Investor Presentation Retail Bond Issue. Suzanne Tindal, John Bishop and Andrew John 21 March 2016

Transcription

1 Investor Presentation Retail Bond Issue Suzanne Tindal, John Bishop and Andrew John 21 March

2 Important Information and Disclaimer Auckland Council (Issuer or Auckland Council) is making an offer of fixed rate bonds (Bonds) in reliance upon the exclusion in clause 19 of schedule 1 of the Financial Markets Conduct Act 2013 (FMCA). The Bonds will be secured, unsubordinated fixed rate debt obligations of the Issuer secured by a charge created by the debenture trust deed dated 2 December 2010, as amended from time to time, (Debenture) over all rates and rates revenue of Auckland Council. The Bonds will rank equally and without any preference among themselves and equally with all other secured indebtedness of the Issuer, except indebtedness preferred by law. Neither the redemption of, nor the payment of interest on, the Bonds is guaranteed by the Crown or by any other person. Important Information The Bonds will have identical rights, privileges, limitations and conditions (except for the interest rate and maturity date) as Auckland Council s NZ$250,000,000 AKC080 Bonds maturing 24 September 2020 with a fixed interest rate of 4.017% per annum, NZ$200,000,000 AKC070 Bonds maturing 25 March 2024 with a fixed interest rate of 5.806% per annum and NZ$125,000,000 AKC060 Bonds maturing 18 December 2018 with a fixed interest rate of 4.410% per annum. Accordingly, the Bonds are of the same class as those debt securities for the purposes of the FMCA and the Financial Markets Conduct Regulations 2014 and investors should look at the market price of those quoted debt securities to find out how the market assesses the returns and risk premium for those debt securities. Auckland Council is subject to disclosure obligations that require it to notify certain material information to NZX Limited (NZX) for the purpose of that information being made available to participants in the market. Such information can be found by visiting Application has been made to NZX for permission to quote the Bonds on the NZX Debt Market. Disclaimer This document does not constitute a recommendation by the Issuer, ANZ Bank New Zealand Limited, or Westpac Banking Corporation (acting through its New Zealand branch) (Joint Lead Managers), Trustees Executors Limited (Trustee) nor any of their respective directors, officers, employees or agents to subscribe for, or purchase, any of the Bonds. The Issuer, Joint Lead Managers and the Trustee do not and nor do any of their respective directors, officers, employees or agents accept any liability whatsoever for any loss arising from this document or its contents or otherwise arising in connection with the offer or any person s investment in the Bonds. This document is for preliminary information purposes only and is not an offer to sell or the solicitation of any offer to purchase or subscribe for the Bonds and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. The information in this document is given in good faith and has been obtained from sources believed to be reliable and accurate at the date of preparation, but its accuracy, correctness and completeness cannot be guaranteed. All material information (including numerical data) in this document is derived from publicly available information, unless otherwise indicated. Except as otherwise indicated, all financial information is derived from Auckland Council s unaudited financial statements for the half-year ended 31 December A series notice dated 21 March 2016 (Series Notice) has been prepared in respect of the offer of the Bonds. The Series Notice is an important document and should be read carefully. Investors should not purchase the Bonds until they have read the Series Notice relating to the Bonds. Investors should consider the risks that are associated with an investment in the Bonds, particularly with regard to their personal circumstances (including financial and tax issues). Any internet site addresses provided in this document are for reference only and, except as expressly stated otherwise, the content of any such internet site is not incorporated by reference into, and does not form part of, this document. Selling restrictions The Bonds may only be offered to investors in New Zealand and to investors in the jurisdictions set out in the Series Notice. No action has been or will be taken by the Issuer which would permit an offer of Bonds, or possession or distribution of any offering material, in any country or jurisdiction where action for that purpose is required (other than New Zealand). Bonds may only be offered for sale or sold in New Zealand in conformity with all applicable laws and regulations in New Zealand and the jurisdictions set out in the Series Notice in conformity with all applicable laws and regulations and the selling restrictions set out in the Series Notice. No person may purchase, offer, sell, distribute or deliver Bonds, or have in their possession, publish, deliver or distribute to any person, any offering material or any documents in connection with the Bonds, in New Zealand and the jurisdictions set out in the Series Notice other than in compliance with all applicable laws and regulations and the selling restrictions set out in the Series Notice relating to those jurisdictions. By its subscription for or purchase of the Bonds, each holder agrees to indemnify the Issuer, the Joint Lead Managers, the Organising Participant, the Trustee, the security trustee under the Debenture and the Registrar and each of their respective directors, officers and employees for any loss, cost, claim, fine, damages, liability or expense sustained or incurred by any of them by reason of any breach of the selling restrictions referred to in the Series Notice. 2

