Macquarie Korea Infrastructure Fund

Transcription

1 Macquarie Infrastructure and Real Assets (MIRA) Macquarie Korea Infrastructure Fund IR General February 2017

2 Macquarie Infrastructure and Real Assets (MIRA) Macquarie Korea Infrastructure Fund IR General February 2017

3 Important notice DISCLAIMER This presentation is not an offer or invitation for subscription or purchase of or a recommendation of securities. It does not take into account the investment objectives, financial situation and particular needs of the investor. Before making an investment in Macquarie Korea Infrastructure Fund ( MKIF ), the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment adviser after reading investment prospectus, if necessary. MKIF and Macquarie Korea Asset Management Co., Ltd.( MKAM ) are not authorised deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia) and their obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of MKIF/ MKAM. Information, including forecast financial information, in this presentation should not be considered as a recommendation in relation to holding, purchasing or selling shares, securities or other instruments in MKIF. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts by their very nature, are subject to uncertainty and contingencies many of which are outside the control of MKIF. Past performance and results are not a reliable indication of future performance. Based on the performance of the fund, loss of principal may incur and such losses will be vested to investors. This presentation is not an offer for sale of the securities of MKIF in the United States or in any jurisdiction where any offer, sale or solicitation in respect of such securities is not permitted. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended, or in any jurisdiction where such offer or sale is not permitted. MKIF does not intend to register any portion of any contemplated offering in the United States or to conduct a public offering of securities in the United States Not for distribution in the United States or in any jurisdiction where any offer, sale or solicitation in respect of the contemplated securities is not permitted. This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ) or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons ). Any securities will only be available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire any securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. FORWARD LOOKING STATEMENT This presentation contains forward-looking statements. All forward-looking statements are our management s present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. PAGE 2

4 Contents 01 Business Overview A leading infrastructure fund in Korea Corporate structure Portfolio summary Stable and long-term businesses Healthy financial position Key investment highlights Track record of stable distributions 02 Key Results FY2016 Highlights Financial results The toll road performance The newer toll road assets Busan New Port Phase 2-3 (BNP) Project restructuring transactions Litigation status 03 Appendix Project restructuring transactions Financial position statements Profit and loss statements Cashflow statements Landmark asset portfolio Portfolio The New Port Asset performance Government s revenue support Minimum Revenue Guarantee Asset management fees Macquarie Asset Management Macquarie worldwide investments MIRA infrastructure overview

5 1 Business Overview

6 A leading infrastructure fund in Korea (As of 31 December 2016) MKIF is a listed infrastructure fund with a market cap over KRW 2.7tr (USD 2.5bn) Established in 2002 / Listed in 2006 on KRX Invests only in Korea as defined under the Korean PPI Act 1 Largest portfolio of toll roads in Asia Currently trading on approx. ~5% yield 2 Korean credit rating of AA0 (Stable) 3 Key Shareholders 4 International investors 22.1% Domestic institutions 48.9% Top shareholders 5 1. Newton Investment Management 7.2% 2. Hanwha Life Insurance 7.2% 3. Shinyoung Asset Management 7.1% * Macquarie Group 3.8% Domestic retails 29.0% 1. Act on Public Private Partnerships in Infrastructure ( PPI Act ) defines infrastructure sectors including roads, railways, ports, energy, airport, communication, water resources, etc. 2. Historical performance does not guarantee future performance 3. Rated by Korea Investors Service on 6 April 2016, Nice Investors Service on 12 April As of 31 December Source: Financial Supervisory Service (over 5% holders and MKAM s affiliates as of 31 January 2017) PAGE 5

7 Corporate structure (As of 31 December 2016) MKIF is a holding company of 12 infrastructure project companies Externally managed by Macquarie Korea Asset Management Co., Ltd ( MKAM ) Active manager of the underlying project companies Corporate tax-exempted when more than 90% of distributable earnings distributed Shareholders Concessionaire Baekyang Tunnel Ltd Cheonan Nonsan Expressway Co., Ltd New Airport Hiway Co., Ltd MKIF shareholding 100% 60% 24.1% Corporate Debt Credit Facility (KRW 250bn) 1 Corporate bonds (KRW 250bn) 2 Invest MKIF Distribute Management Agreement Invests in: Equity Subordinated debt Senior debt Receives: Interest income Dividend Kwangju Beltway Investment Co., Ltd Kwangju Ring Road Company Ltd Soojungsan Investment Co., Ltd Woomyunsan Infraway Co,. Ltd MCB Co. Ltd Seoul Chuncheon Expressway Co., Ltd 100% 75% 100% 36% 70% 15% MKAM (Manager) Incheon Bridge Co. Ltd Gyeogsu Highway Co., Ltd 41% 43.75% 1. Out of KRW 250 bil credit facility, KRW bil drawn as at 31 December KRW 60 bn of Short-term electronic bonds (Underwritten until May 2018) & KRW 190 bn of 7-yr maturity bonds (Maturity date of May 2018) BNCT Co., Ltd 30% PAGE 6

8 Portfolio summary 1 Well balanced and diversified portfolio of essential infrastructure assets (As of 31 December 2016) KRW 1.68 trillion committed and deployed across 12 infrastructure concessions in Korea Weighted average age of the portfolio is 10.4 years (out of weighted average concession period of 29.3 years) Ratio of central and local government involvement is 69:31 in terms of investments Portfolio composition by asset BYTL 0.1% Portfolio composition by phase and type IGB 12.6% BNP 18.4% Port 18.4% KBICL 15.5% NAHC 4.5% SICL 4.5% Mature 16% Sr debt 14.6% Ramp-up 18% Equity 29.9% Asset names Abbrv. Incheon International Airport Expressway NAHC Baekyang Tunnel BYTL Gwangju Second Beltway, Section 1 KBICL Gwangju Second Beltway, Section 3-1 KRRC Woomyunsan Tunnel WIC Cheonan-Nonsan Expressway CNEC Soojungsan Tunnel SICL SCE 8.1% YSE 9.0% MCB 6.7% Toll roads 81.6% KRRC 3.3% WIC 1.2% CNEC 16.1% Sub Debt 55.5% Growth 66% Machang Bridge Yongin-Seoul Expressway Seoul-Chuncheon Expressway Incheon Grand Bridge Busan New Port Phase 2-3 MCB YSE SCE IGB BNP 1. On Commitment basis PAGE 7

