,733
46,510
(8)
172
129
68
(108)
125
279
531
2,094
47,337
–
–
51
–
51
8,232
(18)
60
–
8,274
(a) In July 2019, MAF2 declared a distribution to be funded by the redemption of shares. The total distribution to be paid to Atlas Arteria amounted to € 157.3 million
($253.2 million). € 71.3 million ($114.8 million) of this distribution was paid in September 2019, with the balance of the distribution to be paid in 2020.
The Groups’ maximum credit exposure for receivables is the carrying value. Discussion of the Groups’ policies concerning the
management of credit risk can be found in note 5.4. The fair value of receivables approximates their carrying values.
ATLAS ARTERIA ANNUAL REPORT 2019 | 83
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 4.4 Other liabilities
Payables and other liabilities
Liabilities are recognised when an obligation exists to make future payments as a result of a purchase of assets or services,
whether or not billed. Trade creditors are generally settled within 30 days.
Provisions
Provisions are recognised when: the Groups have a present legal or constructive obligation as a result of past events; it is
probable that an outflow of resources will be required to settle the obligations; and the amount can be reliably estimated.
Provisions are not recognised for future operating losses.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the liability.
Employee benefits
Liabilities for salaries, including non-monetary benefits and leaves that are expected to be settled wholly within 12 months
after the end of the period in which the employees render the related service are recognised in respect of employees’ services
up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
This balance is captured under sundry creditors and accruals.
Current
Manager and adviser fees payable
Provision for toll maintenance
Sundry creditors and accruals
Tax payables
Lease liability (a)
Total current other liabilities
Non-Current
Easement accruals (b)
Provision for toll maintenance
Lease liability (a)
Total non-current other liabilities
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
5,285
2,543
14,572
2,478
1,049
25,927
9,063
14,987
8,288
2,521
–
34,859
–
11,571
14,752
19,598
34,350
–
–
11,571
90
–
3,111
–
176
3,377
–
–
1,756
1,756
471
–
2,905
22
–
3,398
–
–
–
–
(a) AASB 16 Leases became applicable for the current reporting period and the Groups changed their accounting as a result of adopting AASB 16 Leases.
(b) TRIP II has an agreement with the Metropolitan Washington Airports Authority (‘MWAA’) for easements over Washington Dulles International Airport property
necessary to construct, operate and maintain the toll road. The minimum annual payments are accrued using the straight-line method based upon the total
minimum payments to be made over the term of the agreement. Additional payments may be due under the agreement should the toll road exceed certain specified
traffic volumes. This has now been incorporated into the Lease Liability as a result of adopting AASB16 Leases.
84 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 5 Capital and risk management
5.1 Debt at amortised cost
Financial liabilities
Financial liabilities are initially recorded at fair value plus directly attributable transaction costs and thereafter at amortised
cost using the effective interest method.
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
Current
Non-recourse TRIP II bonds and accrued interest thereon (a)
Non-recourse Warnow Tunnel borrowings and interest accrued thereon (b)
Accrued interest on borrowings from financial institutions (c)
Total current debt at amortised cost
Non-current
Non-recourse TRIP II bonds and accrued interest thereon (a)
Non-recourse Warnow Tunnel borrowings and interest accrued thereon (b)
Borrowings from financial institutions (c)
Total non-current debt at amortised cost
41,301
3,880
–
73,595
3,696
31
45,181
77,322
1,397,502
1,356,286
172,932
558,894
180,730
564,946
2,129,328
2,101,962
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(a) Non-recourse TRIP II bonds
The Atlas Arteria consolidated financial statements incorporate bonds raised by TRIP II to finance the construction of infrastructure
assets. These bonds are non-recourse beyond the TRIP II assets and Atlas Arteria has no commitments to provide further debt
or equity funding to TRIP II in order to meet these liabilities.
All of these bonds are in the form of fixed interest rate senior bonds, with US$35.0 million of current interest bonds and
US$1,018.4 million of zero coupon bonds with maturities extending to 2056.
(b) Non-recourse Warnow Tunnel borrowings
The Atlas Arteria consolidated financial statements incorporate borrowings raised by Warnow Tunnel to finance the construction
of infrastructure assets. These borrowings are non-recourse beyond the Warnow Tunnel assets and Atlas Arteria has no
commitments to provide further debt or equity funding to Warnow Tunnel in order to meet these liabilities. The borrowings are
payable in three tranches with maturities extending to 2053.
(c) Borrowings from financial institutions
On 31 May 2018, Atlas Arteria repaid the previous APRR asset finance facility of € 150.0 million using a new APRR facility
of € 350.0 million negotiated with revised terms. On 4 June 2018, a portion of the additional proceeds were used to repay the
US$175.0 million Dulles Greenway asset finance facility along with accrued interest up to that date. The new APRR facility
has a maturity of 2024 with margins as set out below:
− From 24 Oct 2019 to 23 Oct 2022: 2.25%
− From 24 Oct 2022 to 23 Oct 2023: 2.75%
− From 24 Oct 2023 to 23 Oct 2024: 3.25%
Atlas Arteria incurred upfront issue costs of € 4.0 million ($6.2 million) on the APRR finance facility, of which, € 1.8 million
($2.8 million) has been amortised in the year ended 31 December 2019 (2018: € 1.8 million ($2.8 million)). Prior year costs
also included amortisation costs associated with the facilities refinanced in 2018.
ATLAS ARTERIA ANNUAL REPORT 2019 | 85
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 5.2 Contributed equity
Ordinary shares
Contributed equity
On issue at the beginning of the year
Issue of Short term incentive (‘STI’) securities
Application of performance fees to subscription for new securities
Issue of securities
Transaction costs associated with issue of securities
Capital return (refer to note 2.2)
On issue at the end of the year
Attributable to ATLIX
equity holders
Attributable to ATLAX
equity holders
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
3,275,591
1,995,994
3,275,591
1,995,994
187,571
187,571
197,311
197,311
1,995,994
1,911,877
197,311
268,334
791
–
–
84,117
1,304,255
(25,449)
–
–
–
–
3,275,591
1,995,994
27
–
45,745
(2,217)
(53,295)
187,571
–
6,186
–
–
(77,209)
197,311
During the year ended 31 December 2019, the Groups undertook a $1,350.0 million Equity Raise, comprising a $451.9 million
institutional placement and a 4 for 21 accelerated pro-rata non-renounceable entitlement offer of $898.1 million. The Equity
Raise resulted in the issuance of 195.7 million new ordinary stapled securities. The new stapled securities were issued at a price
of $6.90 per security and the entitlement offer was fully subscribed.
During the year ended 31 December 2018, $90.3 million of the full 2018 performance fee, the second and third instalments of the
2017 performance fee and the third instalment of June 2016 performance fee were applied to a subscription for new ATLAX and
ATLIX securities, the remaining $25.0 million of performance fees were settled in cash.
On 16 August 2019, 107,575 stapled securities were issued to fulfil short term incentive (‘STI’) requirements. These were valued
at $7.605 per security, however they have been issued at zero cost and are subject to a holding lock until the vesting date.
On issue at the beginning of the year
Issue of STI Securities
Application of performance fees to subscription for new securities
Issue of securities
On issue at the end of the year
Attributable to ATLIX
equity holders
Attributable to ATLAX
equity holders
As at
31 Dec 2019
As at
31 Dec 2018
As at
31 Dec 2019
As at
31 Dec 2018
Number of
shares
‘000
Number of
shares
‘000
Number of
shares
‘000
Number of
shares
‘000
683,265
669,789
683,265
669,789
108
–
195,652
879,025
–
13,476
–
683,265
108
–
195,652
879,025
–
13,476
–
683,265
Ordinary shares in ATLIX and in ATLAX
Each fully paid stapled security confers the right to vote at meetings of securityholders, subject to any voting restrictions imposed
on a securityholder under the Corporations Act 2001 in Australia, Companies Act in Bermuda and the ASX Listing Rules. On a show
of hands, every securityholder present in person or by proxy has one vote.
On a poll, every securityholder who is present in person or by proxy has one vote for each fully paid share in respect of ATLIX and
one vote for each fully paid share in respect of ATLAX.
The directors of ATLIX and ATLAX may declare distributions which are appropriate given the financial position of ATLIX and ATLAX.
If ATLIX and ATLAX are wound up, the liquidator may, with the sanction of an extraordinary resolution and any other requirement
of law, divide among the securityholders in specie or in kind the whole or any part of the assets of ATLIX and ATLAX.
86 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 5.3 Reserves
Share-based payments
Share-based compensation benefits are provided to employees via the STI Plan and the long term incentive (‘LTI’) Plan.
Securities (equal to 50% of the value awarded) are only issued under the STI plan if performance conditions are met.
Securities issued under the STI Plan are time contingent and are issued in restricted securities on terms determined by the
Boards. The share based STI Plan is recognised as an employee expense with a corresponding increase in equity. The total
amount to be expensed is determined based on the probability of the vesting being met. The fair value of performance rights
granted under the LTI Plan is recognised as an employee benefits expense with a corresponding increase in equity. The total
amount to be expensed is determined by reference to the fair value of the performance rights granted including the market
performance conditions and the number of equity instruments expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions
are to be satisfied. At the end of each period, Atlas Arteria and the ATLAX Group revise their estimates of the number of
performance rights that are expected to vest based on service conditions and recognise the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding adjustment to equity.
Hedging
The hedging reserve includes the cash flow hedge reserve (see note 5.4 for details). The cash flow hedge reserve is used to
recognise the effective portion of gains or losses on derivatives that are designated and qualify as cash flow hedges. Amounts
are subsequently transferred to the initial cost of the investment.
