Governance and risk
Directors' Report
Financial statements
Assurance statements
Security holder information
Introduction Business performance Stakeholders Sustainability
Contents
However, future impacts may increase as the frequency and severity of extreme weather events intensify, consistent with climate science projections. The Group has considered potential long-term impacts through climate scenario analysis (refer to Section C4: Business resilience). Based on this analysis, estimated ranges of cash flow impacts arising from potential asset damage and traffic disruptions, excluding insurance recoveries, over the period to FY50 are presented below. While the quantified impacts are currently not expected to be material relative to the Group’s road operating costs or toll revenue, they remain sensitive to key assumptions, including climate pathways and event severity. The impacts of acute weather events on road assets and operations will continue to be monitored to inform risk management and adaptation strategies. Average annual cash flow impact: Long-term (FY31 to FY50) Physical risks $ million
100% of the Group's road assets and related infrastructure have an inherent vulnerability to physical climate-related risks, reflecting the potential for such risks to affect asset performance in the absence of management actions and adaptation measures. However, the nature and extent of vulnerability varies across the portfolio depending on asset location, characteristics and exposure profile. Appropriate controls and adaptation pathways are currently in place to manage these risks and support asset resilience. There are no high - rated risks in the short to medium-term, and adaptation actions have been identified in response to long - term risks. All risk ratings are determined under the Group’s ERM Framework and represent residual risks after existing controls are considered. CCAPs have identified high or medium risk ratings in FY50 and/or FY90 for the following asset components and regions that may be impacted by chronic and acute climate-related risk factors based on RCP 8.5 / SSP3-7.0 climate projections: 1 • electronic tolling and traffic management systems (NSW, QLD, GWA); • pavements (all regions); • mechanical and electrical systems (all regions); and • civil structures (all regions). Climate-related risk factors are derived from publicly accessible climate projections provided by federal and state government agencies in applicable jurisdictions. These assessments reflect conditions at the reporting date and may change over time as climate data, asset conditions, and management practices evolve. Based on scenario analysis of financial effects under the RCP 8.5 climate scenario, potential future maintenance expenses arising from climate-related asset damage over the long-term (to FY50) are concentrated in road assets in Melbourne (45%), Sydney (33%), and Brisbane (21%) with the remaining immaterial balance attributable to North American assets. Across regions, the most significant modelled damages are primarily associated with bushfires in NSW and QLD, sea level rise in VIC, and landslide risks linked to changes in precipitation across NSW, QLD and VIC. The above regional climate exposures can be referenced against the Group’s asset concentration to assess their significance to the financial results. Note B4 of the financial statements presents proportional revenue by major geographic region and Concession Summary presents concession intangible assets and equity accounted investments by region, reflecting the geographic concentration of the Group’s asset portfolio. The carrying value of the Group’s concession intangible assets and equity accounted investments of $17,846 million and $8,466 million, respectively, represents 78% of the Group’s total assets.
Maintenance expenses (repair or replacement costs) arising from damage to road assets Toll revenue reduction arising from traffic disruption
5
4
The Group supplemented its analysis of anticipated financial effects with an assessment of historical extreme weather impacts on toll revenue. This traffic modelling provides a baseline view of potential climate-related financial effects and reflects operational resilience under past conditions. Results indicate that severe rainfall events have historically reduced regional toll revenue (on an annual basis) by approximately 0.15% per event day for Queensland, with smaller impacts in New South Wales and Victoria. A cumulative three-day impact of severe rainfall events is estimated to reduce revenue by approximately $1-4 million depending on affected regions. Extreme heat events have not historically caused material disruption. Assets vulnerable to physical risks The Group’s CCAPs identify how climate-related physical risks may affect asset components subject to the Group’s concession arrangements and its equity accounted investments over three time horizons: FY30, FY50 and FY90. These time horizons support climate risk management and asset resilience planning and reflect the long-term nature of physical climate risks, the expected timing of their potential impacts and the operational lives of the Group’s infrastructure assets. As such, these horizons extend beyond, and are not directly aligned with the time horizons used for external reporting (i.e. 0–1 years, 1–4 years, and 4+ years), which are based on financial planning and reporting cycles. The Group integrates insights from these long-term assessments into its short-term strategic and financial planning processes where climate- related risks are reasonably expected to affect its financial performance, position, or cash flows.
1 The Group’s asset-level climate risk assessments, completed from FY22 onwards, have used the best available publicly accessible downscaled projection data at the time of assessment. The Group is committed to undertaking climate risk assessments and developing CCAPs for every operational asset. CCAPs will be reviewed and refreshed on a periodic basis including at least once every 5 years
41
Made with FlippingBook Digital Publishing Software