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Infratil Monthly Operational Report

5 April 2011

Introduction

Operational and financial performance has largely been in accord with forecasts. Critically for ongoing performance, investment activities continue to be very positive. At the Infratil investor day CEO Marko Bogoievski updated guidance for FY11.

$Millions Latest FY11 Guidance May 2010 FY11 Guidance FY 2010 Actual
Earnings $415-$435 $390-$430 $363
Operating cash flow $160-$180 $140-$180 ($519)
Investment capex $450-$500 $400-$460 $193

2010/11's notable investment events included the opening of Wellington's new international airport terminal, the acquisition of a 50% interest in Greenstone Energy and the commissioning of the Kwinana Power Station and the Mahinerangi Wind Farm.

Looking forward it is expected that FY12 will be another year of strong internal investment at Infratil's businesses. In-house investment is a crucial part of Infratil's strategy and the strong pipeline of development and upgrade projects is consistent with delivering target returns to shareholders over the medium term.

 

TrustPower

At the Infratil investor day TrustPower CEO Vince Hawksworth and Chairman Bruce Harker spoke about the Company's medium term earnings and investment prospects. Infratil's March Update covers the key factors which are likely to increase TrustPower's earnings and value.
 

Infratil Energy Australia

On 29 March the IEA investor day in Sydney was attended by analysts and fund managers from all the major NZ brokers and the majority of Infratil's larger institutional shareholders. Presentations given by the senior management team covered the IEA group's strategy, operations, financials and forecasts. Presentations are available here.

As set out in the Infratil Update of September 2010 Infratil has been building the IEA business in Australia since 2004 and this year is forecasting earnings of A$45 million. Legacy gas contracts mean that FY12 earnings are expected to be less than those achieved in FY11, but a marked increase is forecast for FY13, by which time IEA's gas position will be in balance.

The Australian energy market continues to represent an attractive investment environment. Its slow State by State emergence from government ownership and control, suits the scale and capability of IEA. At present developments in NSW are being followed closely. This is the largest Australian energy market and as yet price controls make retailing unattractive, but this is expected to change with a review of retail prices expected shortly. The State sold its retailing businesses for prices which equate to approximately A$1,000 per customer.

The attraction of NSW is apparent from a comparison of the size and composition of its energy market in comparison with the other eastern states.

 

Greenstone Energy

Greenstone's Christchurch operations have regained a significant part of their function with only four service stations still closed. Along with the other fuel distribution companies, Greenstone maintained supply to the impacted region during the immediate aftermath of the earthquake while absorbing increased supply costs. The latter point was commented on by Dr Phil Verleger the international oil expert who spoke at the Infratil investor day. He noted the distinct difference between how the NZ fuel companies responded to the Christchurch earthquake and what happened in New Orleans after the Katrina storm.

Dr Verlerger's presentation on the international oil market, drew attention to a number of fascinating anomalies; in particular he explained how the relatively small disruption in Libyan oil production (around two million barrels per day, 3% of world production) was having a massively disproportionate impact on prices. Many refineries blend low and high sulphur crude to produce low sulphur diesel. When they cannot access low sulphur Libyan crude they are obliged to replace it by up to three times higher sulphur crude. A small drop in the supply of Libyan crude has caused a marked increase in aggregate crude demand, and a consequent large increase in prices.

NZ Ministry of Economic Development figures show that in calendar 2011 crude oil prices in NZ$ have risen 27%, the pump price of diesel is up 25% while the price of regular petrol is up only 10%.

In Wellington Greenstone has opened its first electric vehicle charging facility at a retail service station. Wellington's small, but growing number of electric cars can now refuel at the Greenstone's Shell service station on Jervois Quay (at present Wellington's fleet of electric buses probably outnumber the number of electric cars, but they mainly use overhead wires rather than batteries.

 

 

NZ Bus

Higher fuel costs tend to be positive for public transport use and NZ Bus is experiencing solid growth on many services, especially in Auckland. The Auckland growth is also testament to the supportive approach being taken to public transport by Auckland Transport (the Auckland City transport agency) and a lot of past investment. Especially strong patronage growth is occurring on some of the longer routes which feed into the city while central routes have tended to remain flat, probably because of inner-city congestion.

