infratil overview 2011-03-08

8/7/2019 Infratil Overview 2011-03-08

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INFRATIL

OVERVIEWINVESTORDAYMARCH8,2011


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Infratil Investor Day 2011 - Agenda

Time Presenter Topic

9.00am MarkoBogoievski CEO Infratil Infratiloverviewandintroduction

9.45am Dr PhilipVerleger PKVerleger LLC Theglobaloilmarketandfutureoilprices

10.45am Break

11.00am MikeBennetts CEOGreenstoneEnergy

Current plansandthefutureoftheNZsfuel

andenergymarkets

12.30pm Lunch

1.15pm BruceHarker ChairTrustPower

andJohnCuly (Morrison&Co)

Long termoutlookfortheNZelectricity

marketandwhatitmeansforTrustPower

1.45pm VinceHawksworth CEOTrustPower

TrustPoweroptionsanddevelopment

opportunities

2.30pm LloydMorrison ChairMorrison&

CoandMarkoBogoievski Wrapupandsummary

3.00pm Dr PhilipVerleger PKVerleger LLC Crudeoilworkshop(breakoutsession)


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Objectives for the day

Principal objectives:

- Introduce the team

- Update the facts- Highlight the challenges and the opportunities

- Lay out the plan

- Get your perspective

Focus is on capital allocation, NZ energy markets and positioning ofGreenstone Energy and TrustPower:

- Australian energy focus day is scheduled for March 29 in Sydney

Emphasis on the long-term prospects and valuation considerations for

our businesses

Brief update on Christchurch


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Infratil focus and consistency are reaping rewards

Consistency and discipline will drive a re-rating

Strengthening cash flow and earnings

Increased proportion of portfolio with strong market positions in sectors

we believe are fundamentally attractive Improving value of internal development pipeline and reinvestment

options

Better access to capital following improved credit metrics and

significant program of capital raising and refinancing The Greenstone transaction is an example of the opportunities

available for an investor with operating experience and access tocapital


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Current context pressure building for a re-rating

Emphasis on improving free cashflow and earnings continues

Core holdings performing very welland current outlook is significantlyahead of our base 2010-11 plantargets

Value of internal developmentpipeline continues to grow

Less competition for complexinfrastructure assets requiring activemanagement

Most investors accept that IFT istrading at a significant discount tounderlying valuation


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Investors seeking confirmation and follow through

Steady growth in free cash flow and earnings is always the best catalyst

The Greenstone transaction has forced a partial re-examination of IFTfollowing a busy 2008-2010

- good execution in a number of financial and operational initiatives

- most investors now looking for follow through and confirmation of recentperformance

While IFT returns have been good over 2009 and 2010, the share pricehas basically tracked improvements in underlying NTA

- Discount to NTA remains wide

Good long-term sector allocation and growth in valuations needs to besupported by active management and delivery of tangible short-termresults

- Transparency over operational milestones and valuation metrics

- Periodic realisations


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2010/11 delivery - better performance with less risk

Greenstone Energy

- Market share gains and improving margins inrapidly changing market

- Opportunities to reinvest

- Capex consistent with bid case

Lumo Energy (formerly Infratil Energy Australia)

- Material earnings contribution

- NSW privatisation a positive outcome re futurewholesale liquidity, and strong industry valuationmarkers

- Proven value of peaking facilities in increasinglyvolatile market with weak average price outlook

Limited refinancing risk- Successful GEL, TPW and IFT parent bond offers

- Successful rollover of senior debt (with good termand pricing)

- Significantly improved financial flexibility


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Investors are adept at finding new concerns

Immediate outlook for TPW

- recent TPW performance and spike incustomer churn following SOE asset swaps

has raised some question over the mediumterm outlook

Privatisation of SOEs

- SOE privatizations although good for long

term market discipline may create someliquidity and trading issues during theexecution phase

Sustainability of GEL earnings in the longterm

- How long can margin and volume growth besustained?


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So, what will drive the re-rating?