Balance of reserves
Foreign currency translation reserve
Hedging reserve (see note 5.4.2)
Other reserve
Balance at the end of the year
Movements of reserves
Foreign currency translation reserve
Balance at the beginning of the year
Net exchange differences on translation of foreign controlled entities
Transfer to accumulated losses (a)
Balance at the end of the year
Hedging reserve
Balance at the beginning of the year
Change in fair value the cash flow hedges (see note 5.4.2)
Balance at the end of the year
Other reserve
Balance at the beginning of the year
Other equity transactions
Employee share performance rights (b)
Balance at the end of the year
Attributable to ATLIX
equity holders
Attributable to ATLAX
equity holders
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
180,846
(25,287)
1,339
190,155
(6,688)
(7,669)
–
–
–
46
–
141
156,898
190,155
(6,642)
(7,528)
Attributable to ATLIX
equity holders
Attributable to ATLAX
equity holders
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
190,155
(9,309)
–
28,122
161,955
78
(7,669)
981
–
(24,216)
16,547
–
180,846
190,155
(6,688)
(7,669)
–
(25,287)
(25,287)
–
–
1,339
1,339
–
–
–
–
–
–
–
–
–
–
141
–
(95)
46
–
–
–
–
–
141
141
(a) During the year ended 31 December 2018, foreign exchange translation gains in ATLIX Group of $0.1 million were transferred to accumulated losses from foreign
currency translation reserves following the acquisition of the remaining 30% interest of Warnow Tunnel. These transfers arose as the increase in investment
is treated as a disposal of the existing interest in joint venture.
(b) Expenses arising from share based benefits relating to STI’s & LTI’s attributable to ATLIX equity holders as at 31 December 2019: $1.3 million
(31 December 2018: $Nil). Expenses arising from share based benefits relating to STI’s & LTI’s attributable to ATLAX equity holders as at 31 December 2019:
$(0.1) million (31 December 2018: $0.1 million).
ATLAS ARTERIA ANNUAL REPORT 2019 | 87
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 5.4 Financial risk and capital management
5.4.1 Financial risk management
The Groups’ activities expose them to a variety of financial risks: market risk (including foreign exchange risk and fair value
interest rate risk), credit risk, liquidity risk and cash flow interest rate risk. The Groups’ overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on financial performance of
the Groups. The Groups use derivative financial instruments such as foreign exchange contracts to hedge certain risk exposures.
The Risk Management Policy and Framework is implemented by management under policies approved by the Boards.
Management identifies, quantifies and qualifies financial risks and provides written principles for overall risk management, as
well as written policies covering specific areas, such as mitigating foreign exchange, interest rate and credit risks, use of derivative
financial instruments and investing excess liquidity.
5.4.2 Derivatives
The Groups have the following derivative financial instruments in the balance sheet:
Current assets
Interest rate caps
Total current derivative financial instrument assets
Current liabilities
Foreign currency forwards – cash flow hedge
Interest rate swaps
Non-current liabilities
Interest rate swaps
Total derivative financial instrument liabilities
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
–
–
30,581
3,187
12,803
46,571
2,900
2,900
–
3,108
13,495
16,603
–
–
–
–
–
–
–
–
–
–
–
–
Classification of derivatives
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not
meet the hedge accounting criteria, they are accounted for at fair value through profit or loss. They are presented as current assets
or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
Further information about the derivatives used by the Groups is provided in note 5.4.3 below.
Fair value measurement
From time to time, the Groups enter into forward exchange contracts.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date.
The accounting for subsequent changes in fair value depends on whether or not derivatives are designated as hedge accounting
relationships. If hedge accounting is not designated, any changes in their fair value are recognised immediately in the Consolidated
Statement of Comprehensive Income.
Hedging Reserves
The Groups’ hedging reserves disclosed in note 5.3 relate to the following hedging instruments:
Cash flow hedge reserve
Forward
exchange
contracts
$’000
Total hedge
reserves
$’000
–
–
25,287
25,287
25,287
25,287
Opening balance 1 January 2019
Add: Change in fair value of the hedging instrument recognised in other
comprehensive income for the year
Closing balance 31 December 2019
88 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS Amounts recognised in the profit or loss
The following amounts were recognised in profit or loss in relation to the hedge ineffectiveness of the FX Forward Contract
designated in a cash flow hedge relationship:
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
Hedge ineffectiveness of foreign currency forwards – amount
recognised in other (losses)/gains
(5,294)
–
–
–
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
For hedges of foreign currency purchases, the Groups enter into hedge relationships where the critical terms of the hedging
instrument match exactly with the terms of the hedged item. The Groups therefore perform a qualitative assessment of
effectiveness. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly
with the critical terms of the hedging instrument, the Groups use the hypothetical derivative method to assess effectiveness.
In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was
originally estimated, or if there are changes in the credit risk of ATLIX or the derivative counterparty.
Deal contingent foreign exchange forward contract
ATLIX entered into the FX Forward Contract on 20 November 2019. This is a cash flow hedge intended to mitigate foreign exchange
risk associated with € 711.0 million expected future payments on completion of the APRR Transaction. As the cash flow on
settlement of the FX Forward Contract matches the cash flow required by and is contingent upon the settlement of the APRR
Transaction there is an economic relationship.
Hedge ineffectiveness for the FX Forward Contract occurs due to the premium embedded for the contingent component associated
with settlement for the APRR Transaction. Settlement took place on 24 February 2020. Under the terms of the FX Forward
Contract, € 710.0 million was purchased at a EUR:AUD exchange rate of 1.6449. This includes a deal contingency charge of which
$5.3 million was recognised during the year, which represents 0.45% of the total sum payable under the FX Forward Contract. Due
to the premium embedded in the FX Forward Contract an ineffectiveness is noted in the hedge.
ATLAS ARTERIA ANNUAL REPORT 2019 | 89
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 5.4.3 Market risk
Foreign exchange risk
Foreign exchange risk arises when recognised assets and liabilities and future commercial transactions are denominated in
a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The Groups operate internationally and are exposed to foreign exchange risk mainly arising from currency exposures to the
Euro (‘EUR’) and United States Dollar (‘USD’).
The Groups do not hedge the foreign exchange exposure on overseas investments.
Financial instruments are converted to Australian Dollars (‘AUD’) at the rate of exchange ruling at the financial reporting date.
Derivative instruments are valued with reference to forward exchange rates from the year end to settlement date, as provided
by independent financial institutions.
In assessing foreign exchange risk, management has assumed the following possible movements in the AUD:
− AUD/EUR exchange rate increased/decreased by 5 Euro cents (2018: 6 Euro cents)
− AUD/USD exchange rate increased/decreased by 7 US cents (2018: 8 US cents)
− AUD/GBP exchange rate increased/decreased by 6 UK pence (2018: 6 UK pence)
The below tables display the amounts for financial instruments that would be recognised in profit or loss or directly in equity if the
movements in foreign exchange rates as outlined above occur. The Groups’ management have determined the above movements
in the AUD to be a reasonably possible shift following analysis of foreign exchange volatility for relevant currencies over the last
five years.
Appreciation in Australian Dollar
Depreciation in Australian Dollar
Foreign exchange risk
ALX
P&L
2019
$’000
P&L
2018
$’000
Equity
2019
$’000
Equity
2018
$’000
Total financial assets (a)
(721)
(1,185)
Total financial
liabilities (b)
Total
21
(700)
89
(1,096)
–
–
–
–
–
–
P&L
2019
$’000
858
(26)
832
P&L
2018
$’000
1,448
(112)
1,336
Equity
2019
$’000
Equity
2018
$’000
–
–
–
–
–
–
Foreign exchange risk
Appreciation in Australian Dollar
Depreciation in Australian Dollar
P&L
2019
$’000
(3)
4
1
P&L
2018
$’000
(21)
32
11
Equity
2019
$’000
Equity
2018
$’000
–
–
–
–
–
–
P&L
2019
$’000
4
(5)
(1)
P&L
2018
$’000
27
(40)
(13)
Equity
2019
$’000
Equity
2018
$’000
–
–
–
–
–
–
ATLAX Group
Total financial assets (a)
Total financial
liabilities (b)
Total
(a) Financial assets include cash, cash equivalents, restricted cash, receivables and derivative financial instruments.
(b) Financial liabilities include payables, debt at amortised cost and derivative financial instruments.
Interest rate risk
The Groups have no significant interest bearing assets and liabilities whose fair value is significantly impacted by changes
in market interest rates.
In assessing interest rate risk, management has assumed the following movements in the identified interest rates:
− Bank bill swap reference rate (AUD BBSW 90 days) increased/decreased by 58 bps (2018: 34 bps)
− Bank bill swap reference rate (EURIBOR 90 days) increased/decreased by 10 bps (2018: 13 bps)
− Bank bill swap reference rate (USD LIBOR 90 days) increased/decreased by 56 bps (2018: 39 bps)
− Bank bill swap reference rate (GBP LIBOR 90 days) increased/decreased by 21 bps (2018: 19 bps)
− Bank bill swap reference rate (EURIBOR 6 months) increased/decreased by 11 bps (2018: 13 bps)
− Bank bill swap reference rate (AUD BBSW 6 months) increased/decreased by 57 bps (2018: 33 bps)
90 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS The below tables display the amounts for financial instruments that would be recognised in profit or loss or directly in equity
if the above interest rate movements occur. The Groups’ management have determined the above movements in interest rates
to be a reasonably possible shift following analysis of the interest spreads of comparable debt instruments over the past five years.
