ANNUAL REPORT
2013
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ANNUAL REPORT
ENQUIRIES
Corporate Governance Statement
Financial Statements
Transurban Holdings Limited and Controlled Entities
Transurban Holding Trust and Controlled Entities
1
10
149
Transurban International Limited and Controlled Entities 248
Security Holder Information
353
ENQUIRIES ABOUT YOUR TRANSURBAN
STAPLED SECURITIES
The stapled securities register is maintained by
Computershare Investor Services Pty Ltd.
If you have a question about your Transurban securities
or distributions please contact:
COMPUTERSHARE
Yarra Falls
452 Johnston Street
Abbotsford, Victoria 3067
Australia
Mail
The Registrar
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne, Victoria 3001
Australia
Phone
(Australia ) 1300 555 159
(Overseas) +61 3 9415 4062
TRANSURBAN GROUP
AUSTRALIA
Melbourne (Head Office)
Level 3, 505 Little Collins Street
Melbourne, Victoria 3000
Australia
Phone +61 (0)3 8656 8900
Sydney
Level 5, 50 Pitt Street
Sydney, NSW 2000
Australia
UNITED STATES
Washington DC Area
6440 General Green Way
Alexandria VA 22312
United States of America
Phone +1 571 419 6100
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2013 CORPORATE GOVERNANCE STATEMENT
This statement outlines the key aspects of Transurban’s corporate governance framework and main governance practices. Copies or
summaries of certain governance documents referred to in this statement can be found in the “Corporate Governance” section of the
Transurban website at www.transurban.com. These charters, policies and procedures are regularly reviewed and updated to ensure
they continue to reflect best practice.
Throughout the year ended 30 June 2013 (the reporting period), Transurban’s governance arrangements complied with the
ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. The following table indicates
where the Principles and Recommendations are dealt with in this statement. A full checklist cross-referencing the Principles and
Recommendations to this statement and elsewhere in the Annual Report can be found in the ‘Corporate Governance’ section of the
Transurban website at www.transurban.com.
ASX Principles and Recommendations
Section reference in statement
Principle 1 – Lay solid foundations for management and oversight
1, 2 and 3
Principle 2 – Structure the Board to add value
Principle 3 – Promote ethical and responsible decision-making
Principle 4 – Safeguard integrity in financial reporting
Principle 5 – Make timely and balanced disclosure
Principle 6 – Respect the rights of security holders
Principle 7 – Recognise and manage risk
Principle 8 – Remunerate fairly and responsibly
2 and 3
4 and 5
3 and 5
6
6 and 7
8
3
The Board of Transurban Holdings Limited (THL), the Board of Transurban Infrastructure Management Limited (TIML), as responsible
entity of Transurban Holding Trust (THT), and the Board of Transurban International Limited (TIL) are collectively referred to as the
“Board” in this statement, unless otherwise indicated.
1
ROLE OF THE BOARD
Relevant governance documents:
Board Charter
The Board is accountable to security holders for the performance
of Transurban.
The Board has a Charter that sets out its authority, responsibilities
and membership, and the arrangements by which it operates.
The Charter also clearly establishes the relationship between the
Board and management. The Board reviewed the Charter during
the reporting period to ensure its continued appropriateness.
The primary roles of the Board are to provide overall strategic
guidance for Transurban and effective oversight of management.
To this end, the Board has reserved to itself the specific
responsibilities listed in the Charter. To assist it in discharging
these responsibilities, the Board has established Committees to
give detailed consideration to key issues.
The Board has delegated to the CEO, and through the CEO
to other Senior Executives, responsibility for the day-to-day
management of Transurban. The scope of, and limitations to,
these delegations are clearly documented and cover areas such
as operating expenditure, capital expenditure and investments.
These delegations balance effective oversight with appropriate
empowerment and accountability of Senior Executives.
2
BOARD STRUCTURE AND MEMBERSHIP
Relevant governance documents:
Board Charter
Policy and Procedure for the Nomination,
Selection and Appointment of New NEDs
and the Re-Election of Incumbent NEDs
Diversity Policy
2.1 BOARD STRUCTURE
The Board is structured so that its membership provides the mix
of qualifications, skills and experience to enable it to discharge its
responsibilities, and so that its size facilitates effective discussion
and efficient decision making. The Board determines its size and
composition, subject to the constitutions of THL, TIML, and TIL,
and the law.
The Board of THL, the Board of TIML and the Board of TIL have
common directors and meetings are held concurrently. The Board
currently comprises eight Directors, with seven Non-executive
Directors, including the Chair, and one Executive Director, the
CEO. Each Director’s skills, qualifications, experience, relevant
expertise and period in office are set out in the Directors’ Report.
During the reporting period Scott Charlton commenced as CEO,
following the resignation of Chris Lynch. Bob Officer also resigned
from the Board.
2.2 DIRECTOR INDEPENDENCE
Each Director is expected to bring unfettered and independent
judgment to the Board’s deliberations.
Under the Board Charter, the Board must comprise a majority of
independent Non-executive Directors and have an independent
Non-executive Chair. The roles of the Chair and the CEO must be
exercised by separate individuals.
The Board defines an independent Director as a Non-executive
Director who is free of any business or other relationship that
could materially interfere with or could reasonably be perceived
to materially interfere with the independent exercise of their
judgment.
In assessing the independent status of a Non-executive Director,
the Board considers the ‘relationships affecting independent
status’ set out in the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations and
other facts, information and circumstances that the Board
considers relevant. The test of whether a business or other
relationship is material is assessed1 from the perspective of both
Transurban and the Director.
1 While the Board believes it is inappropriate to determine materiality solely on
the basis of arbitrary dollar, profit or turnover percentage tests, when assessing
materiality, thresholds suggested in accounting standards are used and interests
equal to more than 5% of revenue, equity or profit are potentially material. In
certain circumstances, the Board considers that interests of a lesser value might
also be relevant.
1
ANNUAL REPORT 2013 The Board assesses the independence of new Directors upon
appointment, and reviews the independence of all Directors
annually and as appropriate. Each Director is required to provide
the Board with all relevant information to enable it to make this
assessment.
The Board has reviewed the positions and associations of the
current Non-executive Directors named in the Directors’ Report,
including the Chair. The Board considers each of them to be
independent.
Lindsay Maxsted, Neil Chatfield, Rodney Slater and Samantha
Mostyn each hold positions in companies or with firms with
which Transurban has commercial relationships, as described
in note 36 in the notes to the Financial Statements in the Annual
Report. The Board has considered each case separately and
has concluded that these relationships are not material and do
not interfere with the relevant Director’s independent exercise
of judgment or their ability to act in the best interests of security
holders. None of Mr Maxsted, Mr Chatfield, Mr Slater, nor Ms
Mostyn were, or are, involved in any procurement or other Board
decision making regarding the companies or firms with which they
have an association.
Bob Officer was not considered by the Board to be independent
as he was a nominee of CP2 Limited. CP2 Limited is a co-
investor in DRIVe, the US toll road investment vehicle managed
by Transurban, and was previously also one of Transurban’s
largest security holders. Professor Officer resigned from the
Board in August 2012.
2.3 TENURE, RETIREMENT AND RE-ELECTION
Each Non-executive Director’s term of appointment is subject to
the provisions of the Corporations Act, the ASX Listing Rules, and
the constitutions of THL, TIML and TIL.
New Non-executive Directors (appointed by the Board during
the year to fill a casual vacancy or as an addition to the Board)
are required to seek election as a Director at the Annual General
Meeting (AGM) following their appointment, and then re-election
on a rotational basis with the other Directors.
No Director THL, TIML or TIL (other than the CEO) may hold
office without re-election past the third AGM following their
appointment or three years, whichever is longer.
Board support for Directors retiring and seeking re-election is not
automatic. Prior to each AGM, the Board determines whether it
will recommend to security holders that they vote in favour of the
re-election of each Non-executive Director seeking re-election,
having regard to any matters the Board considers relevant,
including the Director’s performance evaluation and his or her
tenure.
The Board does not set fixed tenure limits for Non-executive
Directors. It is the Board’s intention that Non-executive Directors
serve up to three terms, but tenure remains a matter for the
Board’s discretion on a case-by-case basis.
In the case of long-serving Non-executive Directors who are
standing for re-election at an AGM but who intend to retire from
the Board within their next term, this intention to retire will be
clearly disclosed in the AGM notice of meeting.
2.4 NOMINATION AND APPOINTMENT OF NEW DIRECTORS
AND BOARD GENDER DIVERSITY
The Board has established a policy and procedure for the
nomination, selection and appointment of new Non-executive
Directors.
A regular assessment of the range of qualifications, skills,
experience, and diversity of gender, age, experience, relationships
and background on the Board is undertaken to enable the
identification of particular competencies and perspectives that
will best increase the Board’s effectiveness. The assessment is
assisted by the development and use of a Board ‘skills matrix’ to
identify any gaps. Where a need or gap is identified or arises, the
Nomination Committee commences a search process for potential
appointees across a diverse candidate pool, with the assistance
of external consultants as necessary. The Nomination Committee
then undertakes an assessment of short listed potential
appointees. The Chair and other Directors also meet in person
with potential appointees. The Nomination Committee will then
recommend the most appropriate candidate(s) for consideration
by the Board as a whole.
During the reporting period, the Board reviewed the mix of skills,
experience and diversity in its membership, and confirmed the
appropriateness of its current composition.
The Board recognises that diversity is a competitive advantage
bringing real value and adding to the collective skills and
experience of the Board. The Nomination Committee is
responsible for making recommendations to the Board on
strategies for achieving Board diversity.
2.5 INDUCTION OF NEW DIRECTORS
New Non-executive Directors are issued with a formal letter
of appointment that sets out the key terms and conditions
of appointment, including the Director’s duties, rights and
responsibilities, the time commitment envisaged, and the Board’s
expectations regarding involvement with Board Committee work.
An induction program is in place to allow new Non-executive
Directors to participate fully and actively in Board decision making
at the earliest opportunity. The program is designed to enable
new Directors to gain an understanding of Transurban’s financial,
strategic, operational and risk management position, its vision
and values, the role and responsibilities of Senior Executives,
the role of Board Committees, meeting arrangements and
Director interaction with each other, Senior Executives and other
stakeholders.
2.6 KNOWLEDGE, SKILLS AND EXPERIENCE
Directors are expected to maintain the knowledge and skills
required to discharge their duties and obligations. The Board
is provided with papers, presentations and briefings on
Transurban’s operations, and is briefed on relevant changes in
the legislative, regulatory or industry framework. Directors are
expected to undertake any necessary continuing professional
education and training to update and enhance their knowledge
and skills.
2
TRANSURBAN 2.7 BOARD ACCESS TO INFORMATION AND INDEPENDENT
2.8 CONFLICTS OF INTEREST
PROFESSIONAL ADVICE
Directors have unrestricted access to management. Management
is expected to provide regular detailed financial and operational
reports in a form and timeframe and of a quality that enables the
Board to discharge its duties effectively. Directors may request
additional information where necessary to make informed
decisions.
The Board Charter sets out the circumstances and procedures
pursuant to which a Director may seek independent professional
advice at Transurban’s expense. These procedures require prior
consultation with, and the consent of, the Chair and, under normal
circumstances, the provision of a copy of the advice to the Board.
Corporate Governance Framework
Directors are required to take all reasonable steps to avoid actual,
potential or perceived conflicts of interests.
Under the Corporations Act, the constitutions of THL, TIML and
TIL, and the Board Charter, Directors are required to disclose
any conflicts and abstain from participating in any discussion or
voting on matters in which they have a material personal interest.
A Director who discloses that they may have a conflict must
follow the procedures developed by the Board to deal with such
circumstances.
Independent Assurance
External Auditor
Internal Auditor
TRANSURBAN BOARD
Transurban Holdings Limited, Transurban Infrastructure Management Limited as
responsible entity for Transurban Holding Trust, Transurban International Limite
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Renumeration and Human
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Nomination Committee
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ANNUAL REPORT 2013
3
OPERATION OF THE BOARD
Relevant governance documents:
Board Charter
Audit and Risk Committee Charter
Remuneration and Human Resources
Committee Charter
Nomination Committee Charter
3.1 BOARD COMMITTEES
The Board has established three standing Committees of
Directors: the Audit and Risk Committee, the Remuneration and
Human Resources Committee, and the Nomination Committee.
Each standing Committee operates under a charter, approved
by the Board, which sets out the authority, membership and
responsibilities of the Committee, together with any relevant
administrative arrangements and any other matters considered
appropriate by the Board.
The role of Committees is to advise and make recommendations
to the Board. The Committees do not have decision making
authority except as expressly stated in the relevant charter or as
authorised by the Board.
The Board periodically reviews the appropriateness of the
existing Committee structure, as well as the membership and the
charter of each Committee. A review was undertaken during the
reporting period, which resulted in refinements to each Committee
charter. The Remuneration Committee was also re-named the
Remuneration and Human Resources Committee to better reflect
its responsibilities.
The current composition of each Committee is set out below. The
number of meetings held by each Committee during the reporting
period and each member’s attendance at those meetings are set
out in the Directors’ Report.
AUDIT AND RISK COMMITTEE
REMUNERATION AND HUMAN
RESOURCES COMMITTEE
NOMINATION COMMITTEE
Members
Neil Chatfield (Chair)
Bob Edgar
Lindsay Maxsted
Christine O’Reilly
Bob Edgar (Chair)
Neil Chatfield
Samantha Mostyn
Lindsay Maxsted (Chair)
Neil Chatfield
Bob Edgar
Samantha Mostyn
Christine O’Reilly
Rodney Slater
Composition
Responsibilities
Only Non-executive Directors, all of
whom are independent
At least three members, each of
whom is financially literate and has
relevant qualifications/experience
An independent Chair who is not
also Chair of the Board
Integrity of financial reporting
Effectiveness of systems of financial
risk management and internal
control
Internal and external audit functions
Effectiveness of the risk
management framework and
supporting risk management
systems
Only Non-executive Directors, all of
whom are independent
At least three members
An independent Chair
Only Non-executive Directors,
all of whom are independent
At least three members
An independent Chair
Remuneration of Directors,
performance and remuneration of,
and incentives for, the CEO and
other Senior Executives
Remuneration strategies, practices
and disclosures generally
Programs to optimise the
contributions of human resources,
including development planning,
diversity, culture and engagement
Size and composition of the Board
and new Board appointments
Board, Committee and Director
performance
Board and Senior Executive
succession planning
4
TRANSURBAN 3.2 PERFORMANCE OF THE BOARD
4 ETHICAL CONDUCT AND RESPONSIBLE
The Board acknowledges the importance of the regular review
of its own performance and effectiveness, as well as the
performance and effectiveness of its Committees and individual
Directors. The Board conducts an internal evaluation each year
and has an expert external consultant formally facilitate the
process every third year. This arrangement is supplemented by
assessments undertaken by Committees, the results of which are
reported to the Board.
An externally facilitated Board effectiveness review was
conducted during 2012. The review concluded that the Board
was functioning at a high level. The facilitator’s suggestions for
improvement, and actions agreed by the Board in response,
were documented. Those actions were closed out by the Board
during the reporting period. A follow-up internal evaluation also
commenced just prior to the end of the reporting period.
Transurban has a Diversity Policy and the Board has again set
measurable objectives for achieving greater gender diversity.
Achieving these objectives is a measure against which
performance of the Board is assessed. The Board recognises
that increasing Board accountability for diversity objectives is an
important element in delivering improvements in diversity at all
levels of the organisation.
3.3 PERFORMANCE OF SENIOR EXECUTIVES
Each year the Board sets key performance indicators (KPIs) for
the CEO, and approves KPIs set for other Senior Executives,
against which their performance is measured. KPIs relate to both
the performance of Transurban, safety and the performance of
the executive individually.
The performance of the CEO is reviewed by the Board. The CEO
reviews the performance of each Senior Executive and reports
to the Board through the Remuneration and Human Resources
Committee on the outcome of these reviews. The outcomes
directly impact each Senior Executive’s short term incentive.
Performance reviews for the CEO and other Senior Executives
for the year ended 30 June 2013 were conducted during the
reporting period. Information regarding these reviews, and the
reward structure and remuneration outcomes for the CEO and
other Senior Executives during the reporting period, can be found
in the Remuneration Report which forms part of the Directors’
Report.
3.4 REMUNERATION OF DIRECTORS AND SENIOR
EXECUTIVES
The remuneration of Non-executive Directors consists entirely
of Directors’ fees and Committee fees. Non-executive Directors
do not receive any variable remuneration or other performance
related incentives. In September 2005, the Board resolved to
discontinue previously provided retirement benefits for Non-
executive Directors. No current Directors are entitled to any
accrued retirement benefits. Further details of the remuneration
paid to each Non-executive Director during the reporting period
are set out in the Remuneration Report which forms part of the
Directors’ Report.
For the reporting period, the remuneration of the CEO and other
Senior Executives comprised fixed remuneration, short term
incentives (cash and deferred equity) and long term equity based
incentives. Transurban’s remuneration strategy and framework,
and the remuneration package and outcomes for the CEO
and other Senior Executives are also described in detail in the
Remuneration Report.
DECISION-MAKING
Relevant governance documents:
How We Work @ TU
Whistleblower Policy and Fraud Policy
Dealing in Securities Policy
Diversity Policy
Supplier Sustainability Code of Practice
Sustainability Report
Safety Policy
4.1 CONDUCT AND ETHICS
Transurban’s code of conduct, “How We Work @ TU”, sets the
standards for how all of Transurban’s employees, consultants and
contractors should act to ensure that Transurban’s organisational
values (integrity, collaboration, accountability, ingenuity
and respect) are upheld. All employees are expected to align
their actions with the code and the values whenever they are
representing Transurban or undertaking work on Transurban’s
behalf. The code refers employees to relevant Transurban
policies for further information and guidance. It also encourages
employees who become aware of unethical behaviours to report
these to Senior Management.
A copy of How We Work @ TU is provided to new employees and
is discussed as part of their induction training. New employees
are also required to complete online training in relation to the
code.
4.2 WHISTLEBLOWER PROTECTION
In keeping with the spirit of How We Work @ TU, Transurban
has a Whistleblower Policy to encourage Directors, Senior
Executives, employees, contractors and suppliers who have
witnessed, or know about, any misconduct to report it without
fear of reprisal. The policy sets out how Transurban will respond
to, and investigate, reports of misconduct, and outlines the
protections available to those who make a whistleblower report in
good faith.
Transurban also has a separate Fraud Policy that sets out the
procedures for the investigation of reports of fraudulent or corrupt
conduct that are made other than under the Whistleblower Policy.
4.3 DEALING IN SECURITIES
Transurban has a Dealing in Securities Policy that establishes
a procedure for dealings by Directors, Senior Executives,
employees, contractors and their related parties in Transurban
securities, and in securities of other entities with whom
Transurban may have business dealings. The policy prohibits
Directors and all personnel from dealing in securities at any time
if they are in possession of price-sensitive information. Dealing
is also not permitted during designated “Closed Periods” except
with prior approval in circumstances of severe financial hardship.
Directors and all personnel may generally deal in securities during
“Open Periods” if prior approval is obtained in accordance with
procedure set out in the policy. For the purposes of the policy,
dealing includes hedging.
The policy also prohibits dealing in securities on a short-term basis
except in circumstances of severe financial hardship. Employees
who have entitlements to securities under a Transurban equity
plan may not hedge against those entitlements until they have
vested. In addition, Directors and Senior Executives may not
hedge against entitlements that have vested but remain subject
to a holding lock. Directors and employees are also prohibited
from entering into margin lending arrangements using Transurban
securities as security.
5
ANNUAL REPORT 2013 4.4 DIVERSITY
Transurban’s workforce is made up of individuals with diverse
skills, values, backgrounds, experiences and needs. Transurban
values this diversity and recognises the organisational strength,
opportunities for innovation and other corporate benefits that it
brings. Transurban is committed to providing an environment in
which all employees are treated with fairness and respect, and
have equal access to opportunities at work. Transurban has,
and will continue to develop, practices, programs and initiatives
to support and assist with improving diversity at all levels of the
business.
Transurban believes that genuine diversity drives strategic
advantage and contributes to the achievement of its corporate
objectives. It enables Transurban to attract people with the best
skills and attributes, and to develop a workforce selected from all
available talent, whose diversity reflects that of the customers and
communities Transurban serves.
A key focus during the reporting period has been gender diversity.
Transurban’s current gender diversity profile is set out below.
100%
80%
60%
40%
20%
0%
50%
71%
60%
50%
Total Workforce
29%
Board
40%
Male
Female
Senior Executive /
Senior Management
Importantly, 50% of Executive Committee members (the Senior
Executive group) are women.
Transurban has a Diversity Policy that includes a requirement for the Board to set measurable objectives for achieving gender diversity
and to review both the objectives and progress in achieving them annually. Transurban’s gender diversity objectives for the reporting
period, and the progress in achieving those objectives during the period, are outlined below:
OBJECTIVE
FY2013 TARGET
OUTCOME AS AT 30 JUNE 2013
Diversity awareness
Broaden understanding
of diversity across the
business
Establish Diversity Committees
Communicate diversity objectives and achievements
to the wider business
Diversity Committees were established and all
teams were briefed on diversity objectives and
achievements
Recruitment
Female candidates for
Board, senior and middle
management positions
Increase the proportion of
women in executive, senior
and middle management
positions
Increase the number
of females in IT and
Engineering areas
Retention
Minimum of 1 female candidate included in every first
round interview list
86% of first round interviews included female
candidates
36% of executive/senior management positions,
and 27% of middle management positions,
held by women
40% of executive and senior management positions,
and 22% of middle management positions, are
held by women (up from 33.3%/ 21.6% for the prior
period)
Investigate graduate program for IT and Engineering
areas to prepare a pipeline of female talent
Established a partnership with Monash University
to sponsor a 3rd year female engineering student
Promote women in
leadership
Establish a mentoring program for female middle
managers
A coaching and mentoring program was established,
which aims to assist with the promotion and retention
of females
Workplace flexibility
Increase participation
in workplace flexibility
programs
30.0% of employees utilising workplace flexibility
programs (eg. part-time, lifestyle leave, working
from home, telecommuting, flexi-hours, job-share)
25.0% of employees accessed workplace flexibility
programs (down from 28.6% for the prior period)
Maternity leave return rate 90% of employees due to return from maternity
leave return to work
100% of employees due to return from maternity
leave returned to work (up from 80% for the prior
period)
6
TRANSURBAN The principles inherent in Be good neighbours, Use less and
Think long-term enhance Transurban’s ability to deliver efficient
and integrated transport networks that support productivity and
the wellbeing of its communities.
Transurban reports on its outcomes in these areas in its
annual Sustainability Report, which also outlines Transurban’s
commitments for the coming years. Further information about the
Sustainability Strategy will be included in the 2013 Sustainability
Report, which will be published in October.
4.7 SAFETY
Transurban’s top priority is a safe workplace for employees and
contractors and safe roads for customers. Safety is therefore a
critical part of Transurban’s business framework and decision
making. Further detail on the range of strategies, systems,
initiatives and policies in place at Transurban to manage safety
issues is included in the annual Sustainability Report.
4.5 DIVERSITY INITIATIVES
During the reporting period, internal Diversity Committees were
established in Australia and North America to ensure continued
identification of opportunities to assist in improving diversity at
all levels. The Committees are comprised of representatives
from across the business. The Australian Committee is currently
chaired by the CEO.
The Committees have developed a diversity ‘vision’ that supports
the broader Transurban vision. The vision is to “strengthen the
Transurban community through inclusion, respect and valuing
difference”.
A diversity survey was rolled out to the Australian business
during the reporting period. The survey looked at employee
understanding of diversity and asked for demographic data
to allow a comparison of the Transurban workforce with the
communities Transurban serves. The results were positive but
indicated that there was room for further diversity education for
managers and employees.
During the reporting period, formal education on diversity was
provided to senior management focusing on inclusive leadership
and unconscious bias. A gender pay equity review was also
undertaken.
The key focus areas for the year ending 30 June 2014 continue to
be gender diversity and flexible work practices, as well as cultural
diversity. The Diversity Policy has recently been reviewed by the
Board to ensure alignment with these areas of focus.
4.6 SUSTAINABILITY
The Board is committed to Transurban taking a sustainable
approach to its operations, projects and business practices to
create the best outcomes for Transurban’s Government clients
and its communities.
The Board has endorsed a revised Sustainability Strategy, which
underpins Transurban’s corporate strategy and reinforces its
vision to “strengthen communities through transport”.
The Sustainability Strategy highlights three key focus areas:
● Be good neighbours – anticipating, listening and responding
to community needs;
● Use less – reducing the impacts of Transurban’s operations
on the community and environment; and
● Think long-term – improving transport networks to help
people, goods and services move more efficiently and safely
across cities both now and into the future.
7
ANNUAL REPORT 2013 5
INTEGRITY IN FINANCIAL REPORTING
Relevant governance documents:
Audit and Risk Committee Charter
External Auditor Independence Policy
5.1 ROLE OF THE AUDIT AND RISK COMMITTEE
The Audit and Risk Committee assists the Board in overseeing
the integrity of financial reporting, the effectiveness of systems
of financial risk management and internal control, the internal
and external audit functions and the effectiveness of the risk
management framework and supporting risk management
systems.
The CEO, the CFO, the internal auditor and the external auditor
must attend Committee meetings if requested. Other members
of management and advisers may also be invited to attend
meetings.
The Committee has unrestricted access to management and
the auditors, and rights to seek explanations and additional
information. The Committee meets on a regular basis with the
internal auditor, and separately with the external auditor, without
management present.
5.2 INDEPENDENCE OF THE EXTERNAL AUDITOR
Transurban’s external auditor is PricewaterhouseCoopers.
The effectiveness, performance and independence of the
external auditor is reviewed by the Audit and Risk Committee.
If it becomes necessary to replace the external auditor for
performance or independence reasons, the Committee
will formalise a procedure and policy for the selection and
appointment of a new external auditor.
The Corporations Act requires the external auditor to make an
annual independence declaration, addressed to the Board,
declaring that the auditor has maintained its independence
in accordance with the Corporations Act and the rules of
professional accounting bodies. PricewaterhouseCoopers has
provided an independence declaration to the Board for the
reporting period. The declaration forms part of the Directors’
Report.
Chris Dodd has been the lead audit engagement partner of
PricewaterhouseCoopers in relation to the external audit of
Transurban since 1 July 2012.
5.3 RESTRICTIONS ON THE PROVISION OF NON-AUDIT
SERVICES BY THE EXTERNAL AUDITOR
Transurban has implemented policies and procedures to monitor
the independence of the external auditor. The External Auditor
Independence Policy regulates the provision of non-audit services
by the external auditor.
Under the policy, the auditor is prohibited from providing certain
non-audit services, and may only provide a permissible non-audit
service where there is a compelling reason for the auditor to
do so. The provision of permissible non-audit services must be
pre-approved by either the Audit and Risk Committee, the Chair
of that Committee, or the CFO (where the proposed fee for the
service does not exceed $5,000). The CFO provides a verbal
report at each Audit and Risk Committee meeting describing any
non-audit services pre-approved by the CFO or the Chair since
the last meeting.
Details of the fees paid to PricewaterhouseCoopers during the
reporting period, including a breakdown of fees paid for non-audit
services, are set out in the Directors’ Report. The Board has
considered the nature of the non-audit services provided by
PricewaterhouseCoopers during the reporting period and has
determined that the services provided, and the amount paid
for those services, are compatible with the general standard of
independence for auditors imposed by the Corporations Act and
that the auditor’s independence has not been compromised.
5.4 AGM ATTENDANCE OF THE EXTERNAL AUDITOR
The lead audit engagement partner of PricewaterhouseCoopers
attends Transurban’s AGM and is available to answer security
holder questions about the conduct of the audit and the
preparation and content of the auditor’s report.
6 CONTINUOUS DISCLOSURE
Relevant governance documents:
Continuous Disclosure Policy
and Procedure
Transurban has a Continuous Disclosure Policy and Procedure
that establishes a best practice procedure for compliance with
its continuous disclosure obligations, provides guidance for the
identification of material information and requires the reporting
of such information to the Company Secretary for review. The
policy also ensures that Transurban and its personnel are aware
of the penalties for a contravention of Transurban’s continuous
disclosure obligations.
The CEO, the CFO and the Company Secretary have primary
responsibility for the effective operation of the policy. The
Company Secretary is responsible for all communications with
the ASX in relation to continuous disclosure issues. Under the
policy, personnel must immediately notify the Company Secretary
as soon as they become aware of information that should be
considered for release to the ASX. The Company Secretary
reviews that information, determines in consultation with the
CEO and the CFO whether disclosure is required and, if so,
co-ordinates the actual form of the disclosure, its approval and
prompt release. All ASX releases are required to be approved by
either the Board (or a Board sub-committee) or the CEO (or in the
CEO’s absence, the CFO or the Chair of the Board).
The policy was reviewed during the reporting period in light of the
release of revised ASX Guidance Note 8 ‘Continuous Disclosure’.
Refinements were made to confirm the procedures Transurban
has in place to manage disclosure issues.
All information disclosed to the ASX is promptly posted on the
Transurban website at www.transurban.com. All material used in
presentations to equity investors and analysts is released to the
ASX immediately prior to the making of those presentations.
The Board considers potential disclosure issues at each of its
meetings.
8
TRANSURBAN 7 COMMUNICATIONS WITH SECURITY HOLDERS
8 RISK MANAGEMENT
Relevant governance documents:
Security Holder Communication Policy
Transurban places considerable importance on effective
communication with its security holders to ensure they are kept
up to date with Transurban’s latest news and information. The
Security Holder Communications Policy outlines the range of
ways Transurban provides information to its security holders
and other stakeholders. These include the Transurban website,
meetings and briefings, written materials and email updates.
Security holders are encouraged to elect to receive information
in electronic format in line with Transurban’s commitment to
sustainability.
Transurban uses its website to complement the official release
of information to the ASX. All ASX announcements and related
information, such as information provided to analysts or the media
during briefings or presentations, are promptly posted on the
website. The annual and half year results presentations, media
releases and other communications material are also published
on the website.
7.1 ANNUAL GENERAL MEETING
Transurban regards its AGM as an important opportunity to
communicate with security holders. It is also a major forum
for security holders to ask questions about the performance
of Transurban, and to provide feedback to Transurban about
information they have received.
Transurban welcomes and encourages security holder
attendance and participation at AGMs. The full text of notices of
meeting and explanatory material is published on the Transurban
website. AGMs are also webcast to accommodate security
holders who are unable to attend in person.
Relevant governance documents:
Audit and Risk Committee Charter
Risk Management Policy
8.1 RISK OVERSIGHT AND MANAGEMENT
Transurban views effective risk management as central to
achieving its objectives. Responsibility for risk management on a
day to day basis rests with line management.
The Board is responsible for reviewing Transurban’s policies
on risk oversight and management and satisfying itself that
management has developed and implemented a sound system of
risk management and internal control.
Transurban has a Risk Management Policy that sets out its
commitment to risk management and identifies the associated
roles and responsibilities of the Board, management and
employees in the oversight and management of risk. The policy is
supplemented by an enterprise wide risk management framework
(compliant with the Australian / New Zealand standard (AS/
NZ ISO 31000:2009) that seeks to embed risk management
processes into Transurban’s business activities and functions.
Within the framework, each business unit is required to formally
consider its risk environment and create a register of identified
risks, controls, actions to treat risks and where necessary,
a risk management plan. Risk registers are stored in a risk
management information system from which reports are derived.
Risk Management Facilitators are appointed to each business
unit to support managers in implementing a robust and consistent
approach to the identification and management of risks. Progress
in the management of risks is regularly reported to executive
management. Senior Executives have also established a strategic
risk register, which is reviewed regularly.
The Audit and Risk Committee assists the Board in overseeing
the effectiveness of Transurban’s risk management framework
and supporting systems. At each of its meetings, the Committee
considers the ‘Key Risks’ (those with a residual risk rating of
“A” or “B” rated against the corporate consequence table).
Management provides ongoing reporting to the Committee in
relation to the management of Key Risks. Detailed reports are
provided to the Committee if the rating of a Key Risk changes or
if there are any other significant developments in relation those
risks.
8.2 FINANCIAL REPORTING – CEO AND CFO
CERTIFICATIONS
The Board has received certifications from the CEO and the CFO
in connection with the financial statements for the Transurban
Group and the individual entities comprising the Transurban
Group for the year ended 30 June 2013. The certifications state
that the declaration provided in accordance with section 295A of
the Corporations Act as to the integrity of the financial statements
is founded on a sound system of risk management and internal
control and that system is operating effectively in all material
respects in relation to financial reporting risks.
9
ANNUAL REPORT 2013 Transurban Holdings Limited
Controlled Entities
ABN 86 098 143 429
(including Transurban International Limited and Transurban Holding Trust)
and
Annual report
for the
year ended
30 June 2013
10
TRANSURBAN Transurban Holdings Limited
Annual report
-
30 June 2013
ABN
86 098 143 429
Contents
Directors' report
Auditor's Independence Declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
12
59
60
146
147
11
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
Directors' report
The Directors of Transurban Holdings Limited (THL), Transurban International Limited (TIL), and Transurban
Infrastructure Management Limited (TIML), as responsible entity of Transurban Holding Trust (THT), present their
report on the Transurban Group for the year ended 30 June 2013.
Group accounts
The Transurban Group financial statements have been prepared as an aggregation of the financial statements of
THL and controlled entities, TIL and controlled entities, and THT and controlled entities, as if all entities operate
together. They are therefore treated as a combined entity (and referred to as "the Group", or the "Transurban
Group" or "Transurban"), notwithstanding that none of the entities controls any of the others.
The financial statements have been aggregated in recognition of the fact that the securities issued by THL, TIL
and THT are stapled together and comprise one share in THL, one share in TIL and one unit in THT (Stapled
Security). None of the components of the Stapled Security can be traded separately.
Directors
With the exception of the changes noted below, the following persons were Directors of THL, TIML and TIL during
the whole of the financial year and up to the date of this report:
Non-executive Directors
Lindsay Maxsted
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer (resigned 7 August 2012)
Christine O'Reilly
Rodney Slater
Ian Smith
Executive Directors
Scott Charlton (appointed 16 July 2012)
Christopher Lynch (resigned 16 July 2012)
Result
The consolidated net profit for the year ended 30 June 2013 for the Group was $174,541,000 (2012: $58,558,000).
The profit attributable to ordinary equity holders of the Group was $171,706,000 (2012: $54,905,000).
Principal activities
The principal activities of the Group during the financial year were the development, operation and maintenance of
toll roads.
12
TRANSURBAN Distributions
Distributions paid to the ordinary equity holders of the Group during the financial year were as follows:
Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Distribution payable
Final distribution for 2013 financial year payable and recognised as a liability:
15.5 cents (2012: 15.0 cents) per fully paid Stapled Security payable
14 August 2013
Fully franked (2012: fully franked) final dividend based on tax paid at 30% - 3.5
cents (2012: 3.5 cents) per fully paid Stapled Security
Unfranked final distribution - 12.0 cents (2012: 11.5 cents) per fully paid
Stapled Security
Distributions paid during the year
Final distribution for 2012 financial year of 15.0 cents (2011: 14.0 cents)
per fully paid Stapled Security paid 14 August 2012
Fully franked dividend based on tax paid at 30% - 3.5 cents (2011: 0.0 cents)
per fully paid Stapled Security
Unfranked distribution - 11.5 cents (2011: 14.0 cents) per fully paid Stapled
Security
Interim distribution for 2013 financial year of 15.5 cents (2012: 14.5 cents) per
fully paid Stapled Security paid 14 February 2013
Fully franked (2012: fully franked) dividend based on tax paid at 30% - 3.5
cents (2012: 3.5 cents) per fully paid Stapled Security
Unfranked distribution - 12.0 cents (2012: 11.0 cents) per fully paid Stapled
Security
Total distributions paid during the year
Distributions paid in cash or satisfied by the issue of Stapled Securities
under the distribution reinvestment plan during the years ended 30 June
2013 and 30 June 2012
Paid in cash
Satisfied by issue of Stapled Securities
Funds available to future distribution reinvestment plans
2013
$'000
2012
$'000
51,856
177,791
229,647
51,041
167,707
218,748
51,041
167,707
218,748
-
202,096
202,096
51,183
175,486
226,669
50,801
159,654
210,455
445,417
412,551
410,848
34,567
2
445,417
336,549
76,001
1
412,551
13
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Operating and Financial Review - Year ended 30 June 2013
Business review
Transurban is a toll road developer and operator with interests in Australia and the United States. We are an ASX
Top 50 company, and have been in business since 1996.
We have an interest in a total of nine roads in Melbourne, Sydney and in Virginia:
Melbourne, Australia
CityLink
Sydney, Australia
Hills M2
Lane Cove Tunnel
Eastern Distributor
Westlink M7
M5 South West
Virginia, USA
Pochantas 895
495 Epress Lanes
95 Express Lanes (under consttruction)
100%
100%
100%
75.1%
50%
50%
75%
67.5%
67.5%
Business Framework and Strategy
Transurban is focused on providing effective and innovative urban transport solutions in road infrastructure,
through the management and development of urban networks of toll road concessions. The effective management
of toll road concessions involves leveraging a network footprint in our markets, taking a leading role in shaping
policy, and utilising our core capabilities.
These capabilities are defined as:
• Network planning and forecasting
• Operations and customer management
• Project development and delivery
• Application of technology, and
• Community engagement.
As part of the review and confirmation of our strategy in the current period, we have clearly defined our target
markets as the eastern seaboard of Australia and northern Virginia in the US.
Finally, the business continues to focus on distribution growth as part of this overall strategy.
Value drivers
The investment proposition for high quality toll road assets lies in providing investors with access to long dated,
predictable, growing cash flows generated over the life of the concessions through effective management and
development of the road corridors these concessions govern.
14
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
The organic growth in the business derived from traffic growth and inflation protected toll escalation across the
the operations, maintenance and customer
suite of assets is supported by the effective management of
management.
technology in key areas including traffic
management and tolling. In addition, value is unlocked through the development of the portfolio through a range of
activities including asset enhancements such as Sydney’s Hills M2 Upgrade and M5 West Widening, and new
projects negotiated with governments such as the 495 and 95 Express Lanes projects.
is further enhanced by the effective application of
It
Financial performance
Performance indicators
Proportional EBITDA (earnings before interest,
the primary
measures the Transurban Board uses to assess the operating performance of the Group, with the aim of
maintaining a focus on operating results and associated cash generation. It reflects the contribution from
individual assets to the Group's operating performance and permits a meaningful analysis of the underlying
performance of the Group's assets.
tax, depreciation and amortisation) is one of
To arrive at
Transurban interests in non-controlled assets are included, in proportion to Transurban’s ownership.
the proportional result, minority interests in the Group's controlled entities are backed out and
Free cash is the primary measure used to assess cash generation in the Group. Free cash represents the cash
available for distribution to security holders.
Highlights for the year ended
Transurban’s net profit for the year ended 30 June 2013 was $174.5 million. Toll revenue increased by 4.7 per cent
to $801.2 million. The increase in toll revenue was driven by continued traffic growth across all assets, with the
Sydney network beginning to recover through the progressive opening of the M2 Upgrade.
Statutory road operating and corporate costs increased on the prior corresponding period primarily due to:
• Increased traffic volumes
• Non-cash costs associated with the acceleration of accounting for previously issued Long Term Incentives
(LTIs) to the former CEO, and
• The commencement of management services for 495 Express Lanes (offsest by other revenue)
• Costs associated with closure of the New York office
• Prior year recovery of costs by our treasury team for the M5 Motorway and;
• Resheeting of M4 Service Centre
Financial position
As discussed above, Transurban is a member of the S&P/ASX 50 with a market capitalisation of around $10.0
billion. At 30 June 2013 1,481.6 million shares were on issue.
Transurban’s operating assets are primarily long-life intangible assets, representing the provision by State
Governments of the right to toll customers for the use of the assets. The concession assets represent 80.7 per cent
of the total assets of the Group. The duration of the asset concessions range from around 30 years to 99 years and
for accounting purposes the carrying values are amortised on a straight line basis over the duration of the
concession.
Details of the Transurban Group's borrowings are discussed in Financing Activities below.
Operations and performance of Transurban’s portfolio of assets – Year ended 30 June 2013
Transurban considers the best measure of the Group’s performance to be its underlying proportional EBITDA. To
determine the proportional numbers, non-controlling interests are removed from the statutory result and
Transurban’s interests in non-controlled assets are included in proportion to our ownership.
15
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Note 2 to the statutory accounts (Segment
for the
Transurban Group, including reconciliations to the statutory result. While management considers proportional
EBITDA to be the best indicator of asset performance, interest expense and revenue, depreciation and income tax
are also included in the Segment Information disclosure.
Information - page 81) presents the proportional result
Underlying traffic and toll revenue performance
The following shows traffic and toll revenue performance of all operating assets for the year ended 30 June 2013.
The performance is shown for 100 per cent of each asset. Review of costs and revenue in the commentary below
also refer to 100 per cent of the asset.
Asset (and ownership %)
CityLink (100%)
Hills M2 (100%)
Lane Cove Tunnel (100%)
M1 Eastern Distributor (75.1%)
Westlink M7 (50%)
M5 Interlink (50%)
Pocahontas (75%) ($’USD)
495 Express Lanes (67.5%) ($’USD)
CityLink (Melbourne)
Traffic
growth
(%)
Toll revenue
2013
$’m
Toll revenue
2012
$’m
Variance
$’m
Variance
%
& of
prop toll
revenue
2.4%
1.4%
1.8%
0.1%
3.4%
(0.9%)
1.3%
N/A
495.8
143.3
61.5
100.5
209.4
188.8
15.5
7.3
471.6
141.2
60.0
92.6
200.5
181.1
14.9
–
24.2
2.1
1.5
7.9
8.9
7.7
0.6
N/A
5.1%
1.5%
2.5%
8.5%
4.4%
4.3%
4.0%
N/A
50.0%
14.5%
6.2%
7.6%
10.6%
9.5%
1.1%
0.5%
Performance on CityLink was strong throughout the year, with continued traffic growth on all parts of the
motorway. Toll revenue increased 5.1 per cent, driven by a 2.4 per cent increase in traffic and a 4.1 per cent
increase in toll prices. Weekend traffic was particularly strong, with growth of 6.0 per cent.
Changes to the CityLink employee structure during the year ended led to a reduction in direct employee costs
and tolling expenses. In addition there was a decrease in the maintenance provision expense of $0.6 million due
to reconsideration of non-critical maintenance of the asset.
Total CityLink costs decreased $3.8 million to $100.7 million, due to the continual assessment of supplier
arrangements. CityLink’s EBITDA margin remained strong at 89.0 per cent.
A major focus this year has been to reduce the number of ‘nose to tail’ accidents occurring on CityLink,
particularly southbound over the Bolte Bridge. A concentrated safety strategy of
‘Look up, stay back’, in
conjunction with a driver education program sponsored by Murcotts, was launched and variable speed limit signs
were introduced over the bridge in order to better manage traffic flows.
Hills M2 (Sydney)
Stages of the Hills M2 Upgrade were progressively completed during the year, contributing to traffic performance
beginning to recover. In July 2012 the Windsor Road Ramps opened to tolled traffic, followed by the Macquarie
Park Ramps in January 2013. The mainline section west of Pennant Hills Road was completed in April 2013,
contributing to traffic growth in that section and the recovery of traffic performance on the M7 Motorway.
Year on year traffic growth on Hills M2 was 1.4 per cent, which included a full year of construction impact. This,
plus the introduction of new ramps on the asset, resulted in a toll revenue increase of $2.1 million.
Costs on Hills M2 remained consistent with previous years and the asset achieved an EBITDA margin of 81.9 per
cent.
16
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Lane Cove Tunnel/Military Road e-Ramps (Sydney)
Lane Cove Tunnel performance has been impacted this financial year by continued upgrade works on the
connecting M2 Motorway.
Traffic grew 1.8 per cent and was the main driver behind a toll revenue increase of $1.5 million. In the current
year Tollaust Pty Limited (a Group company) commenced as the Operations and Maintenance provider to Lane
Cove Tunnel. This is expected to result in overall savings to the Group however mobilisation costs of the revised
arrangement has resulted in costs being consistent year on year for the asset. The EBITDA margin on Lane
Cove Tunnel increased by 1.0 per cent to 60.0 per cent.
Non-recourse project debt on Lane Cove Tunnel was refinanced in June 2013.
Statewide Roads Group - M4 Motorway (Sydney)
Transurban acquired all remaining shares on issue from the minority equity holders of Statewide Roads on 2 May
2013. Statewide Roads manages the concession for service centres on the M4 Motorway.
In the year ended 30 June 2013 Statewide Roads contributed $0.7 million to the Group's EBITDA through rental
income generated from tenants of the service centres. Statewide Roads is also required to maintain the service
centres and in the current year resheeting of the service centres was undertaken.
M1 Eastern Distributor (Sydney) - Airport Motorway Group
The Eastern Distributor is entering a phase of significant major maintenance activities reflecting the stage in the
asset's life. This includes the upgrade of the Operations Management and Control System, replacement of the
control room video wall and significant resurfacing activities. Planning and execution of these activities has been
a focus of the current year and will continue.
This phase of major maintenance resulted in an increase to the annual M1 maintenance provision charge of $2.9
million. Total costs on the M1 increased $2.0 million.
With toll revenue growth of $7.9 million year on year, the M1’s EBITDA margin increased by 0.6 per cent to 71.1
per cent.
M5 Motorway (Sydney) - Interlink Roads Pty Limited
The motorway’s performance has been impacted in the current year by ongoing widening works. In addition the M5
removed cash tolling in 2013 and now operates on a fully electronic basis.
Total costs on the M5 decreased in the current year by $2.2 million, largely due to lower volumes on the road
during the widening works. Traffic decreased compared to the prior year by 0.9 per cent. However, revenue
increased by 4.3 per cent to $188.8 million due to a truck toll price increase of 50 cents in November 2012.
Despite traffic disruption during the widening, the EBITDA margin increased by 2.2 per cent, to 93.1 per cent for
the year ended 30 June 2013.
Westlink M7 (Sydney) - Westlink Motorway Group
The performance of Westlink M7, particularly the northern section, has been impacted during the year by the
ongoing Hills M2 Upgrade. Since the completion of the upgrade west of Pennant Hills Road in April 2013, traffic
has begun to recover on the M7 - with growth of 5.4 per cent in the fourth quarter.
Traffic growth across the entire motorway was 3.4 per cent and revenue grew by $8.9 million. Total costs
decreased by $2.3 million. This was due to cost savings achieved in Roam Tolling’s operations of the Westlink
retail function. Due to the growth in toll revenue and cost savings, the M7’s EBITDA margin increased by 2.5 per
cent to 81.0 per cent.
17
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Pocahontas 895 (Virginia USA) - Transurban DRIVe
Performance on Pocahontas 895 has continued to be weak throughout the year compared to Transurban’s initial
expectation of traffic at acquisition in 2006. Following the reduction of the carrying value of DRIVe in 2012, the
impact of the 895’s poor performance on Transurban’s returns is minimal.
Traffic increased 1.3 per cent year on year, contributing to a revenue increase of $0.6 million. Costs increased
$0.9 million, leading to a decrease in the overall EBITDA margin by 4.3 per cent to 60.3 per cent.
On 14 June 2013 Transurban announced that discussions to transfer Pocahontas 895 back to the lenders had
commenced, however the final structure has not yet been agreed. There is no cash impact of a transfer of the
asset back to the lenders and the asset is carried at no value in the Transurban Group balance sheet.
495 Express Lanes (Virginia USA) - Transurban DRIVe
The 495 Express Lanes opened to tolled traffic in November 2012, 6 weeks ahead of schedule. Traffic
performance on the lanes has been lower than expected, but has continued to grow. It is still considered too
early to determine any reliable traffic trends.
Total toll revenue generated to 30 June 2013 is $7.2 million. 495 Express Lanes has recorded an EBITDA loss
since opening of $8.1 million to 30 June 2013. In respect of Transurban’s proportional result, this contributed a
loss of $5.4 million.
The weekend of 6-7 April 2013 was toll free on 495 Express Lanes, with the view to increasing public awareness
of the benefits of using the lanes. This public education and engagement proved positive, with traffic growth
increasing after this and other initiatives.
Free cash and cash flows from operations
Free cash represents a key measure of the performance of Transurban’s operating assets and provides the basis
for determining the distribution to be paid to security holders.
Free cash is calculated as:
Cash flow from operations of 100 per cent owned assets and operating companies (CityLink, Hills M2, Lane
Cove Tunnel, Statewide Roads Group, Roam Tolling, Tollaust and Transurban corporate);
Excluding Payments for Maintenance of Intangible Assets;
Excluding Interest received from Term Loan Notes (M7 Investment returns captured as interest payments);
Plus distributions received from non-100 per cent owned assets (Interlink M5, M1 Eastern Distributor)
Plus Term Loan Note repayments from Westlink M7 (as a 50 per cent equity accounted investment)
Less Provision for Maintenance of Intangible Assets and payments for e-TAGs.
Free cash for the year ended 30 June 2013 was $443.3 million. Free cash per security was 30.1 cents. The
calculation of free cash can be found at Note 21 to the statutory accounts.
Business development activities
95 Express Lanes (Virginia USA) – Transurban DRIVe
On 1 August 2012, Transurban announced that financial close had been reached with the Commonwealth of
Virginia to build and operate the 95 Express Lanes in Northern Virginia, USA.
The 95 Express Lanes will be a 29-mile (46-kilometre) reversible, two- and three-lane facility, with a 73 year
operating concession from opening date.
The cost of construction is expected to be $750 million over a two and a half year period.
18
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Toll system delivery and operations of the 95 Express Lanes are to be managed by Transurban and co-located
with the 495 Express Lanes. The 95 Express Lanes will utilise technology developed for the 495 Express Lanes.
At the date of this report the project is 40 per cent complete, has had no lost time injuries and remains on
schedule for completion in late 2014.
F3/M2 connector – discussions with NSW Government
Transurban has worked throughout the year to progress the development of the F3/M2 project with the NSW
Government. Transurban initiated the process in 2012, presenting the Government with a proposal to develop
the project.
On 30 May 2013, the Government announced that it would progress with Transurban to Stage 3 of the proposal
process.
In Stage 3, Transurban, its partners and the NSW Government will work together to procure the design and
construction (D&C) price. The final funding sources will be a function of the D&C price.
Financing activities
Transurban continued to have success in financing activities in the year ended 30 June 2013:
Refinanced $505.0 million of non-recourse project debt on Westlink M7
Refinanced $260.0 million of non-recourse project debt on Lane Cove Tunnel.
September 2012
x
June 2013
x
Debt maturity profiles
The following charts show the Group’s current debt maturity profile. The charts show the debt in the financial year it
matures and in the case of the asset level debt, the full value of the debt facilities has been shown as this is the
value of debt for refinancing purposes.
The debt values are shown at 30 June 2013 and Canadian dollar and US dollar debt has been converted at the
hedged rate where cross currency swaps are in place. Unhedged US dollar debt has been converted to Australian
dollars at spot exchange rate ($0.9275 at 30 June 2013).
Corporate debt maturity profile
19
ANNUAL REPORT 2013DEBT MATURITY BY FINANCIAL YEARA $ MILLIONLETTER OF CREDIT FACILITIES WORKING CAPITAL FACILITIES A$ BONDS US PRIVATE PLACEMENT SYNDICATED FACILITIES C$ BONDS 233254250500 30022010020050 – 100 201420152016201720182019202020212022202320242025202620272028 200 300 400 500 600 700 800 900 31516012513612913316521920617594 Asset level debt maturity profile
Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Financial risk management
Transurban Group’s exposure to financial risk management and its policies for managing that risk can be found in
the Financial Risk Management note in note 38 of the statutory accounts.
Note 38 of the Financial Statements outlines Transurban’s hedging policies, credit risk, interest rate risk and
liquidity and funding policies.
Corporate activities
Change of CEO and Executive Management
A number of changes were made throughout the year to the Transurban structure and Executive leadership team.
In addition to Scott Charlton commencing in the role of CEO in July 2012, the following changes occurred:
• Establishment of a ‘Delivery and Operations’ team with Tim Steinhilber appointed as Group General Manager
• Establishment of a ‘Strategy’ team with Wes Ballantine appointed as Group General Manager
• Appointment of Sue Johnson as Group General Manager, Human Resources
• Appointment of Lisa Tobin as Group General Manager, Technology
• Appointment of Vin Vassallo as Group General Manager, Victoria following the departure of Elizabeth
Mildwater from Transurban, and
• Appointment of Jennifer Aument as Group General Manager, North America.
Issue of securities (underwriting amendment)
As part of the interim distribution Transurban had announced its intention to have the distribution reinvestment plan
underwritten by UBS up to an amount of $115 million (or approximately 50 per cent of the distribution). However,
on 24 December 2012 this was deemed unnecessary as an agreement was reached with UniSuper Limited to
issue 16,260,163 stapled securities at an issue price of $6.15 per security. The underwriting obligations of the
interim distribution were therefore cancelled.
20
TRANSURBAN 505 500 A $ MILLION 142 56 330 447 288 295 225 400 340 255 – 200 400 600 800 1,000 1,200 1,400 1,600 1,800 M7 BANK DEBT M2 BANK DEBT M1 BANK DEBT M5 BANK DEBT LCT BANK DEBT 495 LETTERS OF CREDIT 495 TIFIA DEBT 495 PRIVATE ACTIVITY BONDS 95 PRIVATE ACTIVITY BONDS POCAHONTAS BANK DEBT 95 TIFIA DEBT POCAHONTAS TIFIA DEBT 77 184 201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820412042204320442045204620472048204920392040 635 260 260 635 635 323 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
People
Diversity
During the reporting period, Transurban established diversity committees to raise awareness and to identify
opportunities to improve diversity at all levels of the business. The committees are comprised of representatives
from across the Group. The Australian committee is currently chaired by the CEO.
In the current period, a formal education program on diversity was provided to senior management, focusing on
inclusive leadership and unconscious bias. A gender pay equity review was also undertaken during the year with
no matters of significance noted.
Transurban has identified gender diversity, cultural diversity and flexible work practices as its focus areas for the
next year. The Group’s Diversity Policy has been reviewed to align it with these areas.
Leadership and development
Twice a year Transurban conducts a talent review with the Executive team. This review helps identify high potential
individuals who may have the ability to move into a Senior Leadership or Executive role, or those who may be able
to move laterally outside of their area of technical expertise. It also identifies successors for the Executive team and
other future leaders. Development activities for this group are monitored throughout the year.
In 2013 Transurban ran a Senior Leadership Development Program focusing on strategy, safety, leadership and
diversity. This program was offered in both the US and Australia.
Transurban supports the development of women within the business and has recently started a Coaching and
Mentoring program for female middle managers.
Vision and values
In the year ended 30 June 2013 Transurban reviewed and updated its vision and values to bring them into line
with the updated Group strategy. Workshops and focus groups were conducted in both the US and Australian
offices to give employees significant input into the process. The values established through this process are
integrity, collaboration, accountability, ingenuity and respect.
Sustainability
Transurban is committed to taking a sustainable approach to all our operations, projects and business practices to
create the best outcomes for our government clients and communities.
During the period,
Transurban’s corporate strategy and reinforces our vision to “strengthen communities through transport”.
the Transurban Board endorsed a revised Sustainability Strategy, which underpins
The Sustainability Strategy highlights three key focus areas: Be good neighbours, Use less, and Think long term.
The principles inherent in these focus areas enhance our ability to deliver efficient and integrated transport
networks that support productivity and the wellbeing of our communities.
We report on our outcomes in these areas in our annual Sustainability Report, which also outlines our
commitments for the coming years. Further information on our Sustainability Strategy will be included in our 2013
Sustainability Report, which will be published in October 2013 on our website (www.transurban.com).
21
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Business risks and opportunities
The following are key opportunities that may impact Transurban’s financial and operating result in future periods:
• Negotiation of new business opportunities to develop projects and enhance the motorway networks in
Transurban’s target markets
• Higher traffic volumes across Transurban’s assets resulting in stronger cashflows across the Group
• Integration of technology and systems across Transurban assets, including tolling systems, to leverage
economies of scale available from Transurban’s network footprint.
• Policy change in approach to network pricing to drive efficiencies and improvements in capacity utilisation on
Transurban’s assets
• Development of connecting infrastructure to drive improved traffic volumes on Transurban’s assets
• Changes in law or regulation, that may result in the reduction of taxes or other governmental charges or levies
• Realisation of benefits associated with financing arrangements and financial transactions, including sourcing
new financing, the refinancing of existing indebtedness and credit exposures on transactions with financial
counterparties.
The following are key risks that may impact Transurban’s financial and operating result in future periods:
• Reduced traffic volumes or an inability to grow traffic volumes
• The loss of a toll road concession for non-performance or default under a concession agreement, financing
arrangements, or as a result of government action
• Existence and development of, or changes to, competing roads, feeder roads and other means of transport
• Changes in law or regulation, including the imposition of new or increased taxes or other governmental
charges or levies
• Adverse tax developments, including as a result of legislative change or interpretation, and changes to
accounting standards
• Dependency on the services of key contractors and counterparties for development and construction activities
and for the provision of tolling, customer services, operations and maintenance services, road management
and control systems
• Exposure to risks associated with financing arrangements and financial transactions, including sourcing new
financing, the refinancing of existing indebtedness and credit exposures on transactions with financial
counterparties
• Risks of accidents, incidents and other events relating to the assets and insurance policies not providing
adequate protection against those risks
• Risks of technology failure resulting in the inability to collect tolls or operate the assets
• Unexpected material maintenance of the assets
• Potential for involvement in legal, regulatory and other proceedings and disputes arising from business and
operations; and
• Reliance on dividends, interest on and repayments of shareholder loans from concessionaires and other
subsidiaries for funding.
Risk Management
Managing risk is an essential part of our business. Key risks are regularly reviewed by the Board, the Audit and
Risk Committee and our Executive Committee.
Transurban has a business-wide risk framework in place to help create and continuously improve a consistent
and rigorous approach to identifying, analysing and evaluating risks. This framework has various policies,
standards and guidelines attached to it, including the Risk Management Policy which can be found in the
Corporate Governance section of our website (www.transurban.com).
22
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
The framework is overseen by the Audit and Risk Committee and is actively managed by the Executive Committee.
It is consistent with AS/NZ31000:2009 and is subject to regular review by internal audit. Our Audit and Risk
Committee Charter is also available in the Corporate Governance section of our website.
Significant changes in the entityʼs state of affairs
Other than those matters already discussed in the operating and financial review, the following significant
change has occurred in Transurban’s state of affairs in the year ended 30 June 2013:
• During the year Transurban decided to close its office in New York and focus all US activities out of the 495
Express Lanes HOT Operations Centre in Virginia.
Matters subsequent to the end of the financial year
At the date of this report the Directors are not aware of any other circumstances that have arisen since 30 June
2013 that have significantly affected, or may significantly affect, the Group’s operations in future financial years, the
results of those operations in future financial years, or the Group’s state of affairs in future financial years.
Likely developments in future financial years and the expected results of operations
Other than matters already discussed above, any other potential like developments in the operations of the Group
and the expected results of operations have not been included in these financial statements because the Directors
believe it would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
The Group is subject to environmental regulations under Australian Commonwealth and State laws and certain
applicable laws in the USA. The Group maintains a comprehensive environmental management plan to monitor the
performance of its motorways, and any external parties responsible for operating any of the Group’s motorways,
and takes remedial steps where necessary.
There were no significant breaches reported during the financial year on the Group’s assets.
23
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Information on Directors
Lindsay Maxsted Dip Bus, FCA, FAICD
Chair and independent Non-executive Director
Term of office
Director since 1 March 2008. Chair since 12 August 2010.
Lindsay is currently Chairman and a Non-executive Director of Westpac Banking Corporation, and a
Non-executive Director of BHP Billiton Limited and BHP Billiton plc. He is the Managing Director of Align Capital
Pty Ltd and the Honorary Treasurer of Baker IDI Heart and Diabetes Institute.
Lindsay was formerly the CEO of KPMG Australia from 2001 - 2007. His principal area of practice prior to this
was in the corporate recovery field managing a number of Australia’s largest insolvency / workout / turnaround
engagements.
Lindsay holds interests in 30,000 Stapled Securities.
Transurban Board Committee membership
Chair of the Nomination Committee and a member of the Audit and Risk Committee.
Scott Charlton BSci, MBA (Texas)
Chief Executive Officer
Term of office
Director since 16 July 2012. CEO since 16 July 2012.
Scott joined Transurban from Lend Lease, where he was Group COO (from November 2011) and Group
Director of Operations (from March 2010). Prior to this, Scott held several senior appointments across a range of
infrastructure and financial
institutions, including as CFO of Leighton Holdings Limited (2007-2009) and as
Managing Director of Deutsche Bank in Australia and Hong Kong (1995 - 2003).
Scott holds interests in 88,752 Stapled Securities and 605,904 performance awards.
24
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Information on Directors
Neil Chatfield M.Bus, FCPA, FAICD
Independent Non-executive Director
(continued)
Term of office
Director since 18 February 2009.
Neil served as Executive Director and the CFO of Toll Holdings Limited from 1997 until September 2008. Neil has
extensive experience in general and financial management, capital markets, mergers and acquisitions and risk
management.
is currently the Chairman of Virgin Australia Holdings Limited and of Seek Limited, and a Non-executive
is also Honorary Chairman of HomeGround Services. He was
Neil
Director of Grange Resources Limited. Neil
previously a Non-executive Director of Whitehaven Coal Limited (to May 2012).
Neil holds interests in 30,910 Stapled Securities.
Transurban Board Committee membership
Chair of the Audit and Risk Committee and a member of the Nomination and Remuneration and Human Resources
Committees.
Robert Edgar BEc (Hons), PhD, FAICD
Independent Non-executive Director
Term of office
Director since 21 July 2009.
Bob has over 30 years experience as a senior executive, with 25 years at ANZ Banking Group in various senior
roles, including Deputy CEO, Senior Managing Director, COO, and Chief Economist.
Bob is currently the Chairman of Federation Centres and a Non-executive Director of Asciano Group and of Linfox
Armaguard Pty Ltd. He is also Chairman of the Prince Henry’s Institute of Medical Research. He was previously a
Non-executive Director of Nufarm Limited (to March 2012), AMMB Holdings Berhad, Shanghai Rural Commercial
Bank and of the Bank of Tianjin.
Bob holds interests in 24,590 Stapled Securities.
Transurban Board Committee membership
Chair of the Remuneration and Human Resources Committee and member of the Audit and Risk and Nomination
Committees.
25
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Information on Directors
Samantha Mostyn BA, LLB
Independent Non-executive Director
(continued)
Term of office
Director since 8 December 2010.
Sam is a Non-executive Director and corporate advisor and has previously held senior executive positions at
IAG, Optus and Cable & Wireless Plc. Sam is currently Chair of the Stakeholder Advisory Council of the
CSIRO’s Climate Adaptation Flagship and Deputy Chair of the Diversity Council Australia. She is a member of
the NSW Climate Change Council, the advisory boards of ClimateWorks Australia and the Crawford School of
Government and Economics, ANU. Sam is a Commissioner of the Australian Football League and the National
Mental Health Commission.
Sam is currently a Non-executive Director of Virgin Australia Holdings Limited, Citigroup Pty Ltd, Sydney Theatre
Company, Australian Volunteers International and St James Ethics Centre Foundation.
Sam holds interests in 14,000 Stapled Securities.
Transurban Board Committee membership
Member of the Remuneration and Human Resources and Nomination Committees.
Christine O'Reilly BBus
Independent Non-executive Director
Term of office
Director since 12 April 2012.
Christine has in excess of 25 years experience in the finance and infrastructure sectors in various roles including
as Co-Head of United Infrastructure at Colonial First State Global Asset Management and as CEO of the
GasNet Australia Group.
Christine is currently a Non-executive Director of CSL Limited, Energy Australia, Baker IDI Heart and Diabetes
Institute and is the Deputy Chair of CARE Australia.
Christine holds interests in 4,363 Stapled Securities.
Transurban Board Committee membership
Member of the Audit and Risk and Nomination Committees.
26
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Information on Directors
Rodney Slater J.D., BS
Independent Non-executive Director
(continued)
Term of office
Director since 22 June 2009.
Rodney is a partner in the public policy practice group of Washington DC firm Patton Boggs, where he has been a
leader of its transportation practice since 2001. He served as US Secretary of Transportation from 1997 until the
end of the Clinton Administration in January 2001 and was the Administrator of the Federal Highway Administration
between 1993 and 1996.
In the US, Rodney’s current directorships include Kansas City Southern (railroads), Verizon Communications Inc,
Atkins Global, and Southern Development Bancorporation. He was previously a Director of Parsons Brinckerhoff,
Delta Airlines, Northwest Airlines, and ICx Technologies Inc. He also served on Transurban’s US Advisory Board
until November 2008. Rodney is a Director of the Congressional Awards Foundation and United Way Worldwide.
Rodney does not hold interests in any Stapled Securities.
Transurban Board Committee membership
Member of the Nomination Committee.
Ian Smith BE Mining (Hons), BFin Admin
Independent Non-executive Director
Term of office
Director since 1 January 2012.
Ian has more than 30 years experience in the global mining industry in a variety of operational and project
management roles. He is currently the Managing Director and CEO of Orica Limited.
Ian is President of The Australian Mines and Metals Association. He was previously the CEO at Newcrest Mining
Limited (to July 2011), Chairman of Minerals Council of Australia and a Director of the Australian Chamber of
Commerce and Industry.
Ian holds interests in 71,772 Stapled Securities.
Company Secretaries
Amanda Street LLB (Hons), BComm
Amanda joined Transurban in September 2008 and was appointed as Company Secretary in February 2011.
Before joining Transurban, Amanda was Assistant Company Secretary at SP Ausnet, and Senior Corporate
Counsel at National Australia Bank. She has over 12 years of legal, company secretarial and other relevant
experience. Prior to her in-house work, Amanda was a solicitor specialising in M&A work with Australian law firm
Mallesons.
Julie Galligan LLB, BA
Julie joined Transurban in November 2008 and was appointed as General Counsel, Australia in February 2012.
Julie has over 12 years legal experience in private practice and in-house roles in both Australia and the United
Kingdom. Prior to joining Transurban, Julie worked in-house at Associated British Ports.
27
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Meetings of Directors
The number of meetings of the Boards of Directors of THL, TIML and TIL held during the
2013,
and the number of meetings attended by each Director are set out in the following tables.
year ended
30 June
Meetings of the Boards of Directors of THL, TIML and TIL were held jointly.
(appointed 16 July 2012)
(resigned 16 July 2012)
(resigned 7 August 2012)
Lindsay Maxsted
Scott Charlton
Christopher Lynch
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer
Christine O'Reilly
Rodney Slater
Ian Smith
Board of Directors Board of Directors Board of Directors
TIML
THL
TIL
Attended
Held
Attended
Held
Attended
Held
#
#
#
9
9
-
8
8
8
1
9
9
9
9
9
-
9
9
9
1
9
9
9
9
9
-
8
8
8
1
9
9
9
9
9
-
9
9
9
1
9
9
9
9
9
-
8
8
8
1
9
9
9
9
9
-
9
9
9
1
9
9
9
# = Number of meetings held during the time the Director held office
The number of meetings of each Board Committee held during the year ended
meetings attended by each Director, are set out in the following table.
30 June
2013,
and the number of
(appointed 16 July 2012)
(resigned 16 July 2012)
(resigned 7 August 2012)
Lindsay Maxsted
Scott Charlton
Christopher Lynch
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer
Christine O'Reilly
Rodney Slater
Ian Smith
Audit and Risk
(1)
Committee
Remuneration
and Human
Resources
(2)
Committee
Nomination
(3)
Committee
Special
purpose Sub-
committees
Attended Held# Attended Held# Attended Held# Attended Held#
6
6
*
6
6
*
2
6
*
*
6
*
*
6
6
*
2
4
*
*
5
4
1
5
5
5
*
*
*
*
*
*
*
5
5
5
*
*
*
*
2
2
*
2
2
2
-
2
1
2
2
*
*
2
2
2
-
2
2
*
1
1
*
1
*
*
*
*
*
*
1
1
*
1
*
*
*
*
*
*
# = Number of meetings held during the time the Director held office and was a member of the Committee
* = Not a member of the relevant Committee
(1) Scott Charlton was not a member of the Audit and Risk Committee but attended meetings during the year.
(2) Lindsay Maxsted, Scott Charlton and Chris Lynch were not members of the Remuneration and Human Resources Committee but attended
meetings during the year. Scott Charlton and Chris Lynch were excluded from discussions involving their remuneration during meetings which
they attended.
(3) Ian Smith and Scott Charlton were not members of the Nomination Committee but attended meetings during the year.
28
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
2013 REMUNERATION REPORT (AUDITED)
x
Message from the Chairman of the Remuneration and Human Resources Committee
Dear security holder
I am pleased to present Transurbanʼs remuneration report for the year ended 30 June 2013.
Last yearʼs report
comprehensive review of the Groupʼs executive remuneration arrangements.
received strong support at
the 2012 AGM. That
report detailed the results of our
We continue to be mindful of the expectations of both the market and security holders in setting the executive
reward framework.
There were no substantive changes to our framework or practices this year, but we did make some refinements
to further align the remuneration of our leadership team with the creation of sustainable security holder value,
business outcomes, and the Groupʼs organisational values: integrity, collaboration, accountability, ingenuity and
respect.
A CEO transition and significant executive change also impacted remuneration during the year. Departures were
managed in line with the provisions set out in the relevant executiveʼs service agreement and current termination
benefits legislation. For new executive appointments, we used market data from an independent remuneration
consultant to assist us in determining the quantum and structure of their packages. There was a significant
reduction in the average total remuneration package for current executives (including the CEO) on the prior year.
We believe the outcomes are fair and equitable. We also think that our framework gives us a range of
mechanisms to balance sensible risk management and motivate executives to deliver outstanding results going
forward.
We welcome your feedback on our remuneration practices or on our communication of remuneration matters in
this report.
Bob Edgar
Chairman, Remuneration and Human Resources Committee
29
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
x
(continued)
INTRODUCTION
This report, prepared in accordance with the Corporations Act 2001, contains detailed information regarding
the remuneration arrangements for the Directors and Senior Executives who were the 'key management
personnel' (KMP) of the Transurban Group (Group) during the year ended 30 June 2013.
The KMP disclosed in this report are listed in the table below:
Current Non-executive Directors
Lindsay Maxsted, Chair
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
Former Non-executive Directors
Robert Officer (resigned effective 7 August 2012)
Current Senior Executives*
Scott Charlton, Managing Director and Chief Executive Officer (CEO) (from 16 July 2012)
Jennifer Aument, Group General Manager, North America (from 10 June
Wesley Ballantine, Group General Manager, Strategy (from 22 November
Andrew Head, Group General Manager, New South Wales
Samantha Hogg, Chief Financial Officer
Sue Johnson, Group General Manager, Human Resources (from 8 October
Tim Steinhilber, Group General Manager, Delivery and Operational Excellence (from 10 December
Lisa Tobin, Group General Manager, Technology (from 4 February 2013)
Vin Vassallo, Group General Manager, Victoria (from 4 February 2013)
Transitioning Senior Executive
Michael Kulper, President North
Former Senior Executives
Chris Lynch, Managing Director and CEO (resigned as CEO effective 16 July 2012, departed 30 July 2012)
Ken Daley, President, International Development (resigned effective 2 February 2013)
Elizabeth Mildwater, Group General Manager, Victoria (resigned effective 31 March 2013)
2013)1
2012)2
America5
2012)4
2012)3
* The dates on which the Senior Executives who were promoted or appointed during the year ended 30 June 2013 are the dates that
those Senior Executives commenced being members of KMP. Their remuneration for the period during which they were members of
KMP is disclosed in this report only.
1 Formerly Vice President, Public Affairs.
2 Formerly General Manager, Investor Relations, Media and Government.
3 Formerly General Manager, Human Resources.
4 Formerly Vice President, Major Projects.
5 Michael Kulper will depart the Group on 3 September 2013. Refer to section 1B for further details.
CONTENTS
Content
1
2
3
4
5
6
Remuneration snapshot
Remuneration governance
Remuneration in context
CEO and Senior Executive remuneration for the year ended 30 June 2013
Link between Group performance, security holder wealth and remuneration
Non-executive Director remuneration
Page
31
34
35
36
52
54
All values in this report are in Australian dollars, unless otherwise stated.
30
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
1
REMUNERATION SNAPSHOT
Transurban’s remuneration framework, as reflected in the 2012 report, received strong support from
security holders at the 2012 AGM. The framework was the culmination of a careful and comprehensive
review of the Group’s remuneration arrangements. This review took into account feedback sought and
received from security holders and other stakeholders, market expectations, and regulatory developments.
The remuneration framework was largely unchanged during the year ended 30 June 2013. Certain
refinements were made to further align reward with the creation of security holder value and the
achievement of corporate objectives. The quantum and structure of the remuneration arrangements for
new Senior Executives were also benchmarked using market data provided by Ernst & Young. The
outcome of
this process was a reduction in the CEO's total remuneration package of 28 per cent
(assuming 100 per cent vesting of short and long term incentives) and a reduction in the average total
remuneration package for current Senior Executives (excluding the CEO) of 27 per cent (again assuming
100 per cent vesting).
THE REMUNERATION FRAMEWORK
The key elements of the remuneration framework for the CEO and other Senior Executives for the year
ended 30 June 2013 were as follows:
Remuneration mix
The remuneration of the CEO and other Senior Executives was structured as a mix of fixed remuneration
and variable ('or at risk') remuneration through short term and long term incentive components. The relative
weightings of the three components were as follows:
CEO
Other Senior Executives
Total remuneration % (annualised at target)*
Fixed TEC
Variable (performance based)
40
45
STI
30 (50% deferred)
30 (30 or 50% deferred)
LTI
30
25
* Transition to the remuneration mix for Michael Kulper was due to occur in FY2014. As a result of his departure from the Group on 3
September 2013, this will no longer occur. Refer to section 1B for further details.
Fixed total employment cost (TEC)
Fixed TEC was set with reference to the market median, using the ASX 20-50 as the primary reference,
with consideration also given to the ASX 100. Remuneration packages (including TEC levels) are reviewed
annually by the Remuneration and Human Resources Committee with reference to an individual's role,
experience and performance, as well as relevant comparative market data provided by an independent
remuneration consultant. TEC levels are also reviewed on a change in role.
Short term incentive (STI)
STI performance measures were again linked to growth in proportional EBITDA, cost management based
on proportional net costs, safety, and performance against individual key performance indicators (KPIs).
In the year ended 30 June 2012, mandatory deferral of 30 per cent of the STI award was introduced for the
CEO and other Senior Executives. The deferred component was increased in the year ended 30 June 2013
to 50 per cent for the new CEO and other Senior Executives appointed during the year.
The deferral period is two years. For Australian Senior Executives, deferral is into securities. Due to legal
restrictions on the issue of securities to USA residents, the USA Senior Executives receive deferred cash
awards. The deferred component of remuneration may, at the discretion of the Board, be subject to
forfeiture or clawback (e.g. in the event of misconduct or material misstatement of financial results).
Long term incentive (LTI)
LTI performance measures were as follows:
• 50 per cent relative Total Shareholder Return (TSR) measured against a bespoke comparator group
comprising companies in the transport, utilities, real estate, construction and infrastructure Global Industry
Classification Standards (GICS) sectors of the ASX 150; and
• 50 per cent Free Cash Flow (FCF) per security, reflecting the Group's focus on the maximisation of free
cash flow to drive security holder return. The definition of FCF per security is set out on page 42. The
FCF calculation is included in note 21 of the audited financial statements.
A
x'
x
x
x
31
ANNUAL REPORT 2013 Remuneration report
(continued)
Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
OTHER EVENTS / ACTIONS IMPACTING REMUNERATION IN THE YEAR ENDED 30 JUNE 2013
CEO transition
Chris Lynch resigned as CEO, effective 16 July 2012, and departed Transurban on 30 July 2012.