TotalShareholder

Returns

Dividends

ClosingtheNTADiscount

Buybacks

GrowingUnderlyingNTA


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Weve been working on the qualitative factors

TotalShareholder

Returns

Dividends


Buybacks


- Discipline

- Consistencyofthe

investmentmodel

- Accesstocapital- Originationoutlook


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But focus is always on growing underlying NTA

TotalShareholder

Returns

Dividends


Buybacks


- Sectorallocation

- Performance

management

- Sequenceandtiming

ofprojects

- M&A


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High conviction around our major assumptions ...

FundamentalAssumptionorTrend

Related

Asset

NetAsset

Exposure

Confidence

Levels

Risingelectricityprice pathinNZ TPW $1.1bn High

Inherent NPVinexclusivedevelopment

optionsandinternalcapex

TPW, Lumo,

PE, GEL $2.0bn High

Future valueofdualfuelcustomersinconcentratedAustralianenergymarket Lumo $0.3bn High

FutureinternationalPAXCAGR >GDP WIAL $0.4bn High

ImprovingnetmarginsperlitreinNZ

downstreamoilindustry

GEL $0.4bn Med High

Valueofpeakingandstorageassetsin capacity

constrainedenergymarkets TPW, Lumo $1.6bn Med


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Satisfaction with our secondary assumptions

FundamentalAssumptionorTrend

Related

Asset

NetAsset

Exposure

Confidence

Levels

Developmentofcarbonpricingin Australiaand

NewZealand TPW, Lumo,PE $1.6bn Med

Further developmentofLCCairlinemodelin

AustralasiaandAsia WIAL $0.4bn Med

PublictransportPAXgrowth reflectedin

profitablelongtermcontracts NZBus $0.2bn Med

Crudeoilprices upwardbias IFT $0.2bn Low Med

NZDexchangerates(variesbycurrency) IFT variable Low Med


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And sector choices are being actively managed

Activity RecentExamples FutureFocus(example)

Driveshorttermperformance

Greenstone, LumoEnergy,NZBus

Greenstone, Lumo,TPW

Delivergreenfield

constructionprojects

Kwinana,PortStanvac,

Mahinerangi

SnowtownII,Arnoldhydro,

NSWgasfiredpowerstation

Optimise commercial

modelsPublictransportoperating

modelinNZPricingroundatWIAL,Oil

industryJVstructures

Maximise access to capital NZretailbondmarket Internationalequityinvestors

Sharebuybacks TPWbuybackprogram IFTparent


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2011 Outlook - upside bias to EBITDAF earnings

EBITDAF range $415 million to $435million major assumptions:

- approx $30 million equity earnings contribution from

50% of Greenstone Energy- TrustPower EBITDAF in line with FY 2010

- WIAL and NZ Bus hold first half gains

- IEA $40-$50m FY EBITDAF reflecting significantseasonality in second half of year

Upside confidence to EBITDAF outlookpartially balanced by recent developments

- GEL gross margins temporarily impacted by recentspike in crude oil prices and weakness in NZD

- Direct cost of Christchurch earthquake

Operating cash flow reflects EBITDAF,interest, tax and anticipated movements inworking capital

HY 30Sept2010

($Millions) H12011

FY2011

Guidance

EBITDAF $258 $415$435

NetInterest ($80) ($160$170)

OperatingCashFlow $94 $160$180

Investment/Capex ($301) ($450$500)


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Confidence in the long-term outlook

Favourable sector trends and capital investment program will driveconsolidated EBITDAF towards $500 million

- exposure to rising energy prices and consumption, changing NZ fuels industry, air

travel and urban mobility

Next phase of investment cycle will suit Infratil

- large pools of infrastructure capital targeting passive utility returns (not growthinfrastructure)

- few active managers of complex assets- many quality assets currently in work-out or PE funds

- constraints on government spending will mean increased private provision ofinfrastructure

Infratils priorities: energy and transport sectors in Australia and New

Zealand- control or influential stakes in unlisted assets in sectors we understand well

- partnerships and co-investment model especially for larger value opportunities

- other sectors and investment ideas continue to be actively monitored


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infratil overview 2011-03-08

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