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Infratil Monthly Operational Report

26 March 2010

Introduction

Infratil's Investor Day was held on 11 March and comprised a strategic review and update from CEO Marko Bogoievski and presentations on key Infratil businesses. Presentation slides and webcasts are available on the Infratil website under "For Investors"

A large number of institutions and analysts attended the day and published research is available from a number of the brokers. Over the last year the main area of new investment undertaken by the Infratil group has been in its Australian energy business and the Investor Day was an opportunity to clarify the strategy in Australia and the high-level plan for the group's power station investments, gas purchasing, electricity price hedging and retail profitability.

 

TrustPower

Chris O'Hara's presentation to the Infratil Investor Day addressed the uncertainties and opportunities faced by energy companies in New Zealand and Australia, and how TrustPower was positioned.

The New Zealand market, in particular, is facing both higher generation costs and greater price volatility which suits TrustPower's geographically diversified renewables generation portfolio.

In addition, initiatives such as using Coleridge hydro station to also provide irrigation for the Canterbury Plains illustrate the ability of TrustPower to create future value from their existing assets. This single initiative has the potential to provide irrigation to over 100,000 hectares and increase the peaking capacity of the station. The economic impact of the project is estimated at over $250 million per annum and is forecast to create over 3,000 jobs.

The main themes for 2010/11 are likely to be greater wholesale price volatility and greater retail competition from the SOE generator-retailers as they rebalance following industry restructuring. Over the same period TrustPower anticipates a modest increase in generation capacity with the first 36 MW of the 100MW Mahinerangi wind project open to tender.

TrustPower has 200MW of wind consented and 118MW of hydro in final consent stages. Work is also progressing developing stage two of the South Australian Snowtown wind facility.

 

Infratil Energy Australia (IEA)

Presentations at Infratil's Investor Day addressed all aspects of the IEA business and its future plans.

The presentations also provided clarity around how the various parts of the IEA businesses are functioning. With over 400,000 customer accounts and over 300MW of generation capacity either commissioned or under construction IEA is a substantial energy company with plans to grow as the Australian market continues to deregulate.

The key short term impediment to higher profitability has been difficulties encountered acquiring gas for sale to IEA's retail customer base.

IEA's gas is supplied under contracts which were entered into some time ago and they oblige the company to accept more gas than its retail customers want. Unless other avenues are identified for the gas, the excess gas must then be sold in the wholesale "spot" market. Because IEA hasn't been alone with this problem, spot prices have been very low resulting in losses.

The contracts which oblige IEA to take this excess gas at high prices are finite and progressive solutions are on track through to FY 2012.

This information, and the other details on IEA's operations, finances, and plans were well received by analysts attending the Investor Day.

 

NZ Bus

February patronage was up 3% on the year prior. Northern region was up 1% and southern by 6%.
Auckland's growth has been especially driven by tertiary students and their bus trips in February were 18,000 (27%) higher than the same month last year.

Year to date patronage is down 4% in Auckland and flat in Wellington. Wellington's good recent performance is encouraging given that the new commercially based Hutt Valley contracts began in February.

Northern passenger trips February 11 months to 28 February
2009 2,818,938 31,869.364
2010 2,842,954 30,633,748
Change 0.9% -3.9%
Southern passenger trips February 11 months to 28 February
2009 1,591,563 18,085,688
2010 1,689,169 18,068,338
Change 6..1% -0.1%
 

Snapper

Snapper has processed more than $40 million in transactions since inception. Customer numbers and transaction volume continue to increase strongly in the Wellington market.

The number of schools offering their students personalised Snapper cards in the form of a school ID has doubled to 16 with 8,000 school IDs issued in February. These cards can be used by students to pay for travel and lunch and parents can monitor transactions online

Snapper is also trialling a SmartCard which combines a Snapper chip, Photo ID and building access capability. Working with partners Snapper will be offering this card to the market over the next month. A number of companies which offer staff public transport (rather than just expensive car parks) have expressed interest.

The establishment of a national standard remains unclear. A genuinely open national standard will support competition resulting in lower costs and innovation. It is unclear if this route is favoured by officials.

 

Wellington Airport

Wellington Airport has attracted world-wide publicity for its plan to build a sign parodying the famous Hollywood sign. The Wellywood sign salutes the success of Wellington's local film industry which contributes $285 million per annum to the city's economy, and landmarks the industry's base which is a popular inclusion in film tours of the area.

February airport traffic was up 2% on the same month a year ago. Year to date (11 months) passenger numbers are down 3.5% on the prior year, with 75% of the decline being on regional services.

Over the 11 months international passengers are up 2%, domestic trunk services are down 2% and regional traffic is off 8%.

In February domestic airline loadings were at 81% (from 77% a year ago) and international loadings were 77% (from 74%). The strong demand appears to indicate room for capacity growth.

In February Sydney traffic grew 8% with capacity up 7%, due mainly to Pacific Blue's new services. This was balanced by a small decline on the Brisbane route after a period of strong growth. Air New Zealand's reconfigured Tasman A320 aircraft will add around 4.7% capacity to the Wellington international market later in the year.

  February Domestic February
International
Total Passengers
11 months to 28 February
2008 414,072 49,849 4,515,408
2009 361,919 50,111 4,794,388
2010 370,608 49,870 4,654,721

Operational figures

 

Glasgow Prestwick

  February
Freight Tonnes
February
Passengers
Total Freight
11 months to 28 February
Total Passengers
11 months to 28 February
2008 2,429 165,977 28,476 2,234,488
2009 1,078 137,574 17,659 2,162,521
2010 911 102,902 11,571 1,591,540

Operational Figures

102,902 passengers used Glasgow Prestwick Airport in February, 25% less than a year prior, in line with recent trends. The winter sun destinations continue to perform with strong load factors.

The Scottish First Minister joined Ryanair Chief Executive Michael O'Leary at Glasgow Prestwick on 10th February to announce the creation of a second maintenance, repair and overhaul facility at the airport. The new 6,000 sqm facility will cost £8m and create 200 new local jobs. The facility is scheduled to open in October 2010.

Freight volumes for February were 911 tonnes which is a 15% reduction on the prior year however an increase of 22% on January's figures.

Kent Airport

  February Freight Tonnes Total Freight
11 months to 28 February
2008 3,967 29,020
2009 2,519 20,074
2010 2,576 32,443

February freight volume at KIA was 2,576 tonnes in line with the previous year. For the eleven months of the financial year to date cargo traffic is 62% ahead of FY09.

The airport played a part in the Haiti relief effort during the month, hosting a full cargo shipment of aid supplies which departed from Manston on a direct flight to Port Au Prince on 23 February.

 
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