His contractual entitlements on resignation were finalised in the year ended 30 June 2012 and disclosed at
the time of his departure and in the 2012 report. As these payments were actually made in the year ended
30 June 2013, they are disclosed again in this report. Chris Lynch only received these payments once,
even though they have been disclosed in two reports.
Chris Lynch received the following during the year ended 30 June 2013 in satisfaction of his contractual
entitlements:
• an STI for the year ended 30 June 2012 (awarded at 116 per cent of his TEC based on performance
against applicable performance targets). The cash component of the award (70 per cent or $1,764,963)
was paid in August 2012. The deferred (into securities) component (30 per cent or $756,413) will vest,
subject to clawback provisions, on 1 July 2014;
• a pro-rated 'target'
level STI award for the 30 days worked during the year ended 30 June 2013
($178,652) after satisfying performance targets for that period relating to his role in a successful CEO
transition process. The award was paid in cash in August 2012; and
• an amount in lieu of an LTI earned but not received for a six month period during his tenure ($1,060,000)
in line with his contractual entitlement to receive an LTI award for every day employed by the Group. The
payment was made in cash in August 2012.
Equity instruments previously granted to Chris Lynch under the Group's LTI plans will continue on foot in
accordance with their original terms, with the applicable performance measures for each grant to be tested
at the end of the applicable original performance period.
Chris Lynch did not receive any ex gratia payments on separation.
Scott Charlton commenced as CEO on 16 July 2012.
The remuneration arrangements applying to Scott Charlton under his service agreement were disclosed at
the time of his appointment and in the 2012 report. The arrangements were designed in accordance with the
Group’s remuneration strategy and were developed with the benefit of input from independent remuneration
consultants and Australian peer company benchmark data. The total remuneration package for the CEO has
been reduced by 28 per cent (assuming 100 per cent vesting of STIs and LTIs) on the prior year. Further
details of Scott Charlton’s remuneration during his first year as CEO are set out in section 4.
As previously disclosed, in the year ended 30 June 2013, Scott Charlton received a one-off grant of equity as
a sign-on award in recognition of the incentives he forfeited with his former employer by joining the Group. A
total of 236,256 awards were granted to Scott Charlton on 14 September 2012 to vest, subject to his
continued employment, in three equal tranches (of 78,752 each) on the first, second and third anniversaries
of his commencement with the Group. Each award is an entitlement to receive a fully paid security on
vesting. The value of the awards at grant date was $1,349,022. The first tranche (78,752 awards) vested on
16 July 2013. The maximum total value of the grant yet to vest is $899,348 (based on the fair value per
award at grant date).
x
B
x
32
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Senior Executive restructure and KMP departures
In December 2012, a restructured Executive Committee (the Senior Executive group) was announced.
The new Executive Committee reflects a focus on delivering and enhancing the Group's core competencies
and is structured to balance the diverse range of skills and experience required to deliver the Group's
strategy. Key portfolios have been elevated to report to the CEO.
The new Executive Committee includes three new positions for existing General Managers (Wesley
Ballantine, Sue Johnson and Tim Steinhilber) and an external appointment (Lisa Tobin). Two Senior
Executives (Ken Daley and Elizabeth Mildwater) also resigned and departed the Group during the year, and
Ms Mildwater's role was filled by an external candidate (Vin Vassallo).
Benchmark data from Ernst & Young was used by the Remuneration and Human Resources Committee to
determine the quantum and structure of the remuneration arrangements for the new positions and the new
Senior Executives. The remuneration arrangements were subsequently approved by the Board. The
process resulted in a reduction in the average total remuneration package for current Senior Executives
(excluding the CEO) of 27 per cent (assuming 100% vesting of STIs and LTIs).
The five new Executive Committee members will be eligible for LTIs from 1 July 2013 onwards. No pro rata
LTI grants were made during the year ended 30 June 2013 to these Senior Executives. Along with the
CEO, they will have 50 per cent of their STI award deferred (for two years) for the year ended 30 June
2013 onwards.
Ken Daley resigned as President, International Development, and departed the Group on 2 February 2013.
Elizabeth Mildwater resigned as Group General Manager, Victoria, and departed the Group on 31 March
2013. On departure, Ken Daley and Elizabeth Mildwater forfeited their unvested equity awards (deferred
STI and LTIs) in full. Neither received an STI award for the year ended 30 June 2013 nor any ex gratia
payments on separation.
USA restructure
In the near term the primary focus for the Group's USA business is on the existing asset base in Virginia. In
June 2013, the Board resolved to close the Group's New York office. As a consequence, it was determined
that the position of President, North America would no longer be required. As no suitable positions are
available for Michael Kulper (the incumbent), his employment with the Group will cease on 3 September
2013. The remuneration arrangements to apply to Michael Kulper on his departure from the Group will be
disclosed in the 2014 report.
In June 2013, Jennifer Aument (formerly Vice President, Public Affairs) was appointed Group General
Manager, North America and became a member of the Executive Committee. She will be eligible for LTIs
from 1 July 2013 onwards. Ms Aument will also have 50 per cent of her STI award deferred (for two years)
for the year ended 30 June 2013 onwards.
33
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
(continued)
REMUNERATION GOVERNANCE
Remuneration report
x
2
x
A
x
BOARD AND REMUNERATION AND HUMAN RESOURCES COMMITTEE RESPONSIBILITY
The Remuneration and Human Resources Committee assists the Board in fulfilling its responsibilities relating
to the remuneration of Directors,
the CEO and other Senior
Executives, and remuneration practices, strategies and disclosures generally. The Committee also reviews
gender pay equity.
the remuneration of, and incentives for,
It is critical that the Remuneration and Human Resources Committee is independent of management when
making decisions affecting employee remuneration. Accordingly, the Committee comprises Non-executive
Directors, all of whom are independent. Where appropriate, the CEO and the Group General Manager,
Human Resources attend Committee meetings, however they do not participate in formal decision making.
The membership of the Remuneration and Human Resources Committee was unchanged in the year ended
30 June 2013. The members of the Committee continued to be Robert Edgar (Chair), Samantha Mostyn and
Neil Chatfield. Further details regarding the Committee are set out in the Directors’ report.
ENGAGEMENT OF REMUNERATION CONSULTANTS
To ensure that the Remuneration and Human Resources Committee has all relevant information at its
it may seek and consider advice from independent
disposal when making remuneration decisions,
remuneration consultants where appropriate. Any advice from consultants is used to guide the Committee
and the Board, but does not serve as a substitute for thorough consideration of the issues by Directors.
During the year ended 30 June 2013, no consultants provided the Remuneration and Human Resources
Committee with a remuneration recommendation relating to KMP. Ernst & Young provided the Committee
with benchmark data only.
The Group has a protocol in place governing the appointment of remuneration consultants and the manner
in which any recommendations made by those consultants concerning the remuneration of KMP are to be
provided to the Group, and in particular the circumstances in which management may be given access to
those recommendations. The purpose of the protocol is to ensure that any remuneration recommendations
provided by consultants are provided without undue influence by KMP.
In accordance with the protocol, all remuneration recommendations and advice must be sent directly to the
Remuneration and Human Resources Committee through the Chair of that Committee. The provision of
such material or other information directly to management is prohibited. The protocol also requires a
consultant to provide, with their recommendations, both a declaration of their independence from the KMP
to whom their recommendations relate, and also confirmation that the Committee’s conditions for contact
and dialogue with management had been observed.
x
B
x
34
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
(continued)
Remuneration report
x
3
REMUNERATION IN CONTEXT
Transurban is focused on providing effective and innovative urban transport solutions in road infrastructure,
toll road concessions. The effective
through the management and development of urban networks of
management of toll road concessions involves leveraging a network footprint in our markets, taking a leading
role in shaping policy, and utilising our core capabilities in the following areas:
• Network planning and forecasting;
• Operations and customer management;
• Project development and delivery;
• Application of technology; and
• Community engagement.
The investment proposition for high quality toll road assets lies in providing investors with access to long
dated, predictable, growing cash flows generated over the life of
the concessions through effective
management and development of the road corridors they govern.
The Group is focused on the long term management of toll road assets at various stages of maturity to
achieve the best outcomes for investors, Government partners and the community. In Australia, the
Group’s interests include 100 per cent ownership of CityLink in Melbourne, and the Hills M2 and Lane
Cove Tunnel in Sydney. The Group has partial interests in a further three roads on the Sydney orbital
network, being the M1 Eastern Distributor (75.1 per cent), the M5 (50 per cent), and the Westlink M7 (50
per cent). In North America, the Group currently has interests in three assets, Pocahontas 895 (75 per
cent), the 495 Express Lanes (67.5 per cent), and the 95 Express Lanes project (67.5 per cent), which is
currently under construction and remains on schedule for completion in late 2014.
The Board and management are focused on ensuring security holder value is enhanced through the strong
performance of the Group’s asset portfolio. Development activities also provide opportunities to further
expand the portfolio and unlock further value in the concessions.
35
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
(continued)
CEO / SENIOR EXECUTIVE REMUNERATION FOR THE YEAR ENDED 30 JUNE 2013
Remuneration report
x
4
x
A
x
REMUNERATION STRATEGY AND POLICY
The Group's executive remuneration strategy is designed to attract, retain and motivate a highly qualified and
experienced management team with the necessary skills and attributes to lead the Group in achieving its
business objectives. The strategy also aims to encourage management to strive for superior performance by
rewarding the achievement of targets that are challenging, clearly understood, and within the control of
individuals to achieve through their own actions.
The Group's remuneration strategy and policy as set by the Board is summarised below:
Creating Security Holder Value
Remuneration Strategy
Attract, retain, motivate and reward executives critical to the Group's growth and success by:
• Offering competitive remuneration that is benchmarked against the external market.
• Providing a balance of fixed and variable (or 'at risk') remuneration.
Align executive reward with individual and Group performance by:
• Making short and long term components of remuneration 'at risk' based on performance.
• Assessing rewards against appropriate financial and non-financial performance measures.
• Encouraging executive security holdings.
Remuneration Structure
Fixed remuneration
Total Employment Cost (TEC):
• Comprises cash salary, superannuation and other prescribed benefits.
• Provides a base level of reward for effective completion of Group and specific accountabilities.
• Appropriately benchmarked and set with reference to role, responsibilities, skills and experience.
Variable (or 'at risk') remuneration
Short term incentive (STI):
Annual rewards tied to pre-determined individual and Group performance measures, and includes a
deferred element.
Individual targets reflect individual specific accountabilities and key drivers for growth and success.
•
•
• Group performance targets linked to earnings, cost management and safety.
Long term incentive (LTI):
• Equity rewards to align executive and security holder interests.
•
Vest after three years, subject to achievement of pre-determined internal and external performance
measures.
• Encourages sustainable performance in the medium to longer term, and provides a retention element.
36
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
(continued)
Remuneration report
x
B
x
REMUNERATION MIX
For the year ended 30 June 2013, the remuneration of the CEO and other Senior Executives was structured
as a mix of fixed remuneration and variable (or 'at risk') remuneration through short term and long term
incentive components. The relative weightings of the three components were determined by the Board (on
the recommendation of the Remuneration and Human Resources Committee) and are set out in the table
below:
x
C
x
x
D
x
CEO
Senior Executives commencing in FY2013
Senior Executives commencing prior to FY2013**
Total remuneration % (annualised at target)*
Fixed TEC
Variable (performance based)
40
45
45
STI
30 (50% deferred)
30 (50% deferred)
30 (30% deferred)
LTI
30
25
25
* These figures do not necessarily reflect the relative value derived from each of the components, which depends on actual performance
against targets for the variable components. The STI percentages are based on achieving the relevant performance targets. The LTI
percentages are based on the maximum LTI available at the time of grant to each Senior Executive if the awards granted vest at the end
of the performance period.
** Transition to the remuneration mix for Michael Kulper was due to occur in FY2014. As a result of his departure from the Group on 3
September 2013, this will no longer occur.
FIXED REMUNERATION - TOTAL EMPLOYMENT COST (TEC)
What is TEC?
Fixed remuneration is represented by total employment cost comprising base salary and superannuation
contributions (or pension plans in the case of USA based employees).
Fixed remuneration is not 'at risk' but is set by reference to appropriate benchmark information for an
individual’s responsibilities, performance, qualifications and experience. There are no guaranteed TEC
increases in the service agreement of the CEO or any Senior Executive.
How is TEC determined?
Remuneration packages (including TEC levels) are reviewed annually by the Remuneration and Human
Resources Committee with reference to an individual’s role, experience and performance, as well as
relevant comparative market data. Independent remuneration consultants and surveys, internal relativities
and market conditions also provide guidance. TEC levels are also reviewed on a change in role. Any
changes to TEC levels recommended by the Committee are approved by the Board.
The CEO's and other Senior Executives' TEC is determined with reference to the market median. The
primary reference for determining the market median is the ASX 20-50, with consideration also given to the
ASX 100. Consideration is given to sizing factors including market capitalisation and revenue. A range
around the median provides flexibility to recognise individual experience and capabilities.
SHORT TERM INCENTIVE (STI)
How does the STI plan operate?
Eligible permanent Group employees, including the CEO and other Senior Executives, participate in the
annual STI plan. The STI plan puts a significant proportion of remuneration 'at risk' subject to meeting
specific pre-determined Group, team and individual performance measures linked to corporate objectives.
This aligns employee interests with the Group's financial performance, as well as management principles and
the Group’s cultural values.
For the year ended 30 June 2013, the CEO and other Senior Executives had a target STI opportunity of 30
per cent of their total remuneration package. Mandatory STI deferral of 30 per cent of the overall STI award
was introduced for the CEO and other Senior Executives in the year ended 30 June 2012. The deferred
component was then increased to 50 per cent during the year ended 30 June 2013 for the CEO and all other
newly appointed Senior Executives.
37
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
The deferral period is two years. For Australian Senior Executives, deferral is into securities. Due to legal
restrictions on the issue of securities to USA residents, the USA Senior Executives receive deferred cash
awards. The deferred component of remuneration may, at the discretion of the Board, be subject to
forfeiture or clawback (e.g. in the event of misconduct or the material misstatement of financial results).
What were the STI performance measures for the year ended 30 June 2013?
The STI performance measures for the CEO and other Senior Executives for the year ended 30 June 2013
were chosen to provide a balance between corporate,
financial and
non-financial aspects of performance and are described below:
individual, operational, strategic,
Measure
Description of targets/indicators for FY2013
Group
performance
targets
(1) Growth in proportional EBITDA (20% weighting)
The proportional EBITDA targets were set against the previous year's results and
the Group's FY2013 budget:
Proportional EBITDA result
Less than 6.7% above underlying result for FY2012
6.7% above underlying result for FY2012
Budget EBITDA for FY2013 (9% increase on result for FY2012)
17% above underlying result for FY2012
^ Straight line vesting applies between 50-100% and 100-150%.
% STI that
vests^
zero
50
100
150
(2) Cost management based on proportional net costs (20% weighting)
The proportional net costs targets were set against the previous year's results and
the Group's FY2013 budget. The proportional net costs target excluded Capital
Beltway for FY2013:
Proportional net costs result
Over FY2013 budget
FY2012 result normalised + CPI
FY2012 result normalised
$10 million saving on FY2012 normalised result
^ Straight line vesting applies between 50-100% and 100-150%.
% STI that
vests^
zero
50
100
150
(3) Safety targets (10% weighting),
including multiple indicators that
focused on
improving the Group's safety culture and reducing workplace injuries for employees
and contractors. The safety targets for Australia and the USA comprised a lead and
a lag indicator. The Australian lead indicator required the completion of safety
development action plans and the lag indicator
required a reduction in the
Recordable Injury Frequency Rate. The USA lead indicator required the completion
of all items outlined in the safety management system and the lag indicator related
to the Recordable Incidence Rate for employees and construction contractors.
Individual key
performance
indicators (KPIs)
Individual KPIs (50% weighting), were unique to the individual's area of
accountability, and in FY2013 related to critical business sustainability measures,
including: operational performance; cost reduction; customer satisfaction; project
outcomes; succession planning; risk management; people management; strategy
development; and business plan implementation.
Individual KPIs reflect the behaviours valued by the Group and are capable of
measurement. Individuals have a clear line of sight to KPIs and are able to directly
affect outcomes through their own actions.
38
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Who sets the STI performance measures?
STI performance measures are set at the beginning of the financial year. The CEO's individual KPIs are set by
the Board. All other Senior Executives’ individual KPIs are set by the CEO and approved by the Board. The
Board sets the Group performance targets.
What is proportional EBITDA and why is it used as an STI performance measure?
EBITDA (earnings before interest,
performance measure used by many companies.
taxes, depreciation and amortisation)
is a common operational
the primary measures that
Proportional EBITDA is one of
the Board uses to assess the operating
performance of the Group, with an aim to maintain a focus on the Group’s operating results and associated
cash generation. It reflects the contribution from individual assets to the Group's operating performance
and focuses on elements of the result that management can influence to drive improvements in short term
earnings. Proportional EBITDA is the aggregation of EBITDA from each asset multiplied by the Group's
percentage ownership, as well as any contribution from Group functions. The Board believes proportional
EBITDA provides a better reflection of the underlying performance of the Group’s assets than statutory
EBITDA. The EBITDA calculation from the statutory accounts would not include the EBITDA contribution of
the M5, M7 or DRIVe (equity accounted in the statutory results), which are meaningful contributors to the
Group’s performance. Proportional EBITDA figures used to assess performance are included in note 2 of
the audited financial statements.
The Board can decide to exclude specific items from proportional EBITDA to provide an underlying result
when determining performance incentives. For the year ended 30 June 2013, the Board resolved to exclude
costs associated with the CEO transition. The Board also determined that the contribution by Capital Beltway
Express (the 495 Express Lanes) be excluded when determining performance incentives during the period of
ramp up for this asset.
Proportional EBITDA has been used by the Group as an STI performance measure since 2009.
What are proportional net costs and why is it used as a performance measure?
Proportional net costs is calculated as fee and other revenue less total costs of the Group. Costs after fee and
other revenues encourages and allows management to incur additional costs where these are justified by
increased revenue results.
The use of a cost related STI performance measure reflects the fact that management has the ability to
influence the expenditure of the business. Strong cost management throughout the business drives an
increase in proportional EBITDA and free cash flow and ultimately security holder value.
Proportional net costs has been used by the Group as an STI performance measure since 2010.
How are the varying levels of performance achievement rewarded?
STI targets are designed to differentiate and reward high performance. 50 per cent of the available STI vests
for on-target performance, 100 per cent vests for high performance and up to an additional 50 per cent can
the Group’s eligible
be earned for exceptional performance. These targets are consistent
employees. Given that STI awards are contingent on performance across a range of measures, maximum
STI awards can only be achieved for performance that is exceptional on all measures.
for all of
How is performance assessed?
Performance against the Group performance targets is assessed by the Board. The results are independently
reviewed.
The CEO's performance against his individual KPIs is assessed by the Remuneration and Human Resources
Committee, which then makes recommendations to the Board. The performance of other Senior Executives
against their individual KPIs is assessed by the CEO, who confers with the Committee and then the Board
regarding his assessment.
39
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Once KPIs have been assessed, the Board approves STI awards. STI cash awards for the year ended 30
June 2013 will be paid in August 2013. The STI deferred component for the year ended 30 June 2013 will
be awarded in August 2013 and will vest, subject
to continuity of employment (unless otherwise
determined by the Board) and clawback provisions, on 1 July 2015.
The Board believes the method of assessment is rigorous and provides a balanced evaluation of the
performance of the CEO and each other Senior Executive.
What if a Senior Executive ceases employment?
Under the service agreements for the CEO and other Senior Executives,
the CEO or other Senior
Executive ceases employment with the Group before performance against STI targets is assessed, they
would generally not be entitled to receive any STI award, unless otherwise determined by the Board.
if
What were the STI performance outcomes for the year ended 30 June 2013?
Group performance in respect of the proportional EBITDA, proportional net costs and safety STI performance
measures for the year ended 30 June 2013 was assessed by the Board as
100 per cent in Australia and 100
per cent in the USA.
STI awards for the CEO and other Senior Executives for the year ended 30 June 2013 are set out below:
STI outcome (%)
Actual STI
1
($)
awarded
STI forfeited
(%)
Group
performance
Individual
KPIs
Total
Cash
2 Deferred into
2
securities
Current Senior Executives
S Charlton
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
Tobin4
Vassallo4
V
L
Transitioning Senior Executive
M
Kulper5
Former Senior Executives
C
Lynch6
K Daley
E Mildwater
100
100
100
100
100
100
100
-
-
-
100
-
-
110
130
100
70
80
130
110
-
-
-
105
115
100
85
90
115
105
-
-
738,300
10,7753
81,1503
241,395
284,935
112,3253
97,8253
-
-
738,300
10,7753
81,1503
103,455
122,115
112,3253
97,8253
45,000
45,000
75
362,264
155,256
100
100
178,652
-
-
-
-
-
-
-
-
-
-
-
-
15
10
-
-
-
-
25
-
100
100
1 On-target performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI in respect of
FY2013 was nil. The maximum potential value of the STI was the “Actual STI awarded”.
2 The cash STI payments will be paid in August 2013. The STI deferred component (30/50 per cent of the STI awarded) will vest, subject
to continuity of employment (unless otherwise determined by the Board) and clawback provisions, on 1 July 2015.
3 The Senior Executive was not a member of KMP for the entirety of FY2013. Accordingly only the STI earned whilst a member of KMP is
included in the table.
4 Lisa Tobin and Vin Vassallo were granted STI deferred awards in recognition of their contribution and performance since joining the
Group in February 2013.
5 An overall outcome of 75 per cent of his available STI was awarded to Michael Kulper for FY2013. A holistic approach, which took into
account the performance of the 495 Express Lanes, was considered appropriate in determining his STI. As noted in section 1B, Michael
Kulper will depart the Group in September 2013.
6 Chris Lynch received a pro-rated STI in August 2012 based on performance and targets for his time served during FY2013.
40
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
What was the grant and movement in the number of STI deferred awards?
Mandatory STI deferral was introduced in the year ended 30 June 2012, with the first grant of awards made
in August 2012.
Balance at
start of year
Granted
during year
as
remuneration
Matured and
paid during
year
Forfeited
during the
year
Balance at
the end of
year
Current Senior Executives*
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
Transitioning Senior Executive
M Kulper
Former Senior Executives
C
Lynch2
K Daley
E Mildwater
-
-
-
-
-
-
-
-
-
-
14,7891
15,2121
22,449
18,973
16,5401
19,3561
36,464
133,099
26,742
19,863
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(26,742)
(19,863)
14,789
15,212
22,449
18,973
16,540
19,356
36,464
133,099
-
-
* Scott Charlton, Lisa Tobin and Vin Vassallo joined the Group after the FY2012 STI performance period and therefore were not entitled
to receive an STI deferred award in respect of that period.
1 STI deferred awards granted during the year as remuneration occurred prior to the Senior Executive becoming a member of KMP.
2 Refer to section 1B for further details of Chris Lynch's contractual entitlements on resignation.
x
E
x
LONG TERM INCENTIVE (LTI)
How does the LTI plan operate?
The LTI plan aligns reward with security holder value by tying this component of executive remuneration to
the achievement of performance measures that underpin sustainable long term growth.
Participation in the LTI plan is offered to the CEO and other Senior Executives, and certain other employees
nominated by the CEO and approved by the Board. For the year ended 30 June 2013, the CEO was offered
an LTI grant equivalent to 30 per cent of his total remuneration package. Other eligible Senior Executives
were offered grants equivalent to 25 per cent of their total remuneration package.
LTI grants are made in the form of performance awards under the Group’s Performance Awards Plan (PAP)
at no cost to the recipient. Each performance award is an entitlement to receive a fully paid security, or an
equivalent cash payment, on terms and conditions determined by the Board, subject to the achievement of
certain vesting conditions linked to performance over a three year period.
Subject to the achievement of the performance measures, upon vesting, the Board will determine in its
absolute discretion whether the performance awards will be settled in securities or a cash payment of
equivalent value. Due to legal restrictions on the issue of securities to USA residents, the USA Senior
Executives receive a cash payment upon vesting.
Performance awards that do not vest after testing of the performance measures lapse, without retesting.
Performance awards are not transferable and do not carry voting or distribution rights. However securities
allocated upon vesting of performance awards carry the same rights as other Transurban securities.
What were the LTI performance measures for the year ended 30 June 2013?
Performance awards granted during the year ended 30 June 2013 are subject to a three year performance
period and the following dual performance measures over that period:
41
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Measure % weighting Description of measure
Relative
TSR
50%
Relative TSR is measured against a bespoke comparator group comprising
companies
construction and
infrastructure Global Industry Classification Standards (GICS) sectors of the
ASX150. The 37 companies in this group are:
in the transport, utilities,
real estate,
Telstra Corporation Ltd, Westfield Group, QR National Ltd, Westfield Retail Trust, Stockland,
Leighton Holdings Ltd, AGL Energy Ltd, BWP Trust, GPT Group, Goodman Group, CFS Retail
Property Trust, Lend Lease Group, Asciano Ltd, Qantas Airways Ltd, Dexus Property Group,
Mirvac Group, Telecom Corporation of New Zealand Ltd, Toll Holdings Ltd, SP Ausnet, APA
Group, Commonwealth Property Office Fund, UGL Ltd, Cardno Limited, Auckland International
Airport Ltd, Centro Retail Australia, Investa Office Fund, Spark Infrastructure Group, Charter Hall
Retail Reit, Australand Property Group, Monadelphous Group Ltd, Duet Group, TPG Telecom Ltd,
Australian Infrastructure Fund, Envestra Limited, Hastings Diversified Utilities Fund, QUBE
Logistics Holdings Limited and Sydney Airport.
TSR measures total return on investment of a security, taking into account
both capital appreciation and distributed income which was reinvested on a
pre-tax basis.
For performance awards granted during the year ended 30 June 2013, the
relative TSR component will vest on a straight line basis if the Group’s relative
TSR performance is above the median of the bespoke comparator group at
the end of the performance period, in accordance with the following table:
TSR vesting schedule:
The Groupʼs relative TSR ranking in
the comparator group
At or below the 50% percentile
Above the 50th percentile but below the
75th percentile
At or above the 75th percentile
% of performance awards that
vest
Nil
Straight line vesting between 50%
and 100%
100%
x
Measure % weighting Description of measure
Growth in
FCF per
security
50%
Within Transurban, Free Cash Flow (FCF) per security is defined as:
• the Group's cash flow from operating activities;
• less: cash flows from operating activities of non 100% owned assets;
• add back: maintenance capital expenditure for 100% owned assets;
• less: accounting charge for maintenance provision for the year;
• less: actual tag expenditure in 100% owned assets;
• add: dividends received from non 100% owned assets;
• divided by: weighted average number of securities issued.
The FCF calculation is included in note 21 of the audited financial statements.
For performance awards granted during the year ended 30 June 2013, the
FCF per security component will vest based on the Group's compound annual
growth in FCF per security over the three year performance period, as set out
below:
Growth in FCF per security vesting schedule:
% compound annual growth in FCF per
security
6%
Between 6% and 9%
9% or more
% of performance awards that
vest
50%
Straight line vesting between 50%
and 100%
100%
For performance awards granted during the year ending 30 June 2014, the
performance target
range for compound growth in FCF per security is
between 12 per cent and 15 per cent.
42
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Why were these LTI performance measures selected?
The TSR target is a relative, external, market-based performance measure against those companies with
which the Group competes for capital. It provides a direct link between executive reward and security holder
return.
Growth in FCF per security reflects the Group’s continuing focus on the maximisation of free cash, and has
been used as an LTI performance measure since the year ended 30 June 2012.
How will the LTI performance targets be measured?
Relative TSR
The Group will receive an independent report that sets out the Group's TSR growth and that of each
company in the bespoke comparator group. A volume weighted average price of securities for the 20 trading
days up to and including the testing date is used in the calculation of TSR.
The level of TSR growth achieved by the Group will be given a percentile ranking having regard to the
Group’s performance compared to the performance of other companies in the comparator group (the highest
ranking company being ranked at the 100th percentile). This ranking will determine the extent to which
performance awards subject to this target will vest.
FCF per security
The Group's FCF per security percentage growth rate will be calculated based on the FCF per security over
the three year performance period.
The Board considers these methods of measurement to be rigorous and transparent.
What if a Senior Executive ceases employment?
Under the terms of the service agreements for the CEO and other Senior Executives, if the CEO or other
Senior Executive ceases employment with the Group before the performance measures are tested, their
unvested performance awards would generally lapse, unless otherwise determined by the Board.
What will happen in the event of a change in control?
In the event of a takeover or change of control of the Group, the treatment of any unvested performance
awards granted in the year ended 30 June 2013 will be subject to the incumbent Board's discretion.
43
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
What was the grant, and movement in the number and value, of performance awards during the
year ended 30 June 2013?
Eligible Senior Executives (excluding the CEO) received performance awards with a grant date of 15
August 2012. Following the receipt of security holder approval at the 2012 Annual General Meeting, the
CEO received performance awards with a grant date of 19 October 2012. All performance awards granted
in the year ended 30 June 2013 vest subject to a performance period from 1 July 2012 through to 30 June
2015.
The relevant values of the grants are as follows:
Recipient
Grant date
Fair value of awards at grant
1
date
($)
Closing security
price at grant date
Eligible Senior Executives
15 August 2012
CEO
19 October 2012
$2.72
$2.95
$4.99
$5.43
$5.75
$6.16
1 An explanation of the pricing model used to calculate these values is set out in note 34 to the audited financial statements.
Relative TSR FCF per security
Performance awards granted in FY2013
Name
Number of
performance
awards
granted
3
Value at grant date
($)
Maximum total value
of grant yet to
4
vest
($)
Current Senior Executives*
S
Charlton1,
2
A Head
S Hogg
Transitioning Senior Executive
M Kulper
Former Senior Executives
K
Daley5
Mildwater5
E
448,400
112,754
125,696
1,848,114
427,605
476,684
1,848,114
427,605
476,684
178,830
678,189
678,189
137,167
112,754
520,188
427,605
-
-
* Jennifer Aument, Wesley Ballantine, Sue Johnson, Tim Steinhilber, Lisa Tobin and Vin Vassallo were not eligible for an LTI grant
(including any pro rata grant) in respect of FY2013.
1 The grant made to the CEO constituted his LTI entitlement for FY2013 and was made following security holder approval at the 2012
AGM on the terms summarised above. Performance awards vest subject to performance over the period from 1 July 2012 through to 30
June 2015.
2 In September 2012, Scott Charlton received a one-off sign-on grant of 236,256 performance awards to vest, subject to his continued
employment, in three equal tranches (of 78,752 each) on the first, second and third anniversaries of his commencement with the Group.
The first tranche (78,752 awards) vested on 16 July 2013. The maximum total value of the grant yet to vest is $899,348 (based on the fair
value per award at grant date).
3 The grants made to Senior Executives assume full vesting of their full LTI entitlement
summarised above. Performance awards vest subject to performance testing over the period from 1 July 2012 through to 30 June 2015.
4 The maximum value of the grant has been estimated based on the fair value per award at date of grant. The minimum total value of the
grant, if the applicable performance measures are not met, is nil.
5 Performance awards lapse where the performance and service measures are not satisfied on testing. On departure from the Group, Ken
Daley and Elizabeth Mildwater forfeited their awards. The value of the forfeited awards was $520,188 for Ken Daley and $427,605 for
Elizabeth Mildwater. No other Senior Executives forfeited performance awards during the year.
for FY2013 and were made on the terms
44
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
(continued)
Remuneration report
x
F
x
LEGACY LTI PLANS
The Group has a number of LTI plans that were offered in previous years, as detailed below:
Plan
Grant date
Performance period
FY2012 PAP
26 Sep 2011
11 Nov 2011 (CEO only)
1 Jul 2011 - 30 Jun 2014
FY2011 PAP
1 Nov 2010
FY2010 PAP
11 Dec 2009
TSR : 1 Nov 2010 - 1 Nov
2013
EBITDA : 1 Jul 2010 - 30
Jun 2013
1 Jul 2009 - 30 Jun 2012
External performance
measure (50% of grant)
Comparator group
Relative TSR
Relative TSR
Relative TSR
33 companies within a
bespoke comparator group
within the ASX150
The S&P/ASX 100
Vesting schedule
Above 50th percentile to 75th percentile
Straight line vesting between 50%-100%
Relative TSR
% of performance awards that vest
At or above the 75th percentile
100% vests
Internal performance
measure (50% of grant)
Growth in free cash flow
(FCF) per security
Group's annual growth in
proportional EBITDA
Group's annual growth in
proportional EBITDA
From 7% - 10%
From 7% - 11%
From 6% - 9%
Compound growth
% of performance awards that vest
At target
50% vests
Vesting schedule
From target % to stretch %
Straight line vesting between 50% - 100%
At or above stretch %
100% vests
Current status
Awards on issue
To be tested after 30 Jun
2014
To be tested after 1 Nov
2013
TESTED 100% vested on
11 Dec 2012
1,135,896
1,607,159
-
45
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Value of performance awards vested and lapsed in the year ended 30 June 2013
The FY2010 PAP vested on 11 December 2012. 100 per cent of awards subject to the TSR performance
measure vested based on the Group’s ranking against the constituents of the S&P/ASX 100. 100 per cent of
awards subject to the proportional EBITDA measure vested based on performance against target. There
were no awards that lapsed.
Aument2
Ballantine2
Name
Current Senior Executives
J
W
A Head
S Hogg
S
T
Johnson2
Steinhilber2
Transitioning Senior Executive
M Kulper
Former Senior Executives
C
Lynch3
K Daley
E Mildwater
FY2010 PAP - Vested
Number
17,768
20,030
59,347
47,478
23,145
25,022
161,956
617,211
111,276
66,766
Value
($)1
73,737
83,125
246,290
197,034
96,052
103,841
672,117
2,561,426
461,795
277,079
1 Based on the fair value at date of grant.
2 Awards granted prior to the Senior Executive becoming a member of KMP. Awards vested while the Senior Executive was a member of
KMP except for Jennifer Aument who became a member of KMP after vesting.
3 Refer to section 1B for further details of Chris Lynch's contractual entitlements on resignation.
46
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Number of performance awards on issue as at 30 June 2013
The number of performance awards held by members of KMP as at 30 June 2013 is provided below.
Comparative data is shown for those Senior Executives who were members of KMP during both the years
ended 30 June 2013 and 30 June 2012.
Current Senior Executives*
S Charlton
2013
J Aument
2013
W Ballantine
2013
A Head
2013
2012
S Hogg
2013
2012
S Johnson
2013
T Steinhilber
2013
Transitioning Senior Executive
M Kulper
2013
2012
Former Senior Executives
C
Lynch4
2013
2012
K Daley
2013
2012
E Mildwater
2013
2012
Balance at
start of year
Granted
during year
as
remuneration
Matured and
paid during
year
Lapsed or
forfeited
during year
Balance at
the end of
year
-
684,6561
-
39,3652
44,4712
257,636
196,382
214,633
136,569
52,7712
53,7772
-
-
(17,768)3
(20,030)
112,754
107,766
(59,347)
(44,054)
125,696
101,320
(47,478)
(22,027)
-
-
(23,145)
(25,022)
491,675
477,811
178,830
159,286
(161,956)
(137,736)
-
-
-
-
(2,458)
-
(1,229)
-
-
-
(7,686)
684,6561
21,597
24,441
311,043
257,636
292,851
214,633
29,626
28,755
508,549
491,675
2,016,918
1,785,615
-
715,024
(617,211)
(458,156)
-
1,399,707
(25,565)
2,016,918
284,440
223,297
265,055
186,359
137,167
128,294
112,754
107,766
(111,276)
(310,331)
-
(63,602)
(3,549)
284,440
(66,766)
(27,534)
(311,043)
-
(1,536)
265,055
* Lisa Tobin and Vin Vassallo joined the Group in February 2013 and did not receive a pro rata LTI grant in respect of FY2013.
1 This number includes the 236,256 performance awards granted to Scott Charlton in September 2012 as a sign-on award, to vest,
subject to his continued employment, in three equal tranches on the first, second and third anniversaries of his commencement with the
Group. The first tranche (78,752) awards vested on 16 July 2013. Therefore as at the date of this report, Scott Charlton has 605,904
performance awards yet to vest of which 157,504 awards relate to his sign-on award.
2 Opening balance held prior to the Senior Executive becoming a member of KMP.
3 Awards matured and paid during the year occurred prior to the Senior Executive becoming a member of KMP.
4 Refer to section 1B for further details of Chris Lynch's contractual entitlements on resignation.
47
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
(continued)
Remuneration report
x
G
x
REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Deferred
STI
4
Post-
employment
benefits
Termination
benefits
Short-term employee benefits
Non-
monetary
3
benefits
Cash salary
and fees
Cash
STI
2
1
1
1
-
-
2012)
2012)
2012)
3,823
-
2,030
1,903
2,366
2,260
3,398
-
22,379
-
81,150
-
27,260
-
112,325
-
280,971
-
284,935
251,598
241,395
297,686
656,561
555,892
589,279
571,722
1
2013)
10,775
-
Current CEO
S Charlton (from 16 July 2012)
738,300
1,789,850
2013
2012
-
-
Current Other Senior Executives
J Aument (from 10 June
2013
2012
W Ballantine (from 22 November
230,757
2013
2012
-
A Head
2013
2012
S Hogg
2013
2012
S Johnson (from 8 October
2013
2012
T Steinhilber (from 10 December
269,441
259,550
2013
-
2012
-
L Tobin (from 4 February
2013)
-
2013
2012
-
1
V Vassallo (from 4 February
2013)
-
2013
-
2012
Transitioning Senior Executive
M Kulper
2013
2012
Former CEO
C Lynch (resigned effective 16 July 2012)
2013
2012
Former Other Senior Executives
K Daley (resigned effective 2 February 2013)
53,262
2013
2012
118,030
E Mildwater (resigned effective 31 March 2013)
2013
2012
T Honan (resigned effective 2 May 2012)
2013
2012
178,652
2,153,375 1,764,963
-
1,149,822
1,067,296
955,653
-
354,612
-
263,390
816,330
704,498
485,161
569,468
185,869
-
176,134
-
-
475,000
362,264
492,765
52,658
-
555
46,299
15,482
-
1,525
2,028
-
3,951
144,951
710
-
710
-
1
Super
-annuation
246,100
-
15,098
-
5,204
-
44,498
-
77,012
42,527
76,648
35,943
60,277
-
53,001
-
15,000
-
15,000
-
916
-
9,836
-
16,470
22,760
16,470
15,775
12,043
-
6,388
-
6,863
-
6,863
-
120,168
70,395
10,997
9,458
504,275
252,138
5,490
15,775
(50,659)
50,659
(37,627)
37,627
-
-
13,725
45,813
13,725
15,775
-
26,775
Share
based
5
benefits
Total
Long term
benefits
Long
service
leave
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,368
-
12,696
15,258
13,674
11,492
23,829
-
-
-
-
-
-
-
1,302,848
-
4,114,575
-
3,534
-
47,689
-
26,851
-
411,858
-
441,434
347,920
1,380,652
1,300,133
407,426
280,575
1,457,744
1,153,178
38,665
-
58,491
-
-
-
-
-
531,933
-
699,529
-
208,442
-
198,707
-
28,977
16,165
1,441,431
1,033,606
3,046,615
2,578,042
(62,121) 6,103,6656
3,086,801
40,812
6,875,467
7,360,163
8,346
21,983
(341,435)
594,613
499,569
1,890,208
(15,434)
10,015
(274,631)
350,916
172,719
1,249,219
-
-
-
(824,365)
-
831,183
1 The dates on which the Senior Executive who were promoted or appointed during FY2013 are that dates that those Senior Executives
commenced being a KMP. Their remuneration for the period during which they were members of KMP is disclosed in the table only.
2 The amount represents the cash STI payment to the Senior Executive for FY2013, which will be paid in August 2013. Tim Steinhilber also
received a payment of $161,725 in relation to the successful delivery of the 495 Express Lanes (paid in February 2013).
3 Non-monetary benefits include Group insurance and expatriate allowances (where relevant).
4 A component of STI award is deferred into securities. In accordance with Accounting Standards, the deferred component will be recognised
over the three year service period. The amount recognised in this table is the FY2013 accounting charge for unvested grants.
5 In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity compensation
granted or outstanding during the year (i.e. performance awards under the LTI plan). The fair value of equity instruments is determined as at the
grant date and is progressively allocated over the vesting period.
48
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
5 (continued) The amount included as remuneration may be different to the benefit (if any) that Senior Executives may ultimately realise
should the equity instruments vest. The fair value of performance awards at the date of their grant has been independently determined in
accordance with AASB 2. The fair value of the performance awards has been valued applying a Monte Carlo simulation to model
Transurbanʼs security price and where applicable, the TSR performance against the comparator group performance. The assumptions
underpinning these valuations are set out in note 34 to the audited financial statements.
6 The value for share based benefits for Chris Lynch includes all unvested LTI awards. In accordance with Accounting Standard AASB 2,
these have been accounted as an acceleration of vesting. The amount that would have been recognised for services received from Chris
Lynch as CEO of the Group over the remainder of the vesting period has been included in the table above. These awards will continue on
foot in accordance with the original terms, with the applicable measures for each grant to be tested at the end of the applicable original
performance period. These LTI awards may or may not vest. Also included is a cash payment of $1,060,000 which was made to Chris
Lynch in lieu of an LTI earned but not received for a six month period during his tenure in line with his contractual entitlement to receive an
LTI award for every day employed by the Group. This payment was made in cash in August 2012.
SERVICE AGREEMENTS
The remuneration and other terms of employment for the CEO and other Senior Executives are formalised in
service agreements which have no specified term. Under these agreements, the CEO and other Senior
Executives are eligible to participate in STI and LTI plans. Some other key aspects of the agreements in
place for the year ended 30 June 2013 are outlined below:
x
H
CEO
Other Senior Executives
Period of notice to terminate
(Executive)
6 months
3 months
Period of notice to terminate
(the Group*)
12 months
6 months
* Payment in lieu of the notice period may be provided (based on the executive's fixed remuneration). The Group may also terminate at
any time without notice for serious misconduct.
I
ADDITIONAL REMUNERATION INFORMATION
Employee Security Plans
The Group has three broad employee based security plans.
ShareLink Incentive Plan
Under the ShareLink Incentive Plan, subject to Board approval, an allocation of Transurban securities or cash
payments may be made to eligible employees (excluding the CEO and other Senior Executives) in
recognition of the Group’s prior year performance. Eligible employees received a grant of 100 securities at no
cost to them on 27 February 2013. Due to legal restrictions on the issue of securities to USA residents,
eligible employees in the USA received a cash payment of equivalent value in lieu of securities.
Given that the plan is designed to reward employees for the Group's prior year performance and is not
intended to serve as a future incentive, there are no performance measures attached to grants of securities
or cash payments under the plan.
Securities granted under the plan carry a three year holding lock from the grant date and can only be traded
once the holding lock expires or when employment with the Group ceases, which ever is earlier.
ShareLink Investment Tax Exempt Plan and ShareLink Investment Tax Deferred Plan
The ShareLink Investment Tax Exempt Plan provides eligible employees (excluding the CEO and other
Senior Executives) the opportunity to invest up to $1,000 per year in Transurban securities on a tax exempt
basis. Participants contribute up to $500 by way of salary sacrifice which is matched by the Group dollar for
dollar. Security acquisitions are made quarterly in September, December, March and June each year.
The ShareLink Investment Tax Deferred Plan provides eligible employees (excluding the CEO and other
Senior Executives) with the opportunity to contribute up to $5,000 per year by way of salary sacrifice to be
invested in Transurban securities. The Group matches participants’ contributions dollar for dollar up to
$3,000. The plan has a disposal restriction period of three years from the date of acquisition, including a 12
month forfeiture period.
Grants under both of these plans are designed to encourage employee security holdings and to align the
interests of employees with those of the Group and are therefore not subject to performance measures.
49
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Dealing in Securities
In accordance with the Group’s Dealing in Securities Policy, employees who have awards under a Group
equity plan may not hedge against those awards. In addition, KMP may not hedge against entitlements that
have vested but remain subject to a holding lock. Employees and Directors are not permitted to obtain margin
loans using Transurban securities (either solely or as part of a portfolio) as security for loans.
Securities held by Senior Executives as at 30 June 2013
The number of securities held by members of KMP as at 30 June 2013 is provided below. Comparative
data is shown for those Senior Executives who were members of KMP during both the years ended 30
June 2013 and 30 June 2012.
Balance at start of year Changes during year Balance at end of year
Current Senior Executives
S Charlton
2013
J Aument
2013
W Ballantine
2013
A Head
2013
2012
S Hogg
2013
2012
S Johnson
2013
T Steinhilber
2013
L Tobin
2013
V Vassallo
2013
Transitioning Senior Executive
M Kulper
2013
2012
Former Senior Executives
C Lynch
2013
2012
K Daley
2013
2012
E Mildwater
2013
2012
-
-
2,8891
3,041
21,112
1,553
15,616
19,1291
-
-
10,0181
80,000
103,944
713,563
255,401
384,678
384,678
56,066
27,098
10,000
-
1,099
-
(18,071)
10,000
(14,063)
10,467
-
-
10,000
-
3,988
3,041
3,041
11,553
1,553
29,596
-
-
520
10,538
-
(23,944)
(713,563)2
458,162
(384,678)2
-
(56,066)2
28,968
80,000
80,000
-
713,563
-
384,678
-
56,066
1 Opening balance held prior to the Senior Executive becoming a member of KMP.
2 Balance removed on departure from the Group during FY2013.
50
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Securities held by Non-executive Directors as at 30 June 2013
Current Non-executive Directors
L Maxsted
Balance at start of year Changes during year Balance at end of year
2013
2012
N Chatfield
2013
2012
R Edgar
2013
2012
S Mostyn
2013
2012
C O'Reilly
2013
2012
R Slater
2013
2012
I Smith
2013
2012
Former Non-executive Directors
G Cosgriff
2013
2012
J Davis
2013
2012
R Officer
2013
2012
30,000
30,000
30,910
20,910
23,733
18,627
10,300
-
-
-
-
-
70,000
-
-
152,236
-
384,678
20,115
19,089
-
-
-
10,000
857
5,106
3,700
10,300
4,363
-
-
-
1,772
70,000
-
(152,236)1
-
(384,678)1
(20,115)1
1,026
30,000
30,000
30,910
30,910
24,590
23,733
14,000
10,300
4,363
-
-
-
71,772
70,000
-
-
-
-
-
20,115
1 Balance removed on resignation as a Director during the relevant year.
51
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
(continued)
Remuneration report
x
5
LINK BETWEEN GROUP PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
The variable (or 'at risk') remuneration of the CEO and other Senior Executives is linked to the Group’s
performance through the use of measures based on the operating performance of the business.
GROUP PERFORMANCE AND STI
For the year ended 30 June 2013, 20 per cent of the STI award was determined with reference to
proportional EBITDA, 20 per cent with reference to proportional net costs, and 10 per cent with reference
to safety, as discussed on page 38.
Proportional EBITDA
The proportional EBITDA result for the year ended 30 June 2013 was $828.0 million. Excluding the effect of
Capital Beltway Express and the CEO transition cost, this resulted in the payment of 50 per cent of STIs
attributable to proportional EBITDA. The proportional EBITDA result was driven by the Group's continued
focus on cost control and the performance of the asset portfolio. This result was delivered despite significant
disruption caused by construction on Sydney’s Hills M2 Motorway.
Proportional net costs
The proportional net costs result for the year ended 30 June 2013 was $163.4 million, a 2.2 per cent increase
from the prior year result. Excluding the effect of Capital Beltway Express, proportional net costs decreased
by 4.3 per cent from the prior year which resulted in the payment of 150 per cent of STIs attributable to
proportional net costs.
Safety
For the year ended 30 June 2013, the safety performance measure resulted in a 100 per cent STI
outcome. The safety target included several components as outlined on page 38. In Australia the lead and
lag safety targets were achieved and over 75 per cent of the action items listed in the safety development
action plans were completed and there was a reduction in the Recordable Injury Frequency Rate. In the
USA the lead and lag safety targets were also achieved. All items in their safety management system plan
were completed and there were no Recordable Case Incidences for employees and construction
contractors. These results reflected substantial work focused on safety in the year ended 30 June 2013.
GROUP PERFORMANCE AND LTI
For the year ended 30 June 2013, LTIs were linked to relative TSR and FCF per security.
Relative TSR
Relative TSR for the year ended 30 June 2013 is measured against a bespoke comparator group comprising
companies in the transport, utilities, real estate, construction and infrastructure Global Industry Classification
Standards (GICS) sectors of the ASX150.
FCF per security
The performance target for performance awards granted during the year ended 30 June 2013 was a range
for compound growth in FCF per security of between 6 per cent and 9 per cent over three years. It was
considered an appropriate target that reflects the Group’s focus on the maximisation of free cash to drive
the
security holder
performance target range for compound growth in FCF per security is between 12 per cent and 15 per cent.
return. For performance awards granted during the year ending 30 June 2014,
The table below summarises the Group’s five year results for the relevant performance measures. These
results show that since the year ended 30 June 2009, Transurban’s distribution policy has been to align
distributions with FCF per security. Since that time, Transurban has delivered consistent growth on this
measure based on consistent revenue and EBITDA growth. Based on investor feedback, this remains
Transurban’s financial focus.
A
x
B
x
52
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Group
Performance
1
Measure
Security price at year end
2013
$6.76
2012
$5.69
2011
$5.23
2010
$4.24
2009
$4.18
Distribution paid per security
31.0c
29.5c
27.0c
24.0c
22.0c
Underlying proportional EBITDA -
$m1
TSR
performance2
828.0
25%
784.0
15%
718.7
635.4
583.3
32%
10%
2%
FCF per security performance - weighted average
30.1c
29.8c
27.5c
27.4c
22.2c
1 In the current and prior year, LTIs were linked to relative TSR and FCF per security. In earlier years, LTIs were linked to relative TSR
and proportional EBITDA.
2 The TSR performance is the total security holder return for that financial year.
53
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
(continued)
NON-EXECUTIVE DIRECTOR REMUNERATION
Remuneration report
x
6
x
A
x
REMUNERATION POLICY
The diagram below sets out the key objectives of the Group’s Non-executive Director remuneration policy
and how they are implemented through the Group’s remuneration framework:
Securing and retaining talented,
qualified Directors
Preserving independence and
impartiality
Aligning Director and security
holder interests
Director fee levels are set with
regards to: the responsibilities and
risks attached to the role, the time
commitment expected and the
workload, experience and
expertise, and market benchmark
data provided by remuneration
consultants.
Director remuneration consists of
base (Director) fees and
Committee fees.
No element of Director
remuneration is 'at risk' (i.e. fees
are not based on the performance
of the Group or individual
Directors from year to year).
Directors are encouraged to
hold Transurban securities.
REMUNERATION ARRANGEMENTS
Maximum aggregate remuneration
The amount of aggregate remuneration that may be paid to Non-executive Directors in any year is capped at
a level approved by security holders. The current aggregate fee pool of $2,400,000 per year (inclusive of
superannuation contributions) was approved by security holders at the 2010 Annual General Meeting. No
change to this amount is proposed for the year ending 30 June 2014.
The aggregate fee pool and the manner in which it is apportioned amongst Non-executive Directors is
reviewed annually. The Remuneration and Human Resources Committee undertakes this review and makes
recommendations to the Board. In conducting the review, the Committee considers market benchmark data
from independent remuneration consultants.
Non-executive Director fees for the year ended 30 June 2013
A review of Non-executive Director fees was undertaken during the year ended 30 June 2013, and it was
decided that there would be no change to fees other than an increase in the annual fee for the Chair of the
Remuneration and Human Resources Committee by $5,000 to $30,000.
Base (Director) fees have not increased since 2010. Current base fees and Committee fees per year are set
out below:
Board
Audit and Risk Committee
Nomination Committee
Remuneration and Human Resources Committee
Chair fee $
455,000
Member fee $
170,000
40,000
10,000
30,000
20,000
10,000
20,000
The Chair of the Board does not receive any additional fees for Committee responsibilities. The Chair of
each Committee only receives the Chair fee (and not a member fee).
Non-executive Directors are permitted to be paid additional fees for special duties or exertions. No such fees
were paid during the year ended 30 June 2013. Non-executive Directors are also entitled to be reimbursed
for all business related expenses, including travel, as may be incurred in the discharge of their duties.
x
B
x
54
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Remuneration report
(continued)
Retirement benefits
No current Non-executive Directors are entitled to any retirement benefits. In September 2005, the Board
resolved to discontinue retirement benefits for Non-executive Directors from 30 September 2005. The value
of benefits accrued up to that date attracted interest at the statutory fringe benefits rate.
ShareLink Investment Tax Deferred Plan
Under the ShareLink Investment Tax Deferred Plan, Non-executive Directors are able to sacrifice up to 50
per cent of their pre tax fees to acquire up to $5,000 of Transurban securities each year. No securities were
issued to Non-executive Directors under the plan during the year ended 30 June 2013.
x
C
x
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Non-executive Director remuneration for the years ended 30 June 2013 and 30 June 2012 is set out below:
211,119
207,114
223,625
207,631
438,716
439,411
183,608
176,047
(appointed 12 April 2012)
181,229
34,225
Short-term benefits
Fees
Current Non-executive Directors
L Maxsted
2013
2012
N Chatfield
2013
2012
R Edgar
2013
2012
S Mostyn
2013
2012
C O'Reilly
2013
2012
R Slater
2013
2012
I Smith
2013
2012
Former Non-executive Directors
G Cosgriff
2013
2012
J Davis
2013
2012
R Officer
2013
2012
J Eve
2013
2012
J Keyes
2013
2012
Total
2013
2012
194,070
173,720
(appointed 1 January 2012)
155,967
77,983
-
69,903
(resigned 7 August 2012)
18,832
176,047
(resigned 5 January 2012)
-
48,256
(resigned 5 January 2012)
-
81,778
(resigned 6 December 2011)
(resigned 6 December 2011)
1,607,166
1,717,908
-
25,793
Post-employment benefits
Retirement
Superannuation1
benefits2,3
16,470
15,775
16,470
15,775
16,470
15,775
16,470
15,398
16,247
3,080
-
-
14,037
7,018
-
7,044
-
25,648
1,695
15,398
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
251,028
-
418,186
-
-
-
-
-
-
Total
455,186
455,186
240,095
223,406
227,589
222,889
200,078
191,445
197,476
37,305
194,070
173,720
170,004
85,001
-
339,850
-
513,737
20,527
191,445
-
48,256
-
25,793
97,859
120,911
-
669,214
1,705,025
2,508,0333
1 Superannuation contributions made on behalf of Non-executive Directors to satisfy the Groupʼs obligations under applicable
superannuation guarantee legislation.
2 Amounts represent accrued contractual retirement benefits paid in the year ended 30 June 2012 to two former Non-executive Directors
(Geoff Cosgriff and Jeremy Davis) upon their retirement from the Board on 6 December 2011. No current Non-executive Directors are
entitled to any retirement benefits.
3 Retirement benefits are excluded from the amount of aggregate remuneration that may be paid to Non-executive Directors in any year.
55
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
(continued)
Remuneration report
x
D
x
NON-EXECUTIVE DIRECTOR RELATED PARTY INFORMATION
Rodney Slater is a partner in the public policy practice group of Patton Boggs. Transurban used Patton
Boggs during the year ended 30 June 2013 for various lobbying activities in the USA. This relationship is
based on normal commercial terms. US$226,692 was paid to Patton Boggs during the year ended 30 June
2013.
Lindsay Maxsted is Chairman and a Non-executive Director of Westpac Banking Corporation. Westpac
provides transactional banking and loan facilities to Transurban. This relationship is based on normal
commercial terms.
Neil Chatfield is Chairman and a Non-executive Director of Seek Limited. Seek provides employment
advisory services to Transurban. This relationship is based on normal commercial terms.
Neil Chatfield is also Chairman of, and Samantha Mostyn is a Non-executive Director of, Virgin Australia
Holdings Limited. Transurban uses air travel services provided by Virgin Australia. This relationship is based
on normal commercial terms.
56
TRANSURBAN Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Non-audit services
The Company has an "External Auditor Independence" policy which is intended to support the independence of the
external auditor by regulating the provision of services by the external auditor. The external auditor will not be
engaged to perform any service that may impair or be perceived to impair the external auditor's judgement or
independence. The external auditor will only provide a permissible non-audit service where there is a compelling
reason for it to do so, and the aim is for the external auditor not to provide non-audit services at all. All non-audit
services must be pre-approved by the CFO (services less than $5,000) or the Chair of the Audit and Risk
Committee (in all other cases).
The Board has considered the position and, in accordance with advice received from the Audit and Risk Committee,
is 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:
•
•
the Audit and Risk Committee reviews the non-audit services 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 Group, acting as advocate for the Group or
jointly sharing economic risk and rewards.
During the year the following fees were paid or payable for audit and non-audit services provided by the auditor of
THL, its related practices and non-related audit firms:
Amounts received or due and receivable by PricewaterhouseCoopers
Audit and other assurance services:
Audit and review of financial reports
Other assurance services
Total remuneration for PricewaterhouseCoopers
Total auditors' remuneration
2013
$
2012
$
1,100,000
124,800
1,224,800
1,100,000
189,300
1,289,300
1,224,800
1,289,300
Indemnification and insurance
Each officer (including each Director) of the Group is indemnified, to the maximum extent permitted by law, against
any liabilities incurred as an officer of the Group pursuant to agreements with the Group. Each officer is also
indemnified against reasonable costs (whether legal or otherwise) incurred in relation to relevant proceedings in
which the officer is involved because the officer is or was an officer.
The Group has arranged to pay a premium for a Directors and officers liability insurance policy to indemnify
Directors and officers in accordance with the terms and conditions of the policy.
This policy is subject to a confidentiality clause which prohibits disclosure of the nature of the liability covered, the
name of the insurer, the limit of liability and the premium paid for this policy.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 59.
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the Directors' report. Amounts in the Directors' report have
been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the
nearest dollar.
57
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' report
30 June 2013
(continued)
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors.
Lindsay Maxsted
Director
Scott Charlton
Director
Melbourne
1 August 2013
58
TRANSURBAN 59
ANNUAL REPORT 2013 Transurban Holdings Limited
Annual report
-
30 June 2013
ABN
86 098 143 429
Contents
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
61
62
63
64
65
66
146
147
This financial report covers the Transurban Group which consists of Transurban Holdings Limited, Transurban
Holding Trust and Transurban International Limited and their controlled entities as described in Note 1 to the
Financial Statements. The financial report is presented in the Australian currency.
The equity securities of the parent entities are stapled and cannot be traded separately. Entities within the Group
are domiciled and incorporated in Australia and the United States of America. Transurban Holdings Limited's
registered office and principal place of business is:
Level 3
505 Little Collins Street
Melbourne
3000
VIC
The financial report was authorised for issue by the Directors on 1 August 2013. The Directors have the power to
amend and reissue the financial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete and available
globally. All releases to the ASX and the media, financial reports and other information are available on our
website: www.transurban.com
60
TRANSURBAN Revenue
Toll, fee and other road revenue
Construction revenue
Management, business development and other revenue
Road operating costs
Corporate costs
Business development costs
Construction costs
Profit before depreciation and amortisation, net finance costs, equity
accounted investments and income taxes
Depreciation and amortisation expense
Finance income
Finance costs
Net finance costs
Share of net losses of equity accounted investments
Profit / (loss) before income tax
Income tax benefit
Profit for the year
Profit is attributable to:
Ordinary equity holders of the stapled group
Non-controlling interests
Transurban Holdings Limited
Consolidated income statement
For the year ended 30 June 2013
Notes
2013
$'000
2012
$'000
3
4
5
9
6
886,639
265,799
42,640
1,195,078
(197,519)
(41,192)
(23,779)
(256,390)
(518,880)
846,196
286,258
22,030
1,154,484
(186,134)
(31,602)
(19,591)
(280,222)
(517,549)
676,198
636,935
(312,118)
108,031
(344,999)
(236,968)
(301,641)
157,030
(367,024)
(209,994)
(9,738)
(137,946)
117,374
(12,646)
57,167
174,541
171,706
2,835
174,541
71,204
58,558
54,905
3,653
58,558
Cents
Cents
Earnings per security attributable to ordinary equity holders of the
stapled group:
Basic earnings per stapled security
Diluted earnings per stapled security
32
32
11.7
11.7
3.8
3.8
The above
consolidated income statement
should be read in conjunction with the accompanying notes.
61
ANNUAL REPORT 2013 Transurban Holdings Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2013
Profit for the
year
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of cash flow hedges, net of tax
Exchange differences on translation of foreign operations, net of tax
Blank
Other comprehensive income for the
year,
net of tax
Total comprehensive income for the
year
Total comprehensive income for the
year
is attributable to:
Members of Transurban Holdings Limited
Non-controlling interests
2013
$'000
2012
$'000
174,541
58,558
64,013
(23,066)
(210,773)
12,980
40,947
(197,793)
215,488
(139,235)
256,184
(40,696)
215,488
119,618
(258,853)
(139,235)
consolidated statement of comprehensive income
should be read in conjunction with the accompanying
The above
notes.
62
TRANSURBAN ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Total current assets
Non-current assets
Equity accounted investments
Held to maturity investments
Derivative financial instruments
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Derivative financial instruments
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
(Accumulated losses)
Non-controlling interest - Transurban International Limited
Non-controlling interests
Total equity
Transurban Holdings Limited
Consolidated balance sheet
As at 30 June 2013
Notes
2013
$'000
2012
$'000
7
8
11
9
10
11
12
13
14
15
16
11
17
18
16
13
17
11
18
19
20
20
259,385
88,548
963
348,896
532,266
862,866
9,935
180,166
9,147
8,128,350
9,722,730
318,148
78,420
-
396,568
335,190
791,392
137
191,964
12,551
8,174,115
9,505,349
10,071,626
9,901,917
105,595
438,256
7,037
-
334,413
71,873
957,174
4,499,235
629,648
202,363
357,872
60,358
5,749,476
110,103
-
1,315
8,510
293,485
73,251
486,664
4,489,397
687,287
193,755
504,016
53,673
5,928,128
6,706,650
6,414,792
3,364,976
3,487,125
7,975,953
(104,137)
(4,469,457)
(183,559)
146,176
3,364,976
7,847,912
(138,340)
(4,232,045)
(148,505)
158,103
3,487,125
The above
consolidated balance sheet
should be read in conjunction with the accompanying notes.
63
ANNUAL REPORT 2013 Transurban Holdings Limited
Consolidated statement of changes in equity
For the year ended 30 June 2013
Attributable to members of
Transurban
Holdings Limited
Contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Notes
Total
$'000
Non-
controlling
interests
$'000
Total
equity
$'000
Balance at 1 July 2011
7,772,117
26,461
(4,085,426) 3,713,152
279,199
3,992,351
Comprehensive income
Profit (loss) for the year
Other comprehensive
income
Total comprehensive income
Transactions with owners in
their capacity as owners:
Treasury securities
Distribution reinvestment plan
Distributions provided for or paid
Distributions to non-controlling
interest
Changes in value of
share-based payment reserve
19
19
20
20
-
-
-
1,433
72,961
-
-
-
282,431
282,431
(223,873)
58,558
(162,813)
(162,813)
-
282,431
(162,813)
119,618
(34,980)
(258,853)
(197,793)
(139,235)
-
-
-
-
-
-
(429,203)
1,433
72,961
(429,203)
207
3,040
-
1,640
76,001
(429,203)
-
-
(13,610)
(13,610)
1,401
75,795
(1,988)
(1,988)
153
(429,050)
(434)
(355,243)
(385)
(10,748)
(819)
(365,991)
Balance at
30 June 2012
7,847,912 (138,340)
(4,232,045) 3,477,527
9,598
3,487,125
Balance at 1 July 2012
7,847,912 (138,340)
(4,232,045) 3,477,527
9,598
3,487,125
Comprehensive income
Profit (loss) for the year
Other comprehensive
income
Total comprehensive income
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs
Distribution reinvestment plan
Deferred short term incentives
issued
Distributions provided for or paid
Changes in value of
share-based payment reserve
Acquisition of non-controlling
interest
Distributions to non-controlling
interest
19
19
19
20
20
-
-
-
-
218,904
218,904
(44,363)
174,541
37,280
37,280
-
218,904
37,280
256,184
3,667
(40,696)
40,947
215,488
92,000
31,966
2,589
-
-
-
-
-
-
-
92,000
31,966
8,000
2,601
100,000
34,567
-
(456,316)
2,589
(456,316)
195
-
2,784
(456,316)
1,486
(2,086)
-
(991)
-
-
(600)
(82)
(682)
(991)
(2,241)
(3,232)
-
128,041
-
(3,077)
-
(456,316)
-
(331,352)
(14,758)
(6,285)
(14,758)
(337,637)
Balance at 30 June 2013
7,975,953 (104,137)
(4,469,457) 3,402,359
(37,383) 3,364,976
Non-controlling interests include Transurban International Limited and other non-controlling interests outside of the
Group.
consolidated statement of changes in equity
should be read in conjunction with the accompanying
The above
notes.
64
TRANSURBAN Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Payments for maintenance of intangible assets
Other revenue
Interest received
Interest paid
Income taxes paid
Net cash
from operating activities
inflow
Cash flows from investing activities
Payment for acquisition of non-controlling interest
Payments for held-to-maturity investments, net of fees
Payments for equity accounted investments
Payments for intangible assets
Payments for property, plant and equipment
Distributions received from equity accounted investments
Net cash
from investing activities
(outflow)
Cash flows from financing activities
Proceeds from issues of stapled securities
Proceeds from borrowings (net of costs)
Repayment of borrowings
Dividends and distributions paid to the Group's security holders
Distributions paid to non-controlling interests
Net cash (outflow) inflow from financing activities
Net
(decrease)
in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the
year
Transurban Holdings Limited
Consolidated statement of cash flows
For the year ended 30 June 2013
Notes
2013
$'000
2012
$'000
976,063
(353,210)
(9,573)
66,752
57,579
(314,110)
(12,166)
411,335
(3,232)
(22,495)
(207,844)
(234,536)
(17,486)
50,000
(435,593)
100,000
596,841
(312,000)
(410,848)
(9,860)
(35,867)
945,544
(340,656)
(27,731)
34,078
229,786
(421,841)
(45,937)
373,243
-
(6,975)
(18,271)
(262,306)
(41,832)
53,500
(275,884)
-
1,606,050
(1,445,870)
(336,549)
(14,891)
(191,260)
(60,125)
(93,901)
318,148
1,362
259,385
411,880
169
318,148
31
19
21
7
The above
consolidated statement of cash flows
should be read in conjunction with the accompanying notes.
65
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
Contents of the notes to the consolidated financial statements
Summary of significant accounting policies
Segment information
Revenue
Expenses
Net finance costs
Income tax benefit
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
Equity accounted investments
Non-current assets - Held to maturity investments
Derivative financial instruments
Non-current assets - Property, plant and equipment
Deferred tax assets and liabilities
Non-current assets - Intangible assets
Current liabilities - Trade and other payables
Borrowings
Provisions
Other liabilities
Contributed equity
Reserves and accumulated losses
Distributions
Remuneration of auditors
Contingencies
Intra-group Guarantees
Commitments
Related party transactions
Subsidiaries and transactions with non-controlling interests
Parent entity financial information
Deed of cross guarantee
Events occurring after the reporting period
Reconciliation of profit after income tax to net cash inflow from operating activities
Earnings per stapled security
Net tangible asset backing
Share-based payments
Key management personnel disclosures
Non-cash investing and financing activities
Critical accounting estimates and judgements
Financial risk management
Page
67
81
88
88
89
90
91
92
93
96
98
100
101
102
104
104
108
110
111
113
115
117
117
118
118
120
122
124
125
127
127
128
129
129
133
137
138
140
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
66
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues
Group Interpretations and the Corporations Act 2001.
The Transurban Group financial statements have been prepared as an aggregation of the financial statements of
Transurban Holdings Limited (THL) and controlled entities, Transurban International Limited (TIL) and controlled
entities and Transurban Holding Trust (THT) and controlled entities, as if all entities operate together. They are
therefore treated as a combined entity (hereon referred to as "the Group"), notwithstanding that none of the entities
controls any of the others. The principles of consolidation have been applied in order to present the aggregated
financial statements on a combined basis. THL has been deemed the parent of the Group.
The financial statements have been aggregated in recognition of the fact that the securities issued by THL, THT
and TIL are stapled together and comprise one share in THL, one unit in THT and one share in TIL (Stapled
Security). None of the components of the Stapled Security can be traded separately.
The Group’s current liabilities exceed its current assets by $608.3 million as at 30 June 2013. The financial report
has been prepared on a going concern basis, which contemplates the continuity of normal operations, as the
Group is trading profitably and has continually been able to refinance maturing debt. In addition, at 30 June 2013
the Group has available a total of $217.9 million of undrawn borrowing facilities.
Compliance with IFRS
The consolidated financial statements of Transurban Holdings Limited also comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
Early adoption of standards
The Group has not elected to adopt any new accounting standard early.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation
of other financial assets and liabilities (including derivative financial instruments).
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in
certain cases, to the nearest dollar.
(b) Principles of consolidation
Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are considered when assessing whether the
Group controls another entity.
Subsidiaries are fully consolidated from the date on which control
de-consolidated from the date that control ceases.
is transferred to the Group. They are
67
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(b)
Principles of consolidation
(continued)
(continued)
Subsidiaries
The aggregated financial statements incorporate an elimination of inter-entity transactions and balances and other
adjustments necessary to present the financial statements on a combined basis. The accounting policies adopted
in preparing the financial statements have been consistently applied by the individual entities comprising the Group
except as otherwise indicated.
The acquisition method of accounting is used to account for business combinations by the Group (refer to note
1(h)).
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement, statement of comprehensive income, balance sheet and statement of changes in equity respectively.
Associates and joint ventures
Associates are all entities over which the Group has significant influence but not control. Interests in joint ventures
are where the Group jointly controls an entity with another party (refer to note 9).
Investments in associates and joint ventures are accounted for using the equity method of accounting, after initially
being recognised at cost.
The Group's share of its associates' and joint ventures' post-acquisition profits or losses is recognised in the
income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the
Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint
venture, the Group does not recognise further losses. Dividends received from associates and joint ventures
reduce the carrying amount of the investment.
Application of UIG 1013 Pre-date of Transition Stapling Arrangements and AASB Interpretation 1002 Post-date of
Transition Stapling Arrangements
For the purpose of UIG 1013 and AASB Interpretation 1002, THL was identified as the parent entity in relation to
the pre-date of transition stapling with THT and the post-date of transition stapling with TIL. In accordance with UIG
1013 the results and equity of THL and THT have been combined in the financial statements. AASB Interpretation
1002 however requires the results and equity of TIL to be treated and disclosed as non-controlling interest.
Changes in ownership interest
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions
with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying
amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any
difference between the amount of
to non-controlling interests and any consideration paid or
received is recognised in a separate reserve within equity.
the adjustment
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive
Officer (the chief operating decision maker) and the Executive Committee, who report to the Chief Executive Officer
(CEO).
(d) Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Transurban Holdings Limited's
functional and presentation currency.
68
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(d)
Foreign currency translation
(continued)
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 year end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the consolidated income statement, except when they are deferred in equity as
qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in
a foreign operation.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates
at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value
are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and
liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair
value gain or
loss and translation differences on non-monetary assets such as equities classified as
available-for-sale financial assets are recognised in the fair value reserve in equity.
Foreign operations
The results and financial position of all of the
presentation currency are translated into the presentation currency as follows:
Group
entities that have a functional currency different from the
•
•
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
income and expenses for each income statement are translated at average exchange rates (unless this is
not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings and other financial instruments designated as hedges of such investments, are taken to shareholders'
equity.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable.
Revenue is recognised for the major business activities as follows:
•
•
•
•
Toll and fee revenue - Toll charges and related fees are recognised when the charge is incurred by the
user.
Business development revenue - Business development revenue is recognised when earned, and to
the extent of costs incurred and that these costs will be recovered.
Interest income - Interest income is recognised using the effective interest rate method.
Construction revenue - During the construction phase of service concession infrastructure assets, the
Group records an intangible asset representing the right to charge users of the infrastructure and
recognises revenue from the construction of the infrastructure. Revenue and expenses associated with
construction contracts are recognised in accordance with the percentage of completion method.
(f)
Income tax
The income tax expense or benefit for the period is the tax payable or benefit on the current period's taxable
income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to unused tax losses.
69
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(f)
Income tax
(continued)
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
the reporting period in the countries where the Company operates and generates taxable income.
end of
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. 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 the transaction affects neither accounting nor taxable profit or
loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted
by the reporting 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 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.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in foreign operations where the Company is able to control the timing of the reversal of
the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
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. Current tax assets and tax
liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in the income statement, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
Investment allowances
Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets
(investment allowances). The Group accounts for such allowances as tax credits, which means that the allowance
reduces income tax payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits
that are carried forward as tax losses.
Tax consolidation legislation
The Transurban Group has adopted the tax consolidation legislation for Transurban Holdings Limited and its
wholly-owned Australian entities as of 1 July 2005.
All entities within the tax consolidated group continue to account for their own current and deferred tax amounts.
These tax amounts are measured as if each entity in the tax consolidation group is a separate taxpayer within the
tax consolidated group.
(g) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as
lessee are classified as operating leases (note 25). Payments made under operating leases (net of any incentives
received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period
of the lease.
Lease incentives are recognised as a reduction of the rental expense over the lease term on a straight line basis.
70
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(h) Business combinations
the assets transferred,
for all business combinations,
The acquisition method of accounting is used to account
including business
combinations involving entities or businesses 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 liabilities incurred and the equity interests issued by the Group. 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 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. On an acquisition-by-acquisition
basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling
interest's proportionate share of the acquiree's net identifiable assets.
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 Group's share of
the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net
identifiable assets of
the subsidiary acquired and the measurement of all amounts has been reviewed, the
difference is recognised directly in income statement as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to
their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an independent financier under comparable
terms and conditions.
Contingent consideration is classified either as equity or a financial
liability are subsequently remeasured to fair value with changes in fair value recognised in the income statement.
liability. Amounts classified as a financial
(i)
Impairment of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where
an indicator of impairment exists, the Group makes an estimate of the recoverable amount. Where the carrying
amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its
recoverable amount through the income statement. The decrement in the carrying amount is recognised as an
expense in the income statement in the reporting period in which the impairment occurs.
Recoverable amount is the greater of fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
(j) Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes
cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in
current liabilities.
(k)
Investments and other financial assets
Classification
71
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(k)
Investments and other financial assets
(continued)
The Group classifies its investments and other financial assets in the following categories: financial assets at fair
value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial
assets. The classification depends on the purpose for which the investments and other financial assets were
acquired. The classification of
initial
recognition and, in the case of assets classified as held-to-maturity, is re-evaluated at the end of each reporting
period.
the Group's investments and other financial assets are determined at
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held-for-trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are
classified as held-for-trading unless they are designated as hedges. Assets in this category are classified as
current assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are included in current assets, except for those with maturities greater than 12 months
after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and
other receivables (note 8) in the consolidated balance sheet.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less allowance for impairment. Trade receivables are due for settlement no more than 30
days from revenue recognition.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are
written off by reducing the carrying amount directly. An impairment allowance account (provision for impairment of
trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts
due according to the original terms of the receivables. The amount of the impairment allowance is the difference
between the asset’s carrying amount and the present value of estimated future cash flows. The amount of the
impairment allowance is recognised in the income statement.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group's management has the positive intention and ability to hold to maturity. If the Group were
to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted
and reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except
for those with maturities less than 12 months from the reporting date, which are classified as current assets.
Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are
either designated in this category or not classified in any of the other categories. They are included in non-current
assets unless the investment matures or management intends to dispose of the investment within 12 months of the
end of the reporting period.
Recognition and derecognition
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair
value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair
value and transaction costs are expensed in the income statements. Financial assets are derecognised when the
rights to receive cash flows from the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in
other comprehensive income are reclassified to profit or loss as gains and losses from investment securities.
