Remuneration report
Long Term Incentive (LTI)—how does it work? (continued)
FCF component The Group’s FCF1 per security percentage growth rate is calculated over the four-year performance period. 5 The FCF per security component of performance awards granted will vest based on the Group’s compound annual growth targets translated into annual FCF (excluding Capital Releases) per security over the four-year performance period. The Board uses its discretion to determine whether the performance awards are settled in Transurban stapled securities or a cash payment of equivalent value. Following testing, any awards that do not vest, lapse and any awards that vest are automatically exercised into Transurban stapled securities or settled in cash at the discretion of the Board. No price is payable on exercise. FCF vesting schedule The FCF component of performance awards vest on a straight-line basis in accordance with the following table: FCF per security over the performance period % of performance awards that vest Below minimum threshold Zero Between minimum threshold and maximum target Straight line vesting between 50 and 100 At or above maximum target 100 If employment ceases due to resignation or for cause before the performance measures are tested, generally there is no entitlement to unvested performance awards and any unvested awards will lapse, unless the plan rules provide otherwise, or the Board otherwise resolves. If employment ceases in other circumstances (`good leaver’), unless the Board determines otherwise, a pro rata number of unvested performance awards (calculated based on the portion of the performance period that has elapsed) will remain on foot and subject to the original terms and will be tested for vesting in the ordinary course.
Vesting (continued)
Cessation of employment
Clawback
Same treatment as per STI
Minimum security holding The Board has endorsed minimum security holding guidelines for Non-executive Directors, the CEO and Executive KMP. The guidelines recommend that Non-executive Directors, the CEO and Executive KMP build and maintain a minimum security holding of Transurban stapled securities equal to 100% of their fixed remuneration or base fees (excluding superannuation). The minimum stapled security holding can be accumulated over a five-year period. All KMP have either achieved their minimum security holding or, for those new to the Group, are on track to meet the five year accumulation period.
Service agreements
The remuneration and other terms of employment for the CEO and other Executive KMP are formalised in service agreements that have no specified term. Under these
agreements, the CEO and other Executive KMP are eligible to participate in STI and LTI plans. The notice periods in place for FY24 are outlined below:
Period of notice to terminate by the Executive KMP
Period of notice to terminate by the Group 6
CEO 7
6 months
12 months
Other Executive KMP
3 months
6 months
Other Executive KMP – commencing post 6 Oct 2020
6 months
6 months
1 P roportional EBITDA is the aggregation of EBITDA from each asset multiplied by the Group’s percentage ownership, as well as any contribution from Group functions. Proportional EBITDA figures used to assess performance are included in Note B4 of the audited financial statements 2 P roportional Net Costs is the aggregation of total costs less fee and other revenues from each asset multiplied by the Group’s percentage ownership, as well as any contribution from Group functions 3 R eferences to FCF in relation to FY24 LTI Plan exclude Capital Releases 4 F ace value is the equity value based on the Transurban share price at the date of grant. This differs to the fair value of equity which is the expensing value in accordance with the accounting standards. The fair value takes into consideration factors including: the probability of vesting based on the performance hurdles, share price volatility, life of the instrument, dividend yield, and share price at grant date 5 T he FCF (excluding Capital Releases) per security target range is calculated by adding each of the FCF (excluding Capital Releases) budget and forecasts over the four-year performance period, and determining the CAGR required to achieve the 4-year aggregate FCF (excluding Capital Releases) 6 P ayment 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 7 A pplies to the current CEO and former CEO. On ceasing employment, the entitlements of the former CEO, Scott Charlton, are in accordance with his employment contract and the terms of the STI and LTI plans that Scott participated in as Executive KMP
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