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Infratil Monthly Operational Report
29 April 2010
On 1 April Infratil and its partner
the New Zealand Superannuation Fund settled the acquisition of Shell's
New Zealand fuels processing and distribution business. Details
of this investment are available in this
Update. The transaction was welcomed by both the New Zealand
investment community and future customers.
The Infratil board has decided to establish a dividend reinvestment
plan which will be in effect for the payment of Infratil's next
dividend. The Plan will give shareholders the option of receiving
some or all of their dividends as shares. Any shareholder who does
not apply to be included in the Plan will continue to receive their
normal cash dividend.
A document describing the Plan and an application form will be
mailed to shareholders over the next month.
INFINZ (Institute of Financial Professionals NZ) announced that
Infratil secured "Corporate Communicator of the year"
at its recent annual awards. The nature of Infratil's activities
in very long-term investments in core infrastructure sectors makes
it imperative that good information is provided to both capital
providers and user communities.
Fall-out from Government's initiatives
to restructure the three state owned generator/retailers appears
to be driving a marked increase in competition for residential customers,
especially in the four main urban centres. Almost 35,000 customers
changed supplier in March, a normal level of monthly turnover is
about 15,000. The impact on TrustPower's customer base has been
minor during this period of extreme competition.
Rating agency S&P noted that the reforms impact on the credit
quality of the SOEs are "tough to judge" due to "still
limited transparency". While the restructuring of the SOEs
is likely to continue to provide short term retail-market uncertainty,
the key issue for the industry will be the construction of new generation
capacity to meet demand. In March the Electricity Commission pointed
out that "A significant amount of new generation investment
will be needed to maintain security margins from 2012 onwards. Given
the lead time for new generation, some investment will need to be
committed within the next year; and despite the need for new generation,
investment has slowed in the past year. Over 600 MW of new generation
that was rated as medium or higher probability for 2010 or 2011
in the 2008 assessment, has since been deferred until at least 2013,
The Commission indicated that over the four years, 2010 to 2013
a net addition of only about 100MW of capacity is now forecast and
security margins will correspondingly tighten. The Commission noted
this could mean: "More difficulty in meeting winter peak demand;
more difficulty in meeting peak demand at other times of the year
owing to factors such as increasing summer demand, increasing reliance
on wind generation, and generation and/or transmission outages;
more occasions when instantaneous reserves cannot be maintained;
and a generally 'tighter' power system."
While wholesale prices remain subdued for 2010, higher prices are
now being contracted for 2012. Ultimately if wholesale prices don't
rise, investment in new generation will not occur.
TrustPower's decision on initiating construction of the Mahinerangi
wind farm is pending suitable economics. TrustPower holds consents
for 200 MW at this site but is likely to build in stages as demand,
the price of electricity and construction costs justify the investment.
At present TrustPower's Tararua wind farm is New Zealand's largest
with capacity of 161 MW and average annual output of 620 GWh.
Infratil Energy Australia
At 31 March IEA had 411,000 customers,
an increase of 24,000 over the year, following two years when customer
numbers increased approximately 100,000 per annum. The slower growth
reflected market conditions, especially in Queensland where regulatory
decisions meant forgoing customers to achieve a fair margin. The
slower growth was also a reflection of much closer scrutiny of prospective
new sign-ups and management of collections following recent credit-related
The current expectation is for customer acquisition and growth rates
to resume at stronger levels in FY 2011.
Electricity prices in Victoria and elsewhere have declined markedly
over the year, both in the spot and forward market out to 2012.
This will increase the margin available to retailers buying additional
electricity for new customers. The impact will be muted for existing
customers as retailers hedge their forward purchases of electricity
for 1-2 years which locks in margins (for better and worse). Reported
results will however reflect mark-to-market losses on these forward
contracts. These are not cash costs and retail margins are expected
to remain in line with those originally locked in. To look at this
from a different angle, if the mark-to-market losses were realised
and the forward book repurchased at today's lower levels the business
would expect the mark-to-market losses to be offset by the value
of increased retail margins.
