infratil limitedinfratil group – 2011/12 overview . strong momentum leading into 2012/13 . 3 ....

INFRATIL LIMITED

FULL YEAR RESULT YEAR ENDED 31 MARCH 2012 15 MAY 2012

• Strong 2nd half momentum has carried FY EBITDAF over $500m

• All core businesses have met or exceeded our expectations for FY12

• $172m of FY12 capital expenditure largely targeting future growth projects

• Strong capital position with duration added to debt profile and significant head room for future investment

• Final dividend of 5.00cps, up 18% on PY

• High level of confidence in FY13 Infratil group forecasts and future earnings

2

INFRATIL GROUP – 2011/12 OVERVIEW

Strong momentum leading into 2012/13

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Year Ended 31 March ($Millions) 2012 2011(1) Variance % Change

EBITDAF (continuing activities)(2) $520.2 $470.9 $49.3 10.5

Operating Earnings (continuing activities)(2) $199.3 $192.2 $7.1 3.7

Net Surplus after Tax, MI and Disc Ops $51.6 $64.5 ($12.9) (20.0)

Net Operating Cash Flow $196.4 $178.5 $17.9 10.0

Capital Expenditure/Investment $171.9 $475.3 ($303.4) (63.8)

(1) 2011 EBITDAF and operating earnings excludes fair value gain on acquisition of $60.7 million (2) Continuing operations in FY11 and FY12 exclude Infratil Airports Europe Limited which is held for sale at 31 March 2012

INFRATIL GROUP – FINANCIAL RESULTS

Financial highlights

4

Group Financial Performance ($Millions) FY March 2012 FY March 2011

Operating revenue $2,218.9 $2,040.2 EBITDAF (continuing activities) $520.2 $470.9 Net interest ($187.2) ($167.8) Depreciation & amortisation ($133.7) ($110.9) Operating Earnings $199.3 $192.2 FV gains on acquisition of equity interest - $60.7 Net gain (loss) on reval of financial derivatives $19.2 ($3.9) Net investment realisations/(impairments) $4.3 ($0.5) Tax(1) ($58.4) ($81.4) Discontinued operation(2) ($37.4) ($47.5) Net Surplus after Tax $127.0 $119.6 Minority interests ($75.4) ($55.1) Net Parent Surplus $51.6 $64.5

(1) Includes for 2011 $35m of non-cash tax charges related to removal of tax depreciation on long life buildings (2) Discontinued operation in FY11 and FY12 refers to Infratil Airports Europe Limited which is held for sale at 31 March 2012

INFRATIL GROUP – 2011/12 REPORTED EARNINGS

Consolidated P/L

EBITDAF(1) • $49.3m increase to $520.2m (+10.5% pcp) • Reflects revenue growth from generation investment in 2010 and

disciplined approach to margin and opex management • Strong performances from TPW, NZ Bus & Infratil Australia • Z Energy and WIAL have performed to expectations

NET EARNINGS • Group earnings of $127.0m, and earnings after minority interests of

$51.6m, up from $58.9m and $3.8m respectively (excluding prior period FV gain on acquisition of Z Energy)

• Improved operating margins partly offset by higher depreciation on PY asset revaluations and higher interest costs

OPERATING CASH FLOW • $196m for the year (+10% pcp) reflecting the improved margins and

working capital management

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FINAL DIVIDEND*

- final dividend of 5.0 cps fully imputed payable on 15 June 2012 to shareholders recorded as owners by the registry as at 1 June (last year 4.25 cps)

* The DRP will continue to operate for this dividend. The price of the DRP shares will be the weighted average price recorded on the NZX over 5th – 11th June inclusive. Shares will be issued 15th June

(1) EBITDAF from continuing operations excluding $60.7m fair value gain on acquisition recorded in 2011

INFRATIL GROUP – 2011/12 OVERVIEW

Earnings/cash flow ahead of expectations

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• TrustPower – EBITDAF increased 9% due to higher generation volumes and firmer wholesale prices

• IEA – full year contribution from increased generation. Improved retail gross margins mitigated 2010 gas benefit arising from gas field outage

• Wellington Airport – PAX growth of 1.1% driven by increase in international of 9.7%. Flat domestic PAX due to growth in Jetstar being offset by Virgin exit and impacts of CHCH earthquakes and ash cloud

• NZ Bus – EBITDAF improvement of +15%, reflecting revenue growth of 7.8% from higher passengers and yield, and strong focus on costs

• Z Energy – satisfactory full year performance in a difficult market of high crude oil prices and volatile currency. Z outperformed the market for both petrol and diesel sales in FY12

