2014
TRANSURBAN
ANNUAL REPORT
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Contents
Financial Statements
Transurban Holdings Limited and Controlled Entities
Transurban Holding Trust and Controlled Entities
Transurban International Limited and Controlled Entities
Security Holder Information
Corporate Governance Statement
1
149
251
359
Transurban’s 2014 Corporate Governance Statement is located at
transurban.com/files/2014_Corporate_Governance_Statement.pdf
Transurban Holdings Limited and
Controlled Entities
ABN 86 098 143 429
(including Transurban International Limited and Transurban Holding Trust)
Annual report
for the year ended 30 June 2014
1
2014 Transurban Annual Report Transurban Holdings Limited ABN 86 098 143 429
Annual report - 30 June 2014
Contents
Directors' report
Auditor's independence declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
3
55
56
146
147
2
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
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 2014.
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 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
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
Christine O'Reilly
Rodney Slater
Ian Smith
Executive Director
Scott Charlton
Result
The consolidated net profit for the year ended 30 June 2014 for the Group was $252 million (2013: $175 million).
The profit attributable to ordinary equity holders of the Group was $282 million (2013: $172 million).
Principal activities
The principal activities of the Group during the financial year were the development, operation and maintenance
of toll roads.
3
3
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Distributions
Distributions paid to the ordinary equity holders of the Group during the financial year were as follows:
2014
$M
2013
$M
Distribution payable
Final distribution for 2014 financial year payable and recognised as a liability:
18.0 cents (2013: 15.5 cents) per fully paid Stapled Security payable
14 August 2014
Fully franked final dividend based on tax paid at 30% - 1 cent (2013: 3.5 cents) per
fully paid Stapled Security
Unfranked final distribution – 14.5 cents (2013: 12.0 cents) per fully paid Stapled
Security
Fully franked (2013: nil) final distribution based on tax paid at 30% - 2.5 cents
(2013: nil) per fully paid Stapled Security
Distributions paid during the year
Final distribution for 2013 financial year of 15.5 cents (2012: 15.0 cents)
per fully paid Stapled Security paid 14 August 2013
Fully franked dividend based on tax paid at 30% - 3.5 cents (2012: 3.5 cents) per
fully paid Stapled Security
Unfranked final distribution - 12 cents (2012: 11.5 cents) per fully paid Stapled
Security
Interim distribution for 2014 financial year of 17.0 cents (2013: 15.5 cents) per
fully paid Stapled Security paid 14 February 2014
Fully franked interim dividend based on tax paid at 30% - 3.5 cents (2013: 3.5
cents) per fully paid Stapled Security
Unfranked interim distribution - 13.5 cents (2013: 12.0 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
Paid in cash
Satisfied by issue of Stapled Securities
19
275
47
341
52
178
230
52
201
253
483
418
65
483
52
178
-
230
51
168
219
51
176
227
446
411
35
446
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4
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014
Business review
Transurban manages and develops urban toll road networks in Australia and the United States of America.
Transurban is listed on the Australian Securities Exchange (ASX) and has been in business since 1996.
Transurban has a stake in fourteen roads in Melbourne, Sydney, Brisbane and in Virginia:
Melbourne, Australia
CityLink
Sydney, Australia
Hills M2
Lane Cove Tunnel
Cross City Tunnel (concession asset acquired on 26 June 2014)
Eastern Distributor (Airport Motorway Group)
Westlink M7
M5 South West
Brisbane, Australia (acquired on 2 July 2014)
Gateway Motorway
Logan Motorway
CLEM7
Go Between Bridge
Legacy Way (under construction)
Virginia, USA
Pocahontas 895 (transferred to project lenders on 14 May 2014)
495 Express Lanes
95 Express Lanes (under construction)
Ownership
2014
2013
100%
100%
100%
100%
100%*
75.1%
50%
50%
62.5%
62.5%
62.5%
62.5%
62.5%
0%
94%
77.5%
100%
100%
N/A
75.1%
50%
50%
N/A
N/A
N/A
N/A
N/A
75%
67.5%
67.5%
*On 30 December 2013, the Group gained control of the Cross City Tunnel by acquiring 100% of the senior debt exposure from Royal Bank of
Scotland. Between 30 December 2013 and 26 June 2014 the Group had control, but with a nil% interest (100% non-controlling interest). The
Group subsequently purchased the concession asset from the receivers and managers on 26 June 2014, holding a 100% interest thereafter.
5
5
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
In the year ended 30 June 2014 Transurban expanded its portfolio of assets with the acquisition of Cross City
Tunnel in Sydney. Transurban also increased its interests in 495 Express Lanes and 95 Express Lanes in the
US. Subsequent to year-end, a Transurban led consortium acquired Queensland Motorways in Brisbane,
comprising four operating assets and the Legacy Way Tunnel which is currently under construction.
Having reached agreement with the New South Wales Government in May 2013 to work together to procure the
design and construction price, Transurban announced the preferred contractor for the NorthConnex project in
NSW. Transurban also announced an in-principle agreement with the Victorian Government under the
Government’s Unsolicited Proposals framework for a major co-ordinated upgrade to the western section of
CityLink, the Bolte Bridge-West Gate Freeway interchange and the Tullamarine Freeway.
In addition, Pocahontas 895 was transferred to the project lenders in May 2014 and Transurban no longer has
any operational or financial interest in the asset.
Business Framework and Strategy
At the heart of our business strategy is our desire to be a ‘partner of choice’ for our government clients and an
organisation that meets the needs of our customers. To do that, we have to provide and be part of effective
transportation solutions to support the growth and well-being of our cities.
At Transurban we do this through the effective management of our existing road networks, through our active
involvement in the transport policy debate, and by applying our unique skills to the infrastructure challenges in
our markets.
In delivering on this objective our business has fostered core capabilities in the following areas:
Network planning and forecasting
Operations and customer management
Project development and delivery
Application of technology, and
Community engagement.
Transurban's target markets are the eastern seaboard of Australia and Virginia in the USA, part of the
Washington, DC metro area.
Value drivers
The investment proposition for high quality toll road assets is 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, which is derived from traffic growth and inflation linked toll escalation across
the portfolio of assets, is supported by effective maintenance of operations and customers. It is further enhanced
by the effective application of technology in key areas including traffic management and tolling. In addition, value
can be 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 NorthConnex project in Sydney and the upgrade to the western section of CityLink in
Melbourne.
Financial performance
Performance indicators
Underlying proportional EBITDA (earnings before interest, tax, depreciation and amortisation) is the primary
measure the Transurban Board uses to assess the operating performance of Transurban, with an aim to focus on
operating results and associated cash generation. It reflects the contribution from individual assets to
Transurban’s operating performance and permits a meaningful assessment of the underlying performance of
Transurban’s assets.
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6
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
To arrive at the proportional result, non-controlling interests in Transurban’s controlled roads are removed 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 Transurban’s cash generation. Free cash represents the cash
available for distribution to security holders.
Year ended 30 June 2014 Highlights
Transurban’s net profit for the year ended 30 June 2014 was $252 million. Toll revenue increased by 13.1 per
cent to $906 million. The increase in toll revenue was driven by traffic and toll price growth across most of the
asset portfolio, most notably Hills M2 following the completion of the Hills M2 Upgrade, and on CityLink.
The transfer of Pocahontas 895 to lenders resulted in a net after tax gain of $103.1 million, being Transurban’s
share of the profit recognised from the write-off of loans, offset by previously unrecognised losses.
Key highlights include:
Transfer of Pocahontas 895 to project lenders in May 2014
495 Express Lanes re-capitalisation
Completion of Hills M2 Upgrade in August 2013
Acquisition of Cross City Tunnel
Re-sheeting of CityLink’s Burnley and Domain tunnels in late December and early January.
Subsequent to year end, on 2 July 2014, Transurban completed the acquisition of Queensland Motorways.
Financial position
Transurban has a market capitalisation of approximately $14.5 billion and at 30 June 2014, 1,896 million stapled
securities were on issue. During the year, Transurban issued 405 million stapled securities as part of the capital
raising to fund the acquisition of Queensland Motorways.
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 68.0 per
cent of the total assets of Transurban. The duration of the asset concessions range from around 30 years to 80
years and for accounting purposes, the carrying values are amortised on a straight line basis over the duration of
the concession.
Transurban’s cash and cash equivalents balance at 30 June 2014 included funds raised through capital raising
activities and held for the purpose of purchasing the Queensland Motorways, which was completed on 2 July
2014.
Operations and performance of Transurban’s portfolio of assets – Year ended 30 June 2014
Transurban considers the primary measure of operating performance to be its underlying proportional EBITDA.
To determine the proportional EBITDA, non-controlling interests are removed from the statutory result and
Transurban’s interests in non-controlled assets are included in proportion to our ownership.
Note 2 to the statutory accounts (Segment Information) presents the proportional result 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.
Underlying traffic and toll revenue performance
The following shows traffic and toll revenue performance of all operating assets for the year ended 30 June 2014.
This is shown for 100 per cent of each asset. The review of costs and revenue in the commentary below also
refers to 100 per cent of the asset.
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2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Asset (and ownership %)
CityLink (100%)
Hills M2 (100%)
Cross City Tunnel (100%)
Lane Cove Tunnel / MRE (100%)
M1 Eastern Distributor (75.1%)
Westlink M7 (50%)
Traffic
growth
(%)
1.6%
13.8%
N/A
8.9%
2.3%
8.1%
M5 South West Motorway (50%)
(1.2%)
Pocahontas (75%) ($’USD)
N/A
495 Express Lanes (94%) ($’USD)
32.0%
CityLink (Melbourne)
Toll revenue
2014
$’m
Toll revenue
2013
$’m
Variance
$’m
Variance
%
% of
proportional
toll revenue
$535
$193
$1
$69
$105
$231
$187
$14
$24
$496
$143
$0
$62
$100
$210
$189
$16
$7
$39
$50
$1
$7
$5
$21
($2)
($2)
$17
8.0%
34.7%
N/A
12.0%
4.8%
10.2%
(0.7%)
(11.0%)
234.6%
47.9%
17.3%
0.1%
6.2%
7.1%
10.3%
8.4%
1.0%
1.7%
CityLink had continued traffic growth on all parts of the Asset. Toll revenue increased by 7.9 per cent, driven by a
1.6 per cent increase in traffic and a 4.7 per cent increase in toll prices. Western Link performed particularly well,
seeing growth of 2.1 per cent, however both sections of the Asset were mildly affected by the re-sheeting of the
Domain and Burnley tunnels in late December and early January, which required the closure of those tunnels
during works.
Changes to the operational structure of the call centre, and a shift to electronic channels for communications led
to a reduction in tolling expenses and direct employee costs.
Total CityLink costs have increased by $4 million to $105 million. CityLink’s EBITDA margin continued to improve
from 89.0 per cent to 90.3 per cent.
Hills M2 (Sydney)
The M2 Upgrade project was completed in August 2013 and resulted in a significant uplift in traffic year-on-year.
The completion of the M2 Upgrade saw the majority of the Hills M2 return to normal lane configurations and
operational status which contributed to overall traffic growth across the Hills M2. In addition to the M2 Upgrade,
works were commenced on the maintenance of the Vimiera Road Embankment and construction of the Lane
Cove Road eastbound on-ramp.
Year on year traffic growth on the Hills M2 was 13.8 per cent, which included traffic growth following completion
of the M2 Upgrade project. This traffic increase, in addition to the toll price increase of 19.3 per cent effected on
completion of the upgrade on the asset, resulted in a toll revenue increase of $50 million.
Costs on the Hills M2 increased in comparison to the previous year, however the asset’s EBITDA margin
increased to 84.1 per cent.
8
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2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Lane Cove Tunnel / MRE (Sydney)
Lane Cove Tunnel has observed strong traffic growth during the financial year as the constraints from the
ongoing upgrade works on the connecting Hills M2 Motorway dissipated following completion of the M2 Upgrade
Project.
Traffic growth for the tunnel was 9.6 per cent compared to the prior corresponding period, and 6.6 per cent on the
Military Road e-Ramps, resulting in a $7 million increase in toll revenue in 2014. Tollaust Pty Limited (a Group
company) continued to provide Operations and Maintenance services to Lane Cove Tunnel, and since April 2014
has taken on the role of Operator, using in-house resources. The EBITDA margin on Lane Cove Tunnel
increased from 60.0 per cent to 73.0 per cent.
Cross City Tunnel (Sydney)
On 30 December 2013 Transurban acquired the senior debt exposure of the Cross City Tunnel Group which was
in receivership. As a result of the debt acquisition Transurban was deemed to have gained control of the Cross
City Tunnel Group and its controlled entities.
The acquisition reached financial close on 26 June 2014, when Transurban purchased the Cross City Tunnel
concession asset from the receivers and managers. Transurban acquired this concession for $475 million plus
stamp duty and transaction costs totalling $27 million. As at the end of the financial year work was well advanced
on the integration of this asset into the broader Transurban portfolio.
Statewide Roads / M4 (Sydney)
In the year ended 30 June 2014 Statewide Roads contributed $2 million to the Group’s EBITDA through rental
income generated from service centre tenants. Statewide Roads is required to maintain the service centres and
in the current year there was no significant maintenance expenditure of a capital nature.
M1 Eastern Distributor (Sydney)
The Eastern Distributor commenced three major capital works projects in 2014, which has resulted in elevated
levels of maintenance capital expenditure on the asset:
1) New Roadside Tolling Equipment was installed during 2014 and user acceptance testing of this equipment
commenced;
2) Resurfacing of the motorway, which was commenced as a part of a two year program of resurfacing works;
and
3) Upgrade of the Operations Management and Control System (“OMCS”). The OMCS upgrade is scheduled for
completion in 2016.
On 4 November 2013, the Eastern Distributor moved to quarterly integer tolling increases (previously 50 cent
increments). This has contributed to an increase in toll revenue of $5 million.
M5 South West Motorway (Sydney)
The motorway’s performance has been impacted in the current year by ongoing widening works. Traffic
decreased compared to the prior year by 1.2 per cent, resulting in a decrease in revenue of 0.7 per cent to $187
million.
Despite traffic disruption during the widening, the EBITDA margin increased from 93.1 per cent to 94.9 per cent
for the year ended 30 June 2014.
The M5 removed cash tolling on 1 July 2013 and now operates on fully electronic tolling.
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9
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Westlink M7 (Sydney)
The performance of Westlink M7, particularly the northern section, has improved in 2014 due to the completion of
the M2 Upgrade, with an increase in traffic of 8.1 per cent and an increase in revenue of $21 million to $231
million. The M7’s EBITDA margin increased from 81.0 per cent to 83.6 per cent.
Pocahontas 895 (Virginia USA)
Transurban transferred ownership of Pocahontas 895 to lenders on 14 May 2014 and now has no financial or
operational interests in the asset.
495 Express Lanes (Virginia USA)
The 495 Express Lanes traffic performance and share of corridor volume continued to increase over the year.
Average workday revenue for the month of June 2014 increased 98.8 per cent over the month of June 2013. The
average daily toll revenue for the year grew 105.4 per cent from the prior year. Average daily trips increased 32.0
per cent for the same period.
The average dynamic toll charged increased by 56.3 per cent from US$1.51 in 2013 to US$2.36 for 2014. The
maximum dynamic toll charged during the year was US$11.85 to travel the full length of the Express Lanes.
On 29 May 2014, the 495 Express Lanes achieved record daily toll revenue.
Free cash and cash flows from operations
Free cash is calculated as:
Cash flow from operations of 100 per cent owned assets and operating companies (CityLink, Hills M2, Lane
Cove Tunnel / MRE, Cross City Tunnel, Statewide Roads, Roam Tolling, Tollaust and Transurban
corporate);
Excluding Payments for Maintenance of Intangible Assets (concession assets);
Excluding Interest received from Term Loan Notes (Westlink M7 & M5 South West Motorway
Investment returns captured as interest payments);
Plus distributions received from non-100 per cent owned assets (M5 South West Motorway, M1 Eastern
Distributor)
Plus Term Loan Note repayments from Westlink M7 and M5 South West Motorway (as 50 per cent equity
accounted investments)
Less Provision for Maintenance of Intangible Assets and payments for e-TAGs.
Free cash for the year ended 30 June 2014 was $572 million. Free cash per security was 33.9 cents. The
calculation of free cash can be found at note 22 to the statutory accounts. Free cash per security was impacted in
the year by the issue of new securities to fund the acquisition of Queensland Motorways. All securities issued are
entitled to the full final distribution and this dilutes the free cash. The distribution of 35 cent per security is 96.9
per cent cash covered for the year.
Business development activities
Acquisition of Queensland Motorways
In April 2014, a Transurban-led consortium (62.5 per cent Transurban, 25 per cent AustralianSuper and 12.5 per
cent Tawreed, a wholly-owned subsidiary of the Abu Dhabi Investment Authority) reached agreement to acquire
Queensland Motorways for $6,673 million, plus stamp duty and transaction costs totalling $447 million.
Transurban will operate the network on behalf of the owners. Financial close was achieved on 2 July 2014.
Acquisition of Cross City Tunnel
The process to acquire Cross City Tunnel began when Transurban acquired the secured senior debt of the Cross
City Tunnel Group from Royal Bank of Scotland in December 2013. Cross City Tunnel was in receivership at the
time, with receivers and managers appointed to conduct a sale process.
The debt acquisition gave Transurban the right to remove and appoint the receivers and managers and therefore
significant rights over the relevant activities of the Cross City Tunnel entities. In May 2014, Transurban entered
into an agreement with members of the Cross City Tunnel Group (subject to deeds of company arrangement)
(CCT Vendors), acting by their Receivers and Managers, to acquire CCT for approximately $475 million plus
stamp duty and transaction costs. Financial close was achieved on 26 June 2014.
10
10
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
95 Express Lanes (Virginia USA)
Construction on the project, which connects to the 495 Express Lanes, is now 85.0 per cent complete (US$594
million costs incurred to date), with the 95 Express Lanes due to open at the end of calendar year 2014. The 95
Express Lanes have a 75 year operating concession and the project represents a 29-mile extension to the 495
Express Lanes. Once complete the 95 and 495 Express Lanes network will include more than 40 miles of
Express Lanes.
On 11 April 2014, Transurban acquired Fluor Enterprises Inc.’s 10 per cent interest in 95 Express Lanes LLC.
After this acquisition, Transurban owns 77.5 per cent of 95 Express Lanes LLC.
495 Express Lanes (Virginia USA)
A review of the project was completed during the year, which resulted in downward adjustments to traffic and
revenue projections. As a result, Transurban and Capital Beltway Express LLC worked with key stakeholders,
including lenders, to implement changes to the capital structure to ensure it could be supported by the emerging
revenue profile. On 11 April 2014, during the process to change the capital structure, Transurban acquired Fluor
Enterprises Inc.’s 10 per cent interest in Capital Beltway LLC. On 4 June 2014, Capital Beltway Express LLC
repaid US$433 million of debt and associated swap termination costs through US$281 million of additional equity
investment from Transurban and the release of US$151 million of existing finance reserves. After this acquisition
and the capital injection, Transurban owns 94 per cent of Capital Beltway Express LLC.
M5 South West Motorway Widening
Construction work on the M5 widening, which will expand the M5 South West Motorway from two to three lanes
in each direction from King Georges Road, Beverly Hills to Camden Valley Way, Prestons, is now 80 per cent
complete and is expected to be completed by December 2014.
NorthConnex
Having reached agreement with the New South Wales Government in May 2013 to work together to procure the
design and construction price, in March 2014 Transurban announced the preferred contractor for the
NorthConnex project. This project has now moved into the planning approval stage with the public display of the
Environmental Impact Assessment. If approved, it is expected that work on NorthConnex would begin in 2015
with the project open for use in 2019.
CityLink – Tullamarine Widening
In April 2014, Transurban announced an in-principle agreement with the Victorian Government under the
Government’s Unsolicited Proposals framework for a major co-ordinated upgrade to the western section of
CityLink, the Bolte Bridge-West Gate Freeway interchange and the Tullamarine Freeway (“CityLink – Tulla
Widening”). The project is subject to the State and Transurban reaching final agreement on terms (including
scope) and documentation (expected by late 2014).
Acquisition of TransLink Operations (TLO)
On 1 May 2014, the Group successfully acquired TransLink Operations (“TLO”). TLO manages the CityLink
Traffic Control Room as well as other key aspects of CityLink operations, including incident response.
11
11
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Financing activities
Transurban continued to have success in financing activities in the year ended 30 June 2014.
August 2013
Refinanced $250 million corporate working capital facilities.
September 2013
Replaced $60 million corporate credit facilities.
October 2013
Raised Euro 500 million corporate bonds under Transurban’s existing EMTN
programme.
December 2013
Refinanced tranche A of Airport Motorway’s bank debt with $300 million domestic
MTNs.
April / May 2014
Raised A$175 million and US$93 million corporate bank facilities.
June 2014
Raised A$277 million non-recourse debt on Cross City Tunnel.
On 2 July 2014, the Group raised $2,900 million in non-recourse debt to fund the acquisition of Queensland
Motorways, of which $2,500 million was drawn on that date.
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 2014 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 ($0.94 at 30 June 2014).
Corporate debt maturity profile
1,000
1,000
800
900
800
133
133
206
206
700
600
500
400
n
600
o
i
l
l
i
m
400
D
U
A
300
136
500
500
450
450
300
300
129
136
129
200
200
100
215
215
275
259
275
165
165
259
60
2017
60
2017
125
125
-
2018
2018
2015
2016
2016
254
254
722
722
233
233
219
219
2019
2019
-
2020
2020
2021
2021
172
172
-
2022
2022
-
2023
2023
2024
2024
2025
2025
2026
2026
94
94
2027
2027
-
2028
2028
A$ Notes
A$ notes
US Private Placement
US private placement
Working capital facilities
Working capital facilities
Syndicated facilities
Syndicated facilities
Letters of credit
Letters of credit
EMTN
EMTN
12
-
0
2015
12
2014 Transurban Annual Report
Operating and Financial Review – Year ended 30 June 2014 (continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Asset level debt maturity profile at 30 June 2014
Asset level debt maturity profile at 30 June 2014
Asset level debt maturity profile at 30 June 2014
Asset level debt maturity profile at 30 June 2014
Transurban Holdings Limited
Transurban Holdings Limited
Transurban Holdings Limited
Transurban Holdings Limited
Directors' report
Directors' report
Directors' report
Directors' report
30 June 2014
30 June 2014
30 June 2014
30 June 2014
(continued)
(continued)
(continued)
(continued)
1,200
1,400
1,400
1,400
1,400
1,000
1,200
1,200
1,200
1,200
800
1,000
1,000
1,000
1,000
600
800
800
800
800
400
600
600
600
600
200
400
400
400
400
n
o
i
l
l
i
m
n
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m
m
$
A
$
$
$
A
A
A
7
7
2
7
4
4
-
-
-
-
7
7
7
7
7
2
7
7
7
2
2
2
0
4
3
7
4
7
7
7
4
4
4
4
4
4
4
0
0
4
0
0
5
0
0
0
0
0
4
0
0
0
4
4
4
0
4
0
0
0
3
4
4
4
3
3
3
8
8
2
5
0
5
0
0
0
0
0
5
0
0
0
5
5
5
8
8
8
8
8
2
8
8
8
2
2
2
5
5
2
0
6
2
0
0
3
5
2
2
8
3
2
5
0
5
5
5
5
0
0
0
5
5
5
2016
-
-
-
-
2019
-
-
-
-
-
-
-
-
-
5
5
5
5
5
2
5
5
5
2
2
2
-
-
-
5
2
5
5
5
2
2
2
2
2
2
2
2017
8
3
8
8
8
2
3
3
3
2
2
2
2018
0
6
0
0
0
2
6
6
6
2
2
2
-
-
0
200
200
200
200
2015
-
-
-
-
2020
2021
2022
0
0
0
0
0
3
0
0
0
3
3
3
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
-
-
Cross City Tunnel
-
-
-
-
-
-
-
-
-
-
-
-
M1
Hills M2
8
1
3
8
1
8
8
8
3
1
1
1
3
3
3
5
2
6
5
2
5
5
5
6
2
2
2
6
6
6
8
3
2
6
6
7
7
1
8
1
2038
2033
2037
2035
2034
2036
76
76
76
76
M5 South West
2042
2043
2044
2045
2046
2047
2039
2040
2041
1
8
1
1
1
1
8
8
8
1
1
1
Westlink M7
2049
2048
8
3
8
8
8
2
3
3
3
2
2
2
-
-
-
-
-
-
-
-
-
-
-
-
Lane Cove Tunnel
495 Express Lanes TIFIA funding
Cross City Tunnel
M5
Cross City Tunnel
Cross City Tunnel
Cross City Tunnel
M7 Westlink
M5
M5
M5
95 Express Lanes TIFIA Funding
M7 Westlink
M7 Westlink
M7 Westlink
495 Express Lanes TIFIA Funding
95 Express Lanes TIFIA Funding
95 Express Lanes TIFIA Funding
95 Express Lanes TIFIA Funding
495 Express Lanes Letter of Credit
495 Express Lanes TIFIA Funding
495 Express Lanes TIFIA Funding
495 Express Lanes TIFIA Funding
495 Express Lanes Letter of Credit
495 Express Lanes Letter of Credit
495 Express Lanes Letter of Credit
95 Express Lanes TIFIA funding
95 Express Lanes private activity bonds
495 Express Lanes private activity bonds
495 Express Lanes letter of credit
M2 Hills
Lane Cove Tunnel
M2 Hills
M2 Hills
M2 Hills
M1
Lane Cove Tunnel
Lane Cove Tunnel
Lane Cove Tunnel
95 Express Lanes Private Activity Bonds
M1
M1
M1
495 Express Lanes Private Activity Bonds
95 Express Lanes Private Activity Bonds
95 Express Lanes Private Activity Bonds
95 Express Lanes Private Activity Bonds
495 Express Lanes Private Activity Bonds
495 Express Lanes Private Activity Bonds
495 Express Lanes Private Activity Bonds
Financial risk management
Financial risk management
Financial risk management
Financial risk management
Transurban Group’s exposure to financial risk management and its policies for managing that risk can be found in
Transurban Group’s exposure to financial risk management and its policies for managing that risk can be found in
Transurban Group’s exposure to financial risk management and its policies for managing that risk can be found in
Transurban Group’s exposure to financial risk management and its policies for managing that risk can be found in
the Financial Risk Management notes of the attached accounts (note 40). That note discusses Transurban’s
the Financial Risk Management notes of the attached accounts (note 40). That note discusses Transurban’s
the Financial Risk Management notes of the attached accounts (note 40). That note discusses Transurban’s
the Financial Risk Management notes of the attached accounts (note 40). That note discusses Transurban’s
hedging policies, credit risk, interest rate risk and liquidity and funding policies.
hedging policies, credit risk, interest rate risk and liquidity and funding policies.
hedging policies, credit risk, interest rate risk and liquidity and funding policies.
hedging policies, credit risk, interest rate risk and liquidity and funding policies.
Corporate activities
Corporate activities
Corporate activities
Corporate activities
Equity entitlement offer and share placement
Equity entitlement offer and share placement
Equity entitlement offer and share placement
Equity entitlement offer and share placement
In May 2014, Transurban completed a fully underwritten accelerated renounceable entitlement offer.
In May 2014, Transurban completed a fully underwritten accelerated renounceable entitlement offer.
In May 2014, Transurban completed a fully underwritten accelerated renounceable entitlement offer.
In May 2014, Transurban completed a fully underwritten accelerated renounceable entitlement offer.
The Institutional Entitlement Offer raised gross proceeds of approximately $1.8 billion and resulted in the issue of
The Institutional Entitlement Offer raised gross proceeds of approximately $1.8 billion and resulted in the issue of
The Institutional Entitlement Offer raised gross proceeds of approximately $1.8 billion and resulted in the issue of
The Institutional Entitlement Offer raised gross proceeds of approximately $1.8 billion and resulted in the issue of
approximately 264 million new Transurban stapled securities. Entitlements not taken up by eligible institutional
approximately 264 million new Transurban stapled securities. Entitlements not taken up by eligible institutional
approximately 264 million new Transurban stapled securities. Entitlements not taken up by eligible institutional
approximately 264 million new Transurban stapled securities. Entitlements not taken up by eligible institutional
security holders and entitlements of ineligible institutional security holders were sold and cleared in the
security holders and entitlements of ineligible institutional security holders were sold and cleared in the
security holders and entitlements of ineligible institutional security holders were sold and cleared in the
security holders and entitlements of ineligible institutional security holders were sold and cleared in the
institutional shortfall book build at $7.00 per security, a $0.25 per security premium over the offer price of $6.75
institutional shortfall book build at $7.00 per security, a $0.25 per security premium over the offer price of $6.75
institutional shortfall book build at $7.00 per security, a $0.25 per security premium over the offer price of $6.75
institutional shortfall book build at $7.00 per security, a $0.25 per security premium over the offer price of $6.75
and a 2.4 per cent discount to the theoretical ex-rights price as of 23 April 2014 of $7.17 per security.
and a 2.4 per cent discount to the theoretical ex-rights price as of 23 April 2014 of $7.17 per security.
and a 2.4 per cent discount to the theoretical ex-rights price as of 23 April 2014 of $7.17 per security.
and a 2.4 per cent discount to the theoretical ex-rights price as of 23 April 2014 of $7.17 per security.
The Retail Entitlement Offer raised gross proceeds of approximately $557 million from the issue of approximately
The Retail Entitlement Offer raised gross proceeds of approximately $557 million from the issue of approximately
The Retail Entitlement Offer raised gross proceeds of approximately $557 million from the issue of approximately
The Retail Entitlement Offer raised gross proceeds of approximately $557 million from the issue of approximately
83 million new securities at an issue price of $6.75 per security. Approximately 28.6 million of these new
83 million new securities at an issue price of $6.75 per security. Approximately 28.6 million of these new
83 million new securities at an issue price of $6.75 per security. Approximately 28.6 million of these new
83 million new securities at an issue price of $6.75 per security. Approximately 28.6 million of these new
securities were sold in the bookbuild at a price of $7.21 per security, a $0.46 per security premium over the issue
securities were sold in the bookbuild at a price of $7.21 per security, a $0.46 per security premium over the issue
securities were sold in the bookbuild at a price of $7.21 per security, a $0.46 per security premium over the issue
securities were sold in the bookbuild at a price of $7.21 per security, a $0.46 per security premium over the issue
price of $6.75, a $0.21 per security premium over the institutional bookbuild price of $7.00, and a $0.10 per
price of $6.75, a $0.21 per security premium over the institutional bookbuild price of $7.00, and a $0.10 per
price of $6.75, a $0.21 per security premium over the institutional bookbuild price of $7.00, and a $0.10 per
price of $6.75, a $0.21 per security premium over the institutional bookbuild price of $7.00, and a $0.10 per
security discount to the last traded price of $7.31 per security.
security discount to the last traded price of $7.31 per security.
security discount to the last traded price of $7.31 per security.
security discount to the last traded price of $7.31 per security.
A further $400 million was raised from placement of 58 million securities at a price of $6.95 per security to
A further $400 million was raised from placement of 58 million securities at a price of $6.95 per security to
A further $400 million was raised from placement of 58 million securities at a price of $6.95 per security to
A further $400 million was raised from placement of 58 million securities at a price of $6.95 per security to
AustralianSuper and Tawreed.
AustralianSuper and Tawreed.
AustralianSuper and Tawreed.
AustralianSuper and Tawreed.
13
13
13
13
13
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Changes in Executive Management
On 4 June 2014, Transurban appointed Wes Ballantine, Group General Manager, Strategy, to the role of Group
General Manager, Queensland
On 14 July 2014, Samantha Hogg, Chief Financial Officer, left Transurban. Until a permanent replacement is
appointed, Leigh Petschel, currently General Manager, Finance, will serve as Acting Chief Financial Officer.
Tim Steinhilber, Group General Manager, Project Delivery and Operational Excellence, transferred back to the
USA in July 2014 and will support the delivery of the I95 project that is scheduled for completion at the end of
2014. Tony Adams, previously Vice President, Infrastructure, Major Projects, and based in the USA, will transfer
to Australia as he assumed the role of Group General Manager, Project Delivery and Operational Excellence in
July 2014.
People
Transurban’s People Strategy focuses on the four areas of Leadership, Capability, Performance, and Wellbeing.
These areas are underpinned by the Group values, as well as safety, diversity and sustainability.
Leadership
Transurban conducts a bi-annual 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.
Senior Leaders participated in a three day offsite in February 2014. The key theme of the program was driving for
high performance and it is intended that this will become an annual event for the leadership group.
There has been a focus on building greater leadership capability through the middle management group during
the reporting period. Activities to support this include the implementation of a Group Coaching program;
cascading of activities from the Senior Leadership Program and the continuation of the Coaching and Mentoring
program for female managers.
Capability
A framework identifying both behavioural and technical capabilities has been developed and is being used to
assist in identifying key talent for future roles and determining potential gaps. This assists in developing
strategies to build future capability. A technical career pathway program has also been developed. One area of
continued focus is the Traffic Forecasting Group which is deemed fundamental to the ongoing success of the
Group. Steps to enhance capability in this area have progressed.
Performance
Changes were made to the Short Term Incentive program aimed at enhancing this through increased
performance differentiation, the introduction of formal performance comparisons against peers, and strengthening
the link between individual and Group performance. A review of the Group’s Benefits program was also
undertaken, benchmarking current programs against market practice.
Wellbeing
A new Wellbeing framework has been developed, identifying the key areas of health; work; financial; values and
staying connected. A suite of initiatives to support the framework are being introduced across Transurban. An
employee volunteer program has been launched which includes the introduction of volunteer leave for all
employees.
14
14
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Office moves in Melbourne and Sydney occurred with a focus on increasing collaboration and ensuring a
healthier workspace. Activity based working was also introduced as part of this, which enables greater flexibility
for employees in the way in which they work.
It has been twelve months since the launch of the refreshed Vision and Values. A Group wide Values Health
Check was rolled out to see how and where teams are using the values and to ensure that behaviours continue
to be aligned. This provided positive feedback as did the Employee pulse survey that was conducted in May
2014.
Sustainability
Transurban is committed to taking a sustainable approach to its operations, projects and business practices to
create the best outcomes for its government clients, communities and customers.
Transurban’s Sustainability Strategy highlights three key focus areas: be good neighbours, use less, and think
long term. By adopting and working to these principles, Transurban reinforces its ‘licence to operate’ and
strengthens its ability to deliver efficient and integrated transport networks that support productivity and the
wellbeing of its communities.
During the period, Transurban put into action the Sustainability Strategy. Some important highlights include
developing a community investment strategy which saw the launch of the first corporate grants program,
embedding sustainability requirements in the NorthConnex tender process and committing to reduce operational
energy consumption by 10 per cent by 2023.
Transurban provides regular progress reports to the Board on the focus areas. The annual Sustainability Report
summarises the year’s activities, while also outlining commitments for the coming years.
The 2014 Sustainability Report will be published in October.
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
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.
15
15
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (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
arrangement or as a result of government action
Existence and development of, or changes to, competing roads, feeder roads and other means of transport
A failure of key operating systems, including tolling systems, which impacts the ability to collect revenue
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
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 joint ventures and 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 to help create 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 entity’s state of affairs
Other than those matters already discussed in the operating and financial review, no other significant changes
have occurred in Transurban’s state of affairs in the year ended 30 June 2014.
Matters subsequent to the end of the financial year
On 2 July 2014, the Group announced that the consortium comprising Transurban (62.5 per cent),
AustralianSuper (25 per cent) and Tawreed Investments Limited (a wholly-owned subsidiary of the Abu Dhabi
Investment Authority) (12.5 per cent) had reached financial close on the acquisition of Queensland Motorways for
$6,673 million, plus stamp duty and transaction costs of $447 million.
As at the date of this report the Directors are not aware of any other circumstances that have arisen since 30
June 2014 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, that have not otherwise been disclosed in the financial report.
Likely developments in future financial years and the expected results of operations
Other than matters already discussed above, any other potential likely 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.
16
16
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
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.
17
17
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Information on Directors
Lindsay Maxsted
Chair and independent Non-executive Director
Dip Bus, FCA, FAICD
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 a partner of KPMG Australia and was the CEO of that firm from 2001 to 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.
As at the date of this report, Lindsay holds interests in 66,559 Stapled Securities.
Transurban Board Committee membership
Chairman of the Nomination Committee and a member of the Audit and Risk Committee.
Scott Charlton
Chief Executive Officer and Executive Director
BSci, MBA (Texas)
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 entities and financial institutions, including as CFO of Leighton Holdings Limited (2007 to 2009)
and as Managing Director of Deutsche Bank in Australia and Hong Kong (1995 to 2003).
As at the date of this report, Scott holds interests in 213,374 Stapled Securities, 909,444 performance awards
(unlisted) and 108,486 STI deferred awards (unlisted).
18
18
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Information on Directors (continued)
Neil Chatfield
M.Bus, FCPA, FAICD
Independent Non-executive Director
Term of office
Director since 18 February 2009.
Neil is an established Executive and Non-executive Director with extensive experience across all facets of
company management, and with specific expertise in 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 Recall Holdings Limited. Neil is also Honorary Chairman of HomeGround Services. He was
previously a Non-executive Director of Grange Resources Limited (to April 2014) and of Whitehaven Coal
Limited (to May 2012).
Neil previously served as Executive Director and the CFO of Toll Holdings (from 1997 to 2008).
As at the date of this report, Neil holds interests in 50,424 Stapled Securities.
Transurban Board Committee membership
Chairman 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.
As at the date of this report, Bob holds interests in 30,324 Stapled Securities.
Transurban Board Committee membership
Chairman of the Remuneration and Human Resources Committee and member of the Audit and Risk, and
Nomination Committees.
19
19
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Information on Directors (continued)
Samantha Mostyn
Independent Non-executive Director
BA, LLB
Term of office
Director since 8 December 2010.
Sam has significant experience in the Australian corporate sector both in Executive and Non-executive
capacities, in particular in the areas of human resources, corporate and government affairs, sustainability
management, and diversity.
Sam is currently a Non-executive Director of Virgin Australia Holdings Limited, Citigroup Pty Ltd, and Cover-
More Group Limited. She is President of the Australian Council for International Development. She is also a
Director of Australian Volunteers International, Australia Council for the Arts, Carriageworks, St James Ethics
Centre Foundation, and the NSW Climate Change Council.
Sam is currently Deputy Chair of the Diversity Council Australia, and is a member of the advisory boards of
ClimateWorks Australia and the Crawford School of Government and Economics, ANU. She is also a
Commissioner of the Australian Football League.
Sam has previously held senior executive positions at IAG, Optus and Cable & Wireless plc.
As at the date of this report, Sam holds interests in 17,256 Stapled Securities.
Transurban Board Committee membership
Member of the Remuneration and Human Resources and Nomination Committees.
Christine O'Reilly
Independent Non-executive Director
BBus
Term of office
Director since 12 April 2012.
Christine has over 30 years’ experience in the finance and infrastructure sectors in various roles including as Co-
Head of Unlisted 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, EnergyAustralia Holdings Pty Ltd, Medibank
Private, and Baker IDI, and is the Deputy Chair of CARE Australia.
As at the date of this report, Christine holds interests in 13,972 Stapled Securities.
Transurban Board Committee membership
Member of the Audit and Risk and Nomination Committees.
20
20
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Information on Directors (continued)
Rodney Slater
Independent Non-executive Director
J.D., BS
Term of office
Director since 22 June 2009.
Rodney is a partner in the public policy practice group of Washington DC firm Squire Patton Boggs (US) LLP,
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.
As at the date of this report, Rodney does not hold interests in any Stapled Securities.
Transurban Board Committee membership
Member of the Nomination Committee.
Ian Smith
Independent Non-executive Director
BE Mining (Hons), BFin Admin
Term of office
Director since 1 January 2012.
Ian is currently the Managing Director and CEO of Orica Limited and serves as President of The Australian
Mines and Metals Association. Previously, Ian was the Managing Director and CEO of Newcrest Mining, the
Global Head of Operational and Technical Excellence at Rio Tinto, based in London, and Managing Director of
Comalco Aluminium Smelting within the Rio Tinto Group. Prior to this, Ian held senior operational and project
management roles with WMC Resources, Pasminco Limited and CRA Limited.
Ian was previously the Chairman of the Minerals Council of Australia and a Director of the Australian Chamber of
Commerce and Industry.
Ian is a Fellow of both the Institute of Engineers Australia and the Australasian Institute of Mining and Metallurgy
- from which he was awarded its highest honour, the Institute Medal, in June 2012.
As at the date of this report, Ian holds interests in 92,742 Stapled Securities.
Company Secretaries
LLB (Hons), BComm
Amanda Street
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 14 years of legal, company secretariat and other relevant
experience. Prior to her in-house work, Amanda was a solicitor specialising in M&A work with Australian law firm
King & Wood Mallesons.
21
21
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Information on Directors (continued)
Julie Galligan
Julie joined Transurban in November 2008 and was appointed as General Counsel in February 2012. Julie has
over 14 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.
LLB, BA
Meetings of Directors
The number of meetings of the Boards of Directors of THL, TIML and TIL held during the year ended 30 June
2014, and the number of meetings attended by each Director are set out in the following tables.
Meetings of the Boards of Directors of THL, TIML and TIL were held jointly.
Lindsay Maxsted
Scott Charlton
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
Board of Directors Board of Directors Board of Directors
THL
TIML
TIL
Attended
Held
Attended
Held
Attended
Held
13
13
13
13
13
13
13
12
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
12
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
12
13
13
13
13
13
13
13
13
The number of meetings of each Board Committee held during the year ended 30 June 2014, and the number of
meetings attended by each Director, are set out in the following table.
Audit and Risk
Committee(1)
Remuneration
and Human
Resources
Committee(2)
Nomination
Committee(3)
Special
purpose Sub-
committees(4)
Attended Held Attended Held Attended Held Attended Held
6
6
6
6
*
6
*
1
6
*
6
6
*
6
*
*
5
5
5
5
5
3
*
2
*
*
5
5
5
*
*
*
2
2
2
2
2
2
2
1
2
*
2
2
2
2
2
*
12
12
11
*
*
11
*
*
12
12
12
*
*
11
*
*
Lindsay Maxsted
Scott Charlton
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
* = Not a member of the relevant Committee
(1) Scott Charlton and Ian Smith were not members of the Audit and Risk Committee but attended meetings during the year.
(2) Lindsay Maxsted, Scott Charlton, Christine O'Reilly and Ian Smith were not members of the Remuneration and Human Resources Committee
but attended meetings during the year. Scott Charlton was excluded from discussions involving his remuneration during meetings which he
attended.
(3) Scott Charlton and Ian Smith were not members of the Nomination Committee but attended meetings during the year.
(4) Special purpose sub-committees were formed during the year to deal with matters relating to the Queensland Motorways bid submission and
the due diligence process undertaken in connection with the equity raising for the acquisition of Queensland Motorways.
22
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2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
2014 REMUNERATION REPORT (AUDITED)
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 2014 (FY2014).
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
Current Senior Executives
Scott Charlton, Executive Director and Chief Executive Officer (CEO)
Jennifer Aument, Group General Manager, North America
Wesley Ballantine, Group General Manager, Queensland (from 4 June 2014, formerly Group General Manager, Strategy)
Andrew Head, Group General Manager, New South Wales
Samantha Hogg, Chief Financial Officer (1)
Sue Johnson, Group General Manager, Human Resources
Tim Steinhilber, Group General Manager, Delivery and Operational Excellence (1)
Lisa Tobin, Group General Manager, Technology
Vin Vassallo, Group General Manager, Victoria
Former Senior Executives
Michael Kulper, President North America (departed 3 September 2013)
(1) On 14 July 2014, the Group announced changes to KMP. Samantha Hogg departed the Group and Tim Steinhilber has
transferred back to the USA. Refer to section 1B for further details.
Contents
1 Remuneration snapshot
2 Remuneration governance
3 Remuneration in context
4 CEO / Senior Executive remuneration for FY2014
5 Link between Group performance, security holder wealth and remuneration
6 Non-executive director remuneration
All values in this report are in Australian dollars, unless otherwise stated.
23
24
26
27
28
48
50
23
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
1 Remuneration snapshot
The Transurban Board is committed to an executive remuneration framework that is focused on
driving a performance culture and linking pay to the achievement of the Group’s strategy and
business objectives and, ultimately, generating security holder value.
Transurban’s remuneration framework is reviewed annually taking into consideration security holder and
other stakeholder feedback, market expectations and regulatory developments.
At the 2013 Annual General Meeting (AGM), the framework received strong support from security holders,
with a 98.8 per cent vote in favour of the resolution to adopt the 2013 Remuneration Report.
There were no substantive changes to the framework in FY2014, but some refinements were made to
further align remuneration with the creation of sustainable security holder value, business outcomes, and
the Group’s organisational values: integrity, collaboration, accountability, ingenuity and respect.
In particular, changes were made to the Short Term Incentive (STI) program for all eligible employees,
which were aimed at enhancing this variable pay element through increased performance differentiation,
the introduction of formal performance comparisons against peers, and strengthening the link between
individual and Group performance.
A
TRANSURBAN’S REMUNERATION FRAMEWORK
The key elements of the remuneration framework for the CEO and other Senior Executives for FY2014
were as follows:
Remuneration mix
The remuneration of the CEO and other Senior Executives was structured as a mix of fixed remuneration
and variable ('at risk') remuneration through short term and long term incentive components. The relative
weightings of the three components were as follows:
Total remuneration % (annualised at target)
Fixed TEC
Variable (performance based)
CEO
Senior Executives
40
45
STI
30 (50% deferred)
30 (50% deferred)
LTI
30
25
* All Senior Executives moved to 50% STI deferral effective 1 July 2013.
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.
24
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2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
Short term incentive (STI)
During FY2014, changes were made to the STI program to achieve greater performance differentiation.
The link between Group and individual performance was also strengthened by using individual
performance as a multiplier when calculating reward for Group performance.
Group performance measures under the new STI program were again linked to growth in proportional
EBITDA, cost management based on proportional net costs, and safety. See section 4(D) for further
details.
Individual performance continues to be measured against key performance indicators (KPIs). Under the
new STI program, each individual’s assessment will be used in determining a rating relative to peers. The
overall rating will derive an individual’s STI using a payment schedule as determined by the Board
designed to encourage high performance.
During FY2014, the proportion of the STI award subject to mandatory deferral was aligned for the CEO
and all Senior Executives, so that all members of KMP now have 50 per cent of their STI award deferred
for two years. Increasing the level of STI deferral (from 30 per cent when it was first introduced in FY2012)
strengthens the link between KMP performance and security holder value and provides a greater retention
element.
For Australian Senior Executives, STI deferral is into securities. Due to legal restrictions on the issue of
securities to USA residents, the USA resident 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)
For FY2014, 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, telecommunications and construction 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 maximising free
cash flow to drive security holder return. The definition of FCF per security is set out on page 37. The
FCF calculation is included in note 22 of the audited financial statements.
B
OTHER EVENTS / ACTIONS IMPACTING REMUNERATION IN FY2014
USA restructure
As previously disclosed, the Group’s New York office was closed in FY2014. As a consequence, it was
determined that the position of President, North America was no longer required. As no suitable positions
were available for Michael Kulper (the incumbent), his employment with the Group ceased on 3
September 2013.
On ceasing employment as President, North America, Michael Kulper received a sum equivalent to 3
months TEC as a payment in lieu of notice (USD 247,450), and he was paid (USD 304,554) (equivalent to
16 weeks TEC) severance payment.
The following arrangements also applied to Michael Kulper:
he retained the deferred securities granted to him under the FY2012 and FY2013 STI plans in
accordance with their original terms; and
he retained a pro-rated proportion of his LTI awards granted to him under the FY2011 (161,103
Performance Awards), FY2012 (111,721 Performance Awards) and FY2013 (65,293 Performance
Awards) LTI plans 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. Michael Kulper
was not eligible to participate in the FY2014 LTI plan.
25
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2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
Queensland Motorways
In April 2014, a Transurban-led consortium was announced as the successful bidder for Queensland
Motorways, which operates a network of toll roads in and around Brisbane. Financial close was achieved
on 2 July 2014.
Wesley Ballantine, Group General Manager, Strategy, was appointed to the position of Group General
Manager, Queensland on 4 June 2014. Wesley Ballantine has been employed by the Group since 2006.
Wesley Ballantine’s remuneration was reviewed on this change in role, taking into account benchmark
data and internal relativities. Refer to section 4.
Changes to KMP
On 14 July 2014, Transurban announced changes to its Executive Committee. Samantha Hogg, Chief
Financial Officer, left the Group on 14 July 2014 after six years with the business. Tim Steinhilber, Group
General Manager, Project Delivery and Operational Excellence, transferred back to the USA to support
the delivery of the I95 project that is scheduled for completion at the end of 2014. The remuneration
arrangements applying to Samantha Hogg on her departure, will be disclosed in the 2015 report.
Anthony Adams, currently Vice President, Infrastructure, Major Projects, and based in the USA, will
transfer back to Australia to assume the role of Group General Manager, Project Delivery and Operational
Excellence. Anthony joined Transurban in June 2003.
Leigh Petschel, currently General Manager, Finance, is Acting Chief Financial Officer. Leigh joined
Transurban in October 2013.
2 Remuneration governance
A
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.
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 FY2014. The
members of the Committee continue to be Robert Edgar (Chair), Samantha Mostyn and Neil Chatfield.
Further details regarding the Committee are set out in the Directors’ report.
The Remuneration and Human Resources Committee reviews gender pay equity annually. The Group
has focused on achieving pay equity at all work levels in the organisation and the FY2014 outcomes
indicate that this objective has substantially been achieved.
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2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
B
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 by Directors.
Those consultants who provided the Remuneration and Human Resources Committee with a
remuneration recommendation relating to KMP during FY2014, and who have been deemed by the Group
to be ‘remuneration consultants’, are listed below:
Consultant
Fees for remuneration
recommendations
Fees for other advice provided to the
Group during FY20141
Ernst & Young
$10,000
$768,079
1 Fees for other advice includes the review of USA tax returns, expatriate taxation requirements, audit of various undertakings and
general consulting
Ernst & Young was selected by the Remuneration and Human Resources Committee and commissioned
and instructed by the Chair of the Committee in accordance with the applicable protocol. Ernst & Young’s
appointment terms specified that all remuneration recommendations and advice be sent directly to the
Committee through the Chair, and prohibited the provision of such material or other information directly to
management. The appointment
their
recommendations, both a declaration of independence from the KMP to whom their recommendations
related, and also confirmation of the Committee’s conditions for contact and dialogue with management
had been observed. Ernst & Young provided such a declaration and confirmation in relation to their
remuneration recommendations.
that Ernst & Young provide, with
terms also required
In this way, the Committee and the Board have been assured and are satisfied that Ernst & Young’s
remuneration recommendations and advice were made free from undue influence from management
generally and from KMP specifically.
3 Remuneration in context
Transurban is a top 20 Australian Securities Exchange listed business and is the largest transport
infrastructure entity in Australia, and one of the largest toll road entities in the world. 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.
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2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
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 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. 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, Lane Cove Tunnel and Cross City 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) and, from
2 July 2014, Queensland Motorways in Brisbane (62.5 per cent).
In North America, the Group currently has interests in two assets, the 495 Express Lanes (94.0 per cent),
and the 95 Express Lanes project (77.5 per cent), which is currently under construction and remains on
schedule for completion in late 2014.