3 Contents Contents Page Background and current issues 4 Interim financial result highlights 7 Debt market activity and funding approach 13 Retail bond transaction overview 22 Appendix and contact details 26 3

4 4 Background and current issues

5 Background Auckland region continues to grow rapidly Robust legislative and institutional framework Long-term credit rating AA by S&P and Aa2 by Moody s Broad powers to rate property owners Transparent and prudent financial management Balanced budget Debt used only to fund new assets Depreciation is cash funded used for renewals and debt reduction 5

6 Current issues Growing population Infrastructure demands Housing Unitary Plan Alternative financing sources being explored Collaboration with central government Housing, City Rail Link (CRL), infrastructure Local government election October

7 7 Interim financial results highlights

8 Interim results to 31 December 2015 Group revenues up by NZ$146 million (6%) For the period (NZ$m) Mainly due to increases in: 6 months to Dec 2015 general rates revenue and water and wastewater charges of NZ$62 million target transport levy of NZ$61 million 6 months to Dec 2014 consent and development contributions NZ$23 million 12 months to June 2015 Rates revenue* 1,565 1,456 1,458 Services and other revenues 1,075 1,038 2,100 Total revenue 2,640 2,494 3,558 *Note full year rates revenue recognition in half yearly accounts 8

9 Interim results to 31 December 2015 Group total expenditure up NZ$10 million (1%) For the period (NZ$m) 6 months to Dec months to Dec months to 30 June 2015 Total expenses 1,482 1,471 3,056 Finance costs Total 1,692 1,682 3,478 Depreciation and amortisation up NZ$24 million (partially offset by a reduction in other operating expenses of NZ$17 million) 9

10 Interim results to 31 December 2015 Solid operating surplus For the period (NZ$m) 6 months to Dec months to Dec months to June 2015 Operating surplus before gains and losses (Deficit)/Surplus after income tax (72) Increase in surplus after tax of NZ$242 million from last half year 10

11 Interim results as at 31 December 2015 Strong and growing balance sheet As at (NZ$m) 31 Dec Dec June 2015 Cash Total assets 43,084 41,200 42,167 Total borrowings 7,410 6,984 7,334 Equity 32,959 31,804 32,079 Total borrowings to total assets 17.2% 17.0% 17.4% 11

12 Interim results to 31 December 2015 Improved operating cash flow For the period (NZ$m) 6 months to Dec months to Dec months to June 2015 Operating cash flow Investing cash flow (632) (715) (1,445) Funding cash flow

13 13 Debt market activity and funding approach

14 Funding approach Diversity important across domestic, LGFA and offshore Spread of debt maturities Set monthly targets against BKBM Open to private placement opportunities 14

15 Term debt issuance 2015 (calendar year)* Total issuance of NZ$1.1 billion NZ$536 million refinancing and NZ$559 million new borrowing 4 new issues Domestic 86% and offshore 14% 7% 13% 23% Retail (NZ$250 million) Wholesale (NZ$125 million) 46% 11% LGFA (NZ$505 million) Crown Facility (NZ$77 million) Offshore NZ$138 million equivalent (A$125 million issue) *Excludes Ports of Auckland debt 15

16 Group debt portfolio as at 31 December offshore transactions - (A$, EUR, NOK and CHF) Weighted average term of 8 years Backed by NZ$800 million standby facility Funding via LGFA capped at 40% of their lending 16

17 Group long-term debt maturity profile Volume (NZ$m) Financial year (to 30 June) 17

18 Security and credit ratings Security Lenders have benefit of Debenture Trust Deed giving a charge over rates revenue and future rates income Rates rank ahead of all other claimants on property Ability to appoint Commissioner and to levy special rate Credit ratings Standard and Poor s: AA (Stable Outlook) Moody s: Aa2 (Stable Outlook) Both ratings affirmed in late

19 What underpins the strong credit rating and potential risks? Extremely predictable legislative and governance framework Strong and diversified economy Prudent financial management Extensive capital expenditure programme Prudential borrowing limits Policy limit Actual as at 30 June 2015 Net debt to total revenue <275% 192% Net interest to total revenue <15% 12% Net interest to total rates <25% 21% Liquidity (6 months) >100% 185% Debt burden noted as a risk 19

20 Group forecast borrowing 1,600 1,200 Volume (NZ$m) Financial year (to 30 June) New debt Refinancing 20

21 Group forecast debt level 14,000 12,000 10,000 Volume (NZ$m) 8,000 6,000 4,000 2, Financial year ( to 30 June) LTP LTP