9 Stable and long-term businesses Underlying investments operate on long-term, predictable cash flow with certain downside protection Long-term concessions with weighted average 1 remaining life of 19 years All concessions protected under the Early Termination Support provision 10 toll roads are entitled to receive government support payments from their respective government for next 7 years on average (As of 31 December 2016) Present Weighted Average Support Payment 7 years Weighted Average Concession Term 19 years Early Termination Support 2,3 Relevant Authority (C) Central government (L) Local government Revenue Support 2 Concession Term 2 BYTL(L) KBICL(L) NAHC(C) SICL(L) CNEC(C) WIC(L) KRRC(L) MCB(L) YSE(C) SCE(C) IGB(C) BNP(C) On a weighted average basis based on total commitment amount 2. Government support and termination payment provisions vary for each concession 3. Concession companies have the right to receive payments if the relevant concession agreement is terminated prior to expiration of the concession term, including termination due to events attributable to the concession company or the government body or for events of force majeure 4. Revenue or cost compensation payments received from the relevant government authority and the toll freeze compensations related to the CPI growth PAGE 8

10 Healthy financial position (As of 31 December 2016) Stable revenues with external debt amortisation result in increasing cash income for MKIF MKIF- level debt capped at 30% of its paid in capital (current limit of KRW 500 billion) with average maturity of 1.8 years Current total MKIF-level debt of KRW billion KRW billion drawn down from KRW 250 billion of credit facility limit KRW 60billion of electronic short-term bonds (underwritten til May 2018) & KRW 190 billion of 7-yr fixed rate bond (maturing in May 2018) The asset level debt amortising heavily with remaining average maturity of 6.5 years (KRW bil) Asset-level outstanding debt balance 4 CASH 1 KRW 275.8bil 900 AMORTISING MATURITY years 600 GEARING % Proportionately consolidated cash balance (including MKIF cash balance of KRW 58.7bil) 2. Weighted average amortising maturity of the underlying asset level external debt 3. Gearing = Proportionately consolidated MKIF Net Debt / (Proportionately consolidated MKIF Net Debt + MKIF market capital (3-month average)) 4. Outstanding debt balance based on amortisation schedule of asset level external debt on a proportionate equity shareholding basis. Excludes MKIF level corporate loan balance PAGE 9

11 Key investment highlights MKIF is structured to deliver underlying growth Stable and predictable underlying revenues which are inflation-linked and substantially government s support payment-backed Embedded growth on increasing income Additional growth potential through asset re-ratings and new investments Macquarie-managed fund Management fees aligned with shareholders interest Project Company s Cash Flow 1 Cash Flow to MKIF 1 (Conceptual Diagram) Present (Conceptual Diagram) Revenue Dividend to shareholders Senior debt service (external debt) OPEX & CAPEX Sub-debt service (Shareholder loan) Net cash receipts (Profit & investment principal) 1. Conceptual diagram. Assuming no portfolio change such as divestment of assets or new investment and different from the cash flow chart based on the projection PAGE 10

12 Track record of stable distributions 1 Targets long-term, sustainable and growing distributions Distribution is paid semi-annually (record dates in June and December) Distribution floor is higher of taxable income or 100% of distributable accounting income (to maintain tax exempt status) (KRW / share) 600 Normal distribution One-off net income One-off net loss ( 33 ) (65) DISTRIBUTION KRW 400 per share Historical performance does not guarantee future performance 2. Total of KRW400 per share will be accounted as distribution income in calculating dividend income tax and tax payable under Korean law. Investors are advised to consult their own tax advisor for the appropriate tax treatment of the distribution 3. Net of one off accounting income (dividend income and prepayment fee from WIC transaction of KRW 18.7 billion and loan commitment fee of KRW 0.75 billion from KBICL transaction) and loss (performance fee of KRW 41.1 billion) PAGE 11

13 2 Key Results FY16

14 Full year highlights Declared distribution of KRW 400 per share for the full year 1 Delivered solid operational performance Excluding one-offs 2, revenue and net income decreased by 6.9% and 8.1%, respectively compared with the previous corresponding period ( pcp ) The underlying traffic volume and revenue 3 grew by 6.8% and 7.9%, respectively, on pcp The traffic of the three newer toll road assets 4 reached 87.4% 5 of the Concession Agreement ( CA ) forecasts, an increase of 10.2% over pcp Busan New Port Phase 2-3 ( BNP ) handled 1.60 mil TEU volume for the Period. Revenue and EBITDA increased by 27.0% and 75.4% pcp MKIF issuance of KRW 60 billion short-term bond ( STB ) Refinanced KRW 60bil of 5-yr fixed rate bond maturing on 31 May 2016 by reducing cost and improving cash management flexibility Discount rate at 91-day CD rate + 38bps currently applied rate of 1.72% p.a STB revolving every 3 months in different sizes up to the KRW 60 billion limit Completed three project restructuring transactions Woomyunsan Tunnel (WIC), Gwangju 2 nd Beltway Section 1 (KBICL) and Machang Bridge (MCB) Key outcome of each transactions collectively include: Legal risks on ongoing disputes removed without compromising MKIF s economics in the respective projects Overdue government payments settled, improving MKIF s balance sheet position The level of downside protection remains materially unchanged One-off accounting income of KRW 19.5 billion, representing KRW 59 per share Committed to purchase additional equity in Incheon Grand Bridge project 23.03% equity for a total consideration of KRW 46.2 billion in October Transaction close subject to certain conditions precedents including the potential capital restructure of IBC (negotiation underway) 1. On 31 January 2017, MKIF Board of Directors approved the distribution of KRW 200 per share for the second half of FY2016: Dividend income of KRW 10.1 billion and prepayment fee income of KRW 8.6 billion from WIC transaction, loan commitment fee income of KRW 0.75 billion from KBICL transaction and performance fee of KRW 41.1 billion / FY2015: Write off of effective interest of KRW 3.5 billion from YSE refinancing, prepayment fee income of KRW 0.4 billion from NAHC refinancing and performance fee of KRW 7.8 billion 3. On a weighted average basis based on revenue size of each asset and the MKIF s equity interest in each concession company. 4. Yongin-Seoul Expressway, Seoul-Chuncheon Expressway and Incheon Grand Bridge 5. On a weighted average basis based on total commitment amount and average daily traffic 6. Senior loan invested in Private Infrastructure Investment Korea, which was used for advance payment for commitment to purchase additional 23.03% equity in IGB PAGE 13