4 CEO / Senior Executive remuneration for FY2014
A
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.
28
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2014 Transurban Annual Report
Remuneration report (continued)
The Group's remuneration strategy and policy as set by the Board is summarised below:
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
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 ('at risk') remuneration
Short term incentive (STI):
Annual rewards tied to pre-determined individual and Group performance measures, and includes a
deferred element (into securities)
Individual performance against targets and comparable performance against peers are used to determine
an outcome
Individual targets reflect individual specific accountabilities and key drivers for growth and success
Group performance targets linked to earnings, cost management and safety
Individual performance outcome provides a multiplier for the Group performance element (linking the two
elements)
Maximum potential STI is capped at 150 per cent
Long term incentive (LTI):
Equity rewards to align executive and security holder interests (using indeterminate rights)
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
Maximum LTI opportunity is capped at 100%
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2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
B
REMUNERATION MIX
For FY2014, 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:
Total remuneration % (annualised at target)*
Fixed TEC
Variable (performance based)
CEO
Senior Executives
40
45
STI**
30 (50% deferred)
30 (50% deferred)
LTI
30
25
* These figures may 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.
**All Senior Executives moved to 50% STI deferral for grants made in FY2014.
C
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 must be 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.
D
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 the Group’s
organisational values.
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2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
For FY2014, the CEO and other Senior Executives had a target STI opportunity of 30 per cent of their
total remuneration package. Mandatory STI deferral of 50 per cent of the overall STI award now applies
for all grants to the CEO and other Senior Executives. STI payouts can vary between zero (if targets are
not met) and 150 per cent (for exceptional outperformance).
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 resident Senior Executives receive
deferred cash awards. STI deferral grants are made in the form of awards. Each award is an entitlement
to receive a fully paid security, or an equivalent cash payment, on terms and conditions determined by the
Board. This 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 FY2014?
The STI performance measures for the CEO and other Senior Executives for the year ended 30 June
2014 were chosen to provide a balance between corporate, individual, operational, strategic, financial and
non-financial aspects of performance and are described below:
Measure
Group
performance
target
(1) Growth in proportional EBITDA (20% weighting)
The proportional EBITDA targets were set against the previous year's results and the
Group's FY2014 budget. The EBITDA target excluded the 495 Express Lanes.
Proportional EBITDA result
% STI that vests^
Less than 10% above underlying result for FY2013
10% above underlying result for FY2013
Budget EBITDA for FY2014 ($926 million)
16% above underlying result for FY2013
^ Straight line vesting applies between 50-100% and 100-150%.
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 FY2014 budget. The proportional net costs target included the 495 Express
Lanes.
Proportional net costs result
Over FY2014 budget
FY2014 budget ($201 million)
FY2014 budget less $5 million
FY2014 budget less $15 million
% STI that vests^
zero
50
100
150
^ Straight line vesting applies between 50-100% and 100-150%.
(3) Safety targets (10% weighting)
The safety target was a lead indicator that required the completion of safety
development action plans. The
is split with equal weighting between
employee/contractor (5%) and customer (5%) safety targets.
target
Safety target result
Less than 60% safety action plan items implemented
% STI that vests^
zero
60% safety action plan items implemented
75% safety action plan items implemented
90% safety action plan items implemented
50
100
150
Individual key
performance
indicators
(KPIs)
^ Straight line vesting applies between 50-100% and 100-150%.
Individual KPIs (50% weighting), were unique
individual's area of
accountability, and in FY2014 related to critical business sustainability measures,
including: operational excellence, strategy, people and
leadership, operational
performance, cost reduction, customer satisfaction, project outcomes, succession
planning, risk management, growth and business plan implementation.
Individuals
have a clear line of sight to KPIs and are able to directly affect outcomes through their
own actions.
the
to
31
31
2014 Transurban Annual Report
Remuneration report (continued)
Who sets the STI performance measures?
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
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, taxes, depreciation and amortisation) is a common operational
performance measure used by many companies.
Proportional EBITDA is one of the primary measures that 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 for FY2014 does not include the
EBITDA contribution for those assets which are equity accounted (M5 and M7). DRIVe’s EBITDA is also
excluded from the statutory results for the period that it was equity accounted (1 July 2013 to 4 June
2014). 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 FY2014, the Board resolved to exclude the 495 Express
Lanes from the proportional EBITDA measure as this is a period of ramp-up for this asset. The 495
Express Lanes opened to traffic in November 2012 giving the Group limited toll revenue historical data
when setting targets for FY2014.
Proportional EBITDA has been used by the Group as an STI performance measure since 2009.
What are proportional net costs and why is this used as a performance measure?
Proportional net costs are calculated as fee and other revenue less total costs of the Group. Costs after
fee and other revenues encourage 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 management’s 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 have been used by the Group as an STI performance measure since 2010.
The proportional net costs measure for FY2014 includes costs associated with 495 Express Lanes, as
there is a known cost base to work from and drive efficiencies.
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2014 Transurban Annual Report
Remuneration report (continued)
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
What were the changes to the STI program introduced in FY2014?
The STI program was reviewed in FY2014 and changes implemented to achieve a program that provides
greater performance differentiation between participants. The link between Group and individual
performance has been strengthened by using individual performance as a multiplier when calculating
reward for Group performance.
In FY2014, Group performance measures under the new STI program were again linked to growth in
proportional EBITDA, cost management based on proportional net costs, and safety.
Individual performance continues to be measured against KPIs, with an overall outcome reached for each
participant against target. Under the new program, this information is used to assist with providing a rating
which will consider performance comparative both to peers and against the Group’s values. The overall
rating will derive a STI using a payment schedule as determined by the Board designed to encourage and
reward high performance.
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 considers the appropriate rating for each Senior Executive,
taking into account their comparable performance and behaviours against the Group’s values. The Board
then approves STI awards. STI cash awards for FY2014 will be paid in August 2014. The STI deferred
component for FY2014 will be awarded in August 2014 and will vest, subject to continuity of employment
(unless otherwise determined by the Board) and clawback provisions, on 1 July 2016.
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 before the STI targets are assessed?
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.
How is the annual STI pool determined?
The Board approves a pool to be distributed for the annual STI program (cash and deferred
securities/cash). The pool is the sum of all eligible employee’s possible STI outcomes at 100 per cent
target (TEC multiplied by their STI opportunity). This value is divided by two and each half is treated as
follows: one half represents the individual component of the STI and is capped at 100 per cent, the
second half is multiplied by the Group’s performance outcome to represent the Group’s performance
component and is capped at 150 per cent. The overall pool is capped at 125 per cent.
The Board has discretion as to the proportion of the pool that will be distributed in any given year.
What is the maximum and minimum payment an individual can receive under the STI plan?
The minimum payment an individual can receive is nil per cent and the maximum is 150 per cent of their
STI opportunity.
What were the changes to the STI deferral?
During FY2014, those Senior Executives who had been on the old arrangement of 30 per cent deferral (S
Hogg and A Head) were moved to 50 per cent deferral. This applies for grants made from 1 July 2013
onwards.
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2014 Transurban Annual Report
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Directors' report
30 June 2014
(continued)
Remuneration report (continued)
What were the Group STI performance outcomes for FY2014?
Group performance in respect of the proportional EBITDA, proportional net costs and safety STI
performance measures for FY2014 was assessed by the Board as 125.5 per cent of the possible STI
opportunity. It should be noted that the transaction costs associated with the acquisition of Queensland
Motorways ($5.9 million) and Cross City Tunnel ($3.1 million) were included in both the proportional
EBITDA and proportional net cost outcomes.
Measure
Proportional EBITDA
Proportional net costs
Safety action plan items implemented
Overall Group Performance
Performance
$931.2 million1
$182.6 million
76%
-
1 For FY2014 the 495 Express Lanes are excluded from the Proportional EBITDA measure.
Outcome
113.7%
150.0%
100.0%
125.5%
What were the individual STI performance outcomes and awards for the CEO and Senior
Executives for FY2014?
1
STI outcome (%)
Actual STI awarded1 ($)
Current Senior
Executives
O
n
-
t
a
r
g
e
t
S Charlton
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
1
1
L Tobin
V Vassallo
Individual
KPIs
Group
performance2
131.0
90.0
131.0
125.0
50.0
88.0
75.0
88.0
115.0
164.4
113.0
164.4
156.9
62.8
110.4
94.1
110.4
144.3
Total
147.7
101.5
147.7
140.9
56.4
99.2
84.6
99.2
129.7
Cash3
1,039,250
Deferred into
securities
1,039,250
162,394
207,225
294,000
131,100
136,800
145,700
174,675
228,275
162,394
207,225
294,000
131,100
136,800
145,700
174,675
228,275
STI
forfeited
(%)
-
-
-
-
43.6
0.8
15.4
0.8
-
FY2014 was nil.
O
1 On-target performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI in respect of
n-target performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI in respect of FY2014
was nil.
2 The Group performance outcome is determined by multiplying the individual percentage outcome by the Group’s percentage outcome
2 The Group performance outcome is determined by multiplying the individual percentage outcome by the Group’s percentage outcome of
125.5%.
of 125.5%.
3 The cash STI payments will be paid in August 2014. The STI deferred component (50 per cent of the STI awarded) will vest, subject to
3 The cash STI payments will be paid in August 2014. The STI deferred component (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 2016.
continuity of employment (unless otherwise determined by the Board) and clawback provisions, on 1 July 2016.
34
34
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
What was the grant and movement in the number of STI deferred awards?
Mandatory STI deferral was introduced in FY2012, with the first grant of awards made in August 2012.
Grants were also made in August 2013 as detailed below:
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*
S Charlton1
J Aument
W Ballantine
A Head
S Hogg
S Johnson
-
14,789
15,212
22,449
18,973
16,540
108,486
14,282
17,328
15,202
17,944
21,288
-
-
-
-
-
-
-
-
-
-
-
-
108,486
29,071
32,540
37,651
36,917
37,828
-
-
21,192
19,356
T Steinhilber
L Tobin1
V Vassallo1
Former Senior Executives
M Kulper2
1 Scott Charlton, Lisa Tobin and Vin Vassallo had a zero opening balance at the beginning of FY2014, as they 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. They all
received a grant during FY2014, in respect of the FY2013 performance period.
2 M Kulper was employed for the full FY2013 performance year, and received 22,813 awards in respect of that period. He has retained
his deferred cash awards in the STI plans in accordance with their original terms.
36,464
22,813
40,548
59,277
6,612
6,612
6,612
6,612
-
-
-
-
-
-
-
-
E
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 FY2014, 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.
LTI grants are generally made twice per annum – once following the annual performance review (August)
for Senior Executives excluding the CEO, and at a later date in November for the CEO. This is to allow the
CEO’s grant of performance awards to be put to security holder vote at the AGM.
Two performance measures are used to determine the number of performance awards that will vest at the
end of the performance period. Total Shareholder Return (TSR) provides a comparison for Transurban’s
performance against those companies with which the Group competes for capital. Additionally, growth in
Free Cash Flow (FCF) helps to retain a focus on maximisation of free cash. The maximum opportunity
following these tests is capped at 100 per cent.
35
35
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
The performance awards will, subject to achievement of the two performance measures against the
vesting schedules, vest and be automatically exercised at the vesting date with no exercise price payable
by the recipient. 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 Executive receives 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 is the Group’s LTI allocation valuation methodology?
A fair value approach is applied for the TSR allocation. The Group is currently transitioning to a face value
approach (discounted for distributions) for the FCF component. The transition is over 3 years and all
things being equal there will be a decrease in the number of awards recipients receive until the new
methodology is achieved. This transition will be completed for grants made during FY2016.
What were the LTI performance measures for FY2014?
Performance awards granted during the FY2014 are subject to a three year performance period and the
following dual performance measures over that period:
Measure
Description of measure
Relative TSR
(50% weighting)
Relative TSR is measured against a bespoke comparator group comprising companies
in the transport, utilities, real estate, telecommunications and construction Global
Industry Classification Standards (GICS) sectors of the ASX 150. The 42 companies in
this group are:
Abacus Property Group, AGL Energy Limited, Auckland International Airport Limited,
Asciano Limited, Australand Property Group, APA Group, Aurizon Holdings Limited,
BWP Trust, CFS Retail Property Trust Group, Charter Hall Group, Commonwealth
Property Office Fund, Charter Hall Retail REIT, DUET Group, Dexus Property Group,
Envestra Limited, Federation Centres Limited, Goodman Group, GPT Group, iiNet
Limited, Investa Office Fund, Leighton Holdings Limited, Lend Lease Group, Mirvac
Group, Monadelphous Group Limited, Macquarie Atlas Roads Limited, M2
Telecommunications Group Limited, Qantas Airways Limited, Qube Logistics Holdings
Limited, Shopping Centres Australasia Property Group, Stockland, Spark Infrastructure
Group, SP AusNet, Sydney Airport, Transurban Group, Telecom Corporation of New
Zealand Limited, Telstra Corporation Limited, Toll Holdings Limited, TPG Telecom
Limited, UGL Limited, Virgin Australia Holdings Limited, Westfield Group, Westfield
Retail Trust.
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 2014, 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 Group’s relative TSR ranking in the
comparator group
At or below the 50% percentile
Above the 50th percentile but below
the 75th percentile
% of performance awards that
vest
Nil
Straight line vesting between 50
and 100
At or above the 75th percentile
100
36
36
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
Measure
Description of measure
Growth in FCF
per security
(50% weighting)
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 22 of the audited financial statements.
For performance awards granted during the year ended 30 June 2014, the FCF per
security component will vest based on the Group's compound annual growth targets
translated into annual FCF per security over the three year performance period, as set
out below:
Growth in FCF per security vesting schedule:
% annual growth in FCF per security
% of performance awards that vest
Less than 12%
Nil
Between 12% and 15%
Straight line vesting between 50 and 100
15% or more
100
For performance awards granted during FY2015, the performance target range for
growth in FCF per security is between 10.0 per cent and 13.0 per cent per annum. This
is calculated from a base of 35.0 cents per security for FY2014, which is aligned to the
FY2014 distributions paid. The Board has determined to use this base due to
significant shifts in equity issued by the Group during the period, in particular 404.5
million securities issued in May 2014 associated with the Queensland Motorways
acquisition. The 35.0 cent per security base is considered the best point of alignment
with security holders’ expectation for growth in free cash.
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. The vesting schedule applied is in line with market practice, with straight line vesting
between 50% and 100% for performance above the 50th percentile up to the 75th percentile for
performance against the comparator group.
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 FY2013.
Why has the FCF target for FY2014 of 12-15% increased from 6-9% in FY2013?
Transurban regularly updates its corporate model to reflect the latest assumptions regarding traffic,
operating costs, maintenance costs, discount rates, etc. The Transurban Board considers the Group’s
potential performance over any given three year period and relates remuneration incentives to these
expectations. Most importantly, it is the Board’s role to assess the realistic nature of cash flow
expectations and set challenging but realistic targets. One target may be appropriate one year, but not so
another year. The completion of construction for the M2 was a contributing factor for the change in the
FCF target from FY2013 to FY2014.
37
37
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
Why is a three year performance period used for LTIs?
The three year performance period for LTI has been set in line with market practice. The Board continues
to monitor market practice in this regard.
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 FY2014 will be subject to the incumbent Board's discretion.
38
38
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
What was the grant, and movement in the number and value, of performance awards during
FY2014?
Eligible Senior Executives (excluding the CEO) received performance awards with a grant date of 15
August 2013. Following the receipt of security holder approval at the 2013 AGM, the CEO received
performance awards with a grant date of 1 November 2013. All performance awards granted in FY2014
vest subject to a performance period from 1 July 2013 through to 30 June 2016.
The relevant values of the grants are as follows:
Recipient
Grant date
Fair value of awards
at grant date1($)
Closing security
price at grant
date
Relative TSR FCF per security
Eligible Senior Executives 15 August 2013
CEO
1 November 2013
$3.24
$3.13
$6.07
$6.21
$6.89
$6.97
1 An explanation of the pricing model used to calculate these values is set out in note 36 to the audited financial statements.
Performance awards granted in FY2014
Name
Current Senior Executives
S Charlton1
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
L Tobin
V Vassallo
Number of
performance
awards granted2
Value at
grant date ($)
Maximum total value
of grant yet to vest3($)
382,292
74,494
62,630
94,767
105,633
62,630
78,267
79,980
79,980
1,713,466
1,713,466
334,159
280,940
425,098
473,841
280,941
351,084
358,768
358,768
334,159
280,940
425,098
473,841
280,941
351,084
358,768
358,768
1 The grant made to the CEO constituted his LTI entitlement for FY2014 and was made following security holder approval at the 2013
AGM on the terms summarised above. Performance awards vest subject to performance over the period from 1 July 2013 through to 30
June 2016.
2 The grants made to Senior Executives assume full vesting of their full LTI entitlement for FY2014 and were made on the terms
summarised above. Performance awards vest subject to performance testing over the period from 1 July 2013 through to 30 June 2016.
3 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.
39
39
2014 Transurban Annual Report
Remuneration report (continued)
F
LEGACY LTI PLANS
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
The Group has a number of LTI plans that were offered in previous years, as detailed below:
Plan
Grant date
FY2013 PAP
15 Aug 2012
FY2012 PAP
26 Sep 2011
FY2011 PAP
1 Nov 2010
19 Oct 2012 (CEO only)
11 Nov 2011 (CEO only)
Performance
period
External
performance
measure (50% of
grant)
Comparator
group
1 Jul 2012 – 30 Jun 2015
1 Jul 2011 - 30 Jun 2014
TSR : 1 Nov 2010 - 1 Nov
2013
EBITDA : 1 Jul 2010 - 30
Jun 2013
Relative TSR
Relative TSR
Relative TSR
37 companies within
a bespoke comparator
group within the ASX150
33 companies within
a bespoke comparator
group within the ASX150
The S&P/ASX 100
Relative TSR
% of performance awards that vest
Vesting schedule
Above 50th percentile to 75th percentile Straight line vesting between 50%-100%
At or above the 75th percentile
100% vests
Internal
performance
measure (50% of
grant)
Growth in free cash flow
(FCF) per security
Growth in free cash flow
(FCF) per security
Group's annual growth in
proportional EBITDA
From 6% - 9%
From 7% - 10%
From 7% - 11%
Compound Growth
% of performance awards that vest
Vesting schedule
At target
50% vests
From target % to stretch %
Straight line vesting between 50% -100%
At or above stretch %
100% vests
Current status
To be tested after
30 Jun 2015
TESTED 71.59% vested
on 30 Jun 2014
TESTED 86.51% vested
on 1 Nov 2013
Awards on issue
814,965
–
–
Value of performance awards vested and lapsed in FY2014
The FY2011 PAP vested on 1 November 2013.
The outcome of the performance tests were as follows:
Test type
TSR
Result of test
% units vest
Transurban ranked 33 out of 93 companies (65.21%)
80.42%
92.60%
86.51%
Proportional EBITDA
85% of the target EBITDA range was achieved
Overall vesting
40
40
2014 Transurban Annual Report
Remuneration report (continued)
Current Senior Executives
J Aument2
W Ballantine2
A Head
S Hogg
S Johnson2
T Steinhilber2
Former Senior Executives
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
FY2011 PAP - Lapsed
FY2011 PAP - Vested
Number
Value ($)1
Number
Value ($)1
2,913
3,297
12,211
8,881
3,996
3,879
10,535
11,922
44,156
32,113
14,451
14,026
18,684
21,144
78,312
56,954
25,630
24,876
74,331
84,119
311,555
226,585
101,964
98,967
M Kulper
21,732
78,583
139,371
554,471
1 Based on the fair value at date of grant.
2 Awards granted prior to the Senior Executive becoming a member of KMP. Awards vested while the Senior Executive was a member
of KMP.
The FY2012 PAP vested on 30 June 2014.
The outcome of the performance tests were as follows:
Test type
TSR
Free Cash Flow
Overall vesting
Result of test
Transurban ranked 14 out of 31 companies (56.66%)
% units vest
63.32%
93.8 cents adjusted to 97.9 cents
79.86%
71.59%
Current Senior Executives
A Head
S Hogg
Former Senior Executives
FY2012 PAP - Lapsed
FY2012 PAP – Vested
Number
Value ($)1
Number
Value ($)1
30,616
28,785
116,784
109,799
77,150
72,535
314,102
295,314
M Kulper
31,739
121,070
79,982
325,629
1 Based on the fair value at date of grant.
The Board exercised its discretion to ensure that participants in the FY2012 PAP were neither
advantaged nor disadvantaged as a result of the Queensland Motorways (QM) acquisition and
associated capital raising. The issuance of 404.5 million new securities in May 2014 associated with the
funding of the QM acquisition occurred in FY2014, while financial close of the QM acquisition occurred in
FY2015. The Board exercised its discretion to, in effect, exclude the new securities issued to fund the QM
acquisition from the number of securities used to calculate the FY2014 Free Cash Flow (FCF) per
security for the purposes of calculating the FCF outcome for the FY2012 PAP. Interest income on the
equity raised prior to year end was similarly excluded from the calculation. The targets set at the
beginning of the performance period (1 July 2011) were not adjusted.
41
41
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
Number of performance awards on issue as at 30 June 2014
The number of performance awards held by members of KMP as at 30 June 2014 is provided below.
Comparative data is shown for those Senior Executives who were members of KMP during both FY2014
and FY2013.
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
Current Senior Executives*
S Charlton
2014
2013
J Aument
2014
2013
W Ballantine
2014
2013
A Head
2014
2013
S Hogg
2014
2013
S Johnson
2014
2013
T Steinhilber
2014
2013
L Tobin
2014
2013
V Vassallo
2014
2013
Former Senior Executives
M Kulper
2014
2013
684,6561
–
382,292
684,6561
(78,752)
–
–
–
988,196
684,6561
21,597
39,3652
24,441
44,4712
311,043
257,636
292,851
214,633
29,626
52,7712
28,755
53,7712
–
–
–
–
508,549
491,675
74,494
–
62,630
–
(18,684)
(17,768)3
(21,144)
(20,030)3
(2,913)
–
(3,297)
–
74,494
21,597
62,630
24,441
94,767
(155,462)
(42,827)
112,754
(59,347)
–
207,521
311,043
105,633
125,754
(129,489)
(37,666)
(47,478)
–
231,329
292,851
62,630
–
78,267
–
79,980
–
79,980
–
–
(25,630)
(23,145)3
(24,876)
(25,022)3
–
–
–
–
(3,996)
–
(3,879)
–
–
–
–
–
(219,353)
(223,903)4
178,830
(161,956)
–
62,630
29,626
78,267
28,755
79,980
–
79,980
–
65,293
508,549
All Performance Awards granted or matured in FY14 (where applicable) in the table above were issued by Transurban and resulted or will result in
one ordinary Transurban stapled security (or cash equivalent, as determined by the Board) per Performance Award granted or matured.
* 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 Scott Charlton’s number of performance awards granted during FY2013 includes 236,256 performance awards granted 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, and a second tranche (78,752) awards vested on 16
July 2014. Therefore as at the date of this report, Scott Charlton has 909,444 performance awards yet to vest of which 78,752 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 Awards lapsed/forfeited includes pro rata forfeiture of grants made in FY2011, FY2012 and FY2013 in line with good leaver treatment.
42
42
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
G
REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Short-term employee benefits
Cash salary
and fees
Cash
STI2
Non-
monetary
benefits3
Deferred
STI4
Post-
employment
benefits
Termination
benefits
Super-
annuation
Shared
based
benefits5
Total
Long-
term
benefits
Long
service
leave
Current CEO
S Charlton
2014
2013
1,858,493
1,039,250
7,042
492,200
17,774
1,789,850
738,300
22,379
246,100
15,098
Current Other Senior Executives
J Aument1
2014
516,456
244,487
1,250
126,054
11,274
2013
W Ballantine1
2014
2013
A Head
2014
2013
S Hogg
2014
2013
S Johnson1
2014
2013
T Steinhilber1
2014
2013
L Tobin1
2014
2013
V Vassallo1
2014
2013
27,260
10,775
–
5,204
916
393,737
207,225
1,462
107,433
230,757
81,150
3,398
44,498
604,875
294,000
2,418
111,497
589,279
241,395
2,366
77,012
676,275
131,100
2,018
117,353
656,561
284,935
2,030
76,648
423,737
136,800
1,496
127,917
280,971
112,325
3,823
60,277
572,856
309,886
30,165
177,462
269,441
259,550
52,658
53,001
507,741
174,675
1,753
30,000
185,869
–
710
15,000
507,741
228,275
1,753
30,000
176,134
–
710
15,000
17,774
9,836
17,774
16,470
17,774
16,470
17,774
12,043
17,774
6,388
17,774
6,863
17,774
6,863
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,484,748
4,899,507
1,302,848
4,114,575
192,748
1,092,269
3,534
47,689
21,430
15,368
96,404
26,851
845,465
411,858
13,053
12,696
474,344
1,517,961
441,434
1,380,652
21,368
13,674
485,938
1,451,826
407,426
1,457,744
8,661
23,829
98,710
38,665
815,095
531,933
8,531
208,931
1,325,605
–
–
–
–
–
58,491
699,529
109,235
841,178
–
208,442
109,235
894,778
–
198,707
43
43
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
Short-term employee benefits
Cash salary
and fees
Cash
STI2
Non-
monetary
benefits3
Deferred
STI4
Post-
employment
benefits
Termination
benefits
Super-
annuation
Shared
based
benefits5
Total
Long-
term
benefits
Long
service
leave
Former CEO
C Lynch
2014
2013
–
–
–
–
–
144,951
178,652
555
504,275
5,490
Former Other Senior Executives
–
-
–
–
–
–
(62,121) 6,103,665(6)
–
6,875,467
–
–
–
8,346
(341,435)
499,569
K Daley
2014
2013
M Kulper
2014
2013
E Mildwater
2014
2013
–
816,330
583,403
–
–
–
–
–
–
53,262
(50,659)
13,725
2,912 300,6297
2,791
333,356
–
385,1687
1,608,259
1,067,296
362,264
15,482
120,168
10,997
–
485,161
–
–
–
–
–
1,525
(37,627)
13,725
–
–
-
28,977
1,441,431
3,046,615
–
–
–
(15,434)
(274,631)
172,719
1 The dates on which the Senior Executives who were promoted or appointed during FY2013 are the 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 FY2014, which will be paid in August 2014. Jennifer Aument and Tim
Steinhilber also received a second and final payment in relation to the successful delivery of the 495 Express Lanes of $82,093 and $164,186
respectively (paid in August 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 FY2014 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 Transurban’s security price and where applicable, the TSR performance against the comparator group performance. The
assumptions underpinning these valuations are set out in note 36 to the audited financial statements.
6 The value for share based benefits for C 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.
7The value for Deferred STI and share based benefits for M Kulper includes all unvested 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 M Kulper
as President, North America 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. The LTI awards may or may not vest.
44
44
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
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 FY2014 are outlined below:
Period of notice to terminate
(Executive)
Period of notice to
terminate (the Group*)
CEO
Other Senior Executives
6 months
3 months
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 operated the following broad employee based security plans in FY2014.
ShareLink Incentive Plan
Under the ShareLink Incentive Plan, subject to Board approval, an allocation of Transurban securities 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 21 February 2014. 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, whichever 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.
45
45
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(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 2014
The number of securities held by members of KMP as at 30 June 2014 is provided below. Comparative
data is shown for those Senior Executives who were members of KMP during both FY2014 and FY2013.
Current Senior Executives
Balance at
start of year
Changes
during year
Balance at
end of year
S Charlton
2014
2013
J Aument
2014
2013
W Ballantine
2014
2013
A Head
2014
2013
S Hogg
2014
2013
S Johnson
2014
2013
T Steinhilber
2014
2013
L Tobin
2014
2013
V Vassallo
2014
2013
Former Senior Executives
M Kulper
2014
2013
10,000
–
–
–
3,988
2,8891
3,041
3,041
11,553
1,553
29,596
19,1291
–
–
–
–
10,538
10,0181
80,000
80,000
124,622
10,000
–
–
697
1,099
84,7193
–
129,4893
10,000
14,167
10,467
–
–
–
–
510
520
(80,000)2
–
134,622
10,000
–
–
4,685
3,988
87,760
3,041
141,042
11,553
43,763
29,596
–
–
–
–
11,048
10,538
–
80,000
1 Opening balance held prior to the Senior Executive becoming a member of KMP.
2 Balance removed on departure from the Group during FY2014.
3 Includes the FY2012 PAP awards which vested 30 June 2014. Refer section 4F.
46
46
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
Securities held by Non-executive Directors as at 30 June 2014
Current Non-executive Directors
Balance at
start of year
Changes
during year
Balance at
end of year
L Maxsted
2014
2013
N Chatfield
2014
2013
R Edgar
2014
2013
S Mostyn
2014
2013
C O'Reilly
2014
2013
R Slater
2014
2013
I Smith
2014
2013
Former Non-executive Directors
R Officer
2014
2013
30,000
30,000
30,910
20,910
24,590
23,733
14,000
10,300
4,363
–
–
–
71,772
70,000
–
20,115
36,559
–
19,514
10,000
5,734
857
3,256
3,700
9,609
4,363
–
–
20,970
1,772
–
(20,115)1
66,559
30,000
50,424
30,910
30,324
24,590
17,256
14,000
13,972
4,363
–
–
92,742
71,772
–
–
1 Balance removed on resignation as a Director during the relevant year.
47
47
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
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.
A
GROUP PERFORMANCE AND STI
For the year ended 30 June 2014, 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 31.
STI is an ‘at risk’ component of remuneration – payments are determined based on the following three
measures, and could result in zero payout if targets are not met. The maximum payment available to any
Senior Executive is 150 per cent of target.
Proportional EBITDA
The proportional EBITDA result for FY2014 was $934.1 million. Excluding the effect of 495 Express
Lanes, this resulted in the payment of 113.7 per cent of STIs attributable to proportional EBITDA. The
growth in EBITDA was driven by the completion of the Hills M2 Upgrade in August 2013 and continued
cost and revenue recovery initiatives across all assets in the portfolio.
Proportional net costs
The proportional net costs result for the year ended 30 June 2014 was $182.6 million, an 11.8 per cent
increase from the prior year result. This resulted in the payment of 150 per cent of STIs attributable to
proportional net costs. On an underlying basis, shown in the table below, net costs increased 7.5 per cent
from the prior year result. The increase includes the impact of project development and acquisitions work
in the current financial year.
Net costs as reported
Prior year one-off items
TTMS impact – both periods
Safety
FY14
182.6
–
4.2
FY13
163.4
1.0
9.4
% increase
11.8%
186.9
173.8
7.5%
For the year ended 30 June 2014, the safety performance measure resulted in a 100 per cent STI
outcome. The target was a lead indicator that required the completion of safety development action plans.
The target was split with equal weighting between employee/contractor (5 per cent) and customer (5 per
cent) safety targets. The Group achieved the completion of 76 per cent of the defined safety development
action plans.
48
48
2014 Transurban Annual Report
Remuneration report (continued)
B
GROUP PERFORMANCE AND LTI
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
For the year ended 30 June 2014, LTIs were linked to relative TSR and FCF per security.
Relative TSR
Relative TSR for the year ended 30 June 2014 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 2014 was a
range for compound growth in FCF per security of between 12 per cent and 15 per cent per annum 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
2015, the performance target range for compound growth in FCF per security per annum is between 10.0
per cent and 13.0 per cent.
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 2010, 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
Measure
Security price at year end
Distribution paid per security
Underlying proportional EBITDA - $m1
TSR performance2
TSR rank position3
FCF per security performance - weighted
average
2014
$7.39
35.0c
934.1
17%
2013
$6.76
31.0c
828.0
25%
33 / 934
14 / 315
12 / 896
2012
$5.69
29.5c
784.0
15%
35 / 86
6 / 86
19 / 867
2011
$5.23
27.0c
718.7
32%
2010
$4.24
24.0c
635.4
10%
n/a
n/a
33.9
30.1c
29.8c
27.5c
27.4c
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
3 This is the TSR ranking position for the LTI that vests during the financial year
4 FY2011 PAP that vested 1 November 2013
5 FY2012 PAP that vested 30 June 2014
6 FY2010 PAP that vested November 2012 (testing as at 30 June 2012)
7 FY2009 PAP tested in three tranches
49
49
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
6 Non-executive director remuneration
A
REMUNERATION POLICY
The diagram below sets out the key objectives of the Group’s Non-executive Director remuneration policy
and how they are achieved 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 and workload
expected, the Director’s 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
B
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 FY2015.
The aggregate fee pool and the manner in which it is apportioned amongst Non-executive Directors are
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 FY2014
Non-executive Director (base) 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 $
Member fee $
455,000
40,000
10,000
30,000
170,000
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 FY2014. 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.
50
50
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
Retirement benefits
Non-executive Directors are not entitled to any retirement benefits.
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 FY2014.
C
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Non-executive Director remuneration for FY2014 and FY2013 is set out below:
Short-term benefits
Fees
Post-employment benefits
Superannuation1
Current Non-executive Directors
L Maxsted
2014
2013
N Chatfield
2014
2013
R Edgar
2014
2013
S Mostyn
2014
2013
C O'Reilly
2014
2013
R Slater
2014
2013
I Smith
2014
2013
Former Non-executive Directors
R Officer (resigned 7 August 2012)
2014
2013
Total
2014
2013
437,925
438,716
222,825
223,625
212,825
211,119
183,570
183,608
183,570
181,229
197,023
194,070
155,973
155,967
-
18,832
1,593,711
1,607,166
17,774
16,470
17,774
16,470
17,774
16,470
16,980
16,470
16,980
16,247
-
-
14,427
14,037
-
1,695
101,709
97,859
Total
455,699
455,186
240,599
240,095
230,599
227,589
200,550
200,078
200,550
197,476
197,023
194,070
170,400
170,004
-
20,527
1,695,420
1,705,025
1 Superannuation contributions made on behalf of Non-executive Directors to satisfy the Group’s obligations under applicable
superannuation guarantee legislation.
51
51
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(continued)
Remuneration report (continued)
D
NON-EXECUTIVE DIRECTOR RELATED PARTY INFORMATION
Rodney Slater is a partner in the public policy practice group of Squire Patton Boggs (US) LLP.
Transurban used Squire Patton Boggs (US) LLP during the year ended 30 June 2014 for various lobbying
activities in the USA. This relationship is based on normal commercial terms. US$180,144 was paid to
Squire Patton Boggs (US) LLP during FY2014.
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.
Christine O’Reilly is a Non-executive Director of Energy Australia. Energy Australia is one of Transurban’s
electricity providers in NSW and Queensland. This relationship is based on normal commercial terms.
52
52
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(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 judgment or
independence. The external auditor will only provide a permissible non-audit service where there is a compelling
reason for it to do so. 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 during the period 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
2014
$
2013
$
1,337,000
594,000
1,931,000
1,100,000
124,800
1,224,800
1,931,000
1,224,800
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 55.
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 million, or in certain cases, to the
nearest dollar.
53
53
2014 Transurban Annual Report
Transurban Holdings Limited
Directors' report
30 June 2014
(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
5 August 2014
54
54
2014 Transurban Annual Report
55
2014 Transurban Annual Report Transurban Holdings Limited ABN 86 098 143 429
Annual report - 30 June 2014
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
57
58
59
60
62
63
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 23
727 Collins Street
Docklands VIC 3008
The financial report was authorised for issue by the Directors on 5 August 2014. The Directors have the power to
amend and reissue the financial report.
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
56
56
2014 Transurban Annual Report
Continuing operations
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 profits (losses) of equity accounted investments
Profit before income tax
Income tax benefit
Profit from continuing operations
Discontinued operation
Profit from discontinued operation, net of tax
Profit for the year
Profit is attributable to:
Ordinary equity holders of the stapled group
Non-controlling interests
Earnings per security attributable to ordinary equity holders of the
stapled group:
Basic earnings per stapled security
Diluted earnings per stapled security
Transurban Holdings Limited
Consolidated income statement
For the year ended 30 June 2014
Notes
2014
$M
2013
$M
1,001
110
39
1,150
(214)
(43)
(29)
(105)
(391)
759
(330)
125
(470)
(345)
115
199
45
244
8
252
282
(30)
252
887
267
41
1,195
(198)
(41)
(24)
(256)
(519)
676
(312)
108
(345)
(237)
(10)
117
58
175
-
175
172
3
175
Cents
Cents
18.3
18.3
11.7
11.7
4
5
6
10
7
29
34
34
The above consolidated income statement should be read in conjunction with the accompanying notes.
57
57
2014 Transurban Annual Report
Transurban Holdings Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2014
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
2014
$M
252
26
(3)
23
275
284
(9)
275
2013
$M
175
64
(23)
41
216
256
(40)
216
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
58
58
2014 Transurban Annual Report
Transurban Holdings Limited
Consolidated balance sheet
As at 30 June 2014
Notes
2014
$M
2013
$M
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
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 - Other
Total equity
8
9
12
10
11
12
13
14
15
16
17
12
18
19
17
14
18
12
19
20
21
21
29
2,879
84
-
2,963
268
945
16
226
64
10,386
11,905
14,868
181
721
35
480
76
1,493
6,077
664
217
398
57
7,413
8,906
5,962
10,680
(79)
(4,801)
(96)
258
5,962
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
59
259
89
1
349
532
863
10
180
9
8,129
9,723
10,072
106
438
7
334
72
957
4,499
630
202
358
60
5,749
6,706
3,366
7,976
(104)
(4,469)
(183)
146
3,366
59
2014 Transurban Annual Report
Transurban Holdings Limited
Consolidated statement of changes in equity
For the year ended 30 June 2014
Attributable to members of Transurban Holdings Limited
Notes Contributed
equity
$M
Reserves
$M
Accumulated
losses
$M
Total
$M
Non-
controlling
interests -
TIL
$M
Non-
controlling
interests -
Other
$M
Total
equity
$M
7,848
(138)
(4,232)
3,478
(148)
158
3,488
-
-
-
92
32
3
1
-
-
-
128
-
37
37
-
-
-
(2)
-
(1)
-
(3)
219
219
-
37
219
256
(49)
4
(45)
-
-
-
-
92
32
3
(1)
(456)
(456)
-
-
(1)
-
8
2
-
-
-
-
-
(456)
(331)
10
5
-
5
-
-
-
-
-
(2)
(15)
(17)
175
41
216
100
34
3
(1)
(456)
(3)
(15)
(338)
20
20
20
21
22
Balance at 1 July 2012
Comprehensive income
Profit (loss) for the year
Other comprehensive
income (loss)
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
Changes in value of share-
based payment reserve
Distributions provided for or
paid
Acquisition of non-
controlling interest
Distributions to non-
controlling interest
Balance at 30 June 2013
7,976
(104)
(4,469)
3,403
(183)
146
3,366
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
60
60
2014 Transurban Annual Report
Transurban Holdings Limited
Consolidated statement of changes in equity
For the year ended 30 June 2014
(continued)
Attributable to members of Transurban Holdings Limited
Contributed
equity
$M
Reserves
$M
Accumulated
losses
$M
Total
$M
Notes
Non-
controlling
interests -
TIL
$M
Non-
controlling
interests -
Other
$M
Total
equity
$M
7,976
(104)
(4,469)
3,403
(183)
146
3,366
Balance at 1 July 2013
Comprehensive income
Profit (loss) for the year
Other comprehensive
income (loss)
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
Changes in value of share-
based payment reserve
Distributions provided for or
paid
Distributions to non-
controlling interest
Transactions with NCI
Equity contribution from
non-controlling interests
-
-
-
2,636
64
2
2
-
-
-
-
-
14
14
-
-
-
4
-
-
7
-
20
20
20
21
22
20
262
262
-
14
262
276
20
7
27
(30)
252
2
23
(28)
275
2,636
60
-
-
-
-
64
2
6
(594)
(594)
-
-
-
-
7
-
-
-
-
-
-
(14)
(7)
161
140
2,696
64
2
6
(594)
(14)
-
161
2,321
258
5,962
-
-
-
-
-
-
-
60
(96)
Balance at 30 June 2014
10,680
(79)
(4,801)
5,800
2,704
11
(594)
2,121
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
61
61
2014 Transurban Annual Report
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 inflow from operating activities
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
Payments for business combination, net of cash
Net cash (outflow) from investing activities
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 inflow (outflow) from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate 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 2014
Notes
33
22
8
2014
$M
1,116
(379)
(36)
99
68
(344)
(3)
521
-
(27)
(39)
(112)
(73)
57
(709)
(903)
2,696
2,465
(1,730)
(418)
(9)
3,004
2,622
259
(2)
2,879
2013
$M
976
(353)
(10)
67
57
(314)
(12)
411
(3)
(22)
(208)
(235)
(17)
50
-
(435)
100
597
(312)
(411)
(10)
(36)
(60)
318
1
259
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
62
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
Contents of the notes to the consolidated financial statements
Summary of significant accounting policies
Segment information
Business combinations
Revenue
Expenses
Net finance costs
Income tax benefit
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
Equity accounted investments
1
2
3
4
5
6
7
8
9
10
11 Non-current assets - Held-to-maturity investments
12 Derivative financial instruments
13 Non-current assets - Property, plant and equipment
14 Deferred tax assets and liabilities
15 Non-current assets - Intangible assets
16 Current liabilities - Trade and other payables
17
Borrowings
Provisions
18
19 Other liabilities
20 Contributed equity
21 Reserves and accumulated losses
22 Distributions
23 Remuneration of auditors
24 Contingencies
25
26 Commitments
27 Related party transactions
28
29 Non-controlling interests
30
31 Deed of cross guarantee
32
33 Reconciliation of profit after income tax to net cash inflow from operating activities
34
35 Net tangible asset backing
36
Share-based payments
Key management personnel compensation
37
38 Non-cash investing and financing activities
39 Critical accounting estimates and judgements
40
Events occurring after the reporting period
Parent entity financial information
Earnings per stapled security
Financial risk management
Intra-group Guarantees
Subsidiaries
63
Page
64
80
85
91
92
93
93
95
95
96
100
101
102
103
104
108
109
114
115
116
118
121
123
123
123
124
125
126
127
128
129
130
131
131
133
133
136
138
138
140
63
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(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" or the "Transurban Group" or
"Transurban"), 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 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 assets (which include $2,314 million of cash held on hand to be used to complete the
acquisition of Queensland Motorways on 2 July 2014) exceed its current liabilities by $1,470 million as at 30
June 2014.
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 as at 30 June 2014 there is $721 million in borrowings
classified as current which is planned to be refinanced in the upcoming financial year. In addition, at 30 June
2014 the Group has available a total of $493.4 million of undrawn borrowing facilities across a number of banks.
Compliance with International Financial Reporting Standards (IFRS)
The consolidated financial statements of Transurban Holdings Limited also comply with IFRS as issued by the
International Accounting Standards Board (IASB).
New and amended standards adopted by the Group
The Group has amended some of its accounting policies as the result of new or revised accounting standards
which became effective for the annual reporting period commencing on 1 July 2013.
The affected policies and standards are:
(i) AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets
and Financial Liabilities.
AASB 2012-2 resulted in amendments being made to AASB 7 Financial Instruments - Disclosure requiring
additional disclosures when entities offset financial assets and liabilities within their financial statements. As a
result of this amendment to AASB 7 the Group has expanded its disclosures about the offsetting of financial
assets and liabilities (see note 12).
64
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
New and amended standards adopted by the group (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, AASB 128 Investments in Associates and
Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation
and Joint Arrangements Standards and AASB 2012-10 Amendments to Australian Accounting Standards –
Transition Guidance and Other Amendments.
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.
In accordance with the transitional provisions of AASB 10, the Group reassessed the control conclusions for its
investments at 1 July 2013. Based on this reassessment no changes have been made regarding the Group’s
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.
The Group has re-evaluated its involvement in its joint arrangements at 1 July 2013 and has re-classified its
investments from jointly controlled entities to joint ventures. Notwithstanding the reclassification, these
investments continue to be accounted for using the equity method and accordingly there has been no impact on
the recognised assets, liabilities and comprehensive income of the Group.
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. As a result of
AASB 12, the Group has expanded its disclosures about its interests in subsidiaries (see note 28) and equity
accounted investees (see note 10).
Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not
re-measure 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 has determined that these
amendments have no impact on the financial statements of the Group.
65
65
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
New and amended standards adopted by the group (continued)
(iii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards
arising from AASB 13
AASB 13 establishes a single framework for measuring fair value and making disclosures about fair value
measurements, when such measurements are required or permitted by other AASBs. In particular, it unifies the
definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would
take place between market participants at the measurement date. It also replaces and expands the disclosure
requirements about fair value measurements in other AASBs, including AASB 7 Financial Instruments:
Disclosures. As a result, the Group has included additional disclosures in this regard.
In accordance with the transitional provisions of AASB 13, the Group has applied the new fair value
measurement guidance prospectively, and has not provided any comparative information for new disclosures.
Notwithstanding the above, the change has not had a material impact on the measurement of the Group’s
assets and liabilities.
(iv) AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements
The AASB has 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. This amendment has reduced the
disclosures required in the notes to the financial statements however it has not affected any of the amounts
recognised in the financial statements.
Early adoption of standards
The Group has elected to early adopt AASB 2013-3 Amendments to AASB 136 - Recoverable Amount
Disclosures for Non-Financial Assets, which amends the disclosure requirements in AASB 136 Impairment of
Assets. The amendments include the requirement to disclose additional information about the fair value
measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal, and
may result in additional disclosures if the group recognises an impairment loss or the reversal of an impairment
loss during the year. The application date for the Group would have been 1 July 2014, but the Group has early
adopted as of 1 July 2013.
The adoption of this new standard has not had a significant impact on the disclosure within the financial
statements.
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 million dollars, or in certain
cases, to the nearest dollar.
(b) Principles of consolidation
Subsidiaries
Subsidiaries are all those entities which the Group controls. The Group controls an entity when the group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to govern the financial and operating policies of the entity.
66
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
Subsidiaries (continued)
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases.
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.
Application of Class Order 13/1644
In August 2013 the Australian Securities and Investment Commission released Class Order 13/1050 which
allowed the Stapled Security Groups who were applying AASB 10 for the first time to continue to prepare
aggregated financial statements at 30 June 2013 on the same basis as previous financial reporting periods. In
December 2013 Class Order 13/1644 was released which extended the applicability of Class Order 13/1050
indefinitely. The Transurban Group financial statements for the period ended 30 June 2014 have been prepared
in accordance with Class Order 13/1050.
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 10).
Under AASB 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or
joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than
the legal structure of the joint arrangement. The Group has joint ventures and does not have any joint
operations.
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.
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 the adjustment to non-controlling interests and any consideration paid or
received is recognised in a separate reserve within equity.
(c) Segment reporting
Financial results of the 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). This includes a proportional income statement per operating
segment and consolidated financial statements for the Group.
67
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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.
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 Group entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
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:
68
68
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(e) Revenue recognition (continued)
Toll charges and related fees are recognised when the charge is incurred by the user.
Business development revenue is recognised when earned, and to the extent of costs incurred and that
these costs will be recovered.
Interest income is recognised using the effective interest rate method.
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 construction
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 Company 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 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.
69
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(f)
Income tax (continued)
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. 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.
(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 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. Amounts classified as a financial
liability are subsequently remeasured to fair value with changes in fair value recognised in the income statement.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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 purpose 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
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 the Group's investments and other financial assets are determined at initial
recognition and, in the case of assets classified as held-to-maturity, is re-evaluated at the end of each reporting
period.
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 9) in the consolidated balance sheet.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investments and other financial assets (continued)
Loans and receivables (continued)
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
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.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investments and other financial assets (continued)
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 Group designates certain derivatives as either:
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 12.
Movements in the hedging reserve in shareholders' equity are shown in note 21. 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.
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.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(l) Derivatives and hedging activities (continued)
Cash flow hedges (continued)
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.
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).
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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 15.
Where work is in progress, it is classified as assets under construction.
Goodwill
Goodwill is measured as described in note 1(h). Goodwill on acquisitions of businesses is included in intangible
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 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 sheet 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.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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 measured at the present value of management's best estimate of the expenditure required to
settle the present obligation at the end of the reporting period. The discount rate used to determine the present
value 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.
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.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(s) Employee benefits (continued)
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.
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 information for the parent entity, Transurban Holdings Limited, disclosed in note 30 has been
prepared on the same basis as the consolidated financial statements, except as set out below.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(u) 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
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
2014 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 2017)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets
and financial liabilities. The standard is not applicable until 1 January 2017 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.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(w) New accounting standards and interpretations (continued)
(ii)
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017)
IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
IFRS 15 supersedes:
(a) IAS 11 Construction Contracts
(b) IAS 18 Revenue
(c) IFRIC 13 Customer Loyalty Programmes
(d) IFRIC 15 Agreements for the Construction of Real Estate
(e) IFRIC 18 Transfers of Assets from Customers
(f) SIC-31 Revenue-Barter Transactions Involving Advertising Services
The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. An entity recognises revenue in accordance with that core principle by
applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Although a formal assessment has not been completed, the impact of the application of the new standard is not
expected to be material.
There are no other standards that are not yet effective and that are expected to have a material impact on the
entity in the current or future reporting periods and on foreseeable future transactions.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
2 Segment information
Segment information - Proportional Income Statement
The segment information provided to the Executive Committee is presented on a proportional basis.
The CEO and Executive Committee assess the performance of the operating segments based on a measure of
underlying proportional EBITDA. EBITDA excludes the impact of interest income, interest, tax, depreciation and
amortisation expenses 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 Group operates in one business sector only, being the development, operation and maintenance of toll
roads, therefore it has been determined that the segment information provided to the CEO and Executive
Committee shall be defined by geographical regions, being Victoria and New South Wales in Australia and the
USA.
The table below lists the assets included in each operating segment, together with the proportional ownership
interests held by the Group for both the current and previous financial year:
Proportional ownership %
Segment
Victoria, Australia
New South Wales,
Australia
Assets
CityLink
Hills M2 Motorway
2014
100%
100%
Lane Cove Tunnel
100%
Cross City Tunnel
26 June to 30 June 2014 - 100%
M1 Eastern Distributor
75.1%
Equity investments in:
M5
M7
USA
Transurban DRIVe
50%
50%
75%
Pocahontas 895
1 July 2013 to 14 May 2014 - 75%
15 May to 30 June 2014 - nil%
2013
100%
100%
100%
N/A
75.1%
50%
50%
75%
75%
495 Express Lanes
1 July 2013 to 11 April 2014 - 67.5%
67.5%
12 April to 4 June 2014 - 77.5%
5 June to 30 June 2014 - 94%
95 Express Lanes
1 July 2013 to 11 April 2014 - 67.5%
67.5%
12 April to 30 June 2014 - 77.5%
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.
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2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
2 Segment information (continued)
Segment information - Proportional Income Statement (continued)
The Group's corporate function, which includes costs incurred in relation to the Queensland Motorways
acquisition which did not complete until 2 July 2014, 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 their contribution to the business is closely monitored. As of 2 July
2014, the activities of Queensland Motorways will be disclosed as part of a Queensland geographical operating
segment.