The Victorian gas market continues to reflect widespread inflexibilities
in gas supply contracts - excess take or pay scheduled gas injections
have seen spot gas prices fall to very low levels over FY2010. IEA
has excess contracted gas compared to its retail gas sales and has
been a net seller to the gas spot market - at a higher level than
is optimal for the business. This resulted in an approximately $20
million annual cost, masking what would otherwise have been a good
financial result for the IEA group. IEA has made a lot of progress
in building a diversified more flexible gas forward book but this
may not reflect in trading results until the winter of 2012 when
the volume of exposure to the spot market is expected to become
more appropriate. In the interim, unless offset by increased sales,
IEA forecasts continuing to be a net seller of excess gas to the
spot market and its results will have some elevated variability
over the next two years - this exposure could prove profitable or
costly as it did in FY2010.
Construction work continues on time and on budget at Port Stanvac
in SA and Kwinana in Perth with both power stations expected to
be commissioned in calendar 2010.
The Wellington region performance
in March was close to a monthly record. Over 2 million rides in
one month having only occurred three times, ever. The past surges in traffic
have occured when fuel prices have spiked. This year's
good demand performance occurred notwithstanding flat pump prices
and is likely to have reflected the on-going enhancement to the
region's Valley Flyer and GO Wellington services.
A key goal now will be to ensure capacity stays ahead of demand
so that increasing use does not slow services (through increased
boarding/alighting) or result in congestion.
The Northern region's strong performance over the month signals
encouraging patron support after last year's industrial action.
As always, regulation of the public transport sector continues to
evolve on several fronts. The clear guidance of the Minister in
favour of a consensus outcome is having a positive impact with the sector's
three key groups: operators and central and local government collaborating
In March, 78 NZ Bus drivers achieved the National Certificate of
Passenger Transport. This qualification has been developed to create
an industry benchmark for driver skills and NZ Bus has incorporated
it into its driver recruitment training programmes.
By 31 March 120,000 Snapper cards
were on issue, double the number of a year ago. About a third of
the wallets and purses in Wellington and the Hutt Valley (population
325,000) now hold a Snapper and daily use can exceed 86,000 transactions.
200 retailers have signed-up with all of the North Bus, Valley Flyer
and GO Wellington buses now equipped with Snapper readers and it
is also accepted by Wellington's East by West Ferries. 17 schools
incorporate Snapper in their student IDs and the Snapper Campus
Card integrates photo ID, building access and a transport pass.
For its public transport customers Snapper has delivered the ability
to load passes which will eventually remove the inconvenient cardboard
which occasionally goes through the wash. Snapper is also providing
transfers on Valley Flyer services so that a person going from one
bus to another as part of one journey gets a discounted ride fare
for the second and subsequent legs of the journey. Ultimately integrated-fares
will be a feature of all public transport.
Other benefits delivered over the year include "hot listing"
so that someone who has lost a registered Snapper card can cancel
it and transfer its cash and pass balance to a replacement card.
Self service kiosks are being introduced so that Snapper can be
topped up using EFTPOS without any fees. "Special event"
capability was trialed with the half price bus fares over last year's
Bledisloe Cup weekend and the special Snapper products provided
to participants in the Asia-Pacific Junior Diving Championship.
Recognising its achievements, Snapper is a finalist in the Cyber
Gold category in the 2010 Wellington Gold Awards.
Further initiatives to improve and expand Snapper's capabilities
and scale include:
Total Mobility. The scheme operated by Greater Wellington
Regional Council which will mean that the region's taxis accept
payment by Snapper.
The National Standard for Integrated Ticketing, which would
allow Snapper's proven Wellington services to operate in other regions
with other schemes.
Production of Snapper cards in New Zealand which will allow
them to carry more functions with the goal, amongst others, of having
banks producing debit and credit cards with Snapper included.