• IAE – discontinued operation following decision to market for sale

FY 30 March ($Millions) 2012 2011

TrustPower

$300.2

$274.4

Infratil Energy Australia $64.4 $55.0

Wellington Airport $76.3 $72.3

NZ Bus $46.0 $40.1

Other, eliminations, etc. ($19.0) ($26.0)

EBITDAF pre assoc $467.9 $415.8

Associates – Z Energy(1) $52.3 $55.1

EBITDAF – continuing $520.2 $470.9

EBITDAF – discontinued ($11.9) ($11.3)

Total EBITDAF $508.3 $459.6

(1) Z Energy 2011 comparative excludes FV gain on acquisition

INFRATIL GROUP – 2011/12 EBITDAF BREAKDOWN

Strong growth across all key subsidiaries

Adjusted Results ($Millions) FY March 2012

FY March 2011

Variance

% Change

Net Profit after Tax - reported $127.0 $119.6 $7.4 6.2%

- Fair value gain on acquisition of Z Energy - ($60.7)

- Net reval of derivatives & impairments/revaluations ($18.1) $3.2

- Z Energy equity earnings (adjust from HCA to CCS) ($10.6) ($16.4)

- Tax effect of changes and 2010 law changes ($2.1) $26.0

- Add back result from discontinued operations $37.4 $47.5

Net Profit after Tax – adjusted $133.6 $119.2 $14.4 12.1%

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• Income statement normalised for a) revaluation of all energy, interest rate and FX derivatives, b) Z Energy earnings converted to CCS, c) impairments/realisations, d) results from discontinued operations and e) non-recurring items – e.g. fair value gain on the acquisition of Z (2010) and the effect of tax changes in building depreciation and corporate tax rate (2010)

INFRATIL GROUP – 2011/12 ADJUSTED EARNINGS ANALYSIS

Adjusted earnings up 12.1%

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• Bank capacity retained with $750m of total facilities and ~$400m of head room at 31 March 2012

• Total group wholly owned debt (including PIIBs) of $1.2bn resulting in Infratil interest expense of $97m

• Gearing 40.8% (net dated debt / total net debt + equity capitalisation)

Comfortable gearing and strong support from senior

lenders

• Infratil $81m new 5yr bond (including $6m roll-overs of 2011 maturities) at 8% and $66m 6yrs (including $16m of 2011 rollovers) at 8.5%

• IFT May and November 2011 bond maturities repaid • Z Energy completed $150m 7yr bonds at 7.25% • IFT share buybacks of 18.7m shares at average price of $1.84

Active in bond market activity

across the group and share buybacks

• Infratil $54m export credit facility for NZ Bus acquisitions (executed April 2011 and December 2011)

• Bank facility renewals completed for Infratil, TrustPower, Wellington Airport, Z Energy and Lumo

New sources of capital introduced &

bank re-financing completed

INFRATIL GROUP – 2011/12 CAPITAL MANAGEMENT

Support from bank and debt markets

(1) Infratil and wholly-owned subs excludes TrustPower, WIAL, Perth Energy and Z Energy (2) Vendor finance used for Port Stanvac generation development funding

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• Total Infratil and wholly owned subsidiaries(1) borrowing facilities of $787m. Net drawn debt of $395m at 31 March, 2012 including RPS and utilised guarantees (excluding bonds)

• Senior borrowing facilities include senior debt, RPS and 9 year export credit facility • Maturity profile illustrates access to debt markets for stable long-term infrastructure assets • Infratil will continue to target debt maturities consistent with ownership of long-term assets

As at 31 March ($ Millions) 2013 2014 2015 2016 >4 yrs >10 yrs

Bonds $57 $85 - $153 $328 $236 Infratil bank facilities(1) $98 $181 $118 $78 $55 - Vendor finance(2) $17 $18 $1 - - -

100% Sub. bank facilities $80 $140 - - - -

INFRATIL WHOLLY OWNED GROUP – FACILITIES & MATURITY PROFILE

Long-term funding with flexibility

• TrustPower value change reflects NZX market price (i.e. passive portfolio per share valuation)

• Change in value of IEA due to currency revaluations, hedges and increased receivables, prepayments and inventory

• WIAL increase in value due to asset revaluation

• $210 million invested in Z Energy + share of net income and FV assessment (business valuation and multiple growth not recognised)

• NZ Bus investment in new buses - comparable acquisition multiples suggest significant value uplift from cost

• The value of Kent and Glasgow Prestwick airports and investment properties have been impaired by $26m from the 31 March 2011 independent valuations

• Other investments include Isite, Snapper and Property

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Investment / Assets(1)