Subsequent measurement
72
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(k)
Investments and other financial assets
(continued)
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest
method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried
at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit
or loss' category are presented in the income statements within other income or other expenses in the period in
which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the
income statements as part of revenue from continuing operations when the Group's right to receive payments is
established.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset
or a group of financial assets is impaired.
In the case of equity securities classified as available-for-sale, a
significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the
securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss -
measured as the difference between the acquisition cost and the current fair value, less any impairment loss on
that financial asset previously recognised in the income statement - is reclassified from equity and recognised in
the income statement as a reclassification adjustment. Impairment losses recognised in the income statement on
equity instruments classified as available-for-sale are not reversed through the income statement.
(l) Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent
changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged. The
designates certain derivatives as either:
Group
•
•
•
hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges);
hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly
probable forecast transactions (cash flow hedges); or
hedges of a net investment in a foreign operation (net investment hedges).
At the inception of the hedging transaction the Group documents the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.
The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting
changes in fair values or cash flows of hedged items.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 11.
Movements in the hedging reserve in shareholders' equity are shown in note 20. The full fair value of a hedging
derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more
than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less
than 12 months. The treatment of derivatives is as follows:
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the
income statements, together with any changes in the fair value of the hedged asset or liability that are attributable
to the hedged risk. The gain or loss relating to the effective portion of interest rate swaps and cross currency swaps
hedging fixed rate borrowings is recognised in the income statements within finance costs, together with changes
in the fair value of the hedged fixed rate borrowings attributable to interest rate risk. The gain or loss relating to the
ineffective portion is recognised in the income statement.
73
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(l)
Derivatives and hedging activities
(continued)
(continued)
Fair value hedges
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged
item for which the effective interest method is used is amortised to profit or loss over the period to maturity using a
recalculated effective interest rate.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognised in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to
the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are reclassified to the income statement in the periods when the hedged item
affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate
borrowings is recognised in the income statement.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in the income statements. When a forecast transaction is no
longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the
income statement.
Net investment hedges
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other
comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement.
Gains and losses accumulated in equity are included in the income statement when the foreign operation is
partially disposed of or sold.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognised immediately in the income statement.
(m) Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Costs incurred on development projects
(including computer software and hardware) are recognised as an asset when it is probable that the project will,
after considering its commercial and technical feasibility, be completed and generate future economic benefits and
its costs can be reliably measured. The expenditure capitalised comprises all directly attributable costs, including
costs of materials, services, direct labour and an appropriate proportion of overheads.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of
the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is
derecognised when replaced. All other repairs and maintenance are charged to the income statements during the
reporting period in which they are incurred.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in
the income statement.
74
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(m)
Property, plant and equipment
(continued)
Depreciation
Depreciation is calculated on a straight line basis so as to write off the net cost of items of plant and equipment
over their expected useful
lives will be made annually for all assets. The
expected useful lives are 3 - 15 years.
lives. Estimates of remaining useful
Impairment
Fixed assets are assessed for impairment in line with the policy stated in note 1(i).
(n)
Intangible assets
Concession Assets
Concession Assets represent
the Group's rights to operate roads under Service Concession Arrangements.
Concession Assets constructed by the Group are recorded at the fair value of consideration received or receivable
for the construction services delivered. Concession Assets acquired by the Group are recorded at the fair value of
the assets at the date of acquisition. All Concession Assets are classified as intangible assets and are amortised
over the term of the right to operate the asset on a straight line basis. For details of concession agreement dates
refer to note 14.
Where work is in progress, it is classified as assets under construction.
Goodwill
Goodwill is measured as described in note
assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised.
Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on
the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill on acquisitions of businesses is included in intangible
1(h).
Goodwill is allocated to the relevant cash-generating units for the purpose of impairment testing.
(o) Financial liabilities
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year
which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
Concession and promissory notes
The Group has non-interest bearing long term debt, represented by Concession and Promissory Notes, payable to
the government, measured at the net present value of expected future payments.
(p) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in the consolidated income statement over the period of the borrowings using the effective
interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to
the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until
the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the
facility to which it relates.
Borrowings are removed from the balance sheets when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished
or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities
assumed, is recognised in the income statement as finance income or finance costs.
75
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(p)
Borrowings
(continued)
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
(q) Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred, except to the extent to which
they relate to the construction of qualifying assets in which case specifically identifiable borrowing costs are
capitalised into the cost of the asset. Borrowing costs include interest on short-term and long-term borrowings.
Costs incurred in connection with the arrangement of borrowings are deferred and amortised over the effective
period of the funding.
(r) Provisions
Provisions are recognised when the Group has 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 obligation and the amount has been reliably
estimated. Provisions are not recognised for future operating losses.
Provisions are discounted to 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
reflects current market assessments of the time value of money and the risks specific to the liability. The increase
in the provision due to the discount unwinding over the passage of time is recognised as a finance cost.
Provision for maintenance
As part of its obligations under the service concession arrangements, the Group assumes responsibility for the
maintenance and repair of installations of the publicly-owned roads it operates. A provision for maintenance has
been raised where the Group has a present legal or constructive obligation to maintain and replace components of
the underlying physical assets operated by the Group as a result of past events. The Group's obligations under the
respective concession deeds arise as a consequence of use of the road during the operating phase. The provision
is measured at the present value of management's best estimate of the expenditure required to settle the present
obligation at the reporting date. Provisions giving rise to a cash outflow after more than one year are discounted to
present value if the impact is material. The increase in the provision due to the discount unwinding over the
passage of time is recognised as a finance cost.
Provision for distribution
Provision is made for the amount of any distribution declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting
period.
(s) Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and short-term incentives, and
long service leave expected to be settled within 12 months after the end of the period, are recognised in respect of
employees' services up to the reporting date. They are measured at the amounts expected to be paid when the
liabilities are settled. The liability for annual leave and short-term incentives, and long service leave expected to be
settled within 12 months of the reporting date is recognised in the provision for employee benefits. All other
short-term employee benefit obligations are presented as payables. An expense for non-accumulating sick leave is
recognised when the leave is taken and measured at the rates paid or payable.
76
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(s)
Employee benefits
(continued)
Long-term employee benefit obligations
The liability for long service leave which is not expected to be settled within 12 months after the end of the period is
recognised in the provision for employee benefits. It is measured as the present value of expected future payments
to be made in respect of services provided by employees up to the reporting date. Consideration is given to
expected future wage and salary levels, experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the reporting date on national government bonds with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Equity-based compensation benefits
Equity-based compensation benefits have been provided to some employees.
The fair value of units granted under the plans are recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured at grant date and recognised over the period during
which the employees become unconditionally entitled to the units.
The fair value of units granted under cash settled share-based compensation plans is recognised as an expense
over the vesting period with a corresponding increase in liabilities. The fair value of the liability is remeasured at
each reporting date with any changes in fair value recognised in the income statement for the period.
The fair value is independently determined using a Black-Scholes option pricing model that takes into account the
exercise price, the term, the impact of dilution, the security price at grant date and expected price volatility of the
underlying security, the expected dividend yield and the risk free interest rate for the term of the plan.
The fair value granted is adjusted to reflect the market vesting conditions, but excludes the impact of any
non-market vesting conditions (for example, profitability and growth targets). Non-market vesting conditions are
included in assumptions about the number of units that are expected to become exercisable. At each reporting
date, the Group revises its estimate of the number of units that are expected become exercisable. The employee
benefit expense recognised each reporting period takes into account the most recent estimate. The impact of the
revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to
equity.
Superannuation
Superannuation is contributed to plans as nominated by the employee. The contribution is not less than the
statutory minimum. The superannuation plans are all accumulation funds.
The cost of current and deferred employee compensation and contributions to employee superannuation plans
were charged to the income statement.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits
when it is demonstrably committed to either terminating the employment of current employees according to a
detailed formal plan without possibility of withdrawal or to providing termination benefits as a result of an offer made
to encourage voluntary redundancy.
(t) Contributed equity
Stapled securities are classified as equity.
Incremental costs directly attributable to the issue of new stapled securities are shown in equity as a deduction, net
of tax, from the proceeds.
77
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(t)
Contributed equity
(continued)
If the Group reacquires its own securities, those securities are deducted from equity. No gain or loss is recognised
in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income
taxes) is recognised directly in equity.
(u) Parent entity financial information
The financial
prepared on the same basis as the consolidated financial statements, except as set out below.
information for the parent entity, Transurban Holdings Limited, disclosed in note 28 has been
Investments in subsidiaries and associates
Investments in subsidiaries and associates are accounted for at cost in the financial statements of Transurban
Holdings Limited. Dividends received from associates are recognised in the parent entity's profit or loss, rather than
being deducted from the carrying amount of these investments.
Tax consolidation legislation
Transurban Holdings Limited and its wholly-owned Australian controlled entities have implemented the tax
consolidation legislation effective 1 July 2005.
The head entity, Transurban Holdings Limited, 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 is a separate taxpayer within the tax consolidated group.
In addition to its own current and deferred tax amounts, Transurban Holdings Limited 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.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the 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.
(v) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is
not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(w) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2013 reporting periods. The Group's assessment of the impact of these new standards and interpretations is set
out below.
78
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(w)
New accounting standards and interpretations
(continued)
(i)
AASB 9
AASB 9
(December 2010)
Financial
and AASB 2010-7
Instruments,
(effective from 1 January 2015)
AASB 2009-11
Amendments to Australian Accounting Standards arising from
Amendments to Australian Accounting Standards arising from AASB 9
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets
and financial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption.
Management are in the process of assessing the impact on financial assets but do not believe this will be
significant.
There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not
have any such liabilities. The Group has not yet decided when to adopt AASB 9.
(ii)
Entities,
Ventures,
Consolidated Financial
revised AASB 127
AASB 2011-7
AASB 10
Other
Joint
and Joint Arrangements Standards
Transition Guidance and Other Amendments
and
Statements,
Separate Financial
AASB 11
Joint
Statements,
Arrangements,
AASB 128
AASB 12
Investments in Associates and
Disclosure of Interests in
Amendments to Australian Accounting Standards arising from the Consolidation
AASB 2012-10 Amendments to Australian Accounting Standards -
(effective 1 January 2013)
In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for
joint arrangements, consolidated financial statements and associated disclosures.
AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate
Financial Statements, and Interpretation 112 Consolidation - Special Purpose Entities. The core principle that a
consolidated entity presents a parent and its subsidiaries as if
they are a single economic entity remains
unchanged, as do the mechanics of consolidation. However the standard introduces a single definition of control
that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns
is present. Power is the current ability to direct the activities that significantly influence returns.
before control
Returns must vary and can be positive, negative or both. Management have assessed the impact of AASB10 and
do not believe it changes our assessment of control over any entities where the Group has an equity interest.
AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer on
the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the
joint arrangement. AASB 11 also provides guidance for parties that participate in joint arrangements but do not
share joint control. This will not impact how the Group currently accounts for joint arrangements.
AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB
11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of this
standard by the Group will not affect any of the amounts recognised in the financial statements, but will impact the
type of information disclosed in relation to the Group's investments.
Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not
remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice
versa. The amendments also introduce a 'partial disposal' concept. The Group is still assessing the impact of these
amendments.
The Group does not expect to adopt the new standards before their operative date.
79
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(w)
New accounting standards and interpretations
(continued)
(iii)
AASB 13
from AASB 13
(effective 1 January 2013)
Fair Value Measurement
and AASB 2011-8
Amendments to Australian Accounting Standards
arising
AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value
disclosures. Current measurement techniques will change as a result of new guidance. The impact of the new
rules on any of the amounts recognised in the financial statements is not expected to be material. Application of
the new standard will
information disclosed in the notes to the consolidated financial
the type of
statements. The Group intends to adopt the new standard from 1 July 2013.
impact
(iv)
AASB 2011-4
Personnel Disclosure Requirements
(effective 1 July 2013)
Amendments to Australian Accounting Standards to Remove Individual Key Management
(KMP) disclosure
In July 2011 the AASB decided to remove the individual key management personnel
requirements from AASB 124 Related Party Disclosures, to achieve consistency with the international equivalent
standard and remove a duplication of the requirements with the Corporations Act 2001. While this will reduce the
disclosures that are currently required in the notes to the financial statements, it will not affect any of the amounts
recognised in the financial statements. The amendments apply from 1 July 2013 and cannot be adopted early. The
Corporations Act requirements in relation to remuneration reports will remain unchanged for now, but these
requirements are currently subject to review and may also be revised in the near future.
(v)
IAS 36
Amendments to IAS 36 Impairment of Assets
(effective 1 January 2014)
The IASB has made small changes to some of the disclosures that are required under IAS 36 Impairment of
Assets. These may result in additional disclosures if the group recognises an impairment loss or the reversal of an
impairment loss during the period. They will not affect any of the amounts recognised in the financial statements.
The Group intends to apply the amendment from 1 July 2014.
80
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2 Segment information
Description of segments
It has been determined that the operating segments based on information provided to the CEO and Executive
Committee is by geographical region, being Victoria and New South Wales in Australia and the USA.
The Group operates in one business sector only, being the development, operation and maintenance of toll roads.
The CEO and Executive Committee therefore consider the business from the perspective of locations.
The following assets are included in the operating segments:
Segment
Victoria, Australia
Assets
CityLink
New South Wales, Australia
Hills M2 Motorway
USA
Lane Cove Tunnel
75.1 per cent interest in the M1 Eastern Distributor
Equity investments in the M5 Motorway (50.0 per cent) and Westlink M7 (50.0
per cent)
75.0 per cent interest in Transurban DRIVe. Transurban DRIVe holds 100.0 per
cent of Pocahontas 895, 90.0 per cent of 495 Express Lanes and 90.0 per cent
of 95 Express Lanes
The tolling businesses of Roam and Tollaust have also been included in the NSW operating segment as they are
managed together with each of the assets and contribute tolling services to all NSW assets.
The Group's corporate function is not an operating segment under the requirements of AASB 8 as its revenue
generating activities are only incidental to the business. Management have aggregated and disclosed the corporate
business units as the contribution to the business is closely monitored.
The operating segments have been further broken down by asset to assist with external analysis of the financial
statements.
Segment information - Proportional Income Statement
The CEO and Executive Committee assesses the performance of the operating segments based on a measure of
underlying proportional EBITDA. EBITDA excludes the impact of interest income and expense which have been
presented by segment where applicable. Interest income and expense are allocated across segments where the
charges are related specifically to the assets. Otherwise they have been allocated to the Corporate function.
information provided to the Executive Committee is presented on a proportional basis. The
The segment
information for the reportable segments for the year ended 30 June 2013 and 30 June 2012 is detailed in the
following tables.
81
ANNUAL REPORT 2013 )
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83
ANNUAL REPORT 2013
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2
Segment information
(continued)
Other segment information - Proportional income statement
Proportional basis of presenting results
The CEO and the Executive Committee receive information for assessing the business on an underlying
proportional basis reflecting the contribution of individual assets in the proportion of Transurban's equity ownership.
The Group's proportional EBITDA result reflects business performance and permits a more appropriate and
meaningful analysis of the Group's underlying performance on a comparative basis. This method of presentation
differs from the statutory accounting format and has been reconciled below.
EBITDA is earnings before interest, taxation, depreciation and amortisation.
Segment revenue
Revenue from external customers is through toll and fee revenues earned on toll
inter-segment revenues.
roads. There are no
Segment revenue reconciles to total statutory revenue as follows:
Total segment revenue (proportional)
Add: Revenue attributable to non-controlling interest
Less: Revenue of non-controlled assets
Construction revenue recognised in accordance with AASB-I 12 Service
Concession Arrangements
Business development revenue (offset against business development costs for
proportional result)
Other
Total revenue
(note
3)
2013
$'000
2012
$'000
1,125,490
1,047,180
25,184
(224,882)
25,022
(208,737)
234,615
265,535
30,031
4,640
1,195,078
19,550
5,934
1,154,484
Interest revenue
Interest revenue is earned through bank interest revenue and held to maturity investment interest income.
Interest revenue reconciles to total statutory finance income as follows:
Total segment interest revenue (proportional)
Add: Interest revenue attributable to non-controlling interest
Less: Interest revenue of non-controlled assets
Total statutory finance income (note 5)
2013
$'000
2012
$'000
111,035
148,471
138
(3,142)
108,031
13,207
(4,648)
157,030
84
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2
Segment information
(continued)
Other segment information - Proportional income statement
(continued)
Reconciliation of proportional EBITDA to statutory profit for the year
Proportional EBITDA reconciles to statutory net profit as follows:
Proportional EBITDA
Add: Proportional EBITDA attributable to non-controlling interest
Less: Proportional EBITDA of M5
Less: Proportional EBITDA of M7
Less: Proportional EBITDA of Pocahontas
Less: Proportional EBITDA of 495 Express Lanes
Less: Proportional EBITDA of Other Transurban DRIVe
Statutory profit before depreciation and amortisation, net finance costs,
equity accounted investments and tax
Statutory net finance costs
Statutory depreciation and amortisation
Share of net losses of equity accounted investments
Income tax benefit
Profit for the year
2013
$'000
2012
$'000
827,997
783,984
17,815
(87,828)
(84,775)
(6,836)
5,441
4,384
16,909
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676,198
636,935
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(312,118)
(9,738)
57,167
174,541
(209,994)
(301,641)
(137,946)
71,204
58,558
85
ANNUAL REPORT 2013 l
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87
ANNUAL REPORT 2013
3 Revenue
Toll revenue
Fee revenue
Other road revenue
Total toll, fee and other road revenue
Construction revenue
Management and business development revenue
Other revenue
Total business development and other revenue
Total revenue
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
Notes
3(a)
3(a)
3(b)
3(c)
3(d)
2013
$'000
2012
$'000
801,172
66,803
18,664
886,639
765,431
61,782
18,983
846,196
265,799
286,258
39,828
2,812
42,640
19,550
2,480
22,030
1,195,078
1,154,484
Toll and fee revenue
(a)
Toll revenue and associated fees are recognised when the charge is incurred by the user.
Other road revenue
(b)
Other road revenue includes advertising, rental and other associated revenue.
Construction revenue
(c)
Construction revenue is recognised during the construction phase of an intangible asset, and the development of
assets for sale to third parties.
Management and business development revenue
(d)
Management and business development revenue relates to the provision of management and development
services to related and third parties.
4 Expenses
Profit before income tax includes the following specific
expenses:
Provision for impairment of trade receivables recognised during the year
Rental expenses relating to operating leases
Employee benefit expense
Defined contribution superannuation expense
Share based payment expense
Provision for maintenance recognised during the year
2013
$'000
2012
$'000
705
3,689
90,662
4,335
6,627
21,930
829
4,157
86,035
4,229
3,131
18,945
88
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
4
Expenses
(continued)
Concession fees (road operating cost) are attributable to:
Hills M2 Motorway
M1 Eastern Distributor
Depreciation and amortisation expense
Road operating cost
Corporate cost
5 Net finance costs
Finance income
Interest income on infrastructure bonds
Interest income on held to maturity investments
Interest income on bank deposits
Total finance income
*
Finance costs
Interest and finance charges paid/payable
Interest charges paid/payable on infrastructure bonds *
Unwind of discount on liabilities
Net foreign exchange losses
Total finance costs
Net finance costs
(*) - The M1 Eastern Distributor infrastructure bonds matured in August 2011.
2013
$'000
2012
$'000
1,676
1,728
3,404
289,739
22,379
312,118
1,476
1,722
3,198
287,073
14,568
301,641
2013
$'000
2012
$'000
-
98,229
9,802
108,031
(327,618)
-
(17,307)
(74)
(344,999)
50,129
91,341
15,560
157,030
(338,286)
(16,757)
(11,911)
(70)
(367,024)
(236,968)
(209,994)
89
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2013
$'000
2012
$'000
1,576
(61,442)
2,699
(57,167)
(34,193)
(27,249)
(61,442)
54,793
(111,748)
(14,249)
(71,204)
(49,544)
(62,204)
(111,748)
2013
$'000
2012
$'000
117,374
-
35,212
(115,481)
6,285
7,335
2,921
3,862
(59,866)
2,699
(57,167)
(12,646)
-
(3,794)
(102,688)
6,349
8,837
41,383
(7,042)
(56,955)
(14,249)
(71,204)
(60,207)
83,850
5,936
1,386
7,322
(43,823)
192
(43,631)
6 Income tax benefit
Income tax benefit
Current tax
Deferred tax
Under (over) provision in prior years
Deferred income tax benefit included in income tax benefit comprises:
(Increase) decrease in deferred tax assets
(Decrease) increase in deferred tax liabilities
(note 13)
(note 13)
Numerical reconciliation of income tax benefit to prima facie tax payable
Profit (loss) before income tax benefit
Tax at the Australian tax rate of 30.0% (2012 - 30.0%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Trust income not subject to tax
Accounting depreciation on non tax depreciable assets
Non-deductible interest
Equity accounted results
Sundry items
Under (over) provision in prior years
Income tax benefit
Tax expense (income) relating to items of other comprehensive income
Cash flow hedges (note 20)
Foreign currency translation (note 20)
90
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
6
Income tax benefit
(continued)
Tax consolidation legislation
The Transurban Group elected to implement tax consolidation legislation for Transurban Holdings Limited and its
wholly owned Australian entities with effect from 1 July 2005. The accounting policy in relation to this legislation is
set out in note 1(f).
The entities in the Transurban Holdings Limited tax consolidated group entered into a tax sharing agreement (TSA)
effective from 29 April 2009. The TSA, in the opinion of the Directors, limits the joint and several liability of the
wholly-owned entities in the case of a default by the head entity, Transurban Holdings Limited (THL).
The entities in the Transurban Holdings Limited tax consolidated group have also entered into a tax funding
agreement (TFA) effective from 1 July 2008. Under the TFA the wholly-owned entities fully compensate THL for
any current tax payable assumed and are compensated by THL for any current tax receivable and deferred tax
assets relating to tax losses. The funding amounts are determined by reference to the amounts recognised in the
wholly-owned entities financial statements.
The amount receivable/payable under the TFA are calculated as soon as practicable after the end of the financial
year for each wholly-owned entity. THL communicates the funding amount to each wholly-owned entity along with
the method of calculation and any other information deemed necessary.
7 Current assets - Cash and cash equivalents
Cash at bank and in hand
All cash balances are interest bearing.
Funds not for general use
2013
$'000
2012
$'000
259,385
259,385
318,148
318,148
The amount shown in Cash at Bank includes $66.2 million not available for general use at 30 June 2013 (2012:
$68.0 million). This comprises amounts required to be held under maintenance and funding reserves, and prepaid
tolls, which are restricted from general use.
91
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
8 Current assets - Trade and other receivables
Trade receivables
Provision for impairment of receivables
Other receivables
Prepayments
2013
$'000
2012
$'000
37,244
(791)
36,453
45,150
6,945
88,548
36,440
(973)
35,467
37,103
5,850
78,420
Provision for impaired trade and other receivables
As at 30 June 2013 current trade receivables of the Group with a nominal value of $791,000 (2012: $973,000) were
considered impaired and accordingly the Group held a provision for impairment of $791,000 (2012: $973,000). As
at 30 June 2013, trade receivables of $6,747,000 (2012: $9,783,000) were past due but not impaired.
The ageing of these receivables is as follows:
For the year ended 30 June 2013
Trade and other receivables
Current (not past due)
less than 30 days overdue
more than 30 but less than 60 days overdue
more than 60 but less than 90 days overdue
more than 90 days overdue
For the year ended 30 June 2012
Trade and other receivables
Current (not past due)
less than 30 days overdue
more than 30 but less than 60 days overdue
more than 60 but less than 90 days overdue
more than 90 days overdue
Not Impaired
$'000
Impaired
$'000
Allowance for
Doubtful
Debts
$'000
29,706
5,247
468
77
955
36,453
Not Impaired
$'000
Impaired
$'000
25,684
9,194
491
88
10
35,467
373
32
51
30
305
791
265
66
50
54
538
973
373
32
51
30
305
791
Allowance for
Doubtful
Debts
$'000
265
66
50
54
538
973
The other classes within trade and other receivables do not contain impaired assets and are not past due. Based
on the credit history of these other classes, it is expected that these amounts will be received when due. The Group
does not hold any collateral in relation to these receivables.
Movements in the provision for impairment of receivables are as follows:
92
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
8
Current assets - Trade and other receivables
(continued)
Provision for impaired trade and other receivables
(continued)
At 1 July
Provision for impairment recognised during the year
Receivables written off during the year as uncollectable
Unused amounts reversed
At
30 June
2013
$'000
2012
$'000
973
705
(930)
43
791
1,185
829
(1,041)
-
973
Amounts charged to the provision are generally written off when there is no expectation of recovering additional
cash.
When customers travel on a road without a prior arrangement in place, they are issued with an invoice. If this
invoice is outstanding for a period of time it is sent to a government enforcement authority and the customers are
issued an external fine. These authorities use the full extent of the law to recover the amounts and then pass on an
amount collected back to the Group. This is recognised in ‘other revenue’.
9 Equity accounted investments
Name of company
Westlink M7:
WSO Co Pty Limited
Westlink Motorway Limited
WSO Finance Pty Limited
Westlink Motorway Partnership
Interlink Roads Pty Ltd (M5 Motorway)
Transurban DRIVe Holdings LLC (Transurban
DRIVe)
Ownership interest
2012
2013
%
%
Carrying amounts
2012
2013
$'000
$'000
50
50
50
50
50
75
325
50
50
50
50
50
-
-
-
-
-
-
-
-
303,639
335,190
75
325
228,627
532,266
-
335,190
93
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
9
Equity accounted investments
(continued)
Summarised financial information of equity accounted investments
Westlink M7
M5 Motorway
Transurban DRIVe
Total
2013
$'000
2012
$'000
2013
$'000
2012
$'000
2013
$'000
2012
$'000
2013
$'000
2012
$'000
Group's share of assets
Current assets
Non-current assets
Held for sale assets
41,182
927,900
-
969,082
47,130
17,002
947,226 664,066
-
994,356 681,068
-
106,956 326,247
14,612 268,063
168,698
639,482 1,438,341 1,237,305 3,030,307 2,824,013
-
654,094 1,983,543 1,344,261 3,633,693 2,992,711
- 277,139
- 277,139
Group's share of liabilities
Current liabilities
Non-current liabilities
Held for sale liabilities
14,899
12,573
41,176
1,555,660 1,505,536 336,253
-
1,568,233 1,520,435 377,429
-
-
58,773
31,569 112,522
36,577
83,045
282,327 1,321,604 1,343,392 3,213,517 3,131,255
-
318,904 1,788,648 1,374,961 3,734,310 3,214,300
- 408,271
- 408,271
Group's share of profit and loss
Revenue
Expenses
Net (loss) before tax
Tax benefit (expense)
Net profit (loss)
Space
Movement in carrying
amounts
Carrying amount 1 July
Investments in associates
and joint ventures
Share of recognised profits
/ (losses ) after tax
Distributions received
Movement in exchange
rate
Movement in reserves
Carrying amount at 30
June
106,548
(199,970)
(93,422)
12,711
(80,711)
-
101,548 100,820
(61,250)
39,570
(21,121)
18,449
-
(192,705)
(91,157)
20,071
(71,086)
-
96,334
(76,930)
19,404
(14,654)
4,750
-
17,514
(75,223)
(57,709)
29,522
(28,187)
-
10,855 224,882
(352,442) (336,443)
(341,587) (111,561)
21,112
(90,449)
-
82,932
(258,655)
-
208,737
(622,077)
(413,340)
88,349
(324,991)
-
-
-
-
-
-
-
-
- 335,190
383,890
-
140,944 335,190
524,834
-
-
-
-
-
-
50 205,616
17,586 205,616
17,636
18,449
(50,000)
4,750
(53,500)
(28,187)
-
(142,696)
-
(9,738)
(50,000)
(137,946)
(53,500)
-
-
-
-
23,819
27,379
24,162
(39,996)
23,819
27,379
24,162
(39,996)
- 303,639
335,190 228,627
- 532,266
335,190
Shares of losses not
recognised
Balance at 1 July
Unrecognised losses for
the year
Unrecognised other
comprehensive incomes for
the year
Balance at 30 June
(412,582)
(341,496)
(80,711)
(71,086)
-
(493,293)
-
(412,582)
-
-
-
-
-
-
-
-
(104,525)
-
(517,107)
(341,496)
-
(115,959)
(80,711)
(187,045)
-
(104,525)
11,434
-
(104,525) (597,818)
11,434
(517,107)
94
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
9
Equity accounted investments
(continued)
Summarised financial information of equity accounted investments
(continued)
Westlink M7
M5 Motorway
Transurban DRIVe
Total
2013
$'000
2012
$'000
2013
$'000
2012
$'000
2013
$'000
2012
$'000
2013
$'000
2012
$'000
-
185,919
185,919
- 107,836
204,657
-
204,657 107,836
133,112 311,177
- 229,412
133,112 540,589
64,387 419,013
186,554 415,331
250,941 834,344
197,499
391,211
588,710
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share of expenditure
commitments
Capital commitments
Operating commitments
Contingent liabilities
Share of contingent
liabilities incurred jointly
with other investors
Westlink M7
Transurban owns a 50 per cent interest in the Westlink Group which holds the concession to design, construct,
finance and operate the Westlink M7 Motorway in Sydney for a period of 34 years until February 2037. All were
incorporated in Australia.
WSO Co Pty Limited is the operator of the Motorway.
Westlink Motorway Limited is the nominee manager of the Westlink Motorway Partnership.
WSO Finance Pty Limited is the financier of the Motorway.
Westlink Motorway Partnership was responsible for the construction of the Motorway. The Motorway opened for
operation on 16 December 2005.
The Motorway is a fully electronically tolled motorway with distance-based tolling charges. Tolls are escalated or
deescalated quarterly by quarterly CPI.
Transurban also holds the right to provide tolling and customer management services to the M7.
M5 Motorway
Transurban holds a 50 per cent ownership interest in the M5 Motorway in Sydney. Tolls are collected on the M5
in both directions, with four toll collection points. The concession for the M5 Motorway extends to December
2026 following completion of the M5 widening when all concession assets will be returned to the NSW State
Government.
The M5 has two tolling categories, cars and similar vehicles and all other vehicles (for example, trucks and
buses). Toll increases for the M5 are based on CPI in $0.50 increments. The M5 is a participant in the NSW
State Government Cashback Scheme. Motorists with ETC (Electronic Toll Collection) accounts and driving
privately registered vehicles on the M5 are able to claim the full amount of tolls paid (excluding GST) from the
NSW State Government.
95
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
9
Equity accounted investments
(continued)
Transurban DRIVe
Transurban owns 75 per cent of Transurban DRIVe Holdings LLC (DRIVe). Whilst Transurban ownership
represents greater than half of the voting rights of DRIVe, it does not have power to govern its financial,
investing and operating policies and accordingly is accounted for as a jointly controlled entity.
A Meeting of Members of DRIVe is required to make decisions in relation to such areas as the legal and financial
structure of DRIVe, including distribution policies. 80 per cent or more of the membership interests of those
voting is required to pass a decision of the Meeting of Members. Key decisions relating to the operations and
financing of DRIVe, such as approval to bid for or dispose of an investment and approval of budgets, are made
by Members with member interest of 80 per cent or greater.
DRIVe owns 100 per cent of Pocahontas 895, 90 per cent of 495 Express Lanes and 90 per cent of 95 Express
Lanes, all located in Virginia, USA. Pocahontas 895 is a 99 year concession ending in June 2105. Tolls are
escalated with reference to a prescribed schedule until 2016, thereafter tolls may be increased by the greater of
CPI, real GDP or 2.8 per cent. 495 Express Lanes opened for operation on 17 November 2012 and has a 75
year concession period. Tolls are charged on a dynamic basis to manage congestion and average travel
speeds. 95 Express Lanes is currently in the construction phase and remains on schedule for completion in late
2014.
In June 2013 Transurban DRIVe approved the transfer of Pocahontas 895, in Virginia USA, to the lenders of the
asset. Transfer discussions have commenced with the lenders, however the final structure has not yet been
agreed. As a result, Pocahontas has been classified as held for sale and a discontinued operation in this note.
10 Non-current assets - Held to maturity investments
Term loan notes
M5 debt notes
Notes
10(a)
10(b)
2013
$'000
2012
$'000
831,646
31,220
862,866
782,667
8,725
791,392
96
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
10
Non-current assets - Held to maturity investments
(continued)
(a) Term loan notes
Term Loan Notes (TLN's) represent Transurban's debt funding contribution to Westlink M7. The fixed maturity date
of the TLN's is the earlier of 34 years and the termination of the "Agreement to Lease" between the Roads and
Maritime Services (RMS) (formally known as the Roads and Traffic Authority) of New South Wales and Westlink
Motorway Limited.
The interest rate charged on these notes is 11.93 per cent and any unpaid interest capitalises into additional notes.
During the year ended 30 June 2013 the Group capitalised interest of $49.0 million (2012: $58.4 million).
(b) M5 debt notes
The M5 debt notes are Transurban’s debt funding contribution to the M5 West Widening Project. The fixed maturity
date of the notes is 10 years after financial close of the Project. The interest rate charged on these notes is fixed at
5.0 per cent for the first three years following financial close.
Impairment and risk exposure
None of the held to maturity investments are either past due or impaired. All held-to-maturity investments are
denominated in Australian currency. As a result, there is no exposure to foreign currency risk. There is also no
exposure to price risk as the investments will be held to maturity.
97
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
11 Derivative financial instruments
Current assets
Forwards exchange contracts - cash flow hedges
Non-current assets
Interest rate swap contracts - cash flow hedges
Cross-currency interest rate swap contracts - cash flow hedges
Forwards exchange contracts - cash flow hedges
Total derivative financial instrument assets
Current liabilities
Interest rate swap contracts - cash flow hedges
Forward exchange contracts - cash flow hedges
Non-current liabilities
Interest rate swap contracts - cash flow hedges
Cross-currency interest rate swap contracts - cash flow hedges
Total derivative financial instrument liabilities
Instruments used by the Group
2013
$'000
2012
$'000
963
963
372
9,016
547
9,935
10,898
7,037
-
7,037
-
-
70
-
67
137
137
1,201
114
1,315
221,409
136,463
357,872
279,422
224,594
504,016
364,909
505,331
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure
to fluctuations in interest and foreign exchange rates in accordance with the Group financial risk management
policies (refer to note 38).
The instruments used by the Group are as follows:
Interest rate swap contracts - cash flow hedges
The Group uses interest rate swap contracts for hedging purposes to convert variable rate borrowings to fixed.
Variable rate borrowings of the Group currently bear an average interest rate of 3.9 per cent (2012: 5.0 per cent). It
is policy to protect part or all of the loans from exposure to increasing interest rates. Accordingly, the Group has
entered into interest rate swap contracts under which it receives interest at variable rates and pays interest at fixed
rates.
Interest rate swap contracts currently in place cover 96 per cent (2012: 99 per cent) of long term variable debt
excluding working capital facilities. The average all-in rate after hedging on the hedged portion of the Group's
variable rate borrowings is 6.6 per cent (2012: 7.1 per cent).
98
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
11
Derivative financial instruments
(continued)
Instruments used by the Group
(continued)
Forward exchange contracts - cash flow hedges
In order to protect against exchange rate movements, the Group currently uses forward exchange contracts to
hedge a portion of the US Private Placement interest (Nov 06 - Tranche C).
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised
in other comprehensive income.
Cross-currency interest rate contracts - cash flow hedges
The Group has raised fixed rate foreign currency debt through several U.S. Private Placements and a Maple Bond
issue. It is the policy of the Group to protect foreign currency facilities from exposures to unfavourable exchange
rate movements. Accordingly the Group has entered into cross-currency interest rate swap contracts under which it
is obliged to receive foreign currency at fixed rates and pay AUD at either fixed or floating rates. The Group then
uses interest rate swap contracts to convert the floating rate commitments back to fixed.
99
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
12 Non-current assets - Property, plant and equipment
Equipment,
fittings and
operating
systems
$'000
319,675
(142,127)
177,548
177,548
36,616
(1,085)
(21,163)
48
191,964
352,392
(160,428)
191,964
191,964
17,152
(72)
(29,076)
198
180,166
367,849
(187,683)
180,166
1 July 2011
At
Cost
Accumulated depreciation
Net book amount
Year ended
30 June 2012
Opening net book amount
Additions
Disposals
Depreciation charge
Movement in foreign exchange rates
Closing net book amount
30 June 2012
At
Cost
Accumulated depreciation
Net book amount
Year ended
30 June 2013
Opening net book amount
Additions
Disposals
Depreciation charge
Movement in foreign exchange rates
Closing net book amount
30 June 2013
At
Cost
Accumulated depreciation
Net book amount
100
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
13 Deferred tax assets and liabilities
Assets
Liabilities
Net
2013
$'000
2012
$'000
2013
$'000
2012
$'000
2013
$'000
2012
$'000
2,022
82,015
565,478
2,355
16,801
-
9,249
-
637
90,138
1,712
770,407
(761,260)
9,147
768,809
34,193
(35,520)
115
2,810
770,407
1,384
78,777
531,913
8,027
9,460
-
11,478
-
-
-
-
-
(963,271)
(1,551)
(10,166)
(8,138)
-
-
-
-
(992,585)
(1,413)
(12,621)
(6,165)
513
125,658
1,599
(343,422)
(64,360)
-
768,809 (1,390,908)
(756,258)
761,260
12,551
(629,648)
(336,817)
(93,944)
-
(1,443,545)
756,258
(687,287)
2,022
82,015
565,478
2,355
(946,470)
(1,551)
(917)
(8,138)
(342,785)
25,778
1,712
(620,501)
-
(620,501)
1,384
78,777
531,913
8,027
(983,125)
(1,413)
(1,143)
(6,165)
(336,304)
31,714
1,599
(674,736)
-
(674,736)
705,755 (1,443,545)
49,544
27,249
12,678
28,198
832
-
(1,536,702)
62,204
30,953
-
(674,736)
61,442
(7,322)
115
(830,947)
111,748
43,631
832
-
(2,810)
768,809 (1,390,908)
-
(1,443,545)
-
(620,501)
-
(674,736)
770,407
770,407
768,809 (1,390,908)
768,809 (1,390,908)
(1,443,545)
(1,443,545)
(620,501)
(620,501)
(674,736)
(674,736)
The balance comprises
temporary differences
attributable to:
Accrued expenses
Provisions
Current and prior year losses
Unearned income
Fixed Assets/Intangibles
Interest receivable
Unrealised foreign exchange
Prepayments
Concession fees and promissory
notes
Cash flow hedges
Other
Tax assets/(liabilities)
Set-off of tax
Net tax assets/(liabilities)
Movements:
Opening balance at 1 July
Credited to the income statement
Credited/(charged) to equity
Foreign exchange movements
Transfer from deferred tax
assets/liabilities
Closing balance at 30 June
Deferred tax assets/(liabilities) to be
recovered after more than 12
months
The set off of deferred tax assets and liabilities relates to deferred tax balances for Australian domiciled entities that
are levied tax by the Australian Taxation Office, and separately, the deferred tax balances for United States
domiciled entities that are levied tax by the Internal Revenue Service.
101
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
14 Non-current assets - Intangible assets
Goodwill
$'000
CityLink
$'000
Hills M2
Motorway
$'000
M1
Eastern
Distributor
$'000
M4
Motorway
$'000
Lane
Cove
Tunnel
$'000
Assets
under
construction
$'000
Total
$'000
260,288 4,679,980 2,517,866 2,153,780
178,788
648,068
220,141 10,658,911
- (1,441,143)
(223,652)
260,288 3,238,837 2,000,690 1,930,128
(517,176)
260,288 3,238,837 2,000,690 1,930,128
-
-
-
(52,049)
260,288 3,074,632 1,936,263 1,878,079
-
(89,227)
64,180
(139,158)
-
-
-
(64,427)
-
-
-
-
(176,815)
1,973
(21,844)
626,224
- (2,380,630)
220,141 8,278,281
1,973
-
-
-
(307)
1,666
626,224
-
-
-
(24,533)
601,691
220,141 8,278,281
265,535
265,535
(89,227)
-
(64,180)
-
(280,474)
-
421,496 8,174,115
260,288 4,654,933 2,517,866 2,153,780
178,788
648,068
421,496 10,835,219
- (1,580,301)
(275,701)
260,288 3,074,632 1,936,263 1,878,079
(581,603)
260,288 3,074,632 1,936,263 1,878,079
-
-
(52,050)
260,288 2,935,572 1,871,834 1,826,029
-
2,663
(141,723)
-
-
(64,429)
-
-
-
260,288 4,657,597 2,517,867 2,153,780
(327,751)
260,288 2,935,572 1,871,834 1,826,029
- (1,722,025)
(646,033)
(177,122)
1,666
(46,377)
601,691
- (2,661,104)
421,496 8,174,115
1,666
-
-
(307)
1,359
601,691
-
-
(24,533)
577,158
421,496 8,174,115
234,614
234,614
2,663
-
(283,042)
-
656,110 8,128,350
178,788
(177,429)
1,359
648,068
(70,910)
577,158
656,110 11,072,498
- (2,944,148)
656,110 8,128,350
1 July 2011
At
Cost
Accumulation amortisation
and impairment
Net book amount
Year ended
30 June 2012
Opening net book amount
Additions
Other adjustment (note 17e)
Transfers
Amortisation charge
Closing net book amount
Cost
Accumulation amortisation
and impairment
Net book amount
Year ended
30 June 2013
Opening net book amount
Additions
Other adjustment (note 17e)
Amortisation charge
Closing net book amount
30 June 2013
At
Cost
Accumulated amortisation
Net book amount
Goodwill
Goodwill relates to the Group's Sydney Network and has arisen from the acquisition of Hills Motorway Group,
Tollaust Pty Limited and the Sydney Roads Group.
Concession assets
The CityLink, Hills M2, Eastern Distributor, M4 Motorway and Lane Cove Tunnel Service Concession
Arrangements have been accounted for in accordance with AASB-I 12 and therefore the concession assets have
been classified as Intangible Assets.
102
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
14
Non-current assets - Intangible assets
(continued)
Concession assets
(continued)
CityLink concession asset
Transurban holds the Concession for Melbourne’s CityLink tollway which grants the Group the right to design,
build, operate and maintain CityLink for the concession period ending on 14 January 2034 (being 34 years
following completion of construction). Transurban has the right to collect tolls from CityLink for the duration of the
Concession Arrangement and maintains the tollway to ensure continuous availability for public use. Tolls are
escalated in accordance with the maximum allowable increases in the Concession Deed, being a quarterly
escalation at the greater of quarterly CPI or 1.1065 per cent (equivalent to an annual escalation rate of 4.5 per
cent) for the first 15 years then quarterly by CPI, but no greater than annual CPI plus 2.5 per cent. At the end of the
concession period, all concession assets are to be returned to the Victorian State Government.
Hills M2 concession asset
Transurban has the right to toll the Hills M2 Motorway until 2046 following completion of the M2 widening. The
Concession Deed also requires Transurban to maintain the Motorway.
Toll
increases for the Motorway are based on a maximum toll increase as defined in the Concession Deed,
being a quarterly escalation at the greater of quarterly CPI or 1 per cent, subject to integer rounding. At the end
of the concession period, all concession assets will be returned to the NSW State Government.
M1 Eastern Distributor concession asset
Transurban has the right to toll the M1 Eastern Distributor (ED) until 24 July 2048.
increases for the ED are based on a maximum toll
Toll
increase as defined in the Concession Deed, being a
quarterly escalation at the greater of a weighted sum of quarterly AWE and quarterly CPI or 1 per cent subject to
integer rounding. At the end of the concession period, all concession assets will be returned to the NSW State
Government.
M4 concession asset
Transurban held an investment of 100 per cent in the M4 Motorway in Sydney via the concessionaire, Statewide
Roads Limited. The M4 Motorway opened in 1992 and was handed back to the NSW State Government on 15
February 2010.
The Group continues to operate and maintain the service centres located on the M4 Motorway.
Lane Cove Tunnel
Transurban has the right to toll the Lane Cove Tunnel until January 2037.
Toll increases for the Lane Cove Tunnel are based the maximum toll increase as defined in the Concession
Deed, being a quarterly escalation of CPI. At the end of the concession period, all concession assets will be
returned to the NSW State Government.
Assets under construction
The Group is currently undertaking upgrade works on the Hills M2 Motorway. Construction on the M2 Upgrade
commenced in January 2011. This will be transferred to the intangible asset upon completion.
Impairment testing of goodwill and other intangible assets
Impairment testing
The Group tests whether goodwill and other intangible assets have suffered any impairments, in accordance with
the accounting policy stated in note 1(i). The recoverable amount of assets and cash-generating units have been
determined based on the greater of value-in-use and fair value less cost to sell calculations. These calculations
require the use of assumptions regarding traffic flows, discount rates, growth rates and other factors affecting
operating activities of cash-generating units.
103
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
14
Non-current assets - Intangible assets
(continued)
Impairment testing of goodwill and other intangible assets
(continued)
Key assumptions used for calculating the recoverable amount
The Group makes assumptions in calculating the recoverable amount of its cash generating units. These include
assumptions around expected traffic flows and forecast operational costs. In performing the calculations the
Group has applied a discount rate of 8.2 per cent (2012: 8.8 to 11.0 per cent), representing the implied discount
rate applicable to the risk profile of the Group's assets, to discount the forecast future attributable cash flows. In
determining future cash flows, the Group has also applied rates of growth to underlying operating assumptions
to reflect the expected performance of the assets beyond the budget period in accordance with the respective
concessions. The operating costs have been escalated in line with a combination of Consumer Price Index (CPI)
and Average Weekly Earnings (AWE) forecasts. A long term CPI rate of 2.5 per cent (2012: 2.5 per cent) and
AWE of 4.0 per cent (2012: 4.0 per cent) have been used.
15 Current liabilities - Trade and other payables
Trade payables and accruals
16 Borrowings
Current
Capital Markets debt
Working capital facilities
Non-current
Working capital facilities
Capital Markets debt
Term debt
U.S. Private Placement
Syndicated facility
Total borrowings
2013
$'000
2012
$'000
105,595
105,595
110,103
110,103
Notes
2013
$'000
2012
$'000
16(a)
16(b)
16(b)
16(a)
16(c)
16(d)
16(e)
250,000
188,256
438,256
97,240
1,048,200
1,504,852
1,249,797
599,146
4,499,235
-
-
-
58,355
1,276,478
1,412,849
1,142,963
598,752
4,489,397
4,937,491
4,489,397
Description of borrowings - Financing arrangements and credit facilities
Credit facilities are provided as part of the overall debt funding structure of the Transurban Group. Each facility is
described below.
(a) Capital markets debt
These facilities comprise the following:
104
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
16
Borrowings
(continued)
(a)
Capital markets debt
(continued)
•
•
•
$600.0 million credit wrapped floating rate bonds raised in November 2005 with terms of 10 years
($300.0 million) and 12 years ($300.0 million) with interest currently payable at 3.1 per cent and 3.2 per
cent respectively at 30 June 2013. These facilities are fully hedged with all-in rates of 7.4 and 5.0 per
cent respectively.
$250.0 million non-credit wrapped fixed rate bonds raised in March 2010 with a term of four years.
Interest is payable at 7.3 per cent.
$200.0 million non-credit wrapped fixed rate bonds raised in June 2011 with a term of five years. Interest
is payable at 6.8 per cent.
The above facilities have deferred borrowing costs of $7.9 million. These facilities are secured by a first ranking
charge over the cash flows of the Group.
The Group established a US $2 billion secured EMTN program in October 2011. Under the program the Group
may from time to time issue notes denominated in any currency.
The Group has issued the following notes under the program:
•
$257.8 million of Canadian dollar denominated ($250.0m CAD) secured fixed rate medium term notes
raised in March 2012 with a term of seven years. Interest is payable at 3.4 per cent. This facility is fully
hedged with an all-in rate after hedging of 6.7 per cent.
The EMTN facility has deferred borrowing costs of $1.7 million. This facility is secured by a first ranking charge
over the cash flows of the Group.
(b) Working capital facilities
The Group has the following facilities in place:
•
•
•
•
•
•
$110.0 million facility which is for a term of three years, maturing December 2013. At 30 June 2013,
$98.4 million of the facility was drawn.
$110.0 million facility which is for a term of three years, maturing December 2013. At 30 June 2013,
$89.9 million of the facility was drawn. Letters of credit to the value of $15.5 million have also been
issued under this multi-option facility.
$100.0 million facility which is for a term of three years, maturing August 2014. At 30 June 2013, $72.7
million of the facility was drawn.
$75.0 million facility which is for a term of three years, maturing January 2016. At 30 June 2013, $25.6
million of the facility was drawn.
$50.0 million facility which is for a term of three years, maturing January 2016. At 30 June 2013, the
facility was undrawn.
$75.0 million facility which is for a term of three years, maturing January 2016. At 30 June 2013, the
facility was undrawn.
These facilities are secured by a first ranking charge over the cash flows of the Group. The facilities have deferred
borrowing costs of $1.1 million.
(c) Term debt
The term debt facilities are comprised of:
•
•
•
$520.0 million facility entered into by AMT Management Limited (as trustee for Airport Motorway Trust).
The facility has deferred borrowing costs of $3.1 million.
$740.0 million facility entered into by Hills Motorway Management Limited (as trustee for Hills Motorway
Trust). The facility has deferred borrowing costs of $4.0 million.
$260.0 million facility entered into by LCT-MRE Nominees Pty Limited (as trustee for LCT-MRE Trust).
The facility has deferred borrowing costs of $1.4 million.
105
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
16
Borrowings
(continued)
(c)
Term debt
(continued)
The Airport Motorway facility was refinanced in July 2011 and is fully secured against the respective rights of
Airport Motorway Limited and Airport Motorway Trust and their assets. The facility is a $520.0 million non-recourse
syndicated facility with terms of three years ($295.0 million) and seven years ($225.0 million). The current floating
interest rate applicable to the facility is 2.8 per cent (2012: 3.5 per cent). These facilities are currently fully hedged
to an all-in rate after hedging of 6.9 per cent.
The Hills M2 facility was refinanced in November 2010 and is fully secured against the respective rights of Hills
Motorway Limited and Hills Motorway Trust and their assets. The facility is a non-recourse syndicated facility
totalling $740.0 million. The financing comprised: the refinancing of $465.0 million of existing debt with terms of four
years ($400.0 million), and six years ($65.0 million); and a new construction capex facility of $275.0 million with a
term of six years. As at 30 June 2013, $268.4 million was drawn under the construction capex facility. The current
floating interest rate applicable to the total facility is 2.9 per cent (2012: 3.7 per cent). The total facility is currently
86 per cent hedged with an all-in rate after hedging of 6.8 per cent.
The Lane Cove Tunnel facility was refinanced in June 2013 and is fully secured against the respective rights of
LCT-MRE Pty Limited and LCT-MRE Trust and their assets. This facility is a non-recourse syndicated facility with a
term of approximately three years. The current floating rate applicable to the facility is 2.9 per cent (2012: 3.6 per
cent). The facility is currently fully hedged to an all-in rate after hedging of 6.3 per cent.
(d) U.S. private placement
The composition of the three US Private Placements is outlined below:
Fixed Interest Rate
Dec 04 - Tranche A
Dec 04 - Tranche B
Dec 04 - Tranche C
Aug 05 - Tranche A
Aug 05 - Tranche B
Aug 05 - Tranche C
Nov 06 - Tranche A
Nov 06 - Tranche B
Nov 06 - Tranche C
Nov 06 - Tranche D
Floating Interest Rate
Dec 04 - Tranche D
Total US Private Placement
Deferred borrowing costs
Total
Rate
5.02%
5.17%
5.47%
5.04%
5.19%
5.35%
5.71%
5.86%
5.95%
6.06%
3.5%
USD
$'000
100,000
38,900
108,600
98,000
125,500
156,500
56,980
181,534
162,220
67,392
1,095,626
AUD
$'000
Maturity
107,817 Dec 2014
41,941 Dec 2016
117,089 Dec 2019
105,660 Aug 2015
135,310 Aug 2017
168,733 Aug 2020
61,434 Nov 2016
195,724 Nov 2018
174,900 Nov 2021
72,660 Nov 2026
1,181,268
72,000 Dec 2019
72,000
1,253,268
(3,471)
1,249,797
Note that the Dec 04 - Tranche D facility is fully hedged with an all in rate after hedging of 6.7 per cent.
These facilities are secured by a first ranking charge over the cash flows of the Group.
106
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
16
Borrowings
(continued)
(d)
U.S. private placement
(continued)
Hedge of net investment in foreign entity
Transurban's investment in Transurban DRIVe Holdings LLC acts as a natural hedge against exposure to foreign
currency movements in a portion of the US Private Placement (Nov 06 - Tranche C). Exchange differences arising
on the revaluation of the USD debt are recognised in profit or loss in the separate financial report of Transurban
Finance Company Pty Limited. In the consolidated financial report, such exchange differences are recognised
initially in a separate component of equity and will be recognised in the profit or loss on disposal of the net foreign
investment.
As at 30 June 2013, the Group has deferred $29.7 million in gains (2012: $45.4 million).
(e) Syndicated facility
These facilities, established in August 2007 and December 2011, comprise syndicated bank debt issued by
Transurban Finance Company Pty Limited. At 30 June 2013, the following amounts were drawn:
•
•
•
•
$215.0 million which is for a term of circa three years, maturing February 2015.
$160.0 million which is for a term of circa five years, maturing February 2017.
$100.0 million which is for a term of seven years, maturing August 2014.
$125.0 million which is for a term of ten years, maturing August 2017.
Applicable interest rates ranging between 3.5 and 4.8 per cent. These facilities are fully hedged with an all-in rate
after hedging of 6.2 per cent.
These facilities have deferred borrowing costs of $0.9 million and are secured by a first ranking charge over the
cash flows of the Group.
Letters of credit and corporate credit facilities
The Group has a $50 million letter of credit facility which is for a term of 3 years, maturing December 2013. As at
30 June 2013, letters of credit to the value of $29.4 million have been issued under this facility. Additionally, letters
of credit to the value of $15.5 million have been issued under a multi-option facility (refer to note 16(b)). All letters
of credit are currently undrawn and therefore no liability has been recorded.
A $6.6 million general credit facility is in place covering corporate requirements including letters of credit, credit
card facilities, online banking and an overdraft facility. As at 30 June 2013, $5.3 million of bank guarantees have
been issued which are currently undrawn and therefore no liabilities have been recorded. The 364 day facility
matures June 2014.
107
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
16
Borrowings
(continued)
Covenants
The Group's consolidated borrowings have the following Interest Coverage Ratio (ICR) covenants:
•
•
CityLink - ICR greater than 1.1 times
Group - ICR greater than 1.25 times
In addition, the Group has a market capitalisation based clause where gearing must not exceed 60 per cent.
Based on the balance sheet as at 30 June 2013, the Group's security price would need to close below $2.24 per
Security for 20 consecutive business days to trigger this clause.
In addition, the non-recourse debt at M1 Eastern Distributor, Hills M2 Motorway and Lane Cove Tunnel has the
following covenants:
M1 Eastern Distributor - ICR greater than 1.2 times
Hills M2 Motorway - ICR greater than 1.2 times
Lane Cove Tunnel - ICR greater than 1.15 times
•
•
•
x
17 Provisions
Current
Employee benefits
Onerous lease and restructuring provision
Distribution to security holders
Distribution to non-controlling interests in subsidiaries
Maintenance provision
Non-current
Employee benefits
Maintenance provision
Provision for contingent consideration
Notes
2013
$'000
2012
$'000
17(a)
17(b)
17(c)
17(c)
17(d)
17(a)
17(d)
17(e)
23,201
4,305
229,696
32,963
44,248
334,413
2,303
185,026
15,034
202,363
18,119
1,560
218,798
28,065
26,943
293,485
5,602
175,782
12,371
193,755
Total provisions
536,776
487,240
108
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
17
Provisions
(continued)
Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Current
Non-current
Onerous lease
and
restructuring
provision
$'000
Distribution
to security
holders
$'000
Distributions to
non-controlling
interest in
subsidiaries
$'000
Current
maintenance
provision
$'000
Non-current
maintenance
provision
$'000
Provision for
contingent
consideration
$'000
1,560
218,798
28,065
26,943
175,782
12,371
3,047
(456)
456,315
(445,417)
154
-
-
4,305
-
-
-
229,696
14,758
(9,860)
-
-
-
32,963
21,930
(9,093)
-
-
4,468
44,248
-
-
-
13,712
(4,468)
185,026
2,663
-
-
-
-
15,034
2013
Consolidated -
Balance at 1 July
Additional provision
recognised
Amounts paid/utilised
Movements in foreign
exchange rates
Unwinding of discount
Transfer
Balance at 30 June
(a) Employee benefits
Employee benefits relate to the provision for annual leave, bonuses, long service leave and cash settled long term
incentives.
(b) Onerous lease and restructuring provision
An onerous lease is recognised when the Group has lease commitments on property no longer used. A
restructuring provision is recognised when the Group has a detailed formal plan for restructuring.
(c) Distribution to security holders and non-controlling interests
These distributions are provided for once approved by the board and are announced to equity holders.
(d) Maintenance provision
A maintenance provision is recognised for the present value of the Group's obligations to maintain the tolling
assets as required under the Service Concession Arrangements.
(e) Provision for contingent consideration
As part of the M1 CityLink Upgrade project agreement with the Victorian State Government, Transurban agreed
to share any increased toll revenue resulting from the upgrade once the agreed investment and future operating
costs for the new Southern Link Upgrade section are recovered.
The payment will represent 50 per cent of the present value of this increased revenue. Actual toll revenue for the
third full financial year post construction completion is extrapolated to the end of the CityLink concession to
determine the payment amount. The payment is due 90 days following the calculation date (30 June 2014).
A provision and corresponding intangible asset have been recognised for the potential obligation to pay the
State.
109
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
Notes
2013
$'000
2012
$'000
18(a)
18(b)
18(c)
63,132
6,060
2,681
71,873
58,297
1,404
657
60,358
59,976
12,694
581
73,251
51,072
1,984
617
53,673
132,231
126,924
18 Other liabilities
Current
Prepaid tolls
Unearned income
Other
Non-current
Concession and promissory notes
Lease incentive
Other
Total other liabilities
(a) Prepaid tolls
Prepaid tolls represent amounts received from customers and held on deposit until the charge is incurred by the
user.
(b) Unearned income
Unearned income represents amounts received in advance and will be recognised when the income is earned.
(c) Concession and promissory notes
M1 Eastern Distributor
The Eastern Distributor Project Deed between Airport Motorway Limited, Airport Motorway Trust and the Roads
and Maritime Services (RMS) provides for annual concession fees of $15.0 million during the construction phase
and for the first 24 years after construction completion of the M1 Eastern Distributor. Until a certain threshold return
is achieved, payments of concession fees due under the Project Deed will be satisfied by means of the issue of
non-interest bearing Concession Notes.
Concession Notes are recognised at the present value of expected future repayments. As the timing and profile of
these repayments is largely determined by the available equity cash flows of the motorway, the present value of the
expected future repayments is determined using a discount rate of 12 per cent which recognises their subordinate
nature.
The face value of Concession Notes on issue at 30 June 2013 is $240.0 million (2012: $225.0 million). The net
present value at 30 June 2013 of the redemption payments relating to these Concession Notes is $35.4 million
(2012: $30.7 million).
110
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
18
Other liabilities
(continued)
(c)
Concession and promissory notes
(continued)
M2 Motorway
The Hills Motorway Trust has entered into leases with the Roads and Maritime Services of New South Wales
(RMS). Annual lease liabilities under these leases total $7.0 million, indexed annually to the Consumer Price
index over the estimated period that the M2 Motorway will be used. Until such time as a threshold return is
achieved, payments under these leases can be made at any time at the discretion of the trustee of the Hills
Motorway, by means of the issue of non-interest bearing Promissory Notes to the RMS.
Promissory Notes are recognised at the present value of expected future repayments. As the timing and profile
of these repayments is largely determined by the available equity cash flows of the M2 Motorway, the present
value of the expected future repayments is determined using a discount rate of 12 per cent which recognises
their subordinated nature.
The face value of Promissory Notes on issue at 30 June 2013 is $147.6 million (2012: $136.9 million). The net
present value at 30 June 2013 of the redemption payments relating to these Promissory Notes is $22.9 million
(2012: $20.3 million).
19 Contributed equity
Share capital
Fully paid stapled securities
Fully paid stapled securities
2013
$'000
2012
$'000
7,975,953
7,975,953
7,847,912
7,847,912
2013
Number
'000
2012
Number
'000
1,481,595
1,481,595
1,458,321
1,458,321
Stapled securities
The number of stapled securities on issue is 1,481,594,818 (2012: 1,458,321,154).
Stapled securities entitle the holder to participate in distributions and on winding up of the Group in proportion to
the number of and amounts paid on the securities held. On a show of hands every holder of stapled securities
present at a meeting in person or by proxy, is entitled to one vote.
Capital risk management
The Group is subject to a gearing ratio covenant imposed by senior secured lenders. The Group monitors capital
on the basis of the gearing ratio to ensure compliance with the covenant. There have been no breaches of the
covenant. For further information refer to note 16.
111
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
19
Contributed equity
(continued)
Capital risk management
(continued)
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it
can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of distributions paid to
shareholders, return capital to shareholders, issue new securities or sell assets to reduce debt.
Movements in ordinary share capital:
Opening balance at 1 July 2011
Distribution reinvestment plan
Disposal and vesting of treasury securities
Transfer vesting portion of LTI from share-based
payment reserve
Purchase of Performance Rights Plan units
Less: Amounts attributable to Transurban
International Limited
Closing balance at 30 June 2012
Opening balance at 1 July 2012
Distribution reinvestment plan
Transfer vesting portion of LTI from share-based
payment reserve
Purchase of Performance Awards Plan units
Placement to Unisuper Limited
Deferred Short Term Incentives issued
Less: Amounts attributable to Transurban
International Limited
Closing balance at 30 June 2013
Notes
19(a)
19(b)
19(c)
19(a)
19(d)
19(e)
19(c)
Number of
units
$'000
Consolidated
$'000
1,443,193
14,162
351
7,772,117
76,001
1,640
615
-
4,051
(2,496)
-
1,458,321
(3,401)
7,847,912
1,458,321
5,809
7,847,912
34,567
715
-
16,260
490
2,972
(1,336)
100,000
2,784
-
1,481,595
(10,946)
7,975,953
(a) Distribution reinvestment plan
The Transurban Group has established a distribution reinvestment plan under which holders of stapled securities
may elect to have all or part of their distribution entitlements satisfied by the issue of new stapled securities rather
than by cash.
(b) Treasury securities
Stapled securities were issued to executives under share based payment plans. The securities were held by the
executive but vested in the executive in accordance with the terms of the plans. The acquired securities could not
be transferred or sold prior to vesting date. On forfeit, the securities were sold on market.
112
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
19
Contributed equity
(continued)
(c) Non-controlling interest - Transurban International Limited
THL has been identified as the parent entity of the post-date of transition stapling arrangement of THL, THT and
TIL. AASB Interpretation 1002 requires the equity of TIL to be classified as a non-controlling interest.
(d) Placement to Unisuper Limited
On 7 January 2013 Transurban issued 16,260,163 ordinary stapled securities under a placement to Unisuper
Limited (as trustee of the superannuation fund known as UniSuper).
(e) Deferred Short Term Incentives
Mandatory STI deferral of a portion of the overall STI award, as detailed in the Remuneration Report, was
introduced for the CEO and other Senior Executives in the year ended 30 June 2012. For Australian Senior
Executives deferral is into securities.
20 Reserves and accumulated losses
Reserves
Cash flow hedges
Share-based payments
Foreign currency translation
Transactions with non-controlling interests
Movements:
Cash flow hedges
Balance 1 July
Revaluation - gross
Deferred tax
Transfer to net profit
Amount attributable to non-controlling interest
Movement in equity accounted investment's reserve
Movement in equity accounted investment's reserve attributable to
non-controlling interest
Balance
30 June
Share-based payments
Balance 1 July
Employee share plan expense
Transfer vesting portion of LTI to contributed equity
Transfer non-vesting portion of LTI to retained earnings
Deferred short term incentives
Amount attributable to non-controlling interests
Balance
30 June
2013
$'000
2012
$'000
(94,723)
6,114
(9,410)
(6,118)
(104,137)
(129,119)
8,200
(12,294)
(5,127)
(138,340)
(129,119)
42,112
(5,936)
457
(2,237)
27,379
(27,379)
(94,723)
8,200
6,627
(6,160)
-
(2,786)
233
6,114
34,560
(219,648)
43,823
5,048
7,098
(39,996)
39,996
(129,119)
10,188
3,131
(4,966)
(153)
-
-
8,200
113
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
20
Reserves and accumulated losses
(continued)
Reserves
(continued)
Foreign currency translation
Balance 1 July
Currency translation differences arising during the year
Deferred tax (note 13)
Currency translation differences arising during the year attributable to
non-controlling interest
Balance
30 June
Transactions with non-controlling interests
Balance 1 July
Acquisition of additional ownership in subsidiary (note 27)
Balance
30 June
Accumulated losses
Movements in (accumulated losses) were as follows:
1 July
Balance
Profit attributable to ordinary equity holders of the stapled group
Distributions to ordinary security holders
Transfer of loss attributable to non-controlling interest - Transurban International
Limited
Transfer non-vesting portion of LTI from share-based payment reserve
Balance
30 June
(12,294)
(21,681)
(1,386)
25,951
(9,410)
(5,127)
(991)
(6,118)
(13,160)
13,172
(192)
(12,114)
(12,294)
(5,127)
-
(5,127)
2013
$'000
2012
$'000
(4,232,045)
171,706
(456,316)
47,198
-
(4,469,457)
(4,085,426)
54,905
(429,203)
227,526
153
(4,232,045)
Nature and purpose of reserves
Cash flow hedges
The cash flow hedges reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that
are recognised in other comprehensive income, as described in note 1(l). Amounts are reclassified to profit or loss
when the associated hedged transaction affects profit or loss.
Share-based payments
The share-based payments reserve is used to recognise the fair value of long-term incentives issued but not
exercised.
Foreign currency translation
Exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive
income as described in note 1(d) and accumulated in this reserve within equity.
Transactions with non-controlling interests
The transactions with non-controlling interests reserve was created as a result of the acquisition of an additional
3.75 per cent of the Airport Motorway Group during a prior year, and the acquisition of the remainder of Statewide
Roads Limited and Devome Pty Limited in the current year, as the Group uses the economic entity approach to
transactions with non-controlling interests.
114
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
21 Distributions
Distribution payable
Final distribution for 2013 financial year payable and recognised as a liability:
15.5 cents (2012: 15.0 cents) per fully paid Stapled Security payable
14 August 2013
Fully franked (2012: fully franked) final dividend based on tax paid at 30% - 3.5
cents (2012: 3.5 cents) per fully paid Stapled Security
Unfranked final distribution - 12.0 cents (2012: 11.5 cents) per fully paid
Stapled Security
Distributions paid during the year
Final distribution for 2012 financial year of 15.0 cents (2011: 14.0 cents) per fully
paid stapled security paid 14 August 2012
Fully franked dividend based on tax paid at 30% - 3.5 cents (2011: 0.0 cents)
per fully paid Stapled Security
Unfranked distribution - 11.5 cents (2011: 14.0 cents) per fully paid Stapled
Security
Interim distribution for 2013 financial year of 15.5 cents (2012: 14.5 cents) per
fully paid Stapled Security paid 14 February 2013
Fully franked (2012: fully franked) dividend based on tax paid at 30% - 3.5
cents (2012: 3.5 cents) per fully paid Stapled Security
Unfranked distribution - 12.0 cents (2012: 11.0 cents) per fully paid Stapled
Security
Total distributions paid during the year
Distributions paid in cash or satisfied by the issue of Stapled Securities
under the distribution reinvestment plan during the
and
ended
year
2012
Paid in cash
Satisfied by issue of Stapled Securities
Funds available to future distribution reinvestment plans
30 June 2013
2013
$'000
2012
$'000
51,856
177,791
229,647
51,041
167,707
218,748
51,041
167,707
218,748
-
202,096
202,096
51,183
175,486
226,669
50,801
159,654
210,455
445,417
412,551
410,848
34,567
2
445,417
336,549
76,001
1
412,551
115
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
21
Distributions
(continued)
Distribution policy and free cash calculation
The Group's distribution policy is to align distributions with free cash from operations. The Group calculates free
cash as follows:
Cash flows from operating activities
Less Westlink M7 Term Loan Note interest received
Add back payments for maintenance and intangibles
Less cash flows from operating activities - M1 Eastern Distributor and M4
Controlled cash
Add dividends and distributions received
M1 Easter Distributor
M4 Statewide roads
M5 Interlink
Westlink M7 Term Loan Note interest
Less allowance for maintenance of capital expenditure for CityLink, Hills M2
and Lane Cove Tunnel and e-Tag expenditure
Free cash
Weighted average securities on issue (millions)
Underlying free cash per security (cents) - weighted average securities
Free cash per security (cents) - weighted average securities
Securities on issue (millions)
Underlying free cash per security (cents) - securities on issue
Free cash per security (cents) - securities on issue
Franking credits
2013
$'000
2012
$'000
411,335
(46,367)
9,573
374,541
(38,660)
335,881
29,740
-
50,000
46,366
(18,702)
443,285
1,470
30.1
30.1
1,482
29.9
29.9
373,243
(30,866)
27,731
370,108
(45,406)
324,702
43,183
354
53,500
30,866
(19,208)
433,397
1,453
29.8
29.8
1,458
29.7
29.7
Franking credits available for subsequent reporting periods based on a tax rate of
30.0% (2012 - 30.0%)
306,624
319,886
116
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
22 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity and
its related practices:
Amounts received or due and receivable by PricewaterhouseCoopers
Audit and other assurance services
Audit and review of financial reports
Other assurance services
Total remuneration for PricewaterhouseCoopers
Total auditors' remuneration
23 Contingencies
Contingent liabilities
2013
$
2012
$
1,100,000
124,800
1,224,800
1,100,000
189,300
1,289,300
1,224,800
1,289,300
The Group and parent entity had contingent liabilities at 30 June 2013 in respect of:
Equity guarantee
Subsidiaries of Transurban DRIVe Holdings LLC (DRIVe), a related party of
the Group, hold concession
agreements with The Commonwealth of Virginia to construct and operate High Occupancy Toll (HOT) lanes on
the 495 Express Lanes and 95 Express Lanes. The 495 Express Lanes opened for operation on 17 November
2012. The 95 Express Lanes project is currently in the construction phase. Construction is expected to be
complete in late 2014.
On 31 July 2012, the Transurban Group, through the entities in the triple staple, being Transurban Holdings
Limited, Transurban International Limited and Transurban Infrastructure Management Limited (as responsible
entity of the Transurban Holding Trust), entered into an agreement with 95 Express Lanes LLC, a subsidiary of
DRIVe, the Virginia Department of Transportation and US Bank NA to provide an Equity Funding Guaranty (the
Guarantee) over all of DRIVe’s equity obligations associated with funding the equity contributions to the 95
Express Lane project.
The Group owns 75 per cent of the equity of DRIVe and recognises this investment in the consolidated financial
statements using the equity method of accounting. DRIVe holds 90 per cent of the equity in 495 Express Lanes
and 95 Express Lanes and, from time to time, is required to make equity contributions to fund the equity
component of the 495 and 95 Express Lanes project costs. The total equity contribution DRIVe is obliged to
make to 495 Express Lanes is US$313,825,757, of which the total payment had been paid at balance sheet
date. The total contribution DRIVE is obliged to make to 95 Express Lanes is US$252,336,549 of which
US$151,204,854 had been paid at balance sheet date.
In accordance with the DRIVe LLC Agreement, should a DRIVe member default on any capital calls, the
Transurban Group has the right to acquire their share of DRIVe at a 50 per cent discount to its fair value. As
such in the instance of the Guarantee being called, the Transurban Group may exercise its right to the interest in
DRIVe at a discounted value.
117
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
23
Contingencies
(continued)
Contingent assets
DRIVe capital sum
As a part of the establishment of DRIVe, DRIVe agreed to make a "capital sum" compensation payment to
Transurban for contributing to DRIVe the right to negotiate the 495 Express Lanes and 95 Express Lanes.
The fee is payable to Transurban if the pre-financing/pre-tax net present value of 495 Express Lanes or 95
Express Lanes is positive as at financial close, when calculated three years after the completion of construction.
Receipt of the capital sum is contingent on the projects achieving positive net present value at the strike date,
and as such this amount has not been recognised on the balance sheet. Due to uncertainty associated with the
amount and timing of the potential receipt, an asset has not been recognised.
24 Intra-group Guarantees
As at 30 June 2013, the Transurban Group comprises Transurban Holdings Limited, Transurban Holding Trust and
Transurban International Limited, traded and quoted on the ASX as one triple stapled security.
Under the stapling arrangement, each entity directly and/or indirectly supports each entity and its controlled entities
within the Group on a continual basis.
25 Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Property, plant and equipment payable:
Within one year
Operating commitments payable:
Within one year
Later than one year but not later than five years
Later than five years
Intangible assets payable:
Within one year
Later than one year but not later than five years
2013
$'000
2012
$'000
-
-
3,457
3,457
58,377
109,472
294,701
462,550
62,103
972
63,075
38,590
75,912
312,573
427,075
155,361
14,213
169,574
118
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
25
Commitments
(continued)
Lease commitments
Commitments in relation to leases contracted for at the reporting date but not
recognised as liabilities, payable:
Within one year
Later than one year but not later than five years
Later than five years
Sub-lease payments
Future minimum lease payments expected to be received in relation to
non-cancellable sub-leases of operating leases
2013
$'000
2012
$'000
3,987
9,284
418
13,689
4,059
12,812
496
17,367
-
-
428
428
Promissory Notes
Hills Motorway Management limited, as trustee of the Hills Motorway Trust, has entered into an agreement with
the Roads and Maritime Services of New South Wales (RMS). Annual liabilities under this agreement total $7.0
million indexed annually to the Consumer Price Index over the estimated period that the M2 Motorway will be
used. Until such time as a threshold return is achieved, payments under this agreement can be made at the
discretion of the Responsible Entity, by means of the issue of non-interest bearing promissory notes to the RMS.
For further information refer to note 18.
Concession Notes
The Eastern Distributor Project Deed between Airport Motorway Limited, Airport Motorway Trust and the RMS
provides for annual concession fees of $15.0 million during the construction phase and for the first 24 years after
the construction completion date of the Eastern Distributor.
Other operating leases
The Group leases various offices under non-cancellable operating leases expiring within one to eleven years. The
leases have varying terms, escalating clauses and renewal rights. On renewal, the terms of the leases are
renegotiated.
119
ANNUAL REPORT 2013 26 Related party transactions
Transactions with associates
The following transactions occurred with related parties:
Revenue from services
Operating electronic tolling system for Westlink M7
Interest earned
Term Loan Notes
M5 debt notes
Transactions with joint venture
The following transactions occurred with joint ventures:
Revenue from services
Management and business development fees
Loans to/from joint ventures
Receivable from joint venture
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2013
$
2012
$
4,673,503
8,451,418
97,385,914
842,738
98,228,652
91,328,563
11,952
91,340,515
2013
$
2012
$
39,828,413
19,550,291
2013
$
2012
$
5,786,612
3,423,016
120
TRANSURBAN 26
Related party transactions
(continued)
Loans to/from associates
Term loan notes
Beginning of the year
Net interest capitalised
End of the year
M5 debt notes
Beginning of the year
Amount paid
End of the year
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2013
$
2012
$
782,667,047
48,978,572
831,645,619
724,225,296
58,441,751
782,667,047
8,724,600
22,495,031
31,219,631
-
8,724,600
8,724,600
No provision for doubtful debts has been raised in relation to any outstanding balances, and no expense has been
recognised in respect of bad or doubtful debts from related parties.
Transactions with Director related parties
Refer to note 35 for Director related party transactions.