In April the NSW Government announced a A$1.2 billion (NZ$1.6 billion)
plan to introduce public transport ticketing and naturally raised
questions as to how Snapper can be developed and implemented at
minimal cost to tax or rate payers. There are two fundamental differences
to the approach being adopted in NSW to how Snapper was established.
In the first place Snapper has partnered with Korea Smart Card Corporation
and is able to piggyback the best smart card technology in the world,
it isn't building from scratch. Secondly, Snapper is an "open-platform".
This means that if it wants, for instance, Wellington's parking
meters to accept Snapper, it will work with the meter producer so
their machines can interface with Snapper. Under the "closed"
model being adopted in NSW it the system operator would have to
actually build their own parking meters, only their own bespoke
hardware will communicate with their card. Snapper management consider
the "closed" model to be both flawed and expensive.
|Total 12 months
Relative to the prior year the 12
months saw international passenger numbers rise 2.6% and domestic
numbers decline 3.3%. The domestic decline was mainly on regional
services which were off 7.2% against a fall of only 1.6% on domestic
In March, airline loadings were at 79% for both domestic and international
services (77% and 74% respectively a year ago). The good demand
appears to indicate room for capacity growth which is resulting
in new or expanded services.
flyDirect is to provide a daily Wanaka service and additional Jetstar
services are to be provided to Auckland. Air New Zealand's reconfigured
Tasman A320 aircraft will add around 5% capacity to the Wellington
international market later in the year.
The March international growth reflected a 16% increase on the Sydney
services (largely due to Pacific Blue's new services), with a small
increase in Melbourne traffic balancing a small decline on the Brisbane
route after a period of strong growth.
Wellington Airport's revamp of its food and beverage area is complete,
widening the choice and quality. The pay-by-use Wild at Heart Lounge
has added a barista station operated by Mojo. Improvements to the
retail area are continuing with the recent instalment of a Weta
display within Discover NZ, showcasing local product previously
exclusive to the Weta Cave in Miramar.
In March ratings agency Standard & Poor's released its score card
of the Australian and New Zealand airports. Wellington's rating was
reaffirmed. The Company's rating was not changed during the global
financial crisis or recession. To quote: Wellington International
Airport Ltd. (WIAL; BBB+/Stable/A-2) WIAL generated a 1% increase
in earnings in the six months to Sept. 30, 2009, reflecting higher
passenger services income; this was despite a 5% decline in passenger
numbers. The international terminal upgrade is on track for completion
in 2010. WIAL has minimal upcoming debt maturities, reflecting its
well-spread debt-maturity profile.
The Rocks Construction Update
The roof takes shape as Mainzeal's Swiss expert oversees the copper
cladding. While not obvious from the outside, the building has consumed
approximately 2,500m3 of concrete and 100 tonnes of structural steel
which was "trial assembled" in Tokomaru in the Manawatu before being
shipped to the site as no two pieces are the same length or with
same end details.
12 months to 31 March
12 months to 31 March
122,345 passengers used Glasgow Prestwick Airport in March, 18%
less than a year prior, in line with recent trends. The summer schedule
started on March 28th with good load factors and strong forward
Excellent television and press exposure was achieved for the Airport
hosted event to celebrate the 50th anniversary of Elvis Presley's
only visit to the UK. He touched down briefly at Prestwick on route
to the McGuire Air force base in New Jersey.
Freight volumes for March were 927 tonnes which is a 32% reduction
on the prior year however a slight increase (1.7%) on February's
||March Freight Tonnes
12 months to 31 March
March freight volumes at KIA totalled
3,641 tonnes - a 25% increase on the prior year of 2,914. The month
benefitted from a number of freight charters including an Antonov
124 and an Ilyushin IL-96.
Cargo traffic for the financial year ended 31 March 2010 showed
strong growth with tonnages 57% ahead of the prior financial year
with a total of 36,084 tonnes being transported through the airport.
Scheduled traffic has increased markedly over the period supplemented
by an increasing number of large charter flights.
The airport continues to gear up for the 27 May 2010 launch of scheduled,
daily Flybe services to Edinburgh with early sales continuing to
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