ALX
P&L
2019
$’000
Total financial assets
8,275
Total financial
liabilities
Total
ATLAX Group
Total financial assets
Total financial
liabilities
Total
(766)
7,509
P&L
2019
$’000
281
–
281
Increase in interest rates
Decrease in interest rates
Interest rate risk
P&L
2018
$’000
643
(998)
(355)
Equity
2019
$’000
Equity
2018
$’000
–
–
–
–
–
–
P&L
2019
$’000
(8,275)
766
(7,509)
P&L
2018
$’000
(643)
998
355
Equity
2019
$’000
Equity
2018
$’000
–
–
–
–
–
–
Increase in interest rates
Decrease in interest rates
Interest rate risk
P&L
2018
$’000
219
–
219
Equity
2019
$’000
Equity
2018
$’000
–
–
–
–
–
–
P&L
2019
$’000
(281)
–
(281)
P&L
2018
$’000
(219)
–
(219)
Equity
2019
$’000
Equity
2018
$’000
–
–
–
–
–
–
5.4.4 Credit risk
Potential areas of credit risk consist of deposits with banks and financial institutions as well as receivables from associates
and governments. The Groups limit their exposure in relation to cash balances by only dealing with well-established financial
institutions of high-quality credit standing. With the exception of the transactions between ATLIX and ATLAX, the Groups transact
with independently rated parties with appropriate minimum short-term credit ratings. The Boards set exposure limits to financial
institutions and these are monitored on an ongoing basis.
Sound credit risk management involves prudently managing the risk and reward relationship and controlling and minimising credit
risks across a variety of dimensions, such as quality, concentration, maturity and security.
The below table sets out the balances within the Groups and the ATLAX Group that may be subject to credit risk.
2019
Cash and cash equivalents
Restricted cash
Receivables – current
Tax receivables
Derivative financial instruments
Financial
institutions
$’000
1,450,221
253,904
–
–
–
ALX
Corporates
and others
$’000
Total
$’000
Financial
institutions
$’000
ATLAX Group
Corporates
and others
$’000
–
–
142,274
129
–
1,450,221
48,612
253,904
142,274
129
–
–
–
–
–
–
–
1,801
129
–
Total
$’000
48,612
–
1,801
129
–
Total
1,704,125
142,403
1,846,528
48,612
1,930
50,542
2018
Cash and cash equivalents
Restricted cash
Receivables – current
Receivables – non-current
Tax receivables
Derivative financial instruments
Total
186,468
203,961
–
–
–
2,900
393,329
Financial
institutions
$’000
ALX
Corporates
and others
$’000
Total
$’000
Financial
institutions
$’000
ATLAX Group
Corporates
and others
$’000
Total
$’000
12,461
–
47,041
8,232
279
–
–
–
1,493
–
279
–
186,468
203,961
1,493
–
279
2,900
12,461
–
–
–
–
–
–
–
47,041
8,232
279
–
1,772
395,101
12,461
55,552
68,013
ATLAS ARTERIA ANNUAL REPORT 2019 | 91
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE Financial institutions
The credit risk to financial institutions relates to cash held by and term deposits due from Australian and OECD banks. In line with
the credit risk policies of the Groups these counterparties must meet a minimum Standard and Poor’s short-term credit rating
of A-1 unless an exception is approved by the Boards.
Corporates and others
The Groups and ATLAX Group credit risk relates primarily to receivables from related parties and governments. These
counterparties have a range of credit ratings.
5.4.5 Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount
of committed credit facilities and the ability to close out market positions. The Groups have a liquidity management policy which
manages liquidity risk by monitoring the stability of funding, surplus cash or highly liquid cash assets, anticipated cash in and
outflows and exposure to connected parties.
The below table displays the forecast contractual undiscounted future cash outflows of the liabilities at balance date of the
Groups and the ATLAX Group.
Financial Liabilities
2019
Debt at amortised cost (a)
Payables
Derivatives
Total
2018
Debt at amortised cost (a)
Payables
Derivatives
Total
ALX
1-2 years
$’000
2-3 years
$’000
3-5 years
$’000
Greater
than
5 years
$’000
Total
$’000
56,641
115,739
215,763
1,732,560
2,165,884
2,752
2,748
3,798
2,530
5,172
4,297
22,628
3,228
60,277
15,990
62,141
122,067
225,232
1,758,416
2,242,151
44,687
57,049
202,472
1,714,065
2,095,595
–
2,942
47,629
–
2,744
59,793
–
4,802
11,571
3,007
46,430
16,603
207,274
1,728,643
2,158,628
Less than
1 year
$’000
45,181
25,927
3,187
74,295
77,322
34,859
3,108
115,289
(a) Includes consolidated debt held by TRIP II and Warnow Tunnel that is non-recourse to the Groups.
Financial Liabilities
2019
Payables
Total
2018
Payables
Total
ATLAX Group
1-2 years
$’000
2-3 years
$’000
3-5 years
$’000
155
155
–
–
166
166
–
–
365
365
–
–
Less than
1 year
$’000
3,377
3,377
3,398
3,398
Greater
than
5 years
$’000
1,070
1,070
–
–
Total
$’000
5,133
5,133
3,398
3,398
92 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 5.4.6 Fair value measurement of financial instruments
The fair value measurements of financial assets and liabilities are assessed in accordance with the following hierarchy.
(i) Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities.
(ii) Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices); and
(iii) Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable valuation input).
The Groups have derivative financial instruments that are measured at fair value on a recurring basis. These instruments are
entered to minimize potential variations in cash flows resulting from fluctuations in interest rates and foreign currency and their
impact on its variable-rate debt and cash payments and receipts. The Groups do not enter into derivative instruments for any
purpose other than economic interest rate and foreign currency hedging. That is, the Groups do not speculate using derivative
instruments. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after
the end of the reporting period. These instruments are measured at Level 2 hierarchy and are revalued using externally provided
dealer quotes.
The Groups’ policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting
period. There were no transfers in the current year.
The Groups do not measure any financial assets or financial liabilities at fair value on a non-recurring basis.
Fair values of other financial instruments (unrecognised)
The Groups also have a number of financial instruments which are not measured at fair value in the balance sheet. With the
exception to those listed below, the fair values are not materially different to their carrying amounts as: the interest receivable/
payable is either close to current market rates; the instruments are short-term in nature, or the instruments have recently been
brought onto the balance sheet and therefore the carrying amount approximated the fair value. The fair value of these financial
instruments is determined using discounted cash flow analysis. The fair value of all financial assets (excluding Investments
accounted for using the equity method) and financial liabilities approximated their carrying amounts at 31 December 2019.
There is no debt at amortised cost in the ATLAX Group.
Debt at amortised cost
Non-recourse TRIP II bonds and accrued interest thereon
Warnow borrowings and accrued interest thereon
5.4.7 Capital management
The Groups capital management objectives are to:
Carrying amount
$’000
Fair value
$’000
1,438,803
1,449,707
176,812
157,283
− Ensure sufficient capital resources to support the Groups’ business, operational and growth requirements
− Safeguard the Groups’ ability to continue as a going concern
− Balance distribution growth with long term sustainability
Annual reviews of the Groups’ capital requirements are performed to ensure the Groups are meeting their objectives.
Capital is defined as contributed equity plus reserves. The Groups do not have any externally imposed capital requirements
at 31 December 2019 or 31 December 2018.
ATLAS ARTERIA ANNUAL REPORT 2019 | 93
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 6 Group disclosures
6.1 Parent entity financial information
Parent entity financial information
The financial information for ATLIX and ATLAX for this disclosure has been prepared on the same basis as the Financial
Reports, except as set out below:
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the separate financial
information of ATLIX and ATLAX.
Tax consolidation legislation
ATLAX and its wholly owned Australian controlled entities have implemented the tax consolidation legislation as of 2 February 2010.
The head entity, ATLAX and the controlled entities in the tax consolidated group account for their own current and deferred
tax amounts.
These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its
own right. In addition to its own current and deferred tax amounts, ATLAX also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate ATLAX
for any current tax payable assumed and are compensated by ATLAX for any current tax receivable and deferred tax assets
relating to unused tax losses or unused tax credits that are transferred to ATLAX under the tax consolidation legislation.
The funding amounts are determined by reference to the amounts recognised in the wholly owned entities’ Financial Reports.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head
entity, which is issued as soon as practicable after the end of each financial year.
The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current
amounts receivable from or payable to other entities in the ATLAX Group. Any difference between the amounts assumed and
amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from)
wholly owned tax consolidated entities.
Financial guarantees
Where the parent entities have provided financial guarantees in relation to loans and payables of subsidiaries for no consideration,
the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment.
6.1.1 Summary financial information
In accordance with the Corporations Act 2001, the individual Financial Reports for ATLIX and ATLAX are shown in aggregate
amounts below:
Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholder's equity
Issued capital
Reserves
Retained earnings
Total equity
(Loss)/profit for the year
Total comprehensive (loss)/income
94 | ATLAS ARTERIA ANNUAL REPORT 2019
ATLIX
ATLAX
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
As at
31 Dec 2019
$’000
As at
31 Dec 2018
$’000
1,330,333
74,319
1,008,793
1,332,757
2,339,126
1,407,076
(16,904)
(95,921)
(112,825)
(56,184)
(8,232)
(64,416)
52,731
75,095
127,826
(5,480)
–
59,717
83,862
143,579
(2,894)
–
(5,480)
(2,894)
3,275,591
1,995,994
187,571
197,311
(23,948)
–
(1,025,342)
(653,334)
2,226,301
1,342,660
(221,674)
(221,674)
80,085
80,085
46
(65,271)
122,346
(7,137)
(7,137)
141
(56,767)
140,685
(10,983)
(10,983)
NOTES TO THE FINANCIAL REPORTS 6.1.2 Guarantees entered into by the parent entities
ATLIX and ATLAX have not directly provided any financial guarantees in respect to bank overdrafts and loans of subsidiaries as
at 31 December 2019 and 31 December 2018. ATLIX and ATLAX have not given any unsecured guarantees at 31 December 2019
and 31 December 2018.
However, financial guarantees are held by European Transport Investments (UK) Limited (‘ETI UK’), a subsidiary of ATLIX,
in respect of external borrowings held by Warnow Tunnel.
6.1.3 Contingent liabilities of the parent entities
Refer to note 7.2 for ATLIX and ATLAX’s contingent liabilities as at 31 December 2019 and 31 December 2018.