15 Financial results Year Ended 31 Dec 2016 Year Ended 31 Dec 2015 % Change in recurring items Revenue 226, , % Interest income 177, ,628 Dividend income 1 30,099 40,923 One-off items 2 19,496 (3,126) Other income Expenses 96,938 65, % Management fee 37,744 35,353 Performance fee 41,111 7,835 Interest expense 15,905 19,370 Other fees and expenses 2,178 3,119 (Audited, non-consolidated financial information ) Normalised net income decreased mainly due to drop in dividends paid by Incheon International Expressway and Soojungsan Tunnel in FY2016 compared to pcp (Unit: KRW mil) Net income 129, ,811 (15.6%) Normalised net income 3 151, ,772 (8.1%) EPS (KRW per share) (15.6%) Normalised EPS (KRW per share) 3, (8.1%) DPS (KRW per share) (13.8%) 1. FY16: Dividend income from NAHC of KRW 24.1 billion and from SICL of KRW 6 billion /FY15: Dividend income from NAHC of KRW 28.9 billion and from SICL of KRW 12 billion 2. FY16: Dividend income of KRW 10.1 billion and prepayment fee income of KRW 8.6 billion from WIC transaction and loan commitment fee income of KRW 0.75 billion from KBICL transaction / FY15: Write off of effective interest of KRW 3.5 billion from YSE refinancing and prepayment fee income of KRW 0.4 billion from NAHC refinancing. 3. Excludes one-offs 4. Based on the number of shares outstanding of mil shares 5. Distribution amounts for FY16 and FY15 were determined by considering both taxable and accounting income of the respective period. FY16 distribution includes over-distribution component of KRW 8 per share PAGE 14

16 The toll road performance Traffic volume and traffic revenue increased across all 11 toll road assets, in particular: Incheon International Airport Expressway/ Incheon Grand Bridge: Population growth in Cheongra, Yeongjong and Song-do districts and higher number of airport users during the year Gwangju 2 nd Beltway Section 1 and Section 3-1: Newly installed Hi-pass payment system entranced more traffic volume Machang Bridge: New connecting roads 1 and a newly built container port (Masan I-port) opened in March 2015 Higher or lower traffic revenue growth are generally due to the toll rate adjustment of the roads Year-to-date 4Q 2016 Average daily traffic volume Average daily traffic revenue Average daily traffic volume Average daily traffic revenue Vehicles/day % change on YTD KRW thousand/day % change on YTD Vehicles/day % change on pcp KRW thousand/day % change on pcp Incheon International Airport Expressway 2 76, % 393, % 78, % 402, % Baekyang Tunnel 78, % 64, % 79, % 65, % Gwangju Second Beltway, Section 1 49, % 52, % 51, % 55, % Gwangju Second Beltway, Section , % 43, % 45, % 48, % Woomyunsan Tunnel 29, % 64, % 29, % 64, % Cheonan-Nonsan Expressway 51, % 445, % 52, % 454, % Soojungsan Tunnel 49, % 45, % 50, % 46, % Machang Bridge 36, % 82, % 38, % 86, % Yongin-Seoul Expressway 91, % 148,345 (2.5%) 95, % 154, % Seoul-Chuncheon Expressway 47, % 310, % 46, % 306, % Incheon Grand Bridge 44, % 236, % 46, % 245, % Weighted average growth rate 3 6.8% 7.9% 6.1% 6.8% 1. Yanggok-Wanam route of the national highway and Changwon-Busan Expressway (stage 3) 2. Higher revenue growth than volume growth of Baekyang Tunnel, Soojungsan Tunnel, Cheonan-Nonsan Expressway, Seoul-Chuncheon Expressway and Incheon Bridge is due to toll fare increase. Higher traffic volume increase than revenue increase of Incheon International Airport Expressway and Yongin-Seoul Expressway is due to the toll discount implemented as a result of the capital management transaction 3. On a weighted average basis based on revenue size of each asset and the MKIF s equity interest in each concession company PAGE 15

17 The newer toll road assets 1 The three newer toll roads delivered a daily average traffic of 87.4% of the Concession Agreement forecasts, compared to 82.6% in the previous year During the Period, actual traffic performance of all three newer toll roads were above the minimum revenue guarantee (MRG) threshold. Hence, none of these assets require support payment from the government except for toll-freeze compensations 2 % OF PORTFOLIO 29.6% % OF CA FORECAST TRAFFIC VOLUME % TRAFFIC VOLUME GROWTH % 2016 Traffic Performance Quarterly trend of traffic volume Asset Yongin-Seoul Expressway (YSE) Seoul- Chuncheon Expressway (SCE) Incheon Grand Bridge (IGB) Operation commencement Traffic volume growth on pcp Traffic revenue growth on pcp % of CA forecast traffic volume MRG threshold 01-Jul % (2.5%) 89.7% 70% 15-Jul % 11.4% 85.5% 70% 19-Oct % 18.2% 87.1% 80% (Vehicles/day) 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20, Q1 Q2 Q3 Q Q2 Q3 Q Q2 Q3 Q4 Q1 Q1 YSE SCE IGB CAGR YSE 10.0% SCE 7.5% IGB 13.0% 1. The newer assets opened to traffic in 2H Toll compensation includes toll-freeze compensation and various toll discounts and exempts applied as per the request from the respective government authorities. The amount and components vary by assets 3. During 2016, on a weighted average basis based on total commitment amount and average daily traffic 4. Weighted average daily traffic during 2016 over 2015 PAGE 16

