Transurban’s Expanding Tollway Network Supports 2.5 Million Daily Vehicle Trips

About Transurban Group Limited

Transurban Group Limited (Transurban, the Group) builds and operates government-mandated toll roads in Melbourne, Sydney, and Brisbane, as well as in Greater Washington, United States and Montreal, Canada. The company was founded in 1996 and is headquartered in Melbourne.

Traffic growth supported by long term macro trends

Population and economic growth are driving increased traffic volumes on Transurban’s Australian and North American roads. By 2042, an additional 6.2 million people are estimated to live in cities in which Transurban operates tollways. Transurban operates tollway concessions in Sydney, Brisbane, Melbourne, Washington, and Montreal, with an average concession life of 28 years. The Australian population is growing at about 2 percent per year and is forecast to grow by between 25 and 40 percent over the next two decades. Similarly in the Group’s North American markets population numbers are expected to grow by around 15 percent over the same period.

Freight volumes also drive demand for traffic services and tollway revenue and is forecast to grow by 65 percent in Australia and 59 percent in the US by 2050. Freight volume is dependent on economic output which is expected to grow by around 25 percent in Transurban’s Australian markets over the coming 20 years.

Value accretive growth in North America

Transurban is growing in North America with a four-kilometre extension of Express Lanes towards Maryland in Washington that are scheduled to open in 2025. Within the next five years other Express Lane enhancements and extensions that provide faster, more reliable transportation for Washington commuters are planned. Transurban has also identified future tollway opportunities in Quebec.

The Future

Macroeconomic projections continue to indicate larger, denser, and wealthier futures for the cities in which Transurban operates. This increased urbanisation within the road corridors in which Transurban operates is driving the need for increased travel and the continued development of new roads in response to increased traffic congestion.

Transurban’s portfolio of high-quality, long-life, dependable cash flow generative tollways exhibit both defensive and growth characteristics for investors. Importantly, tolls escalate either with CPI or with fixed escalators at or above inflation on the majority of revenue. EBITDA margins are high at 71 percent in FY2023, with existing debt 96 percent hedged at about 4.1 percent interest and with an average maturity of about 7 years. The tollway portfolio has an average remaining concession length of about 28 years. The value at concession expiry is zero.

Owning privileged assets that generate dependable, long-term, high-margin, inflation-linked cash flows, supported by existing long-term debt and liquidity facilities to fund future asset growth, sets Transurban apart from many utility infrastructure service providers. Income-focused investors can expect consistent distribution growth over the next decade with the medium-term prospect of lower interest rates likely to support tollway asset valuations.