Term loan notes
The Term Loan Notes (TLN) earn interest at a fixed rate of 11.93 per cent until the earlier of 34 years and the
termination of the Agreement to Lease between the RMS and Westlink Motorway Limited.
Any unpaid interest is capitalised and deemed to subscribe for further loan notes with an aggregate principal
amount equal to that unpaid interest.
The TLN are classified as a held-to-maturity receivable. It is not classified as an investment for equity accounting
purposes, and therefore has not been affected by equity accounting losses from the associate.
M5 debt notes
The M5 debt notes are Transurban’s debt funding contribution to the M5 West Widening Project. The fixed maturity
date of the notes is 10 years after financial close of the Project. The interest rate charged on these notes is fixed at
5.0 per cent for the first three years following financial close.
121
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
27 Subsidiaries and transactions with non-controlling interests
(a)
Investments in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1(b):
Name of entity
Country of
incorporation Class of shares
Equity
holding
2013
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
USA
USA
Australia
CityLink Trust
CityLink Melbourne Limited
City Link Extension Pty Limited
Transurban Infrastructure Management Limited
Transurban Limited
Transurban Collateral Security Pty Limited
Transurban Finance Trust
Transurban Finance Company Pty Limited
Transurban Nominees Pty Limited
Transurban Nominees 2 Pty Limited
Transurban WSO Pty Limited
Transurban AL Trust
Transurban CARS Trust
Transurban WSO Trust
Roam Tolling Pty Limited
Transurban Retail Pty Limited
Transurban (USA) Holdings No.1 Pty Limited
Transurban (USA) Holdings No.2 Pty Limited
Transurban (USA) Holdings No.3 Pty Limited
Transurban Asset Management Pty Limited
Transurban Operations Pty Limited
Transurban Investments Pty Limited
The Hills Motorway Limited
Hills Motorway Management Limited
Hills Motorway Construction Company Pty Limited
Hills Motorway Underwriting No.1 Pty Limited
Hills Motorway Trust
LMI WSO Holding No.2 Pty Limited
Abigroup WSO Holding No.2 Pty Limited
Abigroup Westlink Partner Holding No.4 Pty Limited
Abigroup Westlink Partner No.4 Pty Limited
Abigroup WSO Holding No.4 Pty Limited
Abigroup Westlink Partner Holding No.2 Pty Limited
Abigroup Westlink Partner No.2 Pty Limited
LMI Westlink Partner Holding No.4 Pty Limited
LMI Westlink Partner No.4 Pty Limited
LMI WSO Holding No.4 Pty Limited
LMI Westlink Partner Holding No.2 Pty Limited
LMI Westlink Partner No.2 Pty Limited
Tollaust Pty Limited
Transurban (USA) Inc.
Transurban (USA) Holdings Inc.
Transurban (USA) Operations Inc.
Transurban (895) General Partnership
T (895) Finance Trust
122
2012
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
Equity
holding
2012
%
27
Subsidiaries and transactions with non-controlling interests
(continued)
Name of entity
Country of
incorporation Class of shares
Transurban International Holdings Limited
Transurban DRIVe Management LLC
Sydney Roads Limited
Sydney Roads Trust
Sydney Roads Management Limited
Airport Motorway Trust
Airport Motorway Holdings Pty Limited
Airport Motorway Limited
Airport Motorway Construction Company Pty Limited
AMT Management Limited
M5 Holdings Funding Trust
M5 Holdings Pty Limited
M4 Holdings No.1 Pty Limited
Devome Pty Limited
Statewide Roads Limited
SWR Services Pty Limited
Statewide Roads (M4) Pty Limited
SWR Operations Pty Limited
SWR Properties Pty Limited
Statewide Roads (M2) Pty Limited
LCT-MRE Pty Limited
LCT-MRE Nominees Pty Limited
LCT-MRE Trust
LCT-MRE Holdings Trust
LCT-MRE Holdings Pty Limited
LCT-MRE No.1 Pty Limited
(b) Transactions with non-controlling interests
2013
%
100
100
100
100
100
75.1
75.1
75.1
75.1
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Australia
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
75.1
75.1
75.1
75.1
100
100
100
100
75
50.61
50.61
50.61
50.61
50.61
50.61
100
100
100
100
100
100
On 2 May 2013, M4 Holdings No.1 Pty Limited, a wholly owned subsidiary of Transurban Holdings Limited,
acquired all remaining shares in Devome Pty Limited and Statewide Roads Limited,
for consideration of
$3,231,582. The effect of changes in the ownership of Devome Pty Limited and Statewide Roads Limited on the
equity attributable to owners of Transurban Holdings Limited during the year is summarised as follows:
2013
$'000
2012
$'000
Carrying amount of non-controlling interests acquired
Consideration paid to non-controlling interests
Excess of consideration paid recognised in the transactions with non-controlling
interests reserve within equity
2,241
(3,232)
(991)
-
-
-
There were no transactions with non-controlling interests in 2012.
123
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
28 Parent entity financial information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Contributed equity
Reserves
Retained earnings
Profit for the
year
Total comprehensive income
Guarantees entered into by the parent entity
2013
$'000
2012
$'000
993,983
350,222
2,381,241
2,359,945
3,375,224
2,710,167
183,566
154,357
2,306,762
1,906,487
2,490,328
2,060,844
884,896
(2,654,688)
649,323
(1,947,969)
640,294
1,582
243,020
884,896
306,743
306,743
607,190
2,152
39,981
649,323
72,591
72,591
There are cross guarantees given by Transurban Holdings Limited, Transurban Limited, Tollaust Pty Limited,
Roam Tolling Pty Limited, Sydney Roads Limited, Sydney Roads Management Limited, Statewide Roads Limited
and M5 Holdings Pty Limited as described in note 29.
Contingent liabilities of the parent entity
For details of contingent liabilities of the parent entity, refer to note 23.
124
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
29 Deed of cross guarantee
Transurban Holdings Limited, Transurban Limited, Tollaust Pty Limited, Roam Tolling Pty Limited, Sydney Roads
Limited, Sydney Roads Management Limited, Statewide Roads Limited and M5 Holdings Pty Limited are party to a
deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed,
the wholly-owned entities have been relieved from the requirement to prepare a financial report and Directors’
report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
Consolidated income
movements in
consolidated
retained earnings
statement,
consolidated statement of comprehensive income
and summary of
The above companies represent a 'closed group' for the purposes of the Class Order, and as there are no other
parties to the deed of cross guarantee that are controlled by Transurban Holdings Limited, they also represent the
'extended closed group'.
Set out below is a consolidated income statement and a summary of movements in consolidated retained earnings
for the years ended 30 June 2013 and 30 June 2012 for the parties to the deed of the cross guarantee.
Income statement
Revenue
Operating costs
Depreciation and amortisation expense
Net finance costs
Loss before income tax
Income tax benefit
Loss for the
year
Statement of comprehensive income
Profit (loss) for the
Other comprehensive income for the
Total comprehensive income for the year
year
year,
net of tax
consolidated
Summary of movements in
Accumulated losses at the beginning of the
Profit (loss) for the year
Transfer of non-vesting portion of LTI from share-based payment reserve
Dividends provided for or paid
Adjustment for opening retained earnings of entities that joined the 'closed group'
Retained earnings at the end of the
retained earnings
financial year
financial year
2013
$'000
2012
$'000
173,424
(115,060)
(23,107)
(131,648)
(96,391)
40,536
(55,855)
115,999
(101,266)
(15,223)
(114,248)
(114,738)
34,660
(80,078)
(55,855)
-
(55,855)
(80,078)
-
(80,078)
(320,075)
(55,855)
-
(103,034)
797
(478,167)
(138,264)
(80,078)
109
(101,842)
-
(320,075)
125
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
29
Deed of cross guarantee
(continued)
Consolidated balance sheet
Set out below is a consolidated balance sheet as at 30 June 2013 and 30 June 2012 for the parties to the deed of
cross guarantee.
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Other financial assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Payables
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Other reserves
Retained earnings
Total equity
2013
$'000
2012
$'000
55,326
585,452
640,778
33,421
387,894
421,315
1,560,274
167,638
564,834
2,292,746
1,520,031
177,176
536,066
2,233,273
2,933,524
2,654,588
1,338,761
64,814
1,403,575
1,540,926
63,815
1,604,741
1,319,887
35,569
10,324
1,365,780
719,961
33,032
7,586
760,579
2,769,355
2,365,320
164,169
289,268
640,754
1,582
(478,167)
164,169
607,190
2,153
(320,075)
289,268
Under the stapling arrangement, each entity directly and/or indirectly supports each entity and its controlled entities
within the Transurban Group on a continual basis.
During the year, Statewide Roads Limited joined the closed group.
126
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
30 Events occurring after the reporting period
There are no unusual matters or circumstances that have arisen since the end of the financial year that have
significantly affected or may significantly affect the operations of the Group, the results of those operations or the
state of affairs of the Group in subsequent financial years.
31 Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Depreciation and amortisation
Non-cash share-based payments expense
Non-cash finance costs
Share of net losses of equity accounted investments
Change in operating assets and liabilities:
(Increase) decrease in debtors
Increase in concession and promissory note liability
Capitalised held to maturity investment interest
(Decrease) in operating creditors and accruals
Increase in other operating provisions
(Decrease) in provision for income taxes payable
Movement in deferred taxes
Increase in maintenance provision
Net cash inflow (outflow) from operating activities
2013
$'000
2012
$'000
174,541
312,118
6,627
8,400
9,738
(10,128)
7,225
(48,979)
(9,217)
4,528
(8,510)
(61,557)
26,549
411,335
58,558
301,641
3,131
40,658
137,946
143,732
1,562
(60,192)
(138,147)
836
(5,196)
(112,388)
1,102
373,243
127
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
32 Earnings per stapled security
Basic earnings per share
Earnings per security attributable to the ordinary equity holders of the stapled
group
Diluted earnings per share
Earnings per security attributable to the ordinary equity holders of the stapled
group
Reconciliation of earnings used in calculating earnings per security
Basic and diluted earnings per security
Profit for the year
Profit attributable to non-controlling interests
Profit attributable to ordinary equity holders of the stapled group used in calculating
earnings per security
Weighted average number of securities used as denominator
2013
Cents
2012
Cents
11.7
11.7
2013
Cents
2012
Cents
11.7
11.7
3.8
3.8
3.8
3.8
2013
$'000
2012
$'000
174,541
(2,835)
171,706
58,558
(3,653)
54,905
2013
Number
2012
Number
Weighted average number of securities used as the denominator in calculating
basic and diluted earnings per security
1,470,495,508
1,452,932,838
128
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
32
Earnings per stapled security
(continued)
Weighted average number of securities used as denominator
(continued)
Basic earnings per stapled security
Basic earnings per stapled security is calculated by dividing the profit (loss) attributable to members of the stapled
security excluding any non-controlling interest and costs of servicing equity other than distributions, by the
weighted average number of securities outstanding during the financial year.
Diluted earnings per stapled security
Diluted earnings per stapled security adjusts the figures used in the determination of basic earnings per stapled
security to take into account the after income tax effect of interest and other financing costs associated with dilutive
potential stapled securities and the weighted average number of additional stapled securities that would have been
outstanding assuming the conversion of all dilutive potential stapled securities.
33 Net tangible asset backing
Net tangible asset backing per stapled security*
2013
$
2012
$
2.10
2.21
(*) - Net tangible assets used as the basis for this calculation include the concessions and permits relating to the
operational assets of the Group. Assets of this type are characterised as intangibles under Australian Accounting
Standards.
34 Share-based payments
Performance Awards Plan
Under the Performance Awards Plan (PAP), eligible executives receive a grant of Performance Awards which
entitles participants to receive securities at no cost subject to the achievement of performance conditions. The
Board has discretion as to the form of the award at the end of the performance period and may grant cash
payments of equivalent value at vesting. No dividends or distributions on securities are payable to participants prior
to vesting.
Dual performance measures (Free Cash Flow (FCF) (from 1 July 2011) or earnings before interest,
tax,
depreciation and amortisation (EBITDA) measure (pre 1 July 2011) and relative total security holder return (TSR)
apply to Performance Awards, each representing 50 per cent of the award. The use of dual measures balances the
need to both improve the underlying performance of the business over the long term as well as appropriate returns
relative to the market.
Performance Awards were granted with a three year vesting period. For the plan granted 11 December 2009 and
future grants, the awards are tested at the end of the three year vesting period. However, for the 1 November 2008
grant, the awards were tested at the end of each year. If the performance measures were satisfied for the year, one
third of the awards were preserved until the end of the three year period. At the end of the three years a cumulative
test of the performance measures was applied to any unvested awards.
129
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
34
Share-based payments
(continued)
Performance Awards Plan
(continued)
Vesting /
Expiry date
Fair value at grant date
FCF
EBITDA
TSR
11 Dec 2012
1 Nov 2013
1 Nov 2013
30 Jun 2014
30Jun 2014
30 Jun 2015
30 Jun 2015
$3.33
$3.23
$3.33
$3.37
$3.27
$2.72
$2.95
$4.97
$4.62
$4.97
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$4.63
$4.81
$4.99
$5.43
Grant date
2013
11 Dec 2009
1 Nov 2010
23 Dec 2010
26 Sep 2011
11 Nov 2011
15 Aug 2012
19 Oct 2012
Total
x
Weighted average exercise price
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1,625,994
1,201,077
684,683
661,932
715,024
-
-
4,888,710
- (1,624,766)
-
-
-
-
-
-
-
-
-
747,201
-
448,400
1,195,601 (1,624,766)
(1,228)
(278,601)
-
(241,060)
-
(267,099)
-
(787,988)
-
922,476
684,683
420,872
715,024
480,102
448,400
3,671,557
$4.06
$3.98
$4.15
$3.92
$4.02
Vesting /
Expiry date
Fair value at grant date
FCF
EBITDA
TSR
1 Nov 2011
11 Dec 2012
1 Nov 2013
1 Nov 2013
30 Jun 2014
30 Jun 2014
$3.30
$3.33
$3.23
$3.33
$3.37
$3.27
$4.27
$4.97
$4.62
$4.97
N/A
N/A
N/A
N/A
N/A
N/A
$4.63
$4.81
Grant date
2012
1 Nov 2008
11 Dec 2009
1 Nov 2010
23 Dec 2010
26 Sep 2011
11 Nov 2011
Total
x
Weighted average exercise price
Executive Equity Plan
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1,260,113
1,776,583
1,401,575
684,683
-
-
5,122,954
-
-
-
-
837,990
715,024
(1,193,516)
-
-
-
-
-
1,553,014 (1,193,516)
(66,597)
(150,589)
(200,498)
-
(176,058)
-
(593,742)
-
1,625,994
1,201,077
684,683
661,932
715,024
4,888,710
$4.00
$4.02
$3.79
$3.99
$4.06
Equity awards were granted under the Executive Equity Plan (EEP) based on executives’ performance and were
designed to encourage retention of executives while focusing on business excellence.
Individuals who are high performers and in business critical roles were nominated for awards for their past
contribution and expected future performance. Board approval was required to grant EEP awards to nominated
executives.
Under the EEP, eligible executives received a grant of stapled securities in the Transurban Group (”securities”) at
no cost that are subject to disposal restrictions for three years from the grant date. Participants are entitled to
the executive ceases employment with
distributions paid on their Securities during the restriction period.
Transurban during the restriction period, their Securities will be forfeited unless the Board decides otherwise.
If
Awards were last made under the EEP on 1 November 2008 and vested on 1 November 2011. The table below
provides details of the awards granted and vested.
130
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
34
Share-based payments
(continued)
Executive Equity Plan
(continued)
Grant date
2012
1 Nov 2008
Total
Weighted average exercise price
x
Assessed fair value
Vesting /
Expiry date
Exercise
price
1 Nov 2011
$4.27
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
433,722
433,722
$4.27
-
-
$-
(433,722)
(433,722)
$4.27
-
-
$-
-
-
$-
The assessed fair value at grant date of the plans above has been independently determined in accordance with
AASB 2.
The TSR component of the Performance Awards has been valued applying a Monte-Carlo simulation (of a
geometric Brownian motion process, as used in the Black-Scholes framework) to model Transurban's future
security price and TSR performance against the comparator group performance at vesting date. The valuation
model takes into account the term of the award, the security price at grant date and expected price volatility of the
underlying security, the expected dividend yield and the risk free interest rate for the term of the award.
The Free Cash component of performance awards has been valued using the Black-Scholes framework. The
model valuation takes into account the term of the award, the security price at grant date, the expected dividend
yield and the risk free interest rate for the term of the award.
Performance Awards Plan - CEO Sign On Award Plan
Scott Charlton received a one-off grant of equity as a sign-on award in recognition of the incentives forfeited with
his former employer by joining Transurban. The awards were awarded at no cost to Scott and will vest, subject to
his continued employment with Transurban as described in his employment contract, in three equal tranches on
each of the tranches vesting dates. Upon vesting, the awards will automatically exercise and settle in securities. No
dividends or distributions on securities are payable prior to vesting.
Grant date
2013
14 Sep 2012
14 Sep 2012
14 Sep 2012
Total
Weighted average exercise price
x
Short Term Deferred Incentive Plan
Vesting /
Expiry date
Fair value
at grant
date
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
16 Jul 2013
16 Jul 2014
16 Jul 2015
$5.71
$5.71
$5.71
-
-
-
-
78,752
78,752
78,752
236,256
$-
$5.71
-
-
-
-
$-
-
-
-
-
78,752
78,752
78,752
236,256
$-
$5.71
Mandatory short term incentive (STI) deferral of 30 per cent of the STI awarded to the CEO and other Senior
Executives was introduced in the year ended 30 June 2012. The deferral component was increase to 50%
during the year ended 30 June 2013 for the CEO and all other newly appointed senior executives. The deferral
period is three years (comprising the first year as the performance period and a two year trading restriction).
Vesting occurs at the end of the two year deferral period, subject to continued employment with the Transurban
Group and can be exercised at vesting date.
131
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
34
Share-based payments
(continued)
Short Term Deferred Incentive Plan
(continued)
Grant date
2013
15 Aug 2012
Total
Weighted average exercise price
x
Vesting /
Expiry date
Fair value
at grant
date
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Jul 2014
$5.68
-
-
$-
642,388
642,388
$5.68
-
-
$-
-
-
$-
642,388
642,388
$5.68
The fair value at grant dates in both the deferred STI plan and the CEO sign-on awards plan have been determined
in accordance with AASB 2 by using a volume weighted average price (VWAP) over a specified period of time.
Employee security scheme
The Transurban Employee Security Ownership Plan (the Plan) provides employees with an opportunity to be a part
owner of Transurban and partner in its continued success.
All Australian based permanent employees are eligible to participate in the Investment Tax Exempt Plan and the
Investment Tax Deferred Plan. Under the plans, Transurban provides participants with a matching component
toward the acquisition of the Stapled Securities. For the period 1 July 2012 to 30 June 2013, the cost of company
matches was $132,162 (2012: $114,459) for the Investment Tax Exempt Plan and $450,374 (2012: $391,708) for
the Investment Tax Deferred Plan.
The third element under the Plan is the Incentive Plan. Subject to Board approval and the performance of the
Group, eligible employees may receive a certain number of Transurban securities at no cost to them. In February
2013, each participant was allocated 100 stapled securities at a value of $6.12 per security. Stapled securities
provided under the Plan were acquired on the open market. Eligible US based participants received an equivalent
cash award.
2013
Number
2012
Number
Shares purchased on market under the plan and provided to participating
employees
45,900
42,200
Expenses arising from share-based payments
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense was $6.6 million (2012: $3.1 million).
132
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
35 Key management personnel disclosures
Directors
The following persons were Directors of THL, TIML and TIL during the financial year and up until the date of this
report, except as noted below:
Executive Directors
Scott Charlton (appointed 16 July 2012)
Christopher Lynch (resigned 16 July 2012)
Non-executive Directors
Lindsay Maxsted (Chairman)
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer (resigned 7 August 2012)
Christine O'Reilly
Rodney Slater
Ian Smith
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of
the Group, directly or indirectly, during the financial year:
J Aument *
W Ballantine *
K Daley
A Head
S Hogg
S Johnson *
M Kulper
E Mildwater
T Steinhilber *
L Tobin
V Vassallo
Group General Manager, North America (appointed 10 June 2013)
Group General Manager, Strategy (appointed 26 November 2012)
President, International Development (resigned 2 February 2013)
Group General Manager, New South Wales
Chief Financial Officer
Group General Manager, Human Resources (appointed 8 October 2012)
President, Transurban North America
Group General Manager, Victoria (resigned 31 March 2013)
Group General Manager, Project Delivery and Operational Excellence (appointed 10
December 2012)
Group General Manager, Technology (appointed 4 February 2013)
Group General Manager, Victoria (appointed 4 February 2013)
* Executives promoted from within the Group
Key management personnel compensation
The remuneration amounts below represent the entire amounts paid by the Transurban Group.
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Deferred STIs
2013
$
2012
$
10,755,270
232,743
25,335
9,208,279
1,128,897
21,350,524
12,452,823
942,256
115,725
4,870,066
489,289
18,870,159
Detailed remuneration disclosures are made in the remuneration report in the Directors' report.
133
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
35
Key management personnel disclosures
(continued)
Equity instrument disclosures relating to key management personnel
Share-based payments
Details of short and long term incentives provided as remuneration and securities issued, together with terms and
conditions of the incentives, can be found in the remuneration report in the Directors' report.
Performance Awards Plan
2013
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
-
2,016,918
Directors of the Group
S Charlton
C Lynch *
Other key management personnel of the Group
J Aument
W Ballantine
K Daley
A Head
S Hogg
S Johnson
M Kulper
E Mildwater
T Steinhilber
L Tobin
V Vassallo
39,365
44,471
284,440
257,636
214,633
52,771
491,675
265,055
53,777
-
-
684,656
-
-
-
137,167
112,754
125,696
-
178,830
112,754
-
-
-
-
(617,211)
-
(1,399,707)
684,656
-
(17,768)
(20,030)
(111,276)
(59,347)
(47,478)
(23,145)
(161,956)
(66,766)
(25,022)
-
-
-
-
(310,331)
-
-
-
-
(311,043)
-
-
-
21,597
24,441
-
311,043
292,851
29,626
508,549
-
28,755
-
-
-
-
-
-
-
-
-
* The individual
reduced to zero through "other changes during the year" in the table above.
is not key management personnel at 30 June 2013, therefore their closing balance has been
2012
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
1,785,615
Directors of the Group
C Lynch
Other key management personnel of the Group
K Daley
A Head
S Hogg
T Honan
M Kulper
E Mildwater
223,297
196,382
136,569
545,513
477,811
186,359
715,024
(458,156)
(25,565) 2,016,918
128,294
107,766
101,320
171,058
159,286
107,766
(63,602)
(44,054)
(22,027)
(220,267)
(137,736)
(27,534)
(3,549)
(2,458)
(1,229)
(496,304)
(7,686)
(1,536)
284,440
257,636
214,633
-
491,675
265,055
-
-
-
-
-
-
-
134
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
35
Key management personnel disclosures
(continued)
Equity instrument disclosures relating to key management personnel
(continued)
Stapled Security holdings
The numbers of Stapled Securities held during the financial year by each Director of THL and other key
management personnel of the Group, including their personally-related parties, are set out below.
2013
Directors of the Group
L Maxsted
N Chatfield
R Edgar
S Mostyn
R Officer *
C O'Reilly
R Slater
I Smith
S Charlton
C Lynch *
Other key management personnel of the Group
J Aument
W Ballantine
K Daley *
A Head
S Hogg
S Johnson
M Kulper
E Mildwater *
T Steinhilber
L Tobin
V Vassallo
Balance at
start of the
year
Other changes
during the year
Balance at end
of the year
30,000
30,910
23,733
10,300
20,115
-
-
70,000
-
713,563
-
2,889
384,678
3,041
1,553
19,129
80,000
56,066
-
-
10,018
-
-
857
3,700
(20,115)
4,363
-
1,772
10,000
(713,563)
-
1,099
(384,678)
-
10,000
10,467
-
(56,066)
-
-
520
30,000
30,910
24,590
14,000
-
4,363
-
71,772
10,000
-
-
3,988
-
3,041
11,553
29,596
80,000
-
-
-
10,538
* These individuals are not key management personnel at 30 June 2013, therefore their closing balance has been
reduced to zero through "other changes during the year" in the table above.
135
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
35
Key management personnel disclosures
(continued)
Equity instrument disclosures relating to key management personnel
(continued)
Stapled Security holdings
2012
(continued)
Directors of the Group
L Maxsted
N Chatfield
G Cosgriff
J Davis
R Edgar
S Mostyn
R Officer
C O'Reilly
R Slater
I Smith
J Eve
J Keyes
C Lynch
S Charlton
Other key management personnel of the Group
K Daley
A Head
S Hogg
T Honan
M Kulper
E Mildwater
Balance at
start of the
year
Other changes
during the year
Balance at end
of the year
30,000
20,910
152,236
158,188
18,627
-
19,089
-
-
-
-
-
255,401
-
384,678
21,112
15,616
94,820
103,944
27,098
-
10,000
(152,236)
(158,188)
5,106
10,300
1,026
-
-
70,000
-
-
458,162
-
-
(18,071)
(14,063)
(94,820)
(23,944)
28,968
30,000
30,910
-
-
23,733
10,300
20,115
-
-
70,000
-
-
713,563
-
384,678
3,041
1,553
-
80,000
56,066
Executive Equity Plan (EEP)
2012
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
79,647
Directors of the Group
C Lynch
Other key management personnel of the Group
K Daley
A Head
S Hogg
T Honan
M Kulper
E Mildwater
19,146
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
(79,647)
(19,146)
(19,146)
(15,316)
(85,474)
(23,944)
(19,146)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
136
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
35
Key management personnel disclosures
(continued)
Equity instrument disclosures relating to key management personnel
(continued)
Deferred Short Term Incentives (STI)
2013
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
-
-
Directors of the group
S Charlton
C Lynch *
Other key management personnel of the Group
J Aument
W Ballantine
K Daley *
A Head
S Hogg
S Johnson
M Kulper
E Mildwater *
T Steinhilber
L Tobin
V Vassallo
-
-
-
-
-
-
-
-
-
-
-
-
133,099
14,789
15,212
26,742
22,449
18,973
16,540
36,464
19,863
19,356
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(133,099)
-
-
(26,742)
-
-
-
-
(19,863)
-
-
-
-
-
14,789
15,212
-
22,449
18,973
16,540
36,464
-
19,356
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* These individuals are not key management personnel at 30 June 2013, therefore their closing balance has been
reduced to zero through "other changes during the year" in the table above.
Other transactions with Directors and key management personnel
Mr Rodney Slater is a Partner in the public policy practice group of Patton Boggs. Transurban used Patton Boggs
during the year for various lobbying activities in the US. This relationship is based on normal commercial terms.
$226,692 (USD) was paid to Patton Boggs during the year ended 30 June 2013.
Mr Lindsay Maxsted is Chairman and a Non-executive Director of Westpac Banking Corporation. Westpac provides
transactional banking and loan facilities to Transurban. This relationship is based on normal commercial terms.
Mr Neil Chatfield is Chairman and a Non-executive Director of Seek Limited who provides employment advising
services to Transurban. This relationship is based on normal commercial terms.
Mr Chatfield is also Chairman of, and Ms Sam Mostyn is a Non-executive Director of, Virgin Australia Holdings
Limited. Transurban uses air travel services provided by Virgin Australia. This relationship is based on normal
commercial terms.
36 Non-cash investing and financing activities
Distributions satisfied by the issue of stapled securities under the distribution
reinvestment plan
2013
$'000
2012
$'000
34,567
34,567
76,001
76,001
137
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
37 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the Group and that are believed to be
reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
Income taxes
The Group is subject to income taxes in Australia and USA. Significant judgement is required in determining the
provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of
business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax
audit issues based on whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the current and deferred tax
assets and liabilities in the period in which such determination is made.
The Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are
sufficient taxable temporary differences relating to the same taxation authority against which the unused tax losses
can be utilised. However, the utilisation of tax losses also depends on the ability of the Group to satisfy certain tests
at the time the losses are recouped. In the USA tax losses generally expire after a 20 year period. Management
has reviewed the potential future taxable profits and has therefore recognised deferred tax assets in relation to tax
losses.
Useful lives of plant and equipment
The Group determines the estimated useful
lives and related depreciation for its plant and equipment. This
estimate is based on expected useful lives of technology. It could change significantly as a result of technical
innovations. The Group will increase the depreciation charge where useful lives are less than previously estimated
lives, or will write-off or writedown technically obsolete or non-strategic assets.
The Group depreciates the assets associated with the various toll road infrastructure over the life of the respective
concession arrangements.
Estimated impairment of intangible assets and cash generating units
The Group tests whether goodwill, other intangible assets and cash generating units have suffered any impairment,
in accordance with the accounting policy stated in note 1(i). The recoverable amount of each cash generating unit
has been determined based on the greater of value-in-use and fair value less costs to sell calculations. These
calculations require the use of assumptions regarding traffic flows, discount rates, growth rates and other factors
affecting operating activities of the cash generating units.
138
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Critical accounting estimates and judgements
(continued)
Valuation of Promissory Notes and Concession Notes
The Group holds non-interest bearing long term debt, represented by promissory notes and concession notes, that
are included in the financial statements at the present value of expected future payments. The calculations to
discount these notes to their present value are based on the estimated timing and profile of the repayments.
Assumptions are made in determining the timing and profile, based on expected available equity cash flows of the
Group's cash generating units.
A discount rate is used to value the promissory notes and concession notes to their present value, which is
determined through reference to other facilities in the market with similar characteristics.
Fair value of derivatives and other financial instruments
The fair value of financial
instruments that are not traded in an active market is determined using valuation
techniques. The Group uses its judgement to select a variety of methods and makes assumptions that are mainly
based on market conditions existing at each balance sheet date.
Provision for future major maintenance expenditure
The Group records a provision for its present obligation to maintain the Motorways held under Concession Deeds.
The provision is included in the financial statements at the present value of expected future payments. The
calculations to discount these amounts to their present value are based on the estimated timing and profile of
expenditure occurring on the roads.
A discount rate is used to value the maintenance expenditure provision at its present value, which is determined
through reference to the nature of the provision and the risks associated with the expenditure.
Assessment of control
The Group holds an equity interest of 75 per cent in Transurban DRIVe Holdings LLC (DRIVe). Whilst the Group
owns greater than half of the voting rights of DRIVe, it does not have the power to govern its financial, investing
and operating policies and accordingly is accounted for as a jointly controlled entity.
The power to govern DRIVe’s financial, investing and operating policies is through the “Meeting of Members”. 80
per cent or more of the membership interests of those voting is required to pass a decision of the Meeting of
Members. Key decisions relating to the operations and financing of DRIVe, such as approval to bid for or dispose
of an investment and approval of budgets, require approval by Members with member interests of 80 per cent or
greater.
139
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
38 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate
risk), credit risk and liquidity risk. The financial risk management function is carried out centrally by the Transurban
Group Treasury team (Treasury) under policies approved by the Board. Treasury work closely with the Group’s
operating units to actively identify and monitor all financial risks, and put hedging in place where appropriate. The
Board are informed on a regular basis of any material exposures to financial risks.
The Group’s hedging strategies are detailed below, and include the use of derivative financial instruments. The
Group's policies allow derivative transactions to be undertaken only for the purpose of reducing risk, and do not
permit speculative trading. Treasury continuously monitor risk exposures over time through review of cash flows,
price movements, market analysis and ongoing communication within the Group. When measuring financial risk,
Treasury consider positive and negative exposures, existing hedges and the ability to offset exposures where
possible.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk when future commercial transactions
and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency.
Foreign currency exposures are viewed as either investment exposures or operating exposures. Exposures from
investment in foreign assets are generally managed using foreign currency debt. All known material operating
exposures out to 12 months are hedged, using hedging instruments, offsetting exposures or drawing on foreign
currency funds.
The Group's exposure to foreign currency risk at the reporting date, denominated in the currency in which the rise
arises, was as follows:
Cash and cash equivalents
Net investment in foreign operation
Borrowings
Cross-currency interest rate swaps
Trade creditors
Net exposure
30 June 2013
USD$'000
CAD$'000
30 June 2012
USD$'000
CAD$'000
4,483
473,729
(1,361,409)
933,406
(4,159)
46,050
4
-
(250,000)
250,000
-
4
9,371
245,226
(1,156,439)
933,406
(6,123)
25,441
6
-
(250,000)
250,000
-
6
Exposure to other foreign exchange movements is not material.
140
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Market risk
(continued)
(continued)
Foreign exchange risk
Sensitivity
Based on the financial instruments held at end of the period, had the Australian dollar strengthened/weakened by
10 cents against the U.S. dollar with all other variables held constant, the Group’s post-tax profit for the year would
have been $24,000 lower (2012: $199,000 lower) or $30,000 higher (2012: $243,000 higher), as a result of foreign
exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the above table.
The Group’s post-tax profit is less sensitive to movements in the Australian dollar/US dollar exchange rate in the
current year due to a reduction in US dollar cash holdings and trade creditors.
Had the Australian dollar strengthened by 10 cents against the U.S. dollar with all other variables held constant, the
Group's equity would have been $28,683,000 lower (2012: $26,801,000 lower). Had the Australian dollar
weakened by 10 cents against the U.S. dollar with all other variables held constant, the Group's equity would have
been $38,898,000 higher (2012: $35,819,000 higher). The Group revalues its U.S. dollar borrowings each period
using market spot rates and, where a qualifying hedge is in place, defers these movements in equity. The volatility
in equity is caused mainly by fair value movements of the cross currency interest rate swaps, which are affected by
changes in forward Australian dollar/U.S. dollar foreign exchange rates.
Based on the financial instruments held at 30 June 2013, had the Australian dollar strengthened/weakened by 10
cents against the Canadian dollar with all other variables held constant, the Group’s post-tax profit for the year
would have been unchanged, as a result of foreign exchange gains/losses on translation of Canadian dollar
denominated financial instruments as detailed in the above table.
Had the Australian dollar strengthened by 10 cents against the Canadian dollar with all other variables held
constant, the Group's equity would have been $2,824,000 lower (2012: $3,734,000 lower). Had the Australian
dollar weakened by 10 cents against the Canadian dollar with all other variables held constant, the Group's equity
would have been $3,972,000 higher (2012: $5,158,000 higher).
The Group revalues its foreign currency denominated borrowings each period using market spot rates and, where
a qualifying hedge is in place, defers these movements in equity. The volatility in equity is caused mainly by fair
value movements of the cross currency interest rate swaps, which are affected by changes in forward Australian
dollar/foreign currency exchange rates.
Price risk
The Group is not exposed to price risk.
Cash flow interest rate risk
The Group’s main exposure to interest rate risk arises from long-term borrowings. Treasury manages interest rate
risk by entering into fixed rate debt facilities or using interest rate swaps to convert floating rate debt. Generally, the
Group raises long term borrowings at floating rates and swaps them into fixed rates that are lower than those
available if the Group borrowed at fixed rates directly. The Group’s policy is to hedge interest rate exposure at a
minimum in compliance with the covenant requirements of funding facilities and up to 100 per cent. Covenant
requirements vary by debt facility, and require a minimum of between 50 per cent and 80 per cent of interest rate
exposure to be hedged. At 30 June 2013, 87 per cent (2012: 97 per cent) of the Group’s interest rate exposure on
variable rate borrowings was hedged.
As at the reporting date, the
outstanding:
Group
had the following variable rate borrowings and interest rate swap contracts
141
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Market risk
(continued)
Cash flow interest rate risk
(continued)
2013
Weighted
average
interest rate
%
Balance
$'000
2012
Weighted
average
interest rate
%
Balance
$'000
Cash and cash equivalents
Floating rate borrowings
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
3.6%
3.9%
2.9%
(259,385)
3,071,930
(2,685,500)
127,045
4.2%
5.0%
3.9%
(318,148)
2,756,394
(2,680,500)
(242,254)
An analysis by maturities is provided in Liquidity risk below.
Sensitivity
At 30 June 2013, if interest rates had changed by +/-100 basis points from the year-end rates with all other
variables held constant, post-tax profit for the year would have been $1,270,000 lower/higher (2012: $2,423,000
higher/lower). Profit is less sensitive to movements in interest rates in 2013 than 2012, due mainly to an increase in
floating rate borrowings, reducing the net exposure.
Credit risk
The Group has no significant concentrations of credit risk from operating activities, and has policies in place to
ensure that transactions are made with commercial customers with an appropriate credit history. However as an
operator of large infrastructure assets, the Group is exposed to credit risk with its financial counterparties through
undertaking financial transactions intrinsic to its business. These include funds held on deposit, cash investments
and the market value of derivative transactions.
Treasury assesses the credit strength of potential financial counterparties using objective ratings provided by
multiple independent rating agencies. Board approved limit allocation rules ensure higher limits are granted to
higher rated counterparties. The Group also seeks to mitigate its total credit exposure to counterparties by only
dealing with credit worthy counterparties, limiting the exposure to any one counterparty, minimising the size of the
exposure where possible through netting offsetting exposures, diversifying exposures across counterparties,
closely monitoring changes in total credit exposures and changes in credit status, and taking mitigating action when
necessary.
The Group’s investment in the Westlink Motorway is through Term Loan Notes (see note 10 for details). The return
on these Notes is ultimately dependent on the performance of the Motorway. The Group continually monitors the
performance and expected cash flows of the Motorway.
Liquidity risk
The Group maintains sufficient cash and undrawn facilities to maintain short term flexibility and enable the Group to
meet financial commitments in a timely manner. Treasury assesses liquidity over the short term (up to 12 months)
and medium term (one to five years) by maintaining accurate forecasts of operating expenses, committed capital
expenditure and payments to security holders. Long term liquidity requirements are reviewed as part of the annual
strategic planning process.
Short term liquidity is managed by maintaining a strategic liquidity reserve. This reserve is based on the Group’s
forecast annual operating costs and certain risk exposure scenarios as maintained by the Group’s strategic risk
register, and is maintained as cash and undrawn facilities. The reserve is maintained on a rolling 12 month basis.
Medium term liquidity forecasting is maintained on a rolling five year horizon.
142
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Liquidity risk
(continued)
Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Floating rate
- Expiring within one year
- Expiring beyond one year
2013
$'000
2012
$'000
16,251
201,696
217,947
130,000
260,326
390,326
The Group also has a letter of credit facility and a general credit facility in place with undrawn capacity of $22.0
million at 30 June 2013 (refer to note 16).
The facilities are committed for the term of the facility and cannot be withdrawn by the lenders without notice.
Maturities of financial liabilities
The tables below analyse the Group's financial liabilities, net and gross settled derivative financial instruments into
relevant maturity groupings based on their contractual maturities.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant. For interest rate swaps the cash flows
have been estimated using forward interest rates applicable at the end of the reporting period.
Contractual
maturities of
financial liabilities 1 year or
At
30 June 2013
less
$'000
Over 1 to
2 years
$'000
Over 2 to
3 years
$'000
Over 3 to 4
years
$'000
Over 4 to
5 years
$'000
Over 5
years
$'000
Total
contractual
cash flows
$'000
Carrying
amount
(assets)/
liabilities
$'000
Non-derivatives
Non-interest
bearing
Variable rate
Fixed rate
Total
non-derivatives
Derivatives
Net settled (interest
rate swaps)
Net settled
(cross-currency
interest rate
swaps/fx forwards)
Total derivatives
321,374
-
303,958 1,168,217
224,839
358,268
-
652,860
414,048
-
536,838
199,485
-
390,101
303,031
445,311
225,918 1,286,831
711,475
3,410,215
2,709,389
380,329
3,071,930
1,865,561
983,600 1,393,056 1,066,908
736,323
671,229 1,979,963
6,831,079
5,317,820
97,023
72,057
41,041
22,383
10,716
7,710
250,930
228,074
6,948
103,971
30,286
102,343
26,793
67,834
31,413
53,796
24,579
35,295
15,365
23,075
135,384
386,314
125,937
354,011
143
ANNUAL REPORT 2013 Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Liquidity risk
(continued)
1 year or
less
$'000
Over 1 to
2 years
$'000
Over 2 to
3 years
$'000
Over 3 to 4
years
$'000
Over 4 to
5 years
$'000
Over 5
years
$'000
Total
contractual
cash flows
$'000
Carrying
amount
(assets)/
liabilities
$'000
309,898
123,679
100,689
-
-
431,043 1,088,528
219,581
352,609
-
359,111
409,350
-
364,402
750,145
449,192
195,455 1,491,626
674,300
3,201,698
2,769,310
361,587
2,756,393
1,733,004
534,266
783,652 1,308,109
768,461
644,647 2,606,173
6,645,308
4,850,984
82,976
80,993
60,146
39,382
28,586
20,800
312,883
280,552
19,742
102,718
16,817
97,810
47,602
107,748
39,932
79,314
41,806
70,392
94,703
115,503
260,602
573,485
224,642
505,194
At
30 June 2012
Non-derivatives
Non-interest
bearing
Variable rate
Fixed rate
Total
non-derivatives
Derivatives
Net settled (interest
rate swaps)
Net settled
(cross-currency
interest rate
swaps/fx forwards)
Total derivatives
Fair value measurements
The carrying value of
approximates fair value.
financial assets and financial
liabilities brought
to account at balance sheet date
The fair value of these financial assets and financial liabilities must be estimated for recognition and measurement
or for disclosure purposes.
Group
The
fair value measurements by level of the following fair value measurement hierarchy:
has adopted the amendment to AASB 7
Financial Instruments: Disclosures
which requires disclosure of
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b)
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) (level 2), and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level
3).
(c)
The following table presents the
2013
30 June
2012:
and
Group's
assets and liabilities measured and recognised at fair value at
30 June
144
TRANSURBAN Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Fair value measurements
(continued)
30 June 2013
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
30 June 2012
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Level 1
$'000
-
-
-
-
-
-
-
-
10,898
10,898
364,909
364,909
Level 2
$'000
Level 3
$'000
137
137
505,331
505,331
-
-
-
-
-
-
-
-
10,898
10,898
364,909
364,909
Total
$'000
137
137
505,331
505,331
The fair value of financial
instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at the end of each reporting period. The fair value of both
cross-currency interest rate swaps and interest rate swaps is calculated as the present value of the estimated
future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates
at the end of the reporting period. All these instruments are included in level 2.
145
ANNUAL REPORT 2013 Transurban Holdings Limited
Directors' declaration
30 June 2013
60
to
145
are in accordance with the
Corporations Act
Corporations Regulations 2001
and other mandatory
financial position as at
30 June 2013
and of its
In the Directors' opinion:
the financial statements and notes set out on pages
2001,
(i)
including:
complying with Accounting Standards, the
professional reporting requirements, and
giving a true and fair view of the
Group's
performance for the
year ended
on that date, and
Company
(ii)
(a)
(b)
(c)
there are reasonable grounds to believe that the
become due and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended
Closed Group identified in note 29 will be able to meet any obligations or liabilities to which they are, or may
become, subject by virtue of the deed of cross guarantee described in note 29.
will be able to pay its debts as and when they
payable,
and
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations 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 separate resolutions of the
Transurban Infrastructure Management Limited and Transurban International Limited.
Directors
of Transurban Holdings Limited,
Lindsay Maxsted
Director
Scott Charlton
Director
Melbourne
1 August 2013
146
TRANSURBAN Independent auditor’s report to the members of
Transurban Holdings Limited
Report on the financial report
We have audited the accompanying financial report of Transurban Holdings Limited (the Company),
which comprises the balance sheet as at 30 June 2013, and the income statement, the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the year ended
on that date, a summary of significant accounting policies, other explanatory notes and the directors’
declaration for the Transurban Holdings Limited Group (the Group). The Group comprises the
aggregation of Transurban Holdings Limited (THL), Transurban Holding Trust (THT) and Transurban
International Limited (TIL) and the entities they controlled at the year's end or from time to time
during the financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the
audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it
contains any material inconsistencies with the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, Southbank, GPO Box 1331L, MELBOURNE VIC 3001
DX 77 Melbourne, Australia
T +61 3 8603 1000, F +61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
147
ANNUAL REPORT 2013
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of Transurban Holdings Limited is in accordance with the Corporations
Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2013 and of
its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001; and
(b)
the financial report and notes also comply with International Financial Reporting Standards
as disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 29 to 56 of the directors’ report for the
year ended 30 June 2013. The directors of the Company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Transurban Holdings Limited for the year ended
30 June 2013, complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Chris Dodd
Partner
Melbourne
1 August 2013
148
TRANSURBAN
Transurban Holding Trust
Controlled Entities
ARSN 098 807 419
and
Annual report
for the
year ended
30 June 2013
149
ANNUAL REPORT 2013 Transurban Holding Trust
Annual report -
30 June 2013
ARSN 098 807 419
Directors' report
Auditor's Independence Declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
151
162
163
245
246
150
TRANSURBAN Transurban Holding Trust
Directors' report
30 June 2013
Directors' report
The Directors of Transurban Infrastructure Management Limited ("the Company"),
the responsible entity of
Transurban Holding Trust, present their report on the consolidated entity, consisting of Transurban Holding Trust
("the Trust") and the entities it controls (collectively "the Group"), for the year ended 30 June 2013.
The Trust forms part of the triple staple that is Transurban ("the Transurban Group"). A Stapled Security
comprises one share in Transurban Holdings Limited, one share in Transurban International Limited and one
unit in the Trust. None of the components of the Stapled Security can be traded separately.
Responsible entity
The Trust is registered as a managed investment scheme under Chapter 5C of the Corporations Act 2001, and as
a result requires a responsible entity. The Company is the responsible entity of the Trust and is responsible for
performing all functions that are required under the Corporations Act 2001 of a responsible entity.
Directors
With the exception of the changes noted below, the following persons were Directors of the Company during the
whole of the financial year and up to the date of this report:
Non-executive Directors
Lindsay Maxsted
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer (resigned 7 August 2012)
Christine O'Reilly
Rodney Slater
Ian Smith
Executive Directors
Scott Charlton (appointed 16 July 2012)
Christopher Lynch (resigned 16 July 2012)
Result
The consolidated net profit for the Group was $393,241,000 (2012: $350,600,000). The profit attributable to
ordinary equity holders of Transurban Holding Trust was $378,438,000 (2012: $337,662,000).
Principal activities
The principal activities of the Group during the financial year were the leasing of assets and the provision of funding
to the Transurban Group.
151
ANNUAL REPORT 2013 Distributions - Transurban Holdings Trust
Distributions paid to members during the financial year were as follows:
Distribution payable
Final distribution payable and recognised as a liability: 12.0 cents (2012: 11.5
cents) per fully paid Stapled Security payable 14 August 2013
Transurban Holding Trust
Directors' report
30 June 2013
(continued)
2013
$'000
2012
$'000
177,791
177,791
167,707
167,707
Distributions paid during the year
Final distribution for 2012 financial year of 11.5 cents (2011: 14.0 cents) per fully
paid Stapled Security paid 14 August 2012
Interim distribution for 2013 financial year of 12.0 cents (2012: 11.0 cents) per fully
paid Stapled Security paid 14 February 2013
Total distributions paid during the year
167,707
175,491
343,198
202,096
159,654
361,750
Distributions paid in cash or satisfied by the issue of Stapled Securities
under the distribution reinvestment plan during the years ended
30 June 2012
30 June 2013
and
Paid in cash
Satisfied by issue of Stapled securities
Funds available for future distribution reinvestment plans
316,558
26,638
2
343,198
294,958
66,791
1
361,750
Principal activities
The principal activities of the Group during the financial year were the leasing of assets and the provision of
funding to the Transurban Group.
The Trust forms part of the triple staple that is Transurban.
The Group specifically provides external debt funding for the Hills M2, Eastern Distributor and Lane Cove Tunnel
assets. In addition it leases the assets of those companies, as well as CityLink, to Transurban Holdings Limited.
The Group also has an equity accounted investment in Westlink Motorway Partnership, of which Transurban
holds a 50.0 per cent interest.
Operating and financial review - year ended 30 June 2013
As a member of the Transurban Group triple staple, the Group operates with a consistent business framework,
strategy and value drivers as the wider Transurban Group.
Business review
Business Framework and Strategy
The Transurban Group is focused on providing effective and innovative urban transport solutions in road
infrastructure, through the management and development of urban networks of toll road concessions. The
effective management of toll road concessions involves leveraging a network footprint in our markets, taking a
leading role in shaping policy, and utilising our core capabilities.
152
TRANSURBAN Transurban Holding Trust
Directors' report
30 June 2013
(continued)
These capabilities are defined as:
•
•
•
•
•
Network planning and forecasting
Operations and customer management
Project development and delivery
Application of technology, and
Community engagement
As part of the review and confirmation of our strategy for the year ended 30 June 2013, we have clearly defined
our target markets as the eastern seaboard of Australia and northern Virginia in the US.
Finally, the business continues to focus on distribution growth as part of this overall strategy.
Value drivers
The investment proposition for high quality toll road assets lies in providing investors with access to long dated,
predictable, growing cash flows generated over the life of the concessions through effective management and
development of the road corridors these concessions govern.
The organic growth in the business derived from traffic growth and inflation protected toll escalation across the
the operations, maintenance and customer
suite of assets is supported by the effective management of
management. It is further enhanced by the effective application of technology in key areas including traffic
management and tolling. In addition, value is unlocked through the development of the portfolio through a range
of activities including asset enhancements such as Sydney’s Hills M2 Upgrade and M5 West Widening and new
projects negotiated with governments such as the 495 and 95 Express Lanes projects.
Financial performance
Performance indicators
EBITDA (earnings before interest, tax, depreciation and amortisation) is one of the primary measures to assess
the operating performance of the Group. Focus is on operating results and associated cash generation of the
operations within the triple staple. Contribution from individual assets to the Group's operating performance
permits a meaningful analysis of the underlying performance of the Group's assets.
Free cash is the primary measure used to assess cash generation in the Group. Free cash represents the cash
available for distribution to security holders.
Highlights for the year ended 30 June 2013
Transurban Holding Trust’s net profit for the year ended 30 June 2013 was $393.2 million, a 12.2 per cent
increase on the prior year.
The Group generates revenue from two primary sources: rental
income and construction revenue. Rental
income is generated from property held by the Group and leased to entities within the wider Transurban Group.
In the current financial year this increased 2.1 per cent to $265.5 million.
Construction revenue is recognised during the construction phase of an intangible asset. In the year ended 30
June 2013 $210.6 million was generated through the M2 Upgrade project. This construction revenue is offset by
construction costs and was the primary driver behind a 5.8 per cent decrease in total operating costs in the
Group.
Total EBITDA increased 2.3 per cent due to the increase in rental income discussed above.
153
ANNUAL REPORT 2013 Transurban Holding Trust
Directors' report
30 June 2013
(continued)
Financial position
Transurban Group is a member of the S&P/ASX 50 with a market capitalisation of around $10.0 billion. At 30
June 2013 1,481.6 million shares were on issue.
The Group represents one component of the Transurban triple staple and has total assets of $11,155.0 million, a
4.6 per cent increase on the prior year. The increase is due to the following reasons:
•
•
•
The recognition of the M2 Upgrade as an intangible asset as construction continued;
An increase to the concession note receivable from CityLink Group through the unwinding of the
discount on the notes; and
An increase in the loans receivable from other Transurban Group entities.
The concession assets held by THT are primarily long-life intangible assets, representing the provision by the
Victorian and New South Wales State Governments of the right to toll customers for the use of the assets. The
duration of the asset concessions range from around 30 years to 50 years and for accounting purposes the
carrying values are amortised on a straight line basis over the duration of the concession.
Details of the Group's borrowings are discussed in Financing Activities below.
Operations and performance of Transurban’s portfolio of assets - Year ended 30 June 2013
The operations and performance of the assets held within the Group is dependent on the operating activities of
the Transurban Group as a whole. The tolling of the assets is conducted within a separate section of the triple
staple and provide the revenue to fund the lease payments to the Group, and thereby recover the carrying value
of the assets.
Transurban considers that to understand the performance and operations of the Group, reference must be made
to the wider Transurban Group and in particular the Australian based assets. The performance of those assets
are discussed below.
CityLink (Melbourne)
Performance on CityLink was strong throughout the year, with continued traffic growth on all parts of the
motorway. Toll revenue increased 5.1 per cent, driven by a 2.4 per cent increase in traffic and a 4.1 per cent
increase in toll prices. Weekend traffic was particularly strong, with growth of 6.0 per cent.
Changes to the CityLink employee structure during the year led to a reduction in direct employee costs and
tolling expenses. In addition there was a decrease in the maintenance provision expense of $0.6 million due to
reconsideration of non-critical maintenance of the asset.
Total CityLink costs decreased $3.8 million to $100.7 million, due to the continual assessment of supplier
arrangements. CityLink’s EBITDA margin remained strong at 89.0 per cent.
A major focus this year has been to reduce the number of ‘nose to tail’ accidents occurring on CityLink,
particularly southbound over the Bolte Bridge. A concentrated safety strategy of
‘Look up, stay back’, in
conjunction with a driver education program sponsored by Murcotts, was launched and variable speed limit signs
were introduced over the bridge in order to better manage traffic flows.
154
TRANSURBAN Transurban Holding Trust
Directors' report
30 June 2013
(continued)
Hills M2 (Sydney)
Stages of the Hills M2 Upgrade were progressively completed during the year, contributing to traffic performance
beginning to recover. In July 2012 the Windsor Road Ramps opened to tolled traffic, followed by the Macquarie
Park Ramps in January 2013. The mainline section west of Pennant Hills Road was completed in April 2013,
contributing to traffic growth in that section and the recovery of traffic performance on the M7 Motorway.
Year on year traffic growth on Hills M2 was 1.4 per cent, which included a full year of construction impact. This,
plus the introduction of new ramps on the asset, resulted in a toll revenue increase of $2.1 million.
Costs on Hills M2 remained consistent with previous years and the asset achieved an EBITDA margin of 81.9
per cent.
Lane Cove Tunnel/Military Road e-Ramps (Sydney)
Lane Cove Tunnel performance has been impacted this financial year by continued upgrade works on the
connecting M2 Motorway.
Traffic grew 1.8 per cent and was the main driver behind a toll revenue increase of $1.5 million. In the current
year Tollaust (a Transurban Group company) commenced as the Operations and Maintenance provider to Lane
Cove Tunnel. This is expected to result in overall savings to the Group however mobilisation costs of the revised
arrangement has resulted in costs being consistent year on year for the asset. The EBITDA margin on Lane
Cove Tunnel increased by 1.0 per cent to 60.0 per cent.
Non-recourse project debt on Lane Cove Tunnel was refinanced in June 2013.
M1 Eastern Distributor (Sydney) - Airport Motorway Group
The Eastern Distributor is entering a phase of significant major maintenance activities reflecting the stage in the
asset's life cycle. This includes the upgrade of the Operations Management and Control System, replacement of
the control room video wall and significant resurfacing activities. Planning and execution of these activities has
been a focus of the current year and will continue.
This phase of major maintenance resulted in an increase to the annual M1 maintenance provision charge of $2.9
million. Total costs on the M1 increased $2.0 million.
With toll revenue growth of $7.9 million year on year, the M1’s EBITDA margin increased by 0.6 per cent to 71.1
per cent.
Westlink M7 (Sydney) - Westlink Motorway Group
The performance of Westlink M7, particularly the northern section, has been impacted during the year by the
ongoing Hills M2 Upgrade. Since the completion of the upgrade west of Pennant Hills Road in April 2013, traffic
has begun to recover on the M7 - with growth of 5.4 per cent in the fourth quarter.
Traffic growth across the entire motorway was 3.4 per cent and revenue grew by $8.9 million. Total costs
decreased by $2.3 million. This was due to cost savings achieved in Roam Tolling’s operations of the Westlink
retail function. Due to the growth in toll revenue and cost savings, the M7’s EBITDA margin increased by 2.5 per
cent to 81.0 per cent.
Free cash and cash flows from operations
Free cash represents a key measure of the performance of Transurban Group’s operating assets and provides
the basis for determining the distribution to be paid to security holders.
As a large portion of the cash flow from operating activities is through related party transactions within the
Transurban Group, it is considered that analysis of free cash should be conducted on the whole Transurban
Group.
155
ANNUAL REPORT 2013 Transurban Holding Trust
Directors' report
30 June 2013
(continued)
Free cash for the Transurban Group for the year ended 30 June 2013 was $433.3 million. Free cash per security
was 30.1 cents.
Cash flow from operations for the Group for the year ended 30 June 2013 was 80.5 million, an increase of 7.4
per cent.
Business development activities
F3/M2 connector - discussions with NSW Government
Transurban has worked throughout the year to progress the development of the F3/M2 project with the NSW
Government. Transurban initiated the process in 2012, presenting the Government with a proposal to develop
the project.
On 30 May 2013, the Government announced that it would progress with Transurban to Stage 3 of the proposal
process.
In Stage 3, Transurban, its partners and the NSW Government will work together to procure the design and
construction (D&C) price. The final funding sources will be a function of the D&C price.
Financing activities
As discussed above, THT provides funding to certain assets within the Transurban Group.
The following financing activities were undertaken in the year ended 30 June 2013:
•
•
September 2012 Refinanced $505.0 million of non-recourse project debt on Westlink M7.
June 2013 Refinanced $260.0 million of non-recourse project debt on Lane Cove Tunnel.
Debt maturity profiles
The following chart shows the debt maturity profile related to assets through which THT provide funding to the
wider Transurban Group. The chart shows the debt in the financial year it matures and in the case of the asset
level debt, the full value of the debt facilities has been shown as this is the value of debt for refinancing
purposes.
Asset level debt maturity profile
800
700
600
500
400
300
200
100
0
0
4
5
9
2
0
4
3
0
6
2
5
2
2
0
D ec-13
Jun -14
D ec-14
Jun-15
D ec-15
Jun-16
D ec-16
Jun-17
D ec-17
Jun-18
D ec-18
Jun-19
D ec-19
Jun-20
D ec-20
Jun-21
D ec-21
Jun-22
D ec-22
Jun-23
M2 BANK DEBT
M1 BANK DEBT
LCT BANK DEBT
156
TRANSURBAN Transurban Holding Trust
Directors' report
30 June 2013
(continued)
Financial risk management
Transurban Group’s and THT’s exposure to financial risk management and its policies for managing that risk can
be found in the Financial Risk Management note in note 38 of the statutory accounts.
Note 38 to the Financial Statements outlines Transurban’s hedging policies, credit risk, interest rate risk and
liquidity and funding policies.
Corporate activities
As a member of the Transurban Group the corporate activities of the wider group are applicable to THT.
Change of CEO and Executive Management
A number of changes were made throughout the year to the Transurban structure and Executive leadership
team. In addition to Scott Charlton commencing in the role of CEO in July 2012, the following changes occurred:
•
•
•
•
•
•
Establishment of a ‘Delivery and Operations’ team with Tim Steinhilber appointed as Group General
Manager
Establishment of a ‘Strategy’ team with Wes Ballantine appointed as Group General Manager
Appointment of Sue Johnson as Group General Manager, Human Resources
Appointment of Lisa Tobin as Group General Manager, Technology
Appointment of Vin Vassallo as Group General Manager, Victoria following the departure of Elizabeth
Mildwater from Transurban, and
Appointment of Jennifer Aument as Group General Manager, North America.
Issue of securities (underwriting amendment)
As part of the interim distribution Transurban had announced its intention to have the distribution reinvestment
plan underwritten by UBS up to an amount of $115 million (or approximately 50 per cent of the distribution).
However, on 24 December 2012 this was deemed unnecessary as an agreement was reached with UniSuper
Limited to issue 16,260,163 stapled securities at an issue price of $6.15 per security. The underwriting
obligations of the interim distribution were therefore cancelled.
People
Diversity
During the reporting period, Transurban established diversity committees to raise awareness and to identify
opportunities to improve diversity at all levels of the business. The committees are comprised of representatives
from across the Group.
In the current period, a formal education program on diversity was provided to senior management, focusing on
inclusive leadership and unconscious bias. A gender pay equity review was also undertaken during the year,
with no matters of significance noted.
The Transurban Group has identified gender diversity, cultural diversity and flexible work practices as its focus
areas for the next year. The Group’s Diversity Policy has been reviewed to align it with these areas.
157
ANNUAL REPORT 2013 Transurban Holding Trust
Directors' report
30 June 2013
(continued)
Leadership and development
Twice a year the Transurban Group conducts a talent review with the Executive team. This review helps identify
high potential individuals who may have the ability to move into a Senior Leadership or Executive role, or those
who may be able to move laterally outside of their area of technical expertise. It also identifies successors for the
Executive team and other future leaders. Development activities for this group are monitored throughout the
year.
In 2013 the Transurban Group ran a Senior Leadership Development Program focusing on strategy, safety,
leadership and diversity. This program was offered in both the US and Australia.
Transurban supports the development of women within the business and has recently started a Coaching and
Mentoring program for female middle managers.
Vision and values
In the year ended 30 June 2013 Transurban reviewed and updated its vision and values to bring them into line
with the updated Group strategy. Workshops and focus groups were conducted in offices to give employees
significant input into the process. The values established through this process are integrity, collaboration,
accountability, ingenuity and respect.
Sustainability
Transurban is committed to taking a sustainable approach to all our operations, projects and business practices
to create the best outcomes for our government clients and communities.
During the period,
Transurban’s corporate strategy and reinforces our vision to “strengthen communities through transport”.
the Transurban Board endorsed a revised Sustainability Strategy, which underpins
The Sustainability Strategy highlights three key focus areas: Be good neighbours, Use less, and Think long term.
The principles inherent in these focus areas enhance our ability to deliver efficient and integrated transport
networks that support productivity and the wellbeing of our communities.
We report on our outcomes in these areas in our annual Sustainability Report, which also outlines our
commitments for the coming years. Further information on our Sustainability Strategy will be included in our
2013 Sustainability Report, which will be published in October 2013 on our website (www.transurban.com).
Business risks and opportunities
As a member of the Transurban Group the business risks and opportunities of the wider group are applicable to
the Group.
The following are key opportunities that may impact Transurban’s financial and operating result in future periods:
•
•
•
•
•
•
•
Negotiation of new business opportunities to develop projects and enhance the motorway networks in
Transurban’s target markets
Higher traffic volumes across Transurban’s assets resulting in stronger cashflows across the Group
Integration of technology and systems across Transurban assets, including tolling systems, to leverage
economies of scale available from Transurban’s network footprint.
Policy change in approach to network pricing to drive efficiencies and improvements in capacity
utilisation on Transurban’s assets
Development of connecting infrastructure to drive improved traffic volumes on Transurban’s assets
Changes in law or regulation, that may result in the reduction of taxes or other governmental charges
or levies
Realisation of benefits associated with financing arrangements and financial transactions, including
sourcing new financing, the refinancing of existing indebtedness and credit exposures on transactions
with financial counterparties.
158
TRANSURBAN Transurban Holding Trust
Directors' report
30 June 2013
(continued)
The following are key risks that may impact Transurban’s financial and operating result in future periods:
•
•
•
•
•
•
•
•
•
•
•
•
Reduced traffic volumes or an inability to grow traffic volumes
The loss of a toll road concession for non-performance or default under a concession agreement,
financing arrangements, or as a result of government action
Existence and development of, or changes to, competing roads, feeder roads and other means of
transport
Changes in law or regulation, including the imposition of new or increased taxes or other governmental
charges or levies
Adverse tax developments, including as a result of legislative change or interpretation, and changes to
accounting standards
Dependency on the services of key contractors and counterparties for development and construction
activities and for the provision of tolling, customer services, operations and maintenance services, road
management and control systems
Exposure to risks associated with financing arrangements and financial transactions, including sourcing
new financing, the refinancing of existing indebtedness and credit exposures on transactions with
financial counterparties
Risks of accidents, incidents and other events relating to the assets and insurance policies not
providing adequate protection against those risks
Risks of technology failure, resulting in the inability to collect tolls or operate the assets
Unexpected material maintenance of the assets
Potential for involvement in legal, regulatory and other proceedings and disputes arising from business
and operations; and
Reliance on dividends, interest on and repayments of shareholder loans from concessionaires and
other subsidiaries for funding.
Risk Management
Managing risk is an essential part of our business. Key risks are regularly reviewed by the Board, the Audit and
Risk Committee and our Executive Committee.
Transurban has a business-wide risk framework in place to help create and continuously improve a consistent
and rigorous approach to identifying, analysing and evaluating risks. This framework has various policies,
standards and guidelines attached to it, including the Risk Management Policy which can be found in the
Corporate Governance section of our website (www.transurban.com).
The framework is overseen by the Audit and Risk Committee and is actively managed by the Executive
Committee. It is consistent with AS/NZ31000:2009 and is subject to regular review by internal audit. Our Audit
and Risk Committee Charter is also available in the Corporate Governance section of our website.
Significant changes in the state of affairs
There have been no significant changes in the state of affairs of the Group during the year.
Matters subsequent to the end of the financial year
At the date of this report the Directors are not aware of any other circumstances that have arisen since 30 June
2013 that have significantly affected, or may significantly affect, the Group's operations in future financial years, the
results of those operations in future financial years, or the Group's state of affairs in future financial years.
Environmental regulation
The Group is subject to environmental regulations under Australian Commonwealth and State laws and certain
applicable laws in the USA. The Group maintains a comprehensive environmental management plan to monitor the
performance of its motorways, and any external parties responsible for operating any of the Group’s motorways,
and takes remedial steps where necessary.
There were no significant breaches reported during the financial year on the Group’s assets.
159
ANNUAL REPORT 2013 Transurban Holding Trust
Directors' report
30 June 2013
(continued)
Indemnification and insurance
Each officer (including each director) of the Group is indemnified, to the maximum extent permitted by law, against
any liabilities incurred as an officer of the Group pursuant to agreements with the Group. Each officer is also
indemnified against reasonable costs (whether legal or otherwise) incurred in relation to relevant proceedings in
which the officer is involved because the officer is or was an officer.
The Group has arranged to pay a premium for a Directors and officers liability insurance policy to indemnify
Directors and officers in accordance with the terms and conditions of the policy.
The policy is subject to a confidentiality clause which prohibits disclosure of the nature of the liability covered, the
name of the insurer, the limit of liability and the premium paid for this policy.
Fees paid to and interest held in the Trust by the responsible entity or its associates
Fees paid to the responsible entity out of Trust property during the year are disclosed in note 28.
No fees were paid to the Directors of the responsible entity during the year out of Trust property.
Interests in the Group issued during the financial year
Balance at 1 July
Units issues during the year
Balance at 30 June
Value of assets
Value of group assets at 30 June
2013
Number
$'000
2012
Number
$'000
1,458,321
23,274
1,481,595
1,443,193
15,128
1,458,321
2013
$'000
2012
$'000
11,155,019
10,660,841
The value of the Group's assets is derived using the basis of accounting set out in Note 1 to the financial
statements.
Units under option
There are 4,550,201 units of the Trust under share based payment schemes. 2,074,245 units were granted in
the current year. 1,624,766 units were issued on the exercise of the relevant schemes.
Current Directors' interests
Non-Executive Directors
Lindsay Maxsted
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
.
Executive Directors
Scott Charlton (appointed 16 July 2012)
Number of stapled
securities
30,000
30,910
24,590
14,000
4,363
-
71,772
10,000
160
TRANSURBAN Transurban Holding Trust
Directors' report
30 June 2013
(continued)
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 162.
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the Directors' report. Amounts in the Directors' report have
been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the
nearest dollar.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors.
Lindsay Maxsted
Director
Scott Charlton
Director
Melbourne
1 August 2013
161
ANNUAL REPORT 2013 162
TRANSURBAN Transurban Holding Trust
Annual report
30 June 2013
-
ARSN 098 807 419
Contents
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
164
165
166
167
168
169
245
246
This financial report covers Transurban Holding Trust and its subsidiaries. The financial report is presented in the
Australian currency.
Transurban Holding Trust is a Trust registered and domiciled in Australia. Its registered office and principal place of
business is:
Level 3
505 Little Collins Street
Melbourne
3000
VIC
The financial report was authorised for issue by the Directors on 1 August 2013. The Directors have the power to
amend and reissue the financial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete and available
globally. All releases to the ASX and the media, financial reports and other information are available on our
website: www.transurban.com
163
ANNUAL REPORT 2013 Revenue
Other income
space
Administration costs
Promissory notes
Construction costs
Profit before depreciation and amortisation, net finance costs, equity
accounted investments and income taxes
expense
Depreciation and amortisation
space
Finance income
Finance costs
Net finance income
Share of net profits of equity accounted investments
Profit before income tax
Income tax expense
Profit for the
year
Profit is attributable to:
Unit holders of Transurban Holding Trust
Non-controlling interests
Transurban Holding Trust
Consolidated income statement
For the year ended 30 June 2013
Notes
2013
$'000
2012
$'000
4
5
6
7
12
8
476,975
484,530
25,944
25,333
(4,222)
(1,676)
(210,630)
(216,528)
(4,155)
(1,476)
(224,296)
(229,927)
286,391
279,936
(108,605)
(108,604)
550,514
(332,243)
218,271
520,620
(338,778)
181,842
-
-
396,057
353,174
(2,816)
393,241
(2,574)
350,600
378,438
14,803
393,241
337,662
12,938
350,600
Cents
Cents
Earnings per unit for profit attributable to the ordinary unit holders:
Basic earnings per unit
Diluted earnings per unit
34
34
25.7
25.7
23.2
23.2
The above
consolidated income statement
should be read in conjunction with the accompanying notes.
164
TRANSURBAN Profit for the
year
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of cash flow hedges, net of tax
Blank
Other comprehensive income for the
year,
net of tax
Total comprehensive income for the
year
Total comprehensive income for the
year
is attributable to:
Unit holders of Transurban Holding Trust
Non-controlling interest
Transurban Holding Trust
Consolidated statement of comprehensive income
For the year ended 30 June 2013
2013
$'000
2012
$'000
393,241
350,600
21,576
21,576
(71,286)
(71,286)
414,817
279,314
397,777
17,040
414,817
273,473
5,841
279,314
The above
notes.
consolidated statement of comprehensive income
should be read in conjunction with the accompanying
165
ANNUAL REPORT 2013 ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Receivables
Term loan notes
Derivative financial instruments
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
UNIT HOLDERS' FUNDS
Issued units
Reserves
Accumulated losses
Non-controlling interests
Total unit holders' funds
Transurban Holding Trust
Consolidated balance sheet
As at 30 June 2013
Notes
2013
$'000
2012
$'000
9
10
11
13
14
15
16
17
18
14
19
20
18
14
20
21
22
22
28,675
371,712
400,387
3,545
248,970
252,515
6,592,291
831,646
372
3,774
3,326,549
10,754,632
6,398,365
782,667
70
2,700
3,224,524
10,408,326
11,155,019
10,660,841
233,797
438,256
7,037
612
210,803
27,128
917,633
224,837
-
76
1,784
195,821
20,549
443,067
4,615,420
56,803
22,918
4,695,141
4,710,362
85,039
20,326
4,815,727
5,612,774
5,258,794
5,542,245
5,402,047
7,335,659
(52,319)
(1,779,494)
38,399
5,542,245
7,240,721
(70,142)
(1,804,650)
36,118
5,402,047
The above
consolidated balance sheet
should be read in conjunction with the accompanying notes.
166
TRANSURBAN Transurban Holding Trust
Consolidated statement of changes in equity
For the year ended 30 June 2013
Attributable to unit holders of
Transurban Holding Trust
Notes
Issued units
$'000
Reserves
$'000
Accumulated
losses
$'000
Non-
controlling
interests
$'000
Total unit
holders'
funds
$'000
Balance at 1 July 2011
7,188,221
(6,839)
(1,814,990)
43,313
5,409,705
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity
as owners:
Treasury units
Distribution reinvestment plan
Changes in value of share-based payment
reserve
Distributions provided for or paid
Distributions paid to non-controlling interests
21
21
22
22
-
-
-
-
(64,189)
(64,189)
337,662
-
337,662
12,938
(7,097)
5,841
350,600
(71,286)
279,314
413
51,682
405
-
-
52,500
-
-
886
-
-
886
-
-
-
-
413
51,682
44
(327,366)
-
(327,322)
-
-
(13,036)
(13,036)
1,335
(327,366)
(13,036)
(286,972)
Balance at
30 June 2012
7,240,721
(70,142)
(1,804,650)
36,118
5,402,047
Balance at 1 July 2012
7,240,721
(70,142)
(1,804,650)
36,118
5,402,047
Comprehensive income
Profit (loss) for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity
as owners:
Treasury units
Distribution reinvestment plan
Changes in value of share-based payment
reserve
Distributions provided for or paid
Distributions paid to non-controlling interests
Placement to Uni Super
Deferred Short Term Incentives issued
21
21
22
22
-
-
-
-
19,339
19,339
378,438
-
378,438
14,803
2,237
17,040
393,241
21,576
414,817
-
23,705
1,111
-
-
68,200
1,922
94,938
-
-
(1,516)
-
-
-
-
(1,516)
-
-
-
-
-
23,705
-
(353,282)
-
-
-
(353,282)
-
-
(14,759)
-
-
(14,759)
(405)
(353,282)
(14,759)
68,200
1,922
(274,619)
Balance at
30 June 2013
7,335,659
(52,319)
(1,779,494)
38,399
5,542,245
The above
notes.
consolidated statement of changes in equity
should be read in conjunction with the accompanying
167
ANNUAL REPORT 2013 Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Interest paid
Income taxes paid
Net cash
from operating activities
inflow
Cash flows from investing activities
Payments for intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings, net of costs
Repayment of borrowings
Loans to/from related parties
Repayment of loans to/from related parties
Distributions paid to Transurban Group's security holders
Distributions paid to non-controlling interests in subsidiaries
Net cash inflow from financing activities
Net increase
(decrease)
in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at end of the
year
Transurban Holding Trust
Consolidated statement of cash flows
For the year ended 30 June 2013
Notes
2013
$'000
2012
$'000
296,057
(27,501)
130,918
(313,914)
(5,061)
80,499
269,623
(29,242)
129,982
(292,292)
(3,094)
74,977
(211,038)
(211,038)
(217,546)
(217,546)
398,616
(312,000)
(472,417)
867,889
(316,558)
(9,861)
155,669
25,130
3,545
28,675
630,715
(515,000)
(335,969)
664,608
(294,958)
(14,318)
135,078
(7,491)
11,036
3,545
32
23
9
The above
consolidated statement of cash flows
should be read in conjunction with the accompanying notes.
168
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
Contents of the notes to the consolidated financial statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
Summary of significant accounting policies
Trust formation and termination
Segment information
Revenue
Other income
Expenses
Net finance income
Income tax expense
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
Non-current assets - Receivables
Equity accounted investments
Non-current assets - Term loan notes
Derivative financial instruments
Deferred tax assets and liabilities
Non-current assets - Intangible assets
Current liabilities - Trade and other payables
Borrowings
Current liabilities - Provisions
Other liabilities
Issued units
Reserves and accumulated losses
Distributions
Remuneration of auditors
Contingencies
Intra-group guarantees
Commitments
Related party transactions
Subsidiaries
Parent entity financial information
Events occurring after balance sheet date
Reconciliation of profit after income tax to net cash inflow from operating activities
Non-cash investing and financing activities
Earnings per unit
Share-based payments
Critical accounting estimates and judgements
Key management personnel disclosures
Financial risk management
Page
170
179
179
180
180
181
181
182
182
183
183
184
185
186
187
188
190
190
191
192
193
195
196
196
197
197
198
198
200
201
201
202
202
202
203
206
208
239
169
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the consolidated financial report are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
The financial report includes the consolidated entity consisting of Transurban Holding Trust and its subsidiaries (the
Group).
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues
Group Interpretations and the Corporations Act 2001.
The Group’s current liabilities exceed its current assets by $517.2 million as at 30 June 2013. The financial
report has been prepared on a going concern basis, which contemplates the continuity of normal operations, as
the Group is trading profitably and has continually been able to refinance maturing debt. In addition, at 30 June
2013 the Group has available a total of $217.9 million of undrawn borrowing facilities.