6.2 Acquisition of subsidiaries
Business combinations
The acquisition method of accounting is used to account for all business combinations other than those under common
control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the
acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity
interests issued by the Groups. The consideration transferred also includes the fair value of any contingent consideration
arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs for consolidated
entities are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their fair values at the acquisition date. Contingent
consideration is subsequently remeasured to its fair value with changes recognised in the profit or loss.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-
date fair value of any previous equity interest in the acquiree over the fair value of the Groups share of the net identifiable
assets acquired is recorded as goodwill.
6.3 Subsidiaries
Subsidiaries
Subsidiaries, other than those that ATLIX has been deemed to have directly acquired through stapling arrangements, are
those entities over which the Groups are exposed to, or have the right to, variable returns from their involvement with the
entity and have the ability to affect those returns through their power over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. The acquisition method of accounting is used to account for the
acquisition of subsidiaries by the Group. Where control of an entity is obtained during a financial year, its results are included
in the Statement of Comprehensive Income from the date on which control commences. Where control of an entity ceases
during a financial year, its results are included for that part of the year during which control existed and the subsidiary is
deconsolidated from the date that control ceases.
ATLAS ARTERIA ANNUAL REPORT 2019 | 95
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 6.3.1 ALX
Name of controlled entity
Atlas Arteria Limited
ALX Infrastructure US Pty Limited (a)
ALX Infrastructure Australia Pty Limited
ALX Investments (Australia) Pty Limited
Atlas Arteria Service Co Pty Limited (b)
Green Bermudian Holdings Limited
ALX Investments Limited
MIBL Finance (Luxembourg) Sarl
Atlas Arteria Luxembourg 1 Sarl (c)
Tollway Holdings Limited (d)
European Transport Investments (UK) Limited
Tipperhurst Limited (e)
Greenfinch Motorways Limited (f)
MQA 125 Holdings, Inc. (g)
ALX Indiana Holdings LLC
ALX Holdings (US) LLC
Dulles Greenway Partnership
Dulles Greenway Investments 3 (US) LLC
Shenandoah Greenway Corporation
Toll Road Investors Partnership II, L.P.
Warnowquerung GmbH & Co. KG (h)
Warnowquerung Verwaltungsgesellschaft mbH (h)
Country of establishment
2019 voting
%
2018 voting
%
Australia
Australia
Australia
Australia
Australia
Bermuda
Bermuda
Luxembourg
Luxembourg
UK
UK
UK
UK
USA
USA
USA
USA
USA
USA
USA
Germany
Germany
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
(a) Deregistered on 2 June 2019
(b) Incorporated on 7 January 2019
(c) Incorporated on 12 November 2019
(d) In liquidation
(e) In liquidation
(f) In liquidation
(g) Liquidated on 7 December 2018
(h) On 20 September 2018, Atlas Arteria acquired the remaining 30% equity interest in Warnow Tunnel. Prior to this the Atlas Arteria’s investment
in Warnow Tunnel was classified as a joint venture.
6.3.2 ATLAX Group
Name of controlled entity
Country of establishment
2019 voting
%
2018 voting
%
ALX Infrastructure Australia Pty Limited
ALX Investments Australia Pty Limited
Atlas Arteria Service Co Pty Limited (a)
ALX Indiana Holdings LLC
ALX Holdings (US) LLC
Dulles Greenway Partnership
Dulles Greenway Investments 3 (US) LLC
Shenandoah Greenway Corporation
(a) Incorporated on 7 January 2019
Australia
Australia
Australia
USA
USA
USA
USA
USA
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
100.0
96 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 6.4 Related party disclosures
6.4.1 Adviser and Manager
Until management internalisation on 1 April 2019, the Adviser of ATLIX and the Manager of ATLAX was Macquarie Fund Advisers
Pty Ltd, a wholly owned subsidiary of Macquarie Group Limited (‘Macquarie Group’).
6.4.2 Directors
The following persons were directors of ATLIX during the whole of the year and up to the date of this report
(unless otherwise stated):
− Jeffrey Conyers
− Fiona Beck
− James Keyes
− Christopher Leslie
− Nora Scheinkestel
− Derek Stapley
(Chairman)
(Appointed on 13 September 2019)
(Resigned on 1 April 2019)
The following persons were directors of ATLAX during the whole of the year and up to the date of this report
(unless otherwise stated):
− Nora Scheinkestel
− David Bartholomew
− Graeme Bevans
− Debra Goodin
− Jean-Georges Malcor
(Chairman)
(Appointed on 1 April 2019)
6.4.3 Key Management Personnel
Key Management Personnel (‘KMP’) are defined in AASB 124 Related Party Disclosures as those having authority and responsibility
for planning, directing and controlling the activities of the entity. Across the Groups the directors of ATLIX and ATLAX and the
Managing Director and Chief Executive Officer (‘MD & CEO’), Chief Financial Officer (‘CFO’) and Chief Operating Officer (‘COO’)
meet the definition of KMP.
The compensation paid to non-executive directors of ATLIX and ATLAX, is determined by reference to remuneration of similar roles
at similar entities. The level of compensation is not related to the performance of the Groups. The remuneration of the MD & CEO,
CFO and COO include STI and LTI components which include targets related to the performance of the group.
The total remuneration for the Groups and ATLAX KMPs is shown in the table below.
Short term employee benefits
Share based payments
Long term
benefits
Financial year
Cash salary
$
Cash STI
$
Value of LTI
$
Value of STI
$
Superannuation
$
Termination
benefit
$
Total
remuneration
$
Total
Total
2019
2018
2,217,060
1,285,063
611,268
825,976
959,290
448,571
139,030
233,955
57,549
43,225
–
–
4,996,917
1,823,282
Compensation in the form of directors’ fees that were paid to the ATLIX and ATLAX directors is as follows:
Year ended 31 Dec 2019
Year ended 31 Dec 2018
Short term
benefit
Cash salary
and fees
$
764,749
816,039
Long term
benefit
Superannuation
$
Total
directors’ fees
$
7,264
53,961
772,013
870,000
Short term
benefit
Cash salary
and fees
$
598,461
651,363
Long term
benefit
Superannuation
$
Total
directors’ fees
$
–
53,012
598,461
704,375
ATLIX
ATLAX
ATLAS ARTERIA ANNUAL REPORT 2019 | 97
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
The number of ALX stapled securities held directly, indirectly or beneficially by the KMP across the Groups at 31 December
is set out below:
KMP interests
in ALX
stapled
securities
At 31 Dec 2019
KMP interests
in ALX
stapled
securities
At 31 Dec 2018
42,381
20,506
8,333
90,731
26,579
5,952
20,758
20,238
5,636
103,824
26,666
371,604
40,000
–
–
–
5,671
5,000
–
–
–
78,431
5,000
134,102
Jeffrey Conyers
David Bartholomew (a)
Fiona Beck (b)
Graeme Bevans (c)
Debra Goodin
James Keyes
Nadine Lennie (d)
Jean-Georges Malcor (e)
Vincent Portal-Barrault (f)
Nora Scheinkestel
Derek Stapley
Total
(a) Appointed 1 October 2018
(b) Appointed 13 September 2019
(c) Appointed 1 April 2019, previously CEO elect
(d) Appointed 1 April 2019, previously CFO elect
(e) Appointed 1 November 2018
(f) Appointed 1 April 2019, previously COO elect
98 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 6.4.4 Adviser and Manager fees
Under the terms of the governing documents of the individual entities within the Groups, fees incurred to the Adviser/Manager
of the Groups and the ATLAX Group were:
Base fee
Performance fee
Transition fee
MAF/MAF2 advisory fee
Total
ALX
ATLAX Group
As at
31 Dec 2019
$
As at
31 Dec 2018
$
As at
31 Dec 2019
$
As at
31 Dec 2018
$
15,110,431
36,758,504
573,520
2,235,911
–
70,625,097
–
4,983,932
5,637,097
7,488,747
–
–
218,467
–
–
–
28,236,275
107,383,601
791,987
7,219,843
Base fee
Macquarie Advisers received the base management fees under their Atlas Arteria Management and Advisory Agreements until
15 May 2019. This equated to $15.1 million from 1 January to 15 May. Atlas Arteria did not pay any further base or performance
management fees to Macquarie Advisers for the general management of Atlas Arteria after 15 May. Macquarie Advisers provided
specific services under the Transition Services Agreement for a fee of $750,000 per month from 15 May until 31 December 2019.
Total fees under this agreement were $5.6 million for the year ended 31 December 2019.
As at the date of this report, MIRAEL continues to act as manager of ATLIX’s indirect interest in APRR and from 15 May 2019
receives fees of € 7.4 million ($11.9 million) per annum. Upon the completion of the APRR Transaction the agreement will be
terminated. The fee will continue to be payable until termination of this agreement as part of the APRR Transaction, expected
in March 2020. Total fees for the period 15 May to 31 December 2019 were € 4.6 million ($7.5 million).
Performance fee
The performance fees incurred in the year ended 31 December 2018 of $70.6 million reflects the full 2018 performance fee
of $54.7 million and the second and third instalments of the 2017 performance fee of $16 million and these were the final
performance fees incurred by Atlas Arteria under the Atlas Arteria Management and Advisory Agreements. The performance fees
reflected Atlas Arteria’s performance against the S&P/ASX300 Industrials Accumulation Index.
Other balances and transactions
Macquarie Group and companies within the Macquarie Group undertook various transactions with and performed various services
for the Groups during the year. Fees paid to the Macquarie Group were approved solely by the independent directors on the Boards
and, where appropriate, external advice was sought by the directors to ensure that the fees and terms of engagement were
representative of arm’s length transactions.
Atlas Arteria utilises services provided by Macquarie Bank Limited (‘MBL’), a wholly owned subsidiary of the Macquarie Group.
MBL’s foreign exchange and treasury departments provide services from time to time on arm’s length terms.
