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CONNECTEAST ANNU A L REPO R ANNUAL REPORT 2010 T 2010 2 Hillcrest Avenue Ringwood VIC 3134 Australia PO Box 804 Ringwood VIC 3134 T 03 9955 1700 F 03 9955 1701 ConnectEast.com.au EastLink.com.au YARRA VALLEY CITY NORTH OPERATIONAL A CONTENTS HIGHLIGHTS CITY SOUTH EastLink Traffic and Revenue EastLink Safety CHAIRMAN’s STATEMENT 4 B B 600 MANAGING DIRECTOR’s REPORT 8 2009 Eastlink (2009/10) 7 500 2010 550 Victorian Urban SUSTAINABILITY REPORT 16 7.0 6 Freeways (2006/08) 457 BOARD OF DIRECTORS 24 400 Source: Vic Roads 5 SENIOR MANAGEMENT 26 300 4 CORPORATE GOVERNANCE 28 3 200 FINANCIAL REPORT 37 2 2.8 169 100 146 The EastLink C CORPORATE DIRECTORY 96 1 Casualty accidents per 100 million vehicle kilometres 0.12 0.16 0 0 Average Daily Trips Average Daily Revenue PROFILES Casualty accidents Fatal accidents economic ’000 $’000 (inc GST) A EASTERN RECREATION PRECINCT 2 ONE OF AUSTRALIA’S development GROWING TRAFFIC AND REVENUE Due for completion in 2011 SAFEST ROADS corridor is D B EASTLINK SERVICE CENTRES 7 gaining Due for completion in 2011 C SOMERFIELD 11 Toll and Fee Revenue Operating Costs and EBITDA momentum. First residents have already moved in 101% 33% 2009 120 2009 200 ^ D ‘THE KEy’ INDUSTRIAL PARK 14 ^ 2010 2010 Launched in July 2010 100 8%^ 150 E PENINSULA LINK 22 80 E Open to traffic by 2013 $ million $ million 100 60 40 Centres designated by the 50 Victorian Government for 77% 20 investment and jobs growth. ^ 0 0 Toll Revenue Fee Revenue Operating Costs EBITDA 8% DROP IN OPERATING COSTS TOLL AND FEE REVENUE UP 35% Photography: Blugroove Photography, Heaven Pictures EBITDA 101% HIGHER and Life Through a Lens Photography NORTH MORNINGTON Design: Night and Day Communications PENINSULA Map: Copyright © Melway Publishing Pty Ltd 2007 CONNECTEAST | ANNUAL REPORT | 2010 1 Due for completion in 2011 EASTERN RECREATION PRECINCT THEY SAY location IS EVERYTHING… AND IN THE CASE of a major new sports and recreation precinct, Knox City EASTLINK Council has found the perfect place. We’re providing a new home for local, regional and State basketball and football (soccer) just off the EastLink – High Street Road interchange in Wantirna South. Stage One of the Eastern Recreation Precinct began in December 2009, earthworks were completed in February 2010, and work is continuing on the key elements of the project. The two soccer pitches and pavilion are expected to be complete by early 2011, while the new basketball stadium will be set for operation during the second half of 2011. Cr Joe Cossari Mayor Positioning this great new asset alongside EastLink puts it Knox City Council within easy reach of many thousands of sports fans, players, and their families. HIGH STREET RD 2 3 four years. Importantly, the reduction in our financing costs from the repayment of debt, together with the increase in traffic, resulted in ConnectEast becoming cashflow positive during the financial year. CHAIRMAN’S Traffic continues to ramp up on EastLink as more people discover and enjoy the travel time savings and reliability benefits STATEMENT the road delivers for everyday trips, and as the corridor’s population and economic growth rolls on. Significantly, the Average Daily Revenue generated by EastLink from 27 July 2009 (the first anniversary of tolling commencing on EastLink) to 30 June 2010 ON BEHALF OF YOUR BOARD I AM On top of the development that was In a year of continuing consolidation, was 20.2 per cent higher than the prior pleased to report on ConnectEast’s already underway, the motorway’s your business has focused on: comparative period. Average Daily Trips ongoing consolidation and development opening in mid-2008 triggered a range • Growing tolling and fee revenue; were 15.4 per cent higher than the prior as a business, and on the impressive of further commercial, retail, residential • Strengthening the Group’s comparative period. operational performance of the Group’s and recreational investments and this has balance sheet; world class asset, the EastLink tollway. culminated in the creation of a distinct • Managing and reducing costs; At the same time, ConnectEast has EastLink economic development corridor • Maintaining a safe road and working continued to pursue initiatives to reduce Against a backdrop of continuing traffic in Melbourne’s east and south-east. environment; operating costs, including measures to and revenue growth, ConnectEast has • Enhancing our tolling and customer encourage customers to use lower cost worked hard to establish a sound and This corridor, along with road network service systems; service channels such as the web, sustainable financial position for the enhancements already underway • Expanding our customer base; and and refinements to the EastLink tolling Group; these efforts have paid off with the (such as Peninsula Link), or on the Victorian • Deepening the Group’s system to reduce technical losses and transition to positive operating cashflow Government’s drawing board (such as community footprint. the requirements for manual processing. by the end of