Compliance with International Financial Reporting Standards (IFRS)
The consolidated financial statements of Transurban Holding Trust also comply with IFRS as issued by the
International Accounting Standards Board.
Early adoption of standards
The Group has not elected to adopt any new accounting standards early.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation
of other financial assets and liabilities (including derivative financial instruments).
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in
certain cases, to the nearest dollar.
(b) Principles of consolidation
Subsidiaries
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating
policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and
effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether
the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control
de-consolidated from the date that control ceases.
is transferred to the Group. They are
The consolidated financial statements incorporate an elimination of inter-entity transactions and balances and other
adjustments necessary to present the financial statements on a combined basis. The accounting policies adopted
in preparing the financial statements have been consistently applied by the individual entities comprising the Group
except as otherwise indicated.
The acquisition method of accounting is used to account for business combinations by the Group (refer to note
1(g)).
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement, statement of comprehensive income, balance sheet and statement of changes in equity respectively.
170
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(b)
Principles of consolidation
(continued)
Associates and joint ventures
Associates are all entities over which the Group has significant influence but not control. Interests in joint ventures
are where the Group jointly controls an entity with another party (refer to note 12).
The Group's share of its associates' and joint ventures' post-acquisition profits or losses is recognised in the
income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the
Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint
venture, the Trust does not recognise further losses. Dividends received from associates and joint ventures reduce
the carrying amount of the investment.
Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions
with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying
amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any
difference between the amount of
to non-controlling interests and any consideration paid or
received is recognised in a separate reserve within equity.
the adjustment
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive
Officer (the chief operating decision maker) and the Executive Committee, who report to the Chief Executive Officer
(CEO).
(d) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable.
Revenue is recognised for the major business activities as follows:
•
•
•
•
Rental revenue - Rental revenue is recognised as earned in accordance with the lease contract.
Interest income - Interest income is recognised using the effective interest rate method.
Construction revenue - During the construction phase of service concession infrastructure assets, the
Group records an intangible asset representing the right to charge users of the infrastructure and
recognises revenue from the construction of the infrastructure. Revenue and expenses associated with
construction contracts are recognised in accordance with the percentage of completion method.
Distribution revenue - Distribution revenue is recognised when the Trust’s right to receive payment is
established.
(e)
Income tax
Pursuant to the provisions of the Income Tax Legislation, Trusts are not liable to income tax provided that its
taxable income (including assessable realised capital gains) is fully distributed to unit holders.
Income tax is brought to account in the financial statements to the extent it relates to companies in the Group. The
income tax expense or benefit for the period is the tax payable or benefit on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to unused tax losses.
171
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(e)
Income tax
(continued)
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of the reporting period in the countries where the Trust's subsidiaries and associates operate and generate
taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. 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 the transaction affects neither accounting nor taxable profit or
loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted
by the end of the reporting period 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 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.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in foreign operations where the Trust is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax is recognised in the income statement, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
(f) Leases
Leases in which a significant portion of the risk and rewards of ownership are retained by the lessor are classified
as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to the income statement on a straight line basis over the period of the lease.
Lease incentives are recognised as a reduction of the rental expense over the lease term on a straight line basis.
(g) Business combinations
the assets transferred,
for all business combinations,
The acquisition method of accounting is used to account
including business
combinations involving entities or businesses 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 liabilities incurred and the equity interests issued by the Trust. 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 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. On an acquisition-by-acquisition
basis, the Trust recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling
interest's proportionate share of the acquiree’s net identifiable assets.
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 Trust's share of
the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net
identifiable assets of
the subsidiary acquired and the measurement of all amounts has been reviewed, the
difference is recognised directly in profit or loss as a bargain purchase.
172
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(g)
Business combinations
(continued)
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to
their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an independent financier under comparable
terms and conditions.
Contingent consideration is classified either as equity or a financial
liability are subsequently remeasured to fair value with changes in fair value recognised in the income statement.
liability. Amounts classified as a financial
(h)
Impairment of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where
an indicator of impairment exists, the Group makes an estimate of the recoverable amount. Where the carrying
amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its
recoverable amount through the income statement. The decrement in the carrying amount is recognised as an
expense in the income statement in the reporting period in which the impairment occurs.
Recoverable amount is the greater of fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
(i) Cash and cash equivalents
For statement of cash flow presentation purposes, cash and cash equivalents includes cash on hand, deposits held
at call with financial institutions, other short-term, highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the
balance sheet.
(j)
Investments and other financial assets
Classification
The Group classifies its investments and other financial assets in the following categories: financial assets at fair
value through profit or loss, loans and receivables and held-to-maturity investments. The classification depends on
the purpose for which the investments were acquired. The classification of the Group's investments are determined
at initial recognition and re-evaluated at each reporting date.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are
classified as held for trading unless they are designated as hedges. Assets in this category are classified as current
assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are included in current assets, except for those with maturities greater than 12 months
after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and
other receivables (current) (note 10) and in receivables (non-current) (note 11) in the balance sheet.
173
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(j)
Investments and other financial assets
(continued)
Loans and receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less allowance for impairment. Trade receivables are due for settlement no more than 30
days from revenue recognition.
(continued)
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are
written off by reducing the carrying amount directly. An impairment allowance account (provision for impairment of
trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts
due according to the original terms of the receivables. The amount of the impairment allowance is the difference
between the asset’s carrying amount and the present value of estimated future cash flows. The amount of the
impairment allowance is recognised in the income statement.
Held-to-maturity investments (term loan notes)
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group's management has the positive intention and ability to hold to maturity. If the Group were
to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted
and reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except
for those with maturities less than 12 months from the reporting date, which are classified as current assets.
Recognition and derecognition
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair
value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair
value and transaction costs are expensed in the income statements. Financial assets are derecognised when the
rights to receive cash flows from the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in
other comprehensive income are reclassified to profit or loss as gains and losses from investment securities.
Subsequent measurement
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest
method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried
at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit
or loss' category are presented in profit or loss within other income or other expenses in the period in which they
arise. Dividend income from financial assets at fair value through profit or loss is recognised in profit or loss as part
of revenue from continuing operations when the Trust's right to receive payments is established.
174
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(j)
Investments and other financial assets
(continued)
Impairment
The Group assesses at each reporting period whether there is objective evidence that a financial asset or group of
financial assets is impaired.
In the case of equity securities classified as available-for-sale, a significant or
prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are
impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognised in the income statement - is reclassified from equity and recognised in the income statement
as a reclassification adjustment. Impairment losses recognised in the income statement on equity instruments
classified as available-for-sale are not reversed through the income statement.
(k) Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent
changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged. The
designates certain derivatives as either:
Group
•
•
hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges), or
hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly
probable forecast transactions (cash flow hedges).
At the inception of the hedging transaction, the Group documents the relationship between hedging instruments
and hedged items, as well as its risk management objective and strategy for undertaking various hedge
transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in
offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 14.
Movements in the hedging reserve in shareholder's equity are shown in note 22. The full fair value of a hedging
derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more
than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less
than 12 months. Trading derivatives are classified as a current asset or liability.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognised in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately
in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will
affect profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate
borrowings is recognised in the income statement.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to the income
statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognised immediately in the income statement.
175
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(l)
Intangible assets
Concession Assets
the Group's rights to operate roads under Service Concession Arrangements.
Concession Assets represent
Concession Assets constructed by the Group are recorded at the fair value of consideration received or receivable
for the construction services delivered. Concession Assets acquired by the Group are recorded at the fair value of
the assets at the date of acquisition. All Concession Assets are classified as intangible assets and are amortised
over the term of the right to operate the asset on a straight line basis. For details of concession agreement dates
refer to note 16.
Where work is in progress, it is classified as assets under construction.
(m) Financial liabilities
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the
financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition.
Concession and promissory notes
The Group has non-interest bearing long term debt, represented by Concession and Promissory Notes, payable to
the government, measured at the net present value of expected future payments.
(n) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption
amount is recognised in the income statement over the period of the borrowings using an effective interest method.
Borrowings are removed from the balance sheets when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished
or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities
assumed, is recognised in the income statement as finance income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
(o) Borrowing costs
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in the consolidated income statement over the period of the borrowings using the effective
interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to
the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until
the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the
facility to which it relates.
Costs incurred in connection with the arrangement of borrowings are deferred and amortised over the effective
period of the funding.
(p) Provisions
Provisions are recognised when the Group has 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 obligation and the amount has been reliably
estimated. Provisions are not recognised for future operating losses.
176
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(p)
Provisions
(continued)
Provisions are discounted to the present value of management's best estimate of the expenditure required to settle
the present obligation at the reporting date. The discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks specific to the liability. The increase in the provision
due to the discount unwinding over the passage of time is recognised as a finance cost.
Provision for distribution
Provision is made for the amount of any distribution declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting
period.
(q) Contributed equity
Units in the Trust are classified as equity.
Incremental costs directly attributable to the issue of new stapled securities are shown in equity as a deduction, net
of tax, from the proceeds.
If the Group reacquires its own securities, those securities are deducted from equity. No gain or loss is recognised
in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income
taxes) is recognised directly in equity.
(r) Parent entity financial information
The financial information for the parent entity, Transurban Holding Trust, disclosed in note 30 has been prepared
on the same basis as the consolidated financial statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries and associates are accounted for at cost in the financial statements of Transurban
Holding Trust. Dividends received from associates are recognised in the parent entity's profit or loss, rather than
being deducted from the carrying amount of these investments.
(s) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is
not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(t) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2013 reporting periods. The Group's assessment of the impact of these new standards and interpretations is set
out below.
177
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(t)
New accounting standards and interpretations
(continued)
(i)
AASB 9
AASB 9
(December 2010)
Financial
and AASB 2010-7
Instruments,
(effective from 1 January 2015)
AASB 2009-11
Amendments to Australian Accounting Standards arising from
Amendments to Australian Accounting Standards arising from AASB 9
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets
and financial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption.
Management are in the process of assessing the impact on financial assets but do not believe this will be
significant.
There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated at fair value through profit or loss and the Trust does not have
any such liabilities. The Group has not yet decided when to adopt AASB 9.
(ii)
Entities,
Ventures,
Consolidated Financial
revised AASB 127
AASB 2011-7
AASB 10
Other
Joint
and Joint Arrangements Standards
Transition Guidance and Other Amendments
and
Statements,
Separate Financial
AASB 11
Joint
Statements,
Arrangements,
AASB 128
AASB 12
Investments in Associates and
Disclosure of Interests in
Amendments to Australian Accounting Standards arising from the Consolidation
AASB 2012-10 Amendments to Australian Accounting Standards -
(effective 1 January 2013)
In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for
joint arrangements, consolidated financial statements and associated disclosures.
AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate
Financial Statements, and Interpretation 112 Consolidation - Special Purpose Entities. The core principle that a
consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains
unchanged, as do the mechanics of consolidation. However the standard introduces a single definition of control
that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns
before control is present. Power is the current ability to direct the activities that significantly influence returns.
Returns must vary and can be positive, negative or both. Management have assessed the impact of AASB10
and do not believe it changes our assessment of control over any entities where the Group has an equity
interest.
AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer on
the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the
joint arrangement. AASB 11 also provides guidance for parties that participate in joint arrangements but do not
share joint control. This will not impact how the Group currently accounts for joint arrangements.
AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB
11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of this
standard by the Group will not affect any of the amounts recognised in the financial statements, but will impact the
type of information disclosed in relation to the Group's investments.
Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not
remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice
versa. The amendments also introduce a 'partial disposal' concept. The Group is still assessing the impact of these
amendments.
The Group does not expect to adopt the new standards before their operative date.
178
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
1
Summary of significant accounting policies
(continued)
(t)
New accounting standards and interpretations
(continued)
(iii)
AASB 13
from AASB 13
(effective 1 January 2013)
Fair Value Measurement
and AASB 2011-8
Amendments to Australian Accounting Standards
arising
AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value
disclosures. Current measurement techniques will change as a result of new guidance. The impact of the new
rules on any of the amounts recognised in the financial statements is not expected to be material. Application of
the new standard will
information disclosed in the notes to the consolidated financial
the type of
statements. The Group intends to adopt the new standard from 1 July 2013.
impact
(iv)
AASB 2011-4
Personnel Disclosure Requirements
(effective 1 July 2013)
Amendments to Australian Accounting Standards to Remove Individual Key Management
(KMP) disclosure
In July 2011 the AASB decided to remove the individual key management personnel
requirements from AASB 124 Related Party Disclosures, to achieve consistency with the international equivalent
standard and remove a duplication of the requirements with the Corporations Act 2001. While this will reduce the
disclosures that are currently required in the notes to the financial statements, it will not affect any of the amounts
recognised in the financial statements. The amendments apply from 1 July 2013 and cannot be adopted early. The
Corporations Act requirements in relation to remuneration reports will remain unchanged for now, but these
requirements are currently subject to review and may also be revised in the near future.
(v)
IAS 36
Amendments to IAS 36 Impairment of Assets
(effective 1 January 2014)
The IASB has made small changes to some of the disclosures that are required under IAS 36 Impairment of
Assets. These may result in additional disclosures if the group recognises an impairment loss or the reversal of an
impairment loss during the period. They will not affect any of the amounts recognised in the financial statements.
The group intends to apply the amendment from 1 July 2014.
2 Trust formation and termination
The Transurban Holding Trust was established on 15 November 2001. The Trust was due to terminate on 20
December 2081 unless terminated earlier. However, amendments made to the Trust Deed have extended the
Trust to perpetuity.
The Trust was registered as a managed investment scheme by the Australian Securities and Investments
Commission on 28 November 2001.
3 Segment information
Business segment
Management has determined that Transurban Holding Trust has one operating segment, based on the review and
management of the consolidated Group.
Transurban Holding Trust operations involve the leasing of assets and the provision of funding to the Transurban
Group or associates of
the Transurban Group. All revenues and expenses are directly attributable to these
activities. The management structure and internal reporting of the Trust are based on this operating segment.
179
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
Notes
4(a)
4(b)
2013
$'000
2012
$'000
265,468
210,630
877
476,975
260,060
224,296
174
484,530
4 Revenue
Rental income
Construction revenue
Other revenue
Total revenue
(a) Rental income
Rental income is derived from property held by the Group and is recognised in the income statement in accordance
with the lease contract.
(b) Construction revenue
Construction revenue is recognised during the construction phase of an intangible asset.
5 Other income
Concession fees
(a) Concession fees
Notes
5(a)
2013
$'000
2012
$'000
25,944
25,944
25,333
25,333
Income from concession fees relates to the CityLink concession notes, Pursuant to the Agreement for the
Melbourne CityLink Concession Deed (the Concession Deed), CityLink Melbourne Limited (CityLink) (a member
of the Transurban Group), is required to pay annual concession fees for the duration of CityLink's concession
period. Until a certain threshold rate of return on the project is achieved, the payment of concession fees due
under the Concession Deed can be satisfied by means of non-interesting bearing concession notes.
Following agreements reached with the State of Victoria (the State), the Group paid a total of $765 million for the
State to assign all current concession notes issued to the State to Transurban Holding Trust and the State
directed CityLink to pay future concession notes to Transurban Holding Trust. Accordingly, CityLink continues to
issue notes semi-annually to Transurban Holding Trust, and the Group recognises concession note income from
the issue of these notes, at the present value of expected future repayments.
180
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
6 Expenses
Profit before income tax includes the following specific
expenses:
2013
$'000
2012
$'000
Depreciation and amortisation expense - operating cost
108,605
108,604
7 Net finance income
Finance income
Interest income from related parties
Other interest income
Net foreign exchange gains
Net movement in promissory note payable
Re-measurement of concession notes receivable
Total finance income
Finance costs
Interest and finance charges paid/payable
Net movement in promissory note payable
Total finance costs
Net finance income
(a) Re-measurement of concession notes
Notes
2013
$'000
2012
$'000
486,562
844
3,601
-
59,507
550,514
462,093
494
4,272
1,052
52,709
520,620
7(a)
(331,553)
(690)
(332,243)
(338,778)
-
(338,778)
218,271
181,842
Re-measurement of concession notes represent the discount unwinding over the passage of time on these notes
and the change in the payment profile of the concession notes.
181
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
8 Income tax expense
Income tax expense
Current tax
Deferred tax
(Over) provided in prior years
Deferred income tax (revenue) included in income tax expense comprises:
(Increase) in deferred tax assets (note
15)
Increase in deferred tax liabilities (note 15)
Numerical reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense
Tax at the Australian tax rate of 30% (2012 - 30%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Trust income not subject to tax
(Over) provided in prior years
Income tax expense
9 Current assets - Cash and cash equivalents
Cash at bank and in hand
All cash balances are interest bearing.
2013
$'000
2012
$'000
3,890
(1,074)
-
2,816
(1,212)
138
(1,074)
3,534
(936)
(24)
2,574
(1,041)
105
(936)
2013
$'000
2012
$'000
396,057
118,817
353,174
105,952
(116,001)
2,816
(103,354)
2,598
-
2,816
(24)
2,574
(398,873)
(355,748)
2013
$'000
2012
$'000
28,675
28,675
3,545
3,545
182
TRANSURBAN 10 Current assets - Trade and other receivables
Loans to related parties
Prepayments
Other receivables
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
Notes
10(a)
10(b)
2013
$'000
2012
$'000
369,226
1,760
726
371,712
245,699
1,534
1,737
248,970
No class within trade and other receivables contain impaired or past due assets. Based on the credit history, it is
expected these amounts will be received when due. The Group does not hold any collateral in relation to these
receivables.
(a) Loans to related parties
Loans to related parties predominantly represent interest and finance charges on funds loaned from Transurban
Finance Company Pty Limited, distributions receivable from its subsidiaries and accrued interest from a related
party. There is no allowance for doubtful debts as the counterparties are related parties.
(b) Prepayments
Prepayments relate to expenses that have been paid but not yet incurred as at 30 June 2013.
11 Non-current assets - Receivables
Concession notes
Loans to related parties
Notes
11(a)
11(b)
2013
$'000
2012
$'000
717,834
5,874,457
6,592,291
632,383
5,765,982
6,398,365
None of the non-current receivables are impaired or past due but not impaired.
(a) Concession notes
Following agreements reached with the State of Victoria (the State), the Group paid a total of $765 million for the
State to assign all current concession notes issued to the State to Transurban Holding Trust and the State directed
CityLink to pay future concession notes to Transurban Holding Trust.
(b) Loans to related parties
Loans to related parties represents amounts advanced to other members of the Transurban Group. There is no
allowance for doubtful debts as the counterparties are related parties.
183
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
12 Equity accounted investments
Westlink M7:
Westlink Motorway Limited
WSO Finance Pty Limited
Westlink Motorway Partnership
2013
%
2012
%
2013
$'000
2012
$'000
50
50
50
50
50
50
150
150
-
-
-
-
-
-
-
-
Each of the above is a member of the Westlink Group, established to invest in, construct and operate the Westlink
M7 Motorway in Sydney for a period of 34 years until February 2037. All were incorporated in Australia.
Westlink Motorway Limited is the nominee manager of the Westlink Motorway Partnership.
WSO Finance Pty Limited is the financier of the Motorway.
Westlink Motorway Partnership was responsible for the construction of the Motorway. The Motorway opened for
operation on 16 December 2005.
Summarised financial information of equity accounted investments
2013
Westlink M7
2012
Westlink M7
Ownership
Interest %
Assets
$'000
Group's share of:
Liabilities
$'000
Revenues
$'000
Loss
$'000
50
50
1,266,001
1,266,001
(1,540,258)
(1,540,258)
60,827
60,827
(37,165)
(37,165)
726,107
726,107
(970,838)
(970,838)
60,350
60,350
(22,044)
(22,044)
184
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
12
Equity accounted investments
(continued)
Movements in carrying amounts
Balance 1 July
Share of recognised losses after income tax
Additional investment acquired
Balance at
30 June
Losses not recognised
Balance at 1 July
Unrecognised losses for the year
Balance at 30 June
Share of equity accounted investments' expenditure commitments
As at the reporting date, there are no expenditure commitments.
Contingent liabilities of equity accounted investments
As at the reporting date, there are no contingent liabilities.
13 Non-current assets - Term loan notes
Term loan notes
2013
$'000
2012
$'000
-
-
-
-
-
-
-
-
148,612
37,165
185,777
126,568
22,044
148,612
2013
$'000
2012
$'000
831,646
831,646
782,667
782,667
Term Loan Notes (TLN's) represent Transurban’s debt funding contribution to the Westlink M7 Motorway. The fixed
maturity date of the TLN's is the earlier of 34 years and the termination of the “Agreement to Lease” between the
Roads and Maritime Services (formerly known as the Roads and Traffic Authority) of New South Wales and
Westlink Motorway Limited.
The interest rate charged on these notes is 11.93 per cent and any unpaid interest capitalises into additional notes.
During the year ended 30 June 2013 the Group capitalised interest of $49.0 million (2012: $58.4 million). The
TLN's are accounted for as held-to-maturity investments.
Impairment and risk exposure
None of the TLN's are either past due or impaired. All TLN's are denominated in Australian currency. As a result,
there is no exposure to foreign currency risk. There is also no exposure to price risk as the investments will be held
to maturity.
185
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
2013
$'000
2012
$'000
372
372
372
7,037
7,037
56,803
56,803
63,840
70
70
70
76
76
85,039
85,039
85,115
14 Derivative financial instruments
Non-current assets
Interest rate swap contracts - cash flow hedges
Total non-current derivative financial instruments
Total derivative financial instrument assets
Current liabilities
Interest rate swap contracts - cash flow hedges
Total current derivative financial instrument liabilities
Non-current liabilities
Interest rate swap contracts - cash flow hedges
Total non-current derivative financial instrument liabilities
Total derivative financial instrument liabilities
Instruments used by the Group
The Group is party to derivative financial
instruments in the normal course of business in order to hedge
exposure to fluctuations in interest and foreign exchange rates in accordance with the Group's financial risk
management policies (refer to note 38).
The instruments used by the Group are as follows:
Interest rate swap contracts - cash flow hedges
The Group uses interest rate swap contracts for hedging purposes to convert variable rate borrowings to fixed
interest. Variable rate borrowings of the Group currently bear an average interest rate of 4.5 per cent (2012: 5.3 per
cent). It is policy to protect part or all of the loans from exposure to increasing interest rates. Accordingly, the Group
has entered into interest rate swap contracts under which it receives interest at variable rates and pays interest at
fixed rates.
Swaps taken out by the Group currently cover 93 per cent (2012: 99 per cent) of long term variable debt. The
average all-in rate after hedging on the hedged portion of the Group's variable rate borrowings is 6.9 per cent
(2012: 7.1 per cent).
186
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
15 Deferred tax assets and liabilities
Assets
Liabilities
Net
2013
$'000
2012
$'000
2013
$'000
2012
$'000
2013
$'000
2012
$'000
The balance comprises
temporary differences
attributable to:
Current year and prior year
losses
Receivables
Tax assets/(liabilities)
Set off of tax
Net tax assets
Movements
Opening balance at 1 July
Credited/(charged) to the
income statement
Balance at 30 June
Deferred tax assets/(liabilities)
to be recovered after more
than 12 months
5,325
-
5,325
(1,551)
3,774
4,113
1,212
5,325
4,113
-
4,113
(1,413)
2,700
3,072
1,041
4,113
-
(1,551)
(1,551)
1,551
-
(1,413)
(138)
(1,551)
-
(1,413)
(1,413)
1,413
-
(1,308)
(105)
(1,413)
5,325
(1,551)
3,774
-
3,774
2,700
1,074
3,774
5,325
5,325
4,113
4,113
(1,551)
(1,551)
(1,413)
(1,413)
3,774
3,774
4,113
(1,413)
2,700
-
2,700
1,764
936
2,700
2,700
2,700
The set off of deferred tax assets and liabilities relates to deferred tax balances for Australian domiciled entities that
are levied tax by the Australian Taxation Office.
187
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
16 Non-current assets - Intangible assets
CityLink
$'000
Hills M2
Motorway
$'000
Lane Cove
Tunnel
$'000
Assets under
construction
$'000
Total
$'000
1,207,442
(294,638)
912,804
2,116,141
(417,414)
1,698,727
348,290
(11,740)
336,550
160,751
-
160,751
3,832,624
(723,792)
3,108,832
912,804
-
(40,475)
872,329
1,698,727
-
(54,945)
1,643,782
336,550
-
(13,184)
323,366
160,751
224,296
-
385,047
3,108,832
224,296
(108,604)
3,224,524
1,207,442
(335,113)
872,329
2,116,141
(472,359)
1,643,782
348,290
(24,924)
323,366
385,047
-
385,047
4,056,920
(832,396)
3,224,524
872,329
-
(40,475)
831,854
1,643,782
-
(54,945)
1,588,837
323,366
-
(13,185)
310,181
385,047
210,630
-
595,677
3,224,524
210,630
(108,605)
3,326,549
1,207,442
(375,588)
831,854
2,116,141
(527,304)
1,588,837
348,290
(38,109)
310,181
595,677
-
595,677
4,267,550
(941,001)
3,326,549
1 July 2011
At
Cost
Accumulation amortisation
Net book amount
Year ended
30 June 2012
Opening net book amount
Additions
Amortisation charge
Closing net book amount
30 June 2012
At
Cost
Accumulation amortisation
Net book amount
Year ended
30 June 2013
Opening net book amount
Additions
Amortisation charge
Closing net book amount
30 June 2013
At
Cost
Accumulated amortisation
Net book amount
Concession assets
The CityLink, Hills M2, Eastern Distributor and Lane Cove Tunnel Service Concession Arrangements have been
accounted for in accordance with AASB-I 12 and therefore the concession assets have been classified as
Intangible Assets.
CityLink concession asset
Transurban holds the Concession for Melbourne’s CityLink tollway which grants the Group the right to design,
build, operate and maintain CityLink for the concession period ending on 14 January 2034 (being 34 years
following completion of construction). The Concession Deed also requires Transurban to maintain the Motorway.
Transurban has the right
to collect tolls from CityLink for the duration of the Concession Arrangement and
maintains the tollway to ensure continuous availability for public use. Tolls are escalated in accordance with the
maximum allowable increases in the Concession Deed, being a quarterly escalation at the greater of quarterly CPI
or 1.1065 per cent (equivalent to an annual escalation rate of 4.5 per cent) for the first 15 years then quarterly by
CPI, but no greater than annual CPI plus 2.5 per cent. At the end of the concession period, all concession assets
are to be returned to the Victorian State Government.
188
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
16
Non-current assets - Intangible assets
(continued)
Concession assets
(continued)
Hills M2 concession asset
Transurban has the right to toll the Hills M2 Motorway until 2046, following completion of the upgrade project.
The Concession Deed also requires Transurban to maintain the Motorway.
Toll
increases for the Motorway are based on a maximum toll increase as defined in the Concession Deed,
being a quarterly escalation at the greater of quarterly CPI or 1 per cent, subject to integer rounding. At the end
of the concession period, all concession assets will be returned to the NSW State Government.
Lane Cove Tunnel
Transurban has the right to toll the Lane Cove Tunnel until January 2037. The Concession Deed also requires
Transurban to maintain the Motorway.
Toll increases for the Lane Cove Tunnel are based on the maximum toll increase as defined in the Concession
Deed, being a quarterly escalation of CPI, subject to the nearest whole cent rounding. At the end of the
concession period, all concession assets will be returned to the NSW State Government.
Assets under construction
The Group is currently undertaking upgrade works on the Hills M2 Motorway. These will be transferred to the
respective intangible assets upon completion.
Impairment testing
The Group tests whether goodwill and other intangible assets have suffered any impairments, in accordance with
the accounting policy stated in note 1(h). The recoverable amount of assets and cash-generating units have been
determined based on the greater of value-in-use and fair value less cost to sell calculations. These calculations
require the use of assumptions regarding traffic flows, discount rates, growth rates and other factors affecting
operating activities of cash-generating units.
Key assumptions used for calculating the recoverable amount
The Group makes assumptions in calculating the recoverable amount of its cash generating units. These include
assumptions around expected traffic flows and forecast operational costs. In performing the calculations the Group
has applied a discount rate of 8.2 per cent (2012: 8.8 to 11.0 per cent), representing the implied discount rate
applicable to the risk profile of the Group's assets, to discount the forecast future attributable cash flows. In
determining future cash flows, the Group has also applied rates of growth to underlying operating assumptions to
reflect the expected performance of the assets beyond the budget period in accordance with the respective
concessions. The operating costs have been escalated in line with a combination of Consumer Price Index (CPI)
and Average Weekly Earnings (AWE) forecasts. A long term CPI rate of 2.5 per cent (2012: 2.5 per cent) and AWE
of 4.0 per cent (2012: 4.0 per cent) have been used.
189
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
2013
$'000
2012
$'000
24,365
209,432
233,797
24,041
200,796
224,837
Notes
2013
$'000
2012
$'000
18(b)
18(a)
18(b)
438,256
438,256
-
-
1,504,852
3,110,568
4,615,420
1,412,849
3,297,513
4,710,362
5,053,676
4,710,362
17 Current liabilities - Trade and other payables
Trade payables and accruals
Related party payables
18 Borrowings
Current
Loans from related parties
Non-current
Term debt
Loans from related parties
Total borrowings
(a) Term debt
The term debt facilities are comprised of:
•
•
•
$520.0 million facility entered into by AMT Management Limited (as trustee for Airport Motorway Trust).
The facility has deferred borrowing costs of $3.1 million.
$740.0 million facility entered into by Hills Motorway Management Limited (as trustee for Hills Motorway
Trust). The facility has deferred borrowing costs of $4.0 million.
$260.0 million facility entered into by LCT-MRE Nominees Pty Limited (as trustee for LCT-MRE Trust).
The facility has deferred borrowing costs of $1.4 million.
The Airport Motorway facility was refinanced in July 2011 and is fully secured against the respective rights of
Airport Motorway Limited and Airport Motorway Trust and their assets. The facility is a $520.0 million non-recourse
syndicated facility with terms of three years ($295.0 million) and seven years ($225.0 million). The current floating
interest rate applicable to the facility is 2.8 per cent (2012: 3.5 per cent). These facilities are currently fully hedged
to an all-in rate after hedging of 6.9 per cent.
The Hills M2 facility was refinanced in November 2010 and is fully secured against the respective rights of Hills
Motorway Limited and Hills Motorway Trust and their assets. The facility is a non-recourse syndicated facility
totaling $740.0 million. The financing comprised: the refinancing of $465.0 million of existing debt with terms of four
years ($400.0 million), and six years ($65.0 million); and a new construction capex facility of $275.0 million with a
term of six years. As at 30 June 2013, $268.4 million was drawn under the construction capex facility. The current
floating interest rate applicable to the total facility is 2.9 per cent (2012: 3.7 per cent). The total facility is currently
86 per cent hedged with an all-in rate after hedging of 6.8 per cent.
190
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
18
Borrowings
(continued)
(a)
Term debt
(continued)
The Lane Cove Tunnel facility was refinanced in June 2013 and is fully secured against the respective rights of
LCT-MRE Pty Limited and LCT-MRE Trust and their assets. This facility is a non-recourse syndicated facility with a
term of approximately three years. The current floating rate applicable to the facility is 2.9 per cent (2012: 3.6 per
cent). The facility is currently fully hedged to an all-in rate after hedging of 6.3 per cent.
(b) Loans from related parties
The Group receives funding from a related party, Transurban Finance Company Pty Limited, which is used to
finance its activities.
Covenants
The Transurban Group's consolidated debt has the following Interest Coverage Ratio ("ICR") covenants:
•
•
CityLink - ICR greater than 1.1 times
Group - ICR greater than 1.25 times
In addition, the Transurban Group has a market capitalisation clause where gearing must not exceed 60 per
cent. Based on the balance sheet at 30 June 2013, the Transurban Group's Security price would need to close
below $2.24 per Security for 20 consecutive business days to trigger this clause.
In addition, the non-recourse debt at M1 Eastern Distributor, Hills M2 Motorway and Lane Cove Tunnel has the
following covenants:
•
•
•
M1 Eastern Distributor - ICR greater than 1.2 times
Hills M2 Motorway - ICR greater than 1.2 times
Lane Cove Tunnel - ICR greater than 1.15 times
19 Current liabilities - Provisions
Distribution to security holders
Distribution to non-controlling interests in subsidiaries
Notes
19(a)
19(a)
2013
$'000
2012
$'000
177,840
32,963
210,803
167,756
28,065
195,821
(a) Distributions to security holders and non-controlling interests
These distributions are provided for once approved by the Board and are announced to equity holders.
Movements in provisions
Movements in each class of provision during the financial year are set out below:
191
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
19
Current liabilities - Provisions
(continued)
Movements in provisions
(continued)
2013
Carrying amount at 1 July
Provision recognised
Amounts paid/utilised during the year
Carrying amount at 30 June
20 Other liabilities
Current
Unearned income (related parties)
Non-current
Promissory notes
Total other liabilities
(a) Unearned income
Distribution to
non-
controlling
interests in
subsidiaries
$'000
Distribution
to security
holders
$'000
167,756
353,282
(343,198)
177,840
28,065
14,759
(9,861)
32,963
Notes
2013
$'000
2012
$'000
20(a)
20(b)
27,128
27,128
22,918
22,918
50,046
20,549
20,549
20,326
20,326
40,875
Unearned income represents amounts received in advance and will be recognised when the income is earned.
(b) Promissory Notes
The Hills Motorway Trust has entered into leases with Roads and Maritime Service of New South Wales (RMS).
Annual lease liabilities under these leases total $7.0 million, indexed annually to consumer price index (CPI)
over the estimated period that the M2 Motorway will be used. Until such time as a threshold return is achieved,
payments under these leases can be made at any time at the discretion of the trustee of the Hills Motorway
Trust, by means of the issue of non-interest bearing Promissory Notes to the RMS.
Promissory Notes are recognised at the present value of expected future repayments. As the timing and profile
of these repayments is largely determined by the available equity cash flows of the M2 Motorway, the present
value of the expected future repayments is determined using a discount rate of 12 per cent (2012: 12 per cent)
which recognises their subordinated nature.
The face value of Promissory Notes on issue at 30 June 2013 is $147.6 million (2012: $136.9 million). The net
present value at 30 June 2013 of the redemption payments relating to these Promissory Notes is $22.9 million
(2012: $20.3 million).
192
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
21 Issued units
The issued units of the Trust are a component of a parcel of stapled securities, each parcel comprising one share
in Transurban Holdings Limited, one unit in Transurban Holding Trust and one share in Transurban International
Limited.
The individual securities comprising a parcel of stapled securities cannot be traded separately.
Issued units
2013
Number
'000
2012
Number
'000
2013
$'000
2012
$'000
Ordinary units fully paid
1,481,595
1,481,595
1,458,321
1,458,321
7,335,659
7,335,659
7,240,721
7,240,721
Units in trust
The number of units on issue is 1,481,594,818 (2012: 1,458,321,154).
Units entitle the holder to participate in distributions and the winding up of Transurban Holding Trust in proportion to
the number of and amounts paid on the units held. On a show of hands every holder of units present at a meeting
in person or by proxy is entitled to one vote.
All units issued form part of the Transurban Group stapled securities issued. The amounts above represent the
value apportioned to Transurban Holding Trust, with the remaining value apportioned to Transurban Holdings
Limited and Transurban International Limited.
Capital risk management
The Group is subject to a gearing ratio covenant imposed by senior secured lenders. The Group monitors capital
on the basis of the gearing ratio to ensure compliance with the covenant. There have been no breaches of the
covenant. For further information refer to note 18.
The Group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that
they can continue to provide returns to security holders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amounts of distributions paid to
security holders, return capital to security holders, issue new securities or sell assets to reduce debt.
193
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
21
Issued units
(continued)
Movements in issued units
Opening balance at 1 July 2011
Distribution reinvestment plan
Purchase, disposal and vesting of treasury securities
Transfer vesting portion of LTI from share-based
payment reserve
Purchase of Performance Rights Plan units
Closing balance at 30 June 2012
Opening balance at 1 July 2012
Distribution reinvestment plan
Transfer vesting portion of LTI from share-based
payment reserve
Placement to UniSuper Limited
Deferred Short Term Incentives issued
Closing balance at 30 June 2013
Notes
21(a)
21(b)
21(a)
21(c)
21(d)
Number of
units
'000
1,443,193
14,162
351
615
-
1,458,321
$'000
7,188,221
51,682
413
1,022
(617)
7,240,721
1,458,321
5,809
7,240,721
23,705
715
16,260
490
1,481,595
1,111
68,200
1,922
7,335,659
(a) Distribution reinvestment plan
The Transurban Group has established a distribution reinvestment plan under which holders of Stapled Securities
may elect to have all or part of their distribution entitlements satisfied by the issue of new stapled securities rather
than by cash.
(b) Treasury units
Stapled Securities (including units in the Trust) were issued to executives under share-based payment plans. The
stapled securities are held by the executive but will only vest in the executive in accordance with the terms of the
plans. The acquired securities cannot be transferred or sold prior to vesting date. On forfeit the securities are sold
on market.
(c) Placement to UniSuper Limited
On 7 January 2013 Transurban issued 16,260,163 ordinary stapled securities under a placement to Unisuper
Limited (as trustee of the superannuation fund known as UniSuper).
(d) Deferred Short Term Incentives
Mandatory STI deferral of a portion of the overall STI award, as detailed in the Remuneration Report, was
introduced for the CEO and other Senior Executives in the year ended 30 June 2012. For Australian Senior
Executives deferral is into securities.
194
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
22 Reserves and accumulated losses
Reserves
Cash flow hedges
Share-based payments
Movements:
Cash flow hedges
Balance 1 July
Revaluation - gross (note
Amount attributable to non-controlling interests
Balance
30 June
14)
Share-based payments
Balance 1 July
Employee share plan expense
Transfer vesting portion of LTI to issued units
Transfer non-vesting portion of LTI from retained earnings
Deferred Short Term Incentives issued
Balance
30 June
Accumulated losses
Movements in accumulated losses were as follows:
1 July
Balance
Profit for the year attributable to unit holders of Transurban Holding Trust
Distributions to unit holders
Transfer non-vesting portion of LTI to share based payments reserve
Balance
30 June
2013
$'000
2012
$'000
(56,851)
4,532
(52,319)
(76,190)
6,048
(70,142)
2013
$'000
2012
$'000
(76,190)
21,576
(2,237)
(56,851)
6,048
4,596
(4,190)
-
(1,922)
4,532
(12,001)
(71,286)
7,097
(76,190)
5,162
2,365
(1,435)
(44)
-
6,048
2013
$'000
2012
$'000
(1,804,650)
378,438
(353,282)
-
(1,779,494)
(1,814,990)
337,662
(327,366)
44
(1,804,650)
Nature and purpose of other reserves
Cash flow hedges
The cash flow hedges reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that
are recognised in other comprehensive income, as described in note 1(k). Amounts are reclassified to profit or loss
when the associated hedged transaction affects profit or loss.
Share-based payments
The share-based payments reserve is used to recognise the fair value of long-term incentives issued but not
exercised.
195
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
23 Distributions
Distribution payable
Final distribution payable and recognised as a liability: 12.0 cents (2012: 11.5
cents) per fully paid Stapled Security payable 14 August 2013
2013
$'000
2012
$'000
177,791
177,791
167,707
167,707
Distributions paid during the year
Final distribution for 2012 financial year of 11.5 cents (2011: 14.0 cents) per
fully paid Stapled Security paid 14 August 2012
Interim distribution for 2013 financial year of 12.0 cents (2012: 11.0 cents) per
fully paid Stapled Security paid 14 February 2013
Total distributions paid during the year
167,707
175,491
343,198
202,096
159,654
361,750
Distributions paid in cash or satisfied by the issue of Stapled Securities
under the distribution reinvestment plan during the years ended
30 June 2012
30 June 2013
and
Paid in cash
Satisfied by issue of Stapled securities
Funds available for future distribution reinvestment plans
(a)
316,558
26,638
2
343,198
294,958
66,791
1
361,750
(a) The value of stapled securities represents the total value of securities issued, however, this value is
apportioned between Transurban Holdings Limited ($6.4
and Transurban International Limited ($2.0 million).
million), Transurban Holding Trust ($18.2 million)
24 Remuneration of auditors
The audit fee for the current and prior year has been borne and paid by a related party, Transurban Limited.
196
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
25 Contingencies
The Group and parent entity had contingent liabilities at 30 June 2013 in respect of:
Equity guarantee
Subsidiaries of Transurban DRIVe Holdings LLC (DRIVe), a related party of
the Group, hold concession
agreements with The Commonwealth of Virginia to construct and operate High Occupancy Toll (HOT) lanes on
the 495 Express Lanes and 95 Express Lanes. The 495 Express Lanes opened for operation on 17 November
2012. The 95 Express Lanes project is currently in the construction phase. Construction is expected to be
complete in late 2014.
On 31st July 2012, the Transurban Group, through the entities in the triple staple, being Transurban Holdings
Limited, Transurban International Limited and Transurban Infrastructure Management Limited (as responsible
entity of the Transurban Holding Trust), entered into an agreement with 95 Express LLC, a subsidiary of DRIVe,
the Virginia Department of Transportation and US Bank NA to provide an Equity Funding Guaranty (the Guarantee)
over all of DRIVe’s equity obligations associated with funding the equity contributions to the 95 Express Lane
project.
The Group owns 75% of the equity of DRIVe and recognises this investment in the consolidated financial
statements using the equity method of accounting. DRIVe holds 90 per cent of the equity in 495 Express Lanes
and 95 Express Lanes and, from time to time, is required to make equity contributions to fund the equity
component of the 495 and 95 Express Lanes project costs. The total equity contribution DRIVe is obliged to
make to 495 Express Lanes is US$313,825,757, of which the total payment had been paid at balance sheet
date. The total contribution DRIVe is obliged to make to 95 Express Lanes is US$252,336,549 of which
US$151,204,854 had been paid at balance sheet date.
In accordance with the DRIVe LLC Agreement, should a DRIVe member default on any capital calls, the
Transurban Group has the right to acquire their share of DRIVe at a 50 per cent discount to its fair value. As
such in the instance of the Guarantee being called, the Transurban Group may exercise its right to the interest in
DRIVe at a discounted value.
26 Intra-group guarantees
As at 30 June 2013, the Transurban Group comprises Transurban Holdings Limited, Transurban Holding Trust and
Transurban International Limited, traded and quoted on the ASX as one triple stapled security.
Under the stapling arrangement, each entity directly and/or indirectly supports each entity and its controlled entities
within the group on a continual basis.
197
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
27 Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Intangible assets
Payable:
Within one year
Later than one year but not later than five years
Promissory Notes
2013
$'000
2012
$'000
54,803
875
55,678
139,195
12,792
151,987
Hills Motorway Management Limited, as trustee of the Hills Motorway Trust, has entered into an agreement with
the Roads and Maritime Services of New South Wales (RMS). Annual liabilities under this agreement total $7.0
million indexed annually to the Consumer Price Index over the estimated period that the M2 Motorway will be
used. Until such time as a threshold return is achieved, payments under this agreement can be made at the
discretion of the trustee, by means of the issue of non-interest bearing promissory notes to the RMS. For further
information refer to note 20.
28 Related party transactions
Transactions with related parties
All of the directors of Transurban Infrastructure Management Limited are also directors of Transurban Holdings
Limited (THL) and Transurban International Limited (TIL). The following services are provided by the Group to THL
and TIL and/or their subsidiaries:
•
•
Financial support through interest bearing and non-interest bearing loans; and/or
The rental of land.
Financial support is received from Transurban Finance Company Pty Limited in the form of an interest bearing
loan. The Group pays interest and related finance charges for such loan.
Transurban Infrastructure Management Limited is the Responsible Entity of Transurban Holding Trust, CityLink
Trust and CARS Trust and receives Responsible Entity and Management Fees.
The following transactions occurred with related parties:
198
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
28
Related party transactions
(continued)
Transactions with related parties
(continued)
Amounts recognised as revenue
Rental income
Interest income
Term loan note interest revenue
Amounts recognised as expenses
Interest and other related charges paid
Responsible Entity fees
Aggregate amounts of related party receivables at balance date
Current receivables
Term loan notes (loan to associate)
Non-current receivables
Aggregate amounts of related party payables at balance date
Current payables
Non-current payables
2013
$
2012
$
265,467,775
389,176,553
97,385,914
752,030,242
260,060,073
370,765,907
91,328,563
722,154,543
245,070,744
2,855,874
247,926,618
252,330,549
2,791,895
255,122,444
369,225,638
831,645,619
5,874,457,017
7,075,328,274
245,698,961
782,667,047
5,765,981,717
6,794,347,725
647,687,719
3,110,567,741
3,758,255,460
200,795,653
3,297,511,859
3,498,307,512
Loans to/from related parties
No provision for doubtful debts has been raised in relation to any outstanding balances, and no expense has been
recognised in respect of bad or doubtful debts from related parties.
Loans to associate
The “loan to associate” is via Term Loan Notes (“TLN”). The TLN represent the Group’s funding contribution to the
Westlink Motorway Partnership and earn interest at a fixed rate of 11.93 per cent until the earlier of 34 years and
the termination of the “Agreement to Lease” between the Roads and Maritime Services of New South Wales and
Westlink Motorway Limited.
Any unpaid interest is capitalised and deemed to subscribe for further loan notes with an aggregate principal
amount equal to that unpaid interest.
The TLN have not been affected by equity accounting losses from the associate.
Terms and conditions of transactions with related parties other than key management personnel or entities
All transactions were made on normal terms and conditions and at market rates.
199
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
29 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1(b):
Equity holding
2012
%
2013
%
100
100
100
100
100
100
100
100
75.1
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75.1
100
100
100
100
100
100
100
100
100
100
Name of entity
Country of
incorporation Class of shares
CityLink Trust
Transurban Finance Trust
Transurban AL Trust
Transurban CARS Trust
Transurban WSO Trust
Hills Motorway Trust
T (895) Finance Trust
Sydney Roads Trust
Airport Motorway Trust
LCT-MRE Trust
LCT-MRE Holdings Trust
Abigroup Westlink Partner Holding No.4 Pty Ltd
Abigroup Westlink Partner No.4 Pty Ltd
LMI Westlink Partner Holding No.4 Pty Ltd
LMI Westlink Partner No.4 Pty Ltd
Abigroup Westlink Partner Holding No.2 Pty Ltd
Abigroup Westlink Partner No.2 Pty Ltd
LMI Westlink Partner Holding No.2 Pty Ltd
LMI Westlink Partner No.2 Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
The proportion of ownership interest is equal to the proportion of voting power held.
200
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
30 Parent entity financial information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Unit holders' funds
Issued units
Reserves
Accumulated losses
Profit for the
year
Total comprehensive income
Contingent liabilities of the parent entity
For details of contingent liabilities of the parent entity, refer to note 25.
31 Events occurring after balance sheet date
2013
$'000
2012
$'000
1,012,607
683,578
8,181,207
7,697,413
9,193,814
8,380,991
322,904
304,959
2,854,034
2,244,702
3,176,938
2,549,661
(18,050,628)
(17,493,990)
7,335,659
4,532
(1,323,315)
6,016,876
7,240,721
6,048
(1,415,439)
5,831,330
445,406
425,419
445,406
425,419
There are no unusual matters or circumstances that have arisen since the end of the financial year that have
significantly affected or may significantly affect the operations of the Group, the results of those operations or the
state of affairs of the Group in subsequent financial years.
201
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
32 Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Depreciation and amortisation
Capitalised term loan note interest
Non-cash concession notes income
Non-cash finance costs
Change in operating assets and liabilities:
Decrease/(Increase) in receivables and prepayments
Increase in payables
(Increase) in operating related party balances
Movement in current tax liabilities and deferred taxes
Increase (decrease) in unearned income
Increase in Promissory Note liability
Net cash inflow from operating activities
33 Non-cash investing and financing activities
2013
$'000
2012
$'000
393,241
108,605
(48,979)
(85,451)
10,294
785
324
(305,245)
(2,246)
6,579
2,592
80,499
350,600
108,604
(58,442)
(78,042)
14,997
(1,262)
5,429
(255,388)
613
(12,738)
606
74,977
2013
$'000
2012
$'000
Distributions satisfied by the issue of units under the distribution reinvestment plan
23,705
51,682
34 Earnings per unit
Basic earnings per unit
2013
Cents
2012
Cents
Earnings attributable to the ordinary unit holder
Total basic earnings per unit attributable to the ordinary equity holders of the
Trust
25.7
25.7
23.2
23.2
Diluted earnings per unit
2013
Cents
2012
Cents
Earnings attributable to the ordinary unit holder
Total diluted earnings per unit attributable to the ordinary equity holders of the
Trust
25.7
25.7
23.2
23.2
202
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
34
Earnings per unit
(continued)
Reconciliation of earnings used in calculating earnings per unit
2013
$'000
2012
$'000
Basic and diluted earnings per unit
Profit for the year
Profit attributable to non-controlling interests
Profit attributable to ordinary unit holders of the trust and used in calculating basic
and diluted earnings per unit
393,241
(14,803)
378,438
350,600
(12,938)
337,662
Weighted average number of units used as the denominator
2013
Number
2012
Number
Weighted average number of units used as the denominator in calculating basic
and diluted earnings per unit
1,470,495,508
1,452,932,838
Basic earnings per unit
Basic earnings per unit is determined by dividing the profit attributable to unit holders excluding any non-controlling
interest and costs of servicing equity other than distributions, by the weighted average number of units outstanding
during the financial year.
Diluted earnings per unit
Diluted earnings per unit adjusts the figures used in the determination of basic earnings per unit to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential units and
the weighted average number of units that would have been outstanding assuming the conversion of all dilutive
potential units.
35 Share-based payments
Performance Awards Plan
Under the Performance Awards Plan (PAP), eligible executives receive a grant of Performance Awards which
entitles participants to receive securities at no cost subject to the achievement of performance conditions. The
Board has discretion as to the form of the award at the end of the performance period and may grant cash
payments of equivalent value at vesting. No dividends or distributions on securities are payable to participants prior
to vesting.
Dual performance measures (Free Cash Flow (FCF) (from 1 July 2011) or earnings before interest,
tax,
depreciation and amortisation (EBITDA) measure (pre 1 July 2011) and relative total security holder return (TSR)
apply to Performance Awards, each representing 50 per cent of the award. The use of dual measures balances the
need to both improve the underlying performance of the business over the long term as well as appropriate returns
relative to the market.
Performance Awards were granted with a three year vesting period. For the plan granted 11 December 2009 and
future grants, the awards are tested at the end of the three year vesting period. However, for the 1 November 2008
grant, the awards were tested at the end of each year. If the performance measures were satisfied for the year, one
third of the awards were preserved until the end of the three year period. At the end of the three years a cumulative
test of the performance measures was applied to any unvested awards.
203
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
35
Share-based payments
(continued)
Performance Awards Plan
(continued)
Vesting /
Expiry date
11 Dec 2012
1 Nov 2013
1 Nov 2013
30 Jun 2014
30 Jun 2014
30 Jun 2015
30 Jun 2015
Grant date
2013
11 Dec 2009
1 Nov 2010
23 Dec 2010
26 Sep 2011
11 Nov 2011
15 Aug 2012
19 Oct 2012
Total
Fair value at grant date ($)
FCF
EBITDA
TSR
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
3.33
3.23
3.33
3.37
3.27
2.72
2.95
4.97
4.62
4.97
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4.63
4.81
4.99
5.43
1,625,994
1,201,077
684,683
661,932
715,024
-
-
4,888,710
-
-
-
-
-
747,201
448,400
(1,624,766)
-
-
-
-
-
-
1,195,601 (1,624,766)
(1,228)
(278,601)
-
(241,060)
-
(267,099)
-
(764,769)
-
922,476
684,683
420,872
715,024
480,102
448,400
3,671,557
a
Weighted average exercise price
$4.06
$3.98
$4.15
$3.92
$4.02
Vesting /
Expiry date
Fair value at grant date ($)
FCF
EBITDA
TSR
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2011
11 Dec 2012
1 Nov 2013
1 Nov 2013
30 Jun 2014
30 Jun 2014
3.30
3.33
3.23
3.33
3.37
3.27
4.27
4.97
4.62
4.97
N/A
N/A
N/A
N/A
N/A
N/A
4.63
4.81
1,260,113
1,776,583
1,401,575
684,683
-
-
5,122,954
-
-
-
-
837,990
715,024
(1,193,516)
-
-
-
-
-
1,553,014 (1,193,516)
(66,597)
(150,589)
(200,498)
-
(176,058)
-
(593,742)
-
1,625,994
1,201,077
684,683
661,932
715,024
4,888,710
Grant date
2012
1 Nov 2008
11 Dec 2009
1 Nov 2010
23 Dec 2010
26 Sep 2011
11 Nov 2011
Total
a
Weighted average exercise price
Executive Equity Plan
$4.00
$4.02
$3.79
$3.99
$4.06
Equity awards were granted under the Executive Equity Plan (EEP) based on executives' performance and were
designed to encourage retention of executives while focusing on business excellence. Individuals who are high
performers and in business critical roles were nominated for awards for their past contribution and expected future
performance. Board approval was required to grant EEP awards to nominated executives.
Under the EEP, eligible executives received a grant of stapled securities in the Transurban Group (Securities) at no
cost that are subject to disposal restrictions for three years from the grant date. Participants are entitled to
distributions paid on their Securities during the restriction period.
the executive ceases employment with
Transurban during the restriction period, their Securities will be forfeited unless the Board decides otherwise.
If
Awards were last made under the EEP on 1 November 2008 and vested on 1 November 2011. The table below
provides details of the awards granted and vested.
Grant date
2012
1 Nov 2008
Total
Vesting /
Expiry date
Exercise
price
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2011
$4.27
433,722
433,722
-
-
(433,722)
(433,722)
-
-
-
-
Weighted average exercise price
a
$4.27
$-
$4.27
$-
$-
204
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
35
Share-based payments
(continued)
Executive Equity Plan
(continued)
Assessed fair value
The assessed fair value at grant date of the plans above has been independently determined in accordance with
AASB 2.
The TSR component of the Performance Awards has been valued applying a Monte-Carlo simulation (of a
geometric Brownian motion process, as used in the Black-Scholes framework) to model Transurban's future
security price and TSR performance against the comparator group performance at vesting date. The valuation
model takes into account the term of the award, the security price at grant date and expected price volatility of the
underlying security, the expected dividend yield and the risk free interest rate for the term of the award.
The Free Cash component of performance awards has been valued using the Black-Scholes framework. The
model valuation takes into account the term of the award, the security price at grant date, the expected dividend
yield and the risk free interest rate for the term of the award.
Performance Awards Plan - CEO Sign On Award Plan
Scott Charlton received a one-off grant of equity as a sign-on award in recognition of the incentives forfeited with
his former employer by joining Transurban. The awards were awarded at no cost to Scott and will vest, subject to
his continued employment with Transurban as described in his employment contract, in three equal tranches on
each of the tranches vesting dates. Upon vesting, the awards will automatically exercise and settle in securities. No
dividends or distributions on securities are payable prior to vesting.
Grant date
2013
14 Sep 2012
14 Sep 2012
14 Sep 2012
Total
Weighted average exercise price
x
Short Term Deferred Incentive Plan
Vesting /
Expiry date
Fair value
at grant
date
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
16 Jul 2013
16 Jul 2014
16 Jul 2015
$5.71
$5.71
$5.71
-
-
-
-
78,752
78,752
78,752
236,256
$-
$5.71
-
-
-
-
$-
-
-
-
-
78,752
78,752
78,752
236,256
$-
$5.71
Mandatory short term incentive (STI) deferral of 30 per cent of the STI awarded to the CEO and other Senior
Executives was introduced in the year ended 30 June 2012. The deferral component was increased to 50%
during the year ended 30 June 2013 for the CEO and all other newly appointed senior executives. The deferral
period is three years (comprising the first year as the performance period and a two year trading restriction).
Vesting occurs at the end of the two year deferral period, subject to continued employment with the Transurban
Group and can be exercised at vesting date.
Grant date
2013
15 Aug 2012
Total
Weighted average exercise price
x
Vesting /
Expiry date
Fair value
at grant
date
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Jul 2014
$5.68
-
-
$-
642,388
642,388
$5.68
-
-
$-
-
-
$-
642,388
642,388
$5.68
205
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
35
Share-based payments
(continued)
Short Term Deferred Incentive Plan
(continued)
Fair value
The fair value at grant dates in both the deferred STI plan and the CEO sign-on awards plan have been determined
in accordance with AASB 2 by using a volume weighted average price (VWAP) over a specified period of time.
Employee security scheme
The Transurban Employee Security Ownership Plan (the Plan) provides employees with an opportunity to be a part
owner of Transurban and partner in its continued success.
All Australian based permanent employees are eligible to participate in the Investment Tax Exempt Plan and the
Investment Tax Deferred Plan. Under the plans, Transurban provides participants with a matching component
toward the acquisition of the stapled securities. For the period 1 July 2012 to 30 June 2013, the cost of company
matches was $132,162 (2012: $114,459) for the Investment Tax Exempt Plan and $450,374 (2012: $391,708) for
the Investment Tax Deferred Plan.
The third element under the Plan is the Incentive Plan. Subject to Board approval and the performance of the
Group, eligible employees may receive a certain number of Transurban securities at no cost to them. In February
2013, each participant was allocated 100 stapled securities at a value of $6.12 per security. Stapled Securities
provided under the Plan were acquired on the open market. Eligible US based participants received an equivalent
cash award.
2013
Number
2012
Number
Shares purchased on the market under the plan and provided to participating
employees
45,900
42,200
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised for the Transurban Group during the
period as part of employee benefit expense was $6.6 million (2012: $3.1 million).
36 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the Group and that are believed to be
reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
206
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
36
Critical accounting estimates and judgements
(continued)
Valuation of Promissory Notes and Concession Notes
The Group holds non-interest bearing long term debt, represented by promissory notes and concession notes, that
are included in the financial statements at the present value of expected future payments. The calculations to
discount these notes to their present value are based on the estimated timing and profile of the repayments.
Assumptions are made in determining the timing and profile, based on expected available equity cash flows of the
Group's cash generating units.
A discount rate is used to value the promissory notes and concession notes to their present value, which is
determined through reference to other facilities in the market with similar characteristics.
Fair value of derivatives and other financial instruments
The fair value of financial
instruments that are not traded in an active market is determined using valuation
techniques. The Group uses its judgement to select a variety of methods and makes assumptions that are mainly
based on market conditions existing at each balance sheet date.
Impairment of Assets
The Group tests whether its assets have suffered any impairment when an event occurs that indicates that this
may be the case. The recoverable amount of any cash generating units have been determined based on the
to sell calculations. These calculations require the use of
greater of value-in-use and fair value less cost
assumptions regarding traffic flows, discount rates, growth rates and other factors affecting operating activities.
207
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37 Key management personnel disclosures
Directors
With the exception of the changes noted below, the following persons were Directors of Transurban Infrastructure
Management Limited, the responsible entity of the Trust during the financial year.
Executive Directors
Christopher Lynch (resigned 16 July 2012)
Scott Charlton (appointed 16 July 2012)
Non-executive Directors
Lindsay Maxsted (Chairman)
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer (resigned 7 August 2012)
Christine O'Reilly
Rodney Slater
Ian Smith
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of
the Group, directly or indirectly, during the financial year:
J Aument*
W Ballantine*
K Daley
A Head
S Hogg
S Johnson*
M Kulper
E Mildwater
T Steinhilber*
L Tobin
V Vassallo
Group General Manager, North America (appointed 10 June 2013)
Group General Manager, Strategy (appointed 26 November 2012)
President, International Development (resigned 2 February 2013)
Group General Manager, New South Wales
Chief Financial Officer
Group General Manager, Human Resources (appointed 8 October 2012)
President, Transurban North America
Group General Manager, Victoria (resigned 31 March 2013)
Group General Manager, Project Delivery and Operational Excellence
(appointed 10 December 2012)
Group General Manager, Technology (appointed 4 February 2013)
Group General Manager, Victoria (appointed 4 February 2013)
* Executives promoted from within the Group.
208
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
2013 REMUNERATION REPORT (AUDITED)
x
INTRODUCTION
This report, prepared in accordance with the Corporations Act 2001, contains detailed information
regarding the remuneration arrangements for the Directors and Senior Executives who were the 'key
management personnel' (KMP) of the Transurban Group (Group) during the year ended 30 June 2013.
The KMP disclosed in this report are listed in the table below:
Current Non-executive Directors
Lindsay Maxsted, Chair
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
Former Non-executive Directors
Robert Officer (resigned effective 7 August 2012)
Current Senior Executives*
Scott Charlton, Managing Director and Chief Executive Officer (CEO) (from 16 July 2012)
Jennifer Aument, Group General Manager, North America (from 10 June
Wesley Ballantine, Group General Manager, Strategy (from 22 November
Andrew Head, Group General Manager, New South Wales
Samantha Hogg, Chief Financial Officer
Sue Johnson, Group General Manager, Human Resources (from 8 October
Tim Steinhilber, Group General Manager, Delivery and Operational Excellence (from 10 December
Lisa Tobin, Group General Manager, Technology (from 4 February 2013)
Vin Vassallo, Group General Manager, Victoria (from 4 February 2013)
Transitioning Senior Executive
Michael Kulper, President North
Former Senior Executives
Chris Lynch, Managing Director and CEO (resigned as CEO effective 16 July 2012, departed 30 July 2012)
Ken Daley, President, International Development (resigned effective 2 February 2013)
Elizabeth Mildwater, Group General Manager, Victoria (resigned effective 31 March 2013)
* The dates on which the Senior Executives who were promoted or appointed during the year ended 30 June 2013 are the dates that
those Senior Executives commenced being members of KMP. Their remuneration for the period during which they were members of
KMP is disclosed in this report only.
1 Formerly Vice President, Public Affairs.
2 Formerly General Manager, Investor Relations, Media and Government.
3 Formerly General Manager, Human Resources.
4 Formerly Vice President, Major Projects.
5 Michael Kulper will depart the Group on 3 September 2013. Refer to section 1B for further details.
2013)1
2012)2
America5
2012)4
2012)3
CONTENTS
Content
1
2
3
4
5
6
All values in this report are in Australian dollars, unless otherwise stated.
Remuneration snapshot
Remuneration governance
Remuneration in context
CEO and Senior Executive remuneration for the year ended 30 June 2013
Link between Group performance, security holder wealth and remuneration
Non-executive Director remuneration
Page
210
213
214
215
233
235
209
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
1
REMUNERATION SNAPSHOT
Transurban’s remuneration framework, as reflected in the 2012 report, received strong support from
security holders at the 2012 AGM. The framework was the culmination of a careful and comprehensive
review of the Group’s remuneration arrangements. This review took into account feedback sought and
received from security holders and other stakeholders, market expectations, and regulatory developments.
The remuneration framework was largely unchanged during the year ended 30 June 2013. Certain
refinements were made to further align reward with the creation of security holder value and the
achievement of corporate objectives. The quantum and structure of the remuneration arrangements for
new Senior Executives were also benchmarked using market data provided by Ernst & Young. The
outcome of
this process was a reduction in the CEO's total remuneration package of 28 per cent
(assuming 100 per cent vesting of short and long term incentives) and a reduction in the average total
remuneration package for current Senior Executives (excluding the CEO) of 27 per cent (again assuming
100 per cent vesting).
THE REMUNERATION FRAMEWORK
The key elements of the remuneration framework for the CEO and other Senior Executives for the year
ended 30 June 2013 were as follows:
Remuneration mix
The remuneration of the CEO and other Senior Executives was structured as a mix of fixed remuneration
and variable ('or at risk') remuneration through short term and long term incentive components. The relative
weightings of the three components were as follows:
CEO
Other Senior Executives
Total remuneration % (annualised at target)*
Fixed TEC
Variable (performance based)
40
45
STI
30 (50% deferred)
30 (30 or 50% deferred)
LTI
30
25
* Transition to the remuneration mix for Michael Kulper was due to occur in FY2014. As a result of his departure from the Group on 3
September 2013, this will no longer occur. Refer to section 1B for further details.
Fixed total employment cost (TEC)
Fixed TEC was set with reference to the market median, using the ASX 20-50 as the primary reference,
with consideration also given to the ASX 100. Remuneration packages (including TEC levels) are reviewed
annually by the Remuneration and Human Resources Committee with reference to an individual's role,
experience and performance, as well as relevant comparative market data provided by an independent
remuneration consultant. TEC levels are also reviewed on a change in role.
Short term incentive (STI)
STI performance measures were again linked to growth in proportional EBITDA, cost management based
on proportional net costs, safety, and performance against individual key performance indicators (KPIs).
In the year ended 30 June 2012, mandatory deferral of 30 per cent of the STI award was introduced for the
CEO and other Senior Executives. The deferred component was increased in the year ended 30 June 2013
to 50 per cent for the new CEO and other Senior Executives appointed during the year.
The deferral period is two years. For Australian Senior Executives, deferral is into securities. Due to legal
restrictions on the issue of securities to USA residents, the USA Senior Executives receive deferred cash
awards. The deferred component of remuneration may, at the discretion of the Board, be subject to
forfeiture or clawback (e.g. in the event of misconduct or material misstatement of financial results).
Long term incentive (LTI)
LTI performance measures were as follows:
• 50 per cent relative Total Shareholder Return (TSR) measured against a bespoke comparator group
comprising companies in the transport, utilities, real estate, construction and infrastructure Global Industry
Classification Standards (GICS) sectors of the ASX 150; and
• 50 per cent Free Cash Flow (FCF) per security, reflecting the Group's focus on the maximisation of free
cash flow to drive security holder return. The definition of FCF per security is set out on page 222. The
FCF calculation is included in note 21 of the Transurban Holding Limited's audited financial statements.
A
x'
x
x
x
210
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
x
B
x
OTHER EVENTS / ACTIONS IMPACTING REMUNERATION IN THE YEAR ENDED 30 JUNE 2013
CEO transition
Chris Lynch resigned as CEO, effective 16 July 2012, and departed Transurban on 30 July 2012.
His contractual entitlements on resignation were finalised in the year ended 30 June 2012 and disclosed at
the time of his departure and in the 2012 report. As these payments were actually made in the year ended
30 June 2013, they are disclosed again in this report. Chris Lynch only received these payments once,
even though they have been disclosed in two reports.
Chris Lynch received the following during the year ended 30 June 2013 in satisfaction of his contractual
entitlements:
• an STI for the year ended 30 June 2012 (awarded at 116 per cent of his TEC based on performance
against applicable performance targets). The cash component of the award (70 per cent or $1,764,963)
was paid in August 2012. The deferred (into securities) component (30 per cent or $756,413) will vest,
subject to clawback provisions, on 1 July 2014;
• a pro-rated 'target'
level STI award for the 30 days worked during the year ended 30 June 2013
($178,652) after satisfying performance targets for that period relating to his role in a successful CEO
transition process. The award was paid in cash in August 2012; and
• an amount in lieu of an LTI earned but not received for a six month period during his tenure ($1,060,000)
in line with his contractual entitlement to receive an LTI award for every day employed by the Group. The
payment was made in cash in August 2012.
Equity instruments previously granted to Chris Lynch under the Group's LTI plans will continue on foot in
accordance with their original terms, with the applicable performance measures for each grant to be tested
at the end of the applicable original performance period.
Chris Lynch did not receive any ex gratia payments on separation.
Scott Charlton commenced as CEO on 16 July 2012.
The remuneration arrangements applying to Scott Charlton under his service agreement were disclosed at
the time of his appointment and in the 2012 report. The arrangements were designed in accordance with
the Group’s remuneration strategy and were developed with the benefit of input from independent
remuneration consultants and Australian peer company benchmark data. The total remuneration package
for the CEO has been reduced by 28
prior year. Further details of Scott Charlton’s remuneration during his first year as CEO are set out in
section 4.
(assuming 100 per cent vesting of STIs and LTIs) on the
per cent
As previously disclosed, in the year ended 30 June 2013, Scott Charlton received a one-off grant of equity
as a sign-on award in recognition of the incentives he forfeited with his former employer by joining the
Group. A total of 236,256 awards were granted to Scott Charlton on 14 September 2012 to vest, subject to
his continued employment,
tranches (of 78,752 each) on the first, second and third
anniversaries of his commencement with the Group. Each award is an entitlement to receive a fully paid
security on vesting. The value of the awards at grant date was $1,349,022. The first tranche (78,752
awards) vested on 16 July 2013. The maximum total value of the grant yet to vest is $899,348 (based on
the fair value per award at grant date).
in three equal
211
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
Senior Executive restructure and KMP departures
In December 2012, a restructured Executive Committee (the Senior Executive group) was announced.
The new Executive Committee reflects a focus on delivering and enhancing the Group's core competencies
and is structured to balance the diverse range of skills and experience required to deliver the Group's
strategy. Key portfolios have been elevated to report to the CEO.
The new Executive Committee includes three new positions for existing General Managers (Wesley
Ballantine, Sue Johnson and Tim Steinhilber) and an external appointment (Lisa Tobin). Two Senior
Executives (Ken Daley and Elizabeth Mildwater) also resigned and departed the Group during the year, and
Ms Mildwater's role was filled by an external candidate (Vin Vassallo).
Benchmark data from Ernst & Young was used by the Remuneration and Human Resources Committee to
determine the quantum and structure of the remuneration arrangements for the new positions and new
Senior Executives. The remuneration arrangements were subsequently approved by the Board. The
process resulted in a reduction in the average total remuneration package for current Senior Executives
(excluding the CEO) of 27 per cent (assuming 100% vesting of STIs and LTIs).
The five new Executive Committee members will be eligible for LTIs from 1 July 2013 onwards. No pro rata
LTI grants were made during the year ended 30 June 2013 to these Senior Executives. Along with the
CEO, they will have 50 per cent of their STI award deferred (for two years) for the year ended 30 June
2013 onwards.
Ken Daley resigned as President, International Development, and departed the Group on 2 February 2013.
Elizabeth Mildwater resigned as Group General Manager, Victoria, and departed the Group on 31 March
2013. On departure, Ken Daley and Elizabeth Mildwater forfeited their unvested equity awards (deferred
STI and LTIs) in full. Neither received an STI award for the year ended 30 June 2013 nor any ex gratia
payments on separation.
USA restructure
In the near term the primary focus for the Group's USA business is on the existing asset base in Virginia. In
June 2013, the Board resolved to close the Group's New York office. As a consequence, it was determined
that the position of President, North America would no longer be required. As no suitable positions are
available for Michael Kulper (the incumbent), his employment with the Group will cease on 3 September
2013. The remuneration arrangements to apply to Michael Kulper on his departure from the Group will be
disclosed in the 2014 report.
In June 2013, Jennifer Aument (formerly Vice President, Public Affairs) was appointed Group General
Manager, North America and became a member of the Executive Committee. She will be eligible for LTIs
from 1 July 2013 onwards. Ms Aument will also have 50 per cent of her STI award deferred (for two years)
for the year ended 30 June 2013 onwards.
212
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
REMUNERATION GOVERNANCE
(continued)
Remuneration report
x
2
x
A
x
BOARD AND REMUNERATION AND HUMAN RESOURCES COMMITTEE RESPONSIBILITY
The Remuneration and Human Resources Committee assists the Board in fulfilling its responsibilities relating
the CEO and other Senior
to the remuneration of Directors,
Executives, and remuneration practices, strategies and disclosures generally. The Committee also reviews
gender pay equity.
the remuneration of, and incentives for,
x
B
x
It is critical that the Remuneration and Human Resources Committee is independent of management when
making decisions affecting employee remuneration. Accordingly, the Committee comprises Non-executive
Directors, all of whom are independent. Where appropriate, the CEO and the Group General Manager,
Human Resources attend Committee meetings, however they do not participate in formal decision making.
The membership of the Remuneration and Human Resources Committee was unchanged in the year ended
30 June 2013. The members of the Committee continued to be Robert Edgar (Chair), Samantha Mostyn and
Neil Chatfield. Further details regarding the Committee are set out in the Directors’ report.
ENGAGEMENT OF REMUNERATION CONSULTANTS
To ensure that the Remuneration and Human Resources Committee has all relevant information at its
disposal when making remuneration decisions,
it may seek and consider advice from independent
remuneration consultants where appropriate. Any advice from consultants is used to guide the Committee
and the Board, but does not serve as a substitute for thorough consideration of the issues by Directors.
During the year ended 30 June 2013, no consultants provided the Remuneration and Human Resources
Committee with a remuneration recommendation relating to KMP. Ernst & Young provided the Committee
with benchmark data only.
The Group has a protocol in place governing the appointment of remuneration consultants and the manner
in which any recommendations made by those consultants concerning the remuneration of KMP are to be
provided to the Group, and in particular the circumstances in which management may be given access to
those recommendations. The purpose of the protocol is to ensure that any remuneration recommendations
provided by consultants are provided without undue influence by KMP.
In accordance with the protocol, all remuneration recommendations and advice must be sent directly to the
Remuneration and Human Resources Committee through the Chair of that Committee. The provision of
such material or other information directly to management is prohibited. The protocol also requires a
consultant to provide, with their recommendations, both a declaration of their independence from the KMP
to whom their recommendations relate, and also confirmation that the Committee’s conditions for contact
and dialogue with management had been observed.
213
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
x
3
(continued)
REMUNERATION IN CONTEXT
Transurban is focused on providing effective and innovative urban transport solutions in road infrastructure,
through the management and development of urban networks of
toll road concessions. The effective
management of toll road concessions involves leveraging a network footprint in our markets, taking a leading
role in shaping policy, and utilising our core capabilities in the following areas:
• Network planning and forecasting;
• Operations and customer management;
• Project development and delivery;
• Application of technology; and
• Community engagement.
The investment proposition for high quality toll road assets lies in providing investors with access to long
dated, predictable, growing cash flows generated over the life of
the concessions through effective
management and development of the road corridors they govern.
The Group is focused on the long term management of toll road assets at various stages of maturity to
achieve the best outcomes for investors, Government partners and the community. In Australia, the
Group’s interests include 100 per cent ownership of CityLink in Melbourne, and the Hills M2 and Lane
Cove Tunnel in Sydney. The Group has partial interests in a further three roads on the Sydney orbital
network, being the M1 Eastern Distributor (75.1 per cent), the M5 (50 per cent), and the Westlink M7 (50
per cent). In North America, the Group currently has interests in three assets, Pocahontas 895 (75 per
cent), the 495 Express Lanes (67.5 per cent), and the 95 Express Lanes project (67.5 per cent), which is
currently under construction and remains on schedule for completion in late 2014.
The Board and management are focused on ensuring security holder value is enhanced through the strong
performance of the Group’s asset portfolio. Development activities also provide opportunities to further
expand the portfolio and unlock further value in the concessions.
214
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
CEO / SENIOR EXECUTIVE REMUNERATION FOR THE YEAR ENDED 30 JUNE 2013
(continued)
Remuneration report
x
4
x
A
x
REMUNERATION STRATEGY AND POLICY
The Group's executive remuneration strategy is designed to attract, retain and motivate a highly qualified and
experienced management team with the necessary skills and attributes to lead the Group in achieving its
business objectives. The strategy also aims to encourage management to strive for superior performance by
rewarding the achievement of targets that are challenging, clearly understood, and within the control of
individuals to achieve through their own actions.
The Group's remuneration strategy and policy as set by the Board is summarised below:
Creating Security Holder Value
Remuneration Strategy
Attract, retain, motivate and reward executives critical to the Group's growth and success by:
• Offering competitive remuneration that is benchmarked against the external market.
• Providing a balance of fixed and variable (or 'at risk') remuneration.
Align executive reward with individual and Group performance by:
• Making short and long term components of remuneration 'at risk' based on performance.
• Assessing rewards against appropriate financial and non-financial performance measures.
• Encouraging executive security holdings.
Remuneration Structure
Fixed remuneration
Total Employment Cost (TEC):
• Comprises cash salary, superannuation and other prescribed benefits.
• Provides a base level of reward for effective completion of Group and specific accountabilities.
• Appropriately benchmarked and set with reference to role, responsibilities, skills and experience.
