CEO Presentation Marko Bogoievski February 24, 2009 INFRATIL INVESTOR DAY

Transcription

1 CEO Presentation Marko Bogoievski February 24, 2009 INFRATIL INVESTOR DAY 0

2 Today s agenda 9.00am Welcome and Introduction 9.15am Enduring and Emerging Megatrends (Alison Sander, BCG) 10.30am Morning Tea 11.00am Infratil CEO Presentation 12.00pm Lunch 1.30pm Briefings and Q&A on Infratil Businesses 4.00pm Adrian Orr, NZ Super Fund 4.30pm Conclusion 1

3 IFT People depth and experience 2

4 Key messages for today Infratil is well placed to ride the waves of volatility Strong balance sheet and increasing free cashflow giving the flexibility to take advantage of emerging opportunities Our portfolio is aligned with enduring megatrends Good businesses in the right sectors Our basic approach to investing has remained constant Focus on asset allocation, invest early in megatrends, develop exclusive investment options, apply deep sector expertise We are confident about the range of levers through which we can deliver sustained outperformance in the future 3

5 Performing in an increasingly volatile world How do we see the market? Not your average bear Focus on relative value How is Infratil positioned? Strong balance sheet and cash position Significant Discretionary Capex in recent years, coming to end of cycle Capacity to take advantage of growth options How will the economy impact our management approach? Analysing and planning for a range of scenarios Reducing fixed commitments Managing downside risk, holding open options 4

6 INFRATIL INVESTOR DAY 5

7 Highlights and lowlights for 2008/09 Highlights Strong TPW result despite poor hydro and wind conditions in 2008 Proactive corporate finance activity across Group S&P market protection yielded $47.9m and partially offset unrealised losses in holdings of listed entities Strong growth in Australian Energy business Snapper launched in Wellington Lowlights Pressure on European airports with oil price shock and freight volumes Potential for increased regulation in Airports and Public Transport Likely impairment charge for AIA and ENE should market conditions remain unchanged through March 31,

8 Forecasting increased operating earnings in 2010 IFT Earnings Outlook: FY08A FY10F FY08A FY09F FY10F 0 ROFE EBITDAF EBITDAF 7

9 with sizeable reductions in Capex in 2010 Capital Investment in the Infratil Portfolio (NZ$m): FY08-FY IFT Subsidiaries Public Transport NZ Energy Australian Energy NZ Airports European Airports Other Infratil Subsidiaries 8

10 Significant Bank Facilities and Cash on Hand IFT Parent Company Bank Debt Position ex RPS: Feb Limit NZ$ million Drawn Bank Facilities Cash on hand Cash + Facility Head Room 9

11 and a comfortable debt maturity profile IFT Bond and Bank Maturities (NZ$m): Calendar Years (1) Bank Bonds RPS (1) Excludes WIAL, TPW and Perth Energy 10

12 Our basic approach to investing has remained constant Focus on asset allocation Sector attractiveness Market structure & competitive position Active capital management Apply deep sector expertise Energy, airports, transport Privatising or deregulating environments Private Public NZ differentiation 20%+ TSR target Invest early in megatrends Long term perspective Deep understanding of drivers of long term supply, demand and pricing Develop exclusive investment options Significant reinvestment potential Willing to build from greenfield or minority positions 11

13 and our key assumptions remain intact Trends around renewable energy, public transport and mobility are holding firm - Financial crisis will affect short term performance but not long term value - View on energy prices a common factor across the group Although, market events have the potential to disrupt or create new themes - Shift in allocation towards higher yielding / lower risk assets e.g., infrastructure - public / private sector funding of future infrastructure needs 12

14 The IFT portfolio is aligned with Megatrends Energy Airports Public Transport Alignment with Megatrends Rise of alternative energy Global warming and rise of green Deregulating Australian energy markets Rise of mobility Ageing Rise of services Urbanisation, infrastructure deficits? Energy volatility? Global warming and rise of green Energy volatility Global warming and rise of green Power of brands Urbanisation, infrastructure deficits Ageing Impact of Recession Demand correlated to GDP But insulated from market shocks (balance sheet, limited counterparty risk) Short-term drop in pax volumes Mitigated in NZ by new entrant activity Historical downturns followed by bounce to long term trend Trading down behaviour makes Public Transport less cyclical Key risk is regulation 13