Wellington and Hutt performance has continued to be uneven with the Regional Council's fare increases of last October still having a significant impact while difficulties with train services appear to be also generally discouraging use of public transport. Nevertheless, some routes are registering growth and travel patterns are constantly reviewed to ensure lessons will have wider application.

Government continues to make progress developing a new form of contract for bus and ferry public transport services and it is understood that Cabinet will consider the Minister's latest recommendations in April.

NZ Bus is preparing for the new contracting regime by upgrading its fleet so that new buses will become available at about the same time that the new contracts start to be offered.

Northern passenger trips February 11 months to 28 February 12 months to 28 February
20010 2,854,079 30,644,873 34,325,548
2011 2,986,492 32,610,328 36,427,659
Change 4..6% 6.4% 6.1%

Southern passenger trips February 11 months to 28 February 12 months to 28 February
2010 1,689,169 18,068,338 20,014,784
2011 1,634,175 18,317,494 20,339,524
Change (3.3)% 1.4% 1.6%
 

Snapper

Snapper launched its service for retail and taxi payments in the Auckland market with initially 200 retailers and over 1,000 taxis signed-up. Nationally, by the end of April Snapper cards will be accepted in over 450 retail outlets, 2,000 taxi, and the GO Wellington and Valley Flyer bus services.

The Green Cabs group that operates in Wellington and Auckland have an introductory offer whereby Snapper cards will incur only the cash charge (ie. no transaction fees) making them the lowest cost card or chit payment mechanism. It is expected that nationally the number of taxis which accept Snapper will continue to grow, and not just in the Auckland and Wellington markets.

In Auckland NZ Bus is installing Snapper equipment on all its buses and they are expected to start to become operational next month. While passengers will still be able to pay their fares with cash and passes, they will also be able to use the Auckland Transport HOP card which will incorporate Snapper technology and will provide Aucklanders with similar benefits to those which have been available in Wellington for the last 2 years. Auckland Transport intends that the HOP card will ultimately come to be used on all the regions public transport. For more information go to www.myhop.co.nz.

Snapper's trial of its "event capability" at the Wellington Outgames was highly successful. A single card could be used to enter an event, to pay for food and beverage, and to pay for the trip home or back to a hotel. Feedback was universally positive.

 

Wellington Airport

Passenger numbers for FY 11 are flat on the previous year reflecting disappointing capacity provision on trunk services. Announced service increases, and the use of slightly larger aircraft, indicate that airline capacity will resume growth in 2011/12.

Strong showing on Tasman services indicates how sensitive passenger growth is to airline services. In February Sydney capacity was up 11% on the same month last year and the number of passengers on this route rose 15%.

Patronage on the regional services which use Wellington Airport are up almost 10% for FY11 on the previous year.

February Domestic
Passengers
International
Passengers
Total Passengers
11 months to 28 February
2010 370,608 49,870 4,654,721
2011 360,863 54,945 4,676,521

Operational figures

 

Glasgow Prestwick Airport

February Passengers Freight Tonnes Total Passengers
11 months to 28 February
Total Freight Tonnes
11 months to 28 February
2010 103,092 911 1,588,648 11,571
2011 63,424 1,179 1,444,663 11,854

Weak passenger numbers continue to reflect Ryanair's reduced services on UK domestic and Irish routes.

Freight volumes remain strong with February being the sixth consecutive month of year on year growth with tonnages up 29% on the prior year.

Operational Figures

Manston Airport

February Freight Tonnes Passengers Total Freight
11 months to 28 February
Total Passengers
11 months to 28 February
2010 2,576 0 32,443 4,185
2011 1,868 2,067 23,218 30,315

Freight tonnages continue to be impacted from a lack of aircraft capacity serving the African market. Passenger traffic reflects the new scheduled services to Manchester and Edinburgh.

 
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