18 Busan New Port Phase 2-3 (BNP) 2016 Performance highlights BNP Throughput Volume (TEU) 1.60mil 1.37 mil Volume Growth over pcp 16.2% (2.5%) Revenue (KRW bil) Revenue Growth over pcp 27.0% 4.9% EBITDA (KRW bil) EBITDA Growth over pcp 75.4% 12.7% EBITDA margin (%) 48.7% 35.3% Throughput Volume (TEU) Container Terminals of New Port mil Volume Growth over pcp (0.2%) Strong throughput volume growth benefiting from increased volume of both Ocean 3 Alliance and non-alliance customers - such strong record growth contrasts with sluggish volume in other Busan Port terminals over pcp EBITDA margin improved to 48.7% from previous year s 35.3%, highest margin level among other terminals in Busan Port The New Port s overall volume remained at a similar level compared to 2015, handling 12.8 million TEU in Source: Busan Port Authority. Five container terminals including BNP and excluding multi-purpose terminals 2. Actual performance may vary from the forecast provided by BNP Historical results and 2017 targets (KRW bil) (mil TEU) (E) Revenue EBITDA Volume For FY2017, BNP targets approximately 1.7 million TEU of handling volume and KRW billion and KRW 49.6 billion of revenue and EBITDA, respectively 2 BNP s partnership with Ocean Alliance is expected to bring additional volume, service lines and customers to BNP as Ocean Alliance represents an expansion from Ocean 3 Alliance New alliances will begin operations effective in April 2017, and all vessel scheduling will be finalised by March 2017 Busan Port Authority anticipates Busan s overall handling volume target for 2017 to be 20.0 million TEU, a ~3% growth from pcp PAGE 17

19 Project restructuring transactions Successfully completed three project restructuring transactions 1 during the Period, delivered: Legal risks removed without compromising MKIF s economics in the respective projects Overdue government payments settled, improving MKIF s balance sheet position The level of downside protection remains materially unchanged 2 One-off accounting income of KRW 19.5 billion, representing KRW 59 per share Asset Timing Transaction Key outcome Woomyunsan Tunnel ( WIC ) Gwangju 2nd Beltway, Section 1 ( KBICL ) Machang Bridge ( MCB ) January 2016 December 2016 December Project restructuring involving capital return, refinancing of the subordinated debt, and adjustment to the toll fare Introduced a revenue allocation scheme by which MKIF takes priority over other debt in the project in terms of cash waterfall from the actual revenues Project restructuring involving a new amortisation schedule of MKIF s investment in the project Introduced an investment cost compensation scheme through which MKIF retains its target return via government support payments Project restructuring involving refinancing of the senior debt Introduced a revenue allocation scheme by which actual revenues are shared with the government but the government bears the responsibility over senior debt service and corporate taxes MKIF s investment size remains unchanged MRG and toll fare risks removed - actual revenue is expected to be sufficient to meet MKIF s target return and yield Net cash inflow of KRW 18.6 billion One-off accounting income of KRW 18.7 billion Toll fare fixed at KRW 2,500 until the concession end Withdrew a litigation case at the Supreme Court between KBICL and Gwangju Metropolitan City Government paid all overdue support payments of KRW 85.1 billion Accelerated amortization of MKIF s investment Net cash inflow of KRW 55.2 billion One-off accounting income of KRW 0.75 billion MKIF s investment size remains unchanged The level of government support protection remains effectively the same Resolves potential legal and toll fare risks A new senior debt raised at cheaper cost and longer maturity 1. For further details of each transactions, please refer to slide Except for WIC, KBICL and MCB continue to benefit from government s support payment guarantee. After the restructuring, WIC is barely exposed to the traffic volume risks as at the end of December 2015, ~70% of the current traffic level is expected to be sufficient to cover MKIF s target return and yield 3. The document close of the transaction completed on 26 January 2017 PAGE 18

20 Litigation status Two local concession assets of MKIF in Busan are undergoing legal disputes with their respective government authorities Assets % of MKIF portfolio 1 Case Result Current status Administrative order to reinstate the original capital structure at the time of the concession agreement signing Busan High Court ruled in favour or both BYTL and SICL in June 2016 Busan City appealed the case to the Supreme Court Baekyang Tunnel (BYTL) / Soojungsan Tunnel (SICL) 0.1%/ 4.5% Claim of overdue payments 2 Busan District Court ruled against BYTL in October Busan District Court ruled in favour of SICL in November SICL received KRW 4.7 billion of overdue payments in November 2016 BYTL appealed the case to Busan High Court Busan City appealed the case to the High Court 1. On commitment basis 2. BYTL: KRW 13.1 billion (toll compensation) / SICL: KRW 4.7 billion (minimum revenue support and toll compensation) PAGE 19