calendar year 2009. North East Link), creates a compelling growth environment in the region. And ConnectEast continues to work Distributions have been paid to date under The net result of these efforts is an asset EastLink has plenty of capacity to cater for cooperatively and constructively with the a Distribution Reinvestment Plan for a fixed experiencing steady growth and an this growth. Victorian Government road agencies, period that ended in April 2010. Following infrastructure operator that is now soundly VicRoads and the Linking Melbourne the transition to positive operating Other Government policy initiatives are positioned to build on the business, Authority, in the interests of a fully sciences and project delivery practice, positioning the Group for the longer term. cashflow and subject to the prudent also encouraging. In April 2010, the to further drive operational efficiencies, integrated road network. On behalf Sinclair Knight Merz (SKM) since 1996, Paul approach we have adopted to managing State released a discussion paper on and to maximise returns for ConnectEast On behalf of the Board and investors of the business I thank them for their brings to the Board his impressive record ConnectEast’s capital structure, future Melbourne’s growing containerised freight investors over the long term. I want to thank Dennis and his team ongoing assistance and support. as a business leader and innovator. distributions will be aligned with operating task which focused on the longer term for their hard work and commitment to In September 2009 we successfully cashflow (together with the progressive establishment of a coordinated rail-road It is also encouraging that rapid progress John Collier also joined the Board in making EastLink one of Melbourne’s safest completed a $421 million pro-rata release of surplus cash reserves), and are intermodal Metropolitan Freight Terminal is being made on the toll-free 27km August 2010 following his nomination by and busiest roads. I am also grateful to entitlement offer. This was offered to all expected to start from the period ending Network. It proposes three principal rail- Peninsula Link project at EastLink’s the Group’s largest unitholder, CP2. John our many investors for their continuing unitholders on a renounceable basis, 31 December 2010. road terminals to the west, north southern end, and on other projects under is an experienced executive in the toll support, particularly through last year’s enabling unitholders unable to participate and south-east of the city, with one the State Government’s Victorian Transport road sector, having worked with the Hills financial challenges. ConnectEast is now Meanwhile, EastLink itself has continued to get some value for their rights. The earmarked for the Dandenong area Plan such as planning for enhancements Motorway in Sydney from 2004 to 2008. well placed to maximise investor returns to impress as a high quality piece of entitlement offer was priced at a 9.2 per within the EastLink region. to Hoddle Street at the city end of the He is currently Chief Financial Officer of the through a well-run asset that is ideally infrastructure with proactive management cent discount to the theoretical ex-rights Eastern Freeway. accounting advisory firm, PKF, and located to benefit from the ongoing of freeway incidents, widely admired Complementing this proposal is the State’s price, with this slim discount reducing we look forward to him making a economic and population growth it urban design and landscaping, and SmartRoads initiative, which is designed the dilutionary impact on any unitholders As I have reported previously, your Board valuable contribution. has helped to foster. a very good environmental record. to enhance the efficiency of Melbourne’s unable to participate in the offer. This has undertaken detailed succession road network by giving priority to different capital raising enabled the first tranche planning, including a review of the I am also pleased to report that We pride ourselves on EastLink’s modes of transport at certain times of of our debt to be fully repaid well ahead competencies of the current Directors ConnectEast’s new Managing Director, exceptional safety record and value safe the day. Under SmartRoads, EastLink of its November 2010 maturity. By fully against the business’ needs over the next Dennis Cliche, has hit the ground running. driving habits. However, in this Annual is designated a preferred traffic route repaying the first tranche of our debt, the three to five years. This has led to the He is applying drive and strategic A.F. (Tony) Shepherd Report we also want to draw your eyes for cars and trucks, thereby confirming low margins we have on the remainder appointment in this financial year of Paul thought to the tasks of accelerating traffic away from the road itself to see what is our motorway’s key role in addressing of our debt were protected and our next Dougas as an additional independent and revenue growth on EastLink, plus happening on either side of it in terms of Victoria’s future transport and freight tasks.