At 31 December 2019, entities within the Groups had the following balances with related parties:
Cash held with MBL
Interest bearing loan receivable from ATLIX (a)
Current (b)
Non-current
Other intercompany receivables from/(payables) to ATLIX
ALX
ATLAX Group
As at
31 Dec 2019
$
As at
31 Dec 2018
$
As at
31 Dec 2019
$
As at
31 Dec 2018
$
–
–
–
–
85,815,683
–
12,317,726
–
–
–
–
–
46,179,915
8,232,108
1,733,450
329,842
(a) Tranches of the loan owing from ATLIX to ATLAX bear interest at 6-month BBSW plus a margin of 0.9% – 1.1%.
(b) Includes accrued interest of $Nil (2018: $778,623).
ATLAS ARTERIA ANNUAL REPORT 2019 | 99
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE During the year, entities within the Groups had the following transactions with related parties:
ALX
ATLAX Group
As at
31 Dec 2019
$
As at
31 Dec 2018
$
As at
31 Dec 2019
$
As at
31 Dec 2018
$
Interest earned on deposits with MBL
373,326
876,577
55,876
396,181
Interest between ATLAX and ATLIX on loan amount
–
–
353,980
3,465,711
Reimbursement of expenses paid by companies within the Macquarie
Group on behalf of Atlas Arteria
Reimbursement of ATLIX's portion of expenses paid by ATLAX
Advisory and management services
274,952
1,215,254
188,654
795,626
–
–
–
–
1,609,932
1,677,700
6,256,288
–
During the year, entities within the Groups received the following from associates:
ALX
ATLAX Group
As at
31 Dec 2019
$
As at
31 Dec 2018
$
As at
31 Dec 2019
$
As at
31 Dec 2018
$
Principal and interest received from preferred equity certificates
and shares issued by MAF2
Adviser's fee from Warnow Tunnel
238,246,730
249,416,735
–
135,420
–
–
–
–
All of the amounts represent payments on normal commercial terms made in relation to the provision of goods and services.
100 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 7 Other disclosures
7.1 Cash flow information
Reconciliation of profit after income tax to the net cash
flows from operating activities
Profit/(loss) from activities after income tax
(Gain)/loss on equity accounted assets
Net foreign exchange differences
Finance costs
Depreciation and amortisation
Amortisation of tolling concession
Amortisation of deferred tax liabilities
Impairment impact of deferred tax liabilities
Impairment/(gain on revaluation) of investment
Bad debt written off
Current tax (benefit)/expense
Issue of securities against performance fees payable
Issue of securities to employees
Non operating receivable (distribution from MAF2)
Changes in operating assets and liabilities
(Increase)/decrease in receivables
(Decrease)/increase in payables
Net cash inflow from operating activities
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Note
(9,821)
59,852
(254,874)
(246,141)
(26,902)
20,907
(16,831)
4,801
994
112,311
1,010
69,273
(1,558)
(5,675)
3,483
108,920
350
61,768
(1,220)
–
165,429
(13,470)
16
(1,972)
–
2,062
137,475
(138,103)
(186)
76,381
6
2,118
90,303
–
–
(4,855)
(37,974)
23,140
30
37
311
–
–
–
–
–
–
–
(68)
–
466
(2,552)
(7,771)
(63)
–
39
–
–
–
–
–
(1)
6,186
–
–
(457)
(2,364)
(8,690)
7.1.1 Non-cash financing and investing activities
Refer to note 5.2 for further details on application of performance fees to subscription of new securities.
7.1.2 Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Net debt
Cash and cash equivalents
Borrowings – current
Borrowings – non-current
Net debt
Cash
Gross debt – fixed interest rates
Gross debt – variable interest rates
Net debt
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Note
1,450,221
(45,181)
186,468
(77,322)
(2,129,328)
(2,101,962)
48,612
12,461
–
–
–
–
(724,288)
(1,992,816)
48,612
12,461
1,450,221
186,468
48,612
12,461
(1,439,490)
(1,429,881)
(735,019)
(749,403)
–
–
–
–
(724,288)
(1,992,816)
48,612
12,461
ATLAS ARTERIA ANNUAL REPORT 2019 | 101
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE ALX
Net debt at 1 January 2018
Cash flows
Loan facilities
Other non-cash adjustments (a)
Foreign exchange adjustments
Net debt at 31 December 2018
Cash flows
Other non-cash adjustments (a)
Foreign exchange adjustments
Net debt at 31 December 2019
(a) Relates to unpaid interest that has accrued during the period
ATLAX Group
Net debt at 1 January 2018
Cash flows
Foreign exchange adjustments
Net debt at 31 December 2018
Cash flows
Foreign exchange adjustments
Net debt at 31 December 2019
7.2 Contingent liabilities
Assets
Liabilities from Financing activities
Cash and cash
equivalents
$’000
Borrowings –
current
$’000
Borrowings –
non-current
$’000
Note
Total
$’000
122,690
59,327
–
–
4,451
186,468
1,262,673
–
1,080
(66,286)
(1,668,352)
(1,611,948)
21,081
(9,068)
(19,136)
(3,913)
54
(176,821)
(89,784)
(167,059)
80,462
(185,889)
(108,920)
(166,521)
(77,322)
(2,101,962)
(1,992,816)
105,291
(73,353)
–
1,367,964
(29,866)
(103,219)
203
2,500
3,783
1,450,221
(45,181)
(2,129,328)
(724,288)
Cash and cash
equivalents
$’000
34,304
(22,051)
208
12,461
35,928
223
48,612
Total
$’000
34,304
(22,051)
208
12,461
35,928
223
48,612
European Transport Investments (UK) Limited (ETI UK), a subsidiary of ATLIX, has made guarantees, totalling € 2 million
($3.2 million) (31 December 2018: € 2 million ($3.2 million)), in the event of a senior debt payment event of default by
Warnowquerung GmbH & Co KG.
This contingent commitment is backed by an on-demand guarantee, provided through a pledged cash account into which
€ 2 million ($3.2 million) (31 December 2018: € 2 million ($3.2 million)) has been deposited. These funds are restricted and are
classified as restricted cash on the Consolidated Statements of Financial Position. No provision has been raised against this item.
102 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS 7.3 Remuneration of auditors
Amounts paid or payable to PricewaterhouseCoopers Australia for:
Audit services
Other assurance services (a)
Amounts paid or payable to Network firms
of PricewaterhouseCoopers for:
Audit services
Taxation services (b)
Amounts paid or payable to PricewaterhouseCoopers for:
Audit and other assurance services
Other services
Amounts paid or payable to non PricewaterhouseCoopers
audit firms for:
Audit services provided by CERTIS GmbH
Wirtschaftsprüfungsgesellschaft (‘CERTIS’)
Non-audit services provided by CERTIS
ALX
ATLAX Group
Year ended
31 Dec 2019
$
Year ended
31 Dec 2018
$
Year ended
31 Dec 2019
$
Year ended
31 Dec 2018
$
503,200
213,771
716,971
479,130
60,680
539,810
251,600
10,043
261,643
239,565
30,340
269,905
357,779
219,785
577,564
314,211
155,974
470,185
38,101
32,745
–
–
38,101
32,745
1,074,750
219,785
854,021
155,974
299,744
302,650
–
–
1,294,535
1,009,995
299,744
302,650
100,256
64,866
–
–
100,256
64,866
–
–
–
–
–
–
(a) Other assurance services in 2019 relates to the Equity Raise due diligence and a one off review of performance rights allocation. Other assurance services in 2018
related to management internalisation.
(b) Taxation services provided by network firms of the auditor relates to the filing of corporate income tax returns for the Groups’ entities domiciled outside of Australia.
7.4 Share based payments
STI Plan
The STI Plan applies to all Atlas Arteria staff based on a balance of financial and non-financial performance measures aligned
with Atlas Arteria’s short term goals. For the senior executives, following determination of the STI amount, 50% is paid in cash
and 50% is deferred for one year and vests in unrestricted securities on terms determined by Atlas Arteria.
LTI Plan
The LTI Plan is designed to provide long-term incentives to key employees to deliver long-term securityholder returns.
Under the plan, participants are granted performance rights which only vest if certain performance standards are met.
The amount of performance rights that will vest depends on ALX’s relative Total Securityholder Return (TSR) against the TSR
performance of a peer group of companies approved by the Board. Performance rights are granted under the plan for no
consideration. These performance rights are exercisable at no consideration upon satisfaction of performance hurdles.
Set out below are summaries of performance rights granted under the plans:
As at 1 January
Rights granted during the year under the LTI Plan
Rights granted during the year under the STI Plan
As at 31 December
ALX
ATLAX Group
Year ended
31 Dec 2019
Year ended
31 Dec 2018
Year ended
31 Dec 2019
Year ended
31 Dec 2018
Number of
performance
rights
Number of
performance
rights
Number of
performance
rights
Number of
performance
rights
237,765
372,292
107,575
717,632
–
237,765
–
237,765
237,765
372,292
107,575
717,632
–
237,765
–
237,765
LTI share performance rights issued in 2018 that are outstanding at the end of the year will vest on 28 February 2021 only if
performance conditions are met. LTI Share performance rights issued in 2019 that are outstanding at the end of the year will vest
on 28 February 2022 only if performance conditions are met. STI share performance rights issued in 2019 that are outstanding
at year end will vest on 1 April 2020 only if service conditions are met.
ATLAS ARTERIA ANNUAL REPORT 2019 | 103
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE 7.4.1 Fair value of performance rights granted
The assessed fair value at grant date of performance rights granted during the year ended 31 December 2019 ranged from $3.63
to $4.81 per performance right (2018: $3.57 to $4.21). The fair value at grant date is independently determined using an adjusted
form of the Black Scholes Model which includes a Monte Carlo simulation model that takes into account the exercise price, the
term of the performance right, the impact of dilution (where material), the share price at grant date and expected price volatility
of the underlying share, the expected dividend yield, the risk free interest rate for the term of the performance right and the
correlations and volatilities of the peer group companies.