21 A Appendix

22 Woomyunsan Tunnel (WIC) Restructuring transaction Post-transaction, cash flows to MKIF no longer relying on MRG payments toll revenue is expected to be more than sufficient to support target return/cashflows Key aspects of the Transaction WIC capital structure change Introduction of a revenue partitioning structure (the Revenue Partitioning ) to replace the Minimum Revenue Guarantee (MRG) provision 1 Cash flows from toll revenue reprioritized in favour of equity and shareholder loan (SHL) Tr. B investors Pre transaction (KOR 124.6bil) (KRW Equity 26.6bn SHL 26.6bn Sr Loan, 71.4bn MKIF Equity: KRW 10.7bil (36%) SHL: KRW 9.6 bil Toll rate fixed at KRW 2,500 until the concession end Unpaid MRG settled through the Transaction Post transaction (KRW 153.8bil) SHL Tr. B 21.2bn Equity 11.6bn SHL Tr. A 121.0bn MKIF Equity: KRW 5.3bil (36%) SHL Tr. B: KRW 15.0 bil Impacts on MKIF MKIF s return on the investment to be fully paid from the DIA 2 Risks associated with the toll fare changes removed One-off accounting income 3 KRW 18.7 bil (KRW 56 per share) - 1Q 2016 Net cash inflow KRW 18.6 billion Revenue water fall under the Revenue Partitioning Toll Revenue 1st payment Disposable Income Account (DIA) OPEX/ CAPEX SHL Tr. B Interest Cashflow to MKIF paid from DIA SHL Tr. B Principal Reserved for Dividend MKIF Investment Equity (KRW 5.3bil) Shareholder loan Tranche B (KRW 15.0bil) 2nd payment % of MKIF portfolio 1.2% (total investment remain unchanged) Surplus Income Account Corp. Tax SHL Tr. A Interest SHL Tr. A Principal SMC Collection Supported by SMC credit 1. Preset amount will be first reserved from WIC s cash revenue and deposited to the Disposable Income Account (the DIA ). The balance cashflows will be separately managed under the surplus income account (the Surplus Income Account ) for servicing remaining obligations including other debt and corporate taxes 2. Approximately ~70% of the traffic level (as of December 2015) is expected to be sufficient to cover MKIF s target return and yield 3. The pre-payment fee of existing subordinated debt (KRW 8.6 billion) and capital reduction related gains (KRW 10.1 billion) PAGE 21

23 Kwangju Second Beltway Section 1 (KBICL) Restructuring transaction ICC (investment cost compensation) guarantees target cash flow to MKIF whereas MRG guarantees target revenue to KBICL Key aspects of the Transaction Introduction of ICC scheme GMC to pay all overdue MRG Resolution of all legal disputes against GMC Preservation of MKIF economics GMC to top up shortfall in KBICL s net cash flow after tax KRW 85.1bn of MRG payment 1 by GMC in 2016 GMC withdrew the administrative order dated 4 October 2011 No material impact on project valuation or IRR Cash flow comparison Pre-Transaction MKIF Cashflow Toll Revenue MRG* OPEX & CapEx Corporate Taxes Sr. Debt Service Sub Debt Service Dividends * GMC provides MRG at 85% of CA forecast revenue Post-Transaction MKIF Cashflow Toll Revenue OPEX & CapEx Corporate Taxes Sr. Debt Service New SHL Loan Service Sub Debt Service Dividends Investment Cost Compensation** GMC guarantees target cash flow to MKIF ** GMC guarantees target cash flow to MKIF (support Payment to be settled every quarter) KBICL receives support payments to cover shortfall in servicing MKIF investments 1. Overdue MRG for 2012 and 2013, collectively KRW 41.4 billion, was paid in June/July 2016 ahead of the Transaction close. Overdue MRG for 2014 and 2015, collectively KRW 43.7 billion was paid on 23 December MRG for 2016 from 1 January 2016 till 15 December 2016 will be paid by December 2017 PAGE 22

24 KBICL restructuring Impact on MKIF Post-transaction, risk profile is significantly improved while NPV/IRR remains materially unaffected Impact on MKIF Settling KRW billion of interest receivables 1 Net cash inflow of KRW 55.2 billion to MKIF 1,2 One-off accounting income of KRW 0.75 billion Accelerated repayment of MKIF s investment Valuation and return materially unaffected KBICL Capital structure Capital structure largely remains identical except new shareholder debt raised from the Transaction Post-transaction, investments will be amortized faster New shareholder debt will be KRW 50.0billion with 10.5% p.a. (fixed rate) Pre- Transaction Post- Transaction Equity 33.1 Equity 33.1 Senior Debt 142 Senior Debt 142 Sub Debt 35.2 Sub Debt 35.2 MKIF investment: Equity: KRW 33.1bil (100%) Sub loan: KRW 35.2bil (100%) Sr Loan: KRW 142.0bil (100%) New Loan: KRW 50.0bil (100%) New Loan 50.0 Projected MKIF s investment balance (Unit: KRW billion) '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 Year '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 Balance In Dec 2016 and Jan Net cash inflow = Interest received + commitment fee New Loan principal 3. On a commitment basis. Excluding capitalized and deferred interest of KRW billion MKIF Investment in KBICL 3 Pre-Transaction Post-Transaction Equity amount KRW 33.1 billion KRW 33.1 billion Senior loan KRW billion KRW billion New shareholder loan NA KRW 50.0 billion Subordinated loan KRW 35.2 billion KRW 35.2 billion Total investment KRW billion 3 KRW billion % of MKIF portfolio 12.8% 15.5% PAGE 23

25 Machang Bridge (MCB) Restructuring transaction Under the Revenue Allocation scheme, actual toll revenue to be split at pre-determined ratio and managed under two cash accounts responsible for servicing different cash outflow items Key aspects of the Transaction Introduction of the Revenue Allocation scheme Government s revenue support provision Actual toll rate fixed at lower level than CA toll rate Preservation of MKIF economics Shareholder cash flow prioritized before taxes and senior debt service Remains effectively same as previous provision Facilitates traffic growth Timely service of subordinated debt creating room for more dividends Cash flow comparison Pre-Transaction (A) Toll Revenue OPEX & CapEx Corporate Taxes Sr. Debt Service Sub Debt Service Dividends Government Support* * GSND provides MRG at 75.78% of CA forecast revenue MKIF Cashflow Post-Transaction **GSND guarantees minimum revenue for MCB Cash Account at 75.78% of CA forecast revenue MKIF Cashflow (A) Toll Revenue (B) MCB Cash Account (C) GSND Cash Account + + Gov t Guarantee** Gov t Guarantee as Needed OPEX & CapEx Corporate Taxes Sub Debt Service Sr. Debt Service Dividends GSND guarantees minimum revenue for MCB Cash Account Cash shortfall within the GSND Cash Account to be subsidized by GSND (A) Toll revenue = actual toll rate (KRW 2,500 per vehicle; escalates every 8 years) x actual traffic (B) MCB Cash Account = actual traffic x CA toll rate (KRW 2,900 per vehicle; escalates by CPI) x Revenue Allocation Ratio (68.44% up to CA traffic forecast; 50% in excess) (C) GSND responsible Cash Account = (A) (B) PAGE 24