22 Retail bond transaction overview 22

23 Summary of terms and conditions Issuer: Auckland Council Type and description of bonds: Issuer ratings: Expected issue ratings: Use of proceeds: Fixed rate bonds and secured, unsubordinated, debt obligations of Council Aa2 (stable) / AA (stable)(moodys / S&P) Aa2 / AA (Moodys / S&P) For general purposes of Council Security: Issue amount: Issue price: Minimum subscription amount and minimum principal amount: Joint lead managers: The Bonds are secured by a charge created by the debenture trust deed over all rates from time to time set or assessed by Council and all rates revenue of Council and certain proceeds of such assets, being proceeds which constitute accounts receivable, negotiable instruments or cash Up to NZ$150,000,000 with the ability to accept up to NZ$100,000,000 oversubscriptions at Council s discretion. NZ$1.00 per Bond NZ$5,000 and in multiples of NZ$1,000 thereafter ANZ and Westpac Banking Corporation (acting through its New Zealand branch) 23

24 Summary of terms and conditions (continued) Maturity date: Monday, 30 March 2020 Interest rate: Base rate: Indicative issue margin: Who may apply: Selling restrictions: The aggregate of the Base Rate plus the Margin on the Interest Rate Set Date The semi-annual mid-market rate for an interest rate swap for four years calculated by the Joint Lead Managers according to market convention with reference to the Reuters page ICAPKIWISWAP2, rounded to 3 decimal places, if necessary, with being rounded up To be advised The Bonds are offered to investors in New Zealand and investors in other jurisdictions where the Bonds may be lawfully offered The selling restrictions included in the series notice apply Repo-eligibility: Listing: NZDX 1 Application will be made to the RBNZ for the Bonds to be included as Eligible Securities for Domestic Market Operations 1 Application has been made to NZX for permission to quote the Bonds on the NZDX. 24

25 Timetable key transaction dates Roadshow: Monday, 21 March 2016 (Wellington & Auckland) Offer opening date: Monday, 21 March 2016 Offer closing date: Wednesday, 23 March 2016 (bids due by 2pm) Interest rate set date: Wednesday, 23 March 2016 Issue date: Wednesday, 30 March 2016 Expected date of initial quotation and trading on NZDX: Thursday, 31 March 2016 Interest payment dates: 30 March and 30 September in each year up to and including the Maturity Date First interest payment date: Friday, 30 September

26 Appendix and contact details 26

27 Statement of Financial Position As at 31 December 2015 NZ$ (million) Actual half year to 31 Dec 15 Actual half year to 31 Dec 14 Actual year to 30 June 15 Actual year to 30 June 14 Cash Property plant and equipment 39,154 37,325 38,897 36,906 Investments 1,470 1,312 1,450 1,303 Other assets 2,191 2,102 1,475 1,459 Total assets 43,084 41,200 42,167 39,874 Borrowings 7,410 6,984 7,334 6,341 Other liabilities 2,715 2,412 2,754 2,388 Total liabilities 10,125 9,396 10,088 8,729 Net assets 32,959 31,804 32,079 31,145 Total equity 32,959 31,804 32,079 31,145 27

28 Statement of Comprehensive Income For the six months ended 31 December 2015 NZ$ (million) Actual half year to 31 Dec 15 Actual half year to 31 Dec 14 Actual year to 30 June 15 Actual year to 30 June 14 Rates 1,565 1,456 1,458 1,395 Other revenue 1,075 1,038 2,100 1,888 Total revenue excluding other gains 2,640 2,494 3,558 3,283 Depreciation and amortisation Finance costs Other expenses 1,080 1,093 2,278 2,024 Total expenditure excluding other losses 1,692 1,682 3,478 3,133 Operating surplus/(deficit) before gains and losses Net gains/(losses) including income tax (68) (174) (152) 526 Surplus/(Deficit) after income tax (72) 676 Total other comprehensive revenue/(expenditure) ,010 1,641 Total comprehensive revenue ,317 28

29 Statement of Cash Flows For the six months ended 31 December 2015 NZ$ (million) Actual half year to 31 Dec 15 Actual half year to 31 Dec 14 Actual year to 30 June 15 Actual year to 30 June 14 Net cash from operating activities Purchase of P,P&E, investment property and intangible assets (644) (751) (1,490) (1,493) Other investing activities (47) Net cash from investing activities (632) (715) (1,445) (1,540) Proceeds from borrowings 952 1,149 2,797 1,724 Repayment of borrowings (830) (482) (1,943) (1,136) Repayment of finance lease principal (2) Net cash from financing activities Net increase/(decrease) in cash (73) (131) Opening cash and cash equivalents and bank overdraft Closing cash and cash equivalents and bank overdraft

30 Contact details Group Chief Financial Officer Suzanne Tindal Tel: sue.tindal@aucklandcouncil.govt.nz Treasurer John Bishop Tel: john.bishop@aucklandcouncil.govt.nz Funding Manager Andrew John Tel: andrew.john@aucklandcouncil.govt.nz 30