The model inputs for performance rights granted during the year ended 31 December 2019 included:
(i)
Performance rights are granted for no consideration and vest based on ALX’s TSR ranking within a peer group of selected
companies over vesting period. Vested performance rights are exercisable immediately after vesting
(ii) Grant date: 1 January 2019, 30 July 2019 and 20 December 2019
(iii) Expiry date: 28 February 2022
(iv) Expected price volatility of the ALX stapled securities:
Performance rights with a grant date of 1 January 2019: 23.67%
Performance rights with a grant date of 30 July 2019: 22.40%
Performance rights with a grant date of 20 December 2019: 21.73%
(v) Expected dividend yield: 0%
(vi) Risk-free interest rate:
Performance rights with a grant date of 1 January 2019: Between -0.38% and 2.48%
Performance rights with a grant date of 30 July 2019: Between -0.43% and 1.85%
Performance rights with a grant date of 20 December 2019: Between -0.32% and 1.71%
The expected price volatility is based on the historic volatility (based on the remaining life of the performance rights),
adjusted for any expected changes to future volatility due to publicly available information.
7.4.2 Expenses arising from share-based payment transactions
Employee performance rights – LTI
Employee performance rights – STI
ALX
ATLAX Group
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
Year ended
31 Dec 2019
$’000
Year ended
31 Dec 2018
$’000
751
1,141
1,892
141
–
141
25
38
63
141
–
141
104 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS
7.5 Other accounting policies
This note provides a list of the significant accounting policies adopted in preparation of these Financial Reports to the extent they
have not already been disclosed in the other notes above.
7.5.1 Transaction costs
Transaction costs related to a business combination are capitalised into the investment cost. Transaction costs arising on the issue
of equity instruments are recognised directly in equity and those arising on borrowings are netted with the liability and included in
interest expense using the effective interest method.
7.5.2 GST
The amount of GST incurred by the Groups that is not recoverable from the Australian Taxation Office (‘ATO’) is recognised as
an expense or as part of the cost of acquisition of an asset or adjusted from the proceeds of securities issued. These expenses
have been recognised in profit or loss net of the amount of GST recoverable from the ATO. Receivables and payables are stated
at amounts exclusive of GST. The net amount of GST recoverable from the ATO is included in receivables in the Consolidated
Statement of Financial Position. Cash flows relating to GST are included in the Consolidated Statements of Cash Flows on
a net basis.
7.5.3 Foreign currency translation
Functional and presentation currency
Items included in the Financial Reports of each of the Groups’ entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The Financial Reports are presented in Australian Dollars,
which is the functional and presentation currency of ATLIX and ATLAX.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Group companies
The results and financial position of the Groups’ entities that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
− Assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the date of that
Statement of Financial Position
− Income and expenses for each Statement of Comprehensive Income are translated at exchange rates at the dates of transactions
or at an average rate as appropriate
− All resulting exchange differences are recognised as a separate component of equity
On consolidation, exchange differences arising from the translation of any net investment in foreign entities are taken to
securityholders’ equity. When a foreign operation is disposed of or borrowings that form part of the net investment are repaid, a
proportionate share of such exchange differences are recognised in profit or loss as part of the gain or loss on disposal. Goodwill
and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
7.5.4 Offsetting financial instruments
Financial assets and financial liabilities may be offset and the net amount reported on the Statement of Financial Position when
there is a legally enforceable right to offset the amounts and either there is an intention to settle on a net basis, or realise the
financial asset and settle the financial liability simultaneously.
7.5.5 Change in accounting policy – AASB 16 Leases
This note explains the impact of the adoption of AASB 16 Leases on the Groups’ Financial Reports and discloses the new
accounting policies that have been applied from 1 January 2019.
The Groups have applied the standard from its mandatory adoption date of 1 January 2019. The Groups applied the simplified
transition approach and have not restated comparative amounts for the year prior to first adoption.
ATLAS ARTERIA ANNUAL REPORT 2019 | 105
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE Adjustments recognised on adoption of AASB 16
On adoption of AASB 16, the Groups recognised lease liabilities in relation to leases which had previously been classified as
‘operating leases’ under the principles of AASB117 Leases. These liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s
incremental borrowing rate applied to the lease liabilities on 1 January 2019 was between 1.93% to 7.43%. There were no leases
previously recorded as finance leases.
Operating lease commitments as at 31 December 2018
Discounted using the lessee’s incremental borrowing rate of at the date of initial application
Lease liabilities recognised as at 1 January 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
ALX
ATLAX Group
As at
1 Jan 2019
$’000
As at
1 Jan 2019
$’000
76,619
(56,129)
20,490
2,285
(218)
2,067
ALX
ATLAX Group
As at
1 Jan 2019
$’000
As at
1 Jan 2019
$’000
1,161
19,329
20,490
169
1,898
2,067
The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been
applied. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of
initial application.
The material recognised right-of-use assets relate to the following types of assets:
Properties
Easement
Total right-of-use assets
ALX
ATLAX Group
As at
31 Dec 2019
$’000
As at
1 Jan 2019
$’000
As at
31 Dec 2019
$’000
As at
1 Jan 2019
$’000
1,891
5,116
7,007
2,235
5,224
7,459
1,839
–
1,839
2,026
–
2,026
The change in accounting policy affected the following items in the balance sheet on 1 January 2019:
− right-of-use assets (refer Consolidated Statements of Financial Position – property plant and equipment) – increase
by $7.5 million in Atlas Arteria and an increase by $2.0 million in ATLAX Group
− easement accruals (refer to note 4.4 Other Liabilities) – net decrease by $11.6 million in Atlas Arteria
− lease liabilities (refer to note 4.4 Other Liabilities) – increase by $20.5 million in Atlas Arteria and an increase by $2.1 million
in ATLAX Group
− investments accounted for using the equity method (refer to note 3.2.2 Movements in carrying amount) – a decrease
by $0.2 million in ATLAX Group.
The net impact on retained earnings (refer Consolidated Statements of Changes in Equity) on 1 January 2019 was a decrease
of $1.2 million in the ATLIX Group and a decrease of $0.2 million in the ATLAX Group.
Practical expedients applied
In applying AASB 16 for the first time, the Groups have used the following practical expedients permitted by the standard
where applicable:
− the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
− reliance on previous assessments on whether leases are onerous
− the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019
as short-term leases
− the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application
− the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease
− the materiality of the application of AASB16 on the financial accounts when choosing whether to recognise the impact
of an operating lease.
106 | ATLAS ARTERIA ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORTS
Atlas Arteria has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application.
Instead, for contracts entered into before the transition date Atlas Arteria relied on its assessment made applying AASB 117
and Interpretation 4 Determining whether an Arrangement contains a Lease.
The Groups’ leasing activities and how these are accounted for
The Groups’ lease various properties, offices and cars. Rental contracts are for a period of 2 to 64 years but may have
extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different
terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for
borrowing purposes.
Until the 2018 financial year, leases of property, plant and equipment were classified as operating leases (no leases were classified
as finance leases). Payments made under operating leases (net of any incentives received from the lessor) were charged to profit
or loss on a straight-line basis over the period of the lease.
From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased
asset is available for use by the Groups. Each lease payment is allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance
of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term
on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities may include the net
present value of the following lease payments:
− fixed payments (including in-substance fixed payments), less any lease incentives receivable
− variable lease payment that are based on an index or a rate
− amounts expected to be payable by the lessee under residual value guarantees
− the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
− payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s
incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain
an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets measured at cost may comprise the following:
− the amount of the initial measurement of lease liability
− any lease payments made at or before the commencement date less any lease incentives received
− any initial direct costs, and
− restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense
in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small items
of office furniture and cars.
Extension and termination options
Extension and termination options are included in a number of leases across Atlas Arteria. These terms are used to maximise
operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only
by the Groups and not by the respective lessor. No lease payments made in 2019 were optional.
7.6 Events occurring after balance sheet date
The APRR Transaction was granted foreign investment control clearance from the French Ministry of the Economy and anti-trust
clearance from the European Commission in mid-February 2020. Completion of the APRR Transaction is expected to take place
in early March 2020.
Completion of the APRR Transaction will be funded by the ATLIX Group from the proceeds of the Equity Raise. In conjunction
with the APRR Transaction, Eiffage agreed to work with the Atlas Arteria and the other MAF2 Shareholders to refinance
a € 1,070.0 million term loan at Eiffarie SAS (‘Eiffarie’) which matured in February 2022. This term loan was refinanced on
20 February with a new maturity date of February 2025 with amortisation commencing in June 2023. Atlas Arteria’s investment
in Eiffarie is reflected in the share of net profit of investments and is accounted for using the equity method of accounting.
The FX Forward Contract settled on 24 February 2020 with the payment of $1,167.9 million in exchange for € 710.0 million at
a EUR/AUD exchange rate of 1.6449. A transaction premium of $4.9 million is embedded in the settlement of the FX Forward
Contract. The net loss on cash flow hedge ineffectiveness recognised at 31 December 2019 was $5.3 million. A reversal
of $0.4 million on the cash flow hedge ineffectiveness will be recorded in 2020.
The directors of ATLIX and ATLAX are not aware of any other matter or circumstance not otherwise dealt with in the Financial
Reports that has significantly affected or may significantly affect the operations of the Groups, the results of those operations
or the state of affairs of the Groups in years subsequent to the year ended 31 December 2019.
ATLAS ARTERIA ANNUAL REPORT 2019 | 107
NOTES TO THE FINANCIAL REPORTSFINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE DIRECTORS’ DECLARATION – ATLAS ARTERIA
INTERNATIONAL LIMITED
The directors of Atlas Arteria International Limited (‘ATLIX’) declare that:
a) the Financial Report of ATLIX and its controlled entities (‘ALX’) and notes set out on pages 64 to 107:
i) comply with Australian Accounting Standards and other mandatory professional reporting requirements; and
ii)
give a true and fair view of the financial position of the Atlas Arteria as at 31 December 2019 and of its performance
for the year ended on that date; and
b) there are reasonable grounds to believe that ATLIX will be able to pay its debts as and when they become due and payable.
