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Infratil Monthly Operational Report

25 August 2009

 

Introduction

Infratil's Annual Meeting was held on Monday 17 August 2009. CEO Marko Bogoievski gave a presentation updating Infratil's situation and progress on immediate objectives.

TrustPower, Wellington Airport and New Zealand Bus are performing to forecast, Infratil Energy Australia is at the lower end of expectations, the European Airports are under-delivering. Operating income for 2009/10 is now forecast to be up about 5% over last year's $356 million.

Infratil's funding arrangements have worked well throughout the crisis and have allowed Infratil to continue its investment programme. There is now evidence of banks return to "business as usual" has been illustrated by the bidding interest in Energy Developments.

The priority for 2009/10 remains conserving capital by reducing outlays and selling low growth or low yield assets. The aim is to reduce debt and to maintain high return investment programmes. Satisfactory progress is occurring and the success of the capital raising via the IFTWB warrants helped.

Capital spending is also being suppressed by regulatory uncertainties at NZ Bus and Wellington Airport. Legacy regulatory issues in those sectors are consuming a lot of resource and slowing development.

Infratil's continued delivery of good returns for shareholders depends on the growth of the sectors in which its businesses operate and in this regard the prospects remain good. Energy is becoming more expensive and less carbon intensive. The Australian energy sector is restructuring and deregulating. Air travel growth may be on hold right now but is being driven by market and demographic trends. Bus public transport is the quickest and cheapest way to enhance urban mobility in cities.

 

TrustPower

TrustPower Results for the Three Months Ending 30 June 2009 Operating Statistics

Despite relatively low generation TrustPower's directors expressed satisfaction with the Company's trading performance.

Over April-June average wholesale electricity prices were low due to good South Island lake levels, but during July storage was drawn down and prices began to firm towards more average levels.

TrustPower's customer numbers rose 6,000 over the period and its New Zealand generation production was 488 GWh, 8% more than the very low 2008 output, but still 14% below long term projected levels. North Island hydro and wind generation were both below long term averages.

The Snowtown Wind Farm produced 79 GWh during the quarter, approximately 13% below long term expectation.

 

Infratil Energy Australia

Customer numbers grew moderately in July to 399,000 (up 6000), reflecting 30,000 in South Australia, 40,000 in Queensland and 134,000 gas accounts in Victoria, with most of the balance being electricity accounts in Victoria.

July (and August to date) has seen a continuation of exceptionally low spot gas prices in Victoria, at around half expected levels. On most days IEA is long gas (to cover risks of gas supply failures and cold day sales levels) and excess gas is sold into the spot market. Gas supply contracts are currently dictated by sellers and they offer buyers limited flexibility. IEA will have more flexibility in its portfolio in future years through contractual access to gas storage. Increased gas powered electricity generation will also consume surplus gas as it displaces carbon-price affected coal generation.

While IEA’s ability to manage its gas purchasing is improving, the market rules require change to better allocate and share gas market risks. At present residential and other inflexible gas customers are expensive to supply and gas retail prices to customers are higher than they would be with better allocation of market risks.

The West Australia Kwinana generation project is progressing well. Infratil has now committed over A$30 million to the development (by taking up equity in Perth Energy and lifting its ownership to 81%). The project is on schedule to be available for operation in early spring next year.

 

Snapper

Snapper continues to improve reliability, its range of uses and the number of merchants and transport operators which use it. Having surpassed the goal of "less than one error in 10,000 transactions", on established routes Snapper is closing in on "less than one error in 100,000 transactions, 99.999%". Last month Snapper processed its 10,000,000th transaction. In October Snapper expects to pass 100,000 cards on issue.

Snapper cards are now being used to pay for 60% of the rides on buses which accept them. The goal is 80% by Christmas. The minority using cash and slowing up the bus will get the message that switching will save 20% and everyones' time.

By the end of August Snapper cards will be on use on 4 bus companies. Go Wellington, Valley Flyer, Runciman Motors and Adams Coachlines in Whangarei. Any Wellingtonian intending to travel to Whangarei for the Wellington Lions 11 October game against the Northland Taniwha should take their Snapper. Adams operates a flat fare policy so there is only "tag on" no "tag off" (as yet there is no reload network in place in Whangarei so load up your card before you travel).

It is expected that at least two more Wellington transport companies will be accepting Snapper before the end of the year and early in 2010 Wellington's 100s of taxis will also start accepting Snapper.

The services provided by Snapper to the taxis will differ to what is available to bus companies. Fare payment is the same, but taxis are not so interested in the information which bus companies need to ensure their services run when and where they are wanted. Greater Wellington Regional Council will receive information on "Total Mobility" trips and otherwise the transaction information only is provided to Taxicharge which manages the information for individual operators.

