Transurban defends lucrative toll road contracts as NSW reform talks continue

The $40bn heavyweight has defended its lucrative contracts in Sydney as it continues talks with the NSW government over reforms to the state’s toll road charging regime.

Transurban is facing a shake up of Sydney’s toll road pricing regime. Picture: Chris Pavlich

Transurban chairman Craig Drummond has defended the company’s lucrative toll road contracts in Sydney as the company continues talks with the NSW government over reforms to the state’s toll road network.

Addressing securityholders at the company’s annual meeting in Melbourne on Tuesday, Mr Drummond said the company needed to do a better job of selling the benefits of its network in Sydney, Melbourne and Brisbane, which has benefited from the surge in inflation.

Mr Drummond’s comments followed a Four Corners report on Monday that revealed concerns from motorists about rising toll charges, which are embedded into Transurban’s inflation-linked contracts in Australia’s three largest cities.

“We’ve invested with our partners $36bn over the last 20 years in NSW, and I think we do need to acknowledge that sometimes it’s lost in some of the narrative, the benefits that we are bringing, and our partners are also bringing, to these communities,” he said.

“In the narrative you saw last night, it’s not well highlighted that our roads, on average, save our customers about 30 per cent of their fuel bill, they save a third of their carbon emissions, we’re getting travel time savings from Blacktown to the airport of, on average, about 45 minutes.

“We’re getting travel time savings of 30 minutes in a city of 5.5 million like Melbourne, going down CityLink. And then look at safety – it’s twice as safe on our roads.

“These are benefits I think we probably need to, as a company, do a better job at making sure we explain the value proposition, because sometimes we can take these for granted in very busy, highly populated concentrated areas.”

Transurban CEO Michelle Jablko and her predecessor Scott Charlton.Picture: Supplied

Increased traffic volumes and higher toll charges supported a 6.7 per cent increase in proportional toll revenue for Transurban in 2023-24, to $3.5bn, while statutory net profit came in at $376m, up from $92m in the previous year.

Mr Drummond acknowledged that customers were feeling the pinch from rising charges amid a wider cost of living crunch, but said the company had a range of financial hardship programs in place to support struggling customers.

“We do everything we can to ensure that whenever customers have got concerns or complaints, that we deal with them quickly, properly and respectfully,” he said.

“At every board meeting we have extensive customer conversations, every board member has been sitting in the customer complaints team – in fact, over the last week, every board member has listened to customer complaints. And I think, until you get heavily involved in the front line as a board, you can’t begin to understand the experience that customers are having.

“Every major public company that deals with consumers are facing these issues … and the board is holding management to account on this issue.”

Transurban is facing a shake-up of Sydney’s toll road pricing regime following an independent review that recommended the NSW government take back control of the city’s motorway network and lower charges for motorists.

The review, led by former Australian Competition and Consumer Commission chairman Allan Fels, proposes that uniform tolls be applied across Sydney’s 13 ­motorways and two under construction, with lower charges recommended for the majority of trips, and most of the relief earmarked for western Sydney.

In their final report handed down in July, Mr Fels and co-author David Cousins also call for the creation of a state-owned entity, “NSW Motorways”, to enable the state government to set prices and promote more competition between, and regulation of, toll road operators including dominant player Transurban, which operates 11 of Sydney’s toll roads.

Mr Drummond told securityholders negotiations with the NSW state government were progressing in a “pragmatic” and “co-operative” way, and he was confident of reaching a “sensible” outcome that protected the company’s existing contracts.

“All the stakeholders in this process have acknowledged that contracts that we currently have are going to be respected,” he said.

“That doesn’t mean that there won’t be some collaborative work … we’ve made it very clear to the NSW government that we want to be collaborative and work closely with them.”

As part of a quarterly update released on Tuesday, Transurban reaffirmed its distribution guidance after reporting increasing traffic volumes across its network.

The company said average daily traffic volumes were 1.1 per cent higher in the September quarter, when compared to the same time last year, rising to close to 2.5 million trips.

North America was a standout with a 6.5 per cent increase to 166,000, while the company’s Sydney and Brisbane toll roads reported 1.9 per cent and 1.3 per cent increases to 1 million and 480,000 daily trips respectively.

Melbourne was the only part of the network to report a decline, with average daily traffic falling 1 per cent to 813,000 trips, due to construction works along Footscray Rd and the West Gate Freeway as part of the West Gate Tunnel project.

The company reaffirmed its distribution guidance for 2024-25 of 65 cents, representing 5 per cent growth on the previous year.

Responding to questions about the company’s growth prospects, chief executive Michelle Jablko, who took over from former boss Scott Charlton last year, said Transurban was exploring several opportunities for both greenfield developments and expansion of existing infrastructure.

“We are a growth business,” she said.

“We know that populations are increasing in all of our markets, and this brings a very real need for more transport infrastructure. In our existing markets, over 85 per cent of our assets have the potential to be enhanced to increase capacity.”

All four directors up for election and re-election at Tuesday’s meeting were approved, while resolutions on the company’s remuneration report and granting of long-term performance awards to Ms Jablko also passed.

Originally published as Transurban defends lucrative toll road contracts as NSW reform talks continue