The information for the operating segments for the year ended 30 June 2014 and 30 June 2013 is detailed in the
following tables. The operating segments have been further broken down by asset to assist with external
analysis of the financial statements.
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2014 Transurban Annual Report
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2014 Transurban Annual Report
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83
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(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 roads. There are no inter-
segment revenues.
Segment revenue reconciles to total statutory revenue as follows:
Total segment revenue (proportional)
Add: Revenue attributable to non-controlling interest
Less: Revenue of equity accounted assets
Construction revenue recognised in accordance with AASB Interpretation 12
Service Concession Arrangements
Business development revenue (offset against business development costs for
proportional result)
Other
Total revenue (note 4)
2014
$M
1,232
27
(253)
106
35
3
1,150
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)
Less: Interest revenue of non-controlled assets
Total statutory finance income (note 6)
2014
$M
127
(2)
125
2013
$M
1,104
25
(225)
256
30
5
1,195
2013
$M
111
(3)
108
84
84
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(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 (including M1 Eastern Distributor and 495 Express
Lanes) attributable to non-controlling interest
Less: Proportional EBITDA of M5
Less: Proportional EBITDA of M7
Less: Proportional EBITDA of Pocahontas
Less: Proportional EBITDA of Capital Beltway (pre 4 June 2014)
Less: Proportional EBITDA of 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
Profit from discontinued operations
Profit for the year
3 Business combinations
2014
$M
934
14
(89)
(96)
(6)
(1)
4
759
(345)
(330)
115
45
244
8
252
2013
$M
828
17
(88)
(85)
(6)
5
4
676
(237)
(312)
(10)
58
175
-
175
During and subsequent to the end of the financial year the Group completed business acquisitions, details of
which are set out below.
(a) Cross City Tunnel
On 30 December 2013 the Group acquired the secured senior debt of the Cross City Tunnel Group (CCT Group)
which was in receivership. The receivers and managers subsequently conducted a sale process and at the time
of the acquisition the assets and liabilities of the CCT Group were considered held-for-sale. Transurban
subsequently purchased the concession asset on 26 June 2014. The operations of the CCT Group were
presented as a discontinued operation for the period between the acquisition date and 26 June 2014.
As a result of the debt acquisition the Group was deemed in accordance with AASB 10 Consolidated Financial
Statements to have gained control of the CCT Group being Cross City Motorway Pty Ltd, CCT Motorway
Finance Pty Limited, CM Holdings Trust Pty Limited, CCT Motorway Company Nominees Pty Limited, Cross City
Motorway Nominees No. 2 Pty Ltd and CCT Motorway Group Holdings Pty Ltd, who collectively operate the
Cross City Tunnel, a 2.1 kilometre toll road located in Sydney, Australia. The Group achieved control via the
acquisition of 100 per cent of the senior secured debt to the CCT Group from The Royal Bank of Scotland plc.,
Australian Branch and The Royal Bank of Scotland N.V., Australian Branch (together RBS).
At the time of the acquisition, receivers and managers had been appointed to each of the CCT Group entities by
RBS. The Group’s acquisition of the senior secured debt gave it the right to remove and appoint the receivers
and managers and therefore significant rights (power) in relation to the relevant activities of the CCT Group
entities, notwithstanding that the Group had no equity ownership interest in the CCT Group entities. CCT Group
has been treated as a controlled entity with a 100 per cent non-controlling interest from the date of acquisition.
85
85
2014 Transurban Annual Report
3 Business combinations (continued)
(a) Cross City Tunnel (continued)
(i) Purchase consideration
Cash paid
Contingent consideration
Total purchase consideration
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
$M
491
-
491
In the event of material CCT Group traffic outperformance relative to the Transurban base case assumptions
and if certain other conditions are satisfied, a further payment will be made to RBS over four years of up to $27.5
million (year four nominal dollars). As of 30 December 2013, a value of $nil has been ascribed to this contingent
consideration. This assessment has not changed as at 30 June 2014.
(ii) Purchase consideration – cash outflow
Cash consideration
Less: cash acquired
Outflow of cash – investing activities
$M
491
(16)
475
(iii) Acquisition related costs
The Group incurred acquisition related costs of $3 million relating to external legal fees and due diligence costs.
These costs have been included within business development costs in the Group’s Consolidated income
statement.
(iv) Identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Trade and other receivables
Intangible assets
Trade and other payables
Provisions
Net identifiable assets acquired
Fair Value
$M
16
4
514
(4)
(39)
491
At 31 December 2013 the assets and liabilities of the CCT Group entities were measured at fair value less costs
to sell at the acquisition date with fair values having been determined on a provisional basis. No changes to the
provisional fair values recorded at 31 December 2013 were made during the period and are deemed final.
No goodwill has been recognised on the fair value of assets and liabilities acquired.
86
86
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
3 Business combinations (continued)
(a) Cross City Tunnel (continued)
(v) Revenue and profit contribution
From 30 December 2013 (acquisition date) to 30 June 2014 the results of CCT Group have been classified as
discontinued operations in the Group’s Income Statement.
If the acquisition had occurred on 1 July 2013, consolidated revenue and loss before tax for the year ended 30
June 2014 would have been $52.9 million and $7.1 million respectively. These amounts have been calculated
using the subsidiaries’ results and adjusting them for receiver costs and other one-offs not related to the ongoing
operations of the business.
(b) DRIVe, 495 Express Lanes and 95 Express Lanes
Transurban DRIVe Holdings LLC (DRIVe) has historically been reported by the Group as an equity accounted
investment. Transurban owns 75 per cent of DRIVe, but although the ownership represents greater than half of
the voting rights of DRIVe, it was determined that Transurban did not have power to govern its key activities and
it was therefore accounted for as a joint venture.
At 1 July 2013 DRIVe owned 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.
During the year several transactions have occurred impacting the investments held by DRIVe, resulting in a
reassessment of control over the assets and DRIVe.
(i) On 11 April 2014 Transurban purchased a 10 per cent interest directly in each of 495 Express Lanes and
95 Express Lanes from Fluor Enterprises LLC
(ii) On 14 May 2014 Pocahontas was transferred to lenders (refer note 10)
(iii) On 4 June 2014 Transurban contributed additional equity into Capital Beltway Express LLC, giving it an
additional 66 per cent direct interest in 495 Express Lanes
Transurban now holds 10 per cent of 95 Express Lanes and 76 per cent of 495 Express Lanes directly, and 67.5
per cent of 95 Express Lanes and 18 per cent of 495 Express Lanes through DRIVe, resulting in effective
interests in 95 Express Lanes of 77.5 per cent and 495 Express Lanes of 94 per cent.
The direct holding of 76 per cent gives Transurban power over all relevant activities of 495 Express Lanes.
When 95 Express Lanes is complete, 495 Express Lanes and 95 Express Lanes will be directly connected and
will be operated as if they were a single road. As a result, control of 495 Express Lanes has also given
Transurban the power to direct the most significant activities of 95 Express Lanes. As DRIVe is primarily a
holding entity for 95 Express Lanes and 495 Express Lanes, its relevant activities are identical to those of 95
Express Lanes and 495 Express Lanes. Therefore Transurban assumed control of DRIVe on 4 June 2014 and
accounted for the acquisition of DRIVe, including 95 Express Lanes and 495 Express Lanes as a business
combination on that date.
(i) Purchase consideration
Cash paid
Fair value of DRIVe at 4 June 2014
Contingent consideration
Total purchase consideration
87
$M
345
358
-
703
87
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
3 Business combinations (continued)
(b) DRIVe, 495 Express Lanes and 95 Express Lanes (continued)
(ii) Purchase consideration – cash outflow
Cash consideration
Less: cash acquired
Outflow of cash – investing activities
(iii) Acquisition-related costs
$M
345
(113)
232
The Group did not incur any costs directly in the purchase of equity in either 495 Express Lanes or 95 Express
Lanes during the year.
(iv) Identifiable assets acquired and liabilities assumed
495 Express Lanes
Cash and cash equivalents
Trade and other receivables
Intangible assets
Other assets
Trade and other payables
Derivative financial instruments
Provisions
Deferred tax liabilities
Borrowings
Net identifiable assets
Less: non-controlling interest share of net assets
Net identifiable assets acquired
DRIVe and 95 Express Lanes
Cash and cash equivalents
Intangible assets
Held-to-maturity investments
Deferred tax assets
Other assets
Trade and other payables
Borrowings
Provisions
Deferred tax liabilities
Net identifiable assets
Less: non-controlling interest share of net assets
Net identifiable assets acquired
Fair Value
$M
57
1
1,290
3
(25)
(41)
(10)
(40)
(828)
407
(98)
309
Fair Value
$M
69
667
98
80
12
(56)
(346)
(2)
(9)
513
(119)
394
At 4 June 2014 the assets and liabilities of the 495 Express Lanes and DRIVe / 95 Express Lanes were
measured at fair value at the acquisition date with fair values having been determined on a provisional basis.
No goodwill has been recognised on the fair value of assets and liabilities acquired.
88
88
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
3 Business combinations (continued)
(b) DRIVe, 495 Express Lanes and 95 Express Lanes (continued)
(v) Revenue and profit contribution
From the date of acquisition to 30 June 2014, revenue of $4 million and a loss after taxation of $79.8 million was
included in the Consolidated Income Statement with regards to DRIVe, 495 Express Lanes and 95 Express
Lanes. The loss included $73.1 million of break costs incurred on early termination of swaps included in finance
costs.
If the acquisition had occurred on 1 July 2013, consolidated revenue and loss before tax for the year ended 30
June 2014 would have been $33.4 million and $166.5 million respectively. These values exclude the impact of
Pocahontas 895 and change in investment values within DRIVe that do not relate to the ongoing operations of
the business.
(vi) Accounting policy for non-controlling interests
The Group recognises non-controlling interests in an acquired entity either at fair value or at the non-controlling
interests’ proportionate share of the acquired entity’s net identifiable assets. This decision is made on an
acquisition by acquisition basis. For the non-controlling interest in DRIVe, 495 Express Lanes and 95 Express
Lanes, the Group elected to recognise the non-controlling interests in its proportionate share of the acquired net
identifiable assets.
(c) Queensland Motorways (subsequent event)
On 24 April 2014 the Group announced that a consortium (in which the Group holds a 62.5 per cent equity
interest) had reached agreement to acquire Queensland Motorways through an all cash offer to the existing
shareholder. Subsequent to year end the acquisition was completed on 2 July 2014.
The Queensland Motorways portfolio is a motorway network in Brisbane comprising four concessions covering
(i) the Logan and Gateway motorways, (ii) CLEM7, (iii) Go Between Bridge and (iv) Legacy Way, which is
expected to open in the second half of financial year 2015. This urban motorway network is complementary to
the Group’s existing networks in Sydney and Melbourne, and contributes additional scale, long dated
concessions, investment potential and strategic value to the Group’s current portfolio.
(i) Purchase consideration
Cash paid
Contingent consideration
Total purchase consideration
$M
6,403
-
6,403
(ii) Purchase consideration – cash outflow
The consideration was paid on 2 July 2014 and will be reflected in the Group’s financial statements for the 2015
financial year.
(iii) Acquisition related costs
Acquisition costs included in the Group’s Consolidated Income Statement for the current year are $9.5 million.
Acquisition related costs of $407.3 million are expected to be included in the Group’s financial results for the
2015 financial year, inclusive of $383.6 million of stamp duty.
89
89
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
3 Business combinations (continued)
(c) Queensland Motorways (subsequent event) (continued)
(iv) Identifiable assets acquired and liabilities assumed
The provisionally determined fair values of the assets and liabilities of Queensland Motorways as at acquisition
date are as follows:
Cash and cash equivalents
Trade and other receivables
Other assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Trade and other payables
Provisions
Borrowings
Other liabilities
Net identifiable assets
Less: non-controlling interest share of net assets
Net identifiable assets acquired
(v) Fair values measured on a provisional basis
Fair Value
$M
22
14
4
168
548
6,733
(52)
(732)
(270)
(32)
6,403
(2,401)
4,002
Due to the timing of the completion of the acquisition two days after the completion of the Group’s financial year,
the Group has not yet completed its final assessment of the fair value of the assets and liabilities acquired.
If new information is obtained within one year of the acquisition date about facts and circumstances that existed
at the acquisition date that require adjustments to the above amounts, or any additional provisions to be
recognised, then the accounting for the acquisition will be revised.
(vi) Fair values measured on a provisional basis
No goodwill has been recognised on the provisional fair value of assets and liabilities acquired.
90
90
2014 Transurban Annual Report
4 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
(a) Toll and fee revenue
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
Notes
4(a)
4(a)
4(b)
4(c)
4(d)
2014
$M
906
79
16
1,001
110
38
1
39
2013
$M
801
67
19
887
267
39
2
41
1,150
1,195
Toll revenue and associated fees are recognised when the charge is incurred by the user.
(b) Other road revenue
Other road revenue includes advertising, rental and other associated revenue.
(c) Construction revenue
Construction revenue is recognised during the construction phase of an intangible asset, and the development of
assets for sale to third parties.
(d) Management and business development revenue
Management and business development revenue relates to the provision of management and development
services to related and third parties.
91
91
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
5 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
Concession fees (road operating cost) are attributable to:
Hills M2 Motorway
M1 Eastern Distributor
Depreciation and amortisation expense
Road operating cost
Corporate cost
2014
$M
2013
$M
1
4
96
5
7
32
2014
$M
2
2
4
307
23
330
1
4
91
4
7
22
2013
$M
2
2
4
290
22
312
92
92
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
6 Net finance costs
Finance income
Interest income on held-to-maturity investments
Interest income on bank deposits
Net foreign exchange gains
Total finance income
Finance costs
Interest and finance charges paid/payable
Unwind of discount on liabilities
Total finance costs
Net finance costs
7
Income tax benefit
Income tax benefit
Current tax
Deferred tax
Under provision in prior years
Deferred income tax benefit included in income tax benefit comprises:
(Increase) in deferred tax assets (note 14)
(Decrease) in deferred tax liabilities (note 14)
93
2014
$M
106
18
1
125
(463)
(7)
(470)
(345)
2014
$M
(4)
(44)
3
(45)
(56)
12
(44)
2013
$M
98
10
-
108
(328)
(17)
(345)
(237)
2013
$M
1
(61)
2
(58)
(34)
(27)
(61)
93
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
7
Income tax benefit (continued)
Numerical reconciliation of income tax benefit to prima facie tax payable
Profit before income tax benefit
Tax at the Australian tax rate of 30.0% (2013 - 30.0%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Income not subject to tax
Accounting depreciation on non tax depreciable assets
Non-deductible interest
Equity accounted results
Sundry items
Tax differential
Under (over) provision in prior years
Income tax benefit
Tax expense (income) relating to items of other comprehensive income
Cash flow hedges (note 21)
Foreign currency translation (note 21)
Tax consolidation legislation
2014
$M
199
-
60
(81)
(1)
10
(47)
(4)
15
(48)
3
(45)
(154)
(23)
2
(21)
2013
$M
117
-
35
(115)
6
7
3
4
-
(60)
2
(58)
(61)
6
1
7
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 is 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.
94
94
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
8 Current assets - Cash and cash equivalents
Cash at bank and in hand
All cash balances are interest bearing.
2014
$M
2,879
2,879
2013
$M
259
259
The cash at bank and in hand includes $2,314 million which has been used to complete the acquisition of
Queensland Motorways on 2 July 2014.
Funds not for general use
The amount shown in Cash at Bank includes $124 million not available for general use at 30 June 2014 (2013:
$66.2 million). This comprises amounts required to be held under maintenance and funding reserves, and
prepaid tolls, which are restricted from general use.
9 Current assets - Trade and other receivables
Trade receivables
Provision for impairment of receivables
Other receivables
Prepayments
2014
$M
2013
$M
40
(1)
39
36
9
84
38
(1)
37
45
7
89
Provision for impaired trade and other receivables
As at 30 June 2014 current trade receivables of the Group with a nominal value of $1 million (2013: $1 million)
were considered impaired and accordingly the Group held a provision for impairment of $1 million (2013: $1
million). As at 30 June 2014, trade receivables of $6 million (2013: $6 million) were past due but not impaired.
The ageing of these receivables is as follows:
For the year ended 30 June 2014
Trade and other receivables
Current (not past due)
less than 30 days overdue
more than 90 days overdue
Not Impaired
$M
Impaired
$M
Allowance for
Doubtful
Debts
$M
33
5
1
39
-
-
1
1
-
-
1
1
95
95
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
9 Current assets - Trade and other receivables (continued)
Provision for impaired trade and other receivables (continued)
For the year ended 30 June 2013
Trade and other receivables
Current (not past due)
less than 30 days overdue
more than 90 days overdue
Not Impaired
$M
Impaired
$M
Allowance for
Doubtful
Debts
$M
31
5
1
37
-
-
1
1
-
-
1
1
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.
10 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
Carrying amounts
2014
%
50
50
50
50
50
75
325
2013
%
50
50
50
50
50
75
325
2014
$M
-
-
-
-
268
-
268
2013
$M
-
-
-
-
303
229
532
All entities listed above are incorporated in Australia with the exception of Transurban DRIVe which is
incorporated in the United States of America.
The amounts recognised in the income statement are as follows:
Share of net profits (losses) of joint ventures
For the year ended 30 June
Total
2014
$M
115
115
2013
$M
(10)
(10)
96
96
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
10 Equity accounted investments (continued)
(a) Joint ventures
(i) 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.
(ii) 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.
(iii) Transurban DRIVe
On 14 May 2014, Pocahontas 895 was transferred to lenders. The non-cash profit realised on the transfer was
A$103.1 million, inclusive of Transurban’s 75 per cent share of the profit after tax (US$128.1 million),
unrecognised losses from operations (A$104.2 million), and unrecognised profits on the 2007 transfer of
Pocahontas into the DRIVe vehicle (A$69.4 million). Tax losses in the Pocahontas Group were sufficient to
offset the tax payable on the gain made on disposal.
Until 4 June 2014 the Group equity accounted for its investment in DRIVe. On 4 June 2014 it was determined
that the Group had control of DRIVe and from this date equity accounting ceased and DRIVe was consolidated
by the Group (refer note 3). Post the cessation of equity accounting for DRIVe the Group’s investment in DRIVe
was reduced to $nil.
In addition, on consolidation of DRIVe as of 4 June 2014 (as disclosed in note 3) DRIVe’s cashflow hedge
reserve and foreign currency translation reserve were required to be reversed to the Income Statement, resulting
in a $15 million charge.
Both of these items have been included within Share of net profits of equity accounted investments in the
Income Statement.
97
97
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
10 Equity accounted investments (continued)
(b) Summarised financial information of equity accounted investments
Set out below is the summarised financial information for the Group’s investments accounted for using the equity
method.
Westlink M7
50%
M5 Motorway
50%
Transurban DRIVe
75%
Total
Summarised balance sheet
Cash and cash equivalents
Other current assets
Non-current assets
Held for sale assets
Current financial liabilities
Other current liabilities
Non-current financial
liabilities
Other non-current liabilities
Held for sale liabilities
Net assets
2014
$M
86
8
1,798
-
-
(45)
2013
$M
74
9
1,856
-
-
(25)
(3,139)
(62)
-
(1,354)
(3,056)
(55)
-
(1,197)
Summarised income statement
Revenue
Depreciation and
amortisation
Other expenses
Gain on transfer of
Pocahontas
Interest expense
Income tax expense
Profit / (loss)
Other comprehensive
income
Total comprehensive
income
Proportional total
comprehensive income
Amortisation of fair value
uplift
Group's share of
comprehensive income
Losses not recognised
Unrecognised gain on
transfer
Transfer of reserves
Group's recognised share
of total comprehensive
income
Dividends received
98
2014
$M
-
-
-
-
-
-
-
-
-
-
42
(9)
(32)
326
(69)
(104)
154
37
191
143
-
143
(104)
70
(15)
94
-
2013
$M
357
1
1,916
370
-
(78)
2014
$M
117
9
2,216
-
(4)
(127)
2013
$M
460
14
4,061
370
-
(182)
(1,434)
(328)
(544)
260
(3,925)
(77)
-
(1,791)
(5,140)
(394)
(544)
(1,355)
23
(16)
(27)
-
(57)
39
(38)
(1)
(39)
(28)
-
(28)
-
-
-
(28)
-
484
(94)
(107)
326
(393)
(134)
82
49
131
113
(27)
86
(26)
70
(15)
115
57
438
(99)
(99)
-
(370)
24
(106)
13
(93)
(56)
(27)
(83)
73
-
-
(10)
50
2014
$M
31
1
418
-
(4)
(82)
(786)
(15)
-
(437)
206
(15)
(28)
-
(26)
(41)
96
(1)
95
48
2013
$M
29
4
289
-
-
(79)
(650)
(11)
-
(418)
202
(13)
(29)
-
(26)
(42)
92
(1)
91
45
236
(70)
(47)
-
(298)
11
(168)
213
(70)
(43)
-
(287)
27
(160)
13
15
(155)
(145)
(78)
(73)
-
(78)
78
-
-
-
-
-
(27)
(27)
(73)
73
-
-
-
-
18
-
-
-
18
50
21
-
-
-
21
57
98
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
10 Equity accounted investments (continued)
(b) Summarised financial information of equity accounted investments (continued)
Westlink M7
50%
M5 Motorway
50%
Transurban DRIVe
75%
Total
Reconciliation of summarised financial information
2014
$M
2013
$M
2014
$M
2013
$M
Opening net assets on
1 July
Investments in subsidiary
Profit / (loss) for the period
Other comprehensive
income
Foreign exchange
differences
Dividends paid
Closing net assets
Proportional interest in
associates
Uplift on acquisition
Losses not recognised
Cessation of equity
accounting on gain of
control
Carrying value
2014
$M
2013
$M
(1,198)
-
(169)
(1,052)
-
(161)
2014
$M
(418)
-
96
2013
$M
(409)
-
92
13
15
(1)
(1)
-
-
(1,354)
-
-
(1,198)
(677)
-
677
(599)
-
599
-
(114)
(437)
(218)
486
-
-
(100)
(418)
(209)
512
-
260
53
154
37
(26)
-
478
358
-
-
-
-
-
-
-
268
-
303
(358)
-
Share of expenditure commitments
Capital commitments
Operating commitments
-
182
182
-
186
186
Contingent liabilities
Share of contingent
liabilities incurred jointly
with other investments
-
-
-
-
40
-
40
-
-
108
-
108
-
-
-
-
-
-
-
(41)
275
(37)
36
28
-
260
195
(70)
104
-
229
311
229
540
(1,356)
53
81
(1,502)
275
(106)
49
50
(26)
(114)
(1,313)
28
(100)
(1,355)
(537)
486
677
(358)
268
40
182
222
(613)
442
703
-
532
419
415
834
-
-
-
-
-
-
99
99
2014 Transurban Annual Report
11 Non-current assets – Held-to-maturity investments
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
Term loan notes
M5 debt notes
(a) Term loan notes
Notes
11(a)
11(b)
2014
$M
887
58
945
2013
$M
832
31
863
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) (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 2014 the Group capitalised interest of $55.0 million (2013: $49.0 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.
100
100
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
12 Derivative financial instruments
Current assets
Forwards exchange contracts - cash flow hedges
Non-current assets
Cross-currency interest rate swap contracts - net investment hedge
Forwards exchange contracts - cash flow hedges
Total derivative financial instrument assets
Current liabilities
Interest rate swap contracts - cash flow hedges
Cross-currency interest rate swap 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
2014
$M
2013
$M
-
-
16
-
16
16
7
28
35
219
179
398
433
1
1
9
1
10
11
7
-
7
222
136
358
365
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 40).
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 3.4 per cent (2013: 3.9 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 93 per cent (2013: 96 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 6.1 per cent (2013: 6.6 per cent).
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 Group's USD interest commitments.
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.
101
101
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
12 Derivative financial instruments (continued)
Instruments used by the Group (continued)
Cross-currency interest rate contracts - cash flow hedges
The Group has raised fixed rate foreign currency debt through several U.S. Private Placements, a Maple Bond
and a Euro 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. A portion of the Euro bond was swapped into US dollars as part of the hedge of the net investment in the
foreign entity.
Offsetting financial assets and financial liabilities
The Group has not settled any financial assets or financial liabilities on a net basis during the financial year.
Currently there is no right or basis to present any financial assets or financial liabilities on a net basis, and as
such no financial assets or financial liabilities have been presented on a net basis in the Group's balance sheet at
the end of the financial year.
13 Non-current assets - Property, plant and equipment
At 1 July 2012
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2013
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2013
Cost
Accumulated depreciation
Net book amount
At 1 July 2013
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2014
Cost
Accumulated depreciation
Net book amount
102
102
Equipment,
fittings and
operating
systems
$M
352
(160)
192
192
17
(29)
180
368
(188)
180
368
(188)
180
180
73
(27)
226
441
(215)
226
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
14 Deferred tax assets and liabilities
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
Acquired on acquisition
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
Assets
Liabilities
Net
2014
$M
2013
$M
2014
$M
2013
$M
2014
$M
2013
$M
9
102
638
3
27
-
1
-
-
118
2
900
(836)
64
770
56
4
80
(14)
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2
82
565
2
17
-
9
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1
90
2
770
(761)
9
769
34
(36)
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3
770
-
-
-
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(1,041)
(2)
(11)
(13)
(370)
(69)
4
(1,500)
836
(664)
(1,391)
(11)
(49)
(49)
4
(4)
(1,500)
-
-
-
-
(963)
(2)
(10)
(8)
(344)
(64)
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(1,391)
761
(630)
(1,443)
27
28
-
-
(3)
(1,391)
9
102
638
3
(1,014)
(2)
(10)
(13)
(370)
49
6
(600)
-
(600)
(621)
45
(45)
31
(10)
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(600)
2
82
565
2
(946)
(2)
(1)
(8)
(343)
26
2
(621)
-
(621)
(674)
61
(8)
-
-
-
(621)
900
770
(1,500)
(1,391)
(600)
(621)
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.
103
103
2014 Transurban Annual Report
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104
2014 Transurban Annual Report
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105
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
15 Non-current assets – Intangible assets (continued)
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
Service Concession Arrangements have been accounted for in accordance with AASB Interpretation 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. At the end of the
concession period, all concession assets are to be returned to the Victorian State Government.
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.
Hills M2 concession asset
Transurban has the right to toll the Hills M2 Motorway until May 2046. At the end of the concession period, the
concession asset will be returned to the New South Wales State Government.
The Concession Deed requires Transurban to maintain the Motorway to specified conditions.
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.
M1 Eastern Distributor concession asset
Transurban has the right to toll the M1 Eastern Distributor (ED) until 24 July 2048. At the end of the concession
period, all concession assets will be returned to the New South Wales State Government.
The Concession Deed requires Transurban to maintain the Motorway to specified conditions.
Toll increases for the ED are based on a maximum 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.
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 New South Wales State
Government on 15 February 2010.
The concession asset relating to the Group is the right to operate the service centres located on the M4
Motorway until December 2017, at which time the concession asset will be returned to the New South Wales
State Government.
106
106
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
15 Non-current assets – Intangible assets (continued)
Concession assets (continued)
Lane Cove Tunnel
Transurban has the right to toll the Lane Cove Tunnel until January 2037. At the end of the concession period,
all concession assets will be returned to the New South Wales State Government.
The Concession Deed requires Transurban to maintain the tunnel to specified conditions.
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.
Cross City Tunnel
During the year Transurban acquired the right to toll the Cross City Tunnel until December 2035. At the end of
the concession period, the concession asset is returned to the New South Wales State Government.
The Concession Deed requires Transurban to maintain the tunnel to specified conditions.
Toll increases for the tunnel are based on a maximum toll increase as defined in the Concession Deed, being a
quarterly escalation at the greater of quarterly CPI or 0.74 per cent until December 2017, and CPI thereafter.
495 Express Lanes
Transurban has the right to toll the 495 Express Lanes on the Capital Beltway until December 2087. At the end
of the concession period, the concession asset is returned to the Virginia State Government (USA).
The Concession Deed requires Transurban to maintain and operate the 495 Express Lanes to specified
conditions.
Tolling for the 495 Express Lanes is variable, allowing the operator to adjust pricing to manage congestion and
provide road users with predictable travel times.
Assets under construction
Assets under construction relate to the remaining upgrade work on the Lane Cove Road On-Ramps and the
Vimiera Road embankment works in New South Wales, Australia, and the construction of the I95 Express Lanes
in USA.
Construction costs relating to completed works under the M2 Widening Project were transferred to the
concession asset during the year. Remaining costs will be transferred to the concession asset upon final
completion.
The I95 Express Lanes are being constructed under a Concession Arrangement and are due to be completed in
late 2014.
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.
107
107
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
15 Non-current assets – Intangible assets (continued)
Impairment testing of goodwill and other intangible assets (continued)
Key assumptions used for calculating the recoverable amount of goodwill
The Group makes assumptions in calculating the recoverable amount of its goodwill, based on the greater of
value-in-use and fair value less costs to sell calculations. These include assumptions around expected traffic
flows and forecast operational costs. In performing the value in use calculation, the Group has applied a pre-tax
discount rate of 8.2 per cent (2013: 8.2 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 (2013: 2.5 per cent) and AWE of 3.0 per
cent (2013: 4.0 per cent) have been used. Management does not consider that any reasonable possible change
in the assumptions will result in the carrying value of a CGU exceeding its recoverable amount.
16 Current liabilities – Trade and other payables
Trade payables and accruals
2014
$M
181
181
2013
$M
106
106
108
108
2014 Transurban Annual Report
17 Borrowings
Current
Capital markets debt
Working capital facilities
Term debt
U.S. private placement
Syndicated facilities
Non-current
Capital markets debt
Working capital facilities
Term debt
U.S. private placement
Syndicated facilities
TIFIA
Total borrowings
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
Notes
17(a)
17(b)
17(c)
17(d)
17(e)
17(a)
17(b)
17(c)
17(d)
17(e)
17(f)
2014
$M
-
-
400
106
215
721
2,550
245
1,095
1,126
383
678
6,077
6,798
2013
$M
250
188
-
-
-
438
1,048
97
1,505
1,250
599
-
4,499
4,937
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:
$600.0 million credit wrapped floating rate bonds raised in November 2005 with terms of ten years ($300.0
million) and twelve years ($300.0 million) with interest currently payable at 3.0 per cent at 30 June 2014.
These facilities are fully hedged with all-in rates of 7.4 and 5.0 per cent respectively. These facilities are
secured by a first ranking charge over the cash flows of the Group.
$200.0 million fixed rate bonds raised in June 2011 with a term of five years. Interest is payable at 6.8 per
cent. This facility is secured by a first ranking charge over the cash flows of the Group.
$300.0 million fixed rate bonds raised in November 2013 with a term of seven years. Interest is payable at 5.5
per cent. This facility is fully secured against the respective rights of Airport Motorway Limited and Airport
Motorway Trust and their assets.
The Group established a secured EMTN program in October 2011 with a program limit of US $2 billion. 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:
$248.6 million of Canadian dollar denominated ($250.0 million 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 and swapped into Australian dollars with an all-in rate after hedging of 6.7 per cent. This facility is
secured by a first ranking charge over the cash flows of the Group.
$724.0 million of € denominated (€500.0 million) secured fixed rate medium term notes raised in October
2013 with a term of seven years. Interest is payable at 2.5 per cent. This facility is fully hedged with €225.0
million swapped into US Dollars and €275.0 million into Australian dollars at all-in rates after hedging of 3.5
per cent and 5.8 per cent respectively. This facility is secured by a first ranking charge over the cash flows of
the Group.
109
109
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
17 Borrowings (continued)
(a) Capital markets debt (continued)
The Group’s US entities have issued Private Activity Bonds (PABs) comprising the following:
$238.5 million of US dollar denominated ($224.7million USD) PABs raised by Capital Beltway Express LLC
(CBE)
$256.8 million of US dollar denominated ($242.0million USD) PABs raised by 95 Express Lanes LLC (95
Express).
The Capital Beltway Express LLC Private Activity Bonds (CBE PABs) were issued in June 2008 and mature in
December 2047. They are marketed weekly on the SIFMA index at a variable interest rate. The Group has
entered into interest rate hedging to provide protection from movements in the variable interest rate. The CBE
PABs are supported by bank-issued irrevocable direct-pay letters of credit (maturing June 2016). Agreements
are in place for the letter of credit issuers to purchase the bonds should they fail to market. The collateral against
the bonds is a first ranking pledge of toll revenues generated from the operation of the 495 Express Lanes.
The Virginia Small Business Financing Authority Senior Lien Revenue Bonds (95 Express Lanes LLC Project),
Series 2012 PABs were issued in July 2012 at a fixed interest rate of 5 per cent. The term bonds mature July 1,
2034 ($71.7 million USD) and January 1, 2040 ($170.3 million USD). The collateral against the bonds is a first
ranking pledge of toll revenues generated from the operation of the 95 Express Lanes.
The above facilities have deferred borrowing costs of $18.0 million, which are amortised over the life of the
facility on a straight line basis.
(b) Working capital facilities
The Group has the following facilities in place:
$125.0 million facility which is for a term of three years, maturing August 2016. At 30 June 2014, $115.7
million of the facility was drawn. Guarantees to the value of $0.3 million have also been issued under this
multi-option facility.
$125.0 million facility which is for a term of three years, maturing August 2016. At 30 June 2014, letters of
credit to the value of $22.7 million have been issued under this multi-option facility.
$100.0 million facility which is for a term of three years, maturing December 2016. At 30 June 2014, the
facility was undrawn.
$150.0 million facility which is for a term of three years, maturing January 2016. At 30 June 2014, $131.2
million of the facility was drawn.
$50.0 million facility which is for a term of three years, maturing January 2016. At 30 June 2014, the facility
was undrawn.
$75.0 million facility which is for a term of three years, maturing January 2016. At 30 June 2014, guarantees
to the value of $33.7 million have been issued under this multi-option facility.
$100.0 million facility which is for a term of three years, maturing April 2017. At 30 June 2014, 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 $1.7 million.
110
110
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
17 Borrowings (continued)
(c) Term debt
The term debt facilities are comprised of:
A $225.0 million facility entered into by AMT Management Limited (as trustee for Airport Motorway Trust). The
facility has deferred borrowing costs of $1.8 million.
A $740.0 million facility entered into by Hills Motorway Management Limited (as trustee for Hills Motorway
Trust), of which $400 million is current. The facility has deferred borrowing costs of $1.4 million.
A $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 $1.1 million.
A $276.5 million facility entered into by Transurban CCT Nominees Pty Limited (as trustee for Transurban
CCT Trust). The facility has deferred borrowing costs of $1.9 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 $225.0 million non-
recourse syndicated facility with a term of seven years. The current floating interest rate applicable to the facility
is 2.7 per cent (2013: 2.8 per cent). The facility is currently fully hedged to an all-in rate after hedging of 7.5 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 construction capex facility of $275.0 million with a
term of six years. As at 30 June 2014, the construction capex facility was fully drawn. The current floating
interest rate applicable to the total facility is 2.7 per cent (2013: 2.9 per cent). The total facility is currently 86 per
cent hedged with an all-in rate after hedging of 7.1 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 2.7 per cent (2013:
2.9 per cent). The facility is currently fully hedged to an all-in rate after hedging of 4.2 per cent.
The Cross City Tunnel facility was established in June 2014 to partially finance the acquisition of the Cross City
Tunnel. The facility is fully secured against the respective rights of Transurban CCT Pty Limited and Transurban
CCT Trust and their assets. This facility is a non-recourse syndicated facility with a term of three years. The
current floating rate applicable to the facility is 2.7 per cent. The facility is currently fully hedged to an all-in rate
after hedging of 4.3 per cent.
(d) U.S. private placement
The composition of the three US Private Placements is outlined below:
111
111
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
17 Borrowings (continued)
(d) U.S. private placement (continued)
Fixed Interest Rate
Current
Dec 04 - Tranche A
Non-current
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%
3.45%
USD
$M
100
39
109
98
125
157
57
182
162
67
AUD Maturity
$M
106
Dec 2014
41
115
104
133
166
61
193
172
72
Dec 2016
Dec 2019
Aug 2015
Aug 2017
Aug 2020
Nov 2016
Nov 2018
Nov 2021
Nov 2026
Dec 2019
1,096
1,163
72
72
1,235
(3)
1,232
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.
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 Group’s US denominated liabilities. Exchange differences arising
on the revaluation of the USD liabilities 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 2014, the Group has deferred $50.5 million in gains (2013: $29.7 million).
(e) Syndicated facility
These facilities comprise syndicated bank debt issued by Transurban Finance Company Pty Limited. At 30 June
2014, the following amounts were drawn:
$215.0 million established in December 2011 which is for a term of circa three years, maturing February 2015.
$160.0 million established in December 2011 which is for a term of circa five years, maturing February 2017.
$125.0 million established in August 2007 which is for a term of ten years, maturing August 2017.
$98.5 million of US denominated ($92.8 million USD) established in May 2014 which is for a term of three
years, maturing May 2017.
Applicable interest rates on the Australian dollar facilities range between 3.3 and 4.5 per cent. These facilities
are fully hedged with an all-in rate after hedging of 6.0 per cent. The current floating rate applicable to the US
facility is 0.3 per cent.
These facilities have deferred borrowing costs of $0.8 million and are secured by a first ranking charge over the
cash flows of the Group.
112
112
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
17 Borrowings (continued)
(f) Transportation Infrastructure Finance and Innovation Act (TIFIA)
The TIFIA program provides US federal credit assistance to transport infrastructure projects in the form of
secured loans from the United Stated Department of Transport.
These facilities comprise the following:
$589.2 million of US dollar denominated (face value $686.2 million USD) TIFIA funding raised by Capital Beltway
Express LLC (CBE). This debt has been recorded at fair value on acquisition on 4 June 2014 (refer note 3).
$88.7 million of US dollar denominated (face value $198.0 million USD) TIFIA funding raised by 95 Express Lanes
LLC (95 Express). This debt has been recorded at fair value on acquisition on 4 June 2014 (refer note 3).
The CBE TIFIA facility limit is $589.0 million USD (plus accreting interest), of which $589.0 million USD is drawn
and $97.2 million USD of interest has accreted against the facility. Interest accrues at 4.45 per cent and is
initially accretive until five years post substantial completion of the project construction. Substantial completion
was achieved on 16 November 2012 per the Amended and Restated Comprehensive Agreement. The facility
matures on 31 December 2047 and is second ranking in priority to the CBE PABs.
The 95 Express TIFIA facility limit is $300 million USD (excluding capitalised interest). At 30 June 2014, $195.9
million USD is drawn and $2.1 million USD of interest has accreted against the facility. Interest accrues at 2.77
per cent and is accretive until five years post substantial completion of the project construction. The 95 Express
TIFIA facility matures on 1 January 2048 and is second ranking in priority to the 95 Express PABs.
Letters of credit and corporate credit facilities
The Group has a $60 million letter of credit facility which is for a term of 3 years, maturing November 2016. As at
30 June 2014, letters of credit and bank guarantees to the value of $51.3 million have been issued under this
facility. Additionally, letters of credit and bank guarantees to the value of $56.8 million have been issued under
multi-option facilities (refer to note 17(b)). All letters of credit are currently undrawn and therefore no liability has
been recorded.
A $7.1 million general credit facility is in place covering corporate requirements including letters of credit, bank
guarantees, credit card facilities, online banking and an overdraft facility. As at 30 June 2014, $5.1 million of
bank guarantees have been issued. The six month facility matures December 2014.
Covenants
The Group's consolidated borrowings have the following Interest Coverage Ratio (ICR) default covenants:
CityLink - ICR greater than 1.1 times
Corporate – senior ICR greater than 1.25 times
There have been no breaches of any of these covenants during the year.
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 2014, the Group's security price would need to close below $2.16 per
Security for 20 consecutive business days to trigger this clause.
In addition, the non-recourse debt at M1 Eastern Distributor, Hills M2 Motorway, Lane Cove Tunnel and Cross
City Tunnel has the following default covenants:
M1 Eastern Distributor - ICR greater than 1.15 times
Hills M2 Motorway - ICR greater than 1.2 times
Lane Cove Tunnel - ICR greater than 1.15 times
Cross City Tunnel – ICR greater than 1.15 times
113
113
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
17 Borrowings (continued)
Covenants (continued)
In the United States, the non-recourse debt has the following default covenant ratios:
495 Express Lanes – senior DSCR greater than 1.15 times *
95 Express Lanes – non applicable
* The first relevant calculation date for this ratio is 31 December 2015.
18 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
Total provisions
Movements in provisions
Notes
18(a)
18(b)
18(c)
18(c)
18(d)
18(a)
18(d)
18(e)
2014
$M
2013
$M
20
3
341
39
77
480
6
211
-
217
697
23
4
230
33
44
334
2
185
15
202
536
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
$M
Distribution
to security
holders
$M
Distributions to
non-controlling
interest in
subsidiaries
$M
Current
maintenance
provision
$M
Non-current
maintenance
provision
$M
Provision for
contingent
consideration
$M
Consolidated - 2014
Balance at 1 July
Acquisition of subsidiary
Additional provision
recognised
Amounts paid/utilised
Amounts unutilised
Unwinding of discount
Transfer
Balance at 30 June
4
-
2
(3)
-
-
-
3
230
-
594
(483)
-
-
-
341
33
-
8
(2)
-
-
-
39
44
30
32
(39)
-
-
10
77
185
23
-
-
-
13
(10)
211
15
-
-
-
(15)
-
-
-
114
114
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
18 Provisions (continued)
(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 above the investment case for the project.
Based on costs and reported toll revenue for the calculation period the revenue share amount under the
agreement has not been triggered and the provision has been reduced to $nil at 30 June 2014.
19 Other liabilities
Current
Prepaid tolls
Unearned income
Other
Non-current
Concession and promissory notes
Lease incentive
Other
Total other liabilities
Notes
19(a)
19(b)
19(c)
2014
$M
2013
$M
67
9
-
76
55
1
1
57
133
63
6
3
72
58
1
1
60
132
115
115
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
19 Other liabilities (continued)
(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 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 2014 is $255.0 million (2013: $240.0 million). The net
present value at 30 June 2014 of the redemption payments relating to these Concession Notes is $31.3 million
(2013: $35.4 million).
M2 Motorway
The Hills Motorway Trust has entered into leases with the 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 2014 is $158.6 million (2013: $147.6 million). The net
present value at 30 June 2014 of the redemption payments relating to these Promissory Notes is $24.6 million
(2013: $22.9 million).
20 Contributed equity
Share capital
Fully paid stapled securities
Fully paid stapled securities
116
2014
$M
10,680
10,680
2014
Number
M
1,896
1,896
2013
$M
7,976
7,976
2013
Number
M
1,482
1,482
116
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
20 Contributed equity (continued)
Stapled securities
The number of stapled securities on issue is 1,896,384,073 (2013: 1,481,594,818).
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 17.
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 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 amount of distributions paid to
security holders, return capital to security holders, issue new securities or sell assets to reduce debt.
Movements in ordinary share capital:
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
Opening balance at 1 July 2013
Distribution reinvestment plan
Transfer vesting portion of LTI from share-based
payment reserve
Deferred Short Term Incentives issued
Share placement (AustralianSuper / Tawreed)
Share issue
Less: Amounts attributable to Transurban
International Limited
Closing balance at 30 June 2014
Notes
20(a)
20(c)
20(d)
20(b)
20(a)
20(d)
20(e)
20(e)
20(b)
Number of
units
M
Consolidated
$M
1,458
7,848
6
2
-
16
-
-
1,482
1,482
9
-
-
58
347
-
1,896
34
3
(1)
100
3
(11)
7,976
7,976
64
2
2
400
2,296
(60)
10,680
(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.
117
117
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
20 Contributed equity (continued)
(b) 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.
(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.
(e)
Institutional and retail entitlement offer and placement
On 1 May 2014, the Group successfully completed the fully underwritten institutional component of its
accelerated renounceable 10 for 43 pro rata entitlement offer at an offer price of $6.75, raising approximately
$1.8 billion. The retail component of the offer was successfully completed on 29 May 2014 and raised gross
proceeds of approximately $557 million.
As part of the entitlement offer, the Group also completed a placement of securities to its Queensland
Motorways consortium bid partners AustralianSuper and Tawreed, raising gross proceeds of approximately $400
million.
The total gross proceeds from the entitlement offer and placement were approximately $2.7 billion, and were
used to fund the Group’s equity contribution for the Queensland Motorways acquisition, which completed on 2
July 2014.
21 Reserves and accumulated losses
Reserves
Cash flow hedges
Share-based payments
Foreign currency translation
Transactions with non-controlling interests
2014
$M
(95)
7
8
1
(79)
2013
$M
(95)
6
(9)
(6)
(104)
118
118
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
21 Reserves and accumulated losses (continued)
Movements:
Cash flow hedges
Balance 1 July
Revaluation - gross
Deferred tax
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
Transfer to net profit
Balance 30 June
Share-based payments
Balance 1 July
Employee share plan expense
Transfer vesting portion of LTI to contributed equity
Deferred short term incentives
Balance 30 June
Foreign currency translation
Balance 1 July
Currency translation differences arising during the year
Deferred tax (note 14)
Currency translation differences arising during the year attributable to non-
controlling interest
Transfer to net profit
Balance 30 June
Transactions with non-controlling interests
Balance 1 July
Acquisition of additional ownership in subsidiary
Transfer of values on acquisition
Balance 30 June
Accumulated losses
Movements in (accumulated losses) were as follows:
2014
$M
(95)
25
(23)
(2)
40
(77)
37
(95)
6
7
(2)
(4)
7
(9)
(18)
22
35
(22)
8
(6)
-
7
1
2013
$M
(129)
42
(6)
(2)
27
(27)
-
(95)
8
7
(6)
(3)
6
(12)
(22)
(1)
26
-
(9)
(5)
(1)
-
(6)
Balance 1 July
Profit attributable to ordinary equity holders of the stapled group
Distributions to ordinary security holders
Transfer of profit (loss) attributable to non-controlling interest - Transurban
International Limited
Balance 30 June
2014
$M
(4,469)
282
(594)
(20)
(4,801)
2013
$M
(4,232)
172
(456)
47
(4,469)
119
119
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
21 Reserves and accumulated losses (continued)
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, and the acquisition of the remainder of Statewide Roads Limited
and Devome Pty Limited in prior years, as the Group uses the economic entity approach to transactions with
non-controlling interests.
120
120
2014 Transurban Annual Report
22 Distributions
Distribution payable
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
2014
$M
2013
$M
Final distribution for 2014 financial year payable and recognised as a liability:
18.0 cents (2013: 15.5 cents) per fully paid Stapled Security payable
14 August 2014
Fully franked final dividend based on tax paid at 30% - 1 cent (2013: 3.5 cents)
per fully paid Stapled Security
Unfranked final distribution – 14.5 cents (2013: 12.0 cents) per fully paid Stapled
Security
Fully franked (2013: nil) final distribution based on tax paid at 30% - 2.5 cents
(2013: nil) per fully paid Stapled Security
Distributions paid during the year
Final distribution for 2013 financial year of 15.5 cents (2012: 15.0 cents)
per fully paid Stapled Security paid 14 August 2013
Fully franked dividend based on tax paid at 30% - 3.5 cents (2012: 3.5 cents) per
fully paid Stapled Security
Unfranked final distribution - 12 cents (2012: 11.5 cents) per fully paid Stapled
Security
Interim distribution for 2014 financial year of 17.0 cents (2013: 15.5 cents) per
fully paid Stapled Security paid 14 February 2014
Fully franked interim dividend based on tax paid at 30% - 3.5 cents (2013: 3.5
cents) per fully paid Stapled Security
Unfranked interim distribution - 13.5 cents (2013: 12.0 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
Paid in cash
Satisfied by issue of Stapled Securities
19
275
47
341
52
178
230
52
201
253
483
418
65
483
121
52
178
-
230
51
168
219
51
176
227
446
411
35
446
121
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
22 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 M7 Term Loan Note interest received
Less M5 Term Loan Note interest received
Add back payments for maintenance and intangibles
Less cash flows from operating activities – consolidated non 100 per cent owned
entities
Controlled cash
Adjust: dividends and distributions received and maintenance expenditure
M1 Eastern Distributor – Distribution
M5 Interlink – Distribution
M7 Term Loan Note interest
M5 Term Loan Note interest
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
2014
$M
521
(47)
(2)
36
(47)
461
26
57
47
2
(21)
572
1,690
33.9
33.9
1,896
30.2
30.2
2013
$M
411
(46)
10
(39)
336
30
50
46
(19)
443
1,470
30.1
30.1
1,482
29.9
29.9
* Weighted average securities on issue
In calculating the weighted average securities on issue, securities issued on or before 31 December have been
given 100 per cent weighting for the full financial year and securities issued after 31 December have been
weighted for the second half of the financial year.
Franking credits
Franking credits available for subsequent reporting periods based on a tax rate of
30.0% (2013 - 30.0%)
259
307
122
122
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
23 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
24 Contingencies
Contingent liabilities
2014
$
2013
$
1,337,000
594,000
1,931,000
1,931,000
1,100,000
124,800
1,224,800
1,224,800
As part of the Group’s acquisition of the senior secured debt exposure to the CCT Group in December 2013, the
Group will make a further payment to the Royal Bank of Scotland in the event that CCT’s traffic performance
materially exceeds the Group’s base case assumptions and if certain other conditions are met. The amount
concerned is up to $27.5 million (year four nominal dollars) over four years.
25 Intra-group Guarantees
As at 30 June 2014, 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.
123
123
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
26 Commitments
Capital and operating commitments
Expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
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
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
2014
$M
52
92
297
441
152
-
152
2014
$M
-
10
21
31
2013
$M
58
109
295
462
62
1
63
2013
$M
4
9
-
13
Promissory Notes
Hills Motorway Management limited, as trustee of the Hills Motorway Trust, has entered into an agreement with
the 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 19.
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 ten years. The leases
have varying terms, escalating clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
124
124
2014 Transurban Annual Report
27 Related party transactions
Transactions with joint ventures
The following transactions occurred with joint ventures:
Revenue from services
Operating electronic tolling system for Westlink M7
Management and business development fees
Interest earned
Term Loan Notes
M5 debt notes
Loans to/from joint ventures
Receivable from joint venture
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 2014
(continued)
2014
$’000
3,158
36,344
39,502
103,437
2,101
105,538
2014
$’000
-
831,646
55,100
886,746
31,220
27,098
58,318
2013
$’000
4,674
39,828
44,502
97,386
843
98,229
2013
$’000
5,787
782,667
48,979
831,646
8,725
22,495
31,220
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.
125
125
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
27 Related party transactions (continued)
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.
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.
28 Subsidiaries
(a)
Investments in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following material
subsidiaries in accordance with the accounting policy described in note 1(b):
Name of entity
Country of
incorporation Class of shares
Equity
holding
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
USA
USA
USA
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
2014
%
100
100
100
100
100
100
100
100
100
100
100
100
75.1
75.1
100
100
100
100
100
100
100
67.5
67.5
100
100
94
77.5
75
75
75
2013
%
100
100
100
100
100
100
100
100
100
100
100
100
75.1
75.1
100
100
100
100
-
-
-
-
-
100
-
67.5
67.5
75
75
75
CityLink Trust
CityLink Melbourne Ltd
Transurban Infrastructure Management Ltd
Transurban Ltd
Transurban Finance Trust
Transurban Finance Company Pty Ltd
Roam Tolling Pty Ltd
The Hills Motorway Ltd
Hills Motorway Trust
Transurban International Holdings Ltd
Sydney Roads Ltd
Sydney Roads Trust
Airport Motorway Trust
Airport Motorway Ltd
Statewide Roads Ltd
Tollaust Pty Ltd
LCT-MRE Pty Ltd
LCT-MRE Trust
Transurban CCT Pty Ltd
Transurban CCT Trust
TransLink Operations Pty Ltd
Sun Group Holdings 1 Pty Ltd
Sun Group Invest Trust
Transurban (USA) Operations Inc.