($Millions) March 31

2012 Mar 31 2011

TrustPower

$1,154

$1,146

Infratil Energy Australia $477 $442 Wellington Airport $326 $297 Z Energy $331 $312 Infratil Airports Europe $70 $101 NZ Bus $246 $208 Other $65 $57 Total $2,669 $2,563

(1) Values exclude 100% subsidiaries’ cash balances and deferred tax where CGT does not apply

INFRATIL GROUP – NET ASSET VALUATIONS

NAV growth reflects ongoing investment

• EBITDAF increased 9% over prior period – Higher NZ generation and firmer wholesale

prices – Higher revenue from Snowtown I

• Electricity customer numbers decreased to 209k from 221k at 31 March – reduced acquisition activity in final quarter due to replacement of core IT systems

• Good progress on pipeline of material investment options – 2nd stage 270MW Snowtown Wind Farm in SA – Further 970MW of wind development options

secured in VIC & NSW – future irrigation options (Canterbury primary

focus) • Firm wholesale prices and reasonable storage

position suggest positive FY13 outlook for TPW

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NZ ENERGY – TRUSTPOWER

Consistent earnings with growing options

• National “What’s My Number?” campaign is driving customer churn

• Retaining high value customer segments

• 2012 focus on service and product excellence post billing system upgrade

• Product allocation to highest value markets

• TPW rated highest for service and community commitment in EA survey

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Credible retail performance versus market

0%

5%

10%

15%

20%

25%

30%

35%

Apr-0

9Ju

n-09

Aug-

09Oc

t-09

Dec-0

9Fe

b-10

Apr-1

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Aug-

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t-10

Dec-1

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b-11

Apr-1

1Ju

n-11

Aug-

11Oc

t-11

Dec-1

1Fe

b-12

TrustPower Losses vs Market

TPW Losses Market Switches

• Scale: 270 MW • Turbine Supply: Siemens 3MW turbines under

EPC Contract • PPA: 15 Year Term with Origin

Energy • Transmission: TrustPower will own

transmission to grid connection.

• Ownership: Wind Farm divided into two separately metered wind farms

• North: 144MW (TPW to own) • South: 126MW (TPW to sell but provide

management services) • Financial Close: Target 2nd quarter 2012/13

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Snowtown II – PPA milestone achieved

• NZ hydro and wind – near term over-supply headwind to

investment – incremental investment in existing hydro

assets show benefits – strong NZ$ benefits good wind projects – Arnold hydro scheme on hold – for now

• Australian wind – 20% by 2020 renewable energy target

largely met by wind – PPA’s mitigate risk – co-investor model enables large scale,

better value projects and spreads risk – newly acquired options strengthen pipeline

in NSW and Victoria

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TPW retains significant NPV options

0200400600800

1,0001,2001,400

Existing Assets Consented Identified - not yet consented

MW

Generation Development Pipeline - New Zealand

Hydro Wind Diesel

630

529140

0200400600800

1,0001,2001,4001,6001,800

Existing Assets Consented Identified - not yet consented

MW

Generation Development Pipeline - Australia

100270

1,220

• NZ hydro storage remains below average for this time of year – TPW’s hydro storage lakes are

currently close to average – current wholesale prices are firm

• Squeeze on retail margins make channel segmentation and cost control more important

• Clear programme of value add generation investment in NZ

• Focusing our development expertise on the Australian wind programme which should provide near term upside

• Mixed ownership model will improve whole of industry capital allocation

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Well positioned for 2012/13 and beyond

• Current cost EBITDAF +10.0% to $172m despite slower economic growth and increased price-based competition – Z sales volumes flat versus -1% for industry

• Reported earnings impacted negatively by NZ Refining and effect of historic cost accounting – Associate earnings -60% (or $6m) – HCA adjustment -52% (or $32m)

• Expect to see competitive gains during 2012/13 given recent significant investment in brand, reformatting of stores and portfolio management – ~$35m of net incremental EBITDA projected

given current in-flight strategic initiatives • Z leading industry discussion on sustainable

investment and margins, including; capital recovery charge, national storage and distribution capability, service standards and reliability of supply

NZ FUEL DISTRIBUTION & MARKETING – Z ENERGY

Z Energy - Leadership in downstream oil

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-4

-2

0

2

4

6

8

10

12

1Q 2009 3Q 2009 1Q 2010 3Q 2010 1Q 2011 3Q 2011 1Q 2012

NZRC Z Singapore Marker

Gross Refinery Margin (US$/bbl) Industry Volumes (m litres)