Variable (or 'at risk') remuneration
Short term incentive (STI):
Annual rewards tied to pre-determined individual and Group performance measures, and includes a
deferred element.
Individual targets reflect individual specific accountabilities and key drivers for growth and success.
•
•
• Group performance targets linked to earnings, cost management and safety.
Long term incentive (LTI):
• Equity rewards to align executive and security holder interests.
•
Vest after three years, subject to achievement of pre-determined internal and external performance
measures.
• Encourages sustainable performance in the medium to longer term, and provides a retention element.
215
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
(continued)
Remuneration report
x
B
x
REMUNERATION MIX
For the year ended 30 June 2013, the remuneration of the CEO and other Senior Executives was structured
as a mix of fixed remuneration and variable (or 'at risk') remuneration through short term and long term
incentive components. The relative weightings of the three components were determined by the Board (on
the recommendation of the Remuneration and Human Resources Committee) and are set out in the table
below:
CEO
Senior Executives commencing in FY2013
Senior Executives commencing prior to FY2013**
Total remuneration % (annualised at target)*
Fixed TEC
Variable (performance based)
40
45
45
STI
30 (50% deferred)
30 (50% deferred)
30 (30% deferred)
LTI
30
25
25
* These figures do not necessarily reflect the relative value derived from each of the components, which depends on actual performance
against targets for the variable components. The STI percentages are based on achieving the relevant performance targets. The LTI
percentages are based on the maximum LTI available at the time of grant to each Senior Executive if the awards granted vest at the end
of the performance period.
** Transition to the remuneration mix for Michael Kulper was due to occur in FY2014. As a result of his departure from the Group on 3
September 2013, this will no longer occur.
x
C
x
FIXED REMUNERATION - TOTAL EMPLOYMENT COST (TEC)
What is TEC?
Fixed remuneration is represented by total employment cost comprising base salary and superannuation
contributions (or pension plans in the case of USA based employees).
Fixed remuneration is not 'at risk' but is set by reference to appropriate benchmark information for an
individual’s responsibilities, performance, qualifications and experience. There are no guaranteed TEC
increases in the service agreement of the CEO or any Senior Executive.
How is TEC determined?
Remuneration packages (including TEC levels) are reviewed annually by the Remuneration and Human
Resources Committee with reference to an individual’s role, experience and performance, as well as
relevant comparative market data. Independent remuneration consultants and surveys, internal relativities
and market conditions also provide guidance. TEC levels are also reviewed on a change in role. Any
changes to TEC levels recommended by the Committee are approved by the Board.
The CEO's and other Senior Executives' TEC is determined with reference to the market median. The
primary reference for determining the market median is the ASX 20-50, with consideration also given to the
ASX 100. Consideration is given to sizing factors including market capitalisation and revenue. A range
around the median provides flexibility to recognise individual experience and capabilities.
216
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
(continued)
Remuneration report
x
D
x
SHORT TERM INCENTIVE (STI)
How does the STI plan operate?
Eligible permanent Group employees, including the CEO and other Senior Executives, participate in the
annual STI plan. The STI plan puts a significant proportion of remuneration 'at risk' subject to meeting
specific pre-determined Group, team and individual performance measures linked to corporate objectives.
This aligns employee interests with the Group's financial performance, as well as management principles and
the Group’s cultural values.
For the year ended 30 June 2013, the CEO and other Senior Executives had a target STI opportunity of 30
per cent of their total remuneration package. Mandatory STI deferral of 30 per cent of the overall STI award
was introduced for the CEO and other Senior Executives in the year ended 30 June 2012. The deferred
component was then increased to 50 per cent during the year ended 30 June 2013 for the CEO and all other
newly appointed Senior Executives.
The deferral period is two years. For Australian Senior Executives, deferral is into securities. Due to legal
restrictions on the issue of securities to USA residents, the USA Senior Executives receive deferred cash
awards. The deferred component of remuneration may, at the discretion of the Board, be subject to
forfeiture or clawback (e.g. in the event of misconduct or the material misstatement of financial results).
What were the STI performance measures for the year ended 30 June 2013?
The STI performance measures for the CEO and other Senior Executives for the year ended 30 June 2013
were chosen to provide a balance between corporate,
financial and
non-financial aspects of performance and are described below:
individual, operational, strategic,
Measure
Description of targets/indicators for FY2013
Group
performance
targets
(1) Growth in proportional EBITDA (20% weighting)
The proportional EBITDA targets were set against the previous year's results and
the Group's FY2013 budget:
Proportional EBITDA result
Less than 6.7% above underlying result for FY2012
6.7% above underlying result for FY2012
Budget EBITDA for FY2013 (9% increase on result for FY2012)
17% above underlying result for FY2012
^ Straight line vesting applies between 50-100% and 100-150%.
% STI that
vests^
zero
50
100
150
(2) Cost management based on proportional net costs (20% weighting)
The proportional net costs targets were set against the previous year's results and
the Group's FY2013 budget. The proportional net costs target excluded Capital
Beltway for FY2013:
Proportional net costs result
Over FY2013 budget
FY2012 result normalised + CPI
FY2012 result normalised
$10 million saving on FY2012 normalised result
^ Straight line vesting applies between 50-100% and 100-150%.
% STI that
vests^
zero
50
100
150
217
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
(3) Safety targets (10% weighting),
including multiple indicators that
focused on
improving the Group's safety culture and reducing workplace injuries for employees
and contractors. The safety targets for Australia and the USA comprised a lead and
a lag indicator. The Australian lead indicator required the completion of safety
development action plans and the lag indicator
required a reduction in the
Recordable Injury Frequency Rate. The USA lead indicator required the completion
of all items outlined in the safety management system and the lag indicator related
to the Recordable Incidence Rate for employees and construction contractors.
Individual key
performance
indicators (KPIs)
Individual KPIs (50% weighting), were unique to the individual's area of
accountability, and in FY2013 related to critical business sustainability measures,
including: operational performance; cost reduction; customer satisfaction; project
outcomes; succession planning; risk management; people management; strategy
development; and business plan implementation.
Individual KPIs reflect the behaviours valued by the Group and are capable of
measurement. Individuals have a clear line of sight to KPIs and are able to directly
affect outcomes through their own actions.
Who sets the STI performance measures?
STI performance measures are set at the beginning of the financial year. The CEO's individual KPIs are set by
the Board. All other Senior Executives’ individual KPIs are set by the CEO and approved by the Board. The
Board sets the Group performance targets.
What is proportional EBITDA and why is it used as an STI performance measure?
EBITDA (earnings before interest,
performance measure used by many companies.
taxes, depreciation and amortisation)
is a common operational
the primary measures that
Proportional EBITDA is one of
the Board uses to assess the operating
performance of the Group, with an aim to maintain a focus on the Group’s operating results and associated
cash generation. It reflects the contribution from individual assets to the Group's operating performance
and focuses on elements of the result that management can influence to drive improvements in short term
earnings. Proportional EBITDA is the aggregation of EBITDA from each asset multiplied by the Group's
percentage ownership, as well as any contribution from Group functions. The Board believes proportional
EBITDA provides a better reflection of the underlying performance of the Group’s assets than statutory
EBITDA. The EBITDA calculation from the statutory accounts would not include the EBITDA contribution of
the M5, M7 or DRIVe (equity accounted in the statutory results), which are meaningful contributors to the
Group’s performance. Proportional EBITDA figures used to assess performance are included in note 2 of
the audited financial statements of Transurban Holdings Limited.
The Board can decide to exclude specific items from proportional EBITDA to provide an underlying result
when determining performance incentives. For the year ended 30 June 2013, the Board resolved to exclude
costs associated with the CEO transition. The Board also determined that the contribution by Capital Beltway
Express (the 495 Express Lanes) be excluded when determining performance incentives during the period of
ramp up for this asset.
Proportional EBITDA has been used by the Group as an STI performance measure since 2009.
What are proportional net costs and why is it used as a performance measure?
Proportional net costs is calculated as fee and other revenue less total costs of the Group. Costs after fee and
other revenues encourages and allows management to incur additional costs where these are justified by
increased revenue results.
218
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
The use of a cost related STI performance measure reflects the fact that management has the ability to
influence the expenditure of the business. Strong cost management throughout the business drives an
increase in proportional EBITDA and free cash flow and ultimately security holder value.
Proportional net costs has been used by the Group as an STI performance measure since 2010.
How are the varying levels of performance achievement rewarded?
STI targets are designed to differentiate and reward high performance. 50 per cent of the available STI vests
for on-target performance, 100 per cent vests for high performance and up to an additional 50 per cent can
be earned for exceptional performance. These targets are consistent
the Group’s eligible
employees. Given that STI awards are contingent on performance across a range of measures, maximum
STI awards can only be achieved for performance that is exceptional on all measures.
for all of
How is performance assessed?
Performance against the Group performance targets is assessed by the Board. The results are independently
reviewed.
The CEO's performance against his individual KPIs is assessed by the Remuneration and Human Resources
Committee, which then makes recommendations to the Board. The performance of other Senior Executives
against their individual KPIs is assessed by the CEO, who confers with the Committee and then the Board
regarding his assessment.
Once KPIs have been assessed, the Board approves STI awards. STI cash awards for the year ended 30
June 2013 will be paid in August 2013. The STI deferred component for the year ended 30 June 2013 will
to continuity of employment (unless otherwise
be awarded in August 2013 and will vest, subject
determined by the Board) and clawback provisions, on 1 July 2015.
The Board believes the method of assessment is rigorous and provides a balanced evaluation of the
performance of the CEO and each other Senior Executive.
What if a Senior Executive ceases employment?
Under the service agreements for the CEO and other Senior Executives,
the CEO or other Senior
Executive ceases employment with the Group before performance against STI targets is assessed, they
would generally not be entitled to receive any STI award, unless otherwise determined by the Board.
if
What were the STI performance outcomes for the year ended 30 June 2013?
Group performance in respect of the proportional EBITDA, proportional net costs and safety STI performance
measures for the year ended 30 June 2013 was assessed by the Board as
100 per cent in Australia and 100
per cent in the USA.
219
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
STI awards for the CEO and other Senior Executives for the year ended 30 June 2013 are set out below:
STI outcome (%)
Actual STI
1
($)
awarded
STI forfeited
(%)
Group
performance
Individual
KPIs
Total
Cash
2 Deferred into
2
securities
Current Senior Executives
S Charlton
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
Tobin4
Vassallo4
V
L
Transitioning Senior Executive
M
Kulper5
Former Senior Executives
C
Lynch6
K Daley
E Mildwater
100
100
100
100
100
100
100
-
-
-
100
-
-
110
130
100
70
80
130
110
-
-
-
105
115
100
85
90
115
105
-
-
738,300
10,7753
81,1503
241,395
284,935
112,3253
97,8253
-
-
738,300
10,7753
81,1503
103,455
122,115
112,3253
97,8253
45,000
45,000
75
362,264
155,256
100
100
178,652
-
-
-
-
-
-
-
-
-
-
-
-
15
10
-
-
-
-
25
-
100
100
1 On-target performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI in respect of
FY2013 was nil. The maximum potential value of the STI was the “Actual STI awarded”.
2 The cash STI payments will be paid in August 2013. The STI deferred component (30/50 per cent of the STI awarded) will vest, subject
to continuity of employment (unless otherwise determined by the Board) and clawback provisions, on 1 July 2015.
3 The Senior Executive was not a member of KMP for the entirety of FY2013. Accordingly only the STI earned whilst a member of KMP is
included in the table.
4 Lisa Tobin and Vin Vassallo were granted STI deferred awards in recognition of their contribution and performance since joining the
Group in February 2013.
5 An overall outcome of 75 per cent of his available STI was awarded to Michael Kulper for FY2013. A holistic approach, which took into
account the performance of the 495 Express Lanes, was considered appropriate in determining his STI. As noted in section 1B, Michael
Kulper will depart the Group in September 2013.
6 Chris Lynch received a pro-rated STI in August 2012 based on performance and targets for his time served during FY2013.
220
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
What was the grant and movement in the number of STI deferred awards?
Mandatory STI deferral was introduced in the year ended 30 June 2012, with the first grant of awards made
in August 2012.
Balance at
start of year
Granted
during year
as
remuneration
Matured and
paid during
year
Forfeited
during the
year
Balance at
the end of
year
Current Senior Executives*
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
Transitioning Senior Executive
M Kulper
Former Senior Executives
C
Lynch2
K Daley
E Mildwater
-
-
-
-
-
-
-
-
-
-
14,7891
15,2121
22,449
18,973
16,5401
19,3561
36,464
133,099
26,742
19,863
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(26,742)
(19,863)
14,789
15,212
22,449
18,973
16,540
19,356
36,464
133,099
-
-
x
E
x
* Scott Charlton, Lisa Tobin and Vin Vassallo joined the Group after the FY2012 STI performance period and therefore were not entitled
to receive an STI deferred award in respect of that period.
1 STI deferred awards granted during the year as remuneration occurred prior to the Senior Executive becoming a member of KMP.
2 Refer to section 1B for further details of Chris Lynch's contractual entitlements on resignation.
LONG TERM INCENTIVE (LTI)
How does the LTI plan operate?
The LTI plan aligns reward with security holder value by tying this component of executive remuneration to
the achievement of performance measures that underpin sustainable long term growth.
Participation in the LTI plan is offered to the CEO and other Senior Executives, and certain other employees
nominated by the CEO and approved by the Board. For the year ended 30 June 2013, the CEO was offered
an LTI grant equivalent to 30 per cent of his total remuneration package. Other eligible Senior Executives
were offered grants equivalent to 25 per cent of their total remuneration package.
LTI grants are made in the form of performance awards under the Group’s Performance Awards Plan (PAP)
at no cost to the recipient. Each performance award is an entitlement to receive a fully paid security, or an
equivalent cash payment, on terms and conditions determined by the Board, subject to the achievement of
certain vesting conditions linked to performance over a three year period.
Subject to the achievement of the performance measures, upon vesting, the Board will determine in its
absolute discretion whether the performance awards will be settled in securities or a cash payment of
equivalent value. Due to legal restrictions on the issue of securities to USA residents, the USA Senior
Executives receive a cash payment upon vesting.
Performance awards that do not vest after testing of the performance measures lapse, without retesting.
Performance awards are not transferable and do not carry voting or distribution rights. However securities
allocated upon vesting of performance awards carry the same rights as other Transurban securities.
221
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
What were the LTI performance measures for the year ended 30 June 2013?
Performance awards granted during the year ended 30 June 2013 are subject to a three year performance
period and the following dual performance measures over that period:
Measure % weighting Description of measure
Relative
TSR
50%
Relative TSR is measured against a bespoke comparator group comprising
companies
construction and
infrastructure Global Industry Classification Standards (GICS) sectors of the
ASX150. The 37 companies in this group are:
in the transport, utilities,
real estate,
Telstra Corporation Ltd, Westfield Group, QR National Ltd, Westfield Retail Trust, Stockland,
Leighton Holdings Ltd, AGL Energy Ltd, BWP Trust, GPT Group, Goodman Group, CFS Retail
Property Trust, Lend Lease Group, Asciano Ltd, Qantas Airways Ltd, Dexus Property Group,
Mirvac Group, Telecom Corporation of New Zealand Ltd, Toll Holdings Ltd, SP Ausnet, APA
Group, Commonwealth Property Office Fund, UGL Ltd, Cardno Limited, Auckland International
Airport Ltd, Centro Retail Australia, Investa Office Fund, Spark Infrastructure Group, Charter Hall
Retail Reit, Australand Property Group, Monadelphous Group Ltd, Duet Group, TPG Telecom Ltd,
Australian Infrastructure Fund, Envestra Limited, Hastings Diversified Utilities Fund, QUBE
Logistics Holdings Limited and Sydney Airport.
TSR measures total return on investment of a security, taking into account
both capital appreciation and distributed income which was reinvested on a
pre-tax basis.
For performance awards granted during the year ended 30 June 2013, the
relative TSR component will vest on a straight line basis if the Group’s relative
TSR performance is above the median of the bespoke comparator group at
the end of the performance period, in accordance with the following table:
TSR vesting schedule:
The Groupʼs relative TSR ranking in
the comparator group
At or below the 50% percentile
Above the 50th percentile but below the
75th percentile
At or above the 75th percentile
% of performance awards that
vest
Nil
Straight line vesting between 50%
and 100%
100%
x
Measure % weighting Description of measure
Growth in
FCF per
security
50%
Within Transurban, Free Cash Flow (FCF) per security is defined as:
• the Group's cash flow from operating activities;
• less: cash flows from operating activities of non 100% owned assets;
• add back: maintenance capital expenditure for 100% owned assets;
• less: accounting charge for maintenance provision for the year;
• less: actual tag expenditure in 100% owned assets;
• add: dividends received from non 100% owned assets;
• divided by: weighted average number of securities issued.
The FCF calculation is included in note 21 of the audited financial statements of
Transurban Holdings Limited.
For performance awards granted during the year ended 30 June 2013, the
FCF per security component will vest based on the Group's compound annual
growth in FCF per security over the three year performance period, as set out
below:
222
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
Growth in FCF per security vesting schedule:
% compound annual growth in FCF per
security
6%
Between 6% and 9%
9% or more
% of performance awards that
vest
50%
Straight line vesting between 50%
and 100%
100%
For performance awards granted during the year ending 30 June 2014, the
performance target
range for compound growth in FCF per security is
between 12 per cent and 15 per cent.
Why were these LTI performance measures selected?
The TSR target is a relative, external, market-based performance measure against those companies with
which the Group competes for capital. It provides a direct link between executive reward and security holder
return.
Growth in FCF per security reflects the Group’s continuing focus on the maximisation of free cash, and has
been used as an LTI performance measure since the year ended 30 June 2012.
How will the LTI performance targets be measured?
Relative TSR
The Group will receive an independent report that sets out the Group's TSR growth and that of each
company in the bespoke comparator group. A volume weighted average price of securities for the 20 trading
days up to and including the testing date is used in the calculation of TSR.
The level of TSR growth achieved by the Group will be given a percentile ranking having regard to the
Group’s performance compared to the performance of other companies in the comparator group (the highest
ranking company being ranked at the 100th percentile). This ranking will determine the extent to which
performance awards subject to this target will vest.
FCF per security
The Group's FCF per security percentage growth rate will be calculated based on the FCF per security over
the three year performance period.
The Board considers these methods of measurement to be rigorous and transparent.
What if a Senior Executive ceases employment?
Under the terms of the service agreements for the CEO and other Senior Executives, if the CEO or other
Senior Executive ceases employment with the Group before the performance measures are tested, their
unvested performance awards would generally lapse, unless otherwise determined by the Board.
What will happen in the event of a change in control?
In the event of a takeover or change of control of the Group, the treatment of any unvested performance
awards granted in the year ended 30 June 2013 will be subject to the incumbent Board's discretion.
223
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
What was the grant, and movement in the number and value, of performance awards during the
year ended 30 June 2013?
Eligible Senior Executives (excluding the CEO) received performance awards with a grant date of 15
August 2012. Following the receipt of security holder approval at the 2012 Annual General Meeting, the
CEO received performance awards with a grant date of 19 October 2012. All performance awards granted
in the year ended 30 June 2013 vest subject to a performance period from 1 July 2012 through to 30 June
2015.
The relevant values of the grants are as follows:
Recipient
Grant date
Fair value of awards at grant
1
date
($)
Closing security
price at grant date
Eligible Senior Executives
15 August 2012
CEO
19 October 2012
$2.72
$2.95
$4.99
$5.43
$5.75
$6.16
1 An explanation of the pricing model used to calculate these values is set out in
note35
to the audited financial statements.
Relative TSR FCF per security
Performance awards granted in FY2013
Name
Number of
performance
awards
granted
3
Value at grant date
($)
Maximum total value
of grant yet to
vest
4($)
Current Senior Executives*
S
Charlton1,
2
A Head
S Hogg
Transitioning Senior Executive
M Kulper
Former Senior Executives
K
Daley5
Mildwater5
E
448,400
112,754
125,696
1,848,114
427,605
476,684
1,848,114
427,605
476,684
178,830
678,189
678,189
137,167
112,754
520,188
427,605
-
-
* Jennifer Aument, Wesley Ballantine, Sue Johnson, Tim Steinhilber, Lisa Tobin and Vin Vassallo were not eligible for an LTI grant
(including any pro rata grant) in respect of FY2013.
1 The grant made to the CEO constituted his LTI entitlement for FY2013 and was made following security holder approval at the 2012
AGM on the terms summarised above. Performance awards vest subject to performance over the period from 1 July 2012 through to 30
June 2015.
2 In September 2012, Scott Charlton received a one-off sign-on grant of 236,256 performance awards to vest, subject to his continued
employment, in three equal tranches (of 78,752 each) on the first, second and third anniversaries of his commencement with the Group.
The first tranche (78,752 awards) vested on 16 July 2013. The maximum total value of the grant yet to vest is $899,348 (based on the fair
value per award at grant date).
3 The grants made to Senior Executives assume full vesting of their full LTI entitlement
summarised above. Performance awards vest subject to performance testing over the period from 1 July 2012 through to 30 June 2015.
4 The maximum value of the grant has been estimated based on the fair value per award at date of grant. The minimum total value of the
grant, if the applicable performance measures are not met, is nil.
5 Performance awards lapse where the performance and service measures are not satisfied on testing. On departure from the Group, Ken
Daley and Elizabeth Mildwater forfeited their awards. The value of the forfeited awards was $520,188 for Ken Daley and $427,605 for
Elizabeth Mildwater. No other Senior Executives forfeited performance awards during the year.
for FY2013 and were made on the terms
224
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
(continued)
Remuneration report
x
F
x
LEGACY LTI PLANS
The Group has a number of LTI plans that were offered in previous years, as detailed below:
Plan
Grant date
Performance period
FY2012 PAP
26 Sep 2011
11 Nov 2011 (CEO only)
1 Jul 2011 - 30 Jun 2014
FY2011 PAP
1 Nov 2010
FY2010 PAP
11 Dec 2009
TSR : 1 Nov 2010 - 1 Nov
2013
EBITDA : 1 Jul 2010-30 Jun
2013
1 Jul 2009 - 30 Jun 2012
External performance
measure (50% of grant)
Comparator group
Relative TSR
Relative TSR
Relative TSR
33 companies within a
bespoke comparator group
within the ASX150
The S&P/ASX 100
Vesting schedule
Above 50th percentile to 75th percentile
Straight line vesting between 50%-100%
Relative TSR
% of performance awards that vest
At or above the 75th percentile
100% vests
Internal performance
measure (50% of grant)
Growth in free cash flow
(FCF) per security
Group's annual growth in
proportional EBITDA
Group's annual growth in
proportional EBITDA
From 7% - 10%
From 7% - 11%
From 6% - 9%
Compound growth
% of performance awards that vest
At target
50% vests
Vesting schedule
From target % to stretch %
Straight line vesting between 50% - 100%
At or above stretch %
100% vests
Current status
Awards on issue
To be tested after 30 Jun
2014
To be tested after 1 Nov
2013
TESTED 100% vested on
11 Dec 2012
1,135,896
1,607,159
-
225
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
Value of performance awards vested and lapsed in the year ended 30 June 2013
The FY2010 PAP vested on 11 December 2012. 100 per cent of awards subject to the TSR performance
measure vested based on the Group’s ranking against the constituents of the S&P/ASX 100. 100 per cent of
awards subject to the proportional EBITDA measure vested based on performance against target. There
were no awards that lapsed.
Aument2
Ballantine2
Name
Current Senior Executives
J
W
A Head
S Hogg
S
T
Johnson2
Steinhilber2
Transitioning Senior Executive
M Kulper
Former Senior Executives
C
Lynch3
K Daley
E Mildwater
FY2010 PAP - Vested
Number
17,768
20,030
59,347
47,478
23,145
25,022
161,956
617,211
111,276
66,766
Value
($)
1
73,737
83,125
246,290
197,034
96,052
103,841
672,117
2,561,426
461,795
277,079
1 Based on the fair value at date of grant.
2 Awards granted prior to the Senior Executive becoming a member of KMP. Awards vested while the Senior Executive was a member of
KMP except for Jennifer Aument who became a member of KMP after vesting.
3 Refer to section 1B for further details of Chris Lynch's contractual entitlements on resignation.
Number of performance awards on issue as at 30 June 2013
The number of performance awards held by members of KMP as at 30 June 2013 is provided below.
Comparative data is shown for those Senior Executives who were members of KMP during both the years
ended 30 June 2013 and 30 June 2012.
226
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
Current Senior Executives*
S Charlton
2013
J Aument
2013
W Ballantine
2013
A Head
2013
2012
S Hogg
2013
2012
S Johnson
2013
T Steinhilber
2013
Transitioning Senior Executive
M Kulper
2013
2012
Former Senior Executives
C
Lynch4
2013
2012
K Daley
2013
2012
E Mildwater
2013
2012
Balance at
start of year
Granted
during year
as
remuneration
Matured and
paid during
year
Lapsed or
forfeited
during year
Balance at
the end of
year
-
684,6561
-
39,3652
44,4712
257,636
196,382
214,633
136,569
52,7712
53,7772
-
-
(17,768)3
(20,030)
112,754
107,766
(59,347)
(44,054)
125,696
101,320
(47,478)
(22,027)
-
-
(23,145)
(25,022)
491,675
477,811
178,830
159,286
(161,956)
(137,736)
-
-
-
-
(2,458)
-
(1,229)
-
-
-
(7,686)
684,6561
21,597
24,441
311,043
257,636
292,851
214,633
29,626
28,755
508,549
491,675
2,016,918
1,785,615
284,440
223,297
265,055
186,359
-
(617,211)
-
1,399,707
715,024
(458,156)
(25,565)
2,016,918
137,167
128,294
112,754
107,766
(111,276)
(310,331)
-
(63,602)
(3,549)
284,440
(66,766)
(27,534)
(311,043)
-
(1,536)
265,055
* Lisa Tobin and Vin Vassallo joined the Group in February 2013 and did not receive a pro rata LTI grant in respect of FY2013.
1 This number includes the 236,256 performance awards granted to Scott Charlton in September 2012 as a sign-on award, to vest,
subject to his continued employment, in three equal tranches on the first, second and third anniversaries of his commencement with the
Group. The first tranche (78,752) awards vested on 16 July 2013. Therefore as at the date of this report, Scott Charlton has 605,904
performance awards yet to vest of which 157,504 awards relate to his sign-on award.
2 Opening balance held prior to the Senior Executive becoming a member of KMP.
3 Awards matured and paid during the year occurred prior to the Senior Executive becoming a member of KMP.
4 Refer to section 1B for further details of Chris Lynch's contractual entitlements on resignation.
227
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
(continued)
Remuneration report
x
G
x
REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Short-term employee benefits
Cash salary
and fees
Cash
STI
2
Non-
monetary
3
benefits
Deferred
STI
4
Post-
employment
benefits
Termination
benefits
Long term
benefits
Share
based
benefits5
Total
Super
-annuation
Long
service
leave
1
1
1
-
-
2012)
2012)
2012)
3,398
-
3,823
-
2,366
2,260
2,030
1,903
22,379
-
81,150
-
27,260
-
112,325
-
284,935
251,598
241,395
297,686
280,971
-
656,561
555,892
589,279
571,722
1
2013)
10,775
-
Current CEO
S Charlton (from 16 July 2012)
738,300
1,789,850
2013
-
-
2012
Current Other Senior Executives
J Aument (from 10 June
2013
2012
W Ballantine (from 22 November
230,757
2013
2012
-
A Head
2013
2012
S Hogg
2013
2012
S Johnson (from 8 October
2013
2012
T Steinhilber (from 10 December
259,550
269,441
2013
-
2012
-
2013)
L Tobin (from 4 February
-
2013
-
2012
1
2013)
V Vassallo (from 4 February
-
2013
2012
-
Transitioning Senior Executive
M Kulper
2013
2012
Former CEO
C Lynch (resigned effective 16 July 2012)
2013
2012
Former Other Senior Executives
K Daley (resigned effective 2 February 2013)
53,262
2013
2012
118,030
E Mildwater (resigned effective 31 March 2013)
2013
2012
T Honan (resigned effective 2 May 2012)
2013
2012
178,652
2,153,375 1,764,963
1,067,296
955,653
-
1,149,822
-
354,612
-
263,390
362,264
492,765
816,330
704,498
485,161
569,468
185,869
-
176,134
-
-
475,000
52,658
-
15,482
-
555
46,299
1,525
2,028
-
3,951
144,951
710
-
710
-
1
246,100
-
15,098
-
5,204
-
44,498
-
77,012
42,527
76,648
35,943
60,277
-
53,001
-
15,000
-
15,000
-
916
-
9,836
-
16,470
22,760
16,470
15,775
12,043
-
6,388
-
6,863
-
6,863
-
120,168
70,395
10,997
9,458
504,275
252,138
5,490
15,775
(50,659)
50,659
(37,627)
37,627
-
-
13,725
45,813
13,725
15,775
-
26,775
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,368
-
12,696
15,258
13,674
11,492
23,829
-
-
-
-
-
-
-
1,302,848
-
4,114,575
-
3,534
-
47,689
-
26,851
-
411,858
-
441,434
347,920
1,380,652
1,300,133
407,426
280,575
1,457,744
1,153,178
38,665
-
58,491
-
-
-
-
-
531,933
-
699,529
-
208,442
-
198,707
-
28,977
16,165
1,441,431
1,033,606
3,046,615
2,578,042
(62,121) 6,103,6656
3,086,801
40,812
6,875,467
7,360,163
8,346
21,983
(341,435)
594,613
499,569
1,890,208
(15,434)
10,015
(274,631)
350,916
172,719
1,249,219
-
-
-
(824,365)
-
831,183
228
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
1 The dates on which the Senior Executive who were promoted or appointed during FY2013 are that dates that those Senior Executives
commenced being a KMP. Their remuneration for the period during which they were members of KMP is disclosed in the table only.
2 The amount represents the cash STI payment to the Senior Executive for FY2013, which will be paid in August 2013. Tim Steinhilber
also received a payment of $161,725 in relation to the successful delivery of the 495 Express Lanes (paid in February 2013).
3 Non-monetary benefits include Group insurance and expatriate allowances (where relevant).
4 A component of STI award is deferred into securities. In accordance with Accounting Standards, the deferred component will be
recognised over the three year service period. The amount recognised in this table is the FY2013 accounting charge for unvested grants.
5 In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity
compensation granted or outstanding during the year (i.e. performance awards under the LTI plan). The fair value of equity instruments is
determined as at the grant date and is progressively allocated over the vesting period. The amount included as remuneration may be
different to the benefit (if any) that Senior Executives may ultimately realise should the equity instruments vest. The fair value of
performance awards at the date of their grant has been independently determined in accordance with AASB 2. The fair value of the
performance awards has been valued applying a Monte Carlo simulation to model Transurbanʼs security price and where applicable, the
TSR performance against the comparator group performance. The assumptions underpinning these valuations are set out in note 35 to
the audited financial statements.
6 The value for share based benefits for Chris Lynch includes all unvested LTI awards. In accordance with Accounting Standard AASB 2,
these have been accounted as an acceleration of vesting. The amount that would have been recognised for services received from Chris
Lynch as CEO of the Group over the remainder of the vesting period has been included in the table above. These awards will continue on
foot in accordance with the original terms, with the applicable measures for each grant to be tested at the end of the applicable original
performance period. These LTI awards may or may not vest. Also included is a cash payment of $1,060,000 which was made to Chris
Lynch in lieu of an LTI earned but not received for a six month period during his tenure in line with his contractual entitlement to receive
an LTI award for every day employed by the Group. This payment was made in cash in August 2012.
x
H
SERVICE AGREEMENTS
The remuneration and other terms of employment for the CEO and other Senior Executives are formalised in
service agreements which have no specified term. Under these agreements, the CEO and other Senior
Executives are eligible to participate in STI and LTI plans. Some other key aspects of the agreements in
place for the year ended 30 June 2013 are outlined below:
CEO
Other Senior Executives
Period of notice to terminate
(Executive)
6 months
3 months
Period of notice to terminate
(the Group*)
12 months
6 months
* Payment in lieu of the notice period may be provided (based on the executive's fixed remuneration). The Group may also terminate at
any time without notice for serious misconduct.
I
ADDITIONAL REMUNERATION INFORMATION
Employee Security Plans
The Group has three broad employee based security plans.
ShareLink Incentive Plan
Under the ShareLink Incentive Plan, subject to Board approval, an allocation of Transurban securities or cash
payments may be made to eligible employees (excluding the CEO and other Senior Executives) in
recognition of the Group’s prior year performance. Eligible employees received a grant of 100 securities at no
cost to them on 27 February 2013. Due to legal restrictions on the issue of securities to USA residents,
eligible employees in the USA received a cash payment of equivalent value in lieu of securities.
Given that the plan is designed to reward employees for the Group's prior year performance and is not
intended to serve as a future incentive, there are no performance measures attached to grants of securities
or cash payments under the plan.
Securities granted under the plan carry a three year holding lock from the grant date and can only be traded
once the holding lock expires or when employment with the Group ceases, which ever is earlier.
229
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
ShareLink Investment Tax Exempt Plan and ShareLink Investment Tax Deferred Plan
The ShareLink Investment Tax Exempt Plan provides eligible employees (excluding the CEO and other
Senior Executives) the opportunity to invest up to $1,000 per year in Transurban securities on a tax exempt
basis. Participants contribute up to $500 by way of salary sacrifice which is matched by the Group dollar for
dollar. Security acquisitions are made quarterly in September, December, March and June each year.
The ShareLink Investment Tax Deferred Plan provides eligible employees (excluding the CEO and other
Senior Executives) with the opportunity to contribute up to $5,000 per year by way of salary sacrifice to be
invested in Transurban securities. The Group matches participants’ contributions dollar for dollar up to
$3,000. The plan has a disposal restriction period of three years from the date of acquisition, including a 12
month forfeiture period.
Grants under both of these plans are designed to encourage employee security holdings and to align the
interests of employees with those of the Group and are therefore not subject to performance measures.
Dealing in Securities
In accordance with the Group’s Dealing in Securities Policy, employees who have awards under a Group
equity plan may not hedge against those awards. In addition, KMP may not hedge against entitlements that
have vested but remain subject to a holding lock. Employees and Directors are not permitted to obtain margin
loans using Transurban securities (either solely or as part of a portfolio) as security for loans.
230
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
Securities held by Senior Executives as at 30 June 2013
The number of securities held by members of KMP as at 30 June 2013 is provided below. Comparative
data is shown for those Senior Executives who were members of KMP during both the years ended 30
June 2013 and 30 June 2012.
Balance at start of year Changes during year Balance at end of year
Current Senior Executives
S Charlton
2013
J Aument
2013
W Ballantine
2013
A Head
2013
2012
S Hogg
2013
2012
S Johnson
2013
T Steinhilber
2013
L Tobin
2013
V Vassallo
2013
Transitioning Senior Executive
M Kulper
2013
2012
Former Senior Executives
C Lynch
2013
2012
K Daley
2013
2012
E Mildwater
2013
2012
-
-
2,8891
3,041
21,112
1,553
15,616
19,1291
-
-
10,0181
80,000
103,944
713,563
255,401
384,678
384,678
56,066
27,098
10,000
-
1,099
-
(18,071)
10,000
(14,063)
10,467
-
-
10,000
-
3,988
3,041
3,041
11,553
1,553
29,596
-
-
520
10,538
-
(23,944)
(713,563)2
458,162
(384,678)2
-
(56,066)2
28,968
80,000
80,000
-
713,563
-
384,678
-
56,066
1 Opening balance held prior to the Senior Executive becoming a member of KMP.
2 Balance removed on departure from the Group during FY2013.
231
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
Securities held by Non-executive Directors as at 30 June 2013
Current Non-executive Directors
L Maxsted
Balance at start of year Changes during year Balance at end of year
2013
2012
N Chatfield
2013
2012
R Edgar
2013
2012
S Mostyn
2013
2012
C O'Reilly
2013
2012
R Slater
2013
2012
I Smith
2013
2012
Former Non-executive Directors
G Cosgriff
2013
2012
J Davis
2013
2012
R Officer
2013
2012
30,000
30,000
30,910
20,910
23,733
18,627
10,300
-
-
-
-
-
70,000
-
-
152,236
-
384,678
20,115
19,089
-
-
-
10,000
857
5,106
3,700
10,300
4,363
-
-
-
1,772
70,000
-
(152,236)1
-
(384,678)1
(20,115)1
1,026
30,000
30,000
30,910
30,910
24,590
23,733
14,000
10,300
4,363
-
-
-
71,772
70,000
-
-
-
-
-
20,115
1 Balance removed on resignation as a Director during the relevant year.
232
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
x
5
(continued)
LINK BETWEEN GROUP PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
A
x
B
x
The variable (or 'at risk') remuneration of the CEO and other Senior Executives is linked to the Group’s
performance through the use of measures based on the operating performance of the business.
GROUP PERFORMANCE AND STI
For the year ended 30 June 2013, 20 per cent of the STI award was determined with reference to
proportional EBITDA, 20 per cent with reference to proportional net costs, and 10 per cent with reference
to safety, as discussed on page 217 .
Proportional EBITDA
The proportional EBITDA result for the year ended 30 June 2013 was $828.0 million. Excluding the effect of
Capital Beltway Express and the CEO transition cost, this resulted in the payment of 50 per cent of STIs
attributable to proportional EBITDA. The proportional EBITDA result was driven by the Group's continued
focus on cost control and the performance of the asset portfolio. This result was delivered despite significant
disruption caused by construction on Sydney’s Hills M2 Motorway.
Proportional net costs
The proportional net costs result for the year ended 30 June 2013 was $163.4 million, a 2.2 per cent increase
from the prior year result. Excluding the effect of Capital Beltway Express, proportional net costs decreased
by 4.3 per cent from the prior year which resulted in the payment of 150 per cent of STIs attributable to
proportional net costs.
Safety
For the year ended 30 June 2013, the safety performance measure resulted in a 100 per cent STI
outcome. The safety target included several components as outlined on page 217. In Australia the lead
and lag safety targets were achieved and over 75 per cent of the action items listed in the safety
development action plans were completed and there was a reduction in the Recordable Injury Frequency
Rate. In the USA the lead and lag safety targets were also achieved. All items in their safety management
system plan were completed and there were no Recordable Case Incidences for employees and
construction contractors. These results reflected substantial work focused on safety in the year ended 30
June 2013.
GROUP PERFORMANCE AND LTI
For the year ended 30 June 2013, LTIs were linked to relative TSR and FCF per security.
Relative TSR
Relative TSR for the year ended 30 June 2013 is measured against a bespoke comparator group comprising
companies in the transport, utilities, real estate, construction and infrastructure Global Industry Classification
Standards (GICS) sectors of the ASX150.
FCF per security
The performance target for performance awards granted during the year ended 30 June 2013 was a range
for compound growth in FCF per security of between 6 per cent and 9 per cent over three years. It was
considered an appropriate target that reflects the Group’s focus on the maximisation of free cash to drive
security holder
the
performance target range for compound growth in FCF per security is between 12 per cent and 15 per cent.
return. For performance awards granted during the year ending 30 June 2014,
233
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
The table below summarises the Group’s five year results for the relevant performance measures. These
results show that since the year ended 30 June 2009, Transurban’s distribution policy has been to align
distributions with FCF per security. Since that time, Transurban has delivered consistent growth on this
measure based on consistent revenue and EBITDA growth. Based on investor feedback, this remains
Transurban’s financial focus.
Group
Performance
1
Measure
Security price at year end
2013
$6.76
2012
$5.69
2011
$5.23
2010
$4.24
2009
$4.18
Distribution paid per security
31.0c
29.5c
27.0c
24.0c
22.0c
Underlying proportional EBITDA -
$m1
TSR
performance2
828.0
25%
784.0
15%
718.7
635.4
583.3
32%
10%
2%
FCF per security performance - weighted average
30.1c
29.8c
27.5c
27.4c
22.2c
1 In the current and prior year, LTIs were linked to relative TSR and FCF per security. In earlier years, LTIs were linked to relative TSR
and proportional EBITDA.
2 The TSR performance is the total security holder return for that financial year.
234
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
NON-EXECUTIVE DIRECTOR REMUNERATION
(continued)
Remuneration report
x
6
x
A
x
REMUNERATION POLICY
The diagram below sets out the key objectives of the Group’s Non-executive Director remuneration policy
and how they are implemented through the Group’s remuneration framework:
x
B
x
Securing and retaining talented,
qualified Directors
Preserving independence and
impartiality
Aligning Director and security
holder interests
Director fee levels are set with
regards to: the responsibilities and
risks attached to the role, the time
commitment expected and the
workload, experience and
expertise, and market benchmark
data provided by remuneration
consultants.
Director remuneration consists of
base (Director) fees and
Committee fees.
No element of Director
remuneration is 'at risk' (i.e. fees
are not based on the performance
of the Group or individual
Directors from year to year).
Directors are encouraged to
hold Transurban securities.
REMUNERATION ARRANGEMENTS
Maximum aggregate remuneration
The amount of aggregate remuneration that may be paid to Non-executive Directors in any year is capped at
a level approved by security holders. The current aggregate fee pool of $2,400,000 per year (inclusive of
superannuation contributions) was approved by security holders at the 2010 Annual General Meeting. No
change to this amount is proposed for the year ending 30 June 2014.
The aggregate fee pool and the manner in which it is apportioned amongst Non-executive Directors is
reviewed annually. The Remuneration and Human Resources Committee undertakes this review and makes
recommendations to the Board. In conducting the review, the Committee considers market benchmark data
from independent remuneration consultants.
Non-executive Director fees for the year ended 30 June 2013
A review of Non-executive Director fees was undertaken during the year ended 30 June 2013, and it was
decided that there would be no change to fees other than an increase in the annual fee for the Chair of the
Remuneration and Human Resources Committee by $5,000 to $30,000.
Base (Director) fees have not increased since 2010. Current base fees and Committee fees per year are set
out below:
Board
Audit and Risk Committee
Nomination Committee
Remuneration and Human Resources Committee
Chair fee $
455,000
Member fee $
170,000
40,000
10,000
30,000
20,000
10,000
20,000
The Chair of the Board does not receive any additional fees for Committee responsibilities. The Chair of
each Committee only receives the Chair fee (and not a member fee).
235
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
Remuneration report
(continued)
Non-executive Directors are permitted to be paid additional fees for special duties or exertions. No such fees
were paid during the year ended 30 June 2013. Non-executive Directors are also entitled to be reimbursed
for all business related expenses, including travel, as may be incurred in the discharge of their duties.
Retirement benefits
No current Non-executive Directors are entitled to any retirement benefits. In September 2005, the Board
resolved to discontinue retirement benefits for Non-executive Directors from 30 September 2005. The value
of benefits accrued up to that date attracted interest at the statutory fringe benefits rate.
ShareLink Investment Tax Deferred Plan
Under the ShareLink Investment Tax Deferred Plan, Non-executive Directors are able to sacrifice up to 50
per cent of their pre tax fees to acquire up to $5,000 of Transurban securities each year. No securities were
issued to Non-executive Directors under the plan during the year ended 30 June 2013.
236
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
(continued)
Remuneration report
x
C
x
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Non-executive Director remuneration for the years ended 30 June 2013 and 30 June 2012 is set out below:
Short-term benefits
Post-employment benefits
Total
Fees
1
Superannuation
Retirement
2,3
benefits
438,716
439,411
223,625
207,631
211,119
207,114
183,608
176,047
(appointed 12 April 2012)
181,229
34,225
194,070
173,720
(appointed 1 January 2012)
155,967
77,983
Current Non-executive Directors
L Maxsted
2013
2012
N Chatfield
2013
2012
R Edgar
2013
2012
S Mostyn
2013
2012
C O'Reilly
2013
2012
R Slater
2013
2012
I Smith
2013
2012
Former Non-executive Directors
G Cosgriff
2013
2012
J Davis
2013
2012
R Officer
2013
2012
J Eve
2013
2012
J Keyes
2013
2012
Total
2013
2012
(resigned 5 January 2012)
-
48,256
(resigned 5 January 2012)
-
69,903
(resigned 7 August 2012)
18,832
176,047
-
81,778
(resigned 6 December 2011)
-
25,793
1,607,166
1,717,908
(resigned 6 December 2011)
16,470
15,775
16,470
15,775
16,470
15,775
16,470
15,398
16,247
3,080
-
-
14,037
7,018
-
7,044
-
25,648
1,695
15,398
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
251,028
-
418,186
-
-
-
-
-
-
455,186
455,186
240,095
223,406
227,589
222,889
200,078
191,445
197,476
37,305
194,070
173,720
170,004
85,001
-
339,850
-
513,737
20,527
191,445
-
48,256
-
25,793
97,859
120,911
-
669,214
1,705,025
2,508,0333
1 Superannuation contributions made on behalf of Non-executive Directors to satisfy the Groupʼs obligations under applicable
superannuation guarantee legislation.
2 Amounts represent accrued contractual retirement benefits paid in the year ended 30 June 2012 to two former Non-executive Directors
(Geoff Cosgriff and Jeremy Davis) upon their retirement from the Board on 6 December 2011. No current Non-executive Directors are
entitled to any retirement benefits.
3 Retirement benefits are excluded from the amount of aggregate remuneration that may be paid to Non-executive Directors in any year.
237
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
37
Key management personnel disclosures
(continued)
(continued)
Remuneration report
x
D
x
NON-EXECUTIVE DIRECTOR RELATED PARTY INFORMATION
Rodney Slater is a partner in the public policy practice group of Patton Boggs. Transurban used Patton
Boggs during the year ended 30 June 2013 for various lobbying activities in the USA. This relationship is
based on normal commercial terms. US$226,692 was paid to Patton Boggs during the year ended 30 June
2013.
Lindsay Maxsted is Chairman and a Non-executive Director of Westpac Banking Corporation. Westpac
provides transactional banking and loan facilities to Transurban. This relationship is based on normal
commercial terms.
Neil Chatfield is Chairman and a Non-executive Director of Seek Limited. Seek provides employment
advisory services to Transurban. This relationship is based on normal commercial terms.
Neil Chatfield is also Chairman of, and Samantha Mostyn is a Non-executive Director of, Virgin Australia
Holdings Limited. Transurban uses air travel services provided by Virgin Australia. This relationship is based
on normal commercial terms.
238
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
38 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate
risk), credit risk and liquidity risk. The financial risk management function is carried out centrally by the Transurban
Group Treasury team (Treasury) under policies approved by the Board. Treasury work closely with the Group’s
operating units to actively identify and monitor all financial risks, and put hedging in place where appropriate. The
Board are informed on a regular basis of any material exposures to financial risks.
The Group’s hedging strategies are detailed below, and include the use of derivative financial instruments. The
Group's policies allow derivative transactions to be undertaken only for the purpose of reducing risk, and do not
permit speculative trading. Treasury continuously monitor risk exposures over time through review of cash flows,
price movements, market analysis and ongoing communication within the Group. When measuring financial risk,
Treasury consider positive and negative exposures, existing hedges and the ability to offset exposures where
possible.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk when future commercial transactions
and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency.
Foreign currency exposures are viewed as either investment exposures or operating exposures. Exposures from
investment in foreign assets are generally managed using foreign currency debt. All known material operating
exposures out to 12 months are hedged, using hedging instruments, offsetting exposures or drawing on foreign
currency funds.
The Group's exposure to foreign currency risk at the reporting date, denominated in the currency in which the risk
arises, was as follows:
Consolidated
Receivables
Borrowings
Net exposure
2013
USD$'000
2012
USD$'000
584,402
(547,248)
37,154
379,432
(342,278)
37,154
Exposure to other foreign exchange movements is not material.
Sensitivity
Based on the financial instruments held at end of the period, had the Australian dollar strengthened/weakened by
10 cents against the U.S. dollar with all other variables held constant, the Group’s post-tax profit for the year would
have been $3,899,000 lower (2012: $3,258,000 lower) or $4,841,000 higher (2012: $3,967,000 higher), as a result
of foreign exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the
above table.
Equity is not impacted by movements in foreign exchange. The Group’s exposure to other foreign exchange
movements is not material.
Price risk
The Group is not exposed to price risk.
239
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Market risk
(continued)
Cash flow interest rate risk
The Group’s main exposure to interest rate risk arises from cash equivalents, loans and other receivables with
variable interest rates, and long-term borrowings. Treasury manages interest rate risk by entering into fixed rate
debt facilities or using interest rate swaps to convert floating rate debt. Generally, the Group raises long term
borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Group
borrowed at fixed rates directly. The Group’s policy is to hedge interest rate exposure at a minimum in compliance
with the covenant requirements of funding facilities and up to 100 per cent. Covenant requirements vary by debt
facility, and require a minimum of between 50 per cent and 80 per cent of interest rate exposure to be hedged. At
30 June 2013, 93 per cent (2012: 99 per cent) of the Group’s interest rate exposure on variable rate borrowings
was hedged.
As at the reporting date, the
outstanding:
Group
had the following variable rate borrowings and interest rate swap contracts
2013
Weighted
average
interest rate
%
Balance
$'000
2012
Weighted
average
interest rate
%
Balance
$'000
Cash and cash equivalents
Floating rate borrowings
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
3.6%
4.5%
2.9%
(28,675)
1,513,370
(1,413,500)
71,195
4.8%
5.3%
3.6%
(3,545)
1,424,720
(1,408,500)
12,675
An analysis by maturities is provided in liquidity risk below.
Sensitivity
At 30 June 2013, if interest rates had changed by +/-100 basis points from the year-end rates with all other
variables held constant, post-tax profit for the year would have been $712,000 lower/higher (2012: $127,000
lower/higher).
Credit risk
The Group has no significant concentrations of credit risk from operating activities, and has policies in place to
ensure that transactions are made with commercial customers with an appropriate credit history. However as an
owner and operator of
risk with its financial
counterparties through undertaking financial transactions intrinsic to its business. These include funds held on
deposit, cash investments and the market value of derivative transactions.
the Group is exposed to credit
large infrastructure assets,
Treasury assesses the credit strength of potential financial counterparties using objective ratings provided by
multiple independent rating agencies. Board approved limit allocation rules ensure higher limits are granted to
higher rated counterparties. The Group also seeks to mitigate its total credit exposure to counterparties by only
dealing with credit worthy counterparties, limiting the exposure to any one counterparty, minimising the size of the
exposure where possible through netting offsetting exposures, diversifying exposures across counterparties,
closely monitoring changes in total credit exposures and changes in credit status, and taking mitigating action when
necessary.
The Group’s investment in the Westlink Motorway is through term loan notes (see note 13 for details). The return
on these notes is ultimately dependent on the performance of the Motorway. The Group continually monitors the
performance and expected cash flows of the Motorway.
240
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Liquidity risk
The Group maintains sufficient cash and undrawn facilities to maintain short term flexibility and enable the Group to
meet financial commitments in a timely manner. Treasury assesses liquidity over the short term (up to 12 months)
and medium term (1 - 5 years) by maintaining accurate forecasts of operating expenses, committed capital
expenditure and payments to security holders. Long term liquidity requirements are reviewed as part of the annual
strategic planning process.
Short term liquidity is managed by maintaining a strategic liquidity reserve. This reserve is based on the Group’s
forecast annual operating costs and certain risk exposure scenarios as maintained by the Group’s strategic risk
register, and is maintained as cash and undrawn facilities. The reserve is maintained on a rolling 12 month basis.
Medium term liquidity forecasting is maintained on a rolling five year horizon.
Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Floating rate
- Expiring within one year
- Expiring beyond one year
2013
$'000
2012
$'000
16,251
201,696
217,947
130,000
268,212
398,212
The Group also has a letter of credit facility and a general credit facility in place with undrawn capacity at 30 June
2013 of $22.0 million.
The facilities are committed for the term of the facility and cannot be withdrawn by the bank without notice.
Maturities of financial liabilities
The tables below analyse the
relevant maturity groupings based on their contractual maturities.
Group's
financial liabilities, net and gross settled derivative financial instruments into
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant. For interest rate swaps the cash flows
have been estimated using forward interest rates applicable at the end of the reporting period.
241
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Liquidity risk
(continued)
Contractual
maturities of
financial liabilities 1 year or
At
30 June 2013
less
$'000
Over 1 to
2 years
$'000
Over 2 to
3 years
$'000
Over 3 to 4
years
$'000
Over 4 to
5 years
$'000
Over 5
years
$'000
Total
contractual
cash flows
$'000
Carrying
amount
(assets)/
liabilities
$'000
Non-derivatives
Non-interest
bearing
Variable rate
Fixed rate
Total
non-derivatives
437,495
261,100
464,255
-
812,794
633,797
-
323,045
779,556
-
351,026
385,969
-
11,748
147,609
225,223
676,835 1,234,667
585,104
1,984,936
4,175,079
460,413
1,791,411
3,262,264
1,162,850 1,446,591 1,102,601
736,995
688,583 1,607,499
6,745,119
5,514,088
Derivatives
Net settled (interest
rate swaps)
Total derivatives
83,497
83,497
18,605
18,605
9,834
9,834
4,634
4,634
1,093
1,093
57
57
117,720
117,720
67,720
67,720
242
TRANSURBAN Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Liquidity risk
(continued)
Contractual
maturities of
financial liabilities
1 year or
less
Over 1 to
2 years
Over 2 to
3 years
Over 3 to 4
years
Over 4 to 5
years
Over 5
years
Total
contractual
cash flows
Carrying
amount
(assets)/
liabilities
At
30 June 2012
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Non-derivatives
Non-interest
bearing
Variable rate
Fixed rate
Total
non-derivatives
Derivatives
Net settled
(interest rate
swaps)
Total
derivatives
413,886
73,658
223,813
-
379,972
473,813
-
726,625
640,775
-
24,710
782,922
136,910
-
261,833
238,265
385,257 1,889,415
550,796
434,212
1,705,063 1,472,523
4,395,995 3,237,838
711,357
853,785 1,367,400
807,632
647,090 2,264,590
6,651,854 5,144,573
30,495
27,182
15,974
10,685
5,153
1,789
91,278
85,045
30,495
27,182
15,974
10,685
5,153
1,789
91,278
85,045
Fair value measurements
The carrying value of
approximates fair value.
financial assets and financial
liabilities brought
to account at balance sheet date
The fair value of these financial assets and financial liabilities must be estimated for recognition and measurement
or for disclosure purposes.
Transurban Holding Trust has adopted the amendment to AASB 7
requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
Financial Instruments: Disclosures
which
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b)
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) (level 2), and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level
3).
(c)
The following table presents the Group's assets and liabilities measured and recognised at fair value at 30 June
2013 and 30 June 2012:
243
ANNUAL REPORT 2013 Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2013
(continued)
38
Financial risk management
(continued)
Fair value measurements
(continued)
As at
30 June 2013
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
As at
30 June 2012
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
372
372
63,840
63,840
Level 1
$'000
Level 2
$'000
Level 3
$'000
-
-
-
-
70
70
85,115
85,115
-
-
-
-
-
-
-
-
372
372
63,840
63,840
Total
$'000
70
70
85,115
85,115
The fair value of financial
instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at the end of each reporting period. The fair value of
interest rate swaps are calculated as the present value of the estimated future cash flows. These instruments are
included in level 2.
244
TRANSURBAN Transurban Holding Trust
Directors' declaration
30 June 2013
and notes set out on pages
163
to
244
are in accordance with the
Corporations Act
In the Directors' opinion:
financial statements
including:
the
2001,
(i)
(ii)
(a)
(b)
complying with Accounting Standards, the
professional reporting requirements, and
giving a true and fair view of the
Group's
performance for the
year ended
on that date, and
Corporations Regulations 2001
and other mandatory
financial position as at
30 June 2013
and of its
there are reasonable grounds to believe that the
become due and
payable,
and
Group
will be able to pay its debts as and when they
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations 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.
Lindsay Maxsted
Director
Scott Charlton
Director
Melbourne
1 August 2013
245
ANNUAL REPORT 2013 246
TRANSURBAN 247
ANNUAL REPORT 2013 Transurban International Limited
Controlled Entities
ABN 90 121 746 825
and
Annual report
for the
year ended
30 June 2013
248
TRANSURBAN Transurban International Limited ABN 90 121 746 825
Annual report - 30 June 2013
Contents
Directors' report
Auditor's Independence Declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
250
295
296
350
351
249
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
Directors' report
The Directors of Transurban International Limited (TIL or "the Company") present
report on the
consolidated entity (and referred to hereafter as "the Group") consisting of TIL and the entities it controlled at the
end of, or during, the year ended 30 June 2013.
their
TIL forms part of the triple staple that is Transurban ("the Transurban Group"). A Stapled Security comprises one
share in Transurban Holdings Limited, one share in TIL and one unit in Transurban Holding Trust. None of the
components of the Stapled Security can be traded separately.
Directors
With the exception of the changes noted below, the following persons were Directors of the Company during the
whole of the financial year and up to the date of this report.
Non-executive Directors
Lindsay Maxsted
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer (Resigned 7 August 2012)
Christine O'Reilly
Rodney Slater
Ian Smith
Executive Directors
Scott Charlton (Appointed 16 July 2012)
Christopher Lynch (Resigned 16 July 2012)
Principal activities
The principal activity of Transurban International Limited is to provide management services to, and act as the
holding entity of, the Transurban Group’s investment in Transurban DRIVe Holdings LLC (DRIVe), an unlisted
co-investment vehicle which invests in existing and new toll roads and similar or related opportunities in North
America. Transurban holds a 75 per cent interest in DRIVe.
Transurban International Limited (TIL) forms part of the triple staple that is Transurban.
Dividends
No dividends were declared or paid during the financial year.
Operating and financial review
As a member of the Transurban Group triple staple, the Group operates with a consistent business framework,
strategy and value drivers as the wider Transurban Group.
Business review
Business Framework and Strategy
The Transurban Group is focused on providing effective and innovative urban transport solutions in road
infrastructure, through the management and development of urban networks of toll road concessions. The
effective management of toll road concessions involves leveraging a network footprint in our markets, taking a
leading role in shaping policy, and utilising our core capabilities.
250
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
These capabilities are defined as:
•
•
•
•
•
Network planning and forecasting
Operations and customer management
Project development and delivery
Application of technology, and
Community engagement.
As part of the review and confirmation of our strategy in the year ended 30 June 2013, we have clearly defined
our target markets as the eastern seaboard of Australia and northern Virginia in the US. The operations of the
Group are focused specifically in northern Virginia.
Finally, the business continues to focus on distribution growth as part of this overall strategy.
Value drivers
The investment proposition for high quality toll road assets lies in providing investors with access to long dated,
predictable, growing cash flows generated over the life of the concessions through effective management and
development of the road corridors these concessions govern.
The organic growth in the business derived from traffic growth and inflation protected toll escalation across the
suite of assets is supported by the effective management of
the operations, maintenance and customer
management. It is further enhanced by the effective application of technology in key areas including traffic
management and tolling. In addition, value is unlocked through the development of the portfolio through a range
of activities including asset enhancements and new projects negotiated with governments such as the 495
Express Lanes and 95 Express Lanes projects.
Financial performance
Performance indicators
Proportional EBITDA (earnings before interest,
the primary
measures the Transurban Board uses to assess the operating performance of the Group, with the aim of
maintaining a focus on operating results and associated cash generation. It reflects the contribution from
individual assets to the Group's operating performance and permits a meaningful analysis of the underlying
performance of the Group's assets.
tax, depreciation and amortisation) is one of
To arrive at the proportional result, minority interests in the Group's controlled entities are backed out and
Transurban's interests in non-controlled assets are included, in proportion to Transurban’s ownership.
Free cash is the primary measure used to assess cash generation in the Group. Free cash represents the cash
available for distribution to security holders.
Structure of the Group and relationship to the financial performance
The Group holds Transurban’s 75.0 per cent investment in Transurban DRIVe Holdings LLC (DRIVe). DRIVe in
turn owns 100.0 per cent of Pocahontas 895 and 90.0 per cent of each of 495 Express Lanes and 95 Express
Lanes (currently under construction).
While the Group's ownership of DRIVe represents more than half of the voting rights of DRIVe, it does not have
power to govern its financial, investing and operating policies and accordingly DRIVe is accounted for as a jointly
controlled entity.
The results of the Group therefore reflect a combination of the equity accounted results of DRIVe and the results
of the activities of the Group in providing management services to DRIVe.
251
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Highlights for the year ended 30 June 2013
The Group’s loss for the year ended 30 June 2013 was $47.2 million. The Group has no toll revenue as it is
reflected in the share of net losses of equity accounted investments.
Management and business development revenue increased 105.7 per cent to $40.9 million. This was due to the
commencement of operations on 495 Express Lanes and the revenue earned in the management of services
provided to those operations. Costs associated with those operations increased 52.0 per cent to $38.4 million.
Construction revenue and costs in the current year reflects the Group's development of the Tolling and Traffic
Management System for 495 Express Lanes and 95 Express Lanes (still under development).
EBITDA on a statutory basis increased to $11.9 million, compared to $0.7 million in the prior corresponding
period. The movement in EBITDA reflects the change in the Group’s activities in the financial year as it
commenced providing operational and management services to 495 Express Lanes.
The Group’s share of net losses of equity accounted investments was $28.1 million for the year. The prior period
loss was $213.3 million, represented the one-off impairment of the carrying value of Pocahontas.
Financial position
The Transurban Group is a member of the S&P/ASX 50 with a market capitalisation of around $10.0 billion. At
30 June 2013, 1,481.6 million shares were on issue.
TIL represents one component of the Transurban triple staple and has total assets of $264.0 million. This has
increased from $34.1 million at 30 June 2012 due to TIL’s investment in DRIVe for the construction of the 95
Express Lanes.
The operating assets contained within DRIVe are primarily long-life intangible assets, representing the provision
by the Virginian Department of Transportation of the right to toll customers for the use of the assets. Each of the
three assets within DRIVe have a concession life greater than 80 years and for accounting purposes the carrying
values are amortised on a straight line basis over the duration of the concession.
Details of borrowings applicable to the Group and DRIVe are discussed in Financing Activities below.
Operations and performance of the Group’s portfolio of assets - Year ended 30 June 2013
The Transurban Group considers the best measure of performance to be underlying proportional EBITDA. To
determine the proportional numbers, non-controlling interests are removed from the statutory result and the
Group’s interests in non-controlled assets are included in proportion to our ownership.
Note 2 to the statutory accounts (Segment Information - page 315) presents the proportional result for the
Group, including reconciliations to the statutory result. While management considers proportional EBITDA to be
the best indicator of asset performance, interest expense and revenue, depreciation and income tax are also
included in the Segment Information disclosure.
Pocahontas 895 (Virginia USA) - Transurban DRIVe
Performance on Pocahontas 895 has continued to be weak throughout the year compared to the Group’s initial
expectation of traffic at acquisition in 2006. Following the reduction of the carrying value of DRIVe in 2012, the
impact of Pocahontas 895’s poor performance on the Group’s returns is minimal.
Traffic increased 1.3 per cent year on year, contributing to a revenue increase of $0.6 million. Costs increased
$0.9 million, leading to a decrease in the overall EBITDA margin by 4.3 per cent to 60.3 per cent.
On 14 June 2013 the Transurban Group announced that discussions to transfer Pocahontas 895 back to the
lenders had commenced, however the final structure has yet to be agreed. There is no cash impact of a transfer
of the asset back to the lenders and the asset is carried at no value in the Group's balance sheet.
252
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
495 Express Lanes (Virginia USA) - Transurban DRIVe
The 495 Express Lanes opened to tolled traffic in November 2012, 6 weeks ahead of schedule. Traffic
performance on the lanes has been lower than expected, but has continued to grow. It is still considered too
early to determine any reliable traffic trends.
Total toll revenue generated to 30 June 2013 is $7.2 million. 495 Express Lanes has recorded an EBITDA loss
since opening of $8.1 million to 30 June 2013. In respect of the Group’s proportional result, this contributed a
loss of $5.4 million.
The weekend of 6-7 April 2013 was toll free on 495 Express Lanes, with the view to increasing public awareness
of the benefits of using the lanes. This public education and engagement proved positive, with traffic growth
increasing after this and other initiatives.
Free cash and cash flows from operations
Free cash represents a key measure of the performance of the wider Transurban Group’s operating assets and
provides the basis for determining the distribution to be paid to security holders.
For the year ended 30 June 2013, the Group recorded a cash outflow from operating activities of $4.6 million.
Business development activities
95 Express Lanes (Virginia USA) - Transurban DRIVe
On 1 August 2012,
Commonwealth of Virginia to build and operate the 95 Express Lanes in Northern Virginia, USA.
the Transurban Group announced that
financial close had been reached with the
The 95 Express Lanes will be a 29-mile (46-kilometre) reversible, two- and three-lane facility, with a 73 year
operating concession from opening date.
The cost of construction is expected to be $750 million over a two and a half year period.
Toll system delivery and operations of the 95 Express Lanes are to be managed by the Group and co-located
with the 495 Express Lanes. The 95 Express Lanes will utilise technology developed for the 495 Express Lanes.
At the date of this report the project is 40 per cent complete, has had no lost time injuries and remains on
schedule for completion in late 2014.
Financing activities
The Group’s financing is through the loans from related parties, specifically the wider Transurban Group. These
loans increased by $271.3 million during the year, being the contribution the development activities on 495
Express Lanes and 95 Express Lanes.
In addition to the Group’s debt from related parties, both 495 Express Lanes and Pocahontas 895 have external
debt funding.
Debt maturity profiles
The following chart shows the external debt maturity profiles related to the Group’s investments in operating
assets. The charts show the debt in the financial year it matures and shows the full value of the debt facilities as
this is the value of debt for refinancing purposes.
The debt values are shown at 30 June 2013 and US dollar debt has been converted at the hedged rate where
cross currency swaps are in place. Unhedged US dollar debt has been converted to Australian dollars at spot
exchange rate ($0.9275 at 30 June 2013).
253
ANNUAL REPORT 2013 Asset level debt maturity profile
Transurban International Limited
Directors' report
30 June 2013
(continued)
Financial risk management
The Transurban Group and the Group’s exposure to financial risk management and its policies for managing
that risk can be found in the Financial Risk Management note in note 31 of the statutory accounts.
Note 31 to the Financial Statements outlines the Group's hedging policies, credit risk, interest rate risk and
liquidity and funding policies.
Corporate activities
As a member of the Transurban Group the corporate activities of the wider group are applicable to the Group.
Change of CEO and Executive Management
A number of changes were made throughout the year to the Transurban structure and Executive leadership
team. In addition to Scott Charlton commencing in the role of CEO in July 2012, the following changes occurred:
•
•
•
•
•
•
Establishment of a ‘Delivery and Operations’ team with Tim Steinhilber appointed as Group General
Manager
Establishment of a ‘Strategy’ team with Wes Ballantine appointed as Group General Manager
Appointment of Sue Johnson as Group General Manager, Human Resources
Appointment of Lisa Tobin as Group General Manager, Technology
Appointment of Vin Vassallo as Group General Manager, Victoria following the departure of Elizabeth
Mildwater from Transurban, and
Appointment of Jennifer Aument as Group General Manager, North America.
254
TRANSURBAN040080063563560020010001400120018001600200020482046204420422040203820362034203220302028202620242022202020182016201445 LETTERS OF CREDIT95 TIFIA DEBTPOCAHONTAS TIFIA DEBT495 TIFIA DEBT495 PRIVATE ACTIVITY BONDS95 PRIVATE ACTIVITYBONDSPOCAHONTAS BANK DEBT7733018414256635323 Transurban International Limited
Directors' report
30 June 2013
(continued)
Issue of securities (underwriting amendment)
As part of the interim distribution Transurban had announced its intention to have the distribution reinvestment
plan underwritten by UBS up to an amount of $115 million (or approximately 50 per cent of the distribution).
However, on 24 December 2012 this was deemed unnecessary as an agreement was reached with UniSuper
Limited to issue 16,260,163 stapled securities at an issue price of $6.15 per security. The underwriting
obligations of the interim distribution were therefore cancelled.
People
Diversity
During the reporting period, Transurban established diversity committees to raise awareness and to identify
opportunities to improve diversity at all levels of the business. The committees are comprised of representatives
from across the Group. The Australian committee is currently chaired by the CEO.
In the current period, a formal education program on diversity was provided to senior management, focusing on
inclusive leadership and unconscious bias. A gender pay equity review was also undertaken during the year,
with no matters of significance noted.
Transurban has identified gender diversity, cultural diversity and flexible work practices as its focus areas for the
next year. The Group’s Diversity Policy has been reviewed to align it with these areas.
Leadership and development
Twice a year Transurban conducts a talent review with the Executive team. This review helps identify high
potential individuals who may have the ability to move into a Senior Leadership or Executive role, or those who
may be able to move laterally outside of their area of technical expertise. It also identifies successors for the
Executive team and other future leaders. Development activities for this group are monitored throughout the
year.
In 2013 Transurban ran a Senior Leadership Development Program focusing on strategy, safety, leadership and
diversity. This program was offered in both the US and Australia.
Transurban supports the development of women within the business and has recently started a Coaching and
Mentoring program for female middle managers.
Vision and values
In the year ended 30 June 2013, Transurban reviewed and updated its vision and values to bring them into line
with the updated Group strategy. Workshops and focus groups were conducted in both the US and Australian
offices to give employees significant input into the process. The values established through this process are
integrity, collaboration, accountability, ingenuity and respect.
Sustainability
Transurban is committed to taking a sustainable approach to all our operations, projects and business practices
to create the best outcomes for our government clients and communities.
During the period,
Transurban’s corporate strategy and reinforces our vision to “strengthen communities through transport”.
the Transurban Board endorsed a revised Sustainability Strategy, which underpins
The Sustainability Strategy highlights three key focus areas: Be good neighbours, Use less, and Think long term.
The principles inherent in these focus areas enhance our ability to deliver efficient and integrated transport
networks that support productivity and the wellbeing of our communities.
255
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
We report on our outcomes in these areas in our annual Sustainability Report, which also outlines our
commitments for the coming years. Further information on our Sustainability Strategy will be included in our
2013 Sustainability Report, which will be published in October 2013 on our website (www.transurban.com).
Business risks and opportunities
The following are key opportunities that may impact Transurban, and the Group’s, financial and operating result
in future periods:
•
•
•
•
•
•
•
Negotiation of new business opportunities to develop projects and enhance the motorway networks in
Transurban’s target markets
Higher traffic volumes across Transurban’s assets resulting in stronger cashflows across the Group
Integration of technology and systems across Transurban assets, including tolling systems, to leverage
economies of scale available from Transurban’s network footprint.
Policy change in approach to network pricing to drive efficiencies and improvements in capacity
utilisation on Transurban’s assets
Development of connecting infrastructure to drive improved traffic volumes on Transurban’s assets
Changes in law or regulation, that may result in the reduction of taxes or other governmental charges
or levies
Realisation of benefits associated with financing arrangements and financial transactions, including
sourcing new financing, the refinancing of existing indebtedness and credit exposures on transactions
with financial counterparties.
The following are key risks that may impact Transurban’s and the Group's financial and operating result in future
periods:
•
•
•
•
•
•
•
•
•
•
•
•
Reduced traffic volumes or an inability to grow traffic volumes
The loss of a toll road concession for non-performance or default under a concession agreement or as
a result of government action
Existence and development of, or changes to, competing roads, feeder roads and other means of
transport
Changes in law or regulation, including the imposition of new or increased taxes or other governmental
charges or levies
Adverse tax developments, including as a result of legislative change or interpretation, and changes to
accounting standards
Dependency on the services of key contractors and counterparties for development and construction
activities and for the provision of tolling, customer services, operations and maintenance services, road
management and control systems
Exposure to risks associated with financing arrangements and financial transactions, including sourcing
new financing, the refinancing of existing indebtedness and credit exposures on transactions with
financial counterparties
Risks of accidents, incidents and other events relating to the assets and insurance policies not
providing adequate protection against those risks
Risks of technology failure, resulting in the inability to collect tolls or operate the asset.
Unexpected material maintenance of the assets
Potential for involvement in legal, regulatory and other proceedings and disputes arising from business
and operations; and
Reliance on dividends, interest on and repayments of shareholder loans from concessionaires and
other subsidiaries for funding.
256
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Risk Management
Managing risk is an essential part of our business. Key risks are regularly reviewed by the Board, the Audit and
Risk Committee and our Executive Committee.
Transurban has a business-wide risk framework in place to help create and continuously improve a consistent
and rigorous approach to identifying, analysing and evaluating risks. This framework has various policies,
standards and guidelines attached to it, including the Risk Management Policy which can be found in the
Corporate Governance section of our website (www.transurban.com).
The framework is overseen by the Audit and Risk Committee and is actively managed by the Executive
Committee. It is consistent with AS/NZ31000:2009 and is subject to regular review by internal audit. Our Audit
and Risk Committee Charter is also available in the Corporate Governance section of our website.
Significant changes in the entityʼs state of affairs
Other than those matters already discussed in the operating and financial review, the following significant
change has occurred in Transurban, and TIL’s, state of affairs in the year ended 30 June 2013:
• During the year Transurban decided to close its office in New York and focus all US activities out of the
495 Express Lanes HOT Operations Centre in Virginia.
Matters subsequent to the end of the financial year
At the date of this report the Directors are not aware of any other circumstances that have arisen since 30 June
2013 that have significantly affected, or may significantly affect, the Group’s operations in future financial years,
the results of those operations in future financial years, or the Group’s state of affairs in future financial years.
Likely developments in future financial years and the expected results of operations
Other than matters already discussed above, any other potential
like developments in the operations of the
Group and the expected results of operations have not been included in these financial statements because the
Directors believe it would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
The Group is subject to environmental regulations under Australian Commonwealth and State laws and certain
applicable laws in the USA. The Group maintains a comprehensive environmental management plan to monitor
the performance of its motorways, and any external parties responsible for operating any of the Group’s
motorways, and takes remedial steps where necessary.
There were no significant breaches reported during the financial year on the Group’s assets.
257
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Information on Directors
Lindsay Maxsted Dip Bus, FCA, FAICD
Chair and independent Non-executive Director
Term of office
Director and Chair since 12 August 2010.
Lindsay is currently Chairman and a Non-executive Director of Westpac Banking Corporation, and a
Non-executive Director of BHP Billiton Limited and BHP Billiton plc. He is the Managing Director of Align Capital
Pty Ltd and the Honorary Treasurer of Baker IDI Heart and Diabetes Institute.
Lindsay was formerly the CEO of KPMG Australia from 2001 - 2007. His principal area of practice prior to this
was in the corporate recovery field managing a number of Australia’s largest insolvency / workout / turnaround
engagements.
Lindsay holds interests in 30,000 Stapled Securities.
Transurban Board Committee membership
Chair of the Nomination Committee and a member of the Audit and Risk Committee.
Scott Charlton BSci, MBA (Texas)
Chief Executive Officer
Term of office
Director since 16 July 2012. CEO since 16 July 2012.
Scott joined Transurban from Lend Lease, where he was Group COO (since November 2011) and Group
Director of Operations (from March 2010). Prior to this, Scott held several senior appointments across a range of
institutions, including as CFO of Leighton Holdings Limited (2007-2009) and as
infrastructure and financial
Managing Director of Deutsche Bank in Australia and Hong Kong (1995-2003).
Scott holds interests in 88,752 Stapled Securities, and 605,904 performance awards.
Neil Chatfield M.Bus, FCPA, FAICD
Independent Non-executive Director
Term of office
Director since 5 January 2012.
Neil served as Executive Director and the CFO of Toll Holdings Limited from 1997 until September 2008. Neil
has extensive experience in general and financial management, capital markets, mergers and acquisitions and
risk management.
Neil is currently the Chairman of Virgin Australia Holdings Limited and of Seek Limited and a Non-executive
Director of Grange Resources Limited. Neil
is also Honorary Chairman of HomeGround Services. He was
previously a Non-executive Director of Whitehaven Coal Limited (to May 2012).
Neil holds interests in 30,910 Stapled Securities.
Transurban Board Committee membership
Chair of the Audit and Risk Committee and a member of the Nomination and Remuneration and Human
Resources Committees.
258
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Information on Directors (continued)
Robert Edgar BEc (Hons), PhD, FAICD
Independent Non-executive Director
Term of office
Director since 5 January 2012.