Transurban Express Lanes LLC
Capital Beltway Express LLC *
95 Express Lanes LLC *
Transurban DRIVe Holdings LLC *
Transurban DRIVe USA LLC *
DRIVe USA Investment LLC *
* These entities were equity accounted for in prior financial years
126
126
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
29 Non-controlling interests
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are
material to the Group. The amounts disclosed for each subsidiary are before inter-company eliminations.
Airport
Motorway
Group
24.9%
Transurban
DRIVe
25%
Capital
Beltway
Express LLC
6% 1
95 Express
Lanes
Sun Group 3
22.5% 2
37.5%
30
June
2014
$M
30
June
2013
$M
10
2,664
(186)
(1,949)
539
23
2,255
(166)
(1,525)
587
30
June
2014
$M
15
83
(58)
(8)
32
(135)
(146)
(8)
30
June
2013
$M
–
–
–
–
–
–
30
June
2014
$M
57
1,289
(11)
(878)
457
(27)
30
June
2013
$M
–
–
–
–
–
–
30
June
2014
$M
61
689
(44)
(388)
318
(72)
30
June
2013
$M
30
June
2014
$M
30
June
2013
$M
–
–
–
–
–
–
21
–
–
–
21
(8)
–
–
–
–
–
–
Summarised
balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Carrying amount of
NCI
Airport
Motorway
Group
24.9%
Transurban
DRIVe
25%
Capital
Beltway
Express LLC
6% 1
95 Express
Lanes
Sun Group 3
22.5% 2
37.5%
Summarised
statement of
comprehensive
income
Revenue
Expenses
Profit for the year
Other comprehensive
income
Total comprehensive
income
(Profit) loss allocated
to NCI
OCI allocated to NCI
30
June
2014
$M
108
(105)
3
(8)
(5)
(1)
2
30
June
2013
$M
30
June
2014
$M
30
June
2013
$M
30
June
2014
$M
30
June
2013
$M
30
June
2014
$M
30
June
2013
$M
30
June
2014
$M
30
June
2013
$M
101
(89)
12
(16)
–
(104)
(104)
–
(4)
(104)
(3)
4
26
–
–
–
–
–
–
–
–
4
(84)
(80)
–
(80)
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(20)
(20)
–
(20)
8
–
–
–
–
–
–
–
–
127
127
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
29 Non-controlling interests (continued)
Airport
Motorway
Group
24.9%
Transurban
DRIVe
25%
Capital
Beltway
Express LLC
6% 1
95 Express
Lanes
Sun Group 3
22.5% 2
37.5%
Summarised cash
flows
Cash flows from
operating activities
Cash flows from
investing activities
Cash flows from
financing activities
Net increases in
cash and cash
equivalents
30
June
2014
30
June
2013
30
June
2014
30
June
2013
30
June
2014
30
June
2013
30
June
2014
30
June
2013
30
June
2014
$M
$M
$M
$M
33
–
35
–
(34)
(40)
(1)
(5)
$M
(4)
–
(6)
(10)
$M
$M
$M
–
–
–
–
–
(34)
32
(2)
–
–
–
–
$M
(20)
40
–
20
1
–
–
1
–
–
–
–
30
June
2013
$M
–
–
–
–
* Carrying amount of non-controlling interests and (profit) loss allocated to non-controlling interests also includes $8 million relating to the CCT
Group as described in note 3.
1 Non-controlling interest of 6 per cent is derived as Transurban has a direct interest of 76 per cent and indirect interest of 18 per cent through
DRIVe, thus giving the Group effective interest of 94 per cent.
2 Non-controlling interest of 22.5 per cent is derived through Transurban’s direct interest of 10 per cent and indirect interest of 67.5 per cent
through DRIVe, thus giving the Group effective interest of 77.5 per cent.
3 Sun Group refers to the group of holding companies set up for the purpose of investing in Queensland Motorways.
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
Net assets
Shareholders' equity
Contributed equity
Reserves
Retained earnings
Profit (loss) for the year
Total comprehensive income (loss)
128
128
2014
$M
1,352
4,743
6,095
100
4,699
4,799
1,296
2013
$M
994
2,381
3,375
183
2,307
2,490
885
(3,747)
(2,654)
1,208
1
87
1,296
(85)
(85)
640
2
243
885
307
307
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
30 Parent entity financial information (continued)
Guarantees entered into by the parent entity
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 31.
Contingent liabilities of the parent entity
For details of contingent liabilities of the parent entity, refer to note 24.
31 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 statement, consolidated statement of comprehensive income and summary of
movements in consolidated retained earnings
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 2014 and 30 June 2013 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 year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Summary of movements in consolidated retained earnings
Accumulated losses at the beginning of the financial year
Profit (loss) for the year
Dividends provided for or paid
Adjustment for opening retained earnings of entities that joined the 'closed group'
Retained earnings at the end of the financial year
129
2014
$M
208
(136)
(22)
(131)
(82)
34
(48)
(48)
–
(48)
(478)
(48)
(74)
–
(600)
2013
$M
173
(115)
(23)
(132)
(97)
41
(56)
(56)
–
(56)
(320)
(56)
(103)
1
(478)
129
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
31 Deed of cross guarantee (continued)
Consolidated balance sheet
Set out below is a consolidated balance sheet as at 30 June 2014 and 30 June 2013 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
2014
$M
2,347
867
3,214
1,709
215
557
2,481
5,695
3,191
35
3,226
1,814
39
7
1,860
5,086
609
1,208
1
(600)
609
2013
$M
55
586
641
1,560
168
565
2,293
2,934
1,339
65
1,404
1,320
36
10
1,366
2,770
164
641
1
(478)
164
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.
32 Events occurring after the reporting period
The financial close on the acquisition of Queensland Motorways was completed on 2 July 2014. On this date the
Group raised $2,900 million in non-recourse debt to fund the acquisition, of which $2,500 million was drawn on
that date.
The financial effects of this transaction have not been brought to account at 30 June 2014. The operating results
and assets and liabilities of Queensland Motorways will be consolidated from 2 July 2014. Refer to note 3.
130
130
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
33 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 (profits) losses of equity accounted investments
Change in operating assets and liabilities:
(Increase) decrease in debtors
Increase (decrease) in concession and promissory note liability
Increase in capitalised held-to-maturity investment interest
Increase (decrease) in operating creditors and accruals
Increase (decrease) in other operating provisions
Increase (decrease) in provision for income taxes payable
Movement in deferred taxes
Increase (decrease) in maintenance provision
Net cash inflow (outflow) from operating activities
34 Earnings per stapled security
Basic earnings per security
Earnings per security attributable to the ordinary equity holders of the stapled
group
Diluted earnings per security
Earnings per security attributable to the ordinary equity holders of the stapled
group
131
2014
$M
252
330
7
10
(115)
6
(2)
(55)
14
(1)
8
34
33
521
2014
Cents
18.3
18.3
2014
Cents
18.3
18.3
2013
$M
175
312
7
8
10
(10)
7
(49)
(9)
5
(9)
(62)
26
411
2013
Cents
11.7
11.7
2013
Cents
11.7
11.7
131
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
34 Earnings per stapled security (continued)
Reconciliation of earnings used in calculating earnings per security
Basic and diluted earnings per security
Profit from continuing operations
Profit from discontinued operation
(Profit) loss attributable to non-controlling interests
Profit attributable to ordinary equity holders of the stapled group used in
calculating earnings per security
2014
$M
236
8
38
282
2013
$M
175
–
(3)
172
Profit from discontinued operation
Profit from discontinued operation is fully attributable to non-controlling interests as it was related to the CCT
Group entities that were considered to be held-for-sale. Refer to note 3 for further details.
Weighted average number of securities used as denominator
2014
Number
2013
Number
Weighted average number of securities used as the denominator in calculating
basic and diluted earnings per security
1,539,476,092
1,470,495,508
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.
132
132
2014 Transurban Annual Report
35 Net tangible asset backing
Net tangible asset backing per stapled security*
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
2014
$
3.00
2013
$
2.10
* 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.
36 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) (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 generate appropriate
returns relative to the market.
Grant date
Vesting /
Expiry date
Fair value at grant date
Balance at
start of the
year
Granted
during the
year
Vested
during the
year
Forfeited
during the
year
Balance at
end of the
year
TSR
EBITDA
FCF
Number
Number
Number
Number
Number
2014
1 Nov 2010
1 Nov 2013
23 Dec 2010 1 Nov 2013
26 Sep 2011 30 Jun 2014
11 Nov 2011 30 Jun 2014
15 Aug 2012 30 Jun 2015*
19 Oct 2012 30 Jun 2015*
14 Aug 2013 30 Jun 2016*
30 Jun 2016*
1 Nov 2013
$3.23
$3.33
$3.37
$3.27
$2.72
$2.95
$3.24
$3.13
$4.62
$4.97
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$4.63
$4.81
$4.99
$5.43
$6.07
$6.21
Total
x
922,476
684,683
420,872
715,024
480,102
448,400
–
–
–
–
–
–
–
–
728,380
382,292
(789,978)
(592,320)
(267,256)
(511,886)
–
–
–
–
(132,498)
(92,363)
(153,616)
(203,138)
(113,537)
–
–
–
–
–
–
–
366,565
448,400
728,380
382,292
3,671,557
1,110,672 (2,161,440)
(695,152)
1,925,637
* vesting / expiry date refers to the ending date of the performance period. Actual vesting / expiry date is determined within 30 days of the
release of Transurban Group's financial results for that performance period.
133
133
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
36 Share-based payments (continued)
Performance Awards Plan (continued)
Grant date
Vesting /
Expiry date
Fair value at grant date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
TSR
EBITDA
FCF
Number
Number
Number
Number
Number
2013
11 Dec 2009 11 Dec 2012
1 Nov 2010
1 Nov 2013
23 Dec 2010 1 Nov 2013
26 Sep 2011 30 Jun 2014
11 Nov 2011 30 Jun 2014
15 Aug 2012 30 Jun 2015*
30 Jun 2015*
19 Oct 2012
Total
$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
–
–
– (1,624,766)
–
–
–
–
–
–
–
–
–
747,201
–
448,400
(1,228)
(278,601)
–
(241,060)
–
(267,099)
–
–
922,476
684,683
420,872
715,024
480,102
448,400
4,888,710
1,195,601 (1,624,766)
(787,988)
3,671,557
* vesting / expiry date refers to the ending date of the performance period. Actual vesting / expiry date is determined within 30 days of the
release of Transurban Group's financial results for that performance period.
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 Flow component of the Performance Awards has only a non-market based vesting condition
which is not considered in the valuation. The valuation of these awards takes into account the security price at
grant date, and the expected dividend yield which represents the dividends over the life of the Awards that the
rights holder does not receive. A discounted cash flow model is used to perform this valuation.
The Group is currently transitioning to a face value approach (discounted for distributions) for the FCF
component. The transition is over 3 years and all things being equal there will be a decrease in the number of
awards recipients receive until the new methodology is achieved. This transition will be completed for grants
made during FY2016.
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 the first, second and third anniversaries of his employment date. Upon vesting, the awards will automatically
exercise and settle in securities. No dividends or distributions on securities are payable prior to vesting.
Vesting /
Expiry date
Fair value
at grant
date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
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
78,752
157,504
134
Grant date
2014
14 Sep 2012
14 Sep 2012
14 Sep 2012
Total
134
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
36 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
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
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
Short Term Deferred Incentive Plan
For the 2014 financial year, the CEO and other Senior Executives had a target STI opportunity of 30 per cent of
their total remuneration package. Mandatory STI deferral of 50 per cent of the overall STI award now applies for
all grants to the CEO and other Senior Executives. STI payouts can vary between zero (if targets are not met)
and 150 per cent (for exceptional outperformance).
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 resident Senior Executives receive deferred
cash awards. STI deferral grants are made in the form of awards. Each award is an entitlement to receive a fully
paid security, or an equivalent cash payment, on terms and conditions determined by the Board. This 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).
Grant date
2014
15 Aug 2012
15 Aug 2013
Total
Grant date
2013
15 Aug 2012
Total
Vesting /
Expiry date
Fair value
at grant
date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
Number
1 Jul 2014
1 Jul 2015
$5.68
$6.81
642,388
–
–
443,736
642,388
443,736
–
–
–
(79,668)
–
562,720
443,736
(79,668)
1,006,456
Vesting /
Expiry date
Fair value
at grant
date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
Number
1 Jul 2014
$5.68
–
–
642,388
642,388
–
–
–
–
642,388
642,388
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.
135
135
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
36 Share-based payments (continued)
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 were eligible to participate in the Investment Tax Exempt Plan and
the Investment Tax Deferred Plan for the year ended 30 June 2014. Under the plans, Transurban provides
participants with a matching component toward the acquisition of the Stapled Securities. For the period 1 July
2013 to 30 June 2014, the cost of company matches was $139,918 (2013: $132,162) for the Investment Tax
Exempt Plan and $314,667 (2013: $450,374) 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 2014, each participant was allocated 100 stapled securities at a value of $6.94 per security. Stapled
securities provided under the Plan were acquired on the open market. Eligible US based participants received
an equivalent cash award.
Shares purchased on market under the plan and provided to participating
employees
2014
Number
2013
Number
50,800
45,900
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 (2013: $6.6 million).
37 Key management personnel compensation
Directors
The following persons were Directors of THL, TIML and TIL during the financial year and up until the date of this
report:
Chief Executive Officer and Executive Director
Scott Charlton
Non-executive Directors
Lindsay Maxsted (Chairman)
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
136
136
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
37 Key management personnel compensation (continued)
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
A Head
S Hogg
S Johnson
M Kulper
T Steinhilber
L Tobin
V Vassallo
Group General Manager, North America
Group General Manager, Strategy (appointed Group General Manager, Queensland, from 4
June 2014)
Group General Manager, New South Wales
Chief Financial Officer (departed 14 July 2014)
Group General Manager, Human Resources
President, Transurban North America (departed 3 September 2013)
Group General Manager, Project Delivery and Operational Excellence (until 14 July 2014)
Group General Manager, Technology
Group General Manager, Victoria
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
Termination benefits
2014
$
11,056,992
257,966
73,043
3,645,461
1,620,545
333,356
2013
$
10,755,270
232,743
25,335
9,208,279
1,128,897
–
16,987,363
21,350,524
Detailed remuneration disclosures are made in the remuneration report in the Directors' report.
137
137
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
38 Non-cash investing and financing activities
Distributions satisfied by the issue of stapled securities under the distribution
reinvestment plan
2014
$M
65
65
2013
$M
35
35
39 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 write down 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. As disclosed in note 15, 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.
The Group does not consider that there have been any indicators of impairment in relation to any of its cash
generating units during the year.
138
138
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
39 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 considered that, up to 4 June 2014, it jointly controlled (and therefore equity accounted) Transurban
DRIVe Holdings LLC (“DRIVe”) even though it owned 75 per cent of the equity, as at least 80 per cent of the
membership interests were required to pass key decisions relating to operating and financing of the entity.
As disclosed in Note 3, as of 4 June 2014, following the acquisition of Capital Beltway (and its subsequent
recapitalisation), as well as the purchase of Fluor’s 10 per cent equity interest in both Capital Beltway and 95
Express Lanes, the Group re-assessed its control over DRIVe. Due to the operations of the Capital Beltway and
the 95 Express Lanes (which DRIVe already had a direct ownership interest in) being closely linked, it was
determined that the acquisition of Capital Beltway, along with the purchase of Fluor’s 10 per cent interest in both
Capital Beltway and the 95 Express Lanes, gave the Group control over DRIVe and the 95 Express Lanes.
The Group considers that control was gained over the Cross City Tunnel holding and operating entities (“CCT
Group”) as of 30 December 2013, following the acquisition of the group’s debt from Royal Bank of Scotland,
even though the Group’s equity ownership was nil. The CCT Group was therefore consolidated as of 30
December 2013. The subsequent acquisition of the concession asset by the Group (from the CCT Group) on 26
June 2014 had no impact on the assessment of control. See note 3 for further details.
139
139
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
40 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:
USD$M
30 June 2014
CAD$M
EUR$M
USD$M
30 June 2013
CAD$M
EUR$M
Cash and cash
equivalents
Net investment in
foreign operation
Borrowings
Cross-currency
interest rate swaps
Trade creditors
Net exposure
145
872
(1,421)
629
–
225
–
–
(250)
250
–
–
–
–
(500)
500
–
–
4
474
(1,361)
933
(4)
46
–
–
(250)
250
–
–
–
–
–
–
–
–
Exposure to other foreign exchange movements is not material.
140
140
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
40 Financial risk management (continued)
Market risk (continued)
Foreign exchange risk (continued)
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 $10,329,000 lower (2013: $24,000 lower) or $12,783,000 higher (2013: $30,000 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 more sensitive to movements in the Australian dollar/US dollar
exchange rate in the current year due to an increase in US dollar cash holdings.
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 $17,209,000 lower (2013: $28,683,000 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 $22,160,000 higher (2013: $38,898,000 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 2014, 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 (2013: 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 $2,232,000 lower (2013: $2,824,000 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 $3,023,000 higher (2013: $3,972,000 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.
Based on the financial instruments held at 30 June 2014, had the Australian dollar strengthened/weakened by 5
cents against the Euro 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 Euro denominated financial
instruments as detailed in the above table.
Had the Australian dollar strengthened by 5 cents against the Euro with all other variables held constant, the
Group's equity would have been $15,436,000 lower. Had the Australian dollar weakened by 5 cents against the
Euro with all other variables held constant, the Group's equity would have been $19,526,000 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.
141
141
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
40 Financial risk management (continued)
Market risk (continued)
Cash flow interest rate risk
The Group’s main exposure to interest rate risk arises from cash and cash equivalents, 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 2014, 86 per cent
(2013: 87 per cent) of the Group’s interest rate exposure on variable rate borrowings was hedged.
As at the reporting date, the Group had the following variable rate borrowings and interest rate swap contracts
outstanding:
Cash and cash equivalents
Floating rate borrowings
Interest rate swaps (notional principal amount)
Weighted
average
interest rate
%
2.4%
3.4%
2.5%
Net exposure to cash flow interest rate risk
An analysis by maturities is provided in Liquidity risk below.
2014
2013
Weighted
average
interest rate
%
3.6%
3.9%
2.9%
Balance
$M
(2,879)
3,257
(2,808)
(2,430)
Balance
$M
(259)
3,072
(2,686)
127
Sensitivity
At 30 June 2014, 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 $24,296,000 higher/lower (2013:
$1,270,000 lower/higher). Profit is more sensitive to movements in interest rates in 2014 than 2013, due mainly
to an increase in cash holding, as a result of the acquisition of Queensland Motorways which completed on 2
July 2014.
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 11 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.
142
142
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
40 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 (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.
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
2014
$M
–
421
421
2013
$M
16
202
218
The Group also has a letter of credit facility and a general credit facility in place with undrawn capacity of $8.7
million at 30 June 2014 (refer to note 17).
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
At 30 June 2014
Non-derivatives
Non-interest
bearing
Variable rate
Fixed rate
Total non-
derivatives
1 year
or less
$M
Over 1 to
2 years
$M
Over 2 to
3 years
$M
Over 3 to
4 years
$M
Over 4 to
5 years
$M
Over 5
years
$M
Total
contractual
cash flows
$M
Carrying
amount
(assets)/
liabilities
$M
497
723
225
1,445
–
521
422
943
–
1,310
204
1,514
–
447
234
681
–
232
601
405
488
5,339
902
3,721
7,025
554
3,257
3,541
833
6,232
11,648
7,352
143
143
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
40 Financial risk management (continued)
Liquidity risk (continued)
Contractual
maturities of
financial liabilities
At 30 June 2014
Derivatives
Net settled (interest
rate swaps)
Net settled (cross-
currency interest
rate swaps/fx
forwards)
Total derivatives
At 30 June 2013
Non-derivatives
Non-interest
bearing
Variable rate
Fixed rate
Total non-
derivatives
Derivatives
1 year
or less
$M
Over 1 to
2 years
$M
Over 2 to
3 years
$M
Over 3 to
4 years
$M
Over 4 to
5 years
$M
Over 5
years
$M
Total
contractual
cash flows
$M
Carrying
amount
(assets)/
liabilities
$M
86
65
55
141
48
113
41
52
93
24
11
32
259
227
48
72
38
49
(26)
6
215
474
190
417
1 year
or less
$M
Over 1 to
2 years
$M
Over 2 to
3 years
$M
Over 3 to
4 years
$M
Over 4 to
5 years
$M
Over 5
years
$M
Total
contractual
cash flows
$M
Carrying
amount
(assets)/
liabilities
$M
322
304
358
984
–
1,168
225
–
653
414
1,393
1,067
–
537
199
736
–
445
226
390
303
1,287
712
3,410
2,709
380
3,072
1,866
671
1,980
6,831
5,318
Net settled (interest
rate swaps)
Net settled (cross-
currency interest
rate swaps/fx
forwards)
Total derivatives
97
72
7
104
30
102
41
27
68
22
11
8
251
228
32
54
24
35
15
23
135
386
126
354
144
144
2014 Transurban Annual Report
Transurban Holdings Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
40 Financial risk management (continued)
Fair value measurements
The carrying value of financial assets and financial liabilities brought to account at balance sheet date
approximates fair value.
The fair value of these financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
The Group has adopted the amendment to AASB 7 Financial Instruments: Disclosures which requires disclosure
of fair value measurements by level of the following fair value measurement hierarchy:
(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
2014 and 30 June 2013:
30 June 2014
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
30 June 2013
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
Level 1
$M
Level 2
$M
Level 3
$M
–
–
–
–
16
16
433
433
–
–
–
–
Level 1
$M
Level 2
$M
Level 3
$M
–
–
–
–
11
11
365
365
–
–
–
–
Total
$M
16
16
433
433
Total
$M
11
11
365
365
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
145
2014 Transurban Annual Report
In the Directors' opinion:
Transurban Holdings Limited
Directors' declaration
30 June 2014
(a)
(b)
(c)
the financial statements and notes set out on pages 56 to 145 are in accordance with the Corporations Act
2001, including:
(i)
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 2014 and of its
performance for the year ended on that date, and
(ii)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable, and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended
Closed Group identified in note 31 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 31.
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 Directors of Transurban Holdings
Limited, Transurban Infrastructure Management Limited and Transurban International Limited.
Lindsay Maxsted
Director
Scott Charlton
Director
Melbourne
5 August 2014
146
146
2014 Transurban Annual Report
147
2014 Transurban Annual Report 23 to 52
148
2014 Transurban Annual Report Transurban Holding Trust and
Controlled Entities
ARSN 098 807 419
Annual report
for the year ended 30 June 2014
149
2014 Transurban Annual Report Transurban Holding Trust ARSN 098 807 419
Annual report - 30 June 2014
Directors' report
Auditor's Independence Declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
151
164
165
248
249
150
2014 Transurban Annual Report
Transurban Holding Trust
Directors' report
30 June 2014
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 2014.
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
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
Christine O'Reilly
Rodney Slater
Ian Smith
Executive Director
Scott Charlton
Result
The consolidated net profit for the Group was $352 million (2013: $393 million). The profit attributable to ordinary
equity holders of Transurban Holding Trust was $345 million (2013: $378 million).
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
151
2014 Transurban Annual Report
Distributions - Transurban Holdings Trust
Distributions paid to members during the financial year were as follows:
Final distribution for 2014 financial year payable and recognised as a liability: 17.0
cents (2013: 12.0 cents) per fully paid Stapled Security payable 14 August 2014:
Final unfranked distribution payable and recognised as a liability: 14.5 cents
(2013: 12.0 cents) per fully paid Stapled Security payable 14 August 2014
Fully franked final distribution based on tax paid at 30%: 2.5 cents (2013: nil) per
fully paid Stapled Security
Distributions paid during the year
Final distribution for 2013 financial year of 12.0 cents (2012: 11.5 cents) per fully
paid Stapled Security paid 14 August 2013
Interim distribution for 2014 financial year of 13.5 cents (2013: 12.0 cents) per
fully paid Stapled Security paid 14 February 2014
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 2014 and
30 June 2013
Paid in cash
Satisfied by issue of stapled securities (a)
Transurban Holding Trust
Directors' report
30 June 2014
(continued)
2014
$M
2013
$M
275
47
322
178
201
379
327
52
379
178
-
178
168
176
344
317
27
344
(a) The value of stapled securities represents the total value of securities issued; however, this value is
apportioned between Transurban Holdings Limited ($7.7 million), Transurban Holding Trust ($43.3 million), and
Transurban International Limited ($1.0 million).
Operating and Financial Review - Year ended 30 June 2014
As a member of the Transurban Group triple staple, the Group operates under a business framework
(incorporating strategy and value drivers) consistent with the wider Transurban Group.
Business review
Business Framework and Strategy
At the heart of our business strategy is our desire to be a ‘partner of choice’ for our government clients and an
organisation that meets the needs of our customers. To do that, we have to provide and be part of effective
transportation solutions to support the growth and well-being of our cities.
At Transurban we do this through the effective management of our existing road networks, through our active
involvement in the transport policy debate, and by applying our unique skills to the infrastructure challenges in
our markets.
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2014 Transurban Annual Report
Operating and Financial Review - Year ended 30 June 2014 (continued)
In delivering on this objective our business has fostered core capabilities in the following areas:
Transurban Holding Trust
Directors' report
30 June 2014
(continued)
Network planning and forecasting
Operations and customer management
Project development and delivery
Application of technology, and
Community engagement.
Transurban's target markets are the eastern seaboard of Australia and Virginia in the USA, part of the
Washington, DC metro area.
Value drivers
The investment proposition for high quality toll road assets is 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, which is derived from traffic growth and inflation linked toll escalation across
the portfolio of assets, is supported by effective maintenance of operations and customers. It is further enhanced
by the effective application of technology in key areas including traffic management and tolling. In addition, value
can be 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 NorthConnex project in Sydney and the upgrade to the western section of CityLink in
Melbourne.
Financial performance
Performance indicators
Underlying proportional EBITDA (earnings before interest, tax, depreciation and amortisation) is the primary
measure the Transurban Board uses to assess the operating performance of Transurban, with an aim to focus on
operating results and associated cash generation. It reflects the contribution from individual assets to
Transurban’s operating performance and permits a meaningful assessment of the underlying performance of
Transurban’s assets.
To arrive at the proportional result, non-controlling interests in Transurban’s controlled roads are removed and
Transurban’s interests in non-controlled assets are included, in proportion to Transurban’s ownership.
Year ended 30 June 2014 Highlights
Transurban Holding Trust’s net profit for the year ended 30 June 2014 was $352 million, a 10.4 per cent
decrease on the prior year.
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2014 Transurban Annual Report
Transurban Holding Trust
Directors' report
30 June 2014
(continued)
Operating and Financial Review - Year ended 30 June 2014 (continued)
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 year this increased 2.6 per cent to $272 million.
Construction revenue is recognised during the construction phase of an intangible asset. In the year ended 30
June 2014 $55 million was generated through the M2 Upgrade project. This construction revenue is offset by
construction costs.
Total EBITDA versus the prior corresponding period was the same at $286 million.
Financial position
Transurban Group has a market capitalisation of around $14.5 billion. At 30 June 2014 1,896 million stapled
securities were on issue. During the year, Transurban issued 405 million stapled securities as part of the capital
raising to fund the acquisition of Queensland Motorways.
The Group represents one component of the Transurban triple staple and has total assets of $13,941 million, a
25 per cent increase on the prior year. This increase was driven by the Transurban Group’s equity entitlement
offer and share placement undertaken in May 2014 to fund the acquisition of Queensland Motorways (discussed
below).
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 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 2014
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 provides 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 is
discussed below.
CityLink (Melbourne)
CityLink had continued traffic growth on all parts of the Asset. Toll revenue increased by 7.9 per cent, driven by a
1.6 per cent increase in traffic and a 4.7 per cent increase in toll prices. Western Link performed particularly well,
seeing growth of 2.1 per cent, however both sections of the Asset were mildly affected by the re-sheeting of the
Domain and Burnley tunnels in late December and early January, which required the closure of those tunnels
during works.
Changes to the operational structure of the call centre, and a shift to electronic channels for communications led
to a reduction in tolling expenses and direct employee costs.
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Transurban Holding Trust
Directors' report
30 June 2014
(continued)
Operating and Financial Review - Year ended 30 June 2014 (continued)
Total CityLink costs have increased by $4 million to $105 million. CityLink’s EBITDA margin continued to improve
from 89.0 per cent to 90.3 per cent.
Hills M2 (Sydney)
The M2 Upgrade project was completed in August 2013 and resulted in a significant uplift in traffic year-on-year.
The completion of the M2 Upgrade saw the majority of the Hills M2 return to normal lane configurations and
operational status which contributed to overall traffic growth across the Hills M2. In addition to the M2 Upgrade,
works were commenced on the maintenance of the Vimiera Road Embankment and construction of the Lane
Cove Road eastbound on-ramp.
Year on year traffic growth on the Hills M2 was 13.8 per cent, which included traffic growth following completion
of the M2 Upgrade project. This traffic increase, in addition to the toll price increase of 19.3 per cent effected on
completion of the upgrade on the asset, resulted in a toll revenue increase of $50 million.
Costs on the Hills M2 increased in comparison to the previous year, however the asset’s EBITDA margin
increased to 84.1 per cent.
Lane Cove Tunnel / MRE (Sydney)
Lane Cove Tunnel has observed strong traffic growth during the financial year as the constraints from the
ongoing upgrade works on the connecting Hills M2 Motorway dissipated following completion of the M2 Upgrade
Project.
Traffic growth for the tunnel was 9.6 per cent compared to the prior corresponding period, and 6.6 per cent on the
Military Road e-Ramps, resulting in a $7 million increase in toll revenue in 2014. Tollaust Pty Limited (a Group
company) continued to provide Operations and Maintenance services to Lane Cove Tunnel, and since April 2014
has taken on the role of Operator, using in-house resources. The EBITDA margin on Lane Cove Tunnel
increased from 60.0 per cent to 73.0 per cent.
Cross City Tunnel (Sydney)
On 30 December 2013 Transurban acquired the senior debt exposure of the Cross City Tunnel Group which was
in receivership. As a result of the debt acquisition Transurban was deemed to have gained control of the Cross
City Tunnel Group and its controlled entities.
The acquisition reached financial close on 26 June 2014, when Transurban purchased the Cross City Tunnel
concession asset from the receivers and managers. Transurban acquired this concession for $475 million plus
stamp duty and transaction costs totalling $27 million. As at the end of the financial year work was well advanced
on the integration of this asset into the broader Transurban portfolio.
M1 Eastern Distributor (Sydney)
The Eastern Distributor commenced three major capital works projects in 2014, which has resulted in elevated
levels of maintenance capital expenditure on the asset:
1) New Roadside Tolling Equipment was installed during 2014 and user acceptance testing of this equipment
commenced;
2) Resurfacing of the motorway, which was commenced as a part of a two year program of resurfacing works;
and
3) Upgrade of the Operations Management and Control System (“OMCS”). The OMCS upgrade is scheduled for
completion in 2016.
On 4 November 2013, the Eastern Distributor moved to quarterly integer tolling increases (previously 50 cent
increments). This has contributed to an increase in toll revenue of $5 million.
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2014 Transurban Annual Report
Transurban Holding Trust
Directors' report
30 June 2014
(continued)
Operating and Financial Review - Year ended 30 June 2014 (continued)
Westlink M7 (Sydney)
The performance of Westlink M7, particularly the northern section, has improved in 2014 due to the completion of
the M2 Upgrade, with an increase in traffic of 8.1 per cent and an increase in revenue of $21 million to $231
million. The M7’s EBITDA margin increased from 81.0 per cent to 83.6 per cent.
Free cash and cash flows from operations
Free cash is calculated as:
Cash flow from operations of 100% owned assets and operating companies (CityLink, Hills M2, Lane
Cove Tunnel / MRE, Cross City Tunnel, Statewide Roads, Roam Tolling, Tollaust and Transurban
corporate);
Excluding Payments for Maintenance of Intangible Assets (concession assets);
Excluding Interest received from Term Loan Notes (Westlink M7 & M5 South West Motorway
Investment returns captured as interest payments);
Plus distributions received from non-100% owned assets (M5 South West Motorway, M1 Eastern
Distributor)
Plus Term Loan Note repayments from Westlink M7 and M5 South West Motorway (as 50% equity
accounted investments)
Less Provision for Maintenance of Intangible Assets and payments for e-TAGs.
Free cash for the year ended 30 June 2014 was $572 million. Free cash per security was 33.9 cents. The
calculation of free cash can be found at note 22 to the statutory accounts. Free cash per security was impacted in
the year by the issue of new securities to fund the acquisition of Queensland Motorways. All securities issued are
entitled to the full final distribution and this dilutes the free cash. The distribution of 35 cent per security is 96.9
per cent cash covered for the year.
Business development activities
Acquisition of Queensland Motorways
In April 2014, a Transurban-led consortium (62.5% Transurban, 25% AustralianSuper and 12.5% Tawreed, a
wholly-owned subsidiary of the Abu Dhabi Investment Authority) reached agreement to acquire Queensland
Motorways for $6,673 million, plus stamp duty and transaction costs totalling $447 million. Transurban will
operate the network on behalf of the owners. Financial close was achieved on 2 July 2014.
Acquisition of Cross City Tunnel
The process to acquire Cross City Tunnel began when Transurban acquired the secured senior debt of the Cross
City Tunnel Group from Royal Bank of Scotland in December 2013. Cross City Tunnel was in receivership at the
time, with receivers and managers appointed to conduct a sale process.
The debt acquisition gave Transurban the right to remove and appoint the receivers and managers and therefore
significant rights over the relevant activities of the Cross City Tunnel entities. In May 2014, Transurban entered
into an agreement with members of the Cross City Tunnel Group (subject to deeds of company arrangement)
(CCT Vendors), acting by their Receivers and Managers, to acquire CCT for approximately $475 million plus
stamp duty and transaction costs. Financial close was achieved on 26 June 2014.
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2014 Transurban Annual Report
Transurban Holding Trust
Directors' report
30 June 2014
(continued)
Operating and Financial Review - Year ended 30 June 2014 (continued)
NorthConnex
Having reached agreement with the New South Wales Government in May 2013 to work together to procure the
design and construction price, in March 2014 Transurban announced the preferred contractor for the
NorthConnex project. This project has now moved into the planning approval stage with the public display of the
Environmental Impact Assessment. If approved, it is expected that work on NorthConnex would begin in 2015
with the project open for use in 2019.
CityLink – Tullamarine Widening
In April 2014, Transurban announced an in-principle agreement with the Victorian Government under the
Government’s Unsolicited Proposals framework for a major co-ordinated upgrade to the western section of
CityLink, the Bolte Bridge-West Gate Freeway interchange and the Tullamarine Freeway (“CityLink – Tulla
Widening”). The project is subject to the State and Transurban reaching final agreement on terms (including
scope) and documentation (expected by late 2014).
Financing activities
As discussed above, Transurban Holding Trust provides funding to certain assets within the Transurban Group.
The following financing activities were undertaken in the year ended 30 June 2014:
December 2013
Financed tranche A of Airport Motorway’s bank debt with $300 million domestic
MTNs.
June 2014
Raised A$277 million non-recourse debt on Cross City Tunnel.
On 2 July 2014, the Group raised $2,900 million in non-recourse debt to fund the acquisition of Queensland
Motorways, of which $2,500 million was drawn on that date.
Debt maturity profiles
The following chart shows the Group’s current external debt maturity profile related to assets through which the
Trust provide funding to the wider Transurban Group. The charts show the debt in the financial year it matures
and the full value of the debt facilities has been shown as this is the value of debt for refinancing purposes.
600
500
400
300
n
o
i
l
l
i
m
$
A
200
400
340
100
0
260
277
225
300
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
Hills M2
Lane Cove Tunnel
Cross City Tunnel
M1
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2014 Transurban Annual Report
Transurban Holding Trust
Directors' report
30 June 2014
(continued)
Operating and Financial Review - Year ended 30 June 2014 (continued)
Financial risk management
Transurban Group’s and the Trust’s exposure to financial risk management and its policies for managing that risk
can be found in the Financial Risk Management notes of the attached accounts – Note 38. That note discusses
Transurban’s hedging policies, credit risk, interest rate risk and liquidity and funding policies.
Corporate activities
Equity entitlement offer and share placement
In May 2014, Transurban completed a fully underwritten accelerated renounceable entitlement offer.
The Institutional Entitlement Offer raised gross proceeds of approximately $1.8 billion and resulted in the issue of
approximately 264 million new Transurban stapled securities. Entitlements not taken up by eligible institutional
security holders and entitlements of ineligible institutional security holders were sold and cleared in the
institutional shortfall book build at $7.00 per security, a $0.25 per security premium over the offer price of $6.75
and a 2.4 per cent discount to the theoretical ex-rights price as of 23 April 2014 of $7.17 per security.
The Retail Entitlement Offer raised gross proceeds of approximately $557 million from the issue of approximately
83 million new securities at an issue price of $6.75 per security. Approximately 28.6 million of these new
securities were sold in the bookbuild at a price of $7.21 per security, a $0.46 per security premium over the issue
price of $6.75, a $0.21 per security premium over the institutional bookbuild price of $7.00, and a $0.10 per
security discount to the last traded price of $7.31 per security.
A further $400 million was raised from placement of 58 million securities at a price of $6.95 per security to
AustralianSuper and Tawreed.
Changes in Executive Management
On 4 June 2014, Transurban appointed Wes Ballantine, Group General Manager, Strategy, to the role of Group
General Manager, Queensland
On 14 July 2014, Samantha Hogg, Chief Financial Officer, left Transurban. Until a permanent replacement is
appointed, Leigh Petschel, currently General Manager, Finance, will serve as Acting Chief Financial Officer.
Tim Steinhilber, Group General Manager, Project Delivery and Operational Excellence, transferred back to the
USA in July 2014 and will support the delivery of the I95 project that is scheduled for completion at the end of
2014. Tony Adams, previously Vice President, Infrastructure, Major Projects, and based in the USA, will transfer
to Australia as he assumed the role of Group General Manager, Project Delivery and Operational Excellence in
July 2014.
People
Transurban’s People Strategy focuses on the four areas of Leadership, Capability, Performance, and Wellbeing.
These areas are underpinned by the Group values, as well as safety, diversity and sustainability.
Leadership
Transurban conducts a bi-annual 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.
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Transurban Holding Trust
Directors' report
30 June 2014
(continued)
Operating and Financial Review - Year ended 30 June 2014 (continued)
Senior Leaders participated in a three day offsite in February 2014. The key theme of the program was driving for
high performance and it is intended that this will become an annual event for the leadership group.
There has been a focus on building greater leadership capability through the middle management group during
the reporting period. Activities to support this include the implementation of a Group Coaching program;
cascading of activities from the Senior Leadership Program and the continuation of the Coaching and Mentoring
program for female managers.
Capability
A framework identifying both behavioural and technical capabilities has been developed and is being used to
assist in identifying key talent for future roles and determining potential gaps. This assists in developing
strategies to build future capability. A technical career pathway program has also been developed. One area of
continued focus is the Traffic Forecasting Group which is deemed fundamental to the ongoing success of the
Group. Steps to enhance capability in this area have progressed.
Performance
Changes were made to the Short Term Incentive program aimed at enhancing this through increased
performance differentiation, the introduction of formal performance comparisons against peers, and strengthening
the link between individual and Group performance. A review of the Group’s Benefits program was also
undertaken, benchmarking current programs against market practice.
Wellbeing
A new Wellbeing framework has been developed, identifying the key areas of health; work; financial; values and
staying connected. A suite of initiatives to support the framework are being introduced across Transurban. An
employee volunteer program has been launched which includes the introduction of volunteer leave for all
employees.
Office moves in Melbourne and Sydney occurred with a focus on increasing collaboration and ensuring a
healthier workspace. Activity based working was also introduced as part of this, which enables greater flexibility
for employees in the way in which they work.
It has been twelve months since the launch of the refreshed Vision and Values. A Group wide Values Health
Check was rolled out to see how and where teams are using the values and to ensure that behaviours continue
to be aligned. This provided positive feedback as did the Employee pulse survey that was conducted in May
2014.
Sustainability
Transurban is committed to taking a sustainable approach to its operations, projects and business practices to
create the best outcomes for its government clients, communities and customers.
Transurban’s Sustainability Strategy highlights three key focus areas: be good neighbours, use less, and think
long term. By adopting and working to these principles, Transurban reinforces its ‘licence to operate’ and
strengthens its ability to deliver efficient and integrated transport networks that support productivity and the
wellbeing of its communities.
During the period, Transurban put into action the Sustainability Strategy. Some important highlights include
developing a community investment strategy which saw the launch of the first corporate grants program,
embedding sustainability requirements in the NorthConnex tender process and committing to reduce operational
energy consumption by 10 per cent by 2023.
Transurban provides regular progress reports to the Board on the focus areas. The annual Sustainability Report
summarises the year’s activities, while also outlining commitments for the coming years.
The 2014 Sustainability Report will be published in October.
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Directors' report
30 June 2014
(continued)
Operating and Financial Review - Year ended 30 June 2014 (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; and
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
arrangement or as a result of government action
Existence and development of, or changes to, competing roads, feeder roads and other means of transport
A failure of key operating systems, including tolling systems, which impacts the ability to collect revenue
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
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 joint ventures and subsidiaries
for funding.
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Directors' report
30 June 2014
(continued)
Operating and Financial Review - Year ended 30 June 2014 (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 to help create 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 entity’s state of affairs
Other than those matters already discussed in the operating and financial review, no other significant changes
have occurred in Transurban’s state of affairs in the year ended 30 June 2014.
Matters subsequent to the end of the financial year
On 2 July 2014, the Group announced that the consortium comprising Transurban (62.5%), AustralianSuper
(25%) and Tawreed Investments Limited (a wholly-owned subsidiary of the Abu Dhabi Investment Authority)
(12.5%) had reached financial close on the acquisition of Queensland Motorways for $6,673 million, plus stamp
duty and transaction costs of $447 million.
As at the date of this report the Directors are not aware of any other circumstances that have arisen since 30
June 2014 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, that have not otherwise been disclosed in the financial report.
Likely developments in future financial years and the expected results of operations
Other than matters already discussed above, any other potential likely 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.
161
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2014 Transurban Annual Report
Transurban Holding Trust
Directors' report
30 June 2014
(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 27.
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 issued during the year
Balance at 30 June
Value of assets
Value of group assets at 30 June
2014
Number
$M
2013
Number
$M
1,482
414
1,896
2014
$M
1,458
24
1,482
2013
$M
13,941
11,155
The value of the Group's assets is derived using the basis of accounting set out in Note 1 to the financial
statements.
Current Directors' interests
Non-Executive Directors
Lindsay Maxsted
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
.
Executive Director
Scott Charlton
Number of stapled
securities
66,559
50,424
30,324
17,256
13,972
-
92,742
213,374
162
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2014 Transurban Annual Report
Transurban Holding Trust
Directors' report
30 June 2014
(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 164.
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 million 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
5 August 2014
163
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2014 Transurban Annual Report
164
2014 Transurban Annual Report Transurban Holding Trust ARSN 098 807 419
Annual report - 30 June 2014
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
166
167
168
169
170
171
248
249
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 23
727 Collins Street
Docklands VIC 3008
The financial report was authorised for issue by the Directors on 5 August 2014. The Directors have the power to
amend and reissue the financial report.
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
165
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2014 Transurban Annual Report
Revenue
Other income
space
Administration costs
Promissory notes
Construction costs
Transurban Holding Trust
Consolidated income statement
For the year ended 30 June 2014
Notes
4
5
2014
$M
327
28
(12)
(2)
(55)
(69)
2013
$M
477
26
(4)
(2)
(211)
(217)
Profit before depreciation and amortisation, net finance costs, equity
accounted investments and income taxes
286
286
Depreciation and amortisation expense
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
6
7
12
8
(123)
573
(381)
192
-
355
(3)
352
345
7
352
(109)
551
(332)
219
-
396
(3)
393
378
15
393
Cents
Cents
Earnings per unit for profit attributable to the ordinary unit holders:
Basic earnings per unit
Diluted earnings per unit
33
33
22.4
22.4
25.7
25.7
The above consolidated income statement should be read in conjunction with the accompanying notes.
166
166
2014 Transurban Annual Report
Transurban Holding Trust
Consolidated statement of comprehensive income
For the year ended 30 June 2014
2014
$M
352
19
19
2013
$M
393
22
22
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
371
415
Total comprehensive income for the year is attributable to:
Unit holders of Transurban Holding Trust
Non-controlling interest
362
9
371
398
17
415
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
167
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2014 Transurban Annual Report
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Receivables
Term loan notes
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 2014
2014
$M
75
2,421
2,496
6,912
887
5
3,641
11,445
13,941
172
751
4
-
361
46
1,334
5,013
41
25
5,079
6,413
7,528
2013
$M
29
371
400
6,592
832
4
3,327
10,755
11,155
234
438
7
1
211
27
918
4,615
57
23
4,695
5,613
5,542
9,472
(35)
(1,958)
49
7,528
7,336
(52)
(1,780)
38
5,542
Notes
9
10
11
13
15
16
17
18
14
19
20
18
14
20
21
22
22
29
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
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168
2014 Transurban Annual Report
Transurban Holding Trust
Consolidated statement of changes in equity
For the year ended 30 June 2014
Attributable to unit holders of
Transurban Holding Trust
Notes
Issued units
$M
Reserves
$M
Accumulated
losses
$M
Non-
controlling
interests
$M
Total unit
holders'
funds
$M
Balance at 1 July 2012
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity
as owners:
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
22
22
Balance at 30 June 2013
Balance at 1 July 2013
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
Equity contributions
Distributions paid to non-controlling interests
Deferred short term incentives issued
21
21
22
22
7,241
(70)
(1,805)
-
-
-
24
1
-
-
68
2
95
7,336
7,336
-
-
-
2,092
42
1
-
-
-
1
2,136
-
20
20
-
(2)
-
-
-
-
(2)
(52)
(52)
-
17
17
-
-
-
-
-
-
-
-
378
-
378
-
-
(353)
-
-
-
(353)
(1,780)
(1,780)
345
-
345
-
-
-
(523)
-
-
-
(523)
36
15
2
17
-
-
-
(15)
-
-
(15)
38
38
7
2
9
-
-
-
(14)
16
-
-
2
5,402
393
22
415
24
(1)
(353)
(15)
68
2
(275)
5,542
5,542
352
19
371
2,092
42
1
(537)
16
-
1
1,615
Balance at 30 June 2014
9,472
(35)
(1,958)
49
7,528
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
169
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2014 Transurban Annual Report
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 (outflow) inflow from operating activities
Cash flows from investing activities
Payments for intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
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
Payments for establishing borrowing facilities
Proceeds from non-controlling interests
Net cash inflow from financing activities
Net increase 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 2014
Notes
32
23
9
2014
$M
240
(21)
121
(341)
(4)
(5)
(441)
(441)
582
(295)
(354)
907
(327)
(9)
(28)
16
492
46
29
75
2013
$M
296
(28)
131
(314)
(5)
80
(211)
(211)
399
(312)
(472)
868
(317)
(10)
-
-
156
25
4
29
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
Contents of the notes to the consolidated financial statements
Summary of significant accounting policies
1
Trust formation and termination
2
Segment information
3
Revenue
4
Other income
5
Expenses
6
Net finance income
7
Income tax expense
8
9
Current assets - Cash and cash equivalents
10 Current assets - Trade and other receivables
11 Non-current assets - Receivables
12 Equity accounted investments
13 Non-current assets - Term loan notes
14 Derivative financial instruments
15 Deferred tax assets and liabilities
16 Non-current assets - Intangible assets
17 Current liabilities - Trade and other payables
18 Borrowings
19 Current liabilities - Provisions
20 Other liabilities
21 Issued units
22 Reserves and accumulated losses
23 Distributions
24 Remuneration of auditors
25 Intra-group guarantees
26 Commitments
27 Related party transactions
28 Subsidiaries
29 Non-controlling interests
30 Parent entity financial information
31 Events occurring after balance sheet date
32 Reconciliation of profit after income tax to net cash inflow from operating activities
33 Non-cash investing and financing activities
34 Earnings per unit
35 Share-based payments
36 Critical accounting estimates and judgements
37 Key management personnel disclosures
38 Financial risk management
Page
172
183
183
183
184
184
184
185
185
186
186
187
189
189
190
191
193
193
195
196
196
198
200
200
200
201
201
203
204
205
205
206
206
206
207
211
212
243
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(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 assets exceed its current liabilities by $1,162 million as at 30 June 2014. As at 30 June
2014, the Transurban Group comprises Transurban Holdings Limited, Transurban Holding Trust and Transurban
International Limited, traded and quoted on the Australian Stock Exchange as one triple stapled security. 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. 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, as at 30 June 2014 the Transurban Group has
available a total of $493.4 million of unused working capital facilities with a number of financial institutions.
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.
New and amended standards adopted by the Group
The Group has amended some of its accounting policies as the result of new or revised accounting standards
which became effective for the annual reporting period commencing on 1 July 2013.
The affected policies and standards are:
(i) AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets
and Financial Liabilities.
AASB 2012-2 resulted in amendments being made to AASB 7 Financial Instruments - Disclosure, requiring
additional disclosures when entities offset financial assets and liabilities within their financial statements. As a
result of this amendment to AASB 7 the Group has expanded its disclosures about the offsetting of financial
assets and liabilities (see Note 14).
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
New and amended standards adopted by the Group (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, AASB 128 Investments in Associates and
Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation
and Joint Arrangements Standards and AASB 2012-10 Amendments to Australian Accounting Standards -
Transition Guidance and Other Amendments.
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.
In accordance with the transitional provisions of AASB 10, the Group reassessed the control conclusions for its
investments at 1 July 2013. Based on this reassessment no changes have been made regarding the Group’s
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.
The Group has re-evaluated its involvement in its joint arrangements at 1 July 2013 and has re-classified its
investments from jointly controlled entities to joint ventures. Notwithstanding the reclassification, these
investments continue to be accounted for using the equity method and accordingly there has been no impact on
the recognised assets, liabilities and comprehensive income of the Group.
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. As a result of
IFRS 12, the Group has expanded its disclosures about its interests in subsidiaries (see Note 28) and equity
accounted investees (see Note 12).
Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not
re-measure 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 has determined that these
amendments have no impact on the financial statements of the Group.
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
New and amended standards adopted by the Group (continued)
(iii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards
arising from AASB 13
AASB 13 establishes a single framework for measuring fair value and making disclosures about fair value
measurements, when such measurements are required or permitted by other AASBs. In particular, it unifies the
definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would
take place between market participants at the measurement date. It also replaces and expands the disclosure
requirements about fair value measurements in other AASBs, including AASB 7 Financial Instruments:
Disclosures.
