2015 Annual Report Highlights

Chairman &
Chief Executive's Report

By any measure over the year ended 31 March 2015 Infratil was successful in creating value for its shareholders and in positioning to continue to do so.

  • The net parent surplus was $384 million compared with $199 million in the prior year. 
  • Consolidated EBITDAF of continuing operations was $453 million up from $437 million. 
  • Free cash flows from operations amounted to $236 million from $407 million (the prior year was boosted by $145 million of one-offs).
  • $700 million was raised through divestments.
  • $289 million of internal investment was undertaken and a 50% stake in RetireAustralia was acquired for $219 million, expanding Infratil’s interest in this sector at a good entry price.
Chairman & <br />
Chief Executive's Report

The success of the last year has created its own challenges. Normally Infratil relies on debt to provide approximately 50% of its capital. As at 31 March 2015 debt was providing closer to 30% of funding leaving substantial capacity for capital management or investment.

We believe that our shareholders would rather have the capital deployed within Infratil, but we are conscious that if new investments are not executed in a reasonable timeframe then some capital should be returned. 

Illustrating this balanced and incremental approach, for the year under review $120 million has been returned to shareholders via special dividends, while the group invested $508 million.

Although we are confident about future investments, completion risks are significant and timing is intrinsically uncertain. To mitigate these uncertainties, management takes all practical steps to set out the Company’s approach and criteria; which are outlined later in this Report and are described in detail in the presentations from Infratil’s 31 March 2015 Investor Day.​

The overriding theme of Infratil’s allocation of capital is discipline. Practically that means approaching all new investments with the expectation that the asset or business will be part of Infratil in 2025 and beyond; it’s a wonderful incentive to think deeply about all the “what could go wrong” possibilities.

Our message to shareholders is that patience and long-term focus will enable Infratil to invest to grow earnings and value, as illustrated by the last two years when approximately $750 million has been invested in transport and renewable energy and $400 million in retirement facilities.

However, it is natural for shareholders to harbour concerns about overpayment because we are in an environment distorted by cheap money and some asset values clearly reflect very aggressive rate of return expectations with little room for error. The strongest evidence to allay this is the Company’s commitment to maintaining the approach which has delivered an 18.4% per annum after tax compound return to shareholders over the last 21 years; which we understand makes Infratil the best performed share on the NZSE/NZX over that period.

We can also point to individual investments as case studies of discipline and patience; such as the 14 year project that was Infratil Energy Australia (it is fully explained in the 30 September 2014 Interim Report). Over the last five years this approach has seen $2,285 million invested and $1,138 million released by divestment.

Of the $2,285 million invested, over 70% was internal: 

  • terminal facilities at Wellington Airport
  • 400 new buses for Auckland and Wellington
  • Trustpower’s wind farms and so on. 

But even internal opportunities to invest should not however be regarded as “captive” or fait accompli.

Trustpower was able to undertake its Snowtown wind farm developments because of exceptional delivery of its core functions. 

Similarly Wellington Airport’s projects to expand its terminal and passenger services rest on a track record of safe and efficient operation and its management’s successes in working with airlines to deliver expanded capacity and hence passenger throughput.

While the last financial year saw significant investment and divestment, underpinning everything are well-managed businesses.


Good relations in the communities within which we operate is a hallmark of the Infratil approach. 

Most of the facilities and services Infratil provides are crucial to its users and its communities:

  • energy to homes and businesses
  • retirement accommodation and care to the elderly
  • a key connection between central New Zealand and the rest of the world
  • transport fuels
  • public transport in Auckland and Wellington
  • social infrastructure.

Our commitment to our customers and communities is not just that we will seek to provide efficient and reliable facilities at a reasonable cost, it is also that we should anticipate what those customers and communities want. We aim to provide the airport Wellingtonians want, the bus service that Aucklanders want and so on.

The trust generated by good community relations is illustrated by the recent cost-sharing joint venture between Wellington City Council and Wellington Airport to obtain consents for the extension of the Airport’s runway.

Regulation & Government

In the regulatory sphere the main event of the period was the reduced threat of a major restructuring of the New Zealand electricity sector following the result of the last General Election. In contrast, the protracted political process of the Australian Government over its renewable generation targets has delayed Trustpower’s plans to expand its wind power capacity in that country.

An intriguing area of potential is highlighted by the steps being taken by Christchurch City Council to progress the sale of shares in its infrastructure businesses. Across New Zealand councils are facing pressure to invest in better facilities and some are at least contemplating recycling capital (selling one asset to buy another) to augment the usual approach of raising debt and rates.


For Financial Year 2015, Infratil paid a 4.5 cents per share interim dividend in December 2014 and an 8 cents per share final dividend in June 2015 (3.75 cps and 7.0 cps respectively last year). The 16% increase is consistent with Infratil’s objective of providing a steadily rising dividend.

In addition to the ordinary dividends Infratil paid a special dividend of 15 cents per share in December 2014 and a further 6.4 cents per share in June 2015. The special dividends (which total $120 million) reflect Infratil’s low gearing, the availability of imputation credits and comfort with access to capital for immediate investment plans.

Financial Year 2016

EBITDAF is forecast to increase by between 7% and 14% due mainly to past investment.

  • The forecast includes the full year contribution from Trustpower’s Australian generation which was commissioned or acquired last year and Trustpower’s New Zealand retailing base is also expected to continue to grow.
  • RetireAustralia will be making a full year contribution.
  • Wellington Airport’s earnings are expected to rise due to increased traffic and aeronautical charges.
  • Most of Infratil’s other businesses are also expected to increase their contributions.


Actual FY2015

Guidance FY2016




Operating cash flows



* Both EBITDAF sums include Z Energy’s contribution on a replacement cost rather than historic cost basis. To provide consistency, the FY2015 value excludes $8 million of costs associated with the purchase of the 50% interest in RetireAustralia.

Over the last two years the level of divestments and investment has been above average and this is likely to be the case for some time yet.

Infratil has substantial capital resources to deploy, many asset values are high, and interesting opportunities are on the horizon. While we wait to see what unfolds, the priority will be to continue to have our businesses provide good service to their communities to lay the foundation for profitable growth.


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Full Annual Report 2015
Full Annual Report 2015
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