Bob has over 30 years experience as a Senior Executive, with 25 years at ANZ Banking Group in various senior
roles, including Deputy CEO, Senior Managing Director, COO, and Chief Economist.
Bob is currently the Chairman of Federation Centres and a Non-executive Director of Asciano Group and of
Linfox Armaguard Pty Ltd. He is also Chairman of the Prince Henry’s Institute of Medical Research. He was
previously a Non-executive Director of Nufarm Limited (to March 2012), AMMB Holdings Berhad, Shanghai
Rural Commercial Bank and of the Bank of Tianjin.
Bob holds interests in 24,590 Stapled Securities.
Transurban Board Committee membership
Chair of
Nomination Committees.
the Remuneration and Human Resources Committee and member of
the Audit and Risk and
Samantha Mostyn BA, LLB
Independent Non-executive Director
Term of office
Director since 5 January 2012.
Sam is a Non-executive Director and corporate advisor and has previously held senior executive positions at
IAG, Optus and Cable & Wireless Plc. Sam is currently Chair of the Stakeholder Advisory Council of the
CSIRO’s Climate Adaptation Flagship and Deputy Chair of the Diversity Council of Australia. She is a member of
the NSW Climate Change Council, the advisory boards of ClimateWorks Australia and the Crawford School of
Government and Economics, ANU. Sam is a Commissioner of the Australian Football League and the National
Mental Health Commission.
Sam is currently a Non-executive Director of Virgin Australia Holdings Limited, Citygroup Pty Ltd, Sydney
Theatre Company, Australian Volunteers International and St James Ethics Centre Foundation.
Sam holds 14,000 Stapled Securities.
Transurban Board Committee membership
Member of the Remuneration and Human Resources and Nomination Committees.
259
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Information on Directors (continued)
Christine O'Reilly BBus
Independent Non-executive Director
Term of office
Director since 12 April 2012
Christine has in excess of 25 years experience in the finance and infrastructure sectors in various roles including
as Co-Head of United Infrastructure at Colonial First State Global Asset Management and as CEO of the
GasNet Australia Group.
Christine is currently a Non-executive Director of CSL Limited, Energy Australia, Baker IDI Heart and Diabetes
Institute and is the Deputy Chair of CARE Australia.
Christine holds interests in 4,363 Stapled Securities.
Transurban Board Committee membership
Member of the Audit and Risk and Nomination Committees.
Rodney Slater J.D., BS
Independent Non-executive Director
Term of office
Director since 5 January 2012.
Rodney is a partner in the public policy practice group of Washington DC firm Patton Boggs, where he has been
a leader of its transportation practice since 2001. He served as US Secretary of Transportation from 1997 until
the end of the Clinton Administration in January 2001 and was the Administrator of the Federal Highway
Administration between 1993 and 1996.
In the US, Rodney’s current directorships include Kansas City Southern (railroads), Verizon Communications
Inc, Atkins Global, and Southern Development Bancorporation. He was previously a Director of Parsons
Brinckerhoff, Delta Airlines, Northwest Airlines, and ICx Technologies Inc. He also served on Transurban’s US
Advisory Board until November 2008. Rodney is a Director of the Congressional Awards Foundation and United
Way Worldwide.
Rodney does not hold interests in any Stapled Securities.
Transurban Board Committee membership
Member of the Nomination Committee.
260
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Information on Directors (continued)
Ian Smith BE Mining (Hons), BFin Admin
Independent Non-executive Director
Term of office
Director since 5 January 2012.
Ian has more than 30 years experience in the global mining industry in a variety of operational and project
management roles. He is currently the Managing Director and CEO of Orica Limited.
Ian is President of The Australian Mines and Metals Association. He was previously the CEO at Newcrest Mining
Limited, Chairman of the Minerals Council of Australia and a Director of the Australian Chamber of Commerce
and Industry.
Ian holds interests in 71,772 Stapled Securities.
Company Secretaries
Amanda Street LLB (Hons), BComm.
Amanda joined Transurban in September 2008 and was appointed as Company Secretary in February 2011.
Before joining Transurban, Amanda was Assistant Company Secretary at SP Ausnet and Senior Corporate
Counsel at National Australia Bank. She has over 12 years of legal, company secretarial and other relevant
experience. Prior to her in-house work, Amanda was a solicitor specialising in M&A work with Australian law
firm Mallesons.
Julie Galligan LLB, BA
Julie joined Transurban in November 2008 and was appointed as General Counsel, Australia in February 2012.
Julie has over 12 years legal experience in private practice and in-house roles in both Australia and the United
Kingdom. Prior to joining Transurban, Julie worked in-house at Associated British Ports.
261
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Meetings of Directors
The numbers of meetings of the Company's board of Directors and of each board committee held during the
year ended 30 June 2013, and the numbers of meetings attended by each Director were:
Lindsay Maxsted
Scott Charlton (appointed 16 July 2012)
Christopher Lynch (resigned 16 July 2012)
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer (resigned 7 August 2012)
Christine O'Reilly
Rodney Slater
Ian Smith
#
Attended Held
9
9
-
8
8
8
1
9
9
9
9
9
-
9
9
9
1
9
9
9
# = Number of meetings held during the time the director held office
The number of meetings of each Board Committee held during the year ended 30 June 2013, and the number of
meetings attended by each Director, are set out in the following table.
Audit and Risk
Committee
(1)
AttendedHeld
#
Remuneration
and Human
Resources
(2)
Committee
AttendedHeld
#
Nomination
(3)
Committee
Special
purpose Sub-
committees
AttendedHeld
#
AttendedHeld
#
Lindsay Maxsted
Scott Charlton (appointed 16 July 2012)
Christopher Lynch (resigned 16 July 2012)
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer (resigned 7 August 2012)
Christine O'Reilly
Rodney Slater
Ian Smith
6
6
*
6
6
*
2
6
*
*
6
*
*
6
6
*
2
4
*
*
5
4
1
5
5
5
*
*
*
*
*
*
*
5
5
5
*
*
*
*
2
2
*
2
2
2
-
2
1
2
2
*
*
2
2
2
-
2
2
*
1
1
*
1
*
*
*
*
*
*
1
1
*
1
*
*
*
*
*
*
# = Number of meetings held during the time the Director held office and was a member of the Committee
* = Not a member of the relevant Committee
(1) Scott Charlton was not a member of the Audit and Risk Committee but attended meetings during the year.
(2) Lindsay Maxsted, Scott Charlton and Chris Lynch were not members of the Remuneration and Human Resources Committee but attended
meetings during the year. Scott Charlton and Chris Lynch were excluded from discussions involving their remuneration during meetings which
they attended.
(3) Ian Smith and Scott Charlton were not members of the Nomination Committee but attended meetings during the year.
262
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
2013 REMUNERATION REPORT (AUDITED)
Message from the Chairman of the Remuneration and Human Resources Committee
Dear security holder
I am pleased to present Transurbanʼs remuneration report for the year ended 30 June 2013.
Last yearʼs report
comprehensive review of the Groupʼs executive remuneration arrangements.
received strong support at
the 2012 AGM. That
report detailed the results of our
We continue to be mindful of the expectations of both the market and security holders in setting the executive
reward framework.
There were no substantive changes to our framework or practices this year, but we did make some refinements
to further align the remuneration of our leadership team with the creation of sustainable security holder value,
business outcomes, and the Groupʼs organisational values: integrity, collaboration, accountability, ingenuity and
respect.
A CEO transition and significant executive change also impacted remuneration during the year. Departures were
managed in line with the provisions set out in the relevant executiveʼs service agreement and current termination
benefits legislation. For new executive appointments, we used market data from an independent remuneration
consultant to assist us in determining the quantum and structure of their packages. There was a significant
reduction in the average total remuneration package for current executives (including the CEO) on the prior year.
We believe the outcomes are fair and equitable. We also think that our framework gives us a range of
mechanisms to balance sensible risk management and motivate executives to deliver outstanding results going
forward.
We welcome your feedback on our remuneration practices or on our communication of remuneration matters in
this report.
Bob Edgar
Chairman, Remuneration and Human Resources Committee
263
ANNUAL REPORT 2013 Transurban International Limited
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(continued)
Remuneration report (continued)
x
INTRODUCTION
This report, prepared in accordance with the Corporations Act 2001, contains detailed information
regarding the remuneration arrangements for the Directors and Senior Executives who were the 'key
management personnel' (KMP) of the Transurban Group (Group) during the year ended 30 June 2013.
The KMP disclosed in this report are listed in the table below:
Current Non-executive Directors
Lindsay Maxsted, Chair
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
Former Non-executive Directors
Robert Officer (resigned effective 7 August 2012)
Current Senior Executives*
Scott Charlton, Managing Director and Chief Executive Officer (CEO) (from 16 July 2012)
Jennifer Aument, Group General Manager, North America (from 10 June 2013)1
Wesley Ballantine, Group General Manager, Strategy (from 22 November 2012)2
Andrew Head, Group General Manager, New South Wales
Samantha Hogg, Chief Financial Officer
Sue Johnson, Group General Manager, Human Resources (from 8 October 2012)3
Tim Steinhilber, Group General Manager, Delivery and Operational Excellence (from 10 December 2012)4
Lisa Tobin, Group General Manager, Technology (from 4 February 2013)
Vin Vassallo, Group General Manager, Victoria (from 4 February 2013)
Transitioning Senior Executive
Michael Kulper, President North America5
Former Senior Executives
Chris Lynch, Managing Director and CEO (resigned as CEO effective 16 July 2012, departed 30 July
2012)
Ken Daley, President, International Development (resigned effective 2 February 2013)
Elizabeth Mildwater, Group General Manager, Victoria (resigned effective 31 March 2013)
* The dates on which the Senior Executives who were promoted or appointed during the year ended 30 June 2013 are the dates that
those Senior Executives commenced being members of KMP. Their remuneration for the period during which they were members of
KMP is disclosed in this report only.
1 Formerly Vice President, Public Affairs.
2 Formerly General Manager, Investor Relations, Media and Government.
3 Formerly General Manager, Human Resources.
4 Formerly Vice President, Major Projects.
5 Michael Kulper will depart the Group on 3 September 2013. Refer to section 1B for further details.
CONTENTS
Content
1
2
3
4
5
6
All values in this report are in Australian dollars, unless otherwise stated.
Remuneration snapshot
Remuneration governance
Remuneration in context
CEO and Senior Executive remuneration for the year ended 30 June 2013
Link between Group performance, security holder wealth and remuneration
Non-executive Director remuneration
Page
265
268
269
270
288
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Directors' report
30 June 2013
(continued)
Remuneration report (continued)
1
REMUNERATION SNAPSHOT
Transurban’s remuneration framework, as reflected in the 2012 report, received strong support from
security holders at the 2012 AGM. The framework was the culmination of a careful and comprehensive
review of the Group’s remuneration arrangements. This review took into account feedback sought and
received from security holders and other stakeholders, market expectations, and regulatory developments.
The remuneration framework was largely unchanged during the year ended 30 June 2013. Certain
refinements were made to further align reward with the creation of security holder value and the
achievement of corporate objectives. The quantum and structure of the remuneration arrangements for
new Senior Executives were also benchmarked using market data provided by Ernst & Young. The
outcome of
this process was a reduction in the CEO's total remuneration package of 28 per cent
(assuming 100 per cent vesting of short and long term incentives) and a reduction in the average total
remuneration package for current Senior Executives (excluding the CEO) of 27 per cent (again assuming
100 per cent vesting).
THE REMUNERATION FRAMEWORK
The key elements of the remuneration framework for the CEO and other Senior Executives for the year
ended 30 June 2013 were as follows:
Remuneration mix
The remuneration of the CEO and other Senior Executives was structured as a mix of fixed remuneration
and variable ('or at risk') remuneration through short term and long term incentive components. The
relative weightings of the three components were as follows:
CEO
Other Senior Executives
Total remuneration % (annualised at target)*
Fixed TEC
Variable (performance based)
40
45
STI
30 (50% deferred)
30 (30 or 50% deferred)
LTI
30
25
* Transition to the remuneration mix for Michael Kulper was due to occur in FY2014. As a result of his departure from the Group on 3
September 2013, this will no longer occur. Refer to section 1B for further details.
Fixed total employment cost (TEC)
Fixed TEC was set with reference to the market median, using the ASX 20-50 as the primary reference,
with consideration also given to the ASX 100. Remuneration packages (including TEC levels) are
reviewed annually by the Remuneration and Human Resources Committee with reference to an
individual's role, experience and performance, as well as relevant comparative market data provided by
an independent remuneration consultant. TEC levels are also reviewed on a change in role.
Short term incentive (STI)
STI performance measures were again linked to growth in proportional EBITDA, cost management based
on proportional net costs, safety, and performance against individual key performance indicators (KPIs).
In the year ended 30 June 2012, mandatory deferral of 30 per cent of the STI award was introduced for
the CEO and other Senior Executives. The deferred component was increased in the year ended 30 June
2013 to 50 per cent for the new CEO and other Senior Executives appointed during the year.
The deferral period is two years. For Australian Senior Executives, deferral is into securities. Due to legal
restrictions on the issue of securities to USA residents, the USA Senior Executives receive deferred cash
awards. The deferred component of remuneration may, at the discretion of the Board, be subject to
forfeiture or clawback (e.g. in the event of misconduct or material misstatement of financial results).
Long term incentive (LTI)
LTI performance measures were as follows:
• 50 per cent relative Total Shareholder Return (TSR) measured against a bespoke comparator group
comprising companies in the transport, utilities, real estate, construction and infrastructure Global
Industry Classification Standards (GICS) sectors of the ASX 150; and
• 50 per cent Free Cash Flow (FCF) per security, reflecting the Group's focus on the maximisation of free
cash flow to drive security holder return. The definition of FCF per security is set out on page 277. The
FCF calculation is included in note 21 of the audited financial statements of Transurban Holdings
Limited.
A
x'
x
x
x
265
ANNUAL REPORT 2013 Remuneration report (continued)
Transurban International Limited
Directors' report
30 June 2013
(continued)
OTHER EVENTS / ACTIONS IMPACTING REMUNERATION IN THE YEAR ENDED 30 JUNE 2013
CEO transition
Chris Lynch resigned as CEO, effective 16 July 2012, and departed Transurban on 30 July 2012.
His contractual entitlements on resignation were finalised in the year ended 30 June 2012 and disclosed at
the time of his departure and in the 2012 report. As these payments were actually made in the year ended
30 June 2013, they are disclosed again in this report. Chris Lynch only received these payments once,
even though they have been disclosed in two reports.
Chris Lynch received the following during the year ended 30 June 2013 in satisfaction of his contractual
entitlements:
• an STI for the year ended 30 June 2012 (awarded at 116 per cent of his TEC based on performance
against applicable performance targets). The cash component of the award (70 per cent or $1,764,963)
was paid in August 2012. The deferred (into securities) component (30 per cent or $756,413) will vest,
subject to clawback provisions, on 1 July 2014;
• a pro-rated 'target'
level STI award for the 30 days worked during the year ended 30 June 2013
($178,652) after satisfying performance targets for that period relating to his role in a successful CEO
transition process. The award was paid in cash in August 2012; and
• an amount
in lieu of an LTI earned but not received for a six month period during his tenure
($1,060,000) in line with his contractual entitlement to receive an LTI award for every day employed by
the Group. The payment was made in cash in August 2012.
Equity instruments previously granted to Chris Lynch under the Group's LTI plans will continue on foot in
accordance with their original terms, with the applicable performance measures for each grant to be tested
at the end of the applicable original performance period.
Chris Lynch did not receive any ex gratia payments on separation.
Scott Charlton commenced as CEO on 16 July 2012.
The remuneration arrangements applying to Scott Charlton under his service agreement were disclosed at
the time of his appointment and in the 2012 report. The arrangements were designed in accordance with
from independent
the Group’s remuneration strategy and were developed with the benefit of
remuneration consultants and Australian peer company benchmark data. The total remuneration package
for the CEO has been reduced by 28 per cent (assuming 100 per cent vesting of STIs and LTIs) on the
prior year. Further details of Scott Charlton’s remuneration during his first year as CEO are set out in
section 4.
input
As previously disclosed, in the year ended 30 June 2013, Scott Charlton received a one-off grant of equity
as a sign-on award in recognition of the incentives he forfeited with his former employer by joining the
Group. A total of 236,256 awards were granted to Scott Charlton on 14 September 2012 to vest, subject to
his continued employment,
tranches (of 78,752 each) on the first, second and third
anniversaries of his commencement with the Group. Each award is an entitlement to receive a fully paid
security on vesting. The value of the awards at grant date was $1,349,022. The first tranche (78,752
awards) vested on 16 July 2013. The maximum total value of the grant yet to vest is $899,348 (based on
the fair value per award at grant date).
in three equal
x
B
x
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30 June 2013
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Remuneration report (continued)
Senior Executive restructure and KMP departures
In December 2012, a restructured Executive Committee (the Senior Executive group) was announced.
The new Executive Committee reflects a focus on delivering and enhancing the Group's core
competencies and is structured to balance the diverse range of skills and experience required to deliver
the Group's strategy. Key portfolios have been elevated to report to the CEO.
The new Executive Committee includes three new positions for existing General Managers (Wesley
Ballantine, Sue Johnson and Tim Steinhilber) and an external appointment (Lisa Tobin). Two Senior
Executives (Ken Daley and Elizabeth Mildwater) also resigned and departed the Group during the year,
and Ms Mildwater's role was filled by an external candidate (Vin Vassallo).
Benchmark data from Ernst & Young was used by the Remuneration and Human Resources Committee to
determine the quantum and structure of the remuneration arrangements for new positions and the new
Senior Executives. The remuneration arrangements were subsequently approved by the Board. The
process resulted in a reduction in the average total remuneration package for current Senior Executives
(excluding the CEO) of 27 per cent (assuming 100% vesting of STIs and LTIs).
The five new Executive Committee members will be eligible for LTIs from 1 July 2013 onwards. No pro rata
LTI grants were made during the year ended 30 June 2013 to these Senior Executives. Along with the
CEO, they will have 50 per cent of their STI award deferred (for two years) for the year ended 30 June
2013 onwards.
Ken Daley resigned as President, International Development, and departed the Group on 2 February 2013.
Elizabeth Mildwater resigned as Group General Manager, Victoria, and departed the Group on 31 March
2013. On departure, Ken Daley and Elizabeth Mildwater forfeited their unvested equity awards (deferred
STI and LTIs) in full. Neither received an STI award for the year ended 30 June 2013 nor any ex gratia
payments on separation.
USA restructure
In the near term the primary focus for the Group's USA business is on the existing asset base in Virginia. In
June 2013, the Board resolved to close the Group's New York office. As a consequence, it was determined
that the position of President, North America would no longer be required. As no suitable positions are
available for Michael Kulper (the incumbent), his employment with the Group will cease on 3 September
2013. The remuneration arrangements to apply to Michael Kulper on his departure from the Group will be
disclosed in the 2014 report.
In June 2013, Jennifer Aument (formerly Vice President, Public Affairs) was appointed Group General
Manager, North America and became a member of the Executive Committee. She will be eligible for LTIs
from 1 July 2013 onwards. Ms Aument will also have 50 per cent of her STI award deferred (for two years)
for the year ended 30 June 2013 onwards.
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(continued)
REMUNERATION GOVERNANCE
Remuneration report (continued)
x
2
x
A
x
BOARD AND REMUNERATION AND HUMAN RESOURCES COMMITTEE RESPONSIBILITY
The Remuneration and Human Resources Committee assists the Board in fulfilling its responsibilities
relating to the remuneration of Directors, the remuneration of, and incentives for, the CEO and other Senior
Executives, and remuneration practices, strategies and disclosures generally. The Committee also reviews
gender pay equity.
It is critical that the Remuneration and Human Resources Committee is independent of management when
making decisions affecting employee remuneration. Accordingly, the Committee comprises Non-executive
Directors, all of whom are independent. Where appropriate, the CEO and the Group General Manager,
Human Resources attend Committee meetings, however they do not participate in formal decision making.
The membership of the Remuneration and Human Resources Committee was unchanged in the year
ended 30 June 2013. The members of the Committee continued to be Robert Edgar (Chair), Samantha
Mostyn and Neil Chatfield. Further details regarding the Committee are set out in the Directors’ report.
ENGAGEMENT OF REMUNERATION CONSULTANTS
To ensure that the Remuneration and Human Resources Committee has all relevant information at its
it may seek and consider advice from independent
disposal when making remuneration decisions,
remuneration consultants where appropriate. Any advice from consultants is used to guide the Committee
and the Board, but does not serve as a substitute for thorough consideration of the issues by Directors.
During the year ended 30 June 2013, no consultants provided the Remuneration and Human Resources
Committee with a remuneration recommendation relating to KMP. Ernst & Young provided the Committee
with benchmark data only.
The Group has a protocol in place governing the appointment of remuneration consultants and the manner
in which any recommendations made by those consultants concerning the remuneration of KMP are to be
provided to the Group, and in particular the circumstances in which management may be given access to
those recommendations. The purpose of the protocol is to ensure that any remuneration recommendations
provided by consultants are provided without undue influence by KMP.
In accordance with the protocol, all remuneration recommendations and advice must be sent directly to the
Remuneration and Human Resources Committee through the Chair of that Committee. The provision of
such material or other information directly to management is prohibited. The protocol also requires a
consultant to provide, with their recommendations, both a declaration of their independence from the KMP
to whom their recommendations relate, and also confirmation that the Committee’s conditions for contact
and dialogue with management had been observed.
x
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x
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TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
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3
REMUNERATION IN CONTEXT
Transurban is focused on providing effective and innovative urban transport solutions in road
infrastructure, through the management and development of urban networks of toll road concessions. The
effective management of toll road concessions involves leveraging a network footprint in our markets,
taking a leading role in shaping policy, and utilising our core capabilities in the following areas:
• Network planning and forecasting;
• Operations and customer management;
• Project development and delivery;
• Application of technology; and
• Community engagement.
The investment proposition for high quality toll road assets lies in providing investors with access to long
dated, predictable, growing cash flows generated over the life of
the concessions through effective
management and development of the road corridors they govern.
The Group is focused on the long term management of toll road assets at various stages of maturity to
achieve the best outcomes for investors, Government partners and the community. In Australia, the
Group’s interests include 100 per cent ownership of CityLink in Melbourne, and the Hills M2 and Lane
Cove Tunnel in Sydney. The Group has partial interests in a further three roads on the Sydney orbital
network, being the M1 Eastern Distributor (75.1 per cent), the M5 (50 per cent), and the Westlink M7 (50
per cent). In North America, the Group currently has interests in three assets, Pocahontas 895 (75 per
cent), the 495 Express Lanes (67.5 per cent), and the 95 Express Lanes project (67.5 per cent), which is
currently under construction and remains on schedule for completion in late 2014.
The Board and management are focused on ensuring security holder value is enhanced through the strong
performance of the Group’s asset portfolio. Development activities also provide opportunities to further
expand the portfolio and unlock further value in the concessions.
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CEO / SENIOR EXECUTIVE REMUNERATION FOR THE YEAR ENDED 30 JUNE 2013
Remuneration report (continued)
x
4
x
A
x
REMUNERATION STRATEGY AND POLICY
The Group's executive remuneration strategy is designed to attract, retain and motivate a highly qualified
and experienced management team with the necessary skills and attributes to lead the Group in achieving
its business objectives. The strategy also aims to encourage management
to strive for superior
performance by rewarding the achievement of targets that are challenging, clearly understood, and within
the control of individuals to achieve through their own actions.
The Group's remuneration strategy and policy as set by the Board is summarised below:
Creating Security Holder Value
Remuneration Strategy
Attract, retain, motivate and reward executives critical to the Group's growth and success by:
• Offering competitive remuneration that is benchmarked against the external market.
• Providing a balance of fixed and variable (or 'at risk') remuneration.
Align executive reward with individual and Group performance by:
• Making short and long term components of remuneration 'at risk' based on performance.
• Assessing rewards against appropriate financial and non-financial performance measures.
• Encouraging executive security holdings.
Remuneration Structure
Fixed remuneration
Total Employment Cost (TEC):
• Comprises cash salary, superannuation and other prescribed benefits.
• Provides a base level of reward for effective completion of Group and specific accountabilities.
• Appropriately benchmarked and set with reference to role, responsibilities, skills and experience.
Variable (or 'at risk') remuneration
Short term incentive (STI):
Annual rewards tied to pre-determined individual and Group performance measures, and includes a
deferred element.
Individual targets reflect individual specific accountabilities and key drivers for growth and success.
•
•
• Group performance targets linked to earnings, cost management and safety.
Long term incentive (LTI):
• Equity rewards to align executive and security holder interests.
•
•
Vest after three years, subject to achievement of pre-determined internal and external performance
measures.
Encourages sustainable performance in the medium to longer term, and provides a retention
element.
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Remuneration report (continued)
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B
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REMUNERATION MIX
For the year ended 30 June 2013, the remuneration of the CEO and other Senior Executives was
structured as a mix of fixed remuneration and variable (or 'at risk') remuneration through short term and
long term incentive components. The relative weightings of the three components were determined by the
Board (on the recommendation of the Remuneration and Human Resources Committee) and are set out in
the table below:
x
C
x
x
D
x
CEO
Senior Executives commencing in FY2013
Senior Executives commencing prior to FY2013**
Total remuneration % (annualised at target)*
Fixed TEC
Variable (performance based)
40
45
45
STI
30 (50% deferred)
30 (50% deferred)
30 (30% deferred)
LTI
30
25
25
* These figures do not necessarily reflect the relative value derived from each of the components, which depends on actual performance
against targets for the variable components.The STI percentages are based on achieving the relevant performance targets. The LTI
percentages are based on the maximum LTI available at the time of grant to each Senior Executive if the awards granted vest at the end
of the performance period.
** Transition to the remuneration mix for Michael Kulper was due to occur in FY2014. As a result of his departure from the Group on 3
September 2013, this will no longer occur.
FIXED REMUNERATION - TOTAL EMPLOYMENT COST (TEC)
What is TEC?
Fixed remuneration is represented by total employment cost comprising base salary and superannuation
contributions (or pension plans in the case of USA based employees).
Fixed remuneration is not 'at risk' but is set by reference to appropriate benchmark information for an
individual’s responsibilities, performance, qualifications and experience. There are no guaranteed TEC
increases in the service agreement of the CEO or any Senior Executive.
How is TEC determined?
Remuneration packages (including TEC levels) are reviewed annually by the Remuneration and Human
Resources Committee with reference to an individual’s role, experience and performance, as well as
relevant comparative market data. Independent remuneration consultants and surveys, internal relativities
and market conditions also provide guidance. TEC levels are also reviewed on a change in role. Any
changes to TEC levels recommended by the Committee are approved by the Board.
The CEO's and other Senior Executives' TEC is determined with reference to the market median. The
primary reference for determining the market median is the ASX 20-50, with consideration also given to the
ASX 100. Consideration is given to sizing factors including market capitalisation and revenue. A range
around the median provides flexibility to recognise individual experience and capabilities.
SHORT TERM INCENTIVE (STI)
How does the STI plan operate?
Eligible permanent Group employees, including the CEO and other Senior Executives, participate in the
annual STI plan. The STI plan puts a significant proportion of remuneration 'at risk' subject to meeting
specific pre-determined Group, team and individual performance measures linked to corporate objectives.
This aligns employee interests with the Group's financial performance, as well as management principles
and the Group’s cultural values.
For the year ended 30 June 2013, the CEO and other Senior Executives had a target STI opportunity of 30
per cent of their total remuneration package. Mandatory STI deferral of 30 per cent of the overall STI
award was introduced for the CEO and other Senior Executives in the year ended 30 June 2012. The
deferred component was then increased to 50 per cent during the year ended 30 June 2013 for the CEO
and all other newly appointed Senior Executives.
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Remuneration report (continued)
The deferral period is two years. For Australian Senior Executives, deferral is into securities. Due to legal
restrictions on the issue of securities to USA residents, the USA Senior Executives receive deferred cash
awards. The deferred component of remuneration may, at the discretion of the Board, be subject to
forfeiture or clawback (e.g. in the event of misconduct or the material misstatement of financial results).
What were the STI performance measures for the year ended 30 June 2013?
The STI performance measures for the CEO and other Senior Executives for the year ended 30 June 2013
were chosen to provide a balance between corporate, individual, operational, strategic, financial and
non-financial aspects of performance and are described below:
Measure
Description of targets/indicators for FY2013
Group
performance
targets
(1) Growth in proportional EBITDA (20% weighting)
The proportional EBITDA targets were set against the previous year's results and
the Group's FY2013 budget:
Proportional EBITDA result
Less than 6.7% above underlying result for FY2012
6.7% above underlying result for FY2012
Budget EBITDA for FY2013 (9% increase on result for
FY2012)
17% above underlying result for FY2012
^ Straight line vesting applies between 50-100% and 100-150%.
% STI that
vests^
zero
50
100
150
(2) Cost management based on proportional net costs (20% weighting)
The proportional net costs targets were set against the previous year's results
and the Group's FY2013 budget. The proportional net costs target excluded
Capital Beltway for 2013:
Proportional net costs result
Over FY2013 budget
FY2012 result normalised + CPI
FY2012 result normalised
$10 million saving on FY2012 normalised result
^ Straight line vesting applies between 50-100% and 100-150%.
% STI that
vests^
zero
50
100
150
(3) Safety targets (10% weighting), including multiple indicators that focused on
improving the Group's safety culture and reducing workplace injuries for
employees and contractors. The safety targets for Australia and the USA
comprised a lead and a lag indicator. The Australian lead indicator required the
completion of safety development action plans and the lag indicator required a
reduction in the Recordable Injury Frequency Rate. The USA lead indicator
required the completion of all items outlined in the safety management system
and the lag indicator related to the Recordable Incidence Rate for employees and
construction contractors.
Individual KPIs (50% weighting), were unique to the individual's area of
accountability, and in FY2013 related to critical business sustainability measures,
including: operational performance; cost reduction; customer satisfaction; project
outcomes; succession planning; risk management; people management; strategy
development; and business plan implementation.
Individual KPIs reflect the behaviours valued by the Group and are capable of
measurement. Individuals have a clear line of sight to KPIs and are able to
directly affect outcomes through their own actions.
Individual key
performance
indicators (KPIs)
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Remuneration report (continued)
Who sets the STI performance measures?
STI performance measures are set at the beginning of the financial year. The CEO's individual KPIs are set
by the Board. All other Senior Executives’ individual KPIs are set by the CEO and approved by the Board.
The Board sets the Group performance targets.
What is proportional EBITDA and why is it used as an STI performance measure?
EBITDA (earnings before interest,
performance measure used by many companies.
taxes, depreciation and amortisation)
is a common operational
the primary measures that
Proportional EBITDA is one of
the Board uses to assess the operating
performance of the Group, with an aim to maintain a focus on the Group’s operating results and associated
cash generation. It reflects the contribution from individual assets to the Group's operating performance
and focuses on elements of the result that management can influence to drive improvements in short term
earnings. Proportional EBITDA is the aggregation of EBITDA from each asset multiplied by the Group's
percentage ownership, as well as any contribution from Group functions. The Board believes proportional
EBITDA provides a better reflection of the underlying performance of the Group’s assets than statutory
EBITDA. The EBITDA calculation from the statutory accounts would not include the EBITDA contribution of
the M5, M7 or DRIVe (equity accounted in the statutory results), which are meaningful contributors to the
Group’s performance. Proportional EBITDA figures used to assess performance are included in note 2 of
the audited financial statements of Transurban Holdings Limited.
The Board can decide to exclude specific items from proportional EBITDA to provide an underlying result
when determining performance incentives. For the year ended 30 June 2013, the Board resolved to
exclude costs associated with the CEO transition. The Board also determined that the contribution by
Capital Beltway Express (the 495 Express Lanes) be excluded when determining performance incentives
during the period of ramp up for this asset.
Proportional EBITDA has been used by the Group as an STI performance measure since 2009.
What are proportional net costs and why is it used as a performance measure?
Proportional net costs is calculated as fee and other revenue less total costs of the Group. Costs after fee
and other revenues encourages and allows management to incur additional costs where these are justified
by increased revenue results.
The use of a cost related STI performance measure reflects the fact that management has the ability to
influence the expenditure of the business. Strong cost management throughout the business drives an
increase in proportional EBITDA and free cash flow and ultimately security holder value.
Proportional net costs has been used by the Group as an STI performance measure since 2010.
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Remuneration report (continued)
How are the varying levels of performance achievement rewarded?
STI targets are designed to differentiate and reward high performance. 50 per cent of the available STI
vests for on-target performance, 100 per cent vests for high performance and up to an additional 50 per
cent can be earned for exceptional performance. These targets are consistent for all of the Group’s eligible
employees. Given that STI awards are contingent on performance across a range of measures, maximum
STI awards can only be achieved for performance that is exceptional on all measures.
How is performance assessed?
Performance against
independently reviewed.
the Group performance targets is assessed by the Board. The results are
The CEO's performance against his individual KPIs is assessed by the Remuneration and Human
Resources Committee, which then makes recommendations to the Board. The performance of other
Senior Executives against their individual KPIs is assessed by the CEO, who confers with the Committee
and then the Board regarding his assessment.
Once KPIs have been assessed, the Board approves STI awards. STI cash awards for the year ended 30
June 2013 will be paid in August 2013. The STI deferred component for the year ended 30 June 2013 will
be awarded in August 2013 and will vest, subject
to continuity of employment (unless otherwise
determined by the Board) and clawback provisions, on 1 July 2015.
The Board believes the method of assessment is rigorous and provides a balanced evaluation of the
performance of the CEO and each other Senior Executive.
What if a Senior Executive ceases employment?
Under the service agreements for the CEO and other Senior Executives, if the CEO or other Senior
Executive ceases employment with the Group before performance against STI targets is assessed, they
would generally not be entitled to receive any STI award, unless otherwise determined by the Board.
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Remuneration report (continued)
What were the STI performance outcomes for the year ended 30 June 2013?
Group performance in respect of the proportional EBITDA, proportional net costs and safety STI
performance measures for the year ended 30 June 2013 was assessed by the Board as
Australia and 100 per cent in the USA.
100 per cent in
STI awards for the CEO and other Senior Executives for the year ended 30 June 2013 are set out below:
STI outcome (%)
Actual STI
1
($)
awarded
STI forfeited
(%)
Group
performance
Individual
KPIs
Total
Cash
2 Deferred into
2
securities
Current Senior Executives
S Charlton
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
L Tobin4
V Vassallo4
Transitioning Senior Executive
M Kulper5
Former Senior Executives
C Lynch6
K Daley
E Mildwater
100
100
100
100
100
100
100
-
-
-
100
-
-
110
130
100
70
80
130
110
-
-
-
105
115
100
85
90
115
105
-
-
738,300
10,7753
81,1503
241,395
284,935
112,3253
97,8253
-
-
738,300
10,7753
81,1503
103,455
122,115
112,3253
97,8253
45,000
45,000
75
362,264
155,256
100
100
178,652
-
-
-
-
-
-
-
-
-
-
-
-
15
10
-
-
-
-
25
-
100
100
1 On-target performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI in respect of
FY2013 was nil. The maximum potential value of the STI was the “Actual STI awarded”.
2 The cash STI payments will be paid in August 2013. The STI deferred component (30/50 per cent of the STI awarded) will vest, subject
to continuity of employment (unless otherwise determined by the Board) and clawback provisions, on 1 July 2015.
3 The Senior Executive was not a member of KMP for the entirety of FY2013. Accordingly only the STI earned whilst a member of KMP is
included in the table.
4 Lisa Tobin and Vin Vassallo were granted STI deferred awards in recognition of their contribution and performance since joining the
Group in February 2013.
5 An overall outcome of 75 per cent of his available STI was awarded to Michael Kulper for FY2013. A holistic approach, which took into
account the performance of the 495 Express Lanes, was considered appropriate in determining his STI. As noted in section 1B, Michael
Kulper will depart the Group in September 2013.
6 Chris Lynch received a pro-rated STI in August 2012 based on performance and targets for his time served during FY2013.
275
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
What was the grant and movement in the number of STI deferred awards?
Mandatory STI deferral was introduced in the year ended 30 June 2012, with the first grant of awards
made in August 2012.
Balance at
start of year
Granted
during year
as
remuneration
Matured and
paid during
year
Forfeited
during the
year
Balance at
the end of
year
Current Senior Executives*
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
Transitioning Senior Executive
M Kulper
Former Senior Executives
C Lynch2
K Daley
E Mildwater
-
-
-
-
-
-
-
-
-
-
14,7891
15,2121
22,449
18,973
16,5401
19,3561
36,464
133,099
26,742
19,863
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(26,742)
(19,863)
14,789
15,212
22,449
18,973
16,540
19,356
36,464
133,099
-
-
* Scott Charlton, Lisa Tobin and Vin Vassallo joined the Group after the FY2012 STI performance period and therefore were not entitled
to receive an STI deferred award in respect of that period.
1 STI deferred awards granted during the year as remuneration occurred prior to the Senior Executive becoming a member of KMP.
2 Refer to section 1B for further details of Chris Lynch's contractual entitlements on resignation.
x
E
x
LONG TERM INCENTIVE (LTI)
How does the LTI plan operate?
The LTI plan aligns reward with security holder value by tying this component of executive remuneration to
the achievement of performance measures that underpin sustainable long term growth.
Participation in the LTI plan is offered to the CEO and other Senior Executives, and certain other
employees nominated by the CEO and approved by the Board. For the year ended 30 June 2013, the CEO
was offered an LTI grant equivalent to 30 per cent of his total remuneration package. Other eligible Senior
Executives were offered grants equivalent to 25 per cent of their total remuneration package.
LTI grants are made in the form of performance awards under the Group’s Performance Awards Plan
(PAP) at no cost to the recipient. Each performance award is an entitlement to receive a fully paid security,
or an equivalent cash payment, on terms and conditions determined by the Board, subject
to the
achievement of certain vesting conditions linked to performance over a three year period.
Subject to the achievement of the performance measures, upon vesting, the Board will determine in its
absolute discretion whether the performance awards will be settled in securities or a cash payment of
equivalent value. Due to legal restrictions on the issue of securities to USA residents, the USA Senior
Executives receive a cash payment upon vesting.
Performance awards that do not vest after testing of the performance measures lapse, without retesting.
Performance awards are not transferable and do not carry voting or distribution rights. However securities
allocated upon vesting of performance awards carry the same rights as other Transurban securities.
What were the LTI performance measures for the year ended 30 June 2013?
Performance awards granted during the year ended 30 June 2013 are subject to a three year performance
period and the following dual performance measures over that period:
276
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
Measure % weighting Description of measure
Relative
TSR
50%
Relative TSR is measured against a bespoke comparator group comprising
companies
construction and
infrastructure Global Industry Classification Standards (GICS) sectors of the
ASX150. The 37 companies in this group are:
in the transport, utilities,
real estate,
Telstra Corporation Ltd, Westfield Group, QR National Ltd, Westfield Retail Trust, Stockland,
Leighton Holdings Ltd, AGL Energy Ltd, BWP Trust, GPT Group, Goodman Group, CFS Retail
Property Trust, Lend Lease Group, Asciano Ltd, Qantas Airways Ltd, Dexus Property Group,
Mirvac Group, Telecom Corporation of New Zealand Ltd, Toll Holdings Ltd, SP Ausnet, APA
Group, Commonwealth Property Office Fund, UGL Ltd, Cardno Limited, Auckland International
Airport Ltd, Centro Retail Australia, Investa Office Fund, Spark Infrastructure Group, Charter Hall
Retail Reit, Australand Property Group, Monadelphous Group Ltd, Duet Group, TPG Telecom Ltd,
Australian Infrastructure Fund, Envestra Limited, Hastings Diversified Utilities Fund, QUBE
Logistics Holdings Limited and Sydney Airport.
TSR measures total return on investment of a security, taking into account
both capital appreciation and distributed income which was reinvested on a
pre-tax basis.
For performance awards granted during the year ended 30 June 2013, the
relative TSR component will vest on a straight line basis if the Group’s relative
TSR performance is above the median of the bespoke comparator group at
the end of the performance period, in accordance with the following table:
TSR vesting schedule:
The Groupʼs relative TSR ranking in
the comparator group
At or below the 50% percentile
Above the 50th percentile but below the
75th percentile
At or above the 75th percentile
% of performance awards that
vest
Nil
Straight line vesting between 50%
and 100%
100%
x
Measure % weighting Description of measure
Growth in
FCF per
security
50%
Within Transurban, Free Cash Flow (FCF) per security is defined as:
• the Group's cash flow from operating activities;
• less: cash flows from operating activities of non 100% owned assets;
• add back: maintenance capital expenditure for 100% owned assets;
• less: accounting charge for maintenance provision for the year;
• less: actual tag expenditure in 100% owned assets;
• add: dividends received from non 100% owned assets;
• divided by: weighted average number of securities issued.
The FCF calculation is included in note 21 of the audited financial statements of
Transurban Holdings Limited.
For performance awards granted during the year ended 30 June 2013, the
FCF per security component will vest based on the Group's compound annual
growth in FCF per security over the three year performance period, as set out
below:
Growth in FCF per security vesting schedule:
% compound annual growth in FCF per
security
6%
Between 6% and 9%
9% or more
% of performance awards that
vest
50%
Straight line vesting between 50%
and 100%
100%
For performance awards granted during the year ending 30 June 2014, the
performance target
range for compound growth in FCF per security is
between 12 per cent and 15 per cent.
277
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
Why were these LTI performance measures selected?
The TSR target is a relative, external, market-based performance measure against those companies with
which the Group competes for capital. It provides a direct link between executive reward and security
holder return.
Growth in FCF per security reflects the Group’s continuing focus on the maximisation of free cash, and has
been used as an LTI performance measure since the year ended 30 June 2012.
How will the LTI performance targets be measured?
Relative TSR
The Group will receive an independent report that sets out the Group's TSR growth and that of each
company in the bespoke comparator group. A volume weighted average price of securities for the 20
trading days up to and including the testing date is used in the calculation of TSR.
The level of TSR growth achieved by the Group will be given a percentile ranking having regard to the
Group’s performance compared to the performance of other companies in the comparator group (the
highest ranking company being ranked at the 100th percentile). This ranking will determine the extent to
which performance awards subject to this target will vest.
FCF per security
The Group's FCF per security percentage growth rate will be calculated based on the FCF per security
over the three year performance period.
The Board considers these methods of measurement to be rigorous and transparent.
What if a Senior Executive ceases employment?
Under the terms of the service agreements for the CEO and other Senior Executives, if the CEO or other
Senior Executive ceases employment with the Group before the performance measures are tested, their
unvested performance awards would generally lapse, unless otherwise determined by the Board.
What will happen in the event of a change in control?
In the event of a takeover or change of control of the Group, the treatment of any unvested performance
awards granted in the year ended 30 June 2013 will be subject to the incumbent Board's discretion.
What was the grant, and movement in the number and value, of performance awards during the
year ended 30 June 2013?
Eligible Senior Executives (excluding the CEO) received performance awards with a grant date of 15
August 2012. Following the receipt of security holder approval at the 2012 Annual General Meeting, the
CEO received performance awards with a grant date of 19 October 2012. All performance awards granted
in the year ended 30 June 2013 vest subject to a performance period from 1 July 2012 through to 30 June
2015.
The relevant values of the grants are as follows:
278
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
Recipient
Grant date
Fair value of awards at grant
1
($)
date
Closing security
price at grant date
Eligible Senior Executives 15 August 2012
Relative TSR
$2.72
FCF per security
$4.99
CEO
19 October 2012 $2.95
$5.43
$5.75
$6.16
1 An explanation of the pricing model used to calculate these values is set out in note 34 to the audited financial statements of
Transurban Holdings Limited.
Performance awards granted in FY2013
Name
Number of
performance
awards
3
granted
Value at grant date
($)
Maximum total value
of grant yet to
4
($)
vest
Current Senior Executives*
S
Charlton1,
2
A Head
S Hogg
Transitioning Senior Executive
M Kulper
Former Senior Executives
K
Daley5
Mildwater5
E
448,400
112,754
125,696
1,848,114
427,605
476,684
1,848,114
427,605
476,684
178,830
678,189
678,189
137,167
112,754
520,188
427,605
-
-
* Jennifer Aument, Wesley Ballantine, Sue Johnson, Tim Steinhilber, Lisa Tobin and Vin Vassallo were not eligible for an LTI grant
(including any pro rata grant) in respect of FY2013.
1 The grant made to the CEO constituted his LTI entitlement for FY2013 and was made following security holder approval at the 2012
AGM on the terms summarised above. Performance awards vest subject to performance over the period from 1 July 2012 through to 30
June 2015.
2 In September 2012, Scott Charlton received a one-off sign-on grant of 236,256 performance awards to vest, subject to his continued
employment, in three equal tranches (of 78,752 each) on the first, second and third anniversaries of his commencement with the Group.
The first tranche (78,752 awards) vested on 16 July 2013. The maximum total value of the grant yet to vest is $899,348 (based on the fair
value per award at grant date).
3 The grants made to Senior Executives assume full vesting of their full LTI entitlement
summarised above. Performance awards vest subject to performance testing over the period from 1 July 2012 through to 30 June 2015.
4 The maximum value of the grant has been estimated based on the fair value per award at date of grant. The minimum total value of the
grant, if the applicable performance measures are not met, is nil.
5 Performance awards lapse where the performance and service measures are not satisfied on testing. On departure from the Group, Ken
Daley and Elizabeth Mildwater forfeited their awards. The value of the forfeited awards was $520,188 for Ken Daley and $427,605 for
Elizabeth Mildwater. No other Senior Executives forfeited performance awards during the year.
for FY2013 and were made on the terms
279
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
x
F
x
LEGACY LTI PLANS
The Group has a number of LTI plans that were offered in previous years, as detailed below:
Plan
Grant date
Performance period
FY2012 PAP
26 Sep 2011
11 Nov 2011 (CEO only)
1 Jul 2011 - 30 Jun 2014
FY2011 PAP
1 Nov 2010
FY2010 PAP
11 Dec 2009
TSR : 1 Nov 2010 - 1 Nov
2013
EBITDA : 1 Jul 2010 - 30
Jun 2013
1 Jul 2009 - 30 Jun 2012
External performance
measure (50% of grant)
Comparator group
Relative TSR
Relative TSR
Relative TSR
33 companies within a
bespoke comparator group
within the ASX150
The S&P/ASX 100
Vesting schedule
Above 50th percentile to 75th percentile
Straight line vesting between 50%-100%
Relative TSR
% of performance awards that vest
At or above the 75th percentile
100% vests
Internal performance
measure (50% of grant)
Growth in free cash flow
(FCF) per security
Group's annual growth in
proportional EBITDA
Group's annual growth in
proportional EBITDA
From 7% - 10%
From 7% - 11%
From 6% - 9%
Compound growth
% of performance awards that vest
At target
50% vests
Vesting schedule
From target % to stretch %
Straight line vesting between 50% - 100%
At or above stretch %
100% vests
Current status
Awards on issue
To be tested after 30 Jun
2014
To be tested after 1 Nov
2013
TESTED 100% vested on
11 Dec 2012
1,135,896
1,607,159
-
280
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
Value of performance awards vested and lapsed in the year ended 30 June 2013
The FY2010 PAP vested on 11 December 2012. 100 per cent of awards subject to the TSR performance
measure vested based on the Group’s ranking against the constituents of the S&P/ASX 100. 100 per cent
of awards subject to the proportional EBITDA measure vested based on performance against target. There
were no awards that lapsed.
Name
Current Senior Executives
J Aument2
W Ballantine2
A Head
S Hogg
S Johnson2
T Steinhilber2
Transitioning Senior Executive
M Kulper
Former Senior Executives
C Lynch3
K Daley
E Mildwater
FY2010 PAP - Vested
Number
17,768
20,030
59,347
47,478
23,145
25,022
161,956
617,211
111,276
66,766
Value
($)
1
73,737
83,125
246,290
197,034
96,052
103,841
672,117
2,561,426
461,795
277,079
1 Based on the fair value at date of grant.
2 Awards granted prior to the Senior Executive becoming a member of KMP. Awards vested while the Senior Executive was a member of
KMP except for Jennifer Aument who became a member of KMP after vesting.
3 Refer to section 1B for further details of Chris Lynch's contractual entitlements on resignation.
281
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
Number of performance awards on issue as at 30 June 2013
The number of performance awards held by members of KMP as at 30 June 2013 is provided below.
Comparative data is shown for those Senior Executives who were members of KMP during both the years
ended 30 June 2013 and 30 June 2012.
Current Senior Executives*
S Charlton
2013
J Aument
2013
W Ballantine
2013
A Head
2013
2012
S Hogg
2013
2012
S Johnson
2013
T Steinhilber
2013
Transitioning Senior Executive
M Kulper
2013
2012
Former Senior Executives
C Lynch4
2013
2012
K Daley
2013
2012
E Mildwater
2013
2012
Balance at
start of year
Granted
during year
as
remuneration
Matured and
paid during
year
Lapsed or
forfeited
during year
Balance at
the end of
year
-
684,6561
-
39,3652
44,4712
257,636
196,382
214,633
136,569
52,7712
53,7772
-
-
(17,768)3
(20,030)
112,754
107,766
(59,347)
(44,054)
125,696
101,320
(47,478)
(22,027)
-
-
(23,145)
(25,022)
491,675
477,811
178,830
159,286
(161,956)
(137,736)
-
-
-
-
(2,458)
-
(1,229)
-
-
-
(7,686)
684,6561
21,597
24,441
311,043
257,636
292,851
214,633
29,626
28,755
508,549
491,675
2,016,918
1,785,615
-
715,024
(617,211)
(458,156)
-
1,399,707
(25,565)
2,016,918
284,440
223,297
265,055
186,359
137,167
128,294
112,754
107,766
(111,276)
(310,331)
-
(63,602)
(3,549)
284,440
(66,766)
(27,534)
(311,043)
-
(1,536)
265,055
* Lisa Tobin and Vin Vassallo joined the Group in February 2013 and did not receive a pro rata LTI grant in respect of FY2013.
1 This number includes the 236,256 performance awards granted to Scott Charlton in September 2012 as a sign-on award, to vest,
subject to his continued employment, in three equal tranches on the first, second and third anniversaries of his commencement with the
Group. The first tranche (78,752) awards vested on 16 July 2013. Therefore as at the date of this report, Scott Charlton has 605,904
performance awards yet to vest of which 157,504 awards relate to his sign-on award.
2 Opening balance held prior to the Senior Executive becoming a member of KMP.
3 Awards matured and paid during the year occurred prior to the Senior Executive becoming a member of KMP.
4 Refer to section 1B for further details of Chris Lynch's contractual entitlements on resignation.
282
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
x
G
x
REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Short-term employee benefits
Cash salary
and fees
Cash
STI
2
Non-
monetary
3
benefits
Deferred
STI
4
Post-
employment
benefits
Termination
benefits
Long term
benefits
Share
based
benefits5
Total
Super
-annuation
Long
service
leave
1
1
1
-
-
2,030
1,903
2,366
2,260
3,398
-
3,823
-
81,150
-
22,379
-
230,757
-
284,935
251,598
656,561
555,892
241,395
297,686
589,279
571,722
112,325
-
269,441
-
Current CEO
S Charlton (from 16 July 2012)
738,300
1,789,850
2013
2012
-
-
Current Other Senior Executives
1
J Aument (from 10 June 2013)
27,260
10,775
2013
2012
-
-
W Ballantine (from 22 November 2012)
2013
2012
A Head
2013
2012
S Hogg
2013
2012
S Johnson (from 8 October 2012)
280,971
2013
2012
-
T Steinhilber (from 10 December 2012)
259,550
2013
-
2012
L Tobin (from 4 February 2013)
-
185,869
2013
2012
-
-
1
V Vassallo (from 4 February 2013)
-
2013
-
2012
Transitioning Senior Executive
M Kulper
2013
2012
Former CEO
C Lynch (resigned effective 16 July 2012)
2013
2012
Former Other Senior Executives
K Daley (resigned effective 2 February 2013)
2013
2012
E Mildwater (resigned effective 31 March 2013)
2013
2012
T Honan (resigned effective 2 May 2012)
2013
2012
178,652
2,153,375 1,764,963
1,067,296
955,653
-
1,149,822
-
354,612
-
263,390
362,264
492,765
816,330
704,498
485,161
569,468
176,134
-
-
475,000
53,262
118,030
52,658
-
15,482
-
555
46,299
1,525
2,028
-
3,951
144,951
710
-
710
-
1
246,100
-
15,098
-
5,204
-
44,498
-
77,012
42,527
76,648
35,943
60,277
-
53,001
-
15,000
-
15,000
-
916
-
9,836
-
16,470
22,760
16,470
15,775
12,043
-
6,388
-
6,863
-
6,863
-
120,168
70,395
10,997
9,458
504,275
252,138
5,490
15,775
(50,659)
50,659
(37,627)
37,627
-
-
13,725
45,813
13,725
15,775
-
26,775
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,368
-
12,696
15,258
13,674
11,492
23,829
-
-
-
-
-
-
-
1,302,848
-
4,114,575
-
3,534
-
47,689
-
26,851
-
411,858
-
441,434
347,920
1,380,652
1,300,133
407,426
280,575
1,457,744
1,153,178
38,665
-
58,491
-
-
-
-
-
531,933
-
699,529
-
208,442
-
198,707
-
28,977
16,165
1,441,431
1,033,606
3,046,615
2,578,042
(62,121) 6,103,6656
3,086,801
40,812
6,875,467
7,360,163
8,346
21,983
(341,435)
594,613
499,569
1,890,208
(15,434)
10,015
(274,631)
350,916
172,719
1,249,219
-
-
-
(824,365)
-
831,183
283
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
1 The dates on which the Senior Executive who were promoted or appointed during FY2013 are that dates that those Senior Executives
commenced being a KMP. Their remuneration for the period during which they were members of KMP is disclosed in the table only.
2 The amount represents the cash STI payment to the Senior Executive for FY2013, which will be paid in August 2013. Tim Steinhilber
also received a payment of $161,725 in relation to the successful delivery of the 495 Express Lanes (paid in February 2013).
3 Non-monetary benefits include Group insurance and expatriate allowances (where relevant).
4 A component of STI award is deferred into securities. In accordance with Accounting Standards, the deferred component will be
recognised over the three year service period. The amount recognised in this table is the FY2013 accounting charge for unvested grants.
5 In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the fair value of equity
compensation granted or outstanding during the year (i.e. performance awards under the LTI plan). The fair value of equity instruments is
determined as at the grant date and is progressively allocated over the vesting period.The amount included as remuneration may be
different to the benefit (if any) that Senior Executives may ultimately realise should the equity instruments vest. The fair value of
performance awards at the date of their grant has been independently determined in accordance with AASB 2. The fair value of the
performance awards has been valued applying a Monte Carlo simulation to model Transurbanʼs security price and where applicable, the
TSR performance against the comparator group performance. The assumptions underpinning these valuations are set out in note 34 to
the audited financial statements of Transurban Holdings Limited.
6 The value for share based benefits for Chris Lynch includes all unvested LTI awards. In accordance with Accounting Standard AASB 2,
these have been accounted as an acceleration of vesting. The amount that would have been recognised for services received from Chris
Lynch as CEO of the Group over the remainder of the vesting period has been included in the table above. These awards will continue on
foot in accordance with the original terms, with the applicable measures for each grant to be tested at the end of the applicable original
performance period. These LTI awards may or may not vest. Also included is a cash payment of $1,060,000 which was made to Chris
Lynch in lieu of an LTI earned but not received for a six month period during his tenure in line with his contractual entitlement to receive
an LTI award for every day employed by the Group. This payment was made in cash in August 2012.
x
H
SERVICE AGREEMENTS
The remuneration and other terms of employment for the CEO and other Senior Executives are formalised
in service agreements which have no specified term. Under these agreements, the CEO and other Senior
Executives are eligible to participate in STI and LTI plans. Some other key aspects of the agreements in
place for the year ended 30 June 2013 are outlined below:
CEO
Other Senior Executives
Period of notice to terminate
(Executive)
6 months
3 months
Period of notice to terminate
(the Group*)
12 months
6 months
* Payment in lieu of the notice period may be provided (based on the executive's fixed remuneration). The Group may also terminate at
any time without notice for serious misconduct.
I
ADDITIONAL REMUNERATION INFORMATION
Employee Security Plans
The Group has three broad employee based security plans.
ShareLink Incentive Plan
Under the ShareLink Incentive Plan, subject to Board approval, an allocation of Transurban securities or
cash payments may be made to eligible employees (excluding the CEO and other Senior Executives) in
recognition of the Group’s prior year performance. Eligible employees received a grant of 100 securities at
no cost to them on 27 February 2013. Due to legal restrictions on the issue of securities to USA residents,
eligible employees in the USA received a cash payment of equivalent value in lieu of securities.
Given that the plan is designed to reward employees for the Group's prior year performance and is not
intended to serve as a future incentive, there are no performance measures attached to grants of securities
or cash payments under the plan.
Securities granted under the plan carry a three year holding lock from the grant date and can only be
traded once the holding lock expires or when employment with the Group ceases, which ever is earlier.
284
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
ShareLink Investment Tax Exempt Plan and ShareLink Investment Tax Deferred Plan
The ShareLink Investment Tax Exempt Plan provides eligible employees (excluding the CEO and other
Senior Executives) the opportunity to invest up to $1,000 per year in Transurban securities on a tax
exempt basis. Participants contribute up to $500 by way of salary sacrifice which is matched by the Group
dollar for dollar. Security acquisitions are made quarterly in September, December, March and June each
year.
The ShareLink Investment Tax Deferred Plan provides eligible employees (excluding the CEO and other
Senior Executives) with the opportunity to contribute up to $5,000 per year by way of salary sacrifice to be
invested in Transurban securities. The Group matches participants’ contributions dollar for dollar up to
$3,000. The plan has a disposal restriction period of three years from the date of acquisition, including a 12
month forfeiture period.
Grants under both of these plans are designed to encourage employee security holdings and to align the
interests of employees with those of the Group and are therefore not subject to performance measures.
Dealing in Securities
In accordance with the Group’s Dealing in Securities Policy, employees who have awards under a Group
equity plan may not hedge against those awards. In addition, KMP may not hedge against entitlements
that have vested but remain subject to a holding lock. Employees and Directors are not permitted to obtain
margin loans using Transurban securities (either solely or as part of a portfolio) as security for loans.
285
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
Securities held by Senior Executives as at 30 June 2013
The number of securities held by members of KMP as at 30 June 2013 is provided below. Comparative
data is shown for those Senior Executives who were members of KMP during both the years ended 30
June 2013 and 30 June 2012.
Balance at start of year Changes during year Balance at end of year
Current Senior Executives
S Charlton
2013
J Aument
2013
W Ballantine
2013
A Head
2013
2012
S Hogg
2013
2012
S Johnson
2013
T Steinhilber
2013
L Tobin
2013
V Vassallo
2013
Transitioning Senior Executive
M Kulper
2013
2012
Former Senior Executives
C Lynch
2013
2012
K Daley
2013
2012
E Mildwater
2013
2012
-
-
2,8891
3,041
21,112
1,553
15,616
19,1291
-
-
10,0181
80,000
103,944
713,563
255,401
384,678
384,678
56,066
27,098
10,000
-
1,099
-
(18,071)
10,000
(14,063)
10,467
-
-
10,000
-
3,988
3,041
3,041
11,553
1,553
29,596
-
-
520
10,538
-
(23,944)
(713,563)2
458,162
(384,678)2
-
(56,066)2
28,968
80,000
80,000
-
713,563
-
384,678
-
56,066
1 Opening balance held prior to the Senior Executive becoming a member of KMP.
2 Balance removed on departure from the Group during FY2013.
286
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
Securities held by Non-executive Directors as at 30 June 2013
Current Non-executive Directors
L Maxsted
Balance at start of year Changes during year Balance at end of year
2013
2012
N Chatfield
2013
2012
R Edgar
2013
2012
S Mostyn
2013
2012
C O'Reilly
2013
2012
R Slater
2013
2012
I Smith
2013
2012
Former Non-executive Directors
G Cosgriff
2013
2012
J Davis
2013
2012
R Officer
2013
2012
30,000
30,000
30,910
20,910
23,733
18,627
10,300
-
-
-
-
-
70,000
-
-
152,236
-
384,678
20,115
19,089
-
-
-
10,000
857
5,106
3,700
10,300
4,363
-
-
-
1,772
70,000
-
(152,236)1
-
(384,678)1
(20,115)1
1,026
30,000
30,000
30,910
30,910
24,590
23,733
14,000
10,300
4,363
-
-
-
71,772
70,000
-
-
-
-
-
20,115
1 Balance removed on resignation as a Director during the relevant year.
287
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
x
5
LINK BETWEEN GROUP PERFORMANCE, SECURITY HOLDER WEALTH AND
REMUNERATION
The variable (or 'at risk') remuneration of the CEO and other Senior Executives is linked to the Group’s
performance through the use of measures based on the operating performance of the business.
GROUP PERFORMANCE AND STI
For the year ended 30 June 2013, 20 per cent of the STI award was determined with reference to
proportional EBITDA, 20 per cent with reference to proportional net costs, and 10 per cent with reference
to safety, as discussed on page 272 .
Proportional EBITDA
The proportional EBITDA result for the year ended 30 June 2013 was $828.0 million. Excluding the effect
of Capital Beltway Express and the CEO transition cost, this resulted in the payment of 50 per cent of STIs
attributable to proportional EBITDA. The proportional EBITDA result was driven by the Group's continued
focus on cost control and the performance of
the asset portfolio. This result was delivered despite
significant disruption caused by construction on Sydney’s Hills M2 Motorway.
Proportional net costs
The proportional net costs result for the year ended 30 June 2013 was $163.4 million, a 2.2 per cent
increase from the prior year result. Excluding the effect of Capital Beltway Express, proportional net costs
decreased by 4.3 per cent from the prior year which resulted in the payment of 150 per cent of STIs
attributable to proportional net costs.
Safety
For the year ended 30 June 2013, the safety performance measure resulted in a 100 per cent STI
outcome. The safety target included several components as outlined on page 272. In Australia the lead
and lag safety targets were achieved and over 75 per cent of the action items listed in the safety
development action plans were completed and there was a reduction in the Recordable Injury Frequency
Rate. In the USA the lead and lag safety targets were also achieved. All items in their safety management
system plan were completed and there were no Recordable Case Incidences for employees and
construction contractors. These results reflected substantial work focused on safety in the year ended 30
June 2013.
GROUP PERFORMANCE AND LTI
For the year ended 30 June 2013, LTIs were linked to relative TSR and FCF per security.
Relative TSR
Relative TSR for the year ended 30 June 2013 is measured against a bespoke comparator group
comprising companies in the transport, utilities, real estate, construction and infrastructure Global Industry
Classification Standards (GICS) sectors of the ASX150.
FCF per security
The performance target for performance awards granted during the year ended 30 June 2013 was a range
for compound growth in FCF per security of between 6 per cent and 9 per cent over three years. It was
considered an appropriate target that reflects the Group’s focus on the maximisation of free cash to drive
security holder return. For performance awards granted during the year ending 30 June 2014,
the
performance target range for compound growth in FCF per security is between 12 per cent and 15 per
cent.
A
x
B
x
288
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
The table below summarises the Group’s five year results for the relevant performance measures. These
results show that since the year ended 30 June 2009, Transurban’s distribution policy has been to align
distributions with FCF per security. Since that time, Transurban has delivered consistent growth on this
measure based on consistent revenue and EBITDA growth. Based on investor feedback, this remains
Transurban’s financial focus.
Group
1
Performance
Measure
Security price at year end
2013
$6.76
2012
$5.69
2011
$5.23
2010
$4.24
2009
$4.18
Distribution paid per security
31.0c
29.5c
27.0c
24.0c
22.0c
Underlying proportional EBITDA -
$m1
TSR
performance2
828.0
25%
784.0
15%
718.7
635.4
583.3
32%
10%
2%
FCF per security performance - weighted average
30.1c
29.8c
27.5c
27.4c
22.2c
1 In the current and prior year, LTIs were linked to relative TSR and FCF per security. In earlier years, LTIs were linked to relative TSR
and proportional EBITDA.
2 The TSR performance is the total security holder return for that financial year.
x
6
x
A
x
x
B
x
NON-EXECUTIVE DIRECTOR REMUNERATION
REMUNERATION POLICY
The diagram below sets out the key objectives of the Group’s Non-executive Director remuneration policy
and how they are implemented through the Group’s remuneration framework:
Securing and retaining talented,
qualified Directors
Preserving independence and
impartiality
Aligning Director and security
holder interests
Director fee levels are set with
regards to: the responsibilities
and risks attached to the role, the
time commitment expected and
the workload, experience and
expertise, and market benchmark
data provided by remuneration
consultants.
Director remuneration consists of
base (Director) fees and
Committee fees.
No element of Director
remuneration is 'at risk' (i.e. fees
are not based on the
performance of the Group or
individual Directors from year to
year).
Directors are encouraged to
hold Transurban securities.
REMUNERATION ARRANGEMENTS
Maximum aggregate remuneration
The amount of aggregate remuneration that may be paid to Non-executive Directors in any year is capped
at a level approved by security holders. The current aggregate fee pool of $2,400,000 per year (inclusive of
superannuation contributions) was approved by security holders at the 2010 Annual General Meeting. No
change to this amount is proposed for the year ending 30 June 2014.
289
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
The aggregate fee pool and the manner in which it is apportioned amongst Non-executive Directors is
reviewed annually. The Remuneration and Human Resources Committee undertakes this review and
makes recommendations to the Board.
the Committee considers market
benchmark data from independent remuneration consultants.
In conducting the review,
Non-executive Director fees for the year ended 30 June 2013
A review of Non-executive Director fees was undertaken during the year ended 30 June 2013, and it was
decided that there would be no change to fees other than an increase in the annual fee for the Chair of the
Remuneration and Human Resources Committee by $5,000 to $30,000.
Base (Director) fees have not increased since 2010. Current base fees and Committee fees per year are
set out below:
Board
Audit and Risk Committee
Nomination Committee
Remuneration and Human Resources Committee
Chair fee $
455,000
Member fee $
170,000
40,000
10,000
30,000
20,000
10,000
20,000
The Chair of the Board does not receive any additional fees for Committee responsibilities. The Chair of
each Committee only receives the Chair fee (and not a member fee).
Non-executive Directors are permitted to be paid additional fees for special duties or exertions. No such
fees were paid during the year ended 30 June 2013. Non-executive Directors are also entitled to be
reimbursed for all business related expenses, including travel, as may be incurred in the discharge of their
duties.
Retirement benefits
No current Non-executive Directors are entitled to any retirement benefits. In September 2005, the Board
resolved to discontinue retirement benefits for Non-executive Directors from 30 September 2005. The
value of benefits accrued up to that date attracted interest at the statutory fringe benefits rate.
ShareLink Investment Tax Deferred Plan
Under the ShareLink Investment Tax Deferred Plan, Non-executive Directors are able to sacrifice up to 50
per cent of their pre tax fees to acquire up to $5,000 of Transurban securities each year. No securities
were issued to Non-executive Directors under the plan during the year ended 30 June 2013.
290
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
x
C
x
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Non-executive Director remuneration for the years ended 30 June 2013 and 30 June 2012 is set out below:
Short-term benefits
Post-employment benefits
Total
Fees
1
Superannuation
Retirement
2,3
benefits
223,625
207,631
438,716
439,411
211,119
207,114
Current Non-executive Directors
L Maxsted
2013
2012
N Chatfield
2013
2012
R Edgar
2013
2012
S Mostyn
183,608
2013
176,047
2012
C O'Reilly (appointed 12 April 2012)
181,229
2013
2012
34,225
R Slater
194,070
2013
173,720
2012
I Smith (appointed 1 January 2012)
155,967
2013
2012
77,983
Former Non-executive Directors
G Cosgriff (resigned 6 December 2011)
-
2013
2012
81,778
J Davis (resigned 6 December 2011)
-
2013
69,903
2012
R Officer (resigned 7 August 2012)
18,832
2013
2012
176,047
J Eve (resigned 5 January 2012)
-
2013
48,256
2012
J Keyes (resigned 5 January 2012)
2013
2012
Total
2013
2012
1,607,166
1,717,908
-
25,793
16,470
15,775
16,470
15,775
16,470
15,775
16,470
15,398
16,247
3,080
-
-
14,037
7,018
-
7,044
-
25,648
1,695
15,398
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
251,028
-
418,186
-
-
-
-
-
-
455,186
455,186
240,095
223,406
227,589
222,889
200,078
191,445
197,476
37,305
194,070
173,720
170,004
85,001
-
339,850
-
513,737
20,527
191,445
-
48,256
-
25,793
97,859
120,911
-
669,214
1,705,025
2,508,0333
1 Superannuation contributions made on behalf of Non-executive Directors to satisfy the Groupʼs obligations under applicable
superannuation guarantee legislation.
2 Amounts represent accrued contractual retirement benefits paid in the year ended 30 June 2012 to two former Non-executive Directors
(Geoff Cosgriff and Jeremy Davis) upon their retirement from the Board on 6 December 2011. No current Non-executive Directors are
entitled to any retirement benefits.
3 Retirement benefits are excluded from the amount of aggregate remuneration that may be paid to Non-executive Directors in any year.
291
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Remuneration report (continued)
x
D
x
NON-EXECUTIVE DIRECTOR RELATED PARTY INFORMATION
Rodney Slater is a partner in the public policy practice group of Patton Boggs. Transurban used Patton
Boggs during the year ended 30 June 2013 for various lobbying activities in the USA. This relationship is
based on normal commercial terms. US$226,692 was paid to Patton Boggs during the year ended 30 June
2013.
Lindsay Maxsted is Chairman and a Non-executive Director of Westpac Banking Corporation. Westpac
provides transactional banking and loan facilities to Transurban. This relationship is based on normal
commercial terms.
Neil Chatfield is Chairman and a Non-executive Director of Seek Limited. Seek provides employment
advisory services to Transurban. This relationship is based on normal commercial terms.
Neil Chatfield is also Chairman of, and Samantha Mostyn is a Non-executive Director of, Virgin Australia
Holdings Limited. Transurban uses air travel services provided by Virgin Australia. This relationship is
based on normal commercial terms.
292
TRANSURBAN Transurban International Limited
Directors' report
30 June 2013
(continued)
Non-audit services
The Group has an "External Auditor Independence" policy which is intended to support the independence of the
external auditor by regulating the provision of services by the external auditor. The external auditor will not be
engaged to perform any service that may impair or be perceived to impair the external auditor's judgement or
independence. The external auditor will only provide a permissible non-audit service where there is a compelling
reason for it to do so, and the aim is for the external auditor not to provide non-audit services at all. All non-audit
services must be pre-approved by the Chief Financial Officer (services less than $5,000) or the Chair of the
Audit and Risk Committee (in all other cases).
The Board has considered the position and, in accordance with advice received from the Audit and Risk
Committee, is 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:
•
•
the Audit and Risk Committee reviews the non-audit services to ensure they do not
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 Group, acting as advocate for
the Group or jointly sharing economic risk and rewards.
impact
the
During the year the following fees were paid or payable for audit and non-audit services provided by the auditor
of TIL, its related practices and non-related audit firms:
2013
$
2012
$
Amounts received or due and receivable by PricewaterhouseCoopers
Audit and review of financial reports
Total remuneration for PricewaterhouseCoopers
52,000
52,000
52,000
52,000
Indemnification and insurance
Each officer (including each Director) of the Group is indemnified, to the maximum extent permitted by law,
against any liabilities incurred as an officer of the Group pursuant to agreements with the Group. Each officer is
also indemnified against
incurred in relation to relevant
reasonable costs (whether
proceedings in which the officer is involved because the officer is or was an officer.
legal or otherwise)
The Group has arranged to pay a premium for a Directors and officers liability insurance policy to indemnify
directors and officers in accordance with the terms and conditions of the policy.
This policy is subject to a confidentiality clause which prohibits disclosure of the nature of the liability covered,
the name of the insurer, the limit of liability and the premium paid for this policy.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 295.
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the Directors' report. Amounts in the Directors' report
have been rounded off in accordance with that Class Order to the nearest dollars, or in certain cases, to the
nearest dollar.
293
ANNUAL REPORT 2013 Transurban International Limited
Directors' report
30 June 2013
(continued)
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors.
Lindsay Maxsted
Director
Scott Charlton
Director
Melbourne
1 August 2013
294
TRANSURBAN 295
ANNUAL REPORT 2013 Transurban International Limited ABN 90 121 746 825
Annual report - 30 June 2013
Contents
Financial statements
Page
Consolidated income statement
297
Consolidated statement of comprehensive income
298
Consolidated balance sheet 299
Consolidated statement of changes in equity 300
Consolidated statement of cash flows
301
Notes to the consolidated financial statements
302
350
351
Directors' declaration
Independent auditor's report to the members
This financial report covers the consolidated financial statements of
Transurban International Limited and its subsidiaries. The financial report
currency.
the consolidated entity consisting of
is presented in the Australian
Transurban International Limited is incorporated and domiciled in Australia.
Its registered office is:
Level 3
505 Little Collins Street
Melbourne VIC 3000
The financial statements were authorised for issue by the Directors on 1 August 2013 . The Directors have the
power to amend and reissue the financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete and
available globally. All releases to the ASX and the media, financial reports and other information are available on
our website: www.transurban.com
296
TRANSURBAN Revenue
Management and business development revenue
Construction revenue
Administration costs
Road operating costs
Business development costs
Construction costs
Profit before depreciation and amortisation, net finance costs, equity
accounted investments and income tax
Depreciation and amortisation expense
blank
Finance costs
Finance costs
Share of net losses of equity accounted investments
Loss before income tax
Income tax expense
Loss for the
year
Loss is attributable to:
Members of Transurban International Limited
Transurban International Limited
Consolidated income statement
For the year ended 30 June 2013
Notes
2013
$'000
2012
$'000
3
3
4
5
9
6
40,899
31,184
72,083
(9,030)
(9,896)
(19,463)
(21,774)
(60,163)
11,920
(379)
(26,114)
(26,114)
19,883
20,723
40,606
(9,477)
-
(15,778)
(14,687)
(39,942)
664
(592)
(14,211)
(14,211)
(28,187)
(213,338)
(42,760)
(227,477)
(4,438)
(47,198)
(49)
(227,526)
(47,198)
(47,198)
(227,526)
(227,526)
Cents
Cents
Company:
Loss per share for loss attributable to the ordinary equity holders of
the
Basic earnings per share
Diluted earnings per share
27
27
(3.2)
(3.2)
(15.7)
(15.7)
The above
consolidated income statement
should be read in conjunction with the accompanying notes.
297
ANNUAL REPORT 2013 Transurban International Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2013
Loss for the
year
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of cash flow hedges, net of tax
Exchange differences on translation of US operations, net of tax
Blank
Other comprehensive income for the
year,
net of tax
Total comprehensive income for the
year
Total comprehensive profit for the
year
is attributable to:
Members of Transurban International Limited
2013
$'000
2012
$'000
(47,198)
(227,526)
27,382
(25,951)
1,431
(39,996)
12,113
(27,883)
(45,767)
(255,409)
(45,767)
(45,767)
(255,409)
(255,409)
The above
accompanying notes.
consolidated statement of comprehensive income
should be read in conjunction with the
298
TRANSURBAN ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax receivables
Total current assets
Non-current assets
Equity accounted investments
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Other liabilities
Total current liabilities
Total liabilities
Net liabilities
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
Transurban International Limited
Consolidated balance sheet
As at 30 June 2013
Notes
2013
$'000
2012
$'000
7
8
9
10
11
12
13
14
15
16
16
4,843
19,272
492
24,607
228,627
1,831
8,898
239,356
263,963
521,119
6,557
6,038
533,714
9,186
9,889
462
19,537
-
2,009
12,551
14,560
34,097
251,349
4,767
12,678
268,794
533,714
268,794
(269,751)
(234,697)
216,011
(71,513)
(414,249)
(269,751)
205,065
(72,711)
(367,051)
(234,697)
The above
consolidated balance sheet
should be read in conjunction with the accompanying notes.