In accordance with the transitional provisions of AASB 13, the Group has applied the new fair value
measurement guidance prospectively, and has not provided any comparative information for new disclosures.
Notwithstanding the above, the change has not had a material impact on the measurement of the Group’s
assets and liabilities.
(iv) AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements
The AASB has 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. This amendment has reduced the
disclosures required in the notes to the financial statements however it has not affected any of the amounts
recognised in the financial statements.
Early adoption of standards
The Group has elected to early adopt AASB 2013-3 Amendments to AASB 136 - Recoverable Amount
Disclosures for Non-Financial Assets, which amends the disclosure requirements in AASB 136 Impairment of
Assets. The amendments include the requirement to disclose additional information about the fair value
measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal, and
may result in additional disclosures if the group recognises an impairment loss or the reversal of an impairment
loss during the year. The application date for the Group would have been 1 July 2014, but the Group has early
adopted as of 1 July 2013.
The adoption of this new standard has not had a significant impact on the disclosure within the financial
statements.
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 million dollars, or in certain
cases, to the nearest dollar.
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation
Subsidiaries
Subsidiaries are all those entities which the Group controls. The Group controls an entity when the group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to govern the financial and operating policies of the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases.
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.
Associates and joint arrangements
Associates are all entities over which the Group has significant influence but not control. Interests in joint
arrangements are where the Group jointly controls an entity with another party (refer to note 12).
Under AASB 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or
joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than
the legal structure of the joint arrangement. The Group has joint ventures and does not have any joint
operations.
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.
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 the adjustment to non-controlling interests and any consideration paid or
received is recognised in a separate reserve within equity.
(c) Segment reporting
Financial results of the operating segment 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). This includes a proportional income statement per operating
segment and consolidated financial statements for the Group.
(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:
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(d) Revenue recognition (continued)
Rental revenue is recognised as earned in accordance with the lease contract.
Interest income is recognised using the effective interest rate method.
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 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 their
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.
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 risks 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.
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(g) 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 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.
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.
(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 purpose 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.
177
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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.
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 (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.
178
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(j)
Investments and other financial assets (continued)
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.
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 Group designates certain derivatives as either:
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.
179
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(k) Derivatives and hedging activities (continued)
Cash flow hedge (continued)
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.
(l)
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 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 sheet 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.
180
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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.
Provisions are measured 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 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.
181
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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
2014 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 2017)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets
and financial liabilities. The standard is not applicable until 1 January 2017 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)
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017)
IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
IFRS 15 supersedes:
(a) IAS 11 Construction Contracts
(b) IAS 18 Revenue
(c) IFRIC 13 Customer Loyalty Programmes
(d) IFRIC 15 Agreements for the Construction of Real Estate
(e) IFRIC 18 Transfers of Assets from Customers
(f) SIC-31 Revenue-Barter Transactions Involving Advertising Services
The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. An entity recognises revenue in accordance with that core principle by
applying the following steps:
182
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(t) New accounting standards and interpretations (continued)
(ii)
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017) (continued)
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Although a formal assessment has not been completed, the impact of the application of the new standard is not
expected to be material.
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.
4 Revenue
Rental income
Construction revenue
Other revenue
Total revenue
(a) Rental income
Notes
4(a)
4(b)
2014
$M
272
55
-
327
2013
$M
265
211
1
477
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.
183
183
2014 Transurban Annual Report
5 Other income
Concession fees
(a) Concession fees
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Notes
5(a)
2014
$M
28
28
2013
$M
26
26
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-interest bearing concession notes.
Following agreements reached with the State of Victoria (the State), the Group paid a total of $765 million to 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.
6 Expenses
Profit before income tax includes the following specific
expenses:
Depreciation and amortisation expense
7 Net finance income
Finance income
Interest income from related parties
Other interest income
Net foreign exchange gains
Re-measurement of concession notes receivable
Total finance income
Finance costs
Interest and finance charges paid/payable
Net foreign exchange losses
Net movement in promissory note payable
Total finance costs
Net finance income
(a) Re-measurement of concession notes
Notes
7(a)
2014
$M
2013
$M
123
109
2014
$M
523
1
-
49
573
(379)
(1)
(1)
(381)
192
2013
$M
487
1
4
59
551
(331)
-
(1)
(332)
219
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.
184
184
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
8 Income tax expense
Income tax expense
Current tax
Deferred tax
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% (2013 - 30%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Trust income not subject to tax
Income tax expense
9 Current assets - Cash and cash equivalents
Cash at bank and in hand
All cash balances are interest bearing.
2014
$M
4
(1)
3
(2)
1
(1)
2014
$M
355
107
(104)
3
2013
$M
4
(1)
3
(1)
-
(1)
2013
$M
396
119
(116)
3
(359)
(399)
2014
$M
75
75
2013
$M
29
29
185
185
2014 Transurban Annual Report
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 2014
(continued)
Notes
10(a)
10(b)
2014
$M
2,418
2
1
2,421
2013
$M
369
2
-
371
No class within trade and other receivables contains 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 2014.
11 Non-current assets - Receivables
Concession notes
Loans to related parties
Notes
11(a)
11(b)
2014
$M
795
6,117
6,912
2013
$M
718
5,874
6,592
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 represent amounts advanced to other members of the Transurban Group. There is no
allowance for doubtful debts as the counterparties are related parties.
186
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2014 Transurban Annual Report
12 Equity accounted investments
Westlink M7:
Westlink Motorway Limited
WSO Finance Pty Limited
Westlink Motorway Partnership
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
2014
%
50
50
50
2013
%
50
50
50
150
150
2014
$M
2013
$M
-
-
-
-
-
-
-
-
The amounts recognised in the income statement are as follows:
Joint operation
As at 30 June
Total
2014
$M
-
-
2013
$M
-
-
Summarised financial information of equity accounted investments
Set out below is the summarised financial information for the Group’s investments accounted for using the equity
method.
Summarised Balance Sheet
Cash and cash equivalents
Other current assets
Non-current assets
Current financial liabilities
Other current liabilities
Non-current financial liabilities
Other non-current liabilities
Net assets (100%)
Trust's share of net assets
Losses not recognised
Carrying amount of joint venture at June 30
Summarised Income Statement
Revenue
Depreciation and amortisation
Other expenses
Interest expense
Profit / (loss)
Other comprehensive income
Total profit and total comprehensive income
Proportional profit and total comprehensive income
Trust's share of profit and total comprehensive income
187
Westlink M7
2014
$M
46
-
2,508
-
(42)
(3,139)
-
(627)
(314)
314
-
125
(54)
-
(159)
(88)
10
(78)
(39)
(39)
2013
$M
47
-
2,485
-
(25)
(3,056)
-
(549)
(275)
275
-
122
(52)
143
(287)
(74)
15
(59)
(30)
(30)
187
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
12 Equity accounted investments (continued)
Reconciliation of summarised financial information
Reconciliation of the summarized financial information presented to the carrying amount of the Group’s interest
in associates
Westlink M7
Summarised financial information
Opening net assets on 1 July
Investments in subsidiary
Profit / (loss) for the period
Other comprehensive income
Foreign exchange differences
Dividends paid
Closing net assets
Interest in associates (%)
Interest in joint ventures
Goodwill
Uplift on acquisition
Losses not recognised
Elimination of unrealized profit on intragroup transfer
Transfer of reserves to the income statement on gain of control
Cessation of equity accounting on gain of control
Carrying value
Share of expenditure
commitments
Capital commitments
Operating commitments
Contingent liabilities
Share of contingent liabilities incurred jointly with other investors
Associates and joint arrangements
Joint operation
2014
$M
(549)
-
(78)
-
-
-
(627)
(314)
-
-
314
-
-
-
-
-
182
182
-
-
50%
2013
$M
(490)
-
(59)
-
-
-
(549)
(275)
-
-
275
-
-
-
-
-
186
186
-
-
Westlink M7
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.
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2014 Transurban Annual Report
13 Non-current assets - Term loan notes
Term loan notes
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
2014
$M
887
887
2013
$M
832
832
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 2014 the Group capitalised interest of $55.0 million (2013: $49.0 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.
14 Derivative financial instruments
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
2014
$M
2013
$M
4
4
41
41
45
7
7
57
57
64
189
189
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
14 Derivative financial instruments (continued)
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 4.4 per cent (2013: 4.5
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 (2013: 93 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 6.3 per cent
(2013: 6.9 per cent).
Offsetting financial assets and financial liabilities
The Group has not settled any financial assets or financial liabilities on a net basis during the financial year.
Currently there is no right or basis to present any financial assets or financial liabilities on a net basis, and as
such no financial assets or financial liabilities have been presented on a net basis in the Group’s balance sheet
at the end of the financial year.
15 Deferred tax assets and liabilities
The balance comprises temporary difference
attributable to:
Current year and prior year losses
Receivables
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Movements:
Opening balance at 1 July
Credited/(charged) to the income statement
Closing balance 30 June
Deferred tax assets/(liabilities) to be recovered
after more than 12 months
Assets
Liabilities
Net
2014
$M
2013
$M
2014
$M
2013
$M
2014
$M
2013
$M
7
-
7
(2)
5
5
2
7
7
7
5
-
5
(1)
4
4
1
5
5
5
-
(2)
(2)
2
-
(1)
(1)
(2)
(2)
(2)
-
(1)
(1)
1
-
(1)
-
(1)
(1)
(1)
7
(2)
5
-
5
4
1
5
5
5
5
(1)
4
-
4
3
1
4
4
4
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.
190
190
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
16 Non-current assets - Intangible assets
CityLink
$M
Hills M2
Motorway
$M
Lane Cove
Tunnel
$M
Cross City
Tunnel
$M
Assets under
construction
$M
At 1 July 2012
Cost
Accumulation
amortisation
Net book amount
Year ended 30 June
2013
Opening net book
amount
Additions
Amortisation charge
Closing net book
amount
At 30 June 2013
Cost
Accumulation
amortisation
Net book amount
Year ended 30 June
2014
Opening net book
amount
Additions
Transfers
Amortisation charge
Closing net book
amount
At 30 June 2014
Cost
Accumulation
amortisation
Net book amount
Concession assets
1,208
(336)
872
872
-
(40)
832
1,208
(376)
832
832
-
-
(38)
794
1,208
(414)
794
2,116
(472)
1,644
1,644
-
(55)
1,589
2,116
(527)
1,589
1,589
-
596
(72)
2,113
2,712
(599)
2,113
348
(25)
323
323
-
(13)
310
348
(38)
310
310
-
-
(13)
297
348
(51)
297
-
-
-
-
-
-
-
-
-
-
-
382
-
-
382
382
-
382
385
-
385
385
211
-
596
596
-
596
596
55
(596)
-
55
55
-
55
Total
$M
4,057
(833)
3,224
3,224
211
(108)
3,327
4,268
(941)
3,327
3,327
437
-
(123)
3,641
4,705
(1,064)
3,641
Service Concession Arrangements have been accounted for in accordance with AASB Interpretation 12 and
therefore the concession assets have been classified as Intangible Assets.
191
191
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
16 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. At the end of the
concession period, all concession assets are to be returned to the Victorian State Government.
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.
Hills M2 concession asset
Transurban has the right to toll the Hills M2 Motorway until May 2046. At the end of the concession period, the
concession asset is returned to the New South Wales State Government.
The Concession Deed requires Transurban to maintain the Motorway to specified conditions.
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.
Lane Cove Tunnel
Transurban has the right to toll the Lane Cove Tunnel until January 2037. At the end of the concession period,
all concession assets will be returned to the New South Wales State Government.
The Concession Deed requires Transurban to maintain the tunnel to specified conditions.
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.
Cross City Tunnel
During the year Transurban acquired the right to toll the Cross City Tunnel until December 2035. At the end of
the concession period, the concession asset is returned to the New South Wales State Government.
The Concession Deed requires Transurban to maintain the tunnel to specified conditions.
Toll increases for the Tunnel are based on a maximum toll increase as defined in the Concession Deed, being a
quarterly escalation at the greater of quarterly CPI or 0.74 per cent until December 2017, and CPI thereafter.
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 intangible assets have suffered any impairments, in accordance with the accounting
policy stated in note 1(h). The recoverable amount of assets 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.
192
192
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
2014
$M
14
158
172
2014
$M
400
351
751
1,095
296
3,622
5,013
5,764
2013
$M
25
209
234
2013
$M
-
438
438
1,504
-
3,111
4,615
5,053
Notes
18(a)
18(c)
18(a)
18(b)
18(c)
17 Current liabilities - Trade and other payables
Trade payables and accruals
Related party payables
18 Borrowings
Current
Term debt
Loans from related parties
Non-current
Term debt
Capital Markets debt
Loans from related parties
Total borrowings
(a) Term debt
The term debt facilities are comprised of:
$225.0 million facility entered into by AMT Management Limited (as trustee for Airport Motorway Trust). The
facility has deferred borrowing costs of $1.8 million.
$740.0 million facility entered into by Hills Motorway Management Limited (as trustee for Hills Motorway
Trust) of which $400 million is current at 30 June 2014. The facility has deferred borrowing costs of $1.4
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 $1.1 million.
A $276.5 million facility entered into by Transurban CCT Nominees Pty Limited (as trustee for Transurban
CCT Trust). The facility has deferred borrowing costs of $1.9 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 $225.0 million non-
recourse syndicated facility with a term of seven years. The current floating interest rate applicable to the facility
is 2.7 per cent (2013: 2.8 per cent). The facility is currently fully hedged to an all-in rate after hedging of 7.5 per
cent.
193
193
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
18 Borrowings (continued)
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 construction capex facility of $275.0 million with a
term of six years. As at 30 June 2014, the construction capex facility was fully drawn. The current floating
interest rate applicable to the total facility is 2.7 per cent (2013: 2.9 per cent). The total facility is currently 86 per
cent hedged with an all-in rate after hedging of 7.1 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 2.7 per cent (2013:
2.9 per cent). The facility is currently fully hedged to an all-in rate after hedging of 4.2 per cent.
The Cross City Tunnel facility was established in June 2014 to partially finance the acquisition of the Cross City
Tunnel. The facility is fully secured against the respective rights of Transurban CCT Pty Limited and Transurban
CCT Trust and their assets. This facility is a non-recourse syndicated facility with a term of three years. The
current floating rate applicable to the facility is 2.7 per cent. The facility is currently fully hedged to an all-in rate
after hedging of 4.3 per cent.
(b) Capital markets debt
This facility comprises of the following:
$300.0 million fixed rate bonds raised in November 2013 with a term of seven years. Interest is payable at 5.5
per cent. This facility is fully secured against the respective rights of Airport Motorway Limited and Airport
Motorway Trust and their assets.
The above facility has deferred borrowing costs of $4.2 million.
(c) Loans from related parties
The Group receives funding from a related party, Transurban Finance Company Pty Limited, which is used to
finance its activities. Borrowing costs are also passed down.
Covenants
The Group's consolidated external debt has the following Interest Coverage Ratio ("ICR") covenants:
M1 Eastern Distributor - ICR greater than 1.15 times
Hills M2 Motorway - ICR greater than 1.2 times
Lane Cove Tunnel - ICR greater than 1.15 times
Cross City Tunnel - ICR greater than 1.15 times
194
194
2014 Transurban Annual Report
19 Current liabilities - Provisions
Distribution to security holders
Distribution to non-controlling interests in subsidiaries
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Notes
19(a)
19(a)
2014
$M
322
39
361
2013
$M
178
33
211
(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:
2014
Carrying amount at 1 July
Provision recognised
Amounts paid/utilised during the year
Carrying amount at 30 June
Distribution to
non-
controlling
interests in
subsidiaries
$M
Distribution
to security
holders
$M
178
523
(379)
322
33
15
(9)
39
195
195
2014 Transurban Annual Report
20 Other liabilities
Current
Unearned income (related parties)
Non-current
Promissory notes
Total other liabilities
(a) Unearned income
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Notes
20(a)
20(b)
2014
$M
2013
$M
46
46
25
25
71
27
27
23
23
50
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 Services 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 (2013: 12 per cent)
which recognises their subordinated nature.
The face value of Promissory Notes on issue at 30 June 2014 is $158.6 million (2013: $147.6 million). The net
present value at 30 June 2014 of the redemption payments relating to these Promissory Notes is $24.6 million
(2013: $22.9 million).
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
Ordinary units fully paid
2014
Number
M
1,896
1,896
2013
Number
M
1,482
1,482
2014
$M
9,472
9,472
2013
$M
7,336
7,336
196
196
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
21 Issued units (continued)
Units in trust
The number of units on issue is 1,896,384,073 (2013: 1,481,594,818).
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.
Movements in issued units
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
Opening balance at 1 July 2013
Distribution reinvestment plan
Transfer vesting portion of LTI from share-based payment reserve
Deferred Short Term Incentives issued
Institutional Share offer
Share Placement
Retail Share offer
Closing balance at 30 June 2014
(a) Distribution reinvestment plan
Notes
21(a)
21(c)
21(d)
21(a)
21(d)
21(e)
21(e)
21(e)
Number of
units
M
1,458
6
1
16
1
1,482
1,482
10
-
-
264
57
83
1,896
$M
7,241
24
1
68
2
7,336
7,336
42
1
1
1,360
310
422
9,472
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.
197
197
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
21 Issued units (continued)
(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 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.
(e)
Institutional and retail offer and placement
On 1 May 2014, the Transurban Group successfully completed the fully underwritten institutional component of
its accelerated renounceable 10 for 43 pro rata entitlement offer at an offer price of $6.75, raising approximately
$1.79 billion. The retail component of the offer was successfully completed on 29 May 2014 and raised gross
proceeds of approximately $557 million.
As part of the entitlement offer, the Transurban Group also completed a placement of securities to its
Queensland Motorways consortium bid partners AustralianSuper and Tawreed, raising gross proceeds of
approximately $400 million.
The total gross proceeds for the Transurban Group from the entitlement offer and placement were approximately
$2.74 billion, and were used to fund the Transurban Group’s equity contribution for the Queensland Motorways
acquisition, which completed on 2 July 2014.
22 Reserves and accumulated losses
Reserves
Cash flow hedges
Share-based payments
Movements:
Cash flow hedges
Balance 1 July
Revaluation - gross (note 14)
Amount attributable to non-controlling interests
Balance 30 June
198
198
2014
$M
(40)
5
(35)
2014
$M
(57)
19
(2)
(40)
2013
$M
(57)
5
(52)
2013
$M
(76)
21
(2)
(57)
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
22 Reserves and accumulated losses (continued)
Reserves (continued)
Share-based payments
Balance 1 July
Employee share plan expense
Transfer vesting portion of LTI to issued units
Deferred Short Term Incentives issued
Balance 30 June
Nature and purpose of other reserves
2014
$M
5
2
(1)
(1)
5
2013
$M
7
4
(4)
(2)
5
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.
Accumulated losses
Movements in accumulated losses were as follows:
Balance 1 July
Profit for the year attributable to unit holders of Transurban Holding Trust
Distributions to unit holders
Balance 30 June
2014
$M
(1,780)
345
(523)
(1,958)
2013
$M
(1,804)
378
(354)
(1,780)
199
199
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
23 Distributions
Distribution payable
Final distribution for 2014 financial year payable and recognised as a liability:
17.0 cents (2013: 12.0 cents) per fully paid Stapled Security payable 14 August
2014
Final unfranked distribution payable and recognised as a liability: 14.5 cents
(2013: 12.0 cents) per fully paid Stapled Security payable 14 August 2014
Fully franked final distribution based on tax paid at 30%: 2.5 cents (2013: nil) per
fully paid Stapled Security
Distributions paid during the year
Final distribution for 2013 financial year of 12.0 cents (2012: 11.5 cents) per fully
paid Stapled Security paid 14 August 2013
Interim distribution for 2014 financial year of 13.5 cents (2013: 12.0 cents) per
fully paid Stapled Security paid 14 February 2014
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 2014
and 30 June 2013
Paid in cash
Satisfied by issue of Stapled securities (a)
2014
$M
2013
$M
275
47
322
178
201
379
2014
$M
327
52
379
178
-
178
168
176
344
2013
$M
317
27
344
(a) The value of stapled securities represents the total value of securities issued; however, this value is
apportioned between Transurban Holdings Limited ($7.7 million), Transurban Holding Trust ($43.3 million),
and Transurban International Limited ($1.0 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.
25 Intra-group guarantees
As at 30 June 2014, 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.
200
200
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
26 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
2014
$M
20
-
20
2013
$M
55
1
56
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.
27 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.
201
201
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
27 Related party transactions (continued)
The following transactions occurred with related parties:
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
Other administration costs
Aggregate amounts of related party assets at balance date
Current receivables
Term loan notes (loan to associate)
Non-current receivables
Concession notes
Aggregate amounts of related party liabilities at balance date
Current liabilities
Non-current liabilities
2014
$M
2013
$M
272
419
103
794
267
3
9
279
2,418
887
6,117
795
10,217
509
3,622
4,131
266
389
97
752
245
3
-
248
369
832
5,874
718
7,793
648
3,110
3,758
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’s”). The TLN’s 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’s 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.
202
202
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
28 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):
Country of
incorporation Class of shares
Equity holding
Name of entity
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
Transurban CCT Holdings Trust
Transurban CCT 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
Sun Group Invest Trust
Australia
Australia
Australia
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
Ordinary
Ordinary
Ordinary
2014
%
100
100
100
100
100
100
100
100
75.1
100
100
100
100
100
100
100
100
100
100
100
100
62.5
The proportion of ownership interest is equal to the proportion of voting power held.
203
2013
%
100
100
100
100
100
100
100
100
75.1
100
100
-
-
100
100
100
100
100
100
100
100
-
203
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
29 Non-Controlling interests
(a) Non-controlling interests (NCI)
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are
material to the Group. The amounts disclosed for each subsidiary are before inter-company eliminations.
Summarised balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Carrying amount of NCI
Summarised statement of comprehensive income
Revenue
Profit (loss) for the period
Other comprehensive income
Total comprehensive income
Profit allocated to NCI
OCI allocated to NCI
Airport Motorway
Trust
Sun Group
Invest Trust*
24.9%
37.5%
30 June
2014
30 June
2013
30 June
2014
30 June
2013
$M
21
837
(158)
(537)
163
(41)
$M
21
812
(135)
(544)
154
(38)
$M
21
-
-
-
21
(8)
$M
-
-
-
-
-
-
Airport Motorway
Trust
24.9%
Sun Group
Invest Trust*
37.5%
30 June
2014
$M
30 June
2013
$M
30 June
2014
$M
30 June
2013
$M
100
58
-
58
(14)
-
97
59
-
59
(15)
-
-
(19)
-
(19)
7
-
-
-
-
-
-
-
Airport Motorway
Trust
24.9%
Sun Group
Invest Trust*
37.5%
30 June
2014
30 June
2013
30 June
2014
30 June
2013
Summarised cash flow
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increases in cash and cash equivalents
$M
$M
-
-
-
-
-
-
-
-
Distributions paid to NCI
(9)
(10)
*Sun Group Invest Trust is the subsidiary of the Trust for the purpose of investing in Queensland Motorways
$M
(20)
40
-
20
-
$M
-
-
-
-
-
204
204
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(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
The parent entity has no contingent liabilities.
31 Events occurring after balance sheet date
2014
$M
3,442
9,135
12,577
473
3,776
4,249
2013
$M
1,013
8,181
9,194
323
2,854
3,177
(25,125)
(18,051)
9,472
5
(1,149)
8,328
697
697
7,336
4
(1,323)
6,017
445
445
The financial close on the acquisition of Queensland Motorways was completed on 2 July 2014. On this date the
Group raised $2,900 million in non-recourse debt to fund the acquisition of which $2,500 million was drawn on
that date. The financial effects of this transaction have not been brought to account at 30 June 2014. The
operating results and assets and liabilities of Queensland Motorways will be consolidated from 2 July 2014.
As at the date of this report the Directors are not aware of any other circumstances that have arisen since 30
June 2014 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, that have not otherwise been disclosed in the financial report.
205
205
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(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
Decrease in payables
(Increase) in operating related party balances
Movement in current tax liabilities and deferred taxes
Increase in unearned income
Increase in promissory note liability
Net cash inflow from operating activities
33 Non-cash investing and financing activities
Distributions satisfied by the issue of units under the distribution reinvestment
plan
34 Earnings per unit
Basic earnings per unit
Earnings attributable to the ordinary unit holder
Total basic earnings per unit attributable to the ordinary equity holders of the
Trust
Diluted earnings per unit
Earnings attributable to the ordinary unit holder
Total diluted earnings per unit attributable to the ordinary equity holders of the
Trust
2014
$M
352
123
(55)
(77)
10
(1)
11
(387)
(2)
19
2
(5)
2014
$M
42
2014
Cents
22.4
22.4
2014
Cents
22.4
22.4
2013
$M
393
109
(49)
(86)
10
1
-
(305)
(2)
6
3
80
2013
$M
24
2013
Cents
25.7
25.7
2013
Cents
25.7
25.7
206
206
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
34 Earnings per unit (continued)
Reconciliation of earnings used in calculating earnings per unit
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
Weighted average number of units used as the
denominator
2014
$M
352
(7)
345
2013
$M
393
(15)
378
Weighted average number of units used as the denominator in calculating
basic and diluted earnings per unit
2014
Number
2013
Number
1,539,476,092
1,470,495,508
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.
207
207
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
35 Share-based payments (continued)
Performance Awards Plan
(continued)
Grant date
Vesting /
Expiry date
Fair value at grant date ($)
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
TSR
EBITDA
FCF
Number
Number
Number
Number
Number
2014
1 Nov 2010
1 Nov 2013
23 Dec 2010 1 Nov 2013
26 Sep 2011 30 Jun 2014
11 Nov 2011 30 Jun 2014
15 Aug 2012 30 Jun 2015*
30 Jun 2015*
19 Oct 2012
14 Aug 2013 30 Jun 2016*
30 Jun 2016*
i Nov 2013
3.23
3.33
3.37
3.27
2.72
2.95
3.24
3.13
4.62
4.97
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4.63
4.81
4.99
5.43
6.07
6.21
Total
a
922,476
684,683
420,872
715,024
480,102
448,400
-
-
-
-
-
-
-
-
728,380
382,292
(789,978)
(592,320)
(267,256)
(511,886)
-
-
-
-
(132,498)
(92,363)
(153,616)
(203,138)
(113,537)
-
-
-
-
-
-
-
366,565
448,400
728,380
382,292
3,671,557 1,110,672 (2,161,440)
(695,152)
1,925,637
* vesting / expiry date refers to the ending date of the performance period. Actual vesting / expiry date is determined within 30 days of the
release of Transurban Group's financial results for that performance period.
Grant date
Vesting /
Expiry date
Fair value at grant date ($)
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
TSR
EBITDA
FCF
Number Number
Number
Number
Number
2013
11 Dec 2009
1 Nov 2010
23 Dec 2010
26 Sep 2011
11 Nov 2011
15 Aug 2012
19 Oct 2012
Total
a
11 Dec 2012
1 Nov 2013
1 Nov 2013
30 Jun 2014
30 Jun 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
1,625,994
1,201,077
684,683
661,932
715,024
-
-
- (1,624,766)
-
-
-
-
-
-
-
-
-
747,201
-
448,400
(1,228)
(278,601)
-
(241,060)
-
(267,099)
-
-
922,476
684,683
420,872
715,024
480,102
448,400
4,888,710 1,195,601 (1,624,766)
(787,988) 3,671,557
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 Flow component of the Performance Awards has only a non-market based vesting condition
which is not considered in the valuation. The valuation of these awards takes into account the security price at
grant date, and the expected dividend yield which represents the dividends over the life of the Awards that the
rights holder does not receive. A discounted cash flow model is used to perform this valuation.
208
208
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
35 Share-based payments (continued)
Assessed fair value (continued)
The Group is currently transitioning to a face value approach (discounted for distributions) for the FCF
component. The transition is over 3 years and all things being equal there will be a decrease in the number of
awards recipients receive until the new methodology is achieved. This transition will be completed for grants
made during FY2016.
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
the first, second and third anniversaries of his employment date. Upon vesting, the awards will automatically
exercise and settle in securities. No dividends or distributions on securities are payable prior to vesting.
Grant date
2014
14 Sep 2012
14 Sep 2012
Total
x
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
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
Number
16 Jul 2014
16 Jul 2015
$5.71
$5.71
78,752
78,752
157,504
-
-
-
(78,752)
-
(78,752)
-
-
-
-
78,752
78,752
Vesting /
Expiry date
Fair value
at grant
date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
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
Short Term Deferred Incentive Plan
For the 2014 financial year, the CEO and other Senior Executives had a target STI opportunity of 30 per cent of
their total remuneration package. Mandatory STI deferral of 50 per cent of the overall STI award now applies for
all grants to the CEO and other Senior Executives. STI payouts can vary between zero (if targets are not met)
and 150 per cent (for exceptional outperformance).
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 resident Senior Executives receive deferred
cash awards. STI deferral grants are made in the form of awards. Each award is an entitlement to receive a fully
paid security, or an equivalent cash payment, on terms and conditions determined by the Board. This 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).
209
209
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
35 Share-based payments (continued)
Short Term Deferred Incentive Plan (continued)
Vesting /
Expiry date
Fair value
at grant
date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
Number
1 Jul 2014
1 Jul 2014
$5.68
$5.68
642,388
-
443,736
642,388
443,736
(79,668)
-
562,720
443,736
(79,668)
1,006,456
-
-
Vesting /
Expiry date
Fair value
at grant
date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
Number
1 Jul 2014
$5.68
-
-
642,388
642,388
-
-
-
-
642,388
642,388
Grant date
2014
15 Aug 2012
15 Aug 2012
Total
Grant date
2013
15 Aug 2012
Total
Fair value
x
x
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 were eligible to participate in the Investment Tax Exempt Plan and
the Investment Tax Deferred Plan for the year ended 30 June 2014. Under the plans, Transurban provides
participants with a matching component toward the acquisition of the stapled securities. For the period 1 July
2013 to 30 June 2014, the cost of company matches was $139,918 (2013: $132,162) for the Investment Tax
Exempt Plan and $314,667 (2013: $450,374) 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
2014, each participant was allocated 100 stapled securities at a value of $6.94 per security. Stapled Securities
provided under the Plan were acquired on the open market. Eligible US based participants received an
equivalent cash award.
Shares purchased on the market under the plan and provided to participating
employees
2014
Number
50,800
2013
Number
45,900
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 (2013: $6.6 million).
210
210
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
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.
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.
Estimated impairment of intangible assets and cash generating units
The Group tests whether intangible assets and cash generating units have suffered any impairment, in
accordance with the accounting policy stated in note 1(h). 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. As
disclosed in Note 16, 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.
The Group does not consider that there have been any indicators of impairment in relation to any of its cash
generating units during the year.
211
211
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(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 Director
Scott Charlton
Non-executive Directors
Lindsay Maxsted (Chairman)
Neil Chatfield
Robert Edgar
Samantha Mostyn
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
A Head
S Hogg
L Petschel
S Johnson
T Steinhilber
L Tobin
V Vassallo
Group General Manager, North America
Group General Manager, Strategy
Group General Manager, New South Wales
Chief Financial Officer (departed 14 July 2014)
Acting Chief Financial Officer (from 14 July 2014)
Group General Manager, Human Resources
Group General Manager, Project Delivery and Operational Excellence (until 14 July 2014)
Group General Manager, Technology
Group General Manager, Victoria
212
212
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
2014 REMUNERATION REPORT (AUDITED)
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 2014 (FY2014).
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
Current Senior Executives
Scott Charlton, Executive Director and Chief Executive Officer (CEO)
Jennifer Aument, Group General Manager, North America
Wesley Ballantine, Group General Manager, Queensland (from 4 June 2014, formerly Group General Manager, Strategy)
Andrew Head, Group General Manager, New South Wales
Samantha Hogg, Chief Financial Officer (1)
Sue Johnson, Group General Manager, Human Resources
Tim Steinhilber, Group General Manager, Delivery and Operational Excellence (1)
Lisa Tobin, Group General Manager, Technology
Vin Vassallo, Group General Manager, Victoria
Former Senior Executives
Michael Kulper, President North America (departed 3 September 2013)
(1) On 14 July 2014, the Group announced changes to KMP. Samantha Hogg departed the Group and Tim Steinhilber has transferred back to the
USA. Refer to section 1B for further details.
Contents
1 Remuneration snapshot
2 Remuneration governance
3 Remuneration in context
4 CEO / Senior Executive remuneration for FY2014
5 Link between Group performance, security holder wealth and remuneration
6 Non-executive director remuneration
All values in this report are in Australian dollars, unless otherwise stated.
213
214
216
217
218
238
240
213
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Remuneration snapshot
The Transurban Board is committed to an executive remuneration framework that is focused on
driving a performance culture and linking pay to the achievement of the Group’s strategy and
business objectives and, ultimately, generating security holder value.
Transurban’s remuneration framework is reviewed annually taking into consideration security holder and
other stakeholder feedback, market expectations and regulatory developments.
At the 2013 Annual General Meeting (AGM), the framework received strong support from security holders,
with a 98.8% vote in favour of the resolution to adopt the 2013 Remuneration Report.
There were no substantive changes to the framework in FY2014, but some refinements were made to
further align remuneration with the creation of sustainable security holder value, business outcomes, and
the Group’s organisational values: integrity, collaboration, accountability, ingenuity and respect.
In particular, changes were made to the Short Term Incentive (STI) program for all eligible employees,
which were aimed at enhancing this variable pay element through increased performance differentiation,
the introduction of formal performance comparisons against peers, and strengthening the link between
individual and Group performance.
A
TRANSURBAN’S REMUNERATION FRAMEWORK
The key elements of the remuneration framework for the CEO and other Senior Executives for FY2014
were as follows:
Remuneration mix
The remuneration of the CEO and other Senior Executives was structured as a mix of fixed remuneration
and variable ('at risk') remuneration through short term and long term incentive components. The relative
weightings of the three components were as follows:
Total remuneration % (annualised at target)
Fixed TEC
Variable (performance based)
CEO
Senior Executives
40
45
STI
30 (50% deferred)
30 (50% deferred)
LTI
30
25
* All Senior Executives moved to 50% STI deferral effective 1 July 2013.
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.
214
214
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Short term incentive (STI)
During FY2014, changes were made to the STI program to achieve greater performance differentiation.
The link between Group and individual performance was also strengthened by using individual
performance as a multiplier when calculating reward for Group performance.
Group performance measures under the new STI program were again linked to growth in proportional
EBITDA, cost management based on proportional net costs, and safety. See section 5 for further details.
Individual performance continues to be measured against key performance indicators (KPIs). Under the
new STI program, each individual’s assessment will be used in determining a rating relative to peers. The
overall rating will derive an individual’s STI using a payment schedule as determined by the Board
designed to encourage high performance.
During FY2014, the proportion of the STI award subject to mandatory deferral was aligned for the CEO
and all Senior Executives, so that all members of KMP now have 50 per cent of their STI award deferred
for two years. Increasing the level of STI deferral (from 30% when it was first introduced in FY2012)
strengthens the link between KMP performance and security holder value and provides a greater retention
element.
For Australian Senior Executives, STI deferral is into securities. Due to legal restrictions on the issue of
securities to USA residents, the USA resident Senior Executives receive deferred cash awards. The
deferred component of remuneration may, at the discretion of the Board, be subject to forfeiture or
clawback (eg. in the event of misconduct or material misstatement of financial results).
Long term incentive (LTI)
For FY2014, 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, telecommunications and construction
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 maximising free
cash flow to drive security holder return. The definition of FCF per security is set out on page 227 of
the audited financial statements. The FCF calculation is included in note 22 of the Transurban
Holdings Limited audited financial statements.
B
OTHER EVENTS / ACTIONS IMPACTING REMUNERATION IN FY2014
USA restructure
As previously disclosed, the Group’s New York office was closed in FY2014. As a consequence, it was
determined that the position of President, North America was no longer required. As no suitable positions
were available for Michael Kulper (the incumbent), his employment with the Group ceased on 3
September 2013.
On ceasing employment as President, North America, Michael Kulper received a sum equivalent to 3
months TEC as a payment in lieu of notice (USD 247,450), and he was paid (USD 304,554) (equivalent to
16 weeks TEC) severance payment.
The following arrangements also applied to Michael Kulper:
he retained the deferred securities granted to him under the FY2012 and FY2013 STI plans in
accordance with their original terms; and
he retained a pro-rated proportion of his LTI awards granted to him under the FY2011 (161,103
Performance Awards), FY2012 (111,721 Performance Awards) and FY2013 (65,293 Performance
Awards) LTI plans 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. Michael Kulper
was not eligible to participate in the FY2014 LTI plan.
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Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Queensland Motorways
In April 2014, a Transurban-led consortium was announced as the successful bidder for Queensland
Motorways, which operates a network of toll roads in and around Brisbane. Financial close was achieved
on 2 July 2014.
Wesley Ballantine, Group General Manager, Strategy, was appointed to the position of Group General
Manager, Queensland on 4 June 2014. Wesley Ballantine has been employed by the Group since 2006.
Wesley Ballantine’s remuneration was reviewed on this change in role, taking into account benchmark
data and internal relativities. Refer to section 4.
Changes to KMP
On 14 July 2014, Transurban announced changes to its Executive Committee. Samantha Hogg, Chief
Financial Officer, left the Group on 14 July 2014 after six years with the business. Tim Steinhilber, Group
General Manager, Project Delivery and Operational Excellence, transferred back to the USA to support
the delivery of the I95 project that is scheduled for completion at the end of 2014. The remuneration
arrangements applying to Samantha Hogg on her departure, will be disclosed in the 2015 report.
Anthony Adams, currently Vice President, Infrastructure, Major Projects, and based in the USA, will
transfer back to Australia to assume the role of Group General Manager, Project Delivery and Operational
Excellence. Anthony joined Transurban in June 2003.
Leigh Petschel, currently General Manager, Finance, is Acting Chief Financial Officer. Leigh joined
Transurban in October 2013.
2 Remuneration governance
A
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.
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 FY2014. The
members of the Committee continue to be Robert Edgar (Chair), Samantha Mostyn and Neil Chatfield.
Further details regarding the Committee are set out in the Directors’ report.
The Remuneration and Human Resources Committee reviews gender pay equity annually. The Group
has focused on achieving pay equity at all work levels in the organisation and the FY2014 outcomes
indicate that this objective has substantially been achieved.
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Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
B
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 by Directors.
Those consultants who provided the Remuneration and Human Resources Committee with a
remuneration recommendation relating to KMP during FY2014, and who have been deemed by the Group
to be ‘remuneration consultants’, are listed below:
Consultant
Fees for remuneration
recommendations
Ernst & Young
$10,000
Fees for other advice provided to the
Group during FY20141
$768,079
1 Fees for other advice includes the review of USA tax returns, expatriate taxation requirements, audit of various undertakings and
general consulting
Ernst & Young was selected by the Remuneration and Human Resources Committee and commissioned
and instructed by the Chair of the Committee in accordance with the applicable protocol. Ernst & Young’s
appointment terms specified that all remuneration recommendations and advice be sent directly to the
Committee through the Chair, and prohibited the provision of such material or other information directly to
management. The appointment
their
recommendations, both a declaration of independence from the KMP to whom their recommendations
related, and also confirmation of the Committee’s conditions for contact and dialogue with management
had been observed. Ernst & Young provided such a declaration and confirmation in relation to their
remuneration recommendations.
that Ernst & Young provide, with
terms also required
In this way, the Committee and the Board have been assured and are satisfied that Ernst & Young’s
remuneration recommendations and advice were made free from undue influence from management
generally and from KMP specifically.
3 Remuneration in context
Transurban is a top 20 Australian Securities Exchange listed business and is the largest transport
infrastructure entity in Australia, and one of the largest toll road entities in the world. 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.
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Notes to the consolidated financial statements
30 June 2014
(continued)
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 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. 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, Lane Cove Tunnel and Cross City 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) and, from
2 July 2014, Queensland Motorways in Brisbane (62.5 per cent).
In North America, the Group currently has interests in two assets, the 495 Express Lanes (94.0 per cent),
and the 95 Express Lanes project (77.5 per cent), which is currently under construction and remains on
schedule for completion in late 2014.
4 CEO / Senior Executive remuneration for FY2014
A
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.
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The Group's remuneration strategy and policy as set by the Board is summarised below:
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
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 ('at risk') remuneration
Short term incentive (STI):
Annual rewards tied to pre-determined individual and Group performance measures, and includes a
deferred element (into securities)
Individual performance against targets and comparable performance against peers are used to determine
an outcome
Individual targets reflect individual specific accountabilities and key drivers for growth and success
Group performance targets linked to earnings, cost management and safety
Individual performance outcome provides a multiplier for the Group performance element (linking the two
elements)
Maximum potential STI is capped at 150 per cent
Long term incentive (LTI):
Equity rewards to align executive and security holder interests (using indeterminate rights)
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
Maximum LTI opportunity is capped at 100%
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Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
B
REMUNERATION MIX
For FY2014, 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:
Total remuneration % (annualised at target)*
Fixed TEC
Variable (performance based)
CEO
Senior Executives
40
45
STI**
30 (50% deferred)
30 (50% deferred)
LTI
30
25
* These figures may 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.
**All Senior Executives moved to 50% STI deferral for grants made in FY2014.
C
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 must be 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.
D
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 the Group’s
organisational values.
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Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
For FY2014, the CEO and other Senior Executives had a target STI opportunity of 30 per cent of their
total remuneration package. Mandatory STI deferral of 50 per cent of the overall STI award now applies
for all grants to the CEO and other Senior Executives. STI payouts can vary between zero (if targets are
not met) and 150% (for exceptional outperformance).
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 resident Senior Executives receive
deferred cash awards. STI deferral grants are made in the form of awards. Each award is an entitlement
to receive a fully paid security, or an equivalent cash payment, on terms and conditions determined by the
Board. This 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 FY2014?
The STI performance measures for the CEO and other Senior Executives for the year ended 30 June
2014 were chosen to provide a balance between corporate, individual, operational, strategic, financial and
non-financial aspects of performance and are described below:
Measure
Group
performance
target
(1) Growth in proportional EBITDA (20% weighting)
The proportional EBITDA targets were set against the previous year's results
and the Group's FY2014 budget. The EBITDA target excluded the 495 Express
Lanes.
Proportional EBITDA result
% STI that vests^
Less than 10% above underlying result for FY2013
10% above underlying result for FY2013
Budget EBITDA for FY2014 ($926 million)
16% above underlying result for FY2013
zero
50
100
150
^ Straight line vesting applies between 50-100% and 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 FY2014 budget. The proportional net costs target included the
495 Express Lanes.
Proportional net costs result
Over FY2014 budget
FY2014 budget ($201 million)
FY2014 budget less $5 million
FY2014 budget less $15 million
% STI that vests^
zero
50
100
150
^ Straight line vesting applies between 50-100% and 100-150%.
(3) Safety targets (10% weighting)
The safety target was a lead indicator that required the completion of safety
development action plans. The target is split with equal weighting between
employee/contractor (5%) and customer (5%) safety targets.
Safety target result
% STI that vests^
Less than 60% safety action plan items implemented
60% safety action plan items implemented
75% safety action plan items implemented
90% safety action plan items implemented
^ Straight line vesting applies between 50-100% and 100-150%.
zero
50
100
150
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Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Individual key
performance
indicators
(KPIs)
Individual KPIs (50% weighting), were unique to the individual's area of
accountability, and in FY2014 related to critical business sustainability
measures, including: operational excellence, strategy, people and leadership,
operational performance, cost
reduction, customer satisfaction, project
outcomes, succession planning, risk management, growth and business plan
implementation. 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, taxes, depreciation and amortisation) is a common operational
performance measure used by many companies.
Proportional EBITDA is one of the primary measures that 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 for FY2014 does not include the
EBITDA contribution for those assets which are equity accounted (M5 and M7). DRIVe’s EBITDA is also
excluded from the statutory results for the period that it was equity accounted (1 July 2013 to 4 June
2014). Proportional EBITDA figures used to assess performance are included in note 2 of the Transurban
Holdings Limited audited financial statements.
The Board can decide to exclude specific items from proportional EBITDA to provide an underlying result
when determining performance incentives. For FY2014, the Board resolved to exclude the 495 Express
Lanes from the proportional EBITDA measure as this is a period of ramp-up for this asset. The 495
Express Lanes opened to traffic in November 2012 giving the Group limited toll revenue historical data
when setting targets for FY2014.
Proportional EBITDA has been used by the Group as an STI performance measure since 2009.
What are proportional net costs and why is this used as a performance measure?
Proportional net costs are calculated as fee and other revenue less total costs of the Group. Costs after
fee and other revenues encourage 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 management’s 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 have been used by the Group as an STI performance measure since 2010.
The proportional net costs measure for FY2014 includes costs associated with 495 Express Lanes, as
there is a known cost base to work from and drive efficiencies.
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Notes to the consolidated financial statements
30 June 2014
(continued)
What were the changes to the STI program introduced in FY2014?
The STI program was reviewed in FY2014 and changes implemented to achieve a program that provides
greater performance differentiation between participants. The link between Group and individual
performance has been strengthened by using individual performance as a multiplier when calculating
reward for Group performance.
In FY2014, Group performance measures under the new STI program were again linked to growth in
proportional EBITDA, cost management based on proportional net costs, and safety.
Individual performance continues to be measured against KPIs, with an overall outcome reached for each
participant against target. Under the new program, this information is used to assist with providing a rating
which will consider performance comparative both to peers and against the Group’s values. The overall
rating will derive a STI using a payment schedule as determined by the Board designed to encourage and
reward high performance.
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 considers the appropriate rating for each Senior Executive,
taking into account their comparable performance and behaviours against the Group’s values. The Board
then approves STI awards. STI cash awards for FY2014 will be paid in August 2014. The STI deferred
component for FY2014 will be awarded in August 2014 and will vest, subject to continuity of employment
(unless otherwise determined by the Board) and clawback provisions, on 1 July 2016.
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 before the STI targets are assessed?
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.
How is the annual STI pool determined?
The Board approves a pool to be distributed for the annual STI program (cash and deferred
securities/cash). The pool is the sum of all eligible employee’s possible STI outcomes at 100 per cent
target (TEC multiplied by their STI opportunity). This value is divided by two and each half is treated as
follows: one half represents the individual component of the STI and is capped at 100 per cent, the
second half is multiplied by the Group’s performance outcome to represent the Group’s performance
component and is capped at 150 per cent. The overall pool is capped at 125 per cent.
The Board has discretion as to the proportion of the pool that will be distributed in any given year.
What is the maximum and minimum payment an individual can receive under the STI plan?
The minimum payment an individual can receive is 0% and the maximum is 150% of their STI opportunity.
What were the changes to the STI deferral?
During FY2014, those Senior Executives who had been on the old arrangement of 30 per cent deferral (S
Hogg and A Head) were moved to 50 per cent deferral. This applies for grants made from 1 July 2013
onwards.
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Notes to the consolidated financial statements
30 June 2014
(continued)
What were the Group STI performance outcomes for FY2014?
Group performance in respect of the proportional EBITDA, proportional net costs and safety STI
performance measures for FY2014 was assessed by the Board as 125.5% of the possible STI
opportunity. It should be noted that the transaction costs associated with the acquisition of Queensland
Motorways ($5.9 million) and Cross City Tunnel ($3.1 million) were included in both the proportional
EBITDA and proportional net cost outcomes.
Measure
Proportional EBITDA
Proportional net costs
Safety action plan items implemented
Overall Group Performance
Performance
$931.2 million1
$182.6 million
76%
-
1 For FY2014 the 495 Express Lanes are excluded from the Proportional EBITDA measure.
Outcome
113.7%
150.0%
100.0%
125.5%
What were the individual STI performance outcomes and awards for the CEO and Senior
Executives for FY2014?
1
O
n
-
t
a
r
g
e
t
Current Senior
Executives
S Charlton
J Aument
W Ballantine
A Head
S Hogg
S Johnson
1
T Steinhilber
O
n
1
1
L Tobin
V Vassallo
STI outcome (%)
Actual STI awarded1 ($)
Individual
KPIs
131.0
Group
performance2
164.4
90.0
131.0
125.0
50.0
88.0
75.0
88.0
115.0
113.0
164.4
156.9
62.8
110.4
94.1
110.4
144.3
Total
147.7
101.5
147.7
140.9
56.4
99.2
84.6
99.2
Cash3
1,039,250
162,394
207,225
294,000
131,100
136,800
145,700
174,675
129.7
228,275
Deferred into
securities
1,039,250
162,394
207,225
294,000
131,100
136,800
145,700
174,675
228,275
STI
forfeited
(%)
-
-
-
-
43.6
0.8
15.4
0.8
-
1 On-target performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI in respect of
FY2014 was nil.
2 The Group performance outcome is determined by multiplying the individual percentage outcome by the Group’s percentage outcome
of 125.5%.
3 The cash STI payments will be paid in August 2014. The STI deferred component (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 2016.
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Notes to the consolidated financial statements
30 June 2014
(continued)
What was the grant and movement in the number of STI deferred awards?
Mandatory STI deferral was introduced in FY2012, with the first grant of awards made in August 2012.
Grants were also made in August 2013 as detailed below:
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*
S Charlton2
J Aument
W Ballantine
A Head
S Hogg
S Johnson
-
14,789
15,212
22,449
18,973
16,540
108,486
14,282
17,328
15,202
17,944
21,288
-
-
-
-
-
-
-
-
-
-
-
-
108,486
29,071
32,540
37,651
36,917
37,828
-
-
6,612
21,192
19,356
T Steinhilber
L Tobin2
V Vassallo2
Former Senior Executives
M Kulper1
1 M Kulper was employed for the full FY2013 performance year, and received 22,813 awards in respect of that period. He has retained
his deferred cash awards in the STI plans in accordance with their original terms.
2 Scott Charlton, Lisa Tobin and Vin Vassallo had a zero opening balance at the beginning of FY2014, as they 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. They all
received a grant during FY2014, in respect of the FY2013 performance period.
22,813
59,277
40,548
36,464
6,612
6,612
6,612
-
-
-
-
-
-
-
-
E
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 FY2014, 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.
LTI grants are generally made twice per annum – once following the annual performance review (August)
for Senior Executives excluding the CEO, and at a later date in November for the CEO. This is to allow the
CEO’s grant of performance awards to be put to security holder vote at the AGM.
Two performance measures are used to determine the number of performance awards that will vest at the
end of the performance period. Total Shareholder Return (TSR) provides a comparison for Transurban’s
performance against those companies with which the Group competes for capital. Additionally, growth in
Free Cash Flow (FCF) helps to retain a focus on maximisation of free cash. The maximum opportunity
following these tests is capped at 100%.
The performance awards will, subject to achievement of the two performance measures against the
vesting schedules, vest and be automatically exercised at the vesting date with no exercise price payable
by the recipient. 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 Executive receives a cash payment upon vesting.
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Notes to the consolidated financial statements
30 June 2014
(continued)
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 is the Group’s LTI allocation valuation methodology?