• Global margin deterioration in 1Q 2012 • No clear trend for the future with a short term

bearish outlook • Data sourced from NZRC and IEA

• Crude prices range bound USD$100-125/bbl • Retail sales remain soft post recession • Commercial sales tracking GDP growth • Data sourced from LAPT returns

100

200

300

400

500

600

700

800

1Q 2009 3Q 2009 1Q 2010 3Q 2010 1Q 2011 3Q 2011 1Q 2012

Premium Regular Diesel Jet


Trading conditions sluggish

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• Petrol and diesel sales represent about 70% of Z’s total volumes

• For FY12, YoY sales for the industry are –3% for petrol and +2% for diesel

• Petrol volumes are lowest since 2004 • All volume data indexed back to Jan

2010 and sourced from LAPT returns 90

92

94

96

98

100

102

104

106

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12

Z Industry (excl. Z)

90

95

100

105

110

115

120

125

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12

Z Industry (excl. Z)

Petrol Volumes - all channels

Diesel Volumes - all channels

2030405060708090

100110

1Q 2009 3Q 4009 1Q2010 3Q2010 1Q 2011 3Q 2011 1Q 2012

Fuel Only Shop Only Fuel & Shop

Average Daily Customer Count (000’s)


Growing share in a challenging market

18

-

200

400

600

800

1,000

1,200

1,400

2005-2009average

FY 2011 1H FY2012 2H FY2012

refinery marketing

Total Volumes for all Products (ml per half year)

Gross Margins excluding Store ($m per half year)

0

5

10

15

20

25

0

50

100

150

200

2005-09average

FY2011 1H FY2012 2H FY2012

marketingOther supplyGRM less processing fee & coastal distributionFuels cpl (RHS)MED importer margin - petrol cpl (RHS)MED importer margin - diesel cpl (RHS)


Z volumes/margins are relatively stable

19

• Significant deterioration in refinery margins in 4Q plus unplanned shutdowns in 2H reduced net GRM by $19m YoY

• Retail sales volumes and margins affected by increased competitor activity in 4Q • $12m of capex carried forward into FY13 as some projects are not yet completed, e.g. brand rollout

Key Variables Full Year Actual Half Year Forecast

Gross refinery margin (USD/bbl) $6.70 $7.50

RNZ processing volume (ml) 1,930 1,970

Sales volume (ml) 2,647 2,600

Operating costs $250m $250-265m

Operating EBITDAF (CC) $172m $170-190m

Capex $74m $85-90m


EBITDAF reflected a tough 4th quarter

20

$0

$5

$10

$15

$20

$25

$30

$35

$40

FY13 FY14 FY15Retail Commercial S&D

INITIATIVE ($m) - Product procurement - Scheduling optimisation

- Diesel portfolio management - General Aviation network - Marine market

- Brand change - Store refits - Car washes


Strong pipeline of incremental EBITDA

21

• Refinery margins assume a recovery beyond 1Q • Volume loss from competitor activity offset by strategic projects and new sites or rebuilds • Full capital recovery charge benefits not included in these estimates • Capex includes a carry forward from FY12 of $12m and the balance represents the expected commitment irrespective

of timing of spend due to project pace • $50m of terminal capex is not included in the forecast and depends on market conditions

Key Variables FY 2013 FY 2012 FY 2011

Average crude price (USD/bbl) $120 $109 $85

Average crude price (NZD/bbl) $156 $137 $115

Gross refinery margin (USD/bbl) $7.00 $6.70 $7.53

RNZ processing volume (ml) 1,880 1,930 1,901

Sales Volume (ml) 2,600 2,647 2,654

Operating costs $260 - 270m $250m $244m

Operating EBITDAF (CC) $185 - 200m $172m $157m

Capex $70 - 90m $74m $29m


Z Energy outlook remains very positive

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• Strong 12 month growth despite intense competition across all States – revenue growth of A$82.0m (+12.0%) – customer growth in NEM of 8% to 442,000 -

annualised growth rate of 13% over 2nd half – strong market entry into NSW and continued net

growth in VIC, QLD, SA and WA • EBITDAF A$49.8m (+17%) – Lumo and Perth Energy

– improved contribution from Perth Energy – improved net margins in electricity – higher gas supply costs (versus FY11) – flattening of electricity demand due to energy

efficiency products and mild summer • Well positioned hedge book • Increased investment in back office capability and

systems • Generation plant revaluations to A$277m

AUSTRALIAN ENERGY – LUMO AND PERTH ENERGY

Second year of strong earnings growth

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• Sales and operations – Development of multiple channels to market – Improved retention and win-back capability

• Strong momentum into 2012/13 – Lumo is developing its brand, customer

relationships and performance to reduce churn and target preferred customer groups