The directors confirm that the Financial Report also complies with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
This declaration is made in accordance with a resolution of the directors.
Jeffrey Conyers
Chairman
Atlas Arteria International Limited
Pembroke, Bermuda
26 February 2020
Derek Stapley
Director
Atlas Arteria International Limited
Pembroke, Bermuda
26 February 2020
DIRECTORS’ DECLARATION – ATLAS ARTERIA LIMITED
The directors of Atlas Arteria Limited (‘ATLAX’) declare that:
a) the Financial Report of ATLAX and its controlled entities (‘ATLAX Group’) and notes set out on pages 64 to 107:
are in accordance with the constitution of ATLAX and the Corporations Act 2001, including:
i)
ii)
complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements, and
giving a true and fair view of the financial position of the ATLAX Group as at 31 December 2019 and of its performance
for the year ended as on that date; and
b) there are reasonable grounds to believe that ATLAX will be able to pay its debts as and when they become due and payable.
The directors confirm that the Financial Report also complies with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The directors have been given the declaration by the Chief Executive Officer and Chief Financial Officer required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Nora Scheinkestel
Chairman
Atlas Arteria Limited
Melbourne, Australia
27 February 2020
Debra Goodin
Director
Atlas Arteria Limited
Melbourne, Australia
27 February 2020
108 | ATLAS ARTERIA ANNUAL REPORT 2019
Independent auditor’s report
To the stapled security holders of Atlas Arteria International Limited and Atlas Arteria Limited
Report on the audits of the financial reports
Our opinion
In our opinion:
The accompanying financial reports of Atlas Arteria (“ALX” or “Group”), being the consolidated
stapled group which comprises Atlas Arteria International Limited (“ATLIX”) and its controlled
entities and Atlas Arteria Limited (“ATLAX”) and its controlled entities, and the Atlas Arteria Limited
Group (“ATLAX Group”) which comprises ATLAX and its controlled entities, are in accordance with
the Corporations Act 2001 (as applicable), including:
(a) giving a true and fair view of the financial positions of ALX and the ATLAX Group as at 31
December 2019 and of their financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001 (as
applicable).
What we have audited
The financial reports of ALX and the ATLAX Group (the “financial reports”) comprise:
the consolidated statements of financial position as at 31 December 2019
the consolidated statements of comprehensive income for the year then ended
the consolidated statements of changes in equity for the year then ended
the consolidated statements of cash flows for the year then ended
the notes to the financial reports, which include a summary of significant accounting policies
the directors’ declarations.
Basis for opinion
We conducted our audits in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audits of the financial
reports section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of ALX and the ATLAX Group in accordance with the auditor independence
requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(including Independence Standards) (the Code) that are relevant to our audits of the financial reports
in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
ATLAS ARTERIA ANNUAL REPORT 2019 | 109
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Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audits to ensure that we performed enough work to be able to give an
opinion on each of the financial reports as a whole, taking into account the geographic and
management structure of ALX and the ATLAX Group (together, the “Groups”), their accounting
processes and controls and the industry in which they operate.
ALX invests in an international portfolio of toll road assets, the most significant of which are
Autoroutes Paris-Rhin-Rhone (“APRR”) in France and Dulles Greenway (“DG”) in the United States of
America. We engaged with the auditors of APRR and Toll Road Investors Partnership II, L.P. (“TRIP
II”), the concessionaire for DG, to report to us in respect of their audit procedures performed on APRR
and DG, respectively.
Materiality
Audit scope
Key audit matters
ALX materiality was $22.35
million, which represents
approximately 2.5% of its
segment EBITDA. The ATLAX
Group materiality was $1.56
million, which represents
approximately 1% of its total
assets.
We applied these thresholds,
together with qualitative
considerations, to determine
the scope of our audits and
the nature, timing and extent
of our audit procedures and to
evaluate the effect of
misstatements on the
financial reports as a whole.
Our audits focused on where
the Groups made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
We decided the nature, timing
and extent of work that
needed to be performed by
other auditors operating
under our instruction
("component auditors").
For APRR, DG and Warnow
Tunnel, we determined the
level of involvement we
needed to have in the audit
work performed by the
Amongst other relevant topics,
we communicated the
following key audit matters to
the Audit and Risk
Committees:
Value of the DG
concession for
ALX and value of
the equity
accounted
investment in DG
for the ATLAX
Group
Consolidation of
subsidiaries and
equity accounting
of associates.
110 | ATLAS ARTERIA ANNUAL REPORT 2019
These are further described in
the Key audit matters section
of our report.
component auditors to enable
us to conclude whether
sufficient appropriate audit
evidence had been obtained.
Our involvement included
discussions, written
instructions and reviewing a
selection of their workpapers.
As the operating activities of
both DG and Warnowquerung
GmbH & Co., KG, the
concessionaire of Warnow
Tunnel (“Warnow Tunnel”)
are reflected in ALX's
financial report, using
segment EBITDA as the
materiality benchmark
reflects the operating
activities of ALX.
We used total assets as the
materiality benchmark for the
ATLAX Group because, in our
view, it remains the primary
metric against which its
performance is most
commonly measured. It
presents its holding as an
investment, which is net of
associated debt held at the
level of the underlying asset.
We utilised a 2.5% threshold
for ALX and a 1% threshold
for the ATLAX Group based
on our professional
judgement, noting that both
are within the range of
commonly acceptable
thresholds.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audits of the financial reports for the current period. The key audit matters were addressed in the
context of our audits of the financial reports as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter of ALX and the ATLAX
Group
How our audit addressed the key audit
matter
Value of the DG concession for ALX and value
of the equity accounted investment in DG for
the ATLAX Group.
(Refer to notes 4.1 and 3.2)
The value of the DG concession for ALX is $2.2 billion
of the total tolling concession balance disclosed in
note 4.1 ($2.4 billion). The value of the equity
We evaluated the Groups’ assessments by comparing
their analysis to our knowledge of DG and the
environment in which it operates. Our understanding
was informed by enquiries of DG’s auditors and
publicly available information regarding the road
network and the macroeconomic environment of the
region.
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Key audit matter of ALX and the ATLAX
Group
How our audit addressed the key audit
matter
accounted investment in DG for the ATLAX Group is
$145 million as disclosed in note 3.2. During the year
ended 31 December 2019, ALX recognised an
impairment loss on goodwill relating to DG of $66
million as disclosed in note 4.2 and an impairment
loss on the DG concession of $99 million as disclosed
in note 4.1. The ATLAX Group recognised an
impairment loss on the equity accounted investment
in DG of $16 million as disclosed in note 3.2.
At each reporting period, the DG Concession for ALX,
and the value of the equity accounted investment in
DG for the ATLAX Group, need to be assessed for
indicators of impairment. If indicators of impairment
exist, the recoverable amount for each asset needs to
be estimated. These assessments involve significant
judgements in estimating future cash flows and the
rate at which they are discounted.
For ALX, the test for impairment focuses on the DG
Concession. For the ATLAX Group, it is the equity
accounted investment in DG that is assessed for
impairment.
The assessments of the carrying values of the DG
Concession for ALX and the equity accounted
investment in DG for the ATLAX Group were key
audit matters due to the judgement involved in
developing the discounted cashflow models used in
determining the recoverable amounts.
We evaluated the Groups’ discounted cashflow models
used to estimate the recoverable amount of the DG
Concession for ALX and the equity accounted
investment in DG for the ATLAX Group, and the
process by which they were developed. Our
procedures included:
evaluating the Groups’ assessments whether
there were any indicators of impairment, by
reading publicly available information
regarding the road network and the
macroeconomic environment of the region
and making enquiries of DG’s auditors
evaluating the discount rate applied to
cashflow forecasts by using PwC valuation
experts to assess the reasonableness of
management’s estimate of the discount rate.
This assessment was performed with
reference to externally derived data where
possible, including market expectations of
investment return, projected economic
growth, interest rates, valuations of
comparable assets and asset specific
characteristics
comparing previous cashflow forecasts to
actual results to assess the ability of the
Groups to forecast accurately
applying sensitivity analysis to key
assumptions, in particular the discount rate,
toll escalation rates and traffic forecasts
sample testing the mathematical accuracy of
the Groups’ discounted cashflow models
which were used to determine the
recoverable amount of the DG Concession for
ALX and the equity accounted investment in
DG for the ATLAX Group
assessing the relevant disclosures which have
been made in note 4.1, in light of the
112 | ATLAS ARTERIA ANNUAL REPORT 2019
Key audit matter of ALX and the ATLAX
Group
How our audit addressed the key audit
matter
Consolidation of subsidiaries and equity
accounting of associates.
(Refer to note 3.2)
ALX applies equity accounting to its investment in
APRR and consolidates its investments in DG and
Warnow Tunnel. The ATLAX Group applies equity
accounting to its investment in DG. In doing so, they
are required to make a number of adjustments to the
underlying financial information to ensure alignment
to Australian Accounting Standards and to the
Groups’ accounting policies.
This was a key audit matter because certain
adjustments are material and technical in nature such
as adjusting the results of international subsidiaries
and investments in associates prepared using local
accounting policies to reflect Australian Accounting
Standards.
requirements of Australian Accounting
Standards.
Through interaction with management and the APRR,
DG and Warnow Tunnel audit teams, we developed an
understanding of operational developments and local
accounting policies of the subsidiaries and associates
and the nature and extent of any accounting standard
or accounting policy adjustments required to align
with those of the Groups. On a sample basis, we
reperformed the calculation of the adjustments to
assess consistency with this understanding.