A fair value approach is applied for the TSR allocation. The Group is currently transitioning to a face value
approach (discounted for distributions) for the FCF component. The transition is over 3 years and all
things being equal there will be a decrease in the number of awards recipients receive until the new
methodology is achieved. This transition will be completed for grants made during FY2016.
What were the LTI performance measures for FY2014?
Performance awards granted during the FY2014 are subject to a three year performance period and the
following dual performance measures over that period:
Measure
Description of measure
Relative TSR
(50% weighting)
Relative TSR is measured against a bespoke comparator group comprising companies in
the transport, utilities, real estate, telecommunications and construction Global Industry
Classification Standards (GICS) sectors of the ASX 150. The 42 companies in this group
are:
Abacus Property Group, AGL Energy Limited, Auckland International Airport Limited,
Asciano Limited, Australand Property Group, APA Group, Aurizon Holdings Limited, BWP
Trust, CFS Retail Property Trust Group, Charter Hall Group, Commonwealth Property
Office Fund, Charter Hall Retail REIT, DUET Group, Dexus Property Group, Envestra
Limited, Federation Centres Limited, Goodman Group, GPT Group, iiNet Limited, Investa
Office Fund, Leighton Holdings Limited, Lend Lease Group, Mirvac Group, Monadelphous
Group Limited, Macquarie Atlas Roads Limited, M2 Telecommunications Group Limited,
Qantas Airways Limited, Qube Logistics Holdings Limited, Shopping Centres Australasia
Property Group, Stockland, Spark Infrastructure Group, SP AusNet, Sydney Airport,
Transurban Group, Telecom Corporation of New Zealand Limited, Telstra Corporation
Limited, Toll Holdings Limited, TPG Telecom Limited, UGL Limited, Virgin Australia
Holdings Limited, Westfield Group, Westfield Retail Trust.
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 2014, 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 Group’s relative TSR ranking in
the comparator group
% of performance awards that vest
At or below the 50% percentile
Nil
Above the 50th percentile but below
the 75th percentile
Straight line vesting between 50 and 100
At or above the 75th percentile
100
226
226
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Measure
Description of measure
Growth in FCF
per security
(50% weighting)
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 22 of the Transurban Holdings Limited audited
financial statements.
For performance awards granted during the year ended 30 June 2014, the FCF per
security component will vest based on the Group's compound annual growth targets
translated into annual FCF per security over the three year performance period, as set
out below:
Growth in FCF per security vesting schedule:
% annual growth in FCF per security
% of performance awards that vest
Less than 12%
Nil
Between 12% and 15%
Straight line vesting between 50 and 100
15% or more
100
For performance awards granted during FY2015, the performance target range for
growth in FCF per security is between 10.0 per cent and 13.0 per cent per annum. This
is calculated from a base of 35.0 cents per security for FY2014, which is aligned to the
FY2014 distributions paid. The Board has determined to use this base due to significant
shifts in equity issued by the Group during the period, in particular 404.5 million
securities issued in May 2014 associated with the Queensland Motorways acquisition.
The 35.0 cent per security base is considered the best point of alignment with security
holders’ expectation for growth in free cash.
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. The vesting schedule applied is in line with market practice, with straight line vesting
between 50% and 100% for performance above the 50th percentile up to the 75th percentile for
performance against the comparator group.
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 FY2013.
Why has the FCF target for FY2014 of 12-15% increased from 6-9% in FY2013?
Transurban regularly updates its corporate model to reflect the latest assumptions regarding traffic,
operating costs, maintenance costs, discount rates, etc. The Transurban Board considers the Group’s
potential performance over any given three year period and relates remuneration incentives to these
expectations. Most importantly, it is the Board’s role to assess the realistic nature of cash flow
expectations and set challenging but realistic targets. One target may be appropriate one year, but not so
another year. The completion of construction for the M2 was a contributing factor for the change in the
FCF target from FY2013 to FY2014.
227
227
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Why is a three year performance period used for LTIs?
The three year performance period for LTI has been set in line with market practice. The Board continues
to monitor market practice in this regard.
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 FY2014 will be subject to the incumbent Board's discretion.
228
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2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
What was the grant, and movement in the number and value, of performance awards during
FY2014?
Eligible Senior Executives (excluding the CEO) received performance awards with a grant date of 15
August 2013. Following the receipt of security holder approval at the 2013 AGM, the CEO received
performance awards with a grant date of 1 November 2013. All performance awards granted in FY2014
vest subject to a performance period from 1 July 2013 through to 30 June 2016.
The relevant values of the grants are as follows:
Recipient
Grant date
Fair value of awards
at grant date1($)
Closing security
price at grant
date
Eligible Senior Executives 15 August 2013
Relative TSR
$3.24
FCF per security
$6.07
CEO
1 November 2013
$3.13
$6.21
$6.89
$6.97
1 An explanation of the pricing model used to calculate these values is set out in note 36 to the audited Transurban Holdings Limited
financial statements.
Performance awards granted in FY2014
Name
Current Senior Executives
S Charlton1
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
L Tobin
V Vassallo
Number of
performance
awards granted2
Value at
grant date ($)
Maximum total value
of grant yet to vest3($)
382,292
74,494
62,630
94,767
105,633
62,630
78,267
79,980
79,980
1,713,466
1,713,466
334,159
280,940
425,098
473,841
280,941
351,084
358,768
358,768
334,159
280,940
425,098
473,841
280,941
351,084
358,768
358,768
1 The grant made to the CEO constituted his LTI entitlement for FY2014 and was made following security holder approval at the 2013
AGM on the terms summarised above. Performance awards vest subject to performance over the period from 1 July 2013 through to 30
June 2016.
2 The grants made to Senior Executives assume full vesting of their full LTI entitlement for FY2014 and were made on the terms
summarised above. Performance awards vest subject to performance testing over the period from 1 July 2013 through to 30 June 2016.
3 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.
229
229
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
F
LEGACY LTI PLANS
The Group has a number of LTI plans that were offered in previous years, as detailed below:
Plan
Grant date
FY2013 PAP
15 Aug 2012
FY2012 PAP
26 Sep 2011
FY2011 PAP
1 Nov 2010
19 Oct 2012 (CEO only)
11 Nov 2011 (CEO only)
Performance
period
External
performance
measure (50% of
grant)
1 Jul 2012 – 30 Jun 2015
1 Jul 2011 - 30 Jun 2014
TSR : 1 Nov 2010 -
1 Nov 2013
EBITDA : 1 Jul 2010 -
30 Jun 2013
Relative TSR
Relative TSR
Relative TSR
Comparator group 37 companies within
a bespoke comparator
group within the ASX150
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
At or above the 75th percentile
% of performance awards that vest
Straight line vesting between 50%-
100%
100% vests
Internal
performance
measure (50% of
grant)
Growth in free cash flow
(FCF) per security
Growth in free cash flow
(FCF) per security
Group's annual growth in
proportional EBITDA
From 6% - 9%
From 7% - 10%
From 7% - 11%
Compound Growth
% of performance awards that vest
Vesting schedule
At target
From target % to stretch %
50% vests
Straight line vesting between 50% -
100%
At or above stretch %
100% vests
Current status
To be tested after
30 Jun 2015
TESTED 71.59% vested
on 30 Jun 2014
TESTED 86.51% vested
on 1 Nov 2013
Awards on issue
814,965
–
–
Value of performance awards vested and lapsed in FY2014
The FY2011 PAP vested on 1 November 2013.
The outcome of the performance tests were as follows:
Test type
TSR
Result of test
Transurban ranked 33 out of 93 companies (65.21%)
Proportional EBITDA
85% of the target EBITDA range was achieved
Overall vesting
% units vest
80.42%
92.60%
86.51%
230
230
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
FY2011 PAP - Lapsed
FY2011 PAP - Vested
Number
Value ($)1
Number
Value ($)1
2,913
3,297
12,211
8,881
3,996
3,879
10,535
11,922
44,156
32,113
14,451
14,026
18,684
21,144
78,312
56,954
25,630
24,876
74,331
84,119
311,555
226,585
101,964
98,967
Current Senior Executives
J Aument2
W Ballantine2
A Head
S Hogg
S Johnson2
T Steinhilber2
Former Senior Executives
M Kulper
21,732
78,583
139,371
554,471
1 Based on the fair value at date of grant.
2 Awards granted prior to the Senior Executive becoming a member of KMP. Awards vested while the Senior Executive was a member
of KMP.
The FY2012 PAP vested on 30 June 2014.
The outcome of the performance tests were as follows:
Test type
TSR
Free Cash Flow
Overall vesting
Result of test
Transurban ranked 14 out of 31 companies (56.66%)
% units vest
63.32%
93.8 cents adjusted to 97.9 cents
79.86%
71.59%
Current Senior Executives
A Head
S Hogg
Former Senior Executives
FY2012 PAP - Lapsed
FY2012 PAP – Vested
Number
Value ($)1
Number
Value ($)1
30,616
28,785
116,784
109,799
77,150
72,535
314,102
295,314
M Kulper
31,739
121,070
79,982
325,629
1 Based on the fair value at date of grant.
The Board exercised its discretion to ensure that participants in the FY2012 PAP were neither
advantaged nor disadvantaged as a result of the Queensland Motorways (QM) acquisition and
associated capital raising. The issuance of 404.5 million new securities in May 2014 associated with the
funding of the QM acquisition occurred in FY2014, while financial close of the QM acquisition occurred in
FY2015. The Board exercised its discretion to, in effect, exclude the new securities issued to fund the
QM acquisition from the number of securities used to calculate the FY2014 Free Cash Flow (FCF) per
security for the purposes of calculating the FCF outcome for the FY2012 PAP. Interest income on the
equity raised prior to year end was similarly excluded from the calculation. The targets set at the
beginning of the performance period (1 July 2011) were not adjusted.
231
231
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Number of performance awards on issue as at 30 June 2014
The number of performance awards held by members of KMP as at 30 June 2014 is provided below.
Comparative data is shown for those Senior Executives who were members of KMP during both FY2014
and FY2013.
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
Current Senior Executives*
S Charlton
2014
2013
J Aument
2014
2013
W Ballantine
2014
2013
A Head
2014
2013
S Hogg
2014
2013
S Johnson
2014
2013
T Steinhilber
2014
2013
L Tobin
2014
2013
V Vassallo
2014
2013
Former Senior Executives
M Kulper
2014
2013
684,6561
–
382,292
684,6561
(78,752)
–
–
–
988,196
684,6561
21,597
39,3652
24,441
44,4712
311,043
257,636
292,851
214,633
29,626
52,7712
28,755
53,7712
–
–
–
–
508,549
491,675
74,494
–
62,630
–
(18,684)
(17,768)3
(21,144)
(20,030)3
(2,913)
–
(3,297)
–
74,494
21,597
62,630
24,441
94,767
(155,462)
(42,827)
112,754
(59,347)
–
207,521
311,043
105,633
125,754
(129,489)
(37,666)
(47,478)
–
231,329
292,851
62,630
–
78,267
–
79,980
–
79,980
–
–
178,830
(25,630)
(23,145)3
(24,876)
(25,022)3
–
–
–
–
(3,996)
–
(3,879)
–
–
–
–
–
62,630
29,626
78,267
28,755
79,980
–
79,980
–
(219,353)
(161,956)
(223,903)4
–
65,293
508,549
All Performance Awards granted or matured in FY14 (where applicable) in the table above were issued by Transurban and resulted or
will result in one ordinary Transurban stapled security (or cash equivalent, as determined by the Board) per Performance Award granted
or matured.
* 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 Scott Charlton’s number of performance awards granted during FY2013 includes 236,256 performance awards granted 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, and a second tranche
(78,752) awards vested on 16 July 2014. Therefore as at the date of this report, Scott Charlton has 909,444 performance awards yet to
vest of which 78,752 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 Awards lapsed/forfeited includes pro rata forfeiture of grants made in FY2011, FY2012 and FY2013 in line with good leaver treatment.
232
232
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
G
REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Short-term employee benefits
Cash salary
and fees
Cash
STI2
Non-
monetary
benefits3
Deferred
STI4
Post-
employment
benefits
Termination
benefits
Super-
annuation
Shared
based
benefits5
Total
Long-
term
benefits
Long
service
leave
Current CEO
S Charlton
2014
2013
1,858,493
1,039,250
7,042
492,200
17,774
1,789,850
738,300
22,379
246,100
15,098
Current Other Senior Executives
J Aument1
2014
516,456
244,487
1,250
126,054
11,274
2013
W Ballantine1
2014
2013
A Head
2014
2013
S Hogg
2014
2013
S Johnson1
2014
2013
T Steinhilber1
2014
2013
L Tobin1
2014
2013
V Vassallo1
2014
2013
27,260
10,775
-
5,204
916
393,737
207,225
1,462
107,433
230,757
81,150
3,398
44,498
604,875
294,000
2,418
111,497
589,279
241,395
2,366
77,012
676,275
131,100
2,018
117,353
656,561
284,935
2,030
76,648
423,737
136,800
1,496
127,917
280,971
112,325
3,823
60,277
572,856
309,886
30,165
177,462
269,441
259,550
52,658
53,001
507,741
174,675
1,753
30,000
185,869
-
710
15,000
507,741
228,275
1,753
30,000
176,134
-
710
15,000
17,774
9,836
17,774
16,470
17,774
16,470
17,774
12,043
17,774
6,388
17,774
6,863
17,774
6,863
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,484,748
4,899,507
1,302,848
4,114,575
192,748
1,092,269
3,534
47,689
21,430
15,368
96,404
26,851
845,465
411,858
13,053
12,696
474,344
1,517,961
441,434
1,380,652
21,368
13,674
485,938
1,451,826
407,426
1,457,744
8,661
23,829
98,710
38,665
815,095
531,933
8,531
208,931
1,325,605
-
-
-
-
-
58,491
699,529
109,235
841,178
-
208,442
109,235
894,778
-
198,707
233
233
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Short-term employee benefits
Cash salary
and fees
Cash
STI2
Non-
monetary
benefits3
Deferred
STI4
Post-
employment
benefits
Termination
benefits
Super-
annuation
Shared
based
benefits5
Total
Long-
term
benefits
Long
service
leave
Former CEO
C Lynch
2014
2013
-
-
-
-
-
144,951
178,652
555
504,275
5,490
Former Other Senior Executives
-
-
-
-
-
-
(62,121) 6,103,665(6)
-
6,875,467
-
-
-
8,346
(341,435)
499,569
K Daley
2014
2013
M Kulper
2014
2013
E Mildwater
2014
2013
-
816,330
583,403
-
-
-
-
-
-
53,262
(50,659)
13,725
2,912 300,6297
2,791
333,356
-
385,1687
1,608,259
1,067,296
362,264
15,482
120,168
10,997
-
485,161
-
-
-
-
-
1,525
(37,627)
13,725
-
-
-
28,977
1,441,431
3,046,615
-
-
-
(15,434)
(274,631)
172,719
1 The dates on which the Senior Executives who were promoted or appointed during FY2013 are the 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 FY2014, which will be paid in August 2014. Jennifer Aument and Tim
Steinhilber also received a second and final payment in relation to the successful delivery of the 495 Express Lanes of $82,093 and $164,186
respectively (paid in August 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 FY2014 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 Transurban’s security price and where applicable, the TSR performance against the comparator group performance. The
assumptions underpinning these valuations are set out in note 36 to the Transurban Holdings Limited audited financial statements.
6 The value for share based benefits for C 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.
7The value for Deferred STI and share based benefits for M Kulper includes all unvested 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 M Kulper
as President, North America 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. The LTI awards may or may not vest.
234
234
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
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 FY2014 are outlined below:
CEO
Other Senior Executives
Period of notice to
terminate (Executive)
Period of notice to
terminate (the Group*)
6 months
3 months
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 operated the following broad employee based security plans in FY2014.
ShareLink Incentive Plan
Under the ShareLink Incentive Plan, subject to Board approval, an allocation of Transurban securities 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 21 February 2014. 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, whichever 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.
235
235
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(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 2014
The number of securities held by members of KMP as at 30 June 2014 is provided below. Comparative
data is shown for those Senior Executives who were members of KMP during both FY2014 and FY2013.
Current Senior Executives
Balance at
start of year
Changes
during year
Balance at
end of year
S Charlton
2014
2013
J Aument
2014
2013
W Ballantine
2014
2013
A Head
2014
2013
S Hogg
2014
2013
S Johnson
2014
2013
T Steinhilber
2014
2013
L Tobin
2014
2013
V Vassallo
2014
2013
10,000
–
–
–
3,988
2,8891
3,041
3,041
11,553
1,553
29,596
19,1291
–
–
–
–
10,538
10,0181
Former Senior Executives
M Kulper
2014
2013
1 Opening balance held prior to the Senior Executive becoming a member of KMP.
2 Balance removed on departure from the Group during FY2014.
3 Includes the FY2012 PAP awards which vested 30 June 2014. Refer section 4F.
80,000
80,000
236
236
124,622
10,000
–
–
697
1,099
84,7193
–
129,4893
10,000
14,167
10,467
–
–
–
–
510
520
(80,000)2
–
134,622
10,000
–
–
4,685
3,988
87,760
3,041
141,042
11,553
43,763
29,596
–
–
–
–
11,048
10,538
–
80,000
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Securities held by Non-executive Directors as at 30 June 2014
Current Non-executive Directors
Balance at
start of year
Changes
during year
Balance at
end of year
L Maxsted
2014
2013
N Chatfield
2014
2013
R Edgar
2014
2013
S Mostyn
2014
2013
C O'Reilly
2014
2013
R Slater
2014
2013
I Smith
2014
2013
Former Non-executive Directors
R Officer
2014
2013
30,000
30,000
30,910
20,910
24,590
23,733
14,000
10,300
4,363
–
–
–
71,772
70,000
–
20,115
36,559
–
19,514
10,000
5,734
857
3,256
3,700
9,609
4,363
–
–
20,970
1,772
–
(20,115)1
1 Balance removed on resignation as a Director during the relevant year.
237
66,559
30,000
50,424
30,910
30,324
24,590
17,256
14,000
13,972
4,363
–
–
92,742
71,772
–
–
237
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
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.
A
GROUP PERFORMANCE AND STI
For the year ended 30 June 2014, 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 221.
STI is an ‘at risk’ component of remuneration – payments are determined based on the following three
measures, and could result in zero payout if targets are not met. The maximum payment available to any
Senior Executive is 150% of target.
Proportional EBITDA
The proportional EBITDA result for FY2014 was $934.1 million. Excluding the effect of 495 Express
Lanes, this resulted in the payment of 113.7 per cent of STIs attributable to proportional EBITDA. The
growth in EBITDA was driven by the completion of the Hills M2 Upgrade in August 2013 and continued
cost and revenue recovery initiatives across all assets in the portfolio.
Proportional net costs
The proportional net costs result for the year ended 30 June 2014 was $182.6 million, an 11.8 per cent
increase from the prior year result. This resulted in the payment of 150% of STIs attributable to
proportional net costs. On an underlying basis, shown in the table below, net costs increased 7.5% from
the prior year result. The increase includes the impact of project development and acquisitions work in the
current financial year.
Net costs as reported
Prior year one-off items
TTMS impact – both periods
Safety
% increase
11.8%
FY14
182.6
-
4.2
FY13
163.4
1.0
9.4
186.9
173.8
7.5%
For the year ended 30 June 2014, the safety performance measure resulted in a 100 per cent STI
outcome. The target was a lead indicator that required the completion of safety development action plans.
The target was split with equal weighting between employee/contractor (5 per cent) and customer (5 per
cent) safety targets. The Group achieved the completion of 76 per cent of the defined safety development
action plans.
238
238
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
B
GROUP PERFORMANCE AND LTI
For the year ended 30 June 2014, LTIs were linked to relative TSR and FCF per security.
Relative TSR
Relative TSR for the year ended 30 June 2014 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 2014 was a
range for compound growth in FCF per security of between 12 per cent and 15 per cent per annum 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
2015, the performance target range for compound growth in FCF per security per annum is between 10.0
per cent and 13.0 per cent.
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 2010, 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
Measure
Security price at year end
Distribution paid per security
Underlying proportional EBITDA - $m1
TSR performance2
TSR rank position3
2014
$7.39
35.0c
934.1
17%
2013
$6.76
31.0c
828.0
25%
33 / 934
14 / 315
12 / 896
2011
$5.23
27.0c
718.7
32%
2010
$4.24
24.0c
635.4
10%
n/a
n/a
2012
$5.69
29.5c
784.0
15%
35 / 86
6 / 86
19 / 867
29.8c
33.9
FCF per security performance - weighted
average
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
3 This is the TSR ranking position for the LTI that vests during the financial year
4 FY2011 PAP that vested 1 November 2013
5 FY2012 PAP that vested 30 June 2014
6 FY2010 PAP that vested November 2012 (testing as at 30 June 2012)
7 FY2009 PAP tested in three tranches
27.5c
30.1c
27.4c
239
239
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
6 Non-executive director remuneration
A
REMUNERATION POLICY
The diagram below sets out the key objectives of the Group’s Non-executive Director remuneration policy
and how they are achieved 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 and workload expected,
the Director’s 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
B
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 FY2015.
The aggregate fee pool and the manner in which it is apportioned amongst Non-executive Directors are
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 FY2014
Non-executive Director (base) 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
40,000
10,000
30,000
Member fee $
170,000
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 FY2014. 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.
240
240
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
Retirement benefits
Non-executive Directors are not entitled to any retirement benefits.
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 FY2014.
C
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Non-executive Director remuneration for FY2014 and FY2013 is set out below:
Short-term benefits
Fees
Post-employment benefits
Superannuation1
Current Non-executive Directors
L Maxsted
2014
2013
N Chatfield
2014
2013
R Edgar
2014
2013
S Mostyn
2014
2013
C O'Reilly
2014
2013
R Slater
2014
2013
I Smith
2014
2013
Former Non-executive Directors
R Officer (resigned 7 August 2012)
2014
2013
Total
2014
2013
437,925
438,716
222,825
223,625
212,825
211,119
183,570
183,608
183,570
181,229
197,023
194,070
155,973
155,967
-
18,832
1,593,711
1,607,166
17,774
16,470
17,774
16,470
17,774
16,470
16,980
16,470
16,980
16,247
-
-
14,427
14,037
-
1,695
101,709
97,859
Total
455,699
455,186
240,599
240,095
230,599
227,589
200,550
200,078
200,550
197,476
197,023
194,070
170,400
170,004
-
20,527
1,695,420
1,705,025
1 Superannuation contributions made on behalf of Non-executive Directors to satisfy the Group’s obligations under applicable
superannuation guarantee legislation.
241
241
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
D
NON-EXECUTIVE DIRECTOR RELATED PARTY INFORMATION
Rodney Slater is a partner in the public policy practice group of Squire Patton Boggs (US) LLP.
Transurban used Squire Patton Boggs (US) LLP during the year ended 30 June 2014 for various lobbying
activities in the USA. This relationship is based on normal commercial terms. US$180,144 was paid to
Squire Patton Boggs (US) LLP during FY2014.
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.
Christine O’Reilly is a Non-executive Director of Energy Australia. Energy Australia is one of Transurban’s
electricity providers in NSW and Queensland. This relationship is based on normal commercial terms.
242
242
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(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
Exposure to other foreign exchange movements is not material.
30 June 2014 30 June 2013
USD$M
USD$M
946
(909)
37
584
(547)
37
the
financial
Sensitivity
Based on
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 $3.8m lower (2013: $3.9m lower) or $4.7m higher (2013: $4.8m
higher), as a result of foreign exchange gains/losses on translation of US dollar denominated financial
instruments as detailed in the above table.
instruments held at
the period, had
the end of
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.
243
243
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(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 and 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 2014, 93 per cent (2013: 93 per cent) of the Group’s interest rate exposure
on variable rate borrowings was hedged.
As at the reporting date, the Group had the following variable rate borrowings and interest rate swap contracts
outstanding:
Cash and cash equivalents
Floating rate borrowings
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
2014
2013
Weighted
average
interest rate
%
2.2%
4.4%
2.7%
Weighted
average
interest rate
%
3.6%
4.5%
2.9%
Balance
$M
(75)
1,502
(1,398)
29
Balance
$M
(29)
1,513
(1,413)
71
An analysis by maturities is provided in liquidity risk below.
Sensitivity
At 30 June 2014, 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 $0.3m lower/higher (2013: $0.7m
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 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 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.
244
244
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(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
forecasted 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 Transurban 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
2014
$M
-
421
421
2013
$M
16
202
218
The Transurban Group also has a letter of credit facility and a general credit facility in place with undrawn
capacity at 30 June 2014 of $8.7 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 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.
245
245
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
38 Financial risk management (continued)
Liquidity risk (continued)
1 year
or less
$M
Over 1 to 2
years
$M
Over 2 to 3
years
$M
Over 3 to
4 years
$M
Over 4 to
5 years
$M
Over 5
years
$M
Total
contractual
cash flows
$M
Carrying
amount
(assets)/
liabilities
$M
526
469
581
-
193
831
1,576
1,024
-
1,125
437
1,562
22
22
16
16
7
7
-
11
728
739
3
3
-
225
528
148
-
1,868
674
2,023
4,973
551
1,836
3,927
753
2,016
7,670
6,314
-
-
-
-
48
48
45
45
Contractual
maturities of
financial liabilities
At 30 June 2014
Non-derivatives
Non-interest
bearing
Variable rate
Fixed rate
Total non-
derivatives
Derivatives
Net settled (interest
rate swaps)
Total derivatives
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
At 30 June 2013
$M
$M
$M
$M
$M
$M
Total
contractual
cash flows
$M
Carrying
amount
(assets)/
liabilities
$M
Non-derivatives
Non-interest
bearing
Variable rate
Fixed rate
Total non-
derivatives
Derivatives
Net settled
(interest rate
swaps)
Total derivatives
437
261
464
-
813
634
-
323
780
1,162
1,447
1,103
-
351
386
737
-
12
677
147
225
1,235
584
1,985
4,176
461
1,791
3,262
689
1,607
6,745
5,514
83
83
19
19
10
10
5
5
1
1
-
-
118
118
64
64
Fair value measurements
The carrying value of financial assets and financial liabilities brought to account at balance sheet date
approximates fair value.
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 Financial Instruments: Disclosures which
requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
246
246
2014 Transurban Annual Report
Transurban Holding Trust
Notes to the consolidated financial statements
30 June 2014
(continued)
38 Financial risk management (continued)
Fair value measurements (continued)
(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
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The following table presents the Group's assets and liabilities measured and recognised at fair value at 30 June
2014 and 30 June 2013:
As at 30 June 2014
Assets
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
As at 30 June 2013
Assets
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
Level 1
$M
Level 2
$M
Level 3
$M
-
-
-
-
45
45
-
-
-
Level 1
$M
Level 2
$M
Level 3
$M
-
-
-
-
64
64
-
-
-
Total
$M
-
45
45
Total
$M
-
64
64
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.
247
247
2014 Transurban Annual Report
Transurban Holding Trust
Directors' declaration
30 June 2014
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 165 to 247 are in accordance with the Corporations
Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
(ii) giving a true and fair view of the Group's financial position as at 30 June 2014 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
5 August 2014
248
248
2014 Transurban Annual Report
249
2014 Transurban Annual Report 250
2014 Transurban Annual Report Transurban International Limited and
Controlled Entities
ABN 90 121 746 825
Annual report
for the year ended 30 June 2014
251
2014 Transurban Annual Report Transurban International Limited ABN 90 121 746 825
Annual report - 30 June 2014
Contents
Directors' report
Auditor's Independence Declaration
Financial statements
Directors' declaration
Independent auditor's report to the members
Page
253
299
300
356
357
252
2014 Transurban Annual Report
Transurban International Limited
Directors' report
30 June 2014
Directors' report
The Directors of Transurban International Limited (TIL or "the Company") present their 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 2014.
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
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
Christine O'Reilly
Rodney Slater
Ian Smith
Executive Director
Scott Charlton
Result
The consolidated net loss for the year ended 30 June 2014 for the Group was $11.0 million (2013: $47.2 million).
The profit attributable to ordinary equity holders of the Group was $19.5 million (2013: $47.2 million loss).
Principal activities
The principal activities of the Group during the financial year were the development and operation of toll roads.
Dividends
No dividends were declared or paid during the financial year.
Operating and Financial Review – Year ended 30 June 2014
As a member of the Transurban Group triple staple, the Group operates under a business framework
(incorporating strategy and value drivers) consistent with the wider Transurban Group.
Business Framework and Strategy
At the heart of our business strategy is our desire to be a ‘partner of choice’ for our government clients and an
organisation that meets the needs of our customers. To do that, we have to provide and be part of effective
transportation solutions to support the growth and well-being of our cities.
At Transurban we do this through the effective management of our existing road networks, through our active
involvement in the transport policy debate, and by applying our unique skills to the infrastructure challenges in
our markets.
In delivering on this objective our business has fostered 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 Group’s target market is Virginia in the USA, part of the Washington, DC metro area.
253
253
2014 Transurban Annual Report
Transurban International Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Value drivers
The investment proposition for high quality toll road assets is 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.
Financial performance
Performance indicators
Underlying proportional EBITDA (earnings before interest, tax, depreciation and amortisation) is the primary
measure the Transurban Board uses to assess the operating performance of Transurban, with an aim to focus on
operating results and associated cash generation. It reflects the contribution from individual assets to
Transurban’s operating performance and permits a meaningful assessment of the underlying performance of
Transurban’s assets.
To arrive at the proportional result, non-controlling interests in Transurban’s controlled roads are removed 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 Transurban’s cash generation. Free cash represents the cash
available for distribution to security holders.
Structure of the Group and relationship to the financial performance
During the year ended 30 June 2014 the structure of investments within Transurban International Limited
changed.
The Group holds Transurban’s 75.0 per cent investment in Transurban DRIVe Holdings LLC (DRIVe). For the full
year ended 30 June 2013 and for the current year to 11 April 2014, DRIVe in turn owned 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)
On 11 April 2014 Transurban Group acquired Fluor Enterprises Inc.’s 10.0 per cent ownership in each of 495
Express Lanes and 95 Express Lanes. These were acquired outside of the DRIVe Group, instead representing
direct investments for Transurban. After these acquisitions, Transurban’s proportional ownership in each asset
was 77.5 per cent.
Also during the year ended 30 June 2014, a review of 495 Express Lanes was completed which resulted in
downward adjustments to traffic and revenue projections, including the ramp-up profile of the project. As a result,
Transurban and Capital Beltway Express LLC worked with key stakeholders, including lenders, to implement
changes to the capital structure to ensure it could be supported by the emerging revenue profile. On 5 June
2014, Capital Beltway Express LLC repaid $432.8 million of debt and associated swap termination costs through
$281.4 million of additional equity investment from Transurban and the release of $151.4 million of existing
finance reserves. After this recapitalisation, also conducted directly by Transurban rather than within the DRIVe
Group, Transurban’s proportional ownership in Capital Beltway Express LLC increased to 94.0 per cent.
The increase in ownership to 94.0 per cent led the Transurban Group to assess control of assets and operating
entities within Transurban International Limited. Capital Beltway Express LLC is now controlled by Transurban
effective 4 June 2014 and is reflected in the consolidated results of the Group from that time.
By extension, Transurban’s control over Capital Beltway Express LLC has led to the Group assessing that
Transurban DRIVe Holdings LLC is also controlled, including 95 Express Lanes LLC.
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30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
On 14 May 2014, DRIVe also successfully transferred Pocahontas 895 back to lenders. It no longer forms part of
the Transurban International Limited Group.
The results of Transurban International Limited for the year ended 30 June 2014 therefore reflect a combination
of equity accounted results of DRIVe to 4 June 2014, consolidated results from 4 June to 30 June 2014 and the
results of the activities of the Group in providing management services to DRIVe.
Year ended 30 June 2014 Highlights
The Group’s loss for the year ended 30 June 2014 was $11.0 million, compared to $47.2 million in the prior year.
The Group has toll revenue of $3.8 million, derived from 495 Express Lanes LLC from 4 June 2014, when it was
consolidated into the Group.
Management and Business Development revenue decreased to $37.9 million. Construction revenue and costs in
the current year reflects the Group’s development of the Tolling and Traffic Management System (TTMS) for 95
Express Lanes. In the prior period this included development work on the TTMS for 495 Express Lanes also.
EBITDA on a statutory basis decreased to $2.9 million.
The Group’s share of net profit of equity accounted investments was $93.8 million. In the prior period this was a
loss of $28.2 million. The change is due to the prior year impairment of the carrying value of Pocahontas, offset in
the current year by the gain recognised on the hand back of Pocahontas to lenders.
Financial position
Transurban Group has a market capitalisation of approximately $14.5 billion and at 30 June 2014, 1,896 million
stapled securities were on issue. During the year, Transurban issued 405 million stapled securities as part of the
capital raising to fund the acquisition of Queensland Motorways.
Transurban International Limited (TIL) represents one component of the Transurban triple staple and has total
assets of $2,133.6 million. In the prior year total assets were $263.9 million. The increase represents the
recognition of Transurban DRIVe Holdings, and 495 Express Lanes, as consolidated assets at 30 June 2014.
The operating assets contained within the Group 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.
495 Express Lanes has a concession life of 80 years and 95 Express Lanes has a concession life of 75 years.
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.
Operations and performance of Transurban’s portfolio of assets – Year ended 30 June 2014
Transurban considers the primary measure of operating performance to be its underlying proportional EBITDA.
To determine the proportional EBITDA, non-controlling interests are removed from the statutory result and
Transurban’s interests in non-controlled assets are included in proportion to our ownership.
Note 2 to the statutory accounts (Segment Information) 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 transferred ownership of Pocahontas 895 to lenders on 14 May 2014 and now has no financial or
operational interests in the asset.
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Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
495 Express Lanes (Virginia USA)
The 495 Express Lanes traffic performance and share of corridor volume continued to increase over the year.
Average workday revenue for the month of June 2014 increased 98.8 per cent over the month of June 2013. The
average daily toll revenue for the year grew 105.4 per cent from the prior year. Average daily trips increased 32.0
per cent for the same period.
The average dynamic toll charged increased by 56.3 per cent from US$1.51 in 2013 to US$2.36 for 2014. The
maximum dynamic toll charged during the year was US$11.85 to travel the full length of the Express Lanes.
On 29 May 2014, the 495 Express Lanes achieved record daily toll revenue.
Free cash and cash flows from operations
Free cash of the Transurban Group is calculated as:
Cash flow from operations of 100% owned assets and operating companies (CityLink, Hills M2, Lane
Cove Tunnel / MRE, Cross City Tunnel, Statewide Roads, Roam Tolling, Tollaust and Transurban
corporate);
Excluding Payments for Maintenance of Intangible Assets (concession assets);
Excluding Interest received from Term Loan Notes (Westlink M7 & M5 South West Motorway
Investment returns captured as interest payments);
Plus distributions received from non-100% owned assets (M5 South West Motorway, M1 Eastern
Distributor)
Plus Term Loan Note repayments from Westlink M7 and M5 South West Motorway (as 50% equity
accounted investments)
Less Provision for Maintenance of Intangible Assets and payments for e-TAGs.
Free cash of the Transurban Group for the year ended 30 June 2014 was $572 million. Free cash per security
was 33.9 cents. The calculation of free cash can be found at note 22 to the Transurban Holdings Limited
statutory accounts. Free cash per security was impacted in the year by the issue of new securities to fund the
acquisition of Queensland Motorways. All securities issued are entitled to the full final distribution and this dilutes
the free cash. The distribution of 35 cent per security is 96.9 per cent cash covered for the year.
For the year ended 30 June 2014, the Group’s cash flow from operations was an outflow of $5.5 million.
Business development activities
95 Express Lanes (Virginia USA)
Construction on the project, which connects to the 495 Express Lanes, is now 85.0 per cent complete (US$594
million costs incurred to date), with the 95 Express Lanes due to open at the end of calendar year 2014. The 95
Express Lanes have a 75 year operating concession and the project represents a 29-mile extension to the 495
Express Lanes. Once complete the 95 and 495 Express Lanes network will include more than 40 miles of
Express Lanes.
On 11 April 2014, Transurban acquired Fluor Enterprises Inc.’s 10% interest in 95 Express Lanes LLC. After this
acquisition, Transurban owns 77.5% of 95 Express Lanes LLC.
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Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
495 Express Lanes (Virginia USA)
A review of the project was completed during the year, which resulted in downward adjustments to traffic and
revenue projections. As a result, Transurban and Capital Beltway Express LLC worked with key stakeholders,
including lenders, to implement changes to the capital structure to ensure it could be supported by the emerging
revenue profile. On 11 April 2014, during the process to change the capital structure, Transurban acquired Fluor
Enterprises Inc.’s 10 per cent interest in Capital Beltway LLC. On 4 June 2014, Capital Beltway Express LLC
repaid US$433 million of debt and associated swap termination costs through US$281 million of additional equity
investment from Transurban and the release of US$151 million of existing finance reserves. After this acquisition
and the capital injection, Transurban owns 94 per cent of Capital Beltway Express LLC.
Financing activities
The Group’s financing is through the loans from related parties (specifically the wider Transurban Group) and
asset level debt related to the individual road projects.
Related party loans increased by $367.8 million during the year due to the re-capitalisation of Capital Beltway,
the purchase of Fluor’s 10 per cent interest in Capital Beltway and I95 and DRIVe capital calls (relating to the
construction of the I95).
Asset level debt increased due to the Group consolidating DRIVe and Capital Beltway during the year.
Debt maturity profiles
The following chart shows the Group’s current debt maturity profile. 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.
The debt values are shown at 30 June 2014 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 ($0.942 at 30 June 2014).
Asset level debt maturity profile
1,200
1,000
)
t
n
e
l
a
v
i
u
q
e
(
n
o
i
l
l
i
m
$
A
800
600
400
200
0
1
4
2
7
7
3
8
1
2
2
3
2
3
6
1
4
2
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
95 Express Lanes TIFIA funding
95 Express Lanes private activity bonds
495 Express Lanes TIFIA funding
495 Express Lanes private activity bonds
495 Express Lanes letter of credit
257
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2014 Transurban Annual Report
Transurban International Limited
Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (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 of the attached accounts – Note 35.
This section discusses Transurban’s hedging policies, credit risk, interest rate risk and liquidity and funding
policies.
Corporate activities
Equity entitlement offer and share placement
In May 2014, Transurban completed a fully underwritten accelerated renounceable entitlement offer.
The Institutional Entitlement Offer raised gross proceeds of approximately $1.8 billion and resulted in the issue of
approximately 264 million new Transurban stapled securities. Entitlements not taken up by eligible institutional
security holders and entitlements of ineligible institutional security holders were sold and cleared in the
institutional shortfall book build at $7.00 per security, a $0.25 per security premium over the offer price of $6.75
and a 2.4 per cent discount to the theoretical ex-rights price as of 23 April 2014 of $7.17 per security.
The Retail Entitlement Offer raised gross proceeds of approximately $557 million from the issue of approximately
83 million new securities at an issue price of $6.75 per security. Approximately 28.6 million of these new
securities were sold in the bookbuild at a price of $7.21 per security, a $0.46 per security premium over the issue
price of $6.75, a $0.21 per security premium over the institutional bookbuild price of $7.00, and a $0.10 per
security discount to the last traded price of $7.31 per security.
A further $400 million was raised from placement of 58 million securities at a price of $6.95 per security to
AustralianSuper and Tawreed.
Changes in Executive Management
On 14 July 2014, Samantha Hogg, Chief Financial Officer, left Transurban. Until a permanent replacement is
appointed, Leigh Petschel, currently General Manager, Finance, will serve as Acting Chief Financial Officer.
Tim Steinhilber, Group General Manager, Project Delivery and Operational Excellence, transferred back to the
USA in July 2014 and will support the delivery of the I95 project that is scheduled for completion at the end of
2014. Tony Adams, previously Vice President, Infrastructure, Major Projects, and based in the USA, will transfer
to Australia as he assumed the role of Group General Manager, Project Delivery and Operational Excellence in
July 2014.
People
Transurban’s People Strategy focuses on the four areas of Leadership, Capability, Performance, and Wellbeing.
These areas are underpinned by the Group values, as well as safety, diversity and sustainability.
Leadership
Transurban conducts a bi-annual 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.
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Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (continued)
Senior Leaders participated in a three day offsite in February 2014. The key theme of the program was driving for
high performance and it is intended that this will become an annual event for the leadership group.
There has been a focus on building greater leadership capability through the middle management group during
the reporting period. Activities to support this include the implementation of a Group Coaching program;
cascading of activities from the Senior Leadership Program and the continuation of the Coaching and Mentoring
program for female managers.
Capability
A framework identifying both behavioural and technical capabilities has been developed and is being used to
assist in identifying key talent for future roles and determining potential gaps. This assists in developing
strategies to build future capability. A technical career pathway program has also been developed. One area of
continued focus is the Traffic Forecasting Group which is deemed fundamental to the ongoing success of the
Group. Steps to enhance capability in this area have progressed.
Performance
Changes were made to the Short Term Incentive program aimed at enhancing this through increased
performance differentiation, the introduction of formal performance comparisons against peers, and strengthening
the link between individual and Group performance. A review of the Group’s Benefits program was also
undertaken, benchmarking current programs against market practice.
Wellbeing
A new Wellbeing framework has been developed, identifying the key areas of health; work; financial; values and
staying connected. A suite of initiatives to support the framework are being introduced across Transurban. An
employee volunteer program has been launched which includes the introduction of volunteer leave for all
employees.
Office moves in Melbourne and Sydney occurred with a focus on increasing collaboration and ensuring a
healthier workspace. Activity based working was also introduced as part of this, which enables greater flexibility
for employees in the way in which they work.
It has been twelve months since the launch of the refreshed Vision and Values. A Group wide Values Health
Check was rolled out to see how and where teams are using the values and to ensure that behaviours continue
to be aligned. This provided positive feedback as did the Employee pulse survey that was conducted in May
2014.
Sustainability
Transurban is committed to taking a sustainable approach to its operations, projects and business practices to
create the best outcomes for its government clients, communities and customers.
Transurban’s Sustainability Strategy highlights three key focus areas: be good neighbours, use less, and think
long term. By adopting and working to these principles, Transurban reinforces its ‘licence to operate’ and
strengthens its ability to deliver efficient and integrated transport networks that support productivity and the
wellbeing of its communities.
During the period, Transurban put into action the Sustainability Strategy. Some important highlights include
developing a community investment strategy which saw the launch of the first corporate grants program,
embedding sustainability requirements in the NorthConnex tender process and committing to reduce operational
energy consumption by 10 per cent by 2023.
Transurban provides regular progress reports to the Board on the focus areas. The annual Sustainability Report
summarises the year’s activities, while also outlining commitments for the coming years.
The 2014 Sustainability Report will be published in October.
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Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (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; and
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
arrangement or as a result of government action
Existence and development of, or changes to, competing roads, feeder roads and other means of transport
A failure of key operating systems, including tolling systems, which impacts the ability to collect revenue
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
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 joint ventures and 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 to help create 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).
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Directors' report
30 June 2014
(continued)
Operating and Financial Review – Year ended 30 June 2014 (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 entity’s state of affairs
Other than those matters already discussed in the operating and financial review, no other significant changes
have occurred in Transurban’s state of affairs in the year ended 30 June 2014.
Matters subsequent to the end of the financial year
As at the date of this report the Directors are not aware of any other circumstances that have arisen since 30
June 2014 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, that have not otherwise been disclosed in the financial report.
Likely developments in future financial years and the expected results of operations
Other than matters already discussed above, any other potential likely 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.
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Directors' report
30 June 2014
(continued)
Information on Directors
Lindsay Maxsted Dip Bus, FCA, FAICD
Chairman 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 a partner of KPMG and was the CEO of that firm from 2001 to 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.
As at the date of this report Lindsay holds interests in 66,559 Stapled Securities.
Transurban Board Committee membership
Chairman of the Nomination Committee and a member of the Audit and Risk Committee.
Scott Charlton BSci, MBA (Texas)
Chief Executive Officer and Executive Director
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 entities and financial institutions, including as CFO of Leighton Holdings Limited (2007 to 2009)
and as Managing Director of Deutsche Bank in Australia and Hong Kong (1995 to 2003).
As at the date of this report Scott holds interests in 213,374 Stapled Securities, 909,444 performance awards
(unlisted) and 108,486 STI deferred awards (unlisted).
Neil Chatfield M.Bus, FCPA, FAICD
Independent Non-executive Director
Term of office
Director since 18 February 2012.
Neil is an established Executive and Non-executive Director with extensive experience across all facets of
company management, and with specific expertise in 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 Recall Holdings Limited. Neil is also Honorary Chairman of HomeGround Services. He was
previously a Non-executive Director of Grange Resources Limited (to April 2014) and of Whitehaven Coal
Limited (to May 2012).
Neil previously served as Executive Director and the CFO of Toll Holdings Limited (from 1997 to 2008).
As at the date of this report Neil holds interests in 50,424 Stapled Securities.
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Directors' report
30 June 2014
(continued)
Information on Directors (continued)
Transurban Board Committee membership
Chairman 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.
As at the date of this report Bob holds interests in 30,324 Stapled Securities.
Transurban Board Committee membership
Chairman of the Remuneration and Human Resources Committee and member of the Audit and Risk and
Nomination Committees.
Samantha Mostyn BA, LLB
Independent Non-executive Director
Term of office
Director since 8 December 2010.
Sam has significant experience in the Australian corporate sector both in Executive and Non-executive
capacities, in particular in the areas of human resources, corporate and government affairs, sustainability
management, and diversity.
Sam is currently a Non-executive Director of Virgin Australia Holdings Limited, Citigroup Pty Ltd, and Cover-
More Group Limited. She is President of the Australian Council for International Development. She is also a
Director of Australian Volunteers International, Australia Council for the Arts, Carriageworks, St James Ethics
Centre Foundation, and the NSW Climate Change Council.
Sam is currently Deputy Chair of the Diversity Council Australia, and is a member of the advisory boards of
ClimateWorks Australia and the Crawford School of Government and Economics, ANU. She is also a
Commissioner of the Australian Football League.
Sam has previously held senior executive positions at IAG, Optus and Cable & Wireless Plc.
As at the date of this report Sam holds interests in 17,256 Stapled Securities.
Transurban Board Committee membership
Member of the Remuneration and Human Resources and Nomination Committees.
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Directors' report
30 June 2014
(continued)
Information on Directors (continued)
Christine O'Reilly BBus
Independent Non-executive Director
Term of office
Director since 12 April 2012
Christine has 30 years’ experience in the finance and infrastructure sectors in various roles including as Co-
Head of Unlisted 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, Medibank Private, and Baker
IDI, and is the Deputy Chair of CARE Australia.
As at the date of this report Christine holds interests in 13,972 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 22 June 2009.
Rodney is a partner in the public policy practice group of Washington DC firm Squire Patton Boggs (US) LLP,
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.
As at the date of this report Rodney does not hold interests in any Stapled Securities
Transurban Board Committee membership
Member of the Nomination Committee.
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Directors' report
30 June 2014
(continued)
Information on Directors (continued)
Ian Smith BE Mining (Hons), BFin Admin, MAICD
Independent Non-executive Director
Term of office
Director since 1 January 2012.
Ian is currently the Managing Director and CEO of Orica Limited and serves as President of The Australian
Mines and Metals Association.
Previously, Ian was the Managing Director and CEO of Newcrest Mining, the Global Head of Operational and
Technical Excellence at Rio Tinto, based in London, and Managing Director Comalco Aluminium Smelting within
the Rio Tinto Group. Prior to this, Ian held senior operational and project management roles with WMC
Resources, Pasminco Limited and CRA Limited.
He was previously the Chairman of the Minerals Council of Australia and a Director of the Australian Chamber of
Commerce and Industry.
Ian is a Fellow of both the Institute of Engineers Australia and the Australasian Institute of Mining and Metallurgy
- from which he was awarded its highest honour, the Institute Medal, in June 2012.
As at the date of this report Ian holds interests in 92,742 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 14 years of legal, company secretariat and other relevant
experience. Prior to her in-house work, Amanda was a solicitor specialising in M&A work with Australian law
firm King & Wood Mallesons.
Julie Galligan LLB, BA
Julie joined Transurban in November 2008 and was appointed as General Counsel in February 2012. Julie has
over 14 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.
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 2014, and the numbers of meetings attended by each Director were:
Lindsay Maxsted
Scott Charlton
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
Attended
13
13
13
13
13
13
13
12
Held
13
13
13
13
13
13
13
13
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2014 Transurban Annual Report
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Directors' report
30 June 2014
(continued)
Information on Directors (continued)
The number of meetings of each Board Committee held during the year ended 30 June 2014, and the number of
meetings attended by each Director, are set out in the following table.
Audit and Risk
Committee(1)
Remuneration
and Human
Resources
Committee(2)
Nomination
Committee(3)
Special
purpose Sub-
committees(4)
Attended Held Attended Held Attended Held Attended Held
6
6
6
6
*
6
*
1
6
*
6
6
*
6
*
*
5
5
5
5
5
3
*
2
*
*
5
5
5
*
*
*
2
2
2
2
2
2
2
1
2
*
2
2
2
2
2
*
12
12
11
*
*
11
*
*
12
12
12
*
*
11
*
*
Lindsay Maxsted
Scott Charlton
Neil Chatfield
Robert Edgar
Samantha Mostyn
Christine O'Reilly
Rodney Slater
Ian Smith
* = Not a member of the relevant Committee
(1) Scott Charlton and Ian Smith were not members of the Audit and Risk Committee but attended meetings during the year.
(2) Lindsay Maxsted, Scott Charlton, Christine O'Reilly and Ian Smith were not members of the Remuneration and Human Resources Committee
but attended meetings during the year. Scott Charlton was excluded from discussions involving his remuneration during meetings which he
attended.
(3) Ian Smith and Scott Charlton were not members of the Nomination Committee but attended meetings during the year.
(4) Special purpose sub-committees were formed during the year to deal with matters relating to the Queensland Motorways bid submission and
the due diligence process undertaken in connection with the equity raising for the acquisition of Queensland Motorways.
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2014 REMUNERATION REPORT (AUDITED)
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 2014 (FY2014).
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
Current Senior Executives
Scott Charlton, Executive Director and Chief Executive Officer (CEO)
Jennifer Aument, Group General Manager, North America
Wesley Ballantine, Group General Manager, Queensland (from 4 June 2014, formerly Group General Manager, Strategy)
Andrew Head, Group General Manager, New South Wales
Samantha Hogg, Chief Financial Officer (1)
Sue Johnson, Group General Manager, Human Resources
Tim Steinhilber, Group General Manager, Delivery and Operational Excellence (1)
Lisa Tobin, Group General Manager, Technology
Vin Vassallo, Group General Manager, Victoria
Former Senior Executives
Michael Kulper, President North America (departed 3 September 2013)
(1) On 14 July 2014, the Group announced changes to KMP. Samantha Hogg departed the Group and Tim Steinhilber has transferred back to the
USA. Refer to section 1B for further details.
Contents
1 Remuneration snapshot
2 Remuneration governance
3 Remuneration in context
4 CEO / Senior Executive remuneration for FY2014
5 Link between Group performance, security holder wealth and remuneration
6 Non-executive director remuneration
All values in this report are in Australian dollars, unless otherwise stated.