– expanded channels to market through connections business, partnering and direct online channels with target growth rate consistent with the last 6 months

– continued strong focus on wholesale risk management and well positioned to improve gas margins due to balanced and optimised gas portfolio

• 2012/13 EBITDAF outlook A$60m- A$70m (including Perth Energy)

AUSTRALIAN ENERGY – LUMO AND PERTH ENERGY

Building a sustainable business

24

• EBITDAF +5.7% to $76.3m • Commercial revenue +9.7% due to strong growth in

vehicle and duty free revenue • CAPEX - $22m invested during the year including

completion of new hangar, extension of main terminal car park and new baggage handling system. Future CAPEX focused on main terminal and additional car park enhancements

• Pricing and regulation – new schedule of aeronautical prices have been set for the next 5 years. Commerce Commission review of the effectiveness of the new information disclosure regime is set to commence during FY13

• Aeronautical revenue +7.2% – strong international growth +9.7% primarily due to

Air NZ/Virgin alliance – flat domestic PAX due to Jetstar growth being

offset by Virgin exit and impact of Christchurch and ash clouds

NZ AIRPORTS – WELLINGTON AIRPORT

GDP+ growth from a core asset

25

• EBITDAF +14.7% to $46.0m – strong annual patronage growth in AKL

(+6.3%) and WLG (+0.4%) – tightly managed direct labour and maintenance

costs and reduced overheads • Major investment in fleet, facilities and people

– 236 new Alexander Dennis buses ordered and 114 delivered by March 2012

– new state of the art depot in Onehunga – pathway to safer driving programme

• Partnerships – Public Transport Operating Model (“PTOM”)

announced, signaling a commercial partnership approach to delivery of PT services

– partnership with Auckland Transport for the successful launch of the new Flagship bus services and HOP smartcard

– substantial contribution to the PT success associated with the RWC2011

NZ PUBLIC TRANSPORT – NZ BUS

Improved capability and outlook

26

• TrustPower – generation enhancement, and continued investment in customer care and billing systems (FY13 does not include Snowtown II development)

• Australian Energy – organic customer growth and system developments /enhancements

• Wellington Airport – carpark expansion, new private aircraft hangar, and further apron developments

• Public Transport – NZ Bus fleet upgrade to meet future growth and regulatory requirements and Snapper

• Z Energy – rebranding and reformatting of retail service stations

27

Capex ($Millions)

FY March 2012

Outlook Mar 2013

TrustPower $49 $40-$50

Australian Energy $22 $40-$45

Wellington Airport $22 $20-$30

Public Transport $64 $50-$55

Euro Airports & Other $15 $5-$10

SUB TOTAL $172 $155-190

Z Energy(1) $74 $85-$90

Total $246 $240 - $280

(1) 100% of Z Energy CAPEX

INFRATIL GROUP – CAPITAL EXPENDITURE

Strong ongoing investment programme

• 2013 EBITDAF range $530m - $560m - major assumptions: - Consistent gains across all businesses reflecting expected returns on recent CAPEX

investment and ongoing improvement in operating margins delivered in 2011/12 - Improved overall contribution from Infratil Energy Australia due to balanced gas position and

retail growth - Normalised for Z Energy CCS adjustment

• Operating cash flow reflects EBITDAF growth and lower working capital requirements, particularly in IEA where gas prepayments and banked gas inventory will be utilised

28

FY 31 March ($Millions) FY 2012 Actual

FY 2013 Outlook

EBITDAF – normalised (continuing operations) $510 $530 - $560

Net Interest ($187) ($190 - $200)

Operating Cash Flow $196 $260 - $290

Depreciation and amortisation $134 ($145 - $155)

INFRATIL GROUP – OUTLOOK

Outlook reflects operating leverage

• Ensure all core businesses are delivering real growth in cash flow and earnings • Ensure capital structure and risk management systems can sustain inevitable

shocks and future volatility - lock-in LT debt and committed financing at attractive all-in costs

• Complete the sale of businesses or assets with limited growth potential – Marketing process underway for Glasgow Prestwick and Kent Airports and review of

ongoing investment in Perth Energy continues • Actively scan origination opportunities in targeted sectors • Address capital diversity by developing relationships with potential future domestic

and international co-investors • Look to reset or reinforce positions for the next 15 years of growth 29

INFRATIL GROUP – SUMMARY

Clear long-term agenda and focus

For more information: www.infratil.com

INFRATIL GROUP – APPENDIX

Z Energy Profit & Loss

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infratil limitedinfratil group – 2011/12 overview . strong momentum leading into 2012/13 . 3 ....

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