2017 Annual Report Highlights

The infrastructure bond year in review

 On 15 June 2016 Infratil repaid a maturing bond and issued two new bonds:

  • Repayment of $100,000,000 of bonds paying an 8.5% coupon that were issued in 2011.

  • The new bonds issued were $93,833,000 with a 4.9% coupon maturing 15 June 2021, and $56,117,000 with a 5.5% coupon maturing 15 June 2024.

Infratil also established an explicit $30 million bond buy back capability, the first time a New Zealand company has done this. The secondary market for bonds has undergone changes in the period since the GFC which have raised doubts about liquidity and pricing. Reflecting its commitment to its bondholders, Infratil has established this buy back capability; recognising that concerns may well turn out to be unfounded.

Infratil did buy back $1,489,000 of its Infratil Infrastructure Perpetual Bonds (PiiBs) over the year. These bonds become illiquid from time to time and when that occurs their secondary market price can fall to levels that are a poor reflection of value. Their valuation consideration are described at length on the Infratil website

Notwithstanding concerns about the bond secondary market, trading of Infratil’s fixed-maturity bonds appears to have been effective at providing fair value for those who wish to liquidate their holdings. The start and end of year yields of three of the bonds is set out in the table, along with their yield-spread relative to government bonds.

Maturity

Yield 31 March 2017

Relative to Govt Bonds

Yield 31 March 2016

Relative to Govt Bonds

November 2018

4.70% p.a.

+2.50% p.a.

4.40% p.a.

+2.40% p.a.

February 2020

4.90% p.a.

+2.40% p.a.

4.70% p.a.

+2.50% p.a.

June 2022

5.40% p.a.

+2.60%p.a.

5.20% p.a.

+2.60% p.a.

 

Continuous Disclosure Of Information

As Infratil has shares and bonds listed on the NZX it is required to continuously disclose information which could be relevant to investors. This includes: 

  • Annual and interim reports which are released each May and November. They provide financial statements, a summary of key developments and activities, and guidance as to expectations of short term earnings and investments.

  • Update newsletters which give in-depth coverage of topics relevant to Infratil’s businesses. Recently that has included Wellington Airport’s plans to provide direct air links to the northern hemisphere, the economics of electric buses, and the investment plans of Canberra Data Centres, Tilt Renewables, and Longroad Energy.

  • Occasional announcements on matters which could be material to the value of Infratil’s shares and bonds, such as changes in personnel, transactions, financial results, payments to share and bond holders, and so on.

  • Infratil hosts an annual investor day where management present on investment market conditions, strategies and specific business plans. The presentations are available on Infratil’s website

 

Infratil's Capital Structure

Infratil’s capital structure means lender rights are tiered. A lender to, say, Trustpower will have direct recourse to the assets of Trustpower and no recourse to the assets of Infratil. A lender to Infratil will have recourse to Infratil’s assets including its shareholding in Trustpower, but no direct recourse to the assets of Trustpower.

There is also a distinction between the rights of the banks that lend to the Infratil 100% Group and the rights of Infratil’s bondholders. The banks have preferred recourse to Infratil’s shareholdings (in companies such as Trustpower) and other assets of members of the Infratil 100% Group that provide a guarantee to the banks.

The upshot is that Infratil’s bondholders have rights to all of Infratil’s assets and are not limited to the assets of just one subsidiary, but their recourse to assets of Infratil’s subsidiaries is only after the direct recourse of other lenders and creditors.

As at 31 March 2017, the Infratil group debt comprised:

  • $1,636.8 million of net debt of subsidiaries in which Infratil had less than a 100% interest. This included $47.4 million of Perth Energy’s borrowing which was guaranteed by Infratil. None of the other debt of these subsidiaries is guaranteed by Infratil.

  • $1,005.5 million of Infratil Infrastructure Bonds.

  • The wholly-owned group also had $92.2 million of net bank deposits (which increased on 11 April 2017 by $237.9 million when the proceeds from selling the stake in Metlifecare were received).

These amounts do not include the borrowings of the companies in which Infratil owns less than 50%. Infratil does not guarantee any of the debt or other liabilities of these companies which include Canberra Data Centres, RetireAustralia, ANU Student Accommodation and Longroad Energy. 

Annual Report 2017
Annual Report 2017
Download PDF (7.6 MB)