26 MCB restructuring Impact to MKIF Post-transaction, MKIF s economics preserved as MKIF benefits from its higher ownership in equity (70%) compared to subordinated debt (50%) Impact to MKIF Total MKIF investment of KRW 112.8bn to remain unchanged Timely and stable subordinated debt service No material change in MKIF valuation and returns The level of MRG protection remains effectively the same Essentially removes risks associated with the toll rates in the future No cash in/outflow or one-off accounting income/expenses Transaction summary Shareholding Senior debt Pre-Transaction Post-Transaction No change to shareholding ratio/shareholders (MKIF 70% and a domestic infrastructure fund ( Fund A ) 30%) No capital reduction Outstanding amount of KRW 138.4bn New senior debt KRW 140.2bn Tranche A: 110.2bn Tranche B: 30.0bn Credit facility: 10.0bn MCB Capital structure Capital structure largely remains identical except senior debt which will be refinanced at lower interest rate and longer maturity The Transaction results in accelerated pay-down of the subordinated debt and its deferred interest Higher dividends expected Pre-Transaction Post-Transaction Equity 56.8 Equity 56.8 Senior debt Senior debt Sub debt Sub debt MKIF investment: Equity: KRW 33.8 bil (70%) Sub debt: KRW 79.0 bil (50%) Subordinated debt Revenue support and upside Toll rate No material change to key financial terms including lenders, size, interest rate and maturity MRG threshold of 75.78% of the original CA forecast revenue Revenue above 120% of the CA forecast revenue to be clawed-back to GSND Actual toll rate of KRW 2,500 per vehicle vs. original CA toll rate of KRW 2,900 per vehicle (based on 2016) GSND currently suppressing scheduled toll fare increase, incurring toll freeze compensation Government minimum guarantee of 75.78% of the CA forecast revenue remains applicable to the Disposable Toll Income Account portion of the revenue Revenue claw-back threshold removed Actual toll rate of KRW 2,500 per vehicle vs. CA toll rate of KRW 2,900 per vehicle (based on 2016) Disposable Toll Income Account revenue to be calculated based on the CA toll rates PAGE 25

27 Financial position statements Audited, Non-consolidated as at 31 December 2016 and 31 December 2015 (Unit: KRW mil) 31 December December 2015 Assets Invested Assets 1,740,511 1,617,610 Cash & deposits 58,664 15,680 Loans 1,172,379 1,089,746 Equity securities 509, ,184 Others 348, ,746 Interest receivable 342, ,604 Other receivables 2,502 2,430 Deferred costs, net 3,108 3,712 Total Assets 2,088,994 2,057,356 Liabilities Accounts Payable 1 1 Management fee payable 9,415 8,867 Long-term debt 161, ,444 Bonds 249, ,688 Other liabilities 2,920 3,210 Total Liabilities 423, ,210 Shareholders Equity Share Capital 1,670,986 1,670,986 Retained Earnings (Accumulated deficit) (5,480) 15,160 Total Shareholders Equity 1,665,506 1,686,146 Total Liabilities and Shareholders Equity 2,088,994 2,057,356 CHANGE OF INVESTMENT Asset Item 2016 Gwangju 2nd Beltway, 3-1 Senior Debt (6,972) Gwangju 2nd Beltway, 3-1 Shareholder Debt 50,000 Soojungsan Tunnel Senior Debt (7,195) Soojungsan Tunnel Sub Debt (4,800) Woomyunsan Tunnel Shareholder Debt 5,400 Woomyunsan Tunnel Equity (2,724) Private Infrastructure Investment Korea Senior Debt 46,248 Total 79,957 * Excludes Baekyang Tunnel loan amortisation of KRW 48 mil and etc PAGE 26

28 Profit and loss statements Audited, Non-consolidated 12 Months to 31 December 2016 and 31 December 2015 (Unit: KRW mn) Revenue 226, ,488 Interest income 177, ,628 Dividend income 1 30,099 40,923 One-off items 2 19,496 (3,126) Other income Expenses 96,938 65,677 Management fee 37,744 35,353 Performance fee 41,111 7,835 Custodian fee Administrator fee Interest expense 15,905 19,370 Other expense 1,640 2,581 Net Profits 129, ,811 EPS (KRW) FY16: Dividend income from NAHC of KRW 24.1 billion and from SICL of KRW 6 billion /FY15: Dividend income from NAHC of KRW 28.9 billion and from SICL of KRW 12 billion 2. FY16: Dividend income of KRW 10.1 billion and prepayment fee income of KRW 8.6 billion from WIC transaction and loan commitment fee income of KRW 0.75 billion from KBICL transaction / FY15: Write off of effective interest of KRW 3.5 billion from YSE refinancing and prepayment fee income of KRW 0.4 billion from NAHC refinancing. 3. Based on the number of shares outstanding of mil shares PAGE 27

29 Cashflow statements Audited, Non-consolidated 12 Months to 31 December 2016 and 31 December 2015 (Unit: KRW mil) Cashflows from operating activities: Cash inflows from operating activities 348, ,443 Collection of loans receivable 28, ,115 Collection of equity securities 2,724 55,645 Dividend income 40,227 40,923 Interest and other income 277, ,760 Cash outflows from operating activities: (191,019) (209,849) Investments (111,231) (166,030) Fees and expenses (79,788) (43,819) Net cash inflow from operating activities 157, ,594 Cashflows from financing activities: Proceeds from long-term debt 130,000 52,500 Proceeds from corporate bond 60,000 - Repayment of long-term debt (80,000) (155,000) Repayment of corporate bond (60,000) - Distribution (150,483) (144,185) Interest expense (14,070) (15,994) Incidental expenses for borrowings (100) (100) Net cash outflow from financing activities (114,653) (262,779) Net increase (decrease) in cash and deposits 42,982 (33,185) Cash and deposits at beginning of the period 15,680 48,865 Cash and deposits at end of the period 58,662 15,680 PAGE 28