Upon receipt of the audited financial information for
DG, we checked management’s calculation of
adjustments impacting:
ALX’s consolidated statement of
comprehensive income and consolidated
statement of financial position and
the ATLAX Group’s share of net profits or
losses and carrying value of DG.
Upon receipt of the audited financial information for
APRR, we checked management’s calculation of
adjustments impacting ALX’s share of net profits or
losses and carrying value of APRR.
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Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2019, but does not include
the financial reports and our auditor’s report thereon. Prior to the date of this auditor's report, the
other information we obtained included the Directors' Reports. We expect the remaining other
information to be made available to us after the date of this auditor's report.
Our opinion on the financial reports does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audits of the financial reports, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial reports or our knowledge obtained in the audits, or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial reports
The directors of ATLIX and ATLAX are responsible for the preparation of the financial reports that
give a true and fair view in accordance with Australian Accounting Standards and the Corporations
Act 2001 (as applicable) and for such internal control as the directors determine is necessary to enable
the preparation of the financial reports that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
In preparing the financial reports, the directors are responsible for assessing the ability of the Groups
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Groups or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audits of the financial reports
Our objectives are to obtain reasonable assurance about whether the financial reports as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial reports.
114 | ATLAS ARTERIA ANNUAL REPORT 2019
A further description of our responsibilities for the audits of the financial reports is located at the
A further description of our responsibilities for the audits of the financial reports is located at the
Auditing and Assurance Standards Board website at:
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
auditor's report.
Report on the remuneration report
Report on the remuneration report
Our opinion on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 13 to 28 of the directors’ reports for the
We have audited the remuneration report included in pages 45 to 60 of the directors’ reports for the
year ended 31 December 2019.
year ended 31 December 2019.
In our opinion, the remuneration report of ATLIX and ATLAX for the year ended 31 December 2019
In our opinion, the remuneration report of ATLIX and ATLAX for the year ended 31 December 2019
complies with section 300A of the Corporations Act 2001 (as applicable).
complies with section 300A of the Corporations Act 2001 (as applicable).
Responsibilities
Responsibilities
The directors of ATLIX and ATLAX are responsible for the preparation and presentation of the
The directors of ATLIX and ATLAX are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001 (as applicable).
remuneration report in accordance with section 300A of the Corporations Act 2001 (as applicable).
Our responsibility is to express an opinion on the remuneration report, based on our audits conducted
Our responsibility is to express an opinion on the remuneration report, based on our audits conducted
in accordance with Australian Auditing Standards.
in accordance with Australian Auditing Standards.
PricewaterhouseCoopers
PricewaterhouseCoopers
SJ Smith
Partner
SJ Smith
Partner
Sydney
27 February 2020
Sydney
27 February 2020
ATLAS ARTERIA ANNUAL REPORT 2019 | 115
FINANCIAL REPORTGOVERNANCERISK MANAGEMENTSUSTAINABILITYPORTFOLIO AND PERFORMANCEVISION AND VALUESTHE ATLAS ARTERIA BUSINESSFROM THE CEO AND MANAGING DIRECTORCHAIRPERSONS’ REVIEW2019 AT A GLANCE
SECURITYHOLDER INFORMATION
As at 31 March 2020
Distribution of securities
Investor ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
Investors with less than the minimum marketable parcel 1
1. Minimum marketable parcel is $500.00 equating to 91 shares at $5.51 per security
Twenty largest investors
Investor
1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
2
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
3 CITICORP NOMINEES PTY LIMITED
4 NATIONAL NOMINEES LIMITED
5 BNP PARIBAS NOMINEES PTY LTD
6 BNP PARIBAS NOMS PTY LTD
7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
8 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
9 AUSTRALIAN UNITED INVESTMENT COMPANY LIMITED
10 DIVERSIFIED UNITED INVESTMENT LIMITED
11 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
12 BNP PARIBAS NOMS (NZ) LTD
13 CITICORP NOMINEES PTY LIMITED
14 NETWEALTH INVESTMENTS LIMITED
15 BNP PARIBAS NOMINEES PTY LTD
16 SANDHURST TRUSTEES LTD
17 DJERRIWARRH INVESTMENTS LIMITED
18 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
19 AMP LIFE LIMITED
20 CUSTODIAL SERVICES LIMITED
Total
Details of substantial stapled securityholders
Holder
Date of most recent substantial holder notice
Lazard Asset Management
The Vanguard Group, Inc
Pendal Group Limited
16 March 2020
2 April 2020
13 March 2020
Holders
Total
securities
% of issued
securities
11,447
4,350,169
9,035
2,507
2,045
22,533,782
17,877,032
47,531,907
118
786,731,598
25,152
879,024,488
2,568
72,629
0.49
2.56
2.03
5.41
89.50
100.00
0.01%
Number of
securities
% of issued
securities
370,398,469
150,861,550
69,015,240
59,648,729
31,315,033
18,187,154
13,456,814
7,626,203
5,500,000
4,500,000
4,287,614
4,127,096
4,095,447
3,551,918
3,447,000
3,134,106
2,293,696
1,805,078
1,781,657
1,617,556
42.14
17.16
7.85
6.79
3.56
2.07
1.53
0.87
0.63
0.51
0.49
0.47
0.47
0.40
0.39
0.36
0.26
0.21
0.20
0.18
760,650,360
86.53
Number of
securities
% of issued
securities
97,722,842
52,753,348
44,016,341
11.12%
6.00%
5.01%
116 | ATLAS ARTERIA ANNUAL REPORT 2019
Computershare Investor Services Pty Ltd
REGISTRY
GPO Box 2975
Melbourne VIC 3001
Australia
Telephone:
(Australia) 1800 267 108
(Overseas) +61 3 9415 4053
Mon-Fri 8.30am – 7pm AEST
Website: www.computershare.com/au
Facsimile: +61 (0) 3 9473 2500
CORPORATE DIRECTORY
ATLAS ARTERIA LIMITED
Level 5, 141 Flinders Lane
Melbourne VIC 3000
Australia
Telephone (Australia): 1800 621 694
Telephone (International): +61 (0)438 493 692
Email: investors@atlasarteria.com
Website: www.atlasarteria.com
Directors
Nora Scheinkestel, Non-Executive, Independent Chairman
Graeme Bevans, Executive Director
Debbie Goodin, Non-Executive, Independent Director
David Bartholomew, Non-Executive, Independent Director
Jean-Georges Malcor, Non-Executive, Independent Director
Secretary
Clayton McCormack, General Counsel and Company Secretary
ATLAS ARTERIA INTERNATIONAL LIMITED
4th Floor, Cedar House
41 Cedar Avenue
Hamilton HM12 Bermuda
Directors
Jeffrey Conyers, Non-Executive, Independent Chairman
James Keyes, Non-Executive, Independent Director
Derek Stapley, Non-Executive, Independent Director
Nora Scheinkestel, Non-Executive, Independent Director
Fiona Beck, Non-Executive, Independent Director
Secretary
Sheena Dottin
Photography Credits:
APRR, in order of appearance:
Page 8 – Photographer Gilles Leimdorfer: Highway Liane or A41 North
Page 11 – Photographer Gilles Leimdorfer: Titans Highway structure. Nantua Viaduct
Page 12 – Photographer Gilles Leimdorfer: Titans Highway Artwork
Page 20 – Photographer Gilles Leimdorfer: Protective marking for a work area
Page 22 – Photographer Mathieu Payan: A39 motorway in the heart of the Jura forests
Page 24 – Photographer Gilles Leimdorfer: Signposting on the A71 motorway to protect a mowing site
Page 25 – Photographer Gilles Leimdorfer: Saint-Apollinaire central command or security post
Page 27 – Photographer Léonard De SERRES: The Garden of Trees area (A77)
Dulles Greenway, source: David Madison photography
REGISTRY
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne VIC 3001
Australia
Telephone:
(Australia) 1800 267 108
(Overseas) +61 3 9415 4053
Mon-Fri 8.30am – 7pm AEST
Website: www.computershare.com/au
Facsimile: +61 (0) 3 9473 2500
CORPORATE DIRECTORY
ATLAS ARTERIA LIMITED
Level 5, 141 Flinders Lane
Melbourne VIC 3000
Australia
Telephone (Australia): 1800 621 694
Telephone (International): +61 (0)438 493 692
Email: investors@atlasarteria.com
Website: www.atlasarteria.com
Directors
Nora Scheinkestel, Non-Executive, Independent Chairman
Graeme Bevans, Executive Director
Debbie Goodin, Non-Executive, Independent Director
David Bartholomew, Non-Executive, Independent Director
Jean-Georges Malcor, Non-Executive, Independent Director
Secretary
Clayton McCormack, General Counsel and Company Secretary
ATLAS ARTERIA INTERNATIONAL LIMITED
4th Floor, Cedar House
41 Cedar Avenue
Hamilton HM12 Bermuda
Directors
Jeffrey Conyers, Non-Executive, Independent Chairman
James Keyes, Non-Executive, Independent Director
Derek Stapley, Non-Executive, Independent Director
Nora Scheinkestel, Non-Executive, Independent Director
Fiona Beck, Non-Executive, Independent Director
Secretary
Sheena Dottin
Photography Credits:
APRR, in order of appearance:
Page 8 – Photographer Gilles Leimdorfer: Highway Liane or A41 North
Page 11 – Photographer Gilles Leimdorfer: Titans Highway structure. Nantua Viaduct
Page 12 – Photographer Gilles Leimdorfer: Titans Highway Artwork
Page 20 – Photographer Gilles Leimdorfer: Protective marking for a work area
Page 22 – Photographer Mathieu Payan: A39 motorway in the heart of the Jura forests
Page 24 – Photographer Gilles Leimdorfer: Signposting on the A71 motorway to protect a mowing site
Page 25 – Photographer Gilles Leimdorfer: Saint-Apollinaire central command or security post
Page 27 – Photographer Léonard De SERRES: The Garden of Trees area (A77)
Dulles Greenway, source: David Madison photography
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