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1 Remuneration snapshot
The Transurban Board is committed to an executive remuneration framework that is focused on
driving a performance culture and linking pay to the achievement of the Group’s strategy and
business objectives and, ultimately, generating security holder value.
Transurban’s remuneration framework is reviewed annually taking into consideration security holder and
other stakeholder feedback, market expectations and regulatory developments.
At the 2013 Annual General Meeting (AGM), the framework received strong support from security holders,
with a 98.8% vote in favour of the resolution to adopt the 2013 Remuneration Report.
There were no substantive changes to the framework in FY2014, but some refinements were made to
further align remuneration with the creation of sustainable security holder value, business outcomes, and
the Group’s organisational values: integrity, collaboration, accountability, ingenuity and respect.
In particular, changes were made to the Short Term Incentive (STI) program for all eligible employees,
which were aimed at enhancing this variable pay element through increased performance differentiation,
the introduction of formal performance comparisons against peers, and strengthening the link between
individual and Group performance.
A
TRANSURBAN’S REMUNERATION FRAMEWORK
The key elements of the remuneration framework for the CEO and other Senior Executives for FY2014
were as follows:
Remuneration mix
The remuneration of the CEO and other Senior Executives was structured as a mix of fixed remuneration
and variable ('at risk') remuneration through short term and long term incentive components. The relative
weightings of the three components were as follows:
Total remuneration % (annualised at target)
Fixed TEC
Variable (performance based)
CEO
Senior Executives
40
45
STI
30 (50% deferred)
30 (50% deferred)
LTI
30
25
* All Senior Executives moved to 50% STI deferral effective 1 July 2013.
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.
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Short term incentive (STI)
During FY2014, changes were made to the STI program to achieve greater performance differentiation.
The link between Group and individual performance was also strengthened by using individual
performance as a multiplier when calculating reward for Group performance.
Group performance measures under the new STI program were again linked to growth in proportional
EBITDA, cost management based on proportional net costs, and safety. See section D for further
details.
Individual performance continues to be measured against key performance indicators (KPIs). Under the
new STI program, each individual’s assessment will be used in determining a rating relative to peers.
The overall rating will derive an individual’s STI using a payment schedule as determined by the Board
designed to encourage high performance.
During FY2014, the proportion of the STI award subject to mandatory deferral was aligned for the CEO
and all Senior Executives, so that all members of KMP now have 50 per cent of their STI award deferred
for two years. Increasing the level of STI deferral (from 30% when it was first introduced in FY2012)
strengthens the link between KMP performance and security holder value and provides a greater
retention element.
For Australian Senior Executives, STI deferral is into securities. Due to legal restrictions on the issue of
securities to USA residents, the USA resident Senior Executives receive deferred cash awards. The
deferred component of remuneration may, at the discretion of the Board, be subject to forfeiture or
clawback (eg. in the event of misconduct or material misstatement of financial results).
Long term incentive (LTI)
For FY2014, 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, telecommunications and construction
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 maximising free
cash flow to drive security holder return. The definition of FCF per security is set out on page 281.
The FCF calculation is included in note 22 of the audited financial statements of Transurban
Holdings Limited.
B
OTHER EVENTS / ACTIONS IMPACTING REMUNERATION IN FY2014
USA restructure
As previously disclosed, the Group’s New York office was closed in FY2014. As a consequence, it was
determined that the position of President, North America was no longer required. As no suitable positions
were available for Michael Kulper (the incumbent), his employment with the Group ceased on 3
September 2013.
On ceasing employment as President, North America, Michael Kulper received a sum equivalent to 3
months TEC as a payment in lieu of notice (USD 247,450), and he was paid (USD 304,554) (equivalent
to 16 weeks TEC) severance payment.
The following arrangements also applied to Michael Kulper:
he retained the deferred securities granted to him under the FY2012 and FY2013 STI plans in
accordance with their original terms; and
he retained a pro-rated proportion of his LTI awards granted to him under the FY2011 (161,103
Performance Awards), FY2012 (111,721 Performance Awards) and FY2013 (65,293 Performance
Awards) LTI plans 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. Michael Kulper
was not eligible to participate in the FY2014 LTI plan.
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Queensland Motorways
In April 2014, a Transurban-led consortium was announced as the successful bidder for Queensland
Motorways, which operates a network of toll roads in and around Brisbane. Financial close was achieved
on 2 July 2014.
Wesley Ballantine, Group General Manager, Strategy, was appointed to the position of Group General
Manager, Queensland on 4 June 2014. Wesley Ballantine has been employed by the Group since 2006.
Wesley Ballantine’s remuneration was reviewed on this change in role, taking into account benchmark
data and internal relativities. Refer to section 4.
Changes to KMP
On 14 July 2014, Transurban announced changes to its Executive Committee. Samantha Hogg, Chief
Financial Officer, left the Group on 14 July 2014 after six years with the business. Tim Steinhilber, Group
General Manager, Project Delivery and Operational Excellence, transferred back to the USA to support
the delivery of the I95 project that is scheduled for completion at the end of 2014. The remuneration
arrangements applying to Samantha Hogg on her departure, will be disclosed in the 2015 report.
Anthony Adams, currently Vice President, Infrastructure, Major Projects, and based in the USA, will
transfer back to Australia to assume the role of Group General Manager, Project Delivery and Operational
Excellence. Anthony joined Transurban in June 2003.
Leigh Petschel, currently General Manager, Finance, is Acting Chief Financial Officer. Leigh joined
Transurban in October 2013.
2 Remuneration governance
A
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.
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 FY2014. The
members of the Committee continue to be Robert Edgar (Chair), Samantha Mostyn and Neil Chatfield.
Further details regarding the Committee are set out in the Directors’ report.
The Remuneration and Human Resources Committee reviews gender pay equity annually. The Group
has focused on achieving pay equity at all work levels in the organisation and the FY2014 outcomes
indicate that this objective has substantially been achieved.
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B
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 by Directors.
Those consultants who provided the Remuneration and Human Resources Committee with a
remuneration recommendation relating to KMP during FY2014, and who have been deemed by the
Group to be ‘remuneration consultants’, are listed below:
Consultant
Fees for remuneration
recommendations
Ernst & Young
$10,000
Fees for other advice provided to
the Group during FY20141
$768,079
1 Fees for other advice includes the review of USA tax returns, expatriate taxation requirements, audit of various undertakings and
general consulting
Ernst & Young was selected by the Remuneration and Human Resources Committee and commissioned
and instructed by the Chair of the Committee in accordance with the applicable protocol. Ernst & Young’s
appointment terms specified that all remuneration recommendations and advice be sent directly to the
Committee through the Chair, and prohibited the provision of such material or other information directly to
management. The appointment
their
recommendations, both a declaration of independence from the KMP to whom their recommendations
related, and also confirmation of the Committee’s conditions for contact and dialogue with management
had been observed. Ernst & Young provided such a declaration and confirmation in relation to their
remuneration recommendations.
that Ernst & Young provide, with
terms also required
In this way, the Committee and the Board have been assured and are satisfied that Ernst & Young’s
remuneration recommendations and advice were made free from undue influence from management
generally and from KMP specifically.
3 Remuneration in context
Transurban is a top 20 Australian Securities Exchange listed business and is the largest transport
infrastructure entity in Australia, and one of the largest toll road entities in the world. 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.
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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 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. 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, Lane Cove Tunnel and Cross City 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) and, from
2 July 2014, Queensland Motorways in Brisbane (62.5 per cent).
In North America, the Group currently has interests in two assets, the 495 Express Lanes (94.0 per cent),
and the 95 Express Lanes project (77.5 per cent), which is currently under construction and remains on
schedule for completion in late 2014.
4 CEO / Senior Executive remuneration for FY2014
A
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.
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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 ('at risk') remuneration
Short term incentive (STI):
Annual rewards tied to pre-determined individual and Group performance measures, and includes a
deferred element (into securities)
Individual performance against targets and comparable performance against peers are used to determine
an outcome
Individual targets reflect individual specific accountabilities and key drivers for growth and success
Group performance targets linked to earnings, cost management and safety
Individual performance outcome provides a multiplier for the Group performance element (linking the two
elements)
Maximum potential STI is capped at 150 per cent
Long term incentive (LTI):
Equity rewards to align executive and security holder interests (using indeterminate rights)
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
Maximum LTI opportunity is capped at 100%
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B
REMUNERATION MIX
For FY2014, 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:
Total remuneration % (annualised at target)*
Fixed TEC
Variable (performance based)
CEO
Senior Executives
40
45
STI**
30 (50% deferred)
30 (50% deferred)
LTI
30
25
* These figures may 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.
**All Senior Executives moved to 50% STI deferral for grants made in FY2014.
C
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 must be 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.
D
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 the Group’s
organisational values.
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For FY2014, the CEO and other Senior Executives had a target STI opportunity of 30 per cent of their
total remuneration package. Mandatory STI deferral of 50 per cent of the overall STI award now applies
for all grants to the CEO and other Senior Executives. STI payouts can vary between zero (if targets are
not met) and 150% (for exceptional outperformance).
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 resident Senior Executives receive
deferred cash awards. STI deferral grants are made in the form of awards. Each award is an entitlement
to receive a fully paid security, or an equivalent cash payment, on terms and conditions determined by the
Board. This 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 FY2014?
The STI performance measures for the CEO and other Senior Executives for the year ended 30 June
2014 were chosen to provide a balance between corporate, individual, operational, strategic, financial and
non-financial aspects of performance and are described below:
Measure
Group
performance
target
(1) Growth in proportional EBITDA (20% weighting)
The proportional EBITDA targets were set against the previous year's results
and the Group's FY2014 budget. The EBITDA target excluded the 495 Express
Lanes.
Proportional EBITDA result
% STI that vests^
Less than 10% above underlying result for FY2013
10% above underlying result for FY2013
Budget EBITDA for FY2014 ($926 million)
16% above underlying result for FY2013
^ Straight line vesting applies between 50-100% and 100-150%.
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 FY2014 budget. The proportional net costs target included the
495 Express Lanes.
Proportional net costs result
Over FY2014 budget
FY2014 budget ($201 million)
FY2014 budget less $5 million
FY2014 budget less $15 million
^ Straight line vesting applies between 50-100% and 100-150%.
(3) Safety targets (10% weighting)
% STI that vests^
zero
50
100
150
The safety target was a lead indicator that required the completion of safety
development action plans. The target is split with equal weighting between
employee/contractor (5%) and customer (5%) safety targets.
Safety target result
% STI that vests^
Less than 60% safety action plan items implemented
60% safety action plan items implemented
75% safety action plan items implemented
90% safety action plan items implemented
^ Straight line vesting applies between 50-100% and 100-150%.
zero
50
100
150
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Individual key
performance
indicators
(KPIs)
Individual KPIs (50% weighting), were unique to the individual's area of
accountability, and in FY2014 related to critical business sustainability
measures, including: operational excellence, strategy, people and leadership,
operational performance, cost reduction, customer satisfaction, project
outcomes, succession planning, risk management, growth and business plan
implementation. 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, taxes, depreciation and amortisation) is a common operational
performance measure used by many companies.
Proportional EBITDA is one of the primary measures that 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 for FY2014 does not include the
EBITDA contribution for those assets which are equity accounted (M5 and M7). DRIVe’s EBITDA is also
excluded from the statutory results for the period that it was equity accounted (1 July 2013 to 4 June
2014). 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 FY2014, the Board resolved to exclude the 495 Express
Lanes from the proportional EBITDA measure as this is a period of ramp-up for this asset. The 495
Express Lanes opened to traffic in November 2012 giving the Group limited toll revenue historical data
when setting targets for FY2014.
Proportional EBITDA has been used by the Group as an STI performance measure since 2009.
What are proportional net costs and why is this used as a performance measure?
Proportional net costs are calculated as fee and other revenue less total costs of the Group. Costs after
fee and other revenues encourage 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 management’s 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 have been used by the Group as an STI performance measure since 2010.
The proportional net costs measure for FY2014 includes costs associated with 495 Express Lanes, as
there is a known cost base to work from and drive efficiencies.
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What were the changes to the STI program introduced in FY2014?
The STI program was reviewed in FY2014 and changes implemented to achieve a program that provides
greater performance differentiation between participants. The link between Group and individual
performance has been strengthened by using individual performance as a multiplier when calculating
reward for Group performance.
In FY2014, Group performance measures under the new STI program were again linked to growth in
proportional EBITDA, cost management based on proportional net costs, and safety.
Individual performance continues to be measured against KPIs, with an overall outcome reached for each
participant against target. Under the new program, this information is used to assist with providing a rating
which will consider performance comparative both to peers and against the Group’s values. The overall
rating will derive a STI using a payment schedule as determined by the Board designed to encourage and
reward high performance.
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 considers the appropriate rating for each Senior Executive,
taking into account their comparable performance and behaviours against the Group’s values. The Board
then approves STI awards. STI cash awards for FY2014 will be paid in August 2014. The STI deferred
component for FY2014 will be awarded in August 2014 and will vest, subject to continuity of employment
(unless otherwise determined by the Board) and clawback provisions, on 1 July 2016.
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 before the STI targets are assessed?
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.
How is the annual STI pool determined?
The Board approves a pool to be distributed for the annual STI program (cash and deferred
securities/cash). The pool is the sum of all eligible employees’ possible STI outcomes at 100 per cent
target (TEC multiplied by their STI opportunity). This value is divided by two and each half is treated as
follows: one half represents the individual component of the STI and is capped at 100 per cent, the
second half is multiplied by the Group’s performance outcome to represent the Group’s performance
component and is capped at 150 per cent. The overall pool is capped at 125 per cent.
The Board has discretion as to the proportion of the pool that will be distributed in any given year.
What is the maximum and minimum payment an individual can receive under the STI plan?
The minimum payment an individual can receive is 0% and the maximum is 150% of their STI opportunity.
What were the changes to the STI deferral?
During FY2014, those Senior Executives who had been on the old arrangement of 30 per cent deferral (S
Hogg and A Head) were moved to 50 per cent deferral. This applies for grants made from 1 July 2013
onwards.
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What were the Group STI performance outcomes for FY2014?
Group performance in respect of the proportional EBITDA, proportional net costs and safety STI
performance measures for FY2014 was assessed by the Board as 125.5% of the possible STI
opportunity. It should be noted that the transaction costs associated with the acquisition of Queensland
Motorways ($5.9 million) and Cross City Tunnel ($3.1 million) were included in both the proportional
EBITDA and proportional net cost outcomes.
Measure
Proportional EBITDA
Proportional net costs
Safety action plan items implemented
Overall Group Performance
Performance
$931.2 million1
$182.6 million
76%
-
1 For FY2014 the 495 Express Lanes are excluded from the Proportional EBITDA measure.
Outcome
113.7%
150.0%
100.0%
125.5%
What were the individual STI performance outcomes and awards for the CEO and Senior
Executives for FY2014?
1
O
n
-
t
a
r
g
e
t
1
O
n
1
1
Current Senior
Executives
S Charlton
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
L Tobin
V Vassallo
STI outcome (%)
Actual STI awarded1 ($)
Individual
KPIs
131.0
Group
performance2
164.4
90.0
131.0
125.0
50.0
88.0
75.0
88.0
115.0
113.0
164.4
156.9
62.8
110.4
94.1
110.4
144.3
Total
147.7
101.5
147.7
140.9
56.4
99.2
84.6
99.2
129.7
Cash3 Deferred into
securities
1,039,250
1,039,250
162,394
207,225
294,000
131,100
136,800
145,700
174,675
228,275
162,394
207,225
294,000
131,100
136,800
145,700
174,675
228,275
STI
forfeited
(%)
-
-
-
-
43.6
0.8
15.4
0.8
-
1 On-target performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI in respect of
FY2014 was nil.
2 The Group performance outcome is determined by multiplying the individual percentage outcome by the Group’s percentage outcome
of 125.5%.
3 The cash STI payments will be paid in August 2014. The STI deferred component (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 2016.
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What was the grant and movement in the number of STI deferred awards?
Mandatory STI deferral was introduced in FY2012, with the first grant of awards made in August 2012.
Grants were also made in August 2013 as detailed below:
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*
S Charlton2
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
L Tobin2
V Vassallo2
Former Senior Executives
M Kulper1
-
108,486
14,789
15,212
22,449
18,973
16,540
19,356
-
-
14,282
17,328
15,202
17,944
21,288
21,192
6,612
6,612
36,464
22,813
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
108,486
29,071
32,540
37,651
36,917
37,828
40,548
6,612
6,612
59,277
1 M Kulper was employed for the full FY2013 performance year, and received 22,813 awards in respect of that period. He has retained
his deferred cash awards in the STI plans in accordance with their original terms.
2 Scott Charlton, Lisa Tobin and Vin Vassallo had a zero opening balance at the beginning of FY2014, as they 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. They all
received a grant during FY2014, in respect of the FY2013 performance period.
E
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 FY2014, 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.
LTI grants are generally made twice per annum – once following the annual performance review (August)
for Senior Executives excluding the CEO, and at a later date in November for the CEO. This is to allow the
CEO’s grant of performance awards to be put to security holder vote at the AGM.
Two performance measures are used to determine the number of performance awards that will vest at the
end of the performance period. Total Shareholder Return (TSR) provides a comparison for Transurban’s
performance against those companies with which the Group competes for capital. Additionally, growth in
Free Cash Flow (FCF) helps to retain a focus on maximisation of free cash. The maximum opportunity
following these tests is capped at 100%.
The performance awards will, subject to achievement of the two performance measures against the
vesting schedules, vest and be automatically exercised at the vesting date with no exercise price payable
by the recipient. 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 Executive receives a cash payment upon vesting.
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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 is the Group’s LTI allocation valuation methodology?
A fair value approach is applied for the TSR allocation. The Group is currently transitioning to a face value
approach (discounted for distributions) for the FCF component. The transition is over 3 years and all
things being equal there will be a decrease in the number of awards recipients receive until the new
methodology is achieved. This transition will be completed for grants made during FY2016.
What were the LTI performance measures for FY2014?
Performance awards granted during the FY2014 are subject to a three year performance period and the
following dual performance measures over that period:
Measure
Description of measure
Relative TSR
(50% weighting)
Relative TSR is measured against a bespoke comparator group comprising companies in the
transport, utilities, real estate, telecommunications and construction Global Industry
Classification Standards (GICS) sectors of the ASX 150. The 42 companies in this group are:
Abacus Property Group, AGL Energy Limited, Auckland International Airport Limited, Asciano
Limited, Australand Property Group, APA Group, Aurizon Holdings Limited, BWP Trust, CFS
Retail Property Trust Group, Charter Hall Group, Commonwealth Property Office Fund,
Charter Hall Retail REIT, DUET Group, Dexus Property Group, Envestra Limited, Federation
Centres Limited, Goodman Group, GPT Group, iiNet Limited, Investa Office Fund, Leighton
Holdings Limited, Lend Lease Group, Mirvac Group, Monadelphous Group Limited,
Macquarie Atlas Roads Limited, M2 Telecommunications Group Limited, Qantas Airways
Limited, Qube Logistics Holdings Limited, Shopping Centres Australasia Property Group,
Stockland, Spark Infrastructure Group, SP AusNet, Sydney Airport, Transurban Group,
Telecom Corporation of New Zealand Limited, Telstra Corporation Limited, Toll Holdings
Limited, TPG Telecom Limited, UGL Limited, Virgin Australia Holdings Limited, Westfield
Group, Westfield Retail Trust.
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 2014, 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 Group’s relative TSR ranking in
the comparator group
At or below the 50% percentile
Above the 50th percentile but below
the 75th percentile
% of performance awards that vest
Nil
Straight line vesting between 50 and 100
At or above the 75th percentile
100
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Measure
Description of measure
Growth in FCF
per security
(50% weighting)
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 22 of the audited financial statements of Transurban
Holdings Limited.
For performance awards granted during the year ended 30 June 2014, the FCF per security
component will vest based on the Group's compound annual growth targets translated into
annual FCF per security over the three year performance period, as set out below:
Growth in FCF per security vesting schedule:
% annual growth in FCF per security
% of performance awards that vest
Less than 12%
Nil
Between 12% and 15%
Straight line vesting between 50 and 100
15% or more
100
For performance awards granted during FY2015, the performance target range for growth in
FCF per security is between 10.0 per cent and 13.0 per cent per annum. This is calculated
from a base of 35.0 cents per security for FY2014, which is aligned to the FY2014 distributions
paid. The Board has determined to use this base due to significant shifts in equity issued by
the Group during the period, in particular 404.5 million securities issued in May 2014
associated with the Queensland Motorways acquisition. The 35.0 cent per security base is
considered the best point of alignment with security holders’ expectation for growth in free
cash.
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. The vesting schedule applied is in line with market practice, with straight line vesting
between 50% and 100% for performance above the 50th percentile up to the 75th percentile for
performance against the comparator group.
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 FY2013.
Why has the FCF target for FY2014 of 12-15% increased from 6-9% in FY2013?
Transurban regularly updates its corporate model to reflect the latest assumptions regarding traffic,
operating costs, maintenance costs, discount rates, etc. The Transurban Board considers the Group’s
potential performance over any given three year period and relates remuneration incentives to these
expectations. Most importantly, it is the Board’s role to assess the realistic nature of cash flow
expectations and set challenging but realistic targets. One target may be appropriate one year, but not so
another year. The completion of construction for the M2 was a contributing factor for the change in the
FCF target from FY2013 to FY2014.
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Why is a three year performance period used for LTIs?
The three year performance period for LTI has been set in line with market practice. The Board continues
to monitor market practice in this regard.
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 FY2014 will be subject to the incumbent Board's discretion.
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What was the grant, and movement in the number and value, of performance awards during
FY2014?
Eligible Senior Executives (excluding the CEO) received performance awards with a grant date of 15
August 2013. Following the receipt of security holder approval at the 2013 AGM, the CEO received
performance awards with a grant date of 1 November 2013. All performance awards granted in FY2014
vest subject to a performance period from 1 July 2013 through to 30 June 2016.
The relevant values of the grants are as follows:
Recipient
Grant date
Fair value of awards
at grant date1($)
Closing security
price at grant
date
Relative TSR FCF per security
Eligible Senior Executives 15 August 2013
CEO
1 November 2013
$3.24
$3.13
$6.07
$6.21
$6.89
$6.97
1 An explanation of the pricing model used to calculate these values is set out in note 34 to the audited financial statements.
Performance awards granted in FY2014
Name
Current Senior Executives
S Charlton1
J Aument
W Ballantine
A Head
S Hogg
S Johnson
T Steinhilber
L Tobin
V Vassallo
Number of
performance
awards granted2
Value at
grant date ($)
Maximum total value
of grant yet to vest3($)
382,292
74,494
62,630
94,767
105,633
62,630
78,267
79,980
79,980
1,713,466
1,713,466
334,159
280,940
425,098
473,841
280,941
351,084
358,768
358,768
334,159
280,940
425,098
473,841
280,941
351,084
358,768
358,768
1 The grant made to the CEO constituted his LTI entitlement for FY2014 and was made following security holder approval at the 2013
AGM on the terms summarised above. Performance awards vest subject to performance over the period from 1 July 2013 through to 30
June 2016.
2 The grants made to Senior Executives assume full vesting of their full LTI entitlement for FY2014 and were made on the terms
summarised above. Performance awards vest subject to performance testing over the period from 1 July 2013 through to 30 June 2016.
3 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.
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F
LEGACY LTI PLANS
The Group has a number of LTI plans that were offered in previous years, as detailed below:
Plan
Grant date
FY2013 PAP
15 Aug 2012
FY2012 PAP
26 Sep 2011
FY2011 PAP
1 Nov 2010
19 Oct 2012 (CEO only)
11 Nov 2011 (CEO only)
Performance
period
External
performance
measure (50% of
grant)
Comparator
group
1 Jul 2012 – 30 Jun 2015
1 Jul 2011 - 30 Jun 2014
TSR : 1 Nov 2010 - 1 Nov
2013
EBITDA : 1 Jul 2010 - 30
Jun 2013
Relative TSR
Relative TSR
Relative TSR
37 companies within
a bespoke comparator
group within the ASX150
33 companies within
a bespoke comparator
group within the ASX150
The S&P/ASX 100
Relative TSR
% of performance awards that vest
Vesting schedule
Above 50th percentile to 75th percentile Straight line vesting between 50%-100%
At or above the 75th percentile
100% vests
Internal
performance
measure (50% of
grant)
Growth in free cash flow
(FCF) per security
Growth in free cash flow
(FCF) per security
Group's annual growth in
proportional EBITDA
From 6% - 9%
From 7% - 10%
From 7% - 11%
Compound Growth
% of performance awards that vest
Vesting schedule
At target
From target % to stretch %
50% vests
Straight line vesting between 50% -
100%
At or above stretch %
100% vests
Current status
To be tested after
30 Jun 2015
TESTED 71.59% vested
on 30 Jun 2014
TESTED 86.51% vested
on 1 Nov 2013
Awards on issue 814,965
–
–
Value of performance awards vested and lapsed in FY2014
The FY2011 PAP vested on 1 November 2013.
The outcome of the performance tests were as follows:
Test type
TSR
Result of test
Transurban ranked 33 out of 93 companies (65.21%)
% units vest
80.42%
Proportional EBITDA
85% of the target EBITDA range was achieved
Overall vesting
92.60%
86.51%
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FY2011 PAP - Lapsed
FY2011 PAP - Vested
Number
Value ($)1
Number
Value ($)1
2,913
3,297
12,211
8,881
3,996
3,879
10,535
11,922
44,156
32,113
14,451
14,026
18,684
21,144
78,312
56,954
25,630
24,876
74,331
84,119
311,555
226,585
101,964
98,967
Current Senior Executives
J Aument2
W Ballantine2
A Head
S Hogg
S Johnson2
T Steinhilber2
Former Senior Executives
M Kulper
21,732
78,583
139,371
554,471
1 Based on the fair value at date of grant.
2 Awards granted prior to the Senior Executive becoming a member of KMP. Awards vested while the Senior Executive was a member
of KMP.
The FY2012 PAP vested on 30 June 2014.
The outcome of the performance tests were as follows:
Test type
TSR
Free Cash Flow
Overall vesting
Result of test
Transurban ranked 14 out of 31 companies (56.66%)
% units vest
63.32%
93.8 cents adjusted to 97.9 cents
79.86%
71.59%
Current Senior Executives
A Head
S Hogg
Former Senior Executives
FY2012 PAP - Lapsed
FY2012 PAP – Vested
Number
Value ($)1
Number
Value ($)1
30,616
28,785
116,784
109,799
77,150
72,535
314,102
295,314
M Kulper
31,739
121,070
79,982
325,629
1 Based on the fair value at date of grant.
The Board exercised its discretion to ensure that participants in the FY2012 PAP were neither
advantaged nor disadvantaged as a result of the Queensland Motorways (QM) acquisition and
associated capital raising. The issuance of 404.5 million new securities in May 2014 associated with the
funding of the QM acquisition occurred in FY2014, while financial close of the QM acquisition occurred in
FY2015. The Board exercised its discretion to, in effect, exclude the new securities issued to fund the
QM acquisition from the number of securities used to calculate the FY2014 Free Cash Flow (FCF) per
security for the purposes of calculating the FCF outcome for the FY2012 PAP. Interest income on the
equity raised prior to year end was similarly excluded from the calculation. The targets set at the
beginning of the performance period (1 July 2011) were not adjusted.
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Number of performance awards on issue as at 30 June 2014
The number of performance awards held by members of KMP as at 30 June 2014 is provided below.
Comparative data is shown for those Senior Executives who were members of KMP during both FY2014
and FY2013.
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
Current Senior Executives*
S Charlton
2014
2013
J Aument
2014
2013
W Ballantine
2014
2013
A Head
2014
2013
S Hogg
2014
2013
S Johnson
2014
2013
T Steinhilber
2014
2013
L Tobin
2014
2013
V Vassallo
2014
2013
684,6561
–
382,292
684,6561
(78,752)
–
–
–
988,196
684,6561
21,597
39,3652
24,441
44,4712
311,043
257,636
292,851
214,633
29,626
52,7712
28,755
53,7712
–
–
–
–
74,494
–
62,630
–
(18,684)
(17,768)3
(21,144)
(20,030)3
(2,913)
–
(3,297)
–
74,494
21,597
62,630
24,441
94,767
112,754
(155,462)
(59,347)
(42,827)
–
207,521
311,043
105,633
125,754
(129,489)
(47,478)
(37,666)
–
231,329
292,851
62,630
–
78,267
–
79,980
–
79,980
–
(25,630)
(23,145)3
(24,876)
(25,022)3
–
–
–
–
(3,996)
–
(3,879)
–
–
–
–
–
62,630
29,626
78,267
28,755
79,980
–
79,980
–
Former Senior Executives
M Kulper
2014
2013
508,549
491,675
–
178,830
(219,353)
(161,956)
(223,903)4
–
65,293
508,549
All Performance Awards granted or matured in FY14 (where applicable) in the table above were issued by Transurban and resulted or
will result in one ordinary Transurban stapled security (or cash equivalent, as determined by the Board) per Performance Award granted
or matured.
* 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 Scott Charlton’s number of performance awards granted during FY2013 includes 236,256 performance awards granted 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, and a second tranche
(78,752) awards vested on 16 July 2014. Therefore as at the date of this report, Scott Charlton has 909,444 performance awards yet to
vest of which 78,752 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 Awards lapsed/forfeited includes pro rata forfeiture of grants made in FY2011, FY2012 and FY2013 in line with good leaver treatment.
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(continued)
G
REMUNERATION PAID TO THE CEO AND OTHER SENIOR EXECUTIVES
Short-term employee benefits
Cash salary
and fees
Cash
STI2
Non-
monetary
benefits3
Deferred
STI4
Post-
employment
benefits
Termination
benefits
Super-
annuation
Current CEO
S Charlton
2014
2013
1,858,493
1,039,250
7,042
492,200
17,774
1,789,850
738,300
22,379
246,100
15,098
Current Other Senior Executives
J Aument1
2014
516,456
244,487
1,250
126,054
11,274
2013
W Ballantine1
2014
2013
A Head
2014
2013
S Hogg
2014
2013
S Johnson1
2014
2013
T Steinhilber1
2014
2013
L Tobin1
2014
2013
V Vassallo1
2014
2013
27,260
10,775
-
5,204
916
393,737
207,225
1,462
107,433
230,757
81,150
3,398
44,498
604,875
294,000
2,418
111,497
589,279
241,395
2,366
77,012
676,275
131,100
2,018
117,353
656,561
284,935
2,030
76,648
423,737
136,800
1,496
127,917
280,971
112,325
3,823
60,277
572,856
309,886
30,165
177,462
269,441
259,550
52,658
53,001
507,741
174,675
1,753
30,000
185,869
-
710
15,000
507,741
228,275
1,753
30,000
176,134
-
710
15,000
17,774
9,836
17,774
16,470
17,774
16,470
17,774
12,043
17,774
6,388
17,774
6,863
17,774
6,863
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Long-
term
benefits
Long
service
leave
-
-
-
-
21,430
15,368
13,053
12,696
21,368
13,674
8,661
23,829
Shared
based
benefits5
Total
1,484,748
4,899,507
1,302,848
4,114,575
192,748
1,092,269
3,534
47,689
96,404
26,851
845,465
411,858
474,344
1,517,961
441,434
1,380,652
485,938
1,451,826
407,426
1,457,744
98,710
38,665
815,095
531,933
8,531
208,931
1,325,605
-
-
-
-
-
58,491
699,529
109,235
841,178
-
208,442
109,235
894,778
-
198,707
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Short-term employee benefits
Cash salary
and fees
Cash
STI2
Non-
monetary
benefits3
Deferred
STI4
Post-
employment
benefits
Termination
benefits
Super-
annuation
Shared
based
benefits5
Total
Long-
term
benefits
Long
service
leave
Former CEO
C Lynch
2014
2013
-
-
-
-
-
144,951
178,652
555
504,275
5,490
Former Other Senior Executives
-
-
-
-
-
(62,121)
-
6,103,6656
-
6,875,467
-
-
-
8,346
(341,435)
499,569
K Daley
2014
2013
M Kulper
2014
2013
E Mildwater
2014
2013
-
816,330
583,403
-
-
-
-
-
-
53,262
(50,659)
13,725
2,912 300,6297
2,791
333,356
-
385,1687
1,608,259
1,067,296
362,264
15,482
120,168
10,997
-
485,161
-
-
-
-
-
1,525
(37,627)
13,725
-
-
-
28,977
1,441,431
3,046,615
-
-
-
(15,434)
(274,631)
172,719
1 The dates on which the Senior Executives who were promoted or appointed during FY2013 are the 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 FY2014, which will be paid in August 2014. Jennifer Aument and Tim
Steinhilber also received a second and final payment in relation to the successful delivery of the 495 Express Lanes of $82,093 and $164,186
respectively (paid in August 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 FY2014 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 Transurban’s 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 C 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.
7The value for Deferred STI and share based benefits for M Kulper includes all unvested 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 M Kulper
as President, North America 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. The LTI awards may or may not vest.
288
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Directors' report
30 June 2014
(continued)
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 FY2014 are outlined below:
CEO
Other Senior Executives
Period of notice to
terminate (Executive)
Period of notice to
terminate (the Group*)
6 months
3 months
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 operated the following broad employee based security plans in FY2014.
ShareLink Incentive Plan
Under the ShareLink Incentive Plan, subject to Board approval, an allocation of Transurban securities 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 21 February 2014. 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, whichever 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.
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30 June 2014
(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 2014
The number of securities held by members of KMP as at 30 June 2014 is provided below. Comparative
data is shown for those Senior Executives who were members of KMP during both FY2014 and FY2013.
Current Senior Executives
Balance at
start of year
Changes
during year
Balance at
end of year
S Charlton
2014
2013
J Aument
2014
2013
W Ballantine
2014
2013
A Head
2014
2013
S Hogg
2014
2013
S Johnson
2014
2013
T Steinhilber
2014
2013
L Tobin
2014
2013
V Vassallo
2014
2013
10,000
–
–
–
3,988
2,8891
3,041
3,041
11,553
1,553
29,596
19,1291
–
–
–
–
10,538
10,0181
Former Senior Executives
M Kulper
2014
2013
1 Opening balance held prior to the Senior Executive becoming a member of KMP.
2 Balance removed on departure from the Group during FY2014.
3 Includes the FY2012 PAP awards which vested 30 June 2014. Refer section 4F.
80,000
80,000
290
290
124,622
10,000
134,622
10,000
–
–
697
1,099
84,7193
–
129,4893
10,000
14,167
10,467
–
–
–
–
510
520
(80,000)2
–
–
–
4,685
3,988
87,760
3,041
141,042
11,553
43,763
29,596
–
–
–
–
11,048
10,538
–
80,000
2014 Transurban Annual Report
Transurban International Limited
Directors' report
30 June 2014
(continued)
Securities held by Non-executive Directors as at 30 June 2014
Current Non-executive Directors
Balance at
start of year
Changes
during year
Balance at
end of year
L Maxsted
2014
2013
N Chatfield
2014
2013
R Edgar
2014
2013
S Mostyn
2014
2013
C O'Reilly
2014
2013
R Slater
2014
2013
I Smith
2014
2013
Former Non-executive Directors
R Officer
2014
2013
1 Balance removed on resignation as a Director during the relevant year.
30,000
30,000
30,910
20,910
24,590
23,733
14,000
10,300
4,363
–
–
–
36,559
–
19,514
10,000
5,734
857
3,256
3,700
9,609
4,363
–
–
66,559
30,000
50,424
30,910
30,324
24,590
17,256
14,000
13,972
4,363
–
–
71,772
70,000
20,970
1,772
92,742
71,772
–
20,115
–
(20,115)1
–
–
291
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Directors' report
30 June 2014
(continued)
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.
A
GROUP PERFORMANCE AND STI
For the year ended 30 June 2014, 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 275.
STI is an ‘at risk’ component of remuneration – payments are determined based on the following three
measures, and could result in zero payout if targets are not met. The maximum payment available to any
Senior Executive is 150% of target.
Proportional EBITDA
The proportional EBITDA result for FY2014 was $934.1 million. Excluding the effect of 495 Express
Lanes, this resulted in the payment of 113.7 per cent of STIs attributable to proportional EBITDA. The
growth in EBITDA was driven by the completion of the Hills M2 Upgrade in August 2013 and continued
cost and revenue recovery initiatives across all assets in the portfolio.
Proportional net costs
The proportional net costs result for the year ended 30 June 2014 was $182.6 million, an 11.8 per cent
increase from the prior year result. This resulted in the payment of 150% of STIs attributable to
proportional net costs. On an underlying basis, shown in the table below, net costs increased 7.5% from
the prior year result. The increase includes the impact of project development and acquisitions work in the
current financial year.
Net costs as reported
Prior year one-off items
TTMS impact – both periods
Safety
FY14
182.6
-
4.2
FY13 % increase
163.4
11.8%
1.0
9.4
186.9
173.8
7.5%
For the year ended 30 June 2014, the safety performance measure resulted in a 100 per cent STI
outcome. The target was a lead indicator that required the completion of safety development action plans.
The target was split with equal weighting between employee/contractor (5 per cent) and customer (5 per
cent) safety targets. The Group achieved the completion of 76 per cent of the defined safety development
action plans.
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Directors' report
30 June 2014
(continued)
B
GROUP PERFORMANCE AND LTI
For the year ended 30 June 2014, LTIs were linked to relative TSR and FCF per security.
Relative TSR
Relative TSR for the year ended 30 June 2014 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 2014 was a
range for compound growth in FCF per security of between 12 per cent and 15 per cent per annum 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
2015, the performance target range for compound growth in FCF per security per annum is between 10.0
per cent and 13.0 per cent.
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 2010, 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
Measure
Security price at year end
Distribution paid per security
Underlying proportional EBITDA - $m1
TSR performance2
TSR rank position3
2014
$7.39
35.0c
934.1
17%
2013
$6.76
31.0c
828.0
25%
33 / 934
14 / 315
12 / 896
2011
$5.23
27.0c
718.7
32%
2010
$4.24
24.0c
635.4
10%
n/a
n/a
2012
$5.69
29.5c
784.0
15%
35 / 86
6 / 86
19 / 867
29.8c
33.9
FCF per security performance - weighted
average
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
3 This is the TSR ranking position for the LTI that vests during the financial year
4 FY2011 PAP that vested 1 November 2013
5 FY2012 PAP that vested 30 June 2014
6 FY2010 PAP that vested November 2012 (testing as at 30 June 2012)
7 FY2009 PAP tested in three tranches
27.4c
30.1c
27.5c
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Directors' report
30 June 2014
(continued)
6 Non-executive director remuneration
A
REMUNERATION POLICY
The diagram below sets out the key objectives of the Group’s Non-executive Director remuneration policy
and how they are achieved 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 and workload
expected, the Director’s 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
B
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 FY2015.
The aggregate fee pool and the manner in which it is apportioned amongst Non-executive Directors are
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 FY2014
Non-executive Director (base) 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 $
Member fee $
455,000
40,000
10,000
30,000
170,000
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 FY2014. 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.
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Directors' report
30 June 2014
(continued)
Retirement benefits
Non-executive Directors are not entitled to any retirement benefits.
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 FY2014.
C
REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS
Non-executive Director remuneration for FY2014 and FY2013 is set out below:
Short-term benefits
Fees
Post-employment benefits
Superannuation1
Current Non-executive Directors
L Maxsted
2014
2013
N Chatfield
2014
2013
R Edgar
2014
2013
S Mostyn
2014
2013
C O'Reilly
2014
2013
R Slater
2014
2013
I Smith
2014
2013
Former Non-executive Directors
R Officer (resigned 7 August 2012)
2014
2013
Total
2014
2013
437,925
438,716
222,825
223,625
212,825
211,119
183,570
183,608
183,570
181,229
197,023
194,070
155,973
155,967
-
18,832
1,593,711
1,607,166
17,774
16,470
17,774
16,470
17,774
16,470
16,980
16,470
16,980
16,247
-
-
14,427
14,037
-
1,695
101,709
97,859
Total
455,699
455,186
240,599
240,095
230,599
227,589
200,550
200,078
200,550
197,476
197,023
194,070
170,400
170,004
-
20,527
1,695,420
1,705,025
1 Superannuation contributions made on behalf of Non-executive Directors to satisfy the Group’s obligations under applicable
superannuation guarantee legislation.
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Directors' report
30 June 2014
(continued)
D
NON-EXECUTIVE DIRECTOR RELATED PARTY INFORMATION
Rodney Slater is a partner in the public policy practice group of Squire Patton Boggs (US) LLP.
Transurban used Squire Patton Boggs (US) LLP during the year ended 30 June 2014 for various lobbying
activities in the USA. This relationship is based on normal commercial terms. US$180,144 was paid to
Squire Patton Boggs (US) LLP during FY2014.
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.
Christine O’Reilly is a Non-executive Director of Energy Australia. Energy Australia is one of Transurban’s
electricity providers in NSW and Queensland. This relationship is based on normal commercial terms.
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Directors' report
30 June 2014
(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. 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 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 TIL, its related practices and non-related audit firms:
Amounts received or due and receivable by PricewaterhouseCoopers
Audit and review of financial reports
Total remuneration for PricewaterhouseCoopers
Total auditors remuneration
2014
$
2013
$
52,000
52,000
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 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 299.
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 0.1 million dollars, or in certain cases, to the
nearest dollar.
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Transurban International Limited
Directors' report
30 June 2014
(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
5 August 2014
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299
2014 Transurban Annual Report Transurban International Limited ABN 90 121 746 825
Annual report - 30 June 2014
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
301
302
303
304
305
306
356
357
This financial report covers the consolidated financial statements of the consolidated entity consisting of
Transurban International Limited and its subsidiaries. The financial report is presented in the Australian
currency.
Transurban International Limited is incorporated and domiciled in Australia.
Its registered office is:
Level 23
727 Collins Street
Docklands VIC 3008
The financial statements were authorised for issue by the Directors on 5 August 2014. The Directors have the
power to amend and reissue the financial statements.
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
300
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2014 Transurban Annual Report
Transurban International Limited
Consolidated income statement
For the year ended 30 June 2014
Notes
4
5
6
10
7
Revenue
Toll, fee and other road revenue
Construction revenue
Management, business development and other 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
k
Finance costs
Share of net profits / (losses) of equity accounted investments
Loss before income tax
Income tax benefit/(expense)
Loss for the year
Loss is attributable to:
Ordinary equity holders of the Group
Non-controlling interests
Loss per share for loss attributable to the ordinary equity holders of
the Group:
Basic earnings per security
Diluted earnings per security
31
31
2014
$M
3.8
37.2
37.9
78.9
(11.2)
(22.9)
(8.9)
(33.0)
(76.0)
2013
$M
-
31.2
40.9
72.1
(9.0)
(9.9)
(19.5)
(21.8)
(60.2)
2.9
11.9
(4.0)
(0.4)
(126.5)
(26.1)
93.8
(28.2)
(33.8)
22.8
(11.0)
19.5
(30.5)
(11.0)
(42.8)
(4.4)
(47.2)
(47.2)
-
(47.2)
Cents
Cents
1.3
1.3
(3.2)
(3.2)
The above consolidated income statement should be read in conjunction with the accompanying notes.
301
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2014 Transurban Annual Report
Transurban International Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2014
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 foreign 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 the Group
Non-controlling interests
2014
$M
(11.0)
61.0
(42.1)
18.9
7.9
38.4
(30.5)
7.9
2013
$M
(47.2)
27.4
(26.0)
1.4
(45.8)
(45.8)
-
(45.8)
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
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2014 Transurban Annual Report
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
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Provisions
Deferred tax liabilities
Borrowings
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net liabilities
EQUITY
Contributed equity
Reserves
Accumulated losses
Non-controlling interests
Total equity
Transurban International Limited
Consolidated balance sheet
As at 30 June 2014
Notes
8
9
10
12
13
14
15
17
18
17
13
16
11
19
20
20
27
2014
$M
146.7
11.9
-
158.6
-
1.4
55.2
1,965.2
2,021.8
2,180.4
947.1
5.8
8.1
961.0
9.0
54.6
1,171.3
41.4
1,276.3
2,237.3
2013
$M
4.8
19.3
0.5
24.6
228.6
1.8
8.9
-
239.3
263.9
521.1
6.6
6.0
533.7
-
-
-
-
-
533.7
(56.9)
(269.8)
276.3
(46.2)
(394.7)
107.7
(56.9)
216.0
(71.6)
(414.2)
-
(269.8)
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
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2014 Transurban Annual Report
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Consolidated statement of changes in equity
For the year ended 30 June 2014
Attributable to members of Transurban
International Limited
Notes
Contributed
equity
$M
Reserves
$M
Accumulated
losses
$M
Non-
controlling
interests
$M
Total
$M
205.1
(72.8)
(367.0)
(234.7)
-
-
-
-
1.4
1.4
(47.2)
(47.2)
-
1.4
(47.2)
(45.8)
19
20
8.0
2.6
0.1
0.2
10.9
216.0
-
-
(0.2)
-
(0.2)
(71.6)
-
-
-
-
-
8.0
2.6
(0.1)
0.2
10.7
(414.2)
(269.8)
216.0
(71.6)
(414.2)
(269.8)
-
-
-
-
-
-
-
-
-
-
-
Total
equity
$M
(234.7)
(47.2)
1.4
(45.8)
8.0
2.6
(0.1)
0.2
10.7
(269.8)
(269.8)
-
-
-
59.4
0.9
-
-
-
60.3
276.3
-
18.9
18.9
-
-
(0.4)
6.9
-
6.5
19.5
-
19.5
-
-
-
-
-
-
19.5
18.9
38.4
59.4
0.9
(0.4)
6.9
-
66.8
(46.2)
(394.7)
(164.6)
(30.5)
(11.0)
-
(30.5)
18.9
7.9
-
-
-
(6.9)
145.1
138.2
107.7
59.4
0.9
(0.4)
-
145.1
205.0
(56.9)
Balance at 1 July 2012
Comprehensive income
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
Changes in value of share-
based payment reserve
Deferred Short Term
Incentives securities issued
Balance at 30 June 2013
Balance at 1 July 2013
Comprehensive income
Profit 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
Changes in fair value of share-
based payment reserve
Transactions with NCI
Equity contributions
19
19
20
20
Balance at 30 June 2014
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
304
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2014 Transurban Annual Report
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
Interest paid
Tax refunds
Net cash (outflow) from operating activities
Cash flows from investing activities
Payments for acquisition of subsidiary, net of cash acquired
Payment for investments in equity accounted investments
Payments for intangible assets
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
Proceeds from borrowings
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
8
Transurban International Limited
Consolidated statement of cash flows
For the year ended 30 June 2014
Notes
30
3
2014
$M
81.9
(77.3)
(0.5)
(10.1)
0.5
(5.5)
(232.0)
(38.5)
(5.0)
(275.5)
731.1
(339.5)
-
19
32.4
424.0
143.0
4.8
(1.1)
146.7
2013
$M
58.1
(61.2)
-
(1.5)
-
(4.6)
-
(207.8)
-
(207.8)
216.5
(16.4)
8.0
-
208.1
(4.3)
9.1
-
4.8
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
305
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
Contents of the notes to the consolidated financial statements
Summary of significant accounting policies
Segment information
Business combinations
Revenue
Expenses
Net finance costs
Income tax expense
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
1
2
3
4
5
6
7
8
9
10 Equity accounted investments
11 Derivative financial instruments
12 Non-current assets - Property, plant and equipment
13 Deferred tax assets and liabilities
14 Non-current assets - Intangible assets
15 Current liabilities - Trade and other payables
16 Borrowings
17 Provisions
18 Current liabilities - Other current liabilities
19 Contributed equity
20 Reserves and accumulated losses
21 Dividends
22 Remuneration of auditors
23 Intra-group Guarantees
24 Commitments
25 Related party transactions
26 Subsidiaries
27 Non-controlling interests
28 Parent entity financial information
29 Events occurring after the reporting period
30 Reconciliation of profit after income tax to net cash inflow from operating activities
31 Earnings per share
32 Share-based payments
33 Key management personnel compensation
34 Critical accounting estimates and judgements
35 Financial risk management
Page
307
322
325
327
328
328
328
329
329
329
332
333
334
335
336
336
337
339
339
341
342
342
342
343
344
345
345
346
347
347
348
349
352
352
353
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(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
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 $802.4 million as at 30 June 2014. This reflects a
number of specific factors primarily related to an intercompany loan payable of $351.0 million to another entity
within the Transurban Group and term debt of $400.0 maturing within 12 months. As at 30 June 2014, the
Transurban Group comprises Transurban Holdings Limited, Transurban Holding Trust and Transurban
International Limited, traded and quoted on the Australian Stock Exchange as one triple stapled security. 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. The financial report has been prepared on a going concern
basis.
Compliance with International Financial Reporting Standards (IFRS)
The consolidated financial statements of Transurban International Limited also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).
New and amended standards adopted by the group
The Group has amended some of its accounting policies as the result of new or revised accounting standards
which became effective for the annual reporting period commencing on 1 July 2013.
The affected policies and standards are:
(i) AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets
and Financial Liabilities.
AASB 2012-2 resulted in amendments being made to AASB 7 Financial Instruments - Disclosure which requires
additional disclosures when entities offset financial assets and liabilities within their financial statements. As a
result of this amendment to AASB 7 the Group has expanded its disclosures about the offsetting of financial
assets and liabilities (see Note 11).
307
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
Compliance with International Financial Reporting Standards (IFRS) (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, AASB 128 Investments in Associates and
Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation
and Joint Arrangements Standards and AASB 2012-10 Amendments to Australian Accounting Standards -
Transition Guidance and Other Amendments.
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.
In accordance with the transitional provisions of AASB 10, the Group reassessed the control conclusions for its
investments at 1 July 2013. Based on this reassessment no changes have been made regarding 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.
The Group has re-evaluated its involvement in its joint arrangements at 1 July 2013 and has re-classified its
investments from jointly controlled entities to joint ventures. Notwithstanding the reclassification, these
investments continue to be accounted for using the equity method and accordingly there has been no impact on
the recognised assets, liabilities and comprehensive income of the Group.
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. As a result of
IFRS 12, the Group has expanded its disclosures about its interests in subsidiaries (see Note 26) and equity
accounted investees (see Note 10).
Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not
re-measure 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 has determined that these
amendments have no impact on the financial statements of the Group.
308
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
Compliance with International Financial Reporting Standards (IFRS) (continued)
(iii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards
arising from AASB 13
AASB 13 establishes a single framework for measuring fair value and making disclosures about fair value
measurements, when such measurements are required or permitted by other AASBs. In particular, it unifies the
definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would
take place between market participants at the measurement date. It also replaces and expands the disclosure
requirements about fair value measurements in other AASBs, including AASB 7 Financial Instruments:
Disclosures. As a result, the Group has included additional disclosures in this regard (see Note 35).
In accordance with the transitional provisions of AASB 13, the Group has applied the new fair value
measurement guidance prospectively, and has not provided any comparative information for new disclosures.
Notwithstanding the above, the change has not had a material impact on the measurement of the Group’s assets
and liabilities.
(iv) AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements
The AASB has 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. This amendment has reduced the
disclosures required in the notes to the financial statements however it has not affected any of the amounts
recognised in the financial statements.