30 Landmark asset portfolio Incheon International Airport Expressway (NAHC) New Airport Hiway Co., Ltd Seoul-Chuncheon Expressway (SCE) Seoul Chuncheon Expressway Co., Ltd (31 December 2016) Woomyunsan Tunnel (WIC) Woomyunsan Infraway Co,. Ltd Cheonan-Nonsan Expressway (CNEC) Cheonan Nonsan Expressway Co,. Ltd Incheon Grand Bridge (IGB) Incheon Bridge Co. Ltd Baekyang Tunnel (BYTL) Baekyang Tunnel Ltd Yongin-Seoul Expressway (YSE) Gyeogsu Highway Co,. Ltd Soojungsan Tunnel (SICL) Soojungsan Investment Co., Ltd Gwangju 2 nd Beltway Section 3-1 (KRRC) Kwangju Ring Road Co., Ltd Busan New Port Phase 2-3 (BNP) BNCT Co., Ltd Gwangju 2 nd Beltway Section 1 (KBICL) Kwangju Beltway Investment Co., Ltd Machang Bridge (MCB) MCB Co., Ltd Bridge Expressway Tunnel Container port PAGE 29

31 Portfolio 1 (As of 31 December 2016) MKIF COMMITMENT AND DEBT INTEREST RATE (Units: KRW bil, %) Name Abbrev. Equity Ownership (%) Subordinated Debt Interest Rate (%) Senior Debt Interest Rate (%) Total Baekyang Tunnel BYTL Gwangju Second Beltway, Section 1 KBICL ~ Incheon International Airport Expressway NAHC Soojungsan Tunnel SICL Cheonan-Nonsan Expressway CNEC Woomyunsan Tunnel WIC Gwangju Second Beltway, Section 3-1 KRRC Machang Bridge MCB Yongin-Seoul Expressway YSE Seoul-Chuncheon Expressway SCE Incheon Grand Bridge IGB Busan New Port Phase 2-3 BNP ~ Total ,679.5 Percentage(%) 29.9% 55.5% 14.6% 100% 1. Based on commitment amount 2. Includes KRW 3.2bil working capital facility (Interest rate of 15% p.a.) and KRW 50 bil shareholder loan (Interest rate of 10.5% p.a.) 3. Senior loan invested in Private Infrastructure Investment Korea, which used for advance payment for commitment to purchase additional 23.03% equity in IGB 4. Includes KRW 50bil working capital facility (Interest rate of 14% p.a.) PAGE 30

32 The New Port 5 container terminals of the New Port handled 12.8mil TEU of container throughput volume Busan Port Authority anticipates Busan s overall handling volume target for 2017 to be 20.0 million TEU, a ~3% growth from pcp Only BNP with existing and expansion capacity among the five terminals in the New Port over the next 4-5 years Busan Port performance highlights FY2016 BNP New Port North Port Container Terminals ( CTs ) in Operation Handling Capacity of CTs 1 (TEU p.a.) (New Port Terminal) 5 Terminals 3 Terminals 1 2.5mil 14.9mil 7.5mil Actual volume in FY mil 12.8mil 6.6mil Volume Growth over pcp Capacity Utilisation Rate of CTs (%) 16.2% (0.2%) (0.1%) 62.3% 86.0% 87.4% Busan Port Market Share 3 7.9% 66.1% 33.9% New Port s historical performance ( ) 3 (TEU mil) % 100% 89.8% 84.4% 86.0% 16 90% % 72.7% % % % % 8 40% % % 2 10% 0 0% Volume (LHS) Surplus Capacity (LHS) Capacity Utilization (RHS) 1. Source: BNP; reflects the merge of KBCT and BIT as of November Source: BNP s volume includes shifting; New Port s and North Port s volumes are compiled by Busan Port Authority and do not include shifting 3. Source: Busan Port Authority shifting volume excluded; volume of misc. terminals included for market share calculation PAGE 31

33 Asset Perfomance 1 (Unit: KRW mil) Assets Adjusted operating revenue 2 OPEX Adjusted EBITDA 2 Net debt 3 EBITDA margin Net debt to EBITDA Adjusted operating revenue 2 OPEX Adjusted EBITDA 2 Net debt 3 EBITDA margin Net debt to EBITDA Gwangju Second Beltway, Section 1 40,959 (8,586) 32,373 (259) 79.0% (0.0x) 39,636 (6,209) 33,427 (1,657) 84.3% (0.0x) Gwangju Second Beltway, Section ,964 (9,981) 10,983 (2,734) 52.4% (0.2x) 20,356 (4,649) 15,707 (1,548) 77.2% (0.1x) Soojungsan Tunnel 24,442 (4,971) 19,471 (6,147) 79.7% (0.3x) 23,623 (4,130) 19,493 (17,841) 82.5% (0.9x) Baekyang Tunnel 27,349 (4,248) 23, , % 4.4x 26,230 (4,065) 22, , % 5.5x Incheon International Airport Expressway 234,426 (28,682) 205,744 (74,378) 87.8% (0.4x) 226,101 (30,372) 195,729 (160,829) 86.6% (0.8x) Cheonan-Nonsan Expressway 219,642 (30,648) 188,994 (166,523) 86.0% (0.9x) 211,583 (29,005) 182,578 (60,988) 86.3% (0.3x) Woomyunsan Tunnel 4 23,430 (4,036) 19,394 (1,715) 82.8% (0.1x) 22,581 (4,113) 18,467 69, % 3.7x Machang Bridge 30,109 (5,833) 24, , % 5.3x 30,726 (5,354) 25, , % 5.3x Yongin-Seoul Expressway 54,139 (12,608) 41, , % 8.8x 55,329 (12,998) 42, , % 6.5x Seoul-Chuncheon Expressway 123,209 (21,174) 102, , % 5.3x 115,071 (17,345) 97, , % 6.7x Incheon Grand Bridge 91,081 (17,309) 73, , % 5.1x 85,512 (18,816) 66, , % 6.6x Busan New Port Phase ,643 (46,981) 44, , % 11.5x 72,136 (46,452) 25, , % 19.9x Proportionate average 5 432,221 (85,512) 346, , % 1.8x 412,984 (77,549) 335, , % 2.1x 1. Management estimated, unaudited figures 2. Revenue compensation and other compensations from the relevant government authority are reflected on accrued basis, not on cash basis 3. Excludes shareholders loans 4. For calculation of net debt, the loan backed by Seoul Metropolitan Government and the cash balance of Surplus Income Account were excluded 5. On a proportionate average basis based on MKIF s equity interest in each concession company PAGE 32