299
ANNUAL REPORT 2013 Transurban International Limited
Consolidated statement of changes in equity
For the year ended 30 June 2013
Attributable to members of
Transurban International Limited
Contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Total
equity
$'000
Notes
Balance at 1 July 2011
201,661
(44,289)
(139,547)
17,825
Comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive loss
Transactions with owners in their capacity as
owners:
Distribution reinvestment plan
Treasury securities
Changes in value of share-based payment reserve
-
-
-
-
(27,883)
(27,883)
(227,526)
-
(227,526)
(227,526)
(27,883)
(255,409)
15
15
16
3,040
207
157
3,404
-
-
(539)
(539)
-
-
22
22
3,040
207
(360)
2,887
Balance at
30 June 2012
205,065
(72,711)
(367,051)
(234,697)
Balance at 1 July 2012
205,065
(72,711)
(367,051)
(234,697)
Comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive income (loss)
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
Distribution reinvestment plan
Changes in fair value of share-based payment reserve
Deferred Short Term Incentives securities issued
15
15
16
15
-
-
-
-
1,431
1,431
(47,198)
-
(47,198)
(47,198)
1,431
(45,767)
8,000
2,601
151
194
10,946
-
-
(233)
-
(233)
-
-
-
-
-
8,000
2,601
(82)
194
10,713
Balance at
30 June 2013
216,011
(71,513)
(414,249)
(269,751)
consolidated statement of changes in equity
should be read in conjunction with the accompanying
The above
notes.
300
TRANSURBAN Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest paid
Tax refunds (income taxes paid)
Net cash
from operating activities
(outflow)
inflow
Cash flows from investing activities
Payments for property, plant and equipment
Payment for investments in equity accounted investments
Net cash (outflow) from investing activities
Cash flows from financing activities
Loans from related parties
Repayment of loans to related parties
Proceeds from issue of shares
Net cash inflow from financing activities
Net (decrease)
increase
in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of
year
Transurban International Limited
Consolidated statement of cash flows
For the year ended 30 June 2013
Notes
2013
$'000
2012
$'000
58,072
(61,197)
(1,487)
15
(4,597)
(40)
(207,844)
(207,884)
216,535
(16,358)
8,000
208,177
(4,304)
9,186
(39)
4,843
33,621
(29,031)
(901)
(460)
3,229
(1,568)
(18,221)
(19,789)
32,630
(13,900)
-
18,730
2,170
6,574
442
9,186
26
15
7
The above
consolidated statement of cash flows
should be read in conjunction with the accompanying notes.
301
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
Contents of the notes to the consolidated financial statements
Summary of significant accounting policies
Segment information
Revenue
Expenses
Net finance costs
Income tax expense
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
Equity accounted investments
Non-current assets - Property, plant and equipment
Deferred tax assets and liabilities
Current liabilities - Trade and other payables
Provisions
Current liabilities - Other current liabilities
Contributed equity
Reserves and accumulated losses
Dividends
Remuneration of auditors
Contingencies
Intra-group Guarantees
Commitments
Related party transactions
Subsidiaries
Parent entity financial information
Events occurring after the reporting period
Reconciliation of profit after income tax to net cash inflow from operating activities
Loss per share
Share-based payments
Key management personnel disclosures
Critical accounting estimates and judgements
Financial risk management
Page
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302
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
This general purpose financial statements has been prepared in accordance with Australian Accounting
Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues
Group Interpretations and the Corporations Act 2001.
The Group's current liabilities exceed its current assets by $270 million at 30 June 2013. The financial report has
been prepared on a going concern basis, which contemplates the continuity of normal operations. This
deficiency reflects a number of specific factors primarily related to an intercompany loan payable to another
entity within the Transurban Group.
Compliance with IFRS
The consolidated financial statements of Transurban International Limited also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
Early adoption of standards
The Group has not elected to adopt any new accounting standards early.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the
revaluation of other financial assets and liabilities.
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in
certain cases, to the nearest dollar.
(b) Principles of consolidation
Subsidiaries
Subsidiaries are all those entities over which Group has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are considered when assessing whether
Group controls another entity.
Subsidiaries are fully consolidated from the date on which control
de-consolidated from the date that control ceases.
is transferred to Group. They are
The acquisition method of accounting is used to account for business combinations by Group (refer to note 1(h)).
Associates and joint ventures
Associates are all entities over which Group has significant influence but not control. Interests in joint ventures
are where the Group jointly controls an entity with another party (refer to note 9).
Investments in associates and joint ventures are accounted for using the equity method of accounting, after
initially being recognised at cost.
303
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
Associates and joint ventures (continued)
The Group's share of its associates' and joint ventures' post-acquisition profits or losses is recognised in the
income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the
Group's share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint
venture, the Group does not recognise further losses. Dividends received from associates and joint ventures
reduce the carrying amount of the investment.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief
Executive Officer (the chief operating decision maker) and the Executive Committee who report to the Chief
Executive Officer (CEO).
(d) Foreign currency translation
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 year end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the consolidated income statement, except when they are deferred in
equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net
investment in a foreign operation.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at
translation differences on
fair value are reported as part of
non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are
recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary
financial assets such as equities classified as available-for-sale financial assets are included in the fair value
reserve in equity.
the fair value gain or loss. For example,
Foreign operations
The results and financial position of all Group entities that have a functional currency different
presentation currency are translated into the presentation currency as follows:
from the
•
•
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of
that balance sheet;
income and expenses for each income statement are translated at average exchange rates (unless this
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and
instruments designated as hedges of such investments, are taken to
of borrowings and other financial
shareholders' equity.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable.
Revenue is recognised for the major business activities as follows:
304
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(e) Revenue recognition (continued)
•
•
•
Business development revenue - Business development revenue is recognised when earned, and to the
extent of costs incurred and that these costs will be recovered.
Interest income - Interest income is recognised using the effective interest rate method.
Construction revenue - During the construction phase of service concession infrastructure assets, the
Group records an intangible asset representing the right to charge users of the infrastructure and
recognises revenue from the construction of the infrastructure. Revenue and expenses associated with
construction contracts are recognised in accordance with the percentage of completion method.
(f)
Income tax
The income tax expense or benefit for the period is the tax payable or benefit on the current period’s taxable
income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of
the reporting period in the countries where the Group operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. 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 the transaction affects neither accounting nor
taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the end of the reporting period 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 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.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in foreign operations where the Company is able to control the timing of the reversal of
the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
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. Current tax assets and
tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a
net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in the income statement, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income, or directly in equity, respectively.
Investment allowances
Companies within Group may be entitled to claim special tax deductions for investments in qualifying assets
(investment allowances). The Group accounts for such allowances as tax credits, which means that
the
allowance reduces income tax payable and current
is recognised for
unclaimed tax credits that are carried forward as tax losses.
tax expense. A deferred tax asset
305
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(g) Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to Group as
lessee are classified as operating leases (note 21). Payments made under operating leases (net of any
incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the
lease.
Lease incentives are recognised as a reduction of the rental expense over the lease term on a straight-line
basis.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, including business
combinations involving entities or businesses 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 Group. 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 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. On an acquisition-by-acquisition
basis,
the
non-controlling interest's proportionate share of the acquiree's net identifiable assets.
the Group recognises any non-controlling interest
in the acquiree either at
fair value or at
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 Group's share
of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the
net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the
difference is recognised directly in the income statement as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted
to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing
rate, being the rate at which a similar borrowing could be obtained from an independent financier under
comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial
liability are subsequently remeasured to fair value with changes in fair value recognised in the income statement.
(i)
Impairment of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired.
Where an indicator of impairment exists, the Group makes an estimate of the recoverable amount. Where the
carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written
down to its recoverable amount through the income statement. The decrement in the carrying amount is
recognised as an expense in the income statement in the reporting period in which the impairment occurs.
Recoverable amount is the greater of fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating
units).
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
306
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(j) Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes
cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject
to insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
(k)
Investments and other financial assets
Classification
The Group classifies its investments and other financial assets in the following categories: financial assets at fair
value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial
assets. The classification depends on the purpose for which the investments were acquired. The classification of
the Group's investments at
is
re-evaluated at each reporting period.
in the case of assets classified as held-to-maturity,
initial recognition and,
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are
classified as held for trading unless they are designated as hedges. Assets in this category are classified as
current assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in current assets, except for those with maturities greater than 12
months after the reporting period which are classified as non-current assets. Loans and receivables are included
in trade and other receivables (note 8) in the balance sheet.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less allowance for impairment. Trade receivables are due for settlement no more than
30 days from revenue recognition.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible
are written off by reducing the carrying amount directly. An impairment allowance account (provision for
impairment of trade receivables) is used when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivables. The amount of the impairment
allowance is the difference between the asset’s carrying amount and the present value of estimated future cash
flows. The amount of the impairment allowance is recognised in the income statement.
Recognition and derecognition
Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair
value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at
fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when
the rights to receive cash flows from the financial assets have expired or have been transferred and the Group
has transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in
equity are included in the income statement as gains and losses from investment securities.
Subsequent Measurement
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest
method.
307
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investments and other financial assets (continued)
Financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses
arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are
presented in the income statement within other income or other expenses in the period in which they arise.
Dividend income from financial assets at fair value through profit and loss is recognised in the income statement
as part of revenue from continuing operations when the Group's right to receive payments is established.
Impairment
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of
financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or
prolonged decline in the fair value of a security below its cost is considered an indicator that the securities are
impaired. If any such evidence exists for available-for-sale, the cumulative loss - measured as the difference
fair value, less any impairment loss on that financial asset
between the acquisition cost and the current
previously recognised in the profit or loss - is reclassified from equity and recognised in the income statement as
a reclassification adjustment. Impairment losses recognised in the income statement on equity instruments
classified as available-for-sale are not reversed through the income statement.
(l) Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Costs incurred on development projects
(including computer software and hardware) are recognised as an asset when it is probable that the project will,
after considering its commercial and technical feasibility, be completed and generate future economic benefits
and its costs can be reliably measured. The expenditure capitalised comprises all directly attributable costs,
including costs of materials, services, direct labour and an appropriate proportion of overheads.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Company and the
cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate
asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the
reporting period in which they are incurred.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in the income statement.
Depreciation
Depreciation is calculated on a straight line basis so as to write off the net cost of items of plant and equipment
over their expected useful lives. Estimates of remaining useful lives will be made annually for all assets. The
expected useful lives are 3 - 15 years.
Impairment
Fixed assets are assessed for impairment in line with the policy stated in note 1(i).
(m) Financial liabilities
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial
year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
Concession and promissory notes
The Group has non-interest bearing long term debt, represented by Concession and Promissory Notes, payable
to the government, measured at the net present value of expected future payments.
308
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(m) Financial liabilities (continued)
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of
the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition.
(n) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in the income statement over the period of the borrowings using the effective interest
method. Fees paid on the establishment of loan facilities, are recognised as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until
the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the
facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged,
liability that has been
cancelled or expired. The difference between the carrying amount of a financial
extinguished or transferred to another party and the consideration paid,
including any non-cash assets
transferred or liabilities assumed, is recognised in finance income or finance costs.
Borrowings are classified as current liabilities unless Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
(o) Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred, except to the extent to
which they relate to the construction of qualifying assets in which case specifically identifiable borrowing costs
are capitalised into the cost of
the asset. Borrowing costs include interest on short-term and long term
borrowings.
Costs incurred in connection with the arrangement of borrowings are deferred and amortised over the effective
period of the funding.
(p) Provisions
Provisions are recognised when the Group has 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 obligation and the amount has
been reliably estimated. Provisions are not recognised for future operating losses.
Provisions are discounted at the present value of management’s best estimate of the expenditure required to
settle the present obligation at the reporting date. The discount rate used to determine the present value reflects
current market assessments of the time value of money and the risks specific to the liability. The increase in the
provision is due to the discount unwinding over the passage of time and is recognised as a finance cost.
309
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(p) Provisions (continued)
Provision for maintenance
As part of its obligations under the service concession arrangements, the Group assumes responsibility for the
maintenance and repair of installations of the publicly-owned roads it operates. A provision for maintenance has
been raised where the Group has a present legal or constructive obligation to maintain and replace components
of the underlying physical assets operated by the Group as a result of past events. The Group's obligations
under the respective concession deeds arise as a consequence of use of the road during the operating phase.
The provision is measured at the present value of management's best estimate of the expenditure required to
settle the present obligation at the reporting date. Provisions giving rise to a cash outflow after more than one
year are discounted to present value if the impact is material. The increase in the provision due to the discount
unwinding over the passage of time is recognised as a finance cost.
Provision for distribution
Provision is made for the amount of any distribution declared, being appropriately authorised and no longer at
the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the
reporting period.
(q) Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and short-term incentives, and
long service leave expected to be settled within 12 months after the end of the period are recognised in respect
of employees' services up to the reporting date. They are measured at the amounts expected to be paid when
the liabilities are settled. The liability for annual leave and short-term incentives, and long service leave expected
to be settled within 12 months of the reporting date is recognised in the provision for employee benefits. All other
short-term employee benefit obligations are presented in payables. An expense for non-accumulating sick leave
is recognised when the leave is taken and measured at the rates paid or payable.
Long-term employee benefit obligations
The liability for long service leave which is not expected to be settled within 12 months after the end of the period
is recognised in the provision for employee benefits. It is measured as the present value of expected future
payments to be made in respect of services provided by employees up to the reporting date. Consideration is
given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the reporting date on national government
bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Superannuation
Superannuation is contributed to plans as nominated by the employee. The contribution is not less than the
statutory minimum. The superannuation plans are all accumulation funds.
The cost of current and deferred employee compensation and contributions to employee superannuation plans
were charged to the income statement.
Equity-based compensation benefits
Superannuation is contributed to plans as nominated by the employee. The contribution is not less than the
statutory minimum. The superannuation plans are all accumulation funds.
The cost of current and deferred employee compensation and contributions to employee superannuation plans
were charged to the income statement.
310
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(q) Employee benefits (continued)
Equity-based compensation benefits (continued)
Equity-based compensation benefits have been provided to some employees.
The fair value of units granted under the plans are recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured at grant date and recognised over the period during
which the employees become unconditionally entitled to the units.
The fair value of units granted under cash settled share-based compensation plans is recognised as an expense
over the vesting period with a corresponding increase in liabilities. The fair value of the liability is remeasured at
each reporting date with any changes in fair value recognised in the income statement for the period.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes
into account the exercise price, the term, the impact of dilution, the security price at grant date and expected
price volatility of the underlying security, the expected dividend yield and the risk free interest rate for the term of
the plan.
The fair value granted is adjusted to reflect the market vesting conditions, but excludes the impact of any
non-market vesting conditions (for example, profitability and growth targets). Non-market vesting conditions are
included in assumptions about the number of units that are expected to become exercisable. At each reporting
date, the Group revises its estimate of the number of units that are expected to become exercisable. The
employee benefit expense recognised each reporting period takes into account the most recent estimate. The
impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding
adjustment to equity.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination
benefits when it
is demonstrably committed to either terminating the employment of current employees
according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result
of an offer made to encourage voluntary redundancy.
(r) Contributed equity
Stapled securities are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a reduction, net of tax,
from the proceeds.
If the Group reacquires its own securities, those securities are deducted from equity. No gain or loss is
recognised in the profit or loss and the consideration paid including any directly attributable incremental costs
(net of income taxes) is recognised directly in equity.
If the Group reacquires its own equity shares, those shares are deducted from equity. No gain or loss is
recognised in the profit or loss and the consideration paid including any directly attributable incremental costs
(net of income taxes) is recognised directly in equity.
(s) Parent entity financial information
The financial information for the parent entity, Transurban International Limited, disclosed in note 24 has been
prepared on the same basis as the consolidated financial statements, except as set out below.
311
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(s) Parent entity financial information (continued)
Investments in subsidiaries and associates
Investments in subsidiaries and associates are accounted for at cost in the financial statements of Transurban
International Limited. Dividends received from associates are recognised in the parent entity's profit or loss,
rather than being deducted from the carrying amount of these investments.
(t) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
consolidated balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.
(u) Net asset deficiency
As at 30 June 2013 the Group has a net asset deficiency represented by net liabilities of $270 million. This
deficiency reflects a number of specific factors primarily related to an intercompany loan payable with another
entity within the Transurban Group.
(v) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2013 reporting periods. The Group's assessment of the impact of these new standards and interpretations is set
out below.
(i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from
AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9
(December 2010) (effective from 1 January 2015)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets
and financial
liabilities. The standard is not applicable until 1 July 2015 but is available for early adoption.
Management are in the process of assessing the impact on financial assets but do not believe this will be
significant.
There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated as at fair value through profit or loss and the Group does
not have any such liabilities. The Group has not yet decided when to adopt AASB 9.
312
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(v) New accounting standards and interpretations (continued)
(ii) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests
in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in
Associates and Joint Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising
from the Consolidation and Joint Arrangements Standards (effective 1 January 2013)
In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for
joint arrangements, consolidated financial statements and associated disclosures.
AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate
Financial Statements, and Interpretation 112 Consolidation - Special Purpose Entities. The core principle that a
consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains
unchanged, as do the mechanics of consolidation. However the standard introduces a single definition of control
that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns
before control is present. Power is the current ability to direct the activities that significantly influence returns.
Returns must vary and can be positive, negative or both. Management have assessed the impact of AASB 10
and do not believe it changes our assessment of control over any entities where the Group has an equity
interest.
AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer on
the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the
joint arrangement. AASB 11 also provides guidance for parties that participate in joint arrangements but do not
share joint control. This will not impact how the Group currently accounts for joint arrangements.
AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and
AASB 11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of
this standard by the Group will not affect any of the amounts recognised in the financial statements, but will
impact the type of information disclosed in relation to the Group's investments.
Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not
remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and
vice versa. The amendments also introduce a 'partial disposal' concept. The Group is still assessing the impact
of these amendments.
The Group does not expect to adopt the new standards before their operative date.
(iii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards
arising from AASB 13 (effective 1 January 2013)
AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value
disclosures. Current measurement techniques will change as a result of the new guidance. The impact of the
new rules on any of the amounts recognised in the financial statements is not expected to be material.
Application of the new standard will impact the type of information disclosed in the notes to the consolidated
financial statements. The Group intends to adopt the new standard from 1 July 2013.
313
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
1 Summary of significant accounting policies (continued)
(v) New accounting standards and interpretations (continued)
(iv) AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements (effective 1 July 2013)
In July 2011 the AASB decided to remove the individual key management personnel (KMP) disclosure
requirements from AASB 124 Related Party Disclosures, to achieve consistency with the international equivalent
standard and remove a duplication of the requirements with the Corporations Act 2001. While this will reduce the
disclosures that are currently required in the notes to the financial statements, it will not affect any of the
amounts recognised in the financial statements. The amendments apply from 1 July 2013 and cannot be
adopted early. The Corporations Act requirements in relation to remuneration reports will remain unchanged for
now, but these requirements are currently subject to review and may also be revised in the near future.
(v)
IAS 36 Amendments to IAS 36 Impairment of Assets (effective 1 January 2014)
The IASB has made small changes to some of the disclosures that are required under IAS 36 Impairment of
Assets. These may result in additional disclosures if the group recognises an impairment loss or the reversal of
an impairment loss during the period. They will not affect any of the amounts recognised in the financial
statements. The group intends to apply the amendment from 1 July 2014.
314
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2 Segment information
Description of segments
The Group operates in one business sector only, being the development, operation and maintenance of toll
roads. The CEO and Executive Committee therefore consider the business from the perspective of locations.
The Group's corporate function is not an operating segment under the requirements of AASB 8 as its revenue
generating activities are only incidental to the business. Management have aggregated and disclosed the
corporate business units as the contribution to the business is closely monitored.
The operating segments have been further broken down by asset to assist with external analysis of the financial
statements.
Segment information - Proportional Income Statement
The CEO and Executive Committee assess the performance of the operating segments based on a measure of
proportional EBITDA. EBITDA excludes the impact of interest income and expense which have been presented
by segment where applicable. Interest income and expense are allocated across segments where the charges
are related specifically to the assets. Otherwise they have been allocated to the Corporate function.
The segment information provided to the Executive Committee is presented on a proportional basis. The
information for the reportable segments for the year ended 30 June 2013 and 30 June 2012 is as follows:
30 June 2013
$'000
Pocahontas
895
75.0%
495 Express
Lanes
67.5%
95 Express
Lanes
67.5%
Other
Transurban
DRIVe
75.0%
Total
Transurban
DRIVe
100.0%
Transurban DRIVe
Corporate
Total
Toll revenue from
external customers
Fee and other revenue
Total revenue
Proportional EBITDA
x
Interest revenue
Interest expense
Depreciation and
amortisation
Foreign exchange
Proportional profit
(loss) before tax
Income tax benefit
(expense)
Proportional net profit
(loss)
11,301
81
11,382
4,841
1,291
6,132
6,836
(5,441)
-
(14,229)
702
(27,442)
(3,470)
-
(8,331)
-
(10,863)
(40,512)
7,993
-
(2,870)
(8,512)
(40,512)
34,380
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,384)
35
(1,985)
-
-
16,142
1,372
17,514
-
41,851
41,851
16,142
43,223
59,365
(2,989)
11,920
8,931
737
(43,656)
(11,801)
-
-
(26,008)
737
(69,664)
(379)
(106)
(12,180)
(106)
(6,334)
(57,709)
(14,573)
(72,282)
21,529
15,195
(15,195)
29,522
(4,438)
25,084
(28,187)
10,673
(19,011)
(22,840)
(47,198)
(12,167)
315
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2 Segment information (continued)
Segment information - Proportional Income Statement (continued)
30 June 2012
$'000
Pocahontas
895
75.0%
Transurban DRIVe
495
Express
Lanes
67.5%
Other
Transurban
DRIVe
75.0%
Total
Transurban
DRIVe
Corporate
Total
100.0%
Toll revenue from external customers
Fee and other revenue
Total revenue
Proportional EBITDA
x
Impairment of assets
Interest revenue
Interest expense
Depreciation and amortisation
Proportional profit (loss) before
tax
10,750
105
10,855
6,981
-
-
-
-
(302,490)
3
(34,887)
(8,740)
-
1,501
-
-
-
-
-
10,750
105
10,855
-
20,882
20,882
10,750
20,987
31,737
(3,955)
3,026
664
3,690
-
-
-
-
(302,490)
1,504
(34,887)
(8,740)
-
-
(14,210)
(592)
(302,490)
1,504
(49,097)
(9,332)
(339,133)
1,501
(3,955)
(341,587)
(14,138)
(355,725)
Income tax benefit (expense)
Proportional net profit (loss)
79,960
(259,173)
-
1,501
2,972
(983)
82,932
(258,655)
(49)
(14,187)
82,883
(272,842)
316
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2 Segment information (continued)
Other segment information - Proportional income statement
Proportional basis of presenting results
The Executive Committee and the CEO receive information for assessing the business on an underlying
proportional basis reflecting the contribution of
individual assets in the proportion of Transurban's equity
ownership.
The Group's proportional EBITDA result reflects business performance and permits a more appropriate and
meaningful analysis of the Group's underlying performance on a comparative basis. This method of presentation
differs from the statutory accounting format and has been reconciled below.
EBITDA is earnings before interest, taxation, depreciation and amortisation.
Segment revenue
Revenue from external customers is through toll and fee revenues earned on toll roads. There are no
inter-segment revenues.
Segment revenue reconciles to total statutory revenue as follows:
Total segment revenue (proportional)
Less: Revenue of non-controlled assets
Business Development revenue (offset against Business Development costs for
proportional results)
Other
Total revenue
(note
3)
2013
$'000
2012
$'000
59,365
(17,514)
30,031
201
72,083
31,737
(10,855)
19,550
174
40,606
317
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2 Segment information (continued)
Other segment information - Proportional income statement (continued)
Interest revenue
Interest revenue is earned through bank interest revenue.
Interest revenue reconciles to total statutory finance income as follows:
Total segment interest revenue (proportional)
Less: Interest revenue of non-controlled assets
Total finance income
Proportional EBITDA
Proportional EBITDA reconciles to statutory net loss for the year as follows:
Proportional EBITDA
Less: Proportional EBITDA of Pocahontas
Less: Proportional EBITDA of 495 Express Lanes
Less: Proportional EBITDA of DRIVe
Statutory profit (loss) before depreciation and amortisation, net finance
costs, equity accounted investments and tax
Statutory net finance costs
Statutory depreciation and amortisation
Share of net (losses)/profit of equity accounted investments
Income tax expense
Loss for the year
30 June
2013
$'000
30 June
2012
$'000
737
(737)
-
1,504
(1,504)
-
2013
$'000
2012
$'000
8,931
(6,836)
5,441
4,384
11,920
(26,114)
(379)
(28,187)
(4,438)
(47,198)
3,690
(6,981)
-
3,955
664
(14,211)
(592)
(213,338)
(49)
(227,526)
318
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
2 Segment information (continued)
Segment information - Segment assets
The segment information provided to the CEO and Executive Committee in respect of assets is presented on a
statutory consolidated basis. The information for the reportable segments for the periods ended 30 June 2013
and 30 June 2012 is as follows:
30 June 2013
Transurban
DRIVe
$'000
Corporate
$'000
Total
$'000
Total segment assets
228,627
35,336
263,963
Total segment assets include:
Investments in associates and joint venture partnerships
Additions to non-current assets (other
deferred tax)
than financial assets and
228,627
-
-
44
228,627
44
30 June 2012
Total segment assets
Total segment assets include:
Investments in associates and joint venture partnerships
Additions to non-current assets (other
deferred tax)
than financial assets and
Transurban
DRIVe
$'000
Corporate
$'000
Total
$'000
-
-
-
34,097
34,097
-
677
-
677
319
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
3 Revenue
Management and business development revenue
Construction revenue
Total Revenue
Notes
3(a)
3(b)
2013
$'000
2012
$'000
40,899
31,184
72,083
19,883
20,723
40,606
Management and Business development revenue
(a)
Management and business development revenue relates to the provision of management and development
services to third parties.
(b)
Construction revenue is recognised during the development of assets for sale to third parties.
Construction revenue
4 Expenses
2013
$'000
2012
$'000
Loss before income tax includes the following specific
expenses:
Employee benefits expense
Rental expense
15,345
1,010
10,269
635
5 Net finance costs
Finance costs
Interest and finance charges paid/payable
Foreign exchange losses
Total finance costs
Net finance costs
2013
$'000
2012
$'000
(26,008)
(106)
(26,114)
(14,211)
-
(14,211)
(26,114)
(14,211)
320
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
6 Income tax expense
Income tax expense
Current tax
Deferred tax
Under/(over) provided in prior years
Deferred income tax (benefit) expense included in income tax benefit comprises:
Decrease in deferred tax assets (note
11)
Increase (Decrease) in deferred tax liabilities (note
11)
Numerical reconciliation of income tax benefit to prima facie tax payable
Loss before income tax expense
Tax at the Australian tax rate of 30.0% (2012 - 30.0%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Non-deductible interest
Tax differential
Share of equity accounted results
Sundry items
Under/(over) provision in prior years
Income tax expense
7 Current assets - Cash and cash equivalents
Cash at bank and in hand
All cash balances are interest bearing.
2013
$'000
2012
$'000
609
3,767
62
4,438
3,564
203
3,767
(703)
1,178
(426)
49
6,891
(5,713)
1,178
2013
$'000
2012
$'000
(42,760)
(12,828)
(227,477)
(68,243)
7,335
901
8,456
512
62
4,438
3,810
58
64,001
849
(426)
49
38,322
227,428
2013
$'000
2012
$'000
4,843
4,843
9,186
9,186
321
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
8 Current assets - Trade and other receivables
Loans to related parties
Other receivables
Prepayments
2013
$'000
2012
$'000
5,917
13,355
-
19,272
4,377
5,486
26
9,889
No class within trade and other receivables contain impaired or passed due assets. Based on the credit history,
it is expected that these amounts will be received when due. The Group does not hold any collateral in relation
to these receivables.
9 Equity accounted investments
Ownership interest
Carrying amount
2013
%
75
2012
%
75
75
75
2013
$'000
2012
$'000
228,627
228,627
-
-
DRIVe
2012
$'000
2013
$'000
268,063
1,438,341
277,139
1,983,543
106,956
1,237,305
-
1,344,261
(58,773)
(1,321,604)
(408,271)
(1,788,648)
(31,569)
(1,343,392)
-
(1,374,961)
17,514
(75,223)
(57,709)
29,522
(28,187)
10,855
(352,442)
(341,587)
82,932
(258,655)
Transurban DRIVe Holdings LLC
Group's share of assets
Current assets
Non-current assets
Held for sale assets
Group's share of liabilities
Current liabilities
Non-current liabilities
Held for sale liabilities
Group's share of profit and loss
Revenue
Expenses
Net (loss) before tax
Tax benefit
Net (loss)
BREAK
1
322
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
DRIVe
2012
$'000
2013
$'000
-
205,616
(28,187)
23,816
27,382
228,627
(33,883)
-
-
(33,883)
311,177
229,412
540,589
212,197
17,586
(213,338)
23,551
(39,996)
-
-
(45,317)
11,434
(33,883)
64,387
186,554
250,941
9 Equity accounted investments (continued)
Movements in carrying amounts
Carrying amount 1 July
Investments in associates and joint ventures
Share of recognised losses after tax
Movements in exchange rates
Movements in reserves
Carrying amount at 30 June
Share of losses not recognised
Balance at 1 July
Unrecognised losses for the year
Unrecognised other comprehensive income for the year
Balance at 30 June
Share of expenditure commitments
Capital commitments
Operating commitments
Contingent liabilities of associates and joint ventures
As at the reporting date there are no contingent liabilities.
Transurban DRIVe Holdings LLC
Transurban owns 75 per cent of Transurban DRIVe Holdings LLC (DRIVe). Whilst Transurban ownership
represents greater than half of the voting rights of DRIVe, it does not have power to govern its financial,
investing and operating policies and accordingly is accounted for as a jointly controlled entity.
A Meeting of Members of DRIVe is required to make decisions in relation to such areas as the legal and financial
structure of DRIVe, including distribution policies. 80 per cent or more of the membership interests of those
voting is required to pass a decision of the Meeting of Members. Key decisions relating to the operations and
financing of DRIVe, such as approval to bid for or dispose of an investment and approval of budgets, are made
Members with member interest of 80 per cent or greater.
DRIVe owns 100 per cent of Pocahontas 895, 90 per cent of 495 Express Lanes and 90 per cent of 95 Express
Lanes, all located in Virginia, USA. Pocahontas 895 is a 99 year concession ending in June 2105. Tolls are
escalated with reference to a prescribed schedule until 2016, thereafter tolls may be increased by the greater of
CPI, real GDP or 2.8 per cent. 495 Express Lanes opened for operation on 17 November 2012 and has a 75
year concession period. Tolls are charged on a dynamic basis to manage congestion and average travel
speeds. 95 Express Lanes is currently in the construction phase and remains on schedule for completion in late
2014.
In June 2013 the Transurban Board approved the transfer of Pocahontas 895, in Virginia USA, to the lenders to
the asset. Transfer discussions have commenced with the lenders, however the final structure has not yet been
agreed. As a result Pocahontas has been classified as held-for-sale and a discontinued operation in this note.
323
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
10 Non-current assets - Property, plant and equipment
Equipment,
fittings,
operating
systems
$'000
4,276
(3,307)
969
969
1,600
(3)
(592)
35
2,009
5,608
(3,599)
2,009
2,009
44
-
(379)
157
1,831
6,206
(4,375)
1,831
1 July 2011
At
Cost
Accumulated depreciation
Net book amount
Year ended
30 June 2012
Opening net book amount
Additions
Disposals
Depreciation charge
Movement in foreign exchange rates
Closing net book amount
30 June 2012
At
Cost
Accumulated depreciation
Net book amount
Year ended
30 June 2013
Opening net book amount
Additions
Disposals
Depreciation charge
Movement in foreign exchange rates
Closing net book amount
30 June 2013
At
Cost
Accumulated depreciation
Net book amount
324
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
11 Deferred tax assets and liabilities
The balance comprises
temporary difference
attributable to:
Accrued expenses
Provisions
Current and prior year losses
Unearned income
Fixed Assets/Intangibles
Unrealised foreign exchange
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Movements:
Opening balance at 1 July
Credited /(charged) to the income statement
Foreign exchange movements
Closing balance 30 June
Deferred tax assets/(liabilities) to be recovered
after more than 12 months
Assets
Liabilities
Net
2013
$'000
2012
$'000
2013
$'000
2012
$'000
2013
$'000
2012
$'000
1,558
2,557
2,635
2,354
-
43
9,147
(249)
8,898
621
1,251
2,638
8,014
-
67
12,591
(40)
12,551
12,591
(3,564)
120
9,147
18,652
(6,891)
830
12,591
-
-
-
-
(249)
-
(249)
249
-
(40)
(203)
(6)
(249)
-
-
-
-
(40)
-
(40)
-
(40)
1,558
2,557
2,635
2,354
(249)
43
8,898
-
8,898
621
1,251
2,638
8,014
(40)
67
12,551
(40)
12,511
(5,753)
5,713
-
(40)
12,551
(3,767)
114
8,898
12,899
(1,178)
830
12,551
9,147
9,147
12,591
12,591
(249)
(249)
(40)
(40)
8,898
8,898
12,551
12,551
12 Current liabilities - Trade and other payables
Trade payables and accruals
Loans from related parties (note
22)
2013
$'000
2012
$'000
4,482
516,637
521,119
6,008
245,341
251,349
325
ANNUAL REPORT 2013 13 Provisions
Employee benefits
Restructuring and onerous lease provision
Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
Notes
13(a)
13(b)
2013
$'000
2012
$'000
2,252
4,305
6,557
3,207
1,560
4,767
Movements in provisions
Movements in each class of provision during the financial year are set out below:
2013
Consolidated -
Carrying amount at start of year
Amounts provided during the year
Amounts paid/utilised during the year
Movements in foreign exchange rates
Carrying amount at the end of year
(a) Employee benefits
Restructuring
and onerous
lease
provision
$'000
1,560
3,047
(456)
154
4,305
Employee benefits relate to the provision for annual leave, bonuses and long service leave.
(b) Restructuring and onerous lease provision
An onerous lease is recognised when the Group has lease commitments on property no longer used. A
restructuring provision is recognised when the Group has a detailed formal plan for restructuring.
14 Current liabilities - Other current liabilities
Unearned income
(a) Unearned income
Notes
14(a)
2013
$'000
2012
$'000
6,038
6,038
12,678
12,678
Unearned income represents amounts received in advance and will be recognised when the income is earned.
326
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
15 Contributed equity
Share capital
2013
Number
'000
2012
Number
'000
2013
$'000
2012
$'000
Fully paid ordinary securities
1,481,595
1,481,595
1,458,321
1,458,321
216,011
216,011
205,065
205,065
Details
Opening balance at 1 July 2011
Distribution Reinvestment Plan
Disposal and vesting of treasury securities
Purchase of Performance Rights Plan shares
Purchase of Performance Awards Plan shares
Closing balance at 30 June 2012
Opening balance at 1 July 2012
Distribution Reinvestment Plan
Placement to Unisuper Limited
Deferred Short Term Incentives
New shares issued on vesting of LTI
Purchase of Performance Awards Plan shares
Closing balance at 30 June 2013
Notes
15(a)
15(b)
15(a)
15(c)
15(d)
Number of
securities
'000
$'000
1,443,193
14,162
351
615
-
1,458,321
1,458,321
5,809
16,260
490
715
-
1,481,595
201,661
3,040
207
517
(360)
205,065
205,065
2,601
8,000
194
274
(123)
216,011
(a) Distribution Reinvestment Plan
The Transurban Group has established a distribution reinvestment plan under which holders of stapled
securities may elect to have all or part of their distribution entitlements satisfied by the issue of new stapled
securities rather than by cash.
(b) Treasury securities
Stapled securities were issued to Transurban Group executives under the share-based payment plans. The
securities are held by the executive but will only vest in the executive in accordance with the terms of the plans.
The acquired securities cannot be transferred or sold prior to vesting date. On forfeit, the securities are sold on
market.
(c) Unisuper Limited Placement
On 7 January 2013 Transurban issued 16,260,163 ordinary stapled securities under a placement to Unisuper
Limited (as trustee of the superannuation fund known as UniSuper).
327
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
15 Contributed equity (continued)
(d) Deferred Short Term Incentives
Mandatory STI deferral of a portion of the overall STI award, as detailed in the Remuneration Report, was
introduced for the CEO and other Senior Executives in the year ended 30 June 2012. For Australian Senior
Executives deferral is into securities.
Ordinary shares
The number of shares on issue is 1,481,594,818 (2012: 1,458,321,112).
All shares issued are a component of stapled securities issued by the Transurban Group. Prior to June 2008, a
nil value was assigned to TIL with the value being apportioned between Transurban Holdings Limited and
Transurban Holding Trust.
Shares entitle the holder to participate in distributions and the winding up of the Transurban Group in proportion
to the number of and amounts paid on the shares held. On a show of hands, every holder of shares present at a
meeting in person or by proxy is entitled to one vote.
Capital risk management
The Group is subject to a gearing ratio covenant imposed by senior secured lenders. The Group monitors capital
on the basis of the gearing ratio to ensure compliance with the covenant. There have been no breaches of the
covenant.
The Group is subject to a gearing ratio covenant imposed by senior secured lenders. The Group monitors capital
on the basis of the gearing ratio to ensure compliance with the covenant.
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern, so that
they can continue to provide returns to security holders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amounts of distributions paid to
security holders, return capital to security holders, issue new securities or sell assets to reduce debt.
16 Reserves and accumulated losses
Reserves
Cash flow hedges
Share-based payments
Foreign currency translation
Transactions with non-controlling interests
2013
$'000
2012
$'000
(76,952)
532
14,132
(9,225)
(71,513)
(104,334)
765
40,083
(9,225)
(72,711)
328
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
16 Reserves and accumulated losses (continued)
Reserves (continued)
Movements:
Cash flow hedges
Balance 1 July
Movement in equity accounted investment's reserve (note 9)
Balance 30 June
Share-based payments
Balance 1 July
Employee share plan expense
Transfer vesting portion of LTI to contributed equity
Deferred Short Term Incentive issue
Transfer vesting portion of LTI to retained earnings
Balance 30 June
Foreign currency translation
Balance 1 July
Currency translation differences arising during the year
Balance 30 June
Common control reserve
Balance 1 July
Balance 30 June
Accumulated losses
Movements in (accumulated losses) were as follows:
Balance 1 July
Net (loss) for the year
Transfer of non-vesting portion of LTI from shared-based payment reserve
Balance 30 June
2013
$'000
2012
$'000
(104,334)
27,382
(76,952)
(64,338)
(39,996)
(104,334)
765
515
(554)
(194)
-
532
1,304
(725)
208
-
(22)
765
40,083
(25,951)
14,132
27,970
12,113
40,083
(9,225)
(9,225)
(9,225)
(9,225)
2013
$'000
2012
$'000
(367,051)
(47,198)
-
(414,249)
(139,547)
(227,526)
22
(367,051)
Nature and purpose of other reserves
Cash flow hedges
The cash flow hedge reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that
are recognised in other comprehensive income and accumulated in this reserve in equity. Amounts are
reclassified to profit or loss when the associated hedged transaction affects profit and loss.
Share-based payments
The share-based payments reserve is used to recognise the fair value of long-term incentives issued but not
exercised.
329
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
16 Reserves and accumulated losses (continued)
Nature and purpose of other reserves (continued)
Share-based payments (continued)
The share-based payments reserve is used to recognise the fair value of long-term incentives issued but not
exercised.
Foreign currency translation
Exchange differences arising on translation of
comprehensive income as described in note 1(d) and accumulated in this reserve in equity.
the foreign controlled entities are recognised in other
Transactions with non-controlling interests
The transactions with non-controlling interests arose as a result of the acquisition of Transurban (USA) Holdings
Inc. and its subsidiaries Transurban (USA) Inc. and Transurban (USA) Operations Inc. from a commonly
controlled Transurban Group entity (Transurban Limited).
17 Dividends
No dividends were paid or declared during the year.
18 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity
and its related practices:
Amounts received or due and receivable by PricewaterhouseCoopers
Audit services
Audit and review of financial reports
Total remuneration for PricewaterhouseCoopers
19 Contingencies
Contingent liabilities
The parent entity and the Group had contingent liabilities at 30 June 2013 in respect of:
2013
$
2012
$
52,000
52,000
52,000
52,000
330
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
19 Contingencies (continued)
Contingent liabilities (continued)
Equity guarantee
Transurban DRIVe Holdings LLC (DRIVe), a related party of the Group, holds a concession agreement with The
Commonwealth of Virginia to construct and operate High Occupancy Toll (HOT) lanes on the 495 Express
Lanes and 95 Express Lanes. The 495 Express Lanes opened for operation on 17 November 2012. The 95
Express Lanes project is currently in the construction phase. Construction is expected to be complete in late
2014.
On 31 July 2012, the Transurban Group, through the entities in the triple staple, being Transurban Holdings
Limited, Transurban International Limited and Transurban Infrastructure Management Limited (as responsible
entity of the Transurban Holding Trust), entered into an agreement with 95 Express Lanes LLC, a subsidiary of
DRIVe, the Virginia Department of Transportation and US Bank NA to provide an Equity Funding Guaranty (the
Guarantee) over all of DRIVe’s equity obligations associated with funding the equity contributions to the 95
Express Lane project.
The Group owns 75 per cent of the equity of DRIVe and recognises this investment in the consolidated financial
statements using the equity method of accounting. DRIVe holds 90 per cent of the equity in 495 Express Lanes
and 95 Express Lanes and, from time to time, is required to make equity contributions to fund the equity
component of the 495 and 95 Express Lanes project costs. The total equity contribution DRIVe is obliged to
make to 495 Express Lanes is US$313,825,757, of which the total payment had been paid at balance sheet
date. The total contribution DRIVE is obliged to make to 95 Express Lanes is US$252,336,549 of which
US$151,204,854 had been paid at balance sheet date.
In accordance with the DRIVe Holdings LLC Agreement, should a DRIVe member default on any capital calls,
the Transurban Group has the right to acquire their share of DRIVe at a 50 per cent discount to its fair value. As
such in the instance of the Guarantee being called, the Transurban Group may exercise its right to the interest in
DRIVe at a discounted value.
Contingent assets
DRIVe capital sum
As a part of the establishment of Transurban DRIVe, DRIVe Holdings LLC agreed to make a "capital sum"
compensation payment to Transurban for contributing to DRIVe the right to negotiate the 495 Express Lanes
and 95 Express Lanes.
The fee is payable to Transurban if the pre-financing/pre-tax net present value of 495 Express Lanes or 95
Express Lanes is positive as at financial close, when calculated three years after the completion of construction.
Receipt of the capital sum is contingent on the projects achieving positive net present value at the strike date,
and as such this amount has not been recognised on the balance sheet. Due to uncertainty associated with the
amount and timing of the potential receipt, an asset has not been recognised.
331
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
20 Intra-group Guarantees
As at 30 June 2013, the Transurban Group comprises Transurban Holdings Limited, Transurban Holding Trust
and Transurban International Limited, traded and quoted on the ASX as one triple stapled security.
Under the stapling arrangement, each entity directly and/or indirectly supports each entity and its controlled
entities within the Group on a continual basis.
21 Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Property, plant and equipment
Payable:
Within one year
Later than one year but not later than five years
Later than five years
Operating commitments
Operating commitments
Within one year
Later that one year but not later than five years
Lease commitments
Commitments in relation to leases contracted for at the reporting date but no
recognised as liabilities, payable:
Within one year
Later than one year but not later than five years
Later than five years
2013
$'000
2012
$'000
-
-
-
-
3,457
-
-
3,457
2013
$'000
2012
$'000
20,043
13,806
33,849
-
-
-
2013
$'000
2012
$'000
1,030
2,800
418
4,248
932
3,371
496
4,799
332
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
21 Commitments (continued)
Lease commitments (continued)
Sub-lease payments
Future minimum lease payments expected to be received in relation to
non-cancellable sub-leases of operating leases
22 Related party transactions
Transactions with related parties
The following transactions occurred with related parties:
Revenue from services provided to related parties
Management and Business development fees
Loans to/from related parties
Loans to related parties
Beginning of the year
Loans advanced
Repayment of loans
Foreign exchange movements
Loans from related parties
Beginning of the year
Loans advanced
Loans repayments
Foreign exchange movements
2013
$'000
2012
$'000
-
-
428
428
2013
$
2012
$
40,898,575
40,898,575
19,883,145
19,883,145
4,376,530
28,575,566
(27,574,141)
539,044
5,916,999
3,864,127
23,493,685
(23,164,126)
182,844
4,376,530
245,341,322
278,995,308
(55,151,487)
47,451,630
516,636,773
196,761,369
64,326,442
(26,961,002)
11,214,513
245,341,322
333
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
22 Related party transactions (continued)
Loans to/from related parties (continued)
Other related parties
All
the Directors of TIL are also Directors of Transurban Holdings Limited and Transurban Infrastructure
Management Limited. Related party transactions have occurred with these Transurban Group entities and their
wholly-owned subsidiaries.
23 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following principal
subsidiaries in accordance with the accounting policy described in note 1(b):
Equity holding
2012
%
2013
%
100
100
100
100
100
100
100
100
100
100
Name of entity
Country of
incorporation Class of shares
Transurban DRIVe Management LLC
Transurban (USA) Holdings Inc.
Transurban (USA) Inc.
Transurban International Holdings Pty Limited
Transurban (USA) Operations Inc.
USA
USA
USA
Australia
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
334
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
24 Parent entity financial information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders' equity
Contributed equity
Reserves
Accumulated losses
Profit for the year
xx
Exchange differences on translation of US operations, net of tax
xx
Total comprehensive income
2013
$'000
2012
$'000
216,446
184,876
2
1
216,448
184,877
(308)
-
(308)
-
-
-
(650,268)
(554,631)
216,007
(28)
161
216,140
874
19,676
20,550
205,061
(19,471)
(712)
184,878
172
9,437
9,609
Contingent liabilities and guarantees of the parent entity
For details of contingent liabilities and guarantees of the parent entity, refer to note 19.
25 Events occurring after the reporting period
At the date of this report the Directors are not aware of any circumstances that have arisen since 30 June 2013
that have significantly affected, or may significantly affect, the Group's operations in future financial years, the
results of those operations in future financial years, or the Group's state of affairs in future financial years.
335
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
26 Reconciliation of profit after income tax to net cash inflow from operating activities
Loss for the year
Depreciation and amortisation
Share of net losses of equity accounted investments
Change in operating assets and liabilities:
(Increase) decrease in prepayments
(Increase) decrease in trade and other receivables
Increase in related party operating loans
(Decrease) Increase in trade payables and accruals
Increase (Decrease) in provisions
(Decrease) increase in unearned income
Movement in current taxes and deferred taxes
Net cash inflow from operating activities
27 Loss per share
Basic earnings per share
Loss attributable to the ordinary equity holders of the company
2013
$'000
2012
$'000
(47,198)
379
28,187
(26)
(7,869)
24,682
(1,525)
1,790
(6,640)
3,623
(4,597)
(227,526)
592
213,338
(1)
(3,030)
20,915
1,048
(136)
(903)
(1,068)
3,229
2013
Cents
2012
Cents
(3.2)
(3.2)
(15.7)
(15.7)
336
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
27 Loss per share (continued)
Diluted earnings per share
Loss from continuing operations attributable to the ordinary equity holders of the
company
Reconciliation of losses used in calculating loss per share
Basic and diluted earnings per share
Loss for the year
Weighted average number of shares used as denominator
2013
Cents
2012
Cents
(3.2)
(3.2)
(15.7)
(15.7)
2013
$'000
2012
$'000
(47,198)
(47,198)
(227,526)
(227,526)
2013
Number
2012
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
1,470,495,508
1,452,932,838
Loss per share
Basic loss per share
Basic loss per share is calculated by dividing the loss attributable to members of the share excluding any
non-controlling interest and costs of servicing equity other than distributions, by the weighted average number of
shares outstanding during the financial year.
Diluted loss per share
Diluted loss per share adjusts the figures used in the determination of basic loss per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares
and the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
337
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
28 Share-based payments
Performance Awards Plan
Under the Performance Awards Plan (PAP), eligible executives receive a grant of Performance Awards which
entitles participants to receive securities at no cost subject to the achievement of performance conditions. The
Board has discretion as to the form of the award at the end of the performance period and may grant cash
payments of equivalent value at vesting. No dividends or distributions on securities are payable to participants
prior to vesting.
Dual performance measures (Free Cash Flow (FCF) (from 1 July 2011) or earnings before interest, tax,
depreciation and amortisation (EBITDA) measure (pre 1 July 2011) and relative total security holder return
(TSR) apply to Performance Awards, each representing 50 per cent of the award. The use of dual measures
balances the need to both improve the underlying performance of the business over the long term as well as
appropriate returns relative to the market.
Performance Awards were granted with a three year vesting period. For the plan granted 11 December 2009
and future grants, the awards are tested at the end of the three year vesting period. However, for the 1
November 2008 grant, the awards were tested at the end of each year. If the performance measures were
satisfied for the year, one third of the awards were preserved until the end of the three year period. At the end of
the three years a cumulative test of the performance measures was applied to any unvested awards.
Vesting /
Expiry date
11 Dec 2012
1 Nov 2013
1 Nov 2013
30 Jun 2014
30 Jun 2014
30 Jun 2015
30 Jun 2015
Grant date
2013
11 Dec 2009
1 Nov 2010
23 Dec 2010
26 Sep 2011
11 Nov 2011
15 Aug 2012
19 Oct 2012
Total
Fair value at grant date ($)
FCF
EBITDA
TSR
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
3.33
3.23
3.33
3.37
3.27
2.72
2.95
4.97
4.62
4.97
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4.63
4.81
4.99
5.43
1,625,994
1,201,077
684,683
661,932
715,024
-
-
4,888,710
-
-
-
-
-
747,201
448,400
(1,624,766)
-
-
-
-
-
-
1,195,601 (1,624,766)
(1,228)
(278,601)
-
(241,060)
-
(267,099)
-
(787,988)
-
922,476
684,683
420,872
715,024
480,102
448,400
3,671,557
BLANK
Weighted average exercise price
$4.06
$3.98
$4.15
$3.92
$4.02
Vesting /
Expiry date
Fair value at grant date ($)
FCF
EBITDA
TSR
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2011
11 Dec 2012
1 Nov 2013
1 Nov 2013
30 Jun 2014
30 Jun 2014
3.30
3.33
3.23
3.33
3.37
3.27
4.27
4.97
4.62
4.97
N/A
N/A
N/A
N/A
N/A
N/A
4.63
4.81
1,260,113
1,776,583
1,401,575
684,683
-
-
5,122,954
-
-
-
-
837,990
715,024
(1,193,516)
-
-
-
-
-
1,553,014 (1,193,516)
(66,597)
(150,589)
(200,498)
-
(176,058)
-
(593,742)
-
1,625,994
1,201,077
684,683
661,932
715,024
4,888,710
Grant date
2012
1 Nov 2008
11 Dec 2009
1 Nov 2010
23 Dec 2010
26 Sep 2011
11 Nov 2011
Total
a
Weighted average exercise price
$4.00
$4.02
$3.79
$3.99
$4.06
338
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
28 Share-based payments (continued)
Performance Awards Plan (continued)
Executive Equity Plan
Equity awards were granted under the Executive Equity Plan (EEP) based on executives’ performance and were
designed to encourage retention of executives while focusing on business excellence.
Individuals who are high performers and in business critical roles were nominated for awards for their past
contribution and expected future performance. Board approval was required to grant EEP awards to nominated
executives.
Under the EEP, eligible executives received a grant of stapled securities in the Transurban Group (”securities”)
at no cost that are subject to disposal restrictions for three years from the grant date. Participants are entitled to
distributions paid on their Securities during the restriction period. If the executive ceases employment with
Transurban during the restriction period, their Securities will be forfeited unless the Board decides otherwise.
Awards were last made under the EEP on 1 November 2008 and vested on 1 November 2011. The table below
provides details of the awards granted and vested.
Grant date
2012
1 Nov 2008
Total
Vesting /
Expiry date
Exercise
price
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Nov 2011
$4.27
433,722
433,722
-
-
(433,722)
(433,722)
-
-
-
-
Weighted average exercise price
a
$4.27
$-
$4.27
$-
$-
Assessed fair value
The assessed fair value at grant date of the plans above has been independently determined in accordance with
AASB 2.
The TSR component of the Performance Awards has been valued applying a Monte-Carlo simulation (of a
geometric Brownian motion process, as used in the Black-Scholes framework) to model Transurban's future
security price and TSR performance against the comparator group performance at vesting date. The valuation
model takes into account the term of the award, the security price at grant date and expected price volatility of
the underlying security, the expected dividend yield and the risk free interest rate for the term of the award.
The Free Cash component of performance awards has been valued using the Black-Scholes framework. The
model valuation takes into account the term of the award, the security price at grant date, the expected dividend
yield and the risk free interest rate for the term of the award.
Performance Awards Plan - CEO Sign On Award Plan
Scott Charlton received a one-off grant of equity as a sign-on award in recognition of the incentives forfeited with
his former employer by joining Transurban. The awards were awarded at no cost to Scott and will vest, subject
to his continued employment with Transurban as described in his employment contract, in three equal tranches
on each of the tranches vesting dates. Upon vesting, the awards will automatically exercise and settle in
securities. No dividends or distributions on securities are payable prior to vesting.
339
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
28 Share-based payments (continued)
Performance Awards Plan - CEO Sign On Award Plan (continued)
Grant date
2013
14 Sep 2012
14 Sep 2012
14 Sep 2012
Total
Vesting /
Expiry date
Fair value
at grant
date
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
16 Jul 2013
16 Jul 2014
16 Jul 2015
$5.71
$5.71
$5.71
-
-
-
-
78,752
78,752
78,752
236,256
-
-
-
-
-
-
-
-
78,752
78,752
78,752
236,256
Weighted average exercise price
x
Short Term Deferred Incentive Plan
$-
$5.71
$-
$-
$5.71
Mandatory short term incentive (STI) deferral of 30 per cent of the STI awarded to the CEO and other Senior
Executives was introduced in the year ended 30 June 2012. The deferral period is three years (comprising the
first year as the performance period and a two year trading restriction). Vesting occurs at the end of the two year
deferral period, subject to continued employment with the Transurban Group and can be exercised at vesting
date.
Grant date
2013
15 Aug 2012
Total
Vesting /
Expiry date
Fair value
at grant
date
Balance at
start of the
year
Number
Granted
during the
year
Number
Vested
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
1 Jul 2014
$5.68
-
-
642,388
642,388
-
-
-
-
642,388
642,388
Weighted average exercise price
x
$-
$5.68
$-
$-
$5.68
Fair Value
The fair value at grant dates in both the deferred STI plan and the CEO sign-on awards plan have been
determined in accordance with AASB 2 by using a volume weighted average price (VWAP) over a specified
period of time.
Employee security scheme
The Transurban Employee Security Ownership Plan (the Plan) provides employees with an opportunity to be a
part owner of Transurban and partner in its continued success.
All Australian based permanent employees are eligible to participate in the Investment Tax Exempt Plan and the
Investment Tax Deferred Plan. Under the plans, Transurban provides participants with a matching component
toward the acquisition of the stapled securities. For the period 1 July 2012 to 30 June 2013, the cost of company
matches was $132,162 (2012: $114,459) for the Investment Tax Exempt Plan and $450,374 (2012: $391,708)
for the Investment Tax Deferred Plan.
The third element under the Plan is the Incentive Plan. Subject to Board approval and the performance of the
company, eligible employees may receive a certain number of Transurban securities at no cost to them. In
February 2013, each participant was allocated 100 stapled securities at a value of $6.12 per security. Stapled
securities provided under the Plan were acquired on the open market. Eligible US based participants received
an equivalent cash award.
340
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
28 Share-based payments (continued)
Employee security scheme (continued)
2013
Number
2012
Number
Shares purchased on the market under the plan and provided to participating
employees
45,900
42,200
Expenses arising from share-based payments
Total expenses arising from share-based payment
employee benefit expense was $6.6 million (2012: $3.1 million)
transactions recognised during the period as part of
29 Key management personnel disclosures
Directors
The following persons were Directors of Transurban International Limited during the financial year:
Executive Directors
Christopher Lynch (resigned 16 July 2012)
Scott Charlton (appointed 16 July 2012)
Non-executive Directors
Lindsay Maxsted (Chairman)
Neil Chatfield
Robert Edgar
Samantha Mostyn
Robert Officer (resigned 7 August 2012)
Christine O'Reilly
Rodney Slater
Ian Smith
Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of
the Group, directly or indirectly, during the financial year:
J Aument*
W Ballantine*
K Daley
A Head
S Hogg
S Johnson*
M Kulper
E Mildwater
T Steinhilber*
L Tobin
V Vassallo
Group General Manager, North America (appointed 10 June 2013)
Group General Manager, Strategy (appointed 26 November 2012)
President, International Development (resigned 2 February 2013)
Group General Manager, New South Wales
Chief Financial Officer
Group General Manager, Human Resources (appointed 8 October 2012)
President, Transurban North America
Group General Manager, Victoria (resigned 31 March 2013)
Group General Manager, Project Delivery and Operational Excellence (appointed 10
December 2012)
Group General Manager, Technology (appointed 4 February 2013)
Group General Manager, Victoria (appointed 4 February 2013)
* Executives promoted from within the Group.
341
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
29 Key management personnel disclosures (continued)
Key management personnel compensation
The remuneration amounts below represent the entire amounts paid by the Transurban Group.
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Deferred STIs
2013
$
2012
$
10,755,270
232,743
25,335
9,208,279
1,128,897
21,350,524
12,301,143
240,351
115,725
4,870,066
489,289
18,016,574
Detailed remuneration disclosures are made in the Directors’ report. The relevant information can be found in
the remuneration report in the Directors' report.
Equity instrument disclosures relating to key management personnel
Share based payments
Details of sort and long term incentives provided as remuneration and shares issued, together with terms and
conditions of the incentives, can be found in the remuneration report in the Directors' report.
Performance Awards Plan (PAP)
2013
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
-
2,016,918
Directors of the Group
S Charlton
C Lynch*
Other key management personnel of the Group
J Aument
W Ballantine
K Daley
A Head
S Hogg
S Johnson
M Kulper
E Mildwater
T Steinhilber
L Tobin
V Vassallo
39,365
44,471
284,440
257,636
214,633
52,771
491,675
265,055
53,777
-
-
684,656
-
-
-
137,167
112,754
125,696
-
178,830
112,754
-
-
-
-
(617,211) (1,399,707)
-
684,656
-
(17,768)
(20,030)
(111,276)
(59,347)
(47,478)
(23,145)
(161,956)
(66,766)
(25,022)
-
-
-
-
(310,331)
-
-
-
-
(311,043)
-
-
-
21,597
24,441
-
311,043
292,851
29,626
508,549
-
28,755
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*The individual is not key management personnel at 30 June 2013, therefore their closing balance has been
reduced to zero through "other changes during the year" in the table above.
342
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
29 Key management personnel disclosures (continued)
Equity instrument disclosures relating to key management personnel (continued)
Performance Awards Plan (PAP) (continued)
2012
Balance at
start of the
year
Granted
during the
year as
remuneration
1,785,615
Directors of the Group
C Lynch
Other key management personnel of the Group
K Daley
A Head
S Hogg
T Honan
M Kulper
E Mildwater
223,297
196,382
136,569
545,513
477,811
186,359
715,024
128,294
107,766
101,320
171,058
159,286
107,766
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
(458,156)
(25,565) 2,016,918
(63,602)
(44,054)
(22,027)
(220,267)
(137,736)
(27,534)
(3,549)
(2,458)
(1,229)
(496,304)
(7,686)
(1,536)
284,440
257,636
214,633
-
491,675
265,055
-
-
-
-
-
-
-
Stapled security holdings
The numbers of Stapled Securities held during the financial year by each Director of THL and other key
management personnel of the Group, including their personally-related parties, are set out below.
2013
Directors of the Group
L Maxsted
N Chatfield
R Edgar
S Mostyn
R Officer*
C O'Reilly
R Slater
I Smith
S Charlton
C Lynch*
Other key management personnel of the Group
J Aument
W Ballentine
K Daley*
A Head
S Hogg
S Johnson
M Kulper
E Mildwater*
T Steinhilber
L Tobin
V Vassallo
Balance at
start of the
year
Other changes
during the year
Balance at end
of the year
30,000
30,190
23,733
10,300
20,115
-
-
70,000
-
713,563
2,889
384,678
3,041
1,553
-
80,000
56,066
-
-
10,018
-
857
3,700
(20,115)
4,363
-
1,772
10,000
(713,563)
1,099
(384,678)
-
10,000
12,922
-
(56,066)
-
-
520
30,000
30,910
24,590
14,000
-
4,363
-
71,772
10,000
-
3,988
-
3,041
11,553
12,922
80,000
-
-
-
10,538
* These individuals are not key management personnel at 30 June 2013, therefore their closing balance has
been reduced to zero through "other changes during the year" in the table above.
343
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
29 Key management personnel disclosures (continued)
Equity instrument disclosures relating to key management personnel (continued)
Stapled security holdings (continued)
2012
Directors of the Group
L Maxsted
N Chatfield
G Cosgriff
J Davis
R Edgar
S Mostyn
R Officer
C O'Reilly
R Slater
I Smith
J Eve
J Keyes
C Lynch
S Charlton
Other key management personnel of the Group
K Daley
A Head
S Hogg
T Honan
M Kulper
E Mildwater
Balance at
start of the
year
Other changes
during the year
Balance at end
of the year
30,000
20,910
152,236
158,188
18,627
-
19,089
-
-
-
-
-
255,401
-
384,678
21,112
15,616
94,820
103,944
27,098
-
10,000
(152,236)
(158,188)
5,106
10,300
1,026
-
-
70,000
-
-
458,162
-
-
(18,071)
(14,063)
(94,820)
(23,944)
28,968
30,000
30,910
-
-
23,733
10,300
20,115
-
-
70,000
-
-
713,563
-
384,678
3,041
1,553
-
80,000
56,066
344
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
29 Key management personnel disclosures (continued)
Equity instrument disclosures relating to key management personnel (continued)
Executive Equity Plan (EEP)
Awards were last granted on 1 November 2008 which vested on 1 November 2011.
2012
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
79,647
Directors of the Group
C Lynch
Other key management personnel of the Group
K Daley
A Head
S Hogg
T Honan
M Kulper
E Mildwater
19,146
19,146
15,316
85,474
23,944
19,146
-
-
-
-
-
-
-
(79,647)
(19,146)
(19,146)
(15,316)
(85,474)
(23,944)
(19,146)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Deferred Short Term Incentives (STI)
2013
Balance at
start of the
year
Granted
during the
year as
remuneration
Matured and
paid during
the year
Other
changes
during the
year
Balance at
end of the
year
Matured and
payable at
the end of
the year
-
-
Directors of the group
S Charlton
C Lynch*
Other key management personnel of the Group
J Aument
W Ballantine
K Daley*
A Head
S Hogg
S Johnson
M Kulper
E Mildwater*
T Steinhilber
L Tobin
V Vassallo
-
-
-
-
-
-
-
-
-
-
-
-
133,099
14,789
15,212
26,742
22,449
18,973
16,540
36,464
19,863
19,356
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(133,099)
-
-
-
-
(26,742)
-
-
-
-
(19,863)
-
-
-
14,789
15,212
-
22,449
18,973
16,540
36,464
-
19,356
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*These individuals are not key management personnel at 30 June 2013, therefore their closing balance has
been reduced to zero through "other changes during the year" in the table above.
345
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
29 Key management personnel disclosures (continued)
Other transactions with key management personnel
Mr Rodney Slater is a Partner in the public policy practice group of Patton Boggs. Transurban used Patton
Boggs during the year for various lobbying activities in the US. This relationship is based on normal commercial
terms. $226,692 (USD) was paid to Patton Boggs during the year ended 30 June 2013.
Mr Lindsay Maxsted is Chairman and a Non-executive Director of Westpac Banking Corporation. Westpac
provides transactional banking and loan facilities to Transurban. This relationship is based on normal
commercial terms.
Mr Neil Chatfield is Chairman and a Non-executive Director of Seek Limited who provides employment advising
services to Transurban. This relationship is based on normal commercial terms.
Mr Chatfield is also Chairman of, and Ms Sam Mostyn is a Non-executive Director of, Virgin Australia Holdings
Limited. Transurban uses air travel services provided by Virgin Australia. This relationship is based on normal
commercial terms.
30 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the Group and that are believed to be
reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
disclosed below.
Income taxes
The Group is subject to income taxes in the USA. Significant judgment is required in determining the provision
for income taxes. There are many transactions and calculations undertaken during the ordinary course of
business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax
audit issues based on whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will
impact current and deferred tax
assets and liabilities in the period in which such determination is made.
Estimated impairment of the investment of equity in DRIVe
The Group tests whether the investment of equity in DRIVe has suffered any impairment, in accordance with the
accounting policy stated in note 1(i).
Assessment of control
The Group holds an equity interest of 75 per cent in Transurban DRIVe Holdings LLC (DRIVe). Whilst the Group
owns greater than half of the voting rights of DRIVe, it does not have the power to govern its financial, investing
and operating policies and accordingly is accounted for as a jointly controlled entity.
The power to govern DRIVe’s financial, investing and operating policies is through the “Meeting of Members”. 80
per cent or more of the membership interests of those voting is required to pass a decision of the Meeting of
Members. Key decisions relating to the operations and financing of DRIVe, such as approval to bid for or
dispose of an investment and approval of budgets, require approval by Members with member interests of 80
per cent or greater.
346
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
31 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest
rate risk), credit risk and liquidity risk. The financial risk management function is carried out centrally by the
Transurban Group Treasury team (Treasury) under policies approved by the Board. Treasury work closely with
the Group’s operating units to actively identify and monitor all financial risks, and put hedging in place where
appropriate. The Board are informed on a regular basis of any material exposures to financial risks.
The Group’s hedging strategies are detailed below, and include the use of derivative financial instruments. The
Group's policies allow derivative transactions to be undertaken only for the purpose of reducing risk, and do not
permit speculative trading. Treasury continuously monitor risk exposures over time through review of cash flows,
price movements, market analysis and ongoing communication within the Group. When measuring financial risk,
Treasury consider positive and negative exposures, existing hedges and the ability to offset exposures where
possible.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed primarily to foreign exchange risk arising from currency
exposures to the Australian dollar. Foreign exchange risk arises when future commercial transactions and
recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The
risk is measured using cash flow forecasting.
The Group's exposure to foreign currency risk at the end of the reporting date, expressed in Australian dollar,
was as follows:
Receivables
Payables
Net exposure
2013
AUD$'000
2012
AUD$'000
363
(4,883)
(4,520)
363
(4,736)
(4,373)
Exposure to other foreign exchange movements is not material.
Sensitivity
Based on the financial instruments held at end of the period, had the U.S. dollar strengthened/weakened by 10
cents against the Australian dollar with all other variables held constant, the Group’s post-tax loss for the year
would have been $217,000 lower (2012: $251,000 lower) or $261,000 higher (2012: $308,000 higher), as a
result of foreign exchange gains/losses on translation of Australian dollar denominated financial instruments as
detailed in the above table.
Cash flow interest rate risk
The Group's main exposure to interest rate risk arises from long-term intercompany borrowings and funds on
deposit.
As at the reporting period,
Group
had the following variable rate exposure.
347
ANNUAL REPORT 2013 Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
31 Financial risk management (continued)
Market risk (continued)
Cash flow interest rate risk (continued)
2013
Weighted
average
interest rate
%
Balance
$'000
2012
Weighted
average
interest rate
%
Balance
$'000
Cash and cash equivalents
Net exposure to cash flow interest rate risk
-%
4,843
4,843
-%
9,186
9,186
Sensitivity
At 30 June 2013, if interest rates had changed by +100 basis points from the year-end rates with all other
variables held constant, post-tax loss for the year would have been $30,000 lower (2012: $56,000 lower).
Credit risk
The Group has no significant concentrations of credit risk from operating activities and has policies in place to
ensure that transactions are made with commercial customers with an appropriate credit history.
Treasury assesses the credit strength of potential financial counterparties using objective ratings provided by
multiple independent rating agencies. Board approved limit allocation rules ensure higher limits are granted to
higher rated counterparties. The Group also seeks to mitigate its total credit exposure to counterparties by only
dealing with credit worthy counterparties, limiting the exposure to any one counterparty, minimising the size of
the exposure where possible through netting offsetting exposures, diversifying exposures across counterparties,
closely monitoring changes in total credit exposures and changes in credit status, and taking mitigating action
when necessary.
Liquidity risk
The Group maintains sufficient cash to maintain short-term flexibility and enable the Group to meet financial
commitments in a timely manner. Treasury assesses liquidity over the short term (up to 12 months) and medium
term (1 - 5 years) by maintaining accurate forecasts of operating expenses, committed capital expenditure and
payments to security holders. Long term liquidity requirements are reviewed as part of the annual strategic
planning process.
Short term liquidity is managed by maintaining a strategic liquidity reserve. This reserve is based on the Group's
forecast annual operating costs and certain risk exposure scenarios as maintained by the Group's strategic risk
register, and is maintained as cash. The reserve is maintained on a rolling 12 month basis. Medium term liquidity
forecasting is maintained on a 5 year horizon.
348
TRANSURBAN Transurban International Limited
Notes to the consolidated financial statements
30 June 2013
(continued)
31 Financial risk management (continued)
Liquidity risk (continued)
Maturities of financial liabilities
The tables below analyse the Group’s financial
contractual maturities.
liabilities into relevant maturity groupings based on their
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant.
Contractual maturities of
financial liabilities
At
30 June 2013
Non-derivatives
Non-interest bearing
Fixed rate
Total non-derivatives
1 year
or less
$'000
Over 1 to
2 years
$'000
Over 2 to
3 years
$'000
Over 3 to 4
years
$'000
Over 5
years
$'000
Total
contractual
cash flows
$'000
Carrying
amount
(assets)/
liabilities
$'000
7,968
543,427
551,395
-
-
-
-
-
-
-
-
-
-
-
-
7,968
543,427
551,395
7,968
513,151
521,119
At
30 June 2012
1 year or
less
Over 1 to
2 years
Over 2 to
3 years
Over 3 to
4 years
Over 5
years
Total
contractual
cash flows
Carrying
amount
(assets)/
liabilities
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Non-derivatives
Non-interest bearing
Fixed rate
Total non-derivatives
10,481
255,079
265,560
-
-
-
-
-
-
-
-
-
-
-
-
10,481
255,079
265,560
10,481
240,868
251,349
There is no liquidity risk exposure to the Group in the current or prior periods other than as shown above.
349
ANNUAL REPORT 2013 Transurban International Limited
Directors' declaration
30 June 2013
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 296 to 349 are in accordance with the Corporations
Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the Group's financial position as at 30 June 2013 and of its
performance for the year ended on that date, and
(b)
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations 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.
Lindsay Maxsted
Director
Scott Charlton
Director
Melbourne
1 August 2013
350
TRANSURBAN Independent auditor’s report to the members of
Transurban International Limited
Report on the financial report
We have audited the accompanying financial report of Transurban International Limited (the
Company), which comprises the balance sheet as at 30 June 2013, and the income statement, the
statement of comprehensive income, statement of changes in equity and statement of cash flows for
the year ended on that date, a summary of significant accounting policies, other explanatory notes and
the directors’ declaration for the Transurban International Limited Group (the Group). The Group
comprises the Company and the entities it controlled at the year's end or from time to time during the
financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the
audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it
contains any material inconsistencies with the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, Southbank, GPO Box 1331L, MELBOURNE VIC 3001
DX 77 Melbourne, Australia
T +61 3 8603 1000, F +61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
351
ANNUAL REPORT 2013
Auditor’s opinion
In our opinion:
(a)
the financial report of Transurban International Limited is in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2013 and of
its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001; and
(b)
the financial report and notes also comply with International Financial Reporting Standards
as disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 263 to 292 of the directors’ report for the
year ended 30 June 2013. The directors of the Company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Transurban International Limited for the year ended
30 June 2013, complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Chris Dodd
Partner
Melbourne
1 August 2013
352
TRANSURBAN
Security holder information
The security holder information set out below was applicable as at 9 August 2013.
Distribution of stapled securities
The number of holders of stapled securities, which comprise one share in Transurban Holdings
Limited, one share in Transurban International Limited and one unit in Transurban Holding Trust, was
60,340.
The voting rights are one vote per stapled security.
The percentage of total holdings held by or on behalf of the 20 largest holders of these securities was
79.70 per cent.
The distribution of holders was as follows:
Security grouping
Total holders
Stapled securities
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 999,999,999
Total
20,669
28,465
7,026
3,961
219
60,340
8,302,075
72,610,129
50,653,877
86,358,513
1,263,670,224
1,481,594,818
There were 3,829 holders of less than a marketable parcel of stapled securities.
There were 1,481,594,818 stapled securities on issue.
20 largest holders of stapled securities
% of issued stapled
securities
0.56
4.90
3.42
5.83
85.29
100.00
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
JP MORGAN NOMINEES AUSTRALIA LIMITED
BNP PARIBAS NOMS PTY LTD
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
AMP LIFE LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
UBS NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
ARGO INVESTMENTS LIMITED
QIC LIMITED C/- NATIONAL NOMINEES LIMITED
AUSTRALIAN UNITED INVESTMENT COMPANY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
DIVERSIFIED UNITED INVESTMENT LIMITED
BOND STREET CUSTODIANS LIMITED
Number of stapled
securities held
378,043,496
% of issued
stapled securities
25.52
330,177,733
213,991,295
75,824,297
37,510,142
31,209,496
31,086,223
16,025,348
11,678,356
10,714,906
10,393,299
7,925,596
6,222,426
3,474,714
3,311,375
2,838,620
2,800,000
2,632,706
2,572,727
2,470,974
22.29
14.44
5.12
2.53
2.11
2.10
1.08
0.79
0.72
0.70
0.53
0.42
0.23
0.22
0.19
0.19
0.18
0.17
0.17
Total
1,180,903,729
79.70
Substantial holders
Substantial security holders as at 9 August 2013 were as follows:
Name
TREASURY GROUP
UNISUPER
RARE INFRASTRUCTURE
FUTURE FUND BOARD OF GUARDIANS
COMMONWEALTH BANK OF AUSTRALIA
Number of stapled
securities held
123,924,947
125,814,397
102,126,158
85,434,602
83,112,045
% of issued stapled securities
8.50
8.49
7.00
5.77
5.61
353
ANNUAL REPORT 2013
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354
TRANSURBAN This page has been left blank intentionally.
355
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356
TRANSURBAN ANNUAL REPORT
ENQUIRIES
Corporate Governance Statement
Financial Statements
Transurban Holdings Limited and Controlled Entities
Transurban Holding Trust and Controlled Entities
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Transurban International Limited and Controlled Entities 248
Security Holder Information
353
ENQUIRIES ABOUT YOUR TRANSURBAN
STAPLED SECURITIES
The stapled securities register is maintained by
Computershare Investor Services Pty Ltd.
If you have a question about your Transurban securities
or distributions please contact:
COMPUTERSHARE
Yarra Falls
452 Johnston Street
Abbotsford, Victoria 3067
Australia
Mail
The Registrar
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne, Victoria 3001
Australia
Phone
(Australia ) 1300 555 159
(Overseas) +61 3 9415 4062
TRANSURBAN GROUP
AUSTRALIA
Melbourne (Head Office)
Level 3, 505 Little Collins Street
Melbourne, Victoria 3000
Australia
Phone +61 (0)3 8656 8900
Sydney
Level 5, 50 Pitt Street
Sydney, NSW 2000
Australia
UNITED STATES
Washington DC Area
6440 General Green Way
Alexandria VA 22312
United States of America
Phone +1 571 419 6100
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