Early adoption of standards
The Group has elected to early adopt AASB 2013-3 Amendments to AASB 136 - Recoverable Amount
Disclosures for Non-Financial Assets, which amends the disclosure requirements in AASB 136 Impairment of
Assets. The amendments include the requirement to disclose additional information about the fair value
measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal, and
may result in additional disclosures if the group recognises an impairment loss or the reversal of an impairment
loss during the year. The application date for the Group would have been 1 July 2014, but the Group has early
adopted as of 1 July 2013.
The adoption of this new standard has not had a significant impact on the disclosure within the financial
statements.
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 0.1 million dollars, or in
certain cases, to the nearest thousand `dollars.
(b) Principles of consolidation
Subsidiaries
Subsidiaries are all those entities which the Group controls. The Group controls an entity when the group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power to govern the financial and operating policies of the entity.
309
309
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
Subsidiaries (continued)
Subsidiaries are fully consolidated from the date on which control is transferred to Group. They are de-
consolidated from the date that control ceases.
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 10).
Investments in associates and joint ventures are accounted for using the equity method of accounting, after
initially being recognised at cost.
Under AASB 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or
joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than
the legal structure of the joint arrangement. The Group has joint ventures and does not have any joint operations.
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
Financial results of the 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). This includes a proportional income statement per operating
segment and consolidated financial statements for the Group.
(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 fair
value are reported as part of the fair value gain or loss. For example, translation differences on 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.
310
310
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(d) Foreign currency translation (continued)
Foreign operations
The results and financial position of all Group entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
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 charges and related fees are recognised when the charge is incurred by the user.
Business development revenue is recognised when earned, and to the extent of costs incurred and that these
costs will be recovered.
Interest income is recognised using the effective interest rate method.
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 construction 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.
311
311
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(f)
Income tax (continued)
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 tax expense. A deferred tax asset is recognised for unclaimed
tax credits that are carried forward as tax losses.
(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 24). 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 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.
312
312
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(h) Business combinations (continued)
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.
(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.
313
313
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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 initial recognition and, in the case of assets classified as held-to-maturity, is re-
evaluated at each reporting period.
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 9) 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.
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.
314
314
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investments and other financial assets (continued)
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
between the acquisition cost and the current fair value, less any impairment loss on that financial asset 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) 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 Group designates certain derivatives as either:
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.
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.
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(l) Derivatives and hedging activities (continued)
Cash flow hedges (continued)
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 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).
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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 1(h). Goodwill on acquisitions of businesses is included in intangible
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 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.
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.
(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 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,
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 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.
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(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 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.
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 in payables. An expense for non-accumulating sick leave
is recognised when the leave is taken and measured at the rates paid or payable.
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(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.
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.
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.
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(t) 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.
(u) Parent entity financial information
The financial information for the parent entity, Transurban International Limited, disclosed in note 28 has been
prepared on the same basis as the consolidated financial statements, except as set out below.
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.
(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
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.
(w) Net asset deficiency
As at 30 June 2014 the Group has a net asset deficiency represented by net liabilities of $56.9 million. This
deficiency reflects a number of specific factors primarily related to an intercompany loan payable with another
entity within the Transurban Group.
(x) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2014 reporting periods. The Group's assessment of the impact of these new standards and interpretations is set
out below.
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
1 Summary of significant accounting policies (continued)
(x) New accounting standards and interpretations (continued)
(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 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 Company does
not have any such liabilities. The Group has not yet decided when to adopt AASB 9.
(ii)
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017)
IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
IFRS 15 supersedes:
(a) IAS 11 Construction Contracts
(b) IAS 18 Revenue
(c) IFRIC 13 Customer Loyalty Programmes
(d) IFRIC 15 Agreements for the Construction of Real Estate
(e) IFRIC 18 Transfers of Assets from Customers
(f) SIC-31 Revenue-Barter Transactions Involving Advertising Services
The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. An entity recognises revenue in accordance with that core principle by
applying the following steps:
(a) Step 1: Identify the contract(s) with a customer
(b) Step 2: Identify the performance obligations in the contract
(c) Step 3: Determine the transaction price
(d) Step 4: Allocate the transaction price to the performance obligations in the contract
(e) Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Although a formal assessment has not been completed, the impact of the application of the new standard is not
expected to be material.
321
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
2 Segment information
Segment information - Proportional Income Statement
The segment information provided to the Executive Committee is presented on a proportional basis.
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, tax, depreciation and
amortisation 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 Group operates in one business sector only, being the development, operation and maintenance of toll
roads, therefore It has been determined that the segment information provided to the CEO and Executive
Committee shall be defined by geographical regions, being the USA.
The table below lists the assets included in each operating segment, together with the proportional ownership
interests held by the Group for both the current and previous financial year:
Segment
Assets
USA
Transurban DRIVe
2014
75%
2013
75%
Proportional ownership %
Pocahontas
1 July 2013 to 14 May 2014 - 75%
75%
15 May to 30 June 2014 - nil%
495 Express Lanes
1 July 2013 to 11 May 2014 - 67.5% 67.5%
12 May to 4 June 2014 - 77.5%
5 June to 30 June 2014 - 94%
95 Express Lanes
1 July 2013 to 11 April 2014 - 67.5% 67.5%
12 April to 30 June 2014 - 77.5%
322
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
2 Segment information (continued)
Segment information - Proportional Income Statement (continued)
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 2014 and 30 June 2013 is as follows:
30 June 2014
$M
USA
Pocahontas
895
495
Express
Lanes
Other
Transurban
DRIVe
Total
Transurban
DRIVe
Corporate
Total
Toll revenue from external customers
Fee and other revenue
Total revenue
Proportional EBITDA
Interest revenue
Interest expense
Depreciation and amortisation
Gain on transfer
Proportional profit (loss) before tax
Income tax benefit (expense)
Proportional net profit (loss)
11.4
-
11.4
6.7
-
(14.9)
-
249.7
241.5
(173.9)
67.6
19.2
4.8
24.0
2.9
0.1
(119.9)
(15.6)
-
(132.5)
-
(132.5)
-
-
-
(4.5)
-
(5.1)
-
-
(9.6)
59.3
49.7
(79.0)
108.5
(49.7)
30.6
4.8
35.4
5.1
0.1
(139.9)
(15.6)
249.7
99.4
(114.6)
(15.2)
(20.2)
30 June 2013
$M
Pocahontas
895
75.0%
USA
495
Express
Lanes
67.5%
Other
Transurban
DRIVe
75.0%
Total
Transurban
DRIVe
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)
11.3
0.1
11.4
6.9
-
(14.2)
(3.5)
-
(10.8)
8.0
(2.8)
4.8
1.3
6.1
(5.5)
0.7
(27.4)
(8.3)
-
(40.4)
-
(40.4)
-
-
-
(4.4)
-
(2.0)
-
-
(6.4)
21.5
15.1
16.1
1.4
17.5
(3.0)
0.7
(43.6)
(11.8)
-
(57.7)
29.5
(28.2)
-
7.0
7.0
1.9
-
(46.3)
(0.4)
-
(44.8)
(11.5)
(56.3)
49.4
30.6
11.8
42.4
7.0
0.1
(186.2)
(16.0)
249.7
54.6
(126.1)
(71.5)
29.2
Corporate
Total
100.0%
-
20.1
20.1
11.9
-
(26.0)
(0.4)
(0.1)
(14.6)
(4.4)
(19.0)
16.1
21.5
37.6
8.9
0.7
(69.6)
(12.2)
(0.1)
(72.3)
25.1
(47.2)
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.
323
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
2 Segment information (continued)
Segment information - Proportional Income Statement (continued)
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)
Add: Revenue of non-controlled assets
Less: Revenue of equity accounted assets
Add: Business Development revenue (offset against Business Development costs
for proportional results)
Construction Revenue
Other
Total revenue (note 4)
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 (loss) profit before depreciation and amortisation, net finance
costs, equity accounted investments and tax
Statutory net finance costs
Statutory depreciation and amortisation
Share of associates profit (loss)
Income tax expense
Loss for the year
324
324
2014
$M
42.4
0.2
(31.6)
34.9
33.0
-
78.9
2014
$M
0.1
(0.1)
-
2014
$M
6.9
(6.7)
(1.4)
4.1
2.9
(126.5)
(4.0)
93.8
22.8
(11.0)
2013
$M
37.6
-
(17.5)
30.0
21.8
0.2
72.1
2013
$M
0.7
(0.7)
-
2013
$M
8.9
(6.8)
5.4
4.4
11.9
(26.1)
(0.4)
(28.2)
(4.4)
(47.2)
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
3 Business combinations
DRIVe, 495 Express Lanes and 95 Express Lanes
Transurban DRIVe Holdings LLC (DRIVe) has historically been reported by the Group as an equity accounted
investment. Transurban owns 75 per cent of DRIVe, but although the ownership represents greater than half of
the voting rights of DRIVe, it was determined that Transurban did not have power to govern its key activities and
it was therefore accounted for as a joint venture.
At 1 July 2013 DRIVe owned 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.
During the year several transactions have occurred impacting the investments held by DRIVe, resulting in a
reassessment of control over the assets and DRIVe.
(i) On 11 April 2014 Transurban purchased a 10% interest directly in each of 495 Express Lanes and 95
Express Lanes from Fluor Enterprises LLC
(ii) On 14 May 2014 Pocahontas was transferred to lenders (refer note 10)
(iii) On 4 June 2014 Transurban contributed additional equity into Capital Beltway Express LLC, giving it an
additional 66% direct interest in 495 Express Lanes
Transurban now holds 10 per cent of 95 Express Lanes and 76 per cent of 495 Express Lanes directly, and 67.5
per cent of 95 Express Lanes and 18 per cent of 495 Express Lanes through DRIVe, resulting in effective
interests in 95 Express Lanes of 77.5 per cent and 495 Express Lanes of 94 per cent.
The direct holding of 76% gives Transurban power over all relevant activities of 495 Express Lanes. When 95
Express Lanes is complete, 495 Express Lanes and 95 Express Lanes will be directly connected and will be
operated as if they were a single road. As a result, control of 495 Express Lanes has also given Transurban the
power to direct the most significant activities of 95 Express Lanes. As DRIVe is primarily a holding entity for 95
Express Lanes and 495 Express Lanes, its relevant activities are identical to those of 95 Express Lanes and 495
Express Lanes. Therefore Transurban assumed control of DRIVe on 4 June 2014 and accounted for the
acquisition of DRIVe, including 95 Express Lanes and 495 Express Lanes as a business combination on that
date.
(i) Purchase consideration
Cash paid
Fair value of DRIVe at 4 June 2014
Contingent consideration
Total purchase consideration
(ii) Purchase consideration – cash outflow
Cash consideration
Less: cash acquired
Outflow of cash – investing activities
325
$M
345
358
-
703
$M
345
(113)
232
325
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
3 Business combinations (continued)
(iii) Acquisition related costs
The Group did not incur any costs directly in the purchase of equity in either 495 Express Lanes or 95 Express
Lanes during the year.
(iv) Identifiable assets acquired and liabilities assumed
495 Express Lanes
Cash and cash equivalents
Trade and other receivables
Intangible assets
Other assets
Trade and other payables
Derivative financial instruments
Borrowings
Deferred tax liabilities
Provisions
Net identifiable assets
Less: non-controlling interest share of net assets
Net identifiable assets acquired
DRIVe
Cash and cash equivalents
Intangible assets
Held to maturity investments
Deferred tax assets
Other assets
Trade and other payables
Provisions
Borrowings
Deferred tax liabilities
Net identifiable assets
Less: non-controlling interest share of net assets
Net identifiable assets acquired
Fair Value
$M
57
1
1,290
3
(25)
(41)
(828)
(40)
(10)
407
(98)
309
Fair Value
$M
69
667
98
80
12
(56)
(2)
(346)
(9)
513
(119)
394
At 4 June 2014 the assets and liabilities of the 495 Express Lanes and DRIVe / 95 Express Lanes were
measured at fair value at the acquisition date with fair values having been determined on a provisional basis.
No goodwill has been recognised on the fair value of assets and liabilities acquired.
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2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
3 Business combinations (continued)
(v) Revenue and profit contribution
From the date of acquisition to 30 June 2014, revenue of $4 million and a loss after taxation of $79.8 million was
included in the Consolidated Income Statement with regards to DRIVe, 495 Express Lanes and 95 Express
Lanes. The loss included $73.1 million of break costs incurred on early termination of swaps included in finance
costs.
If the acquisition had occurred on 1 July 2013, consolidated revenue and loss before tax for the year ended 30
June 2014 would have been $33.4 million and $166.5 million respectively. These values exclude the impact of
Pocahontas 895 and change in investment values within DRIVe that do not relate to the ongoing operations of
the business.
(vi) Accounting policy for non-controlling interests
The Group recognises non-controlling interests in an acquired entity either at fair value or at the non-controlling
interests’ proportionate share of the acquired entity’s net identifiable assets. This decision is made on an
acquisition by acquisition basis. For the non-controlling interest in DRIVe, 495 Express Lanes and 95 Express
Lanes, the Group elected to recognise the non-controlling interests in its proportionate share of the acquired net
identifiable assets.
4 Revenue
Toll revenue
Fee revenue
Other road revenue
Total toll, fee and other road revenue
Management and business development revenue
Construction revenue
Total business development and other revenue
Total revenue
Notes
4(a)
4(a)
4(b)
4(c)
4(d)
2014
$M
3.1
0.9
(0.2)
3.8
37.9
37.2
75.1
78.9
2013
$M
-
-
-
-
40.9
31.2
72.1
72.1
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.
Management and Business development revenue
(c)
Management and business development revenue relates to the provision of management and development
services to third parties.
Construction revenue
(d)
Construction revenue is recognised during the construction phase of an intangible asset, and the development of
assets for sale to third parties.
327
327
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
5 Expenses
Loss before income tax includes the following specific
expenses:
Employee benefits expense
Rental expense
6 Net finance costs
Finance costs
Interest and finance charges paid/payable
Foreign exchange gains/(losses)
Total finance costs
Net finance costs
7 Income tax expense
Income tax expense
Current tax
Deferred tax
(Over)/under provided in prior years
Deferred income tax (benefit) /expense included in income tax benefit comprises:
(Increase)/decrease in deferred tax assets (note 13)
Increase in deferred tax liabilities (note 13)
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% (2013 - 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
(Over)/under provision in prior years
Income tax (benefit)/ expense
328
328
2014
$M
12.3
0.5
2014
$M
(127.1)
0.6
(126.5)
(126.5)
2014
$M
(33.5)
5.2
5.5
(22.8)
(27.9)
33.1
5.2
2014
$M
(33.8)
(10.1)
10.3
15.3
(41.0)
(2.8)
5.5
(22.8)
2013
$M
15.3
1.0
2013
$M
(26.0)
(0.1)
(26.1)
(26.1)
2013
$M
0.6
3.7
0.1
4.4
3.6
0.1
3.7
2013
$M
(42.8)
(12.8)
7.3
0.9
8.5
0.4
0.1
4.4
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
56.
2014
$M
86.9
59.8
146.7
2013
$M
4.8
-
4.8
8 Current assets - Cash and cash equivalents
Cash at bank and in hand
Unavailable cash
All cash balances are interest bearing.
Funds not for general use
The amount shown in Cash at Bank includes $59.8 million not available for general use at 30 June 2014 (2013:
$nil). This comprises amounts required to be held under funding reserves which are restricted from general use.
9 Current assets - Trade and other receivables
Trade receivables
Loans to related parties
Other receivables
Prepayments
2014
$M
0.9
7.6
3.0
0.4
11.9
2013
$M
-
5.9
13.4
-
19.3
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.
10 Equity accounted investments
Transurban DRIVe Holdings LLC
Ownership interest
Carrying amount
2014
%
75.0
2013
%
75.0
-
75.0
2014
$M
-
-
2013
$M
228.6
228.6
On 14 May 2014, Pocahontas 895 was transferred to lenders. The non-cash profit realised on the transfer was
A$103.1 million, inclusive of Transurban’s 75 per cent share of the profit after tax (US$128.1 million),
unrecognised losses from operations (A$104.2 million), and unrecognised profits on the 2007 transfer of
Pocahontas into the DRIVe vehicle (A$69.4 million). Tax losses in the Pocahontas Group were sufficient to
offset the tax payable on the gain made on disposal.
Until 4 June 2014 the Group equity accounted for its investment in DRIVe. On 4 June 2014 it was determined
that the Group had control of DRIVe and from this date equity accounting ceased and DRIVe was consolidated
by the Group (refer note 3). Post the cessation of equity accounting for DRIVe the Group’s investment in DRIVe
was reduced to $nil.
In addition, on consolidation of DRIVe as of 4 June 2014 (as disclosed in note 3) DRIVe’s cashflow hedge
reserve and foreign currency translation reserve were required to be reversed to the Income Statement, resulting
in a $15 million charge.
Both of these items have been included within Share of net profits of equity accounted investments in the
Income Statement.
329
329
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
10 Equity accounted investments (continued)
The amounts recognised in the income statement are as follows:
Joint venture
As at 30 June
Total
2014
$M
93.8
93.8
2013
$M
(28.2)
(28.2)
Summarised financial information of equity accounted investments
Set out below is the summarised financial information for the Group’s investments accounted for using the
equity method.
Summarised balance sheet
Cash and cash equivalents
Other current assets
Non-current assets
Held for sale assets
Current financial liabilities
Other current liabilitiesv
Non-current financial liabilities
Other non-current liabilities
Held for sale liabilities
Net assets
Summarised income statement
Revenue
Depreciation and amortisation
Other expenses
Gain on transfer of Pocahontas
Interest expense
Income tax expense
Profit / (loss)
Other comprehensive income
Total profit and total comprehensive income
Proportional profit and total comprehensive income
Losses not recognised
OCI not recognised
Reserves transferred to the income statement
Group's recognised share of profit and total comprehensive
income
Dividends received
Transurban DRIVe
75%
Total
2014
$M
2013
$M
2014
$M
2013
$M
-
-
-
-
-
-
-
-
-
-
356.5
0.9
1,917.8
369.5
-
(78.4)
(1,433.8)
(328.4)
(544.2)
259.9
-
-
-
-
-
-
-
-
-
-
356.5
0.9
1,917.8
369.5
-
(78.4)
(1,433.8)
(328.4)
(544.2)
259.9
42.2
(8.8)
(32.9)
326.2
(69.2)
(103.7)
153.8
37.7
191.5
143.9
(34.4)
-
(15.7)
93.8
-
23.3
(15.7)
(27.1)
-
(56.7)
39.4
(36.8)
(0.8)
(37.6)
(28.2)
-
-
-
(28.2)
-
42.2
(8.8)
(32.9)
326.2
(69.2)
(103.7)
153.8
37.7
191.5
143.9
(34.4)
-
(15.7)
93.8
-
23.3
(15.7)
(27.1)
-
(56.7)
39.4
(36.8)
(0.8)
(37.6)
(28.2)
-
-
-
(28.2)
-
330
330
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
10 Equity accounted investments (continued)
Reconciliation of summarised financial information
Opening net assets on 1 July
Investments in subsidiary
Profit / (loss) for the period
Other comprehensive income
Foreign exchange differences
Dividends paid
Closing net assets
Proportional interest in associates
Goodwill
Losses not recognised
Transfer of reserves to the income statement on gain of control
OCI not recognised
Elimination of unrealized profit on intragroup transfer
Cessation of equity accounting on gain of control
Carrying value
Space
Share of expenditure commitments
Capital commitments
Operating commitments
Contingent liabilities
Share of contingent liabilities incurred jointly with other investors
Space
Contingent liabilities of associates and joint ventures
As at the reporting date there are no contingent liabilities.
Transurban DRIVe
75%
Total
2014
$M
259.9
52.9
153.8
36.7
(25.6)
-
477.7
358.3
-
-
-
-
-
(358.3)
-
2013
$M
(41.3)
274.7
(36.8)
35.6
27.7
-
259.9
194.2
-
34.4
-
-
-
-
228.6
2014
$M
259.9
52.9
153.8
36.7
(25.6)
-
477.7
358.3
-
-
-
-
-
(358.3)
-
2013
$M
(41.3)
274.7
(36.8)
35.6
27.7
-
259.9
194.2
-
34.4
-
-
-
-
228.6
-
-
-
-
-
311.0
229.1
540.1
-
-
-
-
-
-
-
-
-
-
311.0
229.1
540.1
-
-
-
331
331
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
11 Derivative financial instruments
Non-current liabilities
Interest rate swap contracts - cash flow hedges
Total derivative financial instrument liabilities
2014
$M
41.4
41.4
41.4
2013
$M
-
-
-
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 financial risk
management policies (refer to note 35).
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 0.3 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.
Interest rate swap contracts currently in place cover 100 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 4.8 per cent.
Offsetting financial assets and liabilities
The Group has not settled any financial assets or financial liabilities on a net basis during the financial year.
Currently there is no right or basis to present any financial assets or financial liabilities on a net basis, and as
such no financial assets or financial liabilities have been presented on a net basis in the Group's balance sheet at
the end of the financial year.
332
332
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
12 Non-current assets - Property, plant and equipment
At 1 July 2012
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
At 30 June 2013
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Disposals
Depreciation charge
Movement in foreign exchange rates
Closing net book amount
At 30 June 2014
Cost
Accumulated depreciation
Net book amount
333
Equipment,
fittings,
operating
systems
$M
5.6
(3.6)
2.0
2.0
-
-
(0.4)
0.2
1.8
6.2
(4.4)
1.8
1.8
-
-
(0.1)
(0.3)
1.4
5.2
(3.8)
1.4
333
2014 Transurban Annual Report
13 Deferred tax assets and liabilities
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
Assets
Liabilities
Net
2014
$M
2013
$M
2014
$M
2013
$M
2014
$M
2013
$M
The balance comprises
temporary difference
attributable to:
Accrued expenses
Provisions
Current and prior year losses
Unearned income
Fixed Assets/Intangibles
Cash flow hedges
Unrealised foreign exchange
Tax assets/(liabilities)
Set off of tax
7.2
6.1
77.0
3.1
0.5
14.5
0.3
108.7
(53.5)
1.6
2.5
2.6
2.4
-
-
-
9.1
(0.2)
-
-
-
-
(108.1)
-
-
(108.1)
53.5
-
-
-
-
(0.2)
-
-
(0.2)
0.2
7.2
6.1
77.0
3.1
(107.6)
14.5
0.3
0.6
-
Net tax assets/(liabilities)
55.2
8.9
(54.6)
-
0.6
Movements:
Opening balance at 1 July
Credited /(charged) to the income statement
Credited /(charged) to equity
Acquired on consolidation of DRIVe
Foreign exchange movements
9.1
27.9
6.0
80.0
(14.3)
12.6
(3.6)
-
-
0.1
(0.2)
(33.1)
(26.7)
(48.8)
0.7
-
(0.2)
-
-
-
Closing balance 30 June
108.7
9.1
(108.1)
(0.2)
Deferred tax assets/(liabilities) to be recovered
after more than 12 months
108.7
108.7
9.1
9.1
(108.1)
(108.1)
(0.2)
(0.2)
8.9
(5.2)
(20.7)
31.2
(13.6)
0.6
0.6
0.6
1.6
2.5
2.6
2.4
(0.2)
-
-
8.9
-
8.9
12.6
(3.8)
-
-
0.1
8.9
8.9
8.9
334
334
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
495 Express
Lanes
$M
Assets under
construction
$M
Total
$M
-
-
-
-
-
1,290.4
-
(1.7)
1,288.7
1,290.4
(1.7)
1,288.7
-
-
-
-
-
-
-
-
-
667.0
9.7
-
676.7
-
1,957.4
9.7
(1.7)
1,965.4
676.7
-
1,967.1
(1.7)
676.7
1,965.4
14 Non-current assets - Intangible assets
At 1 July 2012
Net book amount
Year ended 30 June 2013
Closing net book amount
At 30 June 2013
Net book amount
Year ended 30 June 2013
Closing net book amount
Year ended 30 June 2014
Opening net book amount
Intangible assets acquired on acquisition
Additions
Amortisation charge
Closing net book amount
At 30 June 2014
Gross value
Accumulated amortisation
Net book amount
Concession assets
Service Concession Arrangements have been accounted for in accordance with AASB Interpretation 12 and
therefore the concession assets have been classified as Intangible Assets.
Capital Beltway
Transurban has the right to toll the Express Lanes on the Capital Beltway until December 2087. At the end of the
concession period, the concession asset is returned to the Virginia State Government (USA).
The Concession Deed requires Transurban to maintain and operate the Express Lanes to specified conditions.
Tolling for the 495 Express Lanes is variable, allowing the operator to adjust pricing to manage congestion and
provide road users with predictable travel times.
Assets under construction
The I95 Express Lanes which are being constructed under a Concession Arrangement and are due to be
completed in late 2014.
Impairment testing of other intangible assets
Impairment testing
The Group tests whether other intangible assets have suffered any impairments, in accordance with the
accounting policy stated in note 1(i). When required, 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.
335
335
2014 Transurban Annual Report
15 Current liabilities - Trade and other payables
Trade payables and accruals
Loans from related parties (note 25)
16 Borrowings
Non-current
Capital Markets debt
TIFIA
Total borrowings
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
2014
$M
60.9
886.2
947.1
2014
$M
493.4
677.9
1,171.3
2013
$M
4.5
516.6
521.1
2013
$M
-
-
-
Notes
16(a)
16(b)
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
The Group’s US entities have issued Private Activity Bonds (PABs) comprising the following:
•
•
$238.5 million of US dollar denominated ($224.7 million USD) PABs raised by Capital Beltway Express
LLC (CBE).
$256.8 million of US dollar denominated ($242.0 million USD) PABs raised by 95 Express Lanes LLC
(95 Express).
The Capital Beltway Express LLC Private Activity Bonds (CBE PABs) were issued in June 2008 and mature in
December 2047. They are marketed weekly on the SIFMA index at a variable interest rate. The Group has
entered into interest rate hedging to provide protection from movements in the variable interest rate. The CBE
PABs are supported by bank-issued irrevocable direct-pay letters of credit (maturing June 2016). Agreements are
in place for the letters of credit issuers to purchase the bonds should they fail to market. The collateral against the
bonds is a first ranking pledge of toll revenues generated from the operation of the 495 Express Lanes.
The Virginia Small Business Financing Authority Senior Lien Revenue Bonds (95 Express Lanes LLC Project),
Series 2012 PABs were issued in July 2012 at a fixed interest rate of 5 per cent. The term bonds mature 1 July
2034 ($71.7 million USD) and 1 January 2040 ($170.3 million USD). The collateral against the bonds is a first
ranking pledge of toll revenues generated from the operation of the 95 Express Lanes.
(b) TIFIA
The TIFIA program provides US federal credit assistance to transport infrastructure projects in the form of
secured loans from the United Stated Department of Transport.
These facilities comprise the following:
•
•
$589.2 million of US dollar denominated (face value: $686.2 million USD) TIFIA funding raised by
Capital Beltway Express LLC (CBE). This debt has been recorded at fair value (refer to note 3).
$88.7 million of US dollar denominated (face value: $198.0 million USD) TIFIA funding raised by 95
Express Lanes LLC (95 Express). This debt has been recorded at fair value (refer to note 3).
336
336
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
16 Borrowings (continued)
The CBE TIFIA facility limit is $589.0 million USD (plus accreting interest), of which $589.0 million USD is drawn
and $97.2 million USD of interest has accreted against the facility. Interest accrues at 4.45 per cent and is initially
accretive until five years post substantial completion of the project construction. Substantial completion was
achieved on 16 November 2012 per the Amended and Restated Comprehensive Agreement. The facility matures
on 31 December 2047 and is second ranking in priority to the CBE PABs.
The 95 Express TIFIA facility limit is $300 million USD (excluding capitalized interest). At 30 June 2014, $195.9
million USD is drawn and $2.1 million USD of interest has accreted against the facility. Interest accrues at 2.77
per cent and is accretive until five years post substantial completion of the project construction. The 95 Express
TIFIA facility matures on 1 January 2048 and is second ranking in priority to the 95 Express PABs.
Covenants
The Group's debt has the following Interest Coverage Ratio (ICR) covenants:
495 Express Lanes - DSCR greater than 1.15 times *
95 Express Lanes – non applicable
* Senior lenders provided a waiver with respect to the DSCR ratio requirement for 30 June 2014, 31 December
2014 and 30 June 2015.
17 Provisions
Current
Employee benefits
Onerous lease provision
Maintenance provision
Non-current
Maintenance provision
Notes
17(a)
17(b)
17(c)
Notes
17(c)
2014
$M
3.5
1.5
0.8
5.8
2014
$M
9.0
9.0
2013
$M
2.3
4.3
-
6.6
2013
$M
-
-
337
337
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
Movements in provisions
Movements in each class of provision during the financial year are set out below:
Current provisions
Consolidated - 2014
Carrying amount at start of year
Amounts provided during the year
Amounts paid/utilised during the year
Acquired provision
Movements in foreign exchange rates
Carrying amount at the end of year
Non-current provisions
Consolidated - 2014
Carrying amount at start of year
Amounts provided during the year
Amounts paid/utilised during the year
Acquired provision
Movements in foreign exchange rates
Carrying amount at the end of year
(a) Employee benefits
Restructuring
and onerous
lease provision
$M
Maintenance
provision
$M
4.3
0.4
(3.2)
-
-
1.5
-
-
-
0.8
-
0.8
Maintenance
provision
$M
-
-
-
9.0
-
9.0
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.
(c) 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. On consolidation of Capital Beltway the Group
has recognised its maintenance provision.
338
338
2014 Transurban Annual Report
18 Current liabilities - Other current liabilities
Unearned income
(a) Unearned income
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
Notes
18(a)
2014
$M
8.1
8.1
2013
$M
6.0
6.0
Unearned income represents amounts received in advance and will be recognised when the income is earned.
19 Contributed equity
Share capital
Fully paid ordinary securities
2014
Number
M
1,896.4
1,896.4
Details
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
Opening balance at 1 July 2013
Distribution Reinvestment Plan
Deferred Short Term Incentives
New shares issued on vesting of LTI
Institutional share offer (May 2014)
Share placement (May 2014)
Retail share offer (June 2014)
Closing balance at 30 June 2014
2013
Number
M
1,481.6
1,481.6
Notes
2014
$M
276.3
276.3
Number of
securities
M
2013
$M
216.0
216.0
$M
1,458.3
205.1
15(a)
15(b)
15(c)
15(a)
15(c)
15(d)
15(d)
15(d)
5.8
16.2
0.5
0.8
-
1,481.6
1,481.6
9.5
0.2
0.5
264.4
57.6
82.6
1,896.4
2.6
8.0
0.2
0.2
(0.1)
216.0
216.0
0.9
-
-
38.6
8.8
12.0
276.3
(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.
339
339
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
(b) 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).
(c) 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.
(d) Institutional and retail entitlement offer and placement
On 1 May 2014, the Group successfully completed the fully underwritten institutional component of its
accelerated renounceable 10 for 43 pro rata entitlement offer at an offer price of $6.75, raising approximately
$1.79 billion. The retail component of the offer was successfully completed on 29 May 2014 and raised gross
proceeds of approximately $557 million.
As part of the entitlement offer, the Group also completed a placement of securities to its Queensland Motorways
consortium bid partners AustralianSuper and Tawreed, raising gross proceeds of approximately $400 million. The
total gross proceeds from the entitlement offer and placement were approximately $2.74 billion, and were used to
fund the Group’s equity contribution for the Queensland Motorways acquisition, which completed on 2 July 2014.
Ordinary shares
The number of securities on issue is 1,896,384,073 (2013: 1,481,594,818).
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.
340
340
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
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
Movement in equity accounted investment's reserve (note 10)
Transfer to net profit
Previously unrecognised equity accounted investment’s reserve
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
Balance 30 June
Foreign currency translation
Balance 1 July
Currency translation differences arising during the year
Deferred tax
Transfer to net profit
Balance 30 June
Transactions with non-controlling interests
Balance 1 July
Transfer of values on acquisition
Balance 30 June
Accumulated losses
Movements in (accumulated losses) were as follows:
Profit 1 July
Net (loss) for the year
Balance 30 June
Nature and purpose of other reserves
2014
$M
-
0.1
(44.0)
(2.3)
(46.2)
2014
$M
(77.0)
-
40.0
37.0
-
-
0.5
0.2
(0.1)
(0.5)
0.1
14.1
(35.8)
(0.3)
(22.0)
(44.0)
(9.2)
6.9
(2.3)
2014
$M
(414.2)
19.5
(394.7)
2013
$M
(77.0)
0.5
14.1
(9.2)
(71.6)
2013
$M
(104.3)
-
27.3
-
-
(77.0)
0.8
0.5
(0.6)
(0.2)
0.5
40.1
(26.0)
-
-
14.1
(9.2)
-
(9.2)
2013
$M
(367.0)
(47.2)
(414.2)
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.
341
341
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
20 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 the foreign controlled entities are recognised in other
comprehensive income as described in note 1(d) and accumulated in this reserve in equity.
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).
21 Dividends
No dividends were paid or declared during the year.
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 services
Audit and review of financial reports
Total remuneration for PricewaterhouseCoopers
23 Intra-group Guarantees
2014
$
52,000
52,000
2013
$
52,000
52,000
As at 30 June 2014, 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.
342
342
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
24 Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Property, plant and equipment and intangibles
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 not
recognised as liabilities, payable:
Within one year
Later than one year but not later than five years
Later than five years
343
2014
$M
113.7
-
-
113.7
2014
$M
21.7
16.5
38.2
2014
$M
0.3
1.2
0.3
1.8
2013
$M
-
-
-
-
2013
$M
20.0
13.8
33.8
2013
$M
1.0
2.8
0.4
4.2
343
2014 Transurban Annual Report
25 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
Other related parties
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
2014
$
2013
$
37,935,013
37,935,013
40,898,575
40,898,575
2014
$M
5.9
27.7
(26.3)
0.3
7.6
516.6
1,776.3
(1,450.7)
44.0
886.2
2013
$M
4.4
28.6
(27.6)
0.5
5.9
245.3
279.0
(55.1)
47.4
516.6
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.
344
344
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
26 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):
Name of entity
incorporation Class of shares
Equity holding
Country of
Transurban DRIVe Management LLC
Transurban (USA) Holdings Inc.
Transurban (USA) Inc.
Transurban International Holdings Pty Limited
Transurban (USA) Operations Inc.
Transurban Express Lanes LLC
Transurban DRIVe Holdings LLC*
Transurban DRIVe USA LLC*
DRIVe USA Investments LLC*
Transurban (895) US Holdings LLC
Transurban (895) LLC
Transurban (895) Finance Inc.
Capital Beltway Express LLC*
95 Express Lanes LLC*
*These entities were equity-accounted for in prior financial years.
27 Non-controlling interests
USA
USA
USA
Australia
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2014
%
100
100
100
100
100
100
75
75
75
75
75
75
94
77.5
2013
%
100
100
100
100
100
-
75
75
75
-
-
-
67.5
67.5
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are
material to the Group. The amounts disclosed for each subsidiary are before inter-company eliminations.
Transurban DRIVe Capital Beltway Express LLC
95 Express Lanes
25%
6%
22.5%
Summarised balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Carrying amount of NCI
2014
$M
15.4
84.9
(57.6)
(7.8)
34.9
(8.7)
2013
$M
-
-
-
-
-
-
2014
$M
57.7
1,289.0
(11.3)
(878.1)
457.3
(27.4)
2013
$M
-
-
-
-
-
-
2014
$M
60.7
689.1
(43.7)
(388.1)
318.0
(71.6)
2013
$M
-
-
-
-
-
-
Transurban DRIVe Capital Beltway Express LLC
95 Express Lanes
25%
2014
2013
Summarised statement of
comprehensive income
Revenue
Profit for the period
Other comprehensive income
Total comprehensive income
Profit allocated to NCI
OCI allocated to NCI
$M
-
(102.8)
-
(102.8)
25.7
-
$M
-
-
-
-
-
-
6%
2014
$M
4.0
(79.8)
-
(79.8)
4.8
-
345
22.5%
2013
2014
2013
$M
-
-
-
-
-
-
$M
-
-
-
-
-
-
$M
-
-
-
-
-
-
345
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
27 Non-controlling interests (continued)
Transurban DRIVe
Capital Beltway Express LLC
95 Express Lanes
from
flows
flows
from operating
Summarised balance sheet
Cash
activities
Cash
activities
Cash
activities
Net increases in cash and
cash equivalents
financing
investing
flows
from
25%
2014
$M
1.2
-
-
1.2
2013
$M
-
-
-
-
6%
22.5%
2014
$M
(4.4)
-
(5.7)
(10.1)
2013
$M
-
-
-
-
2014
$M
-
(33.5)
31.8
(1.7)
28 Parent entity financial information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
2013
$M
-
-
-
-
2013
$M
216.4
-
216.4
(0.3)
-
(0.3)
2014
$M
272.5
-
272.5
-
-
-
(817.5)
272.5
(650.1)
216.1
276.3
(4.3)
0.5
272.5
216.0
-
0.1
216.1
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Contributed equity
Reserves
Accumulated losses
346
346
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
28 Parent entity financial information (continued)
Summary financial information (continued)
Profit for the year
xx
Exchange differences on translation of US operations, net of tax
xx
Total comprehensive income
Contingent liabilities and guarantees of the parent entity
The parent entity has no contingent liabilities.
0.3
(3.9)
(3.6)
0.9
19.7
20.6
29 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 2014
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.
30 Reconciliation of profit after income tax to net cash inflow from operating activities
Loss for the year
Depreciation and amortisation
Share of net (profit) losses of equity accounted investments
Change in operating assets and liabilities:
(Increase) in prepayments
Decrease (Increase) in trade and other receivables
(Decrease) increase in related party operating loans
(Decrease) in trade payables and accruals
Increase in provisions
Increase (Decrease) in unearned income
Movement in current taxes and deferred taxes
Net cash inflow from operating activities
347
2014
$M
(11.0)
4.0
(93.8)
(0.4)
13.4
(39.2)
(23.7)
17.9
2.1
125.2
(5.5)
2013
$M
(47.2)
0.4
28.2
-
(7.9)
24.6
(1.4)
1.8
(6.7)
3.6
(4.6)
347
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
31 Earnings per share
Basic earnings per share
Earnings / (loss) per share attributable to the ordinary equity holders of the
company
Diluted earnings per share
Earnings / (loss) per share attributable to the ordinary equity holders of the
company
Reconciliation of earnings / (losses) used in calculating
earnings per share
Basic and diluted earnings per share
Loss for the year
Loss attributable to non-controlling interests
Weighted average number of shares used as denominator
2014
Cents
1.3
3.6
2014
Cents
1.3
1.3
2014
$M
(11.0)
30.5
19.5
2013
Cents
(3.2)
(3.2)
2013
Cents
(3.2)
(3.2)
2013
$M
(47.2)
-
(47.2)
2014
Number
2013
Number
Weighted average number of ordinary and potential ordinary shares used as
the denominator in calculating earnings per share
1,539,476,092
1,470,495,508
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the earnings / (loss) attributable to shareholders 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 earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings 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.
348
348
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
32 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.
Grant date
Vesting /
Expiry date
Fair value at grant date ($)
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
TSR
EBITDA
FCF
Number
Number
Number
Number
Number
2014
1 Nov 2010
1 Nov 2013
23 Dec 2010 1 Nov 2013
26 Sep 2011 30 Jun 2014
11 Nov 2011 30 Jun 2014
15 Aug 2012 30 Jun 2015*
19 Oct 2012 30 Jun 2015*
14 Aug 2013 30 Jun 2016*
30 Jun 2016*
1 Nov 2013
3.23
3.33
3.37
3.27
2.72
2.95
3.24
3.13
4.62
4.97
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4.63
4.81
4.99
5.43
6.07
6.21
Total
BLANK
922,476
684,683
420,872
715,024
480,102
448,400
-
-
-
-
-
-
-
-
728,380
382,292
(789,978)
(592,320)
(267,256)
(511,886)
-
-
-
-
(132,498)
(92,363)
(153,616)
(203,138)
(113,537)
-
-
-
-
-
-
-
366,565
448,400
728,380
382,292
3,671,557
1,110,672 (2,161,440)
(695,152)
1,925,637
* vesting / expiry date refers to the ending date of the performance period. Actual vesting / expiry date is determined within 30 days of the
release of Transurban Group's financial results for that performance period.
Grant date
Vesting /
Expiry date
Fair value at grant date ($)
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
TSR
EBITDA
FCF
Number
Number
Number
Number
Number
2013
11 Dec 2009
1 Nov 2010
23 Dec 2010
26 Sep 2011
11 Nov 2011
15 Aug 2012
19 Oct 2012
Total
11 Dec 2012
1 Nov 2013
1 Nov 2013
30 Jun 2014
30 Jun 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
1,625,994
1,201,077
684,683
661,932
715,024
-
-
- (1,624,766)
-
-
-
-
-
-
-
747,201
448,400
-
(1,228)
(278,601)
-
(241,060)
-
(267,099)
-
-
922,476
684,683
420,872
715,024
480,102
448,400
4,888,710
1,195,601 (1,624,766)
(787,988)
3,671,557
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.
349
349
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
32 Share-based payments (continued)
Assessed fair value (continued)
The Free Cash Flow component of the Performance Awards has only a non-market based vesting condition
which is not considered in the valuation. The valuation of these awards takes into account the security price at
grant date, and the expected dividend yield which represents the dividends over the life of the Awards that the
rights holder does not receive. A discounted cash flow model is used to perform this valuation.
The Group is currently transitioning to a face value approach (discounted for distributions) for the FCF
component. The transition is over 3 years and all things being equal there will be a decrease in the number of
awards recipients receive until the new methodology is achieved. This transition will be completed for grants
made during FY2016.
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
the first, second and third anniversaries of his employment date. Upon vesting, the awards will automatically
exercise and settle in securities. No dividends or distributions on securities are payable prior to vesting.
Grant date
2014
14 Sep 2012
14 Sep 2012
14 Sep 2012
Total
Grant date
2013
14 Sep 2012
14 Sep 2012
14 Sep 2012
Total
x
x
Vesting /
Expiry date
Fair value
at grant
date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance at
end of
the year
Number
Number
Number
Number
Number
16 Jul 2013
16 Jul 2014
16 Jul 2015
$5.71
$5.71
$5.71
78,752
78,752
78,752
236,256
-
-
-
-
(78,752)
-
-
(78,752)
-
-
-
-
-
78,752
78,752
157,504
Vesting /
Expiry date
Fair value
at grant
date ($)
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
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
Short Term Deferred Incentive Plan
For the 2014 financial year, the CEO and other Senior Executives had a target STI opportunity of 30 per cent of
their total remuneration package. Mandatory STI deferral of 50 per cent of the overall STI award now applies for
all grants to the CEO and other Senior Executives. STI payouts can vary between zero (if targets are not met)
and 150 per cent (for exceptional outperformance).
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 resident Senior Executives receive deferred
cash awards. STI deferral grants are made in the form of awards. Each award is an entitlement to receive a fully
paid security, or an equivalent cash payment, on terms and conditions determined by the Board. This 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).
350
350
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
32 Share-based payments (continued)
Short Term Deferred Incentive Plan (continued)
Vesting /
Expiry date
Fair value
at grant
date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
Number
1 Jul 2014
1 Jul 2015
$5.68
$6.81
642,388
-
-
443,736
642,388
443,736
-
-
-
(79,668)
-
562,720
443,736
(79,668)
1,006,456
Vesting /
Expiry date
Fair value
at grant
date
Balance
at start of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
Number
Number
Number
Number
1 Jul 2014
$5.68
-
-
642,388
642,388
-
-
-
-
642,388
642,388
Grant date
2014
15 Aug 2012
15 Aug 2013
Total
Grant date
2013
15 Aug 2012
Total
Fair Value
x
x
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 were eligible to participate in the Investment Tax Exempt Plan and
the Investment Tax Deferred Plan for the year ended 30 June 2014. Under the plans, Transurban provides
participants with a matching component toward the acquisition of the stapled securities. For the period 1 July
2013 to 30 June 2014, the cost of company matches was $139,918 (2013: $132,162) for the Investment Tax
Exempt Plan and $314,667 (2013: $450,374) 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
2014, each participant was allocated 100 stapled securities at a value of $6.94 per security. Stapled Securities
provided under the Plan were acquired on the open market. Eligible US based participants received an
equivalent cash award.
Shares purchased on the market under the plan and provided to participating
employees
Expenses arising from share-based payments
2014
Number
2013
Number
50,800
45,900
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense was $0.3 million (2013: $0.5 million)
351
351
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
33 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
Termination benefits
2014
$
11,056,992
257,966
73,043
3,645,461
1,620,545
333,356
2013
$
10,755,270
232,743
25,335
9,208,279
1,128,897
-
16,987,363
21,350,524
Detailed remuneration disclosures are made in the Directors’ report. The relevant information can be found in the
remuneration report in the Directors' report.
34 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). 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. As disclosed in Note 14, 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.
Assessment of control
The Group considered that, up to 4 June 2014, it jointly controlled (and therefore equity accounted) Transurban
DRIVe Holdings LLC (“DRIVe”) even though it owned 75% of the equity, as at least 80% of the membership
interests were required to pass key decisions relating to operating and financing of the entity.
352
352
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
34 Critical accounting estimates and judgements (continued)
(continued)
Assessment of control (continued)
As disclosed in Note 3, as of 4 June 2014, following the acquisition of Capital Beltway (and its subsequent
recapitalisation), as well as the purchase of Fluor’s 10 per cent equity interest in both Capital Beltway and 95
Express Lanes, the Group re-assessed its control over DRIVe. Due to the operations of the Capital Beltway and
the 95 Express Lanes (which DRIVe already had a direct ownership interest in) being closely linked, it was
determined that the acquisition of Capital Beltway, along with the purchase of Fluor’s 10 per cent interest in both
Capital Beltway and the 95 Express Lanes, gave the Group control over DRIVe and the 95 Express Lanes.
35 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:
Cash and cash equivalents
Receivables
Payables
Net exposure
Exposure to other foreign exchange movements is not material.
2014
AUD$M
2013
AUD$M
0.3
1.0
(2.7)
(1.4)
-
0.4
(4.9)
(4.5)
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 $68,000 lower (2013: $217,000 lower) or $82,000 higher (2013: $261,000 higher), as a result
of foreign exchange gains/losses on translation of Australian dollar denominated financial instruments as
detailed in the above table.
353
353
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
35 Financial risk management (continued)
Market risk (continued)
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, the Group had the following variable rate exposures.
Cash and cash equivalents
Borrowings
Floating rate borrowings
Net exposure to cash flow interest rate risk
Weighted
average
interest rate
%
0.1%
0.3%
0.1%
2014
Balance
$M
(146.7)
238.5
(238.5)
(146.7)
Weighted
average
interest rate
%
-%
-%
-%
2013
Balance
$M
(4.8)
-
-
(4.8)
Sensitivity
At 30 June 2014, 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 $895,000 lower / higher (2013: $30,000
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.
354
354
2014 Transurban Annual Report
Transurban International Limited
Notes to the consolidated financial statements
30 June 2014
(continued)
35 Financial risk management (continued)
Liquidity risk (continued)
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities 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.
Contractual
maturities of
financial liabilities
At 30 June 2014
Non-derivatives
Non-interest
bearing
Variable rate
Fixed rate
Total non-
derivatives
Derivatives
Net settled (interest
rate swaps)
Total derivatives
1 year
or less
$M
Over 1 to 2
years
$M
Over 2 to
3 years
$M
Over 3 to
4 years
$M
Over 4 to
5 years
$M
Over 5
years
$M
Total
contractual
cash flows
$M
Carrying
amount
(assets)/
liabilities
$M
62.8
885.5
947.5
1,895.8
-
3.2
13.4
16.6
-
3.3
13.7
17.0
-
3.3
13.8
-
3.3
54.9
-
414.3
3,462.4
62.8
1,312.9
4,505.7
62.8
238.5
1,817.1
17.1
58.2
3,876.7
5,881.4
2,118.4
8.3
8.3
7.5
7.5
5.9
5.9
4.7
4.7
3.9
3.9
22.6
22.6
52.9
52.9
41.4
41.4
There is no liquidity risk exposure to the Group in the current or prior periods other than as shown above.
355
355
2014 Transurban Annual Report
Transurban International Limited
Directors' declaration
30 June 2014
In the Directors' opinion:
(a) the financial statements and notes set out on pages 300 to 355 in accordance with the Corporations Act
2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
(ii) giving a true and fair view of the Group's financial position as at 30 June 2014 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
5 August 2014
356
356
2014 Transurban Annual Report
357
2014 Transurban Annual Report 267 to 296 of the director’s report for the
358
2014 Transurban Annual Report Security holder information
Security holder information
The security holder information set out below was applicable as at 15 August 2014.
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 67,063.
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
80.14 per cent.
The distribution of holders was as follows:
Security grouping
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 999,999,999
Rounding
Total
Stapled securities
% of issued stapled
securities
Total
holders
20,500
31,432
8,958
5,904
269
8,101,538
80,769,851
63,391,601
127,032,179
1,626,664,728
67,063
1,905,959,897
There were 3,557 holders of less than a marketable parcel of stapled securities.
There were 1,905,959,897 stapled securities on issue.
20 largest holders of stapled securities
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
AMP LIFE LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ARGO INVESTMENTS LIMITED
BNP PARIBAS NOMINEES PTY LTD
UBS NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
AUSTRALIAN UNITED INVESTMENT COMPANY LIMITED
BOND STREET CUSTODIANS LIMITED
MILTON CORPORATION LIMITED
CS FOURTH NOMINEES PTY LTD
DIVERSIFIED UNITED INVESTMENT LIMITED
Total
Number of stapled
securities held
518,617,575
416,766,790
303,634,254
100,226,148
52,557,090
39,392,509
18,335,264
14,920,571
12,879,580
10,271,459
6,919,715
5,481,463
5,149,357
4,062,773
3,977,158
3,500,000
2,849,444
2,743,081
2,654,811
2,572,727
1,527,511,769
80.14
Substantial holders
Substantial security holders as at 15 August 2014 were as follows:
Name
UNISUPER
COMMONWEALTH BANK OF AUSTRALIA
Number of stapled
securities held
180,235,466
121,869,397
% of issued stapled securities
9.92
6.42
359
0.43
4.24
3.33
6.66
85.35
-0.01
100.00
% of issued
stapled securities
27.21
21.87
15.93
5.26
2.76
2.07
0.96
0.78
0.68
0.54
0.36
0.29
0.27
0.21
0.21
0.18
0.15
0.14
0.14
0.13
2014 Transurban Annual Report This page left blank intentionally
Enquiries
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
AUSTRALIA
MELBOURNE (HEAD OFFICE)
Level 23
Tower One, Collins Square
727 Collins Street
Docklands
Victoria 3008
SYDNEY
Level 9
1 Chifley Square
Sydney
New South Wales 2000
BRISBANE
Brisbane Technology Park
7 Brandl Street
Eight Mile Plains
Queensland 4113
MAILING ADDRESS
Locked Bag 28
South Melbourne
Victoria 3205
Phone +61 3 8656 8900
Fax +61 3 8656 8585
UNITED STATES
WASHINGTON DC AREA
6440 General Green Way
Alexandria VA 22312
USA
Phone +1 (571) 419 6100
Email corporate@transurban.com
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