34 Government s revenue support Asset Baekyang Tunnel Gwangju 2nd Beltway, Section 1 Incheon International Airport Expressway Soojungsan Tunnel Relevant Authority Busan Metropolitan City Gwangju Metropolitan City Concession Term Concession Term Remaining Support Payment Duration Support Payment Duration Remaining Revenue Guarantee Threshold 1 Revenue Cap Threshold 1, % 110% Investment cost compensation MOLIT % 110% Busan Metropolitan City % 110% Remarks (As of 31 December 2016) Support payment to guarantee target cash flow to the shareholder s investment Partial revenue sharing in excess of 80% to 110% level In toll revenue below 90%, Busan City Government is obliged to compensate 91.5% of the shortfall amount Cheonan-Nonsan Expressway MOLIT % 110% Woomyunsan Tunnel Gwangju 2nd Beltway, Section 3-1 Seoul Metropolitan City Gwangju Metropolitan City N/A N/A % 110% Machang Bridge GSND % 100% Yongin-Seoul Expressway 5 MOLIT % 130% Seoul-Chuncheon Expressway 5 MOLIT %/60% 130%/140% Incheon Grand Bridge MOLIT % 120% Partial revenue sharing in excess of 82% to 110% level As part of the capital restructuring transaction completed in Jan 2016, MRG provision removed Revenue guarantee applied to MCB account Partial revenue sharing (50:50) in excess of 100% level Applies 70%/130% up to 10 August 2019 and 60%/140% up to 10 August 2024 Busan New Port Phase 2-3 MOF N/A N/A Weighted average % of annual concession agreement projected revenue 2. Relevant government authorities are entitled to receive the portion exceeding the threshold 3. MOLIT (Ministry of Land, Infrastructure and Transport) 4. GSND (Gyeongsang Namdo (Provincial) government) 5. No revenue guarantee applies if actual revenue are below 50 % of the toll revenue forecast 6. MOF (Ministry of Oceans and Fisheries) 7. Weighted by investment commitment PAGE 33

35 Minimum Revenue Guarantee Minimum Revenue Guarantee (MRG) mechanism (Conceptual Diagram) Revenue Actual Revenue Inflation-linked revenue support Relevant government authorities extract the excess portion Revenue Cap 1 Forecast Revenues 2 MRG 1,3 MRG line tracking the forecast revenue line (typically 70~90% below forecast revenue) Korea s sovereign rating as of December 2016: S&P: AA (Stable) Moody s: Aa2 (Stable) Government bodies compensate the shortfall Time in years 1. MRG and revenue caps vary across assets 2. Forecast revenues set out in the Concession Agreement 3. In two of 10 MRG assets, no revenue guarantee applies if actual revenue falls below 50% of the toll revenue forecast PAGE 34

36 Asset management fees 1 Management fees consist of Base Management Fee and Performance Fee Fees calculated and paid on a quarterly basis Performance Fee is linked to the performance of the fund (primarily the market capitalization of the fund) Paid only when there is outperformance exceeding benchmark hurdle return Underperformance is carried forward Management Fee 1.25% per annum falling to 1.10% 2 of Net Investment Value (NIV) of MKIF; plus (+) 1.15% per annum falling to 1.05% 2 per annum of Commitment 3 of MKIF Performance Fee 20% of outperformance; the amount by which the sum of quarterly return 4 and cumulative deficit 5 exceeds the quarter s benchmark return (8% p.a.) *NIV for any quarter equals: The average market capitalisation 6 of MKIF over all trading days in each calculation period; plus (+) The amount of any external borrowings by MKIF; less (-) Cash or cash equivalent held by MKIF 1. Details of the calculation method is stated in the Articles of Incorporation available on MKIF website ( 2. For NIV +Commitment in excess of KRW 1.5 trillion 3. Commitment means all amounts that MKIF has firmly committed for future investment 4. Quarterly return to be measured by multiplying the performance of MKIF accumulation index to the market capitalisation 6 of the previous quarter-end over last 15 trading-days. Performance of MKIF accumulation index is measured as increase in the average of the index over last 15 trading days of a considered quarter compared to its previous quarter. Index is calculated on a daily basis inclusive of share price performance and distribution. Distribution is assumed to be re-invested on the ex-dividend date at the closing price 5. Cumulative deficit is the sum of quarterly surplus/deficit accumulated from the payment of previous performance fee. Quarterly surplus/deficit is the difference between quarterly return and the quarter s benchmark return (surplus when positive, deficit when negative) 6. Calculated on the basis of volume weighted average trading price for the considered period PAGE 35

37 Macquarie Asset Management Macquarie Infrastructure and Real Assets ( MIRA ) Macquarie Investment Management ( MIM ) Macquarie Specialised Investment Solutions ( MSIS ) Alternative asset management Infrastructure Real Estate Agriculture Energy Securities investment management Fixed interest and currencies Equities, including infrastructure securities Private markets Hedge funds Multi-asset allocation solutions Best of breed external managers Fund and equity-based solutions Fund linked products Capital protected investments Retirement and annuity solutions Agriculture Infrastructure debt Operations Legal and Compliance $A476.9b 20 ~15,000 AUM 1 Countries worldwide 1 Staff 1 1. All numbers as at 31 March PAGE 36