15 Market conditions should suit IFT in 2009 Scarce capital - IFT track record and expertise - Emphasis on stock picking Market disruption - More challenging to value assets and assess risk - Early investor in emerging long term trends - Don t mind messy or difficult situations Characteristics of the infrastructure asset class - Central and local government funding needs - Duration requirements of sovereign wealth and pension funds - Large reinvestment potential 14

16 Delivering excess returns in the next 24 months Closing the NAV discount Active management of the portfolio Internal capex and re-investment options Focusing on performance management Making accretive acquisitions 20%+ TSR target 15

17 1 Addressing the discount to NAV Possible rationale for the discount to NAV: - NAV not credible - Parent company debt and leverage - Concerns over the infrastructure model - Comparisons to peers - Lack of liquidity - Reinvestment risk Performance closes gaps over time - Including periodic realisations Analyst Valuations (1) TPW $1,154m WIAL $340m AIA $90m EDL $107m IEA $282m IAE $251m NZB $242m Other $75m Debt $1,156m IFT NAV $2.60 (1) Listed assets at market cap, unlisted at average analyst valuations Sept 08 (excluding high and low), debt as at Jan 31,

18 1 Optimising the corporate finance equation IFT Buybacks - Debt - Equity Debt structuring and minimising the cost of capital - Utilisation of parent company losses - Balance between parent company and subsidiary debt - Fixing current forward swap rates Structuring and stakeholder requirements - Considering objectives of local authorities and community trusts Pre-tax income - WIAL 66% tax grouping - Potential inefficiencies 17

19 2 Active Management of the Portfolio Constant review of basic assumptions and portfolio positions: - Macro trends - Regulation - Industry structure - Technology Goal to minimise risk for targeted rate of return - Geographic and sector diversification - Sequencing projects and cash requirements across group - Managing group relationship with banks and capital markets IFT Portfolio by Asset Value Europe Airports NZ Airports NZ Transport Australia Energy Other NZ Energy Source: Infratil Half-Year Report (September 2008) 18

20 2 Active Management of the Portfolio: Specifics Investment TrustPower WIAL Energy Australia Infratil Airports Europe NZ Bus Auckland Airport Energy Developments Portfolio View Prudent growth, careful sequencing / timing of projects Prudent growth, management of Commerce Act implications Slower growth pending regulatory and State outcomes Significant overhead reduction and review of Lübeck put Completion of fleet upgrade dependent on regulatory outlook Strategic position to be developed over time Review options pending completion of strategic review 19

21 2 Auckland Airport Update IFT holds 3.3% of AIA and Morrison & Co manages another 7.2% for NZ Super Government intervention into the market at the time of the CPPIB bid was highly disruptive and damaging IFT still considers AIA to be NZ s preeminent transport infrastructure asset with good medium to long term prospects - Strong new management team with focused set of objectives around capital and operating expenditure optimisation (especially for aeronautical services) and route development - Leveraged to regional aviation growth - Significant freehold landbank for development Infratil retains its hold view and is cognisant that significant corporate activity could occur following Auckland governance review 20

22 3 The value of internal capex IFT prefers assets with significant re-investment potential relative to acquisition price - Uncontested spend - Familiar assets - Timing at IFT discretion Around $600m of growth capex in 2008 and Particularly TPW, Australian energy and NZ Bus Significant value of imbedded options, e.g. - Perth Energy (AUD/USD FX rate locked in at 0.93c) - VEL growth rates by State - TPW consented wind schemes - Snapper technology investment 21

23 4 Focusing on performance management IFT has traditionally emphasised sector selection over operational performance - Recruit high quality management teams - Little or no group synergy Upside available through improved performance - Targeting operational improvement in European airports, NZ Bus and VEL - Significant growth capex over the last 24 months highlights management of large-scale projects and associated risk 22

24 5 No shortage of external opportunities Energy - Renewable energy - Consolidation in the energy sector (Australia and NZ) Airports and transport - Australia and NZ - Asia - Minority participation in consortia NZ Infrastructure needs - Greenfield investment under PPP framework - Local authority assets - SOE s and privatisation agenda 23

25 Infratil resilient and opportunistic Good businesses in the right sectors Value from active capital management in the current environment Track record and experience will attract future opportunities 24