Snapper is achieving operator and transport agency recognition that it is delivering world-class integrated ticketing at low cost which will lead to other operators taking up the system. It is also becoming apparent that only Snapper can deliver integrated ticketing at scale prior to New Zealand's influx of tourists for Rugby World Cup 2011.

In addition to its proven delivery and low cost, another feature of Snapper which differentiates it relative to other systems is that it is an open scheme. For instance in Europe there are no large scale small-value transaction systems which function as Snapper does enabling payment on many public transport operators as well as to make small-value retail purchases.
 

NZ Bus

Northern region patronage in July was 2.2% higher than a year prior, but the southern region was 4.5% lower (3.3% when adjusted for tertiary holiday differences).

The recession appears to be reducing demand in both regions (in Auckland patronage is down in areas of the region where the economic down turn has probably hit harder).

Auckland patronage has probably been helped by changes to fare terms and some prices. The cost of public transport to seniors and tertiary students has been reduced and while this has resulted in some erosion of adult fares, total patronage appears to have responded positively.

Northern passenger trips July 4 months to 31 July 12 months to 31 July
2008 2,908,957 11,925,961 33,317,870
2009 2,927,941 9,004,852 35,602,022
Change 2.2% 0.4% 6.9%
Southern passenger trips July 4 months to 31 July 12 months to 31 July
2008 1,819,682 7,139,341 20,143,808
2009 1,737,561 6,817,300 19,696,683
Change -4.5% -4.5% -2.2%
 

Wellington Airport

Operational figures in July, 388,595 domestic passengers used Wellington Airport, a decline of 3.3% compared to July 2008, there were 1% fewer seats available than a year prior.

Jetstar's commencement of services from Wellington to Auckland and Christchurch is stimulating traffic on the trunk especially with resolution of its early teething issues. In July 79% of Jetstar's service arrived within 15 minutes of the scheduled time.

International passengers were down 6.5% against July 2008, reflecting a 6% decline in capacity. In particular Sydney experienced a drop of 11.6% in seat capacity and 8.6% in passengers relative to July 2008, although the anticipated commencement of Pacific Blue services to Sydney in September 2009 will add competition on this route and generate passenger growth. Despite Qantas stopping its Brisbane services, there was an increase in overall passenger numbers on the Brisbane and Melbourne routes.

Pacific Blue's marketing campaign targeting New Zealand expats in East Coast Australia contributed to a 24% increase in Visiting Family and Friends (VFR) travellers in June 2009 compared to June 2008.

Wellington Airport has completed another major infrastructure project - the $11m runway overlay - on time and on budget, bringing recent investment in runway quality and safety to a total of $42m. This includes the new safety areas at each end of the runway.

  July Domestic July International Total Passengers
4 months to 31 July
2007 347,497 48,899 1,154,099
2008 401,877 52,397 1,793,705
2009 388,595 49,004 1,678,870

Work is well underway on the new international departure terminal, the Rocks. This photograph was taken on 19 August.

 

Glasgow Prestwick

  July Freight Tonnes July Passengers Total Passengers
4 months to 31 July
Total Freight
4 months to 31 July
2007 2,327 256,489 892,815 10,821
2008 1,463 258,211 901,480 8,973
2009 1,027 191,940 678,911 4,759

Glasgow Prestwick Operational Figures

191,940 passengers used Glasgow Prestwick Airport in July, 28,000 more than June, but 66,000 less than the year before. Load factors across the majority of routes held up versus the prior year, with the decrease in scheduled passengers being driven primarily by capacity reductions by Ryanair, mainly on domestic and Irish routes. Ryanair, along with other airlines and airports, continues to apply pressure to UK and Irish Governments to drop the aviation taxes due to their economic damage which is compounding the impact of the recession on the tourism sector.

Ryanair announced the launch of six new sunshine routes with Alicante, Palma, Gran Canaria, Lanzarote and Ibiza for Summer 2010.

Freight volumes for July were 1,027 tonnes, 30% down on the previous year, when Polar Air Cargo had scheduled services into Europe

Kent International Airport

July was another strong month for Kent with 3,637 tonnes handled during the month, an increase of 234% on the prior year (1,088 tonnes).

It was the busiest July in the history of the airport's freight operation. Services were undertaken by nine separate carriers. In addition Virgin Atlantic operated a series of A340 charters to move military personnel on behalf of the Ministry of Defence.

Lübeck Airport

Scheduled traffic for July was a record for Lübeck at 79,515 passengers compared to 55,499 for July 2008 (43% up). The new summer routes to Palma de Mallorca, Alghero and Alicante delivered strong load factors attracting travellers from the Hamburg area and also Denmark. The high percentage of outbound passengers also created a record month for car park patronage.

In the six months to the end of June 2009, Lübeck traffic rose by 24.9%, making it one of only three of the top 20 German airports to experience growth. Hamburg Airport traffic declined by 8.2% in the same period.

The City's search for alternative investors continues in advance of Infratil's put option becoming exercisable in October.

 
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