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Infratil Monthly Operational Report
27 May 2009
Infratil announced its
annual results for the year to 31 March 2009 on 18 May. Guidance
was also given that over the year to 31 March 2010 operating earnings
are expected to rise while interest costs and capital spending are
expected to fall. The nature of infrastructure businesses means generally
that their operations and earnings remain robust and predictable,
even during a period of great economic uncertainty.
TrustPower announced record annual
earnings of $260 million reflecting commissioning of new plant in
Australia and New Zealand. Dividends of 17 cents per ordinary share
and 10 cents special dividend are to be paid in June, bringing the
annual total to 47 cents per share.
TrustPower has now concluded a period of substantial investment
in new generation. While further capital spending plans are limited
in the immediate future, work is progressing on consents for 420
MW of wind and 118 MW of hydro power in New Zealand and 273 MW of
wind capacity in South Australia. It is expected that these projects
will be undertaken when their economics warrant the capital outlay.
In May the Commerce Commission released a report undertaken on the
structure of the New Zealand wholesale market by a US academic.
This report postulated that between 2001 to 2007 the three energy
SOEs and Contact Energy over-earned by $4.3 billion. Given that
this sum represents 90% of the entire generation industry's profits
for the period the report has generated some confusion. The Minister
of Energy has passed it to the Task Force he had previously established
to review the industry structure. The plausibility of the claims
can be tested by looking at whether New Zealand has witnessed over
construction of power stations during that period. If generators
were over-earning they would have over-invested in new plant to
reap the high prices. In fact over the period new capacity has roughly
kept pace with increasing load.
Of greater importance, the Chief Executive of TrustPower, Keith
Tempest, announced that after 23 years with the Company he plans
to retire in December 2009. Chairman of TrustPower, Bruce Harker
said "after working with Keith for the last ten years, I both
regret his decision and congratulate him. He has done a great job
and has been a real pleasure to work with. Our shareholders have
also enjoyed the experience."
Lloyd Morrison said from hospital "Keith is a great guy, it's
been our luck and privilege to have him on the team. We are fortunate
that Keith has built such an excellent team around him. He will
be missed. We are very pleased that Keith has agreed to stay on
the board of NZ Bus so the Infratil Group can continue to benefit
from both his company and expertise."
Infratil Energy Australia
A slight increase in customer numbers
(388,000 accounts) over the month continues to reflect growth in
Victoria and contraction in Queensland. The more deregulated Victorian
market remains the focus for now, but recent regulatory developments
in Queensland and NSW have also been positive. In Queensland, Origin
and AGL won their court appeal against the 2008 price cap, while
the NSW Government has reconfirmed its intention to privatise its
energy retailing businesses this year. Whether privatisation will
also entail deregulation is not certain, but it seems unlikely the
State would sell quasi-monopolies.
The NSW Independent Pricing and Regulatory Tribunal (IPART) also recently approved material increases in the retail price caps and commented "that wholesale purchase costs have increased substantially and that the allowance for electricity purchase costs should increase to reflect this. If the electricity cost allowance is insufficient, some retailers may be unwilling to supply customers, and incentives to invest in new generation capacity when it is needed may be inadequate."
On a different front, TRU Energy lost its court action to overturn the outcome of a period of exceptionally high Melbourne gas prices in November 2008 which resulted in that company incurring a A$40 million incremental cost. The failure of their appeal means all the parties who incurred costs associated with the $800 per Gj period (usually prices are about $5) will not gain redress. This includes IEA which had a small exposure to these prices which has been fully accounted in last year's results.
While IEA will not now receive a small windfall, the decision demonstrates
the sound logic of IEA's extremely low risk approach to risk management,
even when avoiding risk is expensive. Practically this means IEA
has to have several contracted sources of gas to avoid the costs
associated with field or transmission failures (which is what caused
TRU's A$40 million cost blow out). It is expected that this lesson
will be reflected in the future behaviour of other market participants.
A trend towards better recognition and pricing of risk will be of
benefit to all energy retailers.
The Australian Federal Government announced a deferral of emission trading (CPRS) for one year to 2011 and a fixed carbon price of A$10/tonne for the first year it is in operation. The potential for delay had resulted in IEA delaying fully hedging its forward electricity price exposure in the relevant years so the hedge book will now be extended to a normal term.
In Western Australia the Kwinana power station project is on schedule for completion in mid 2010.
The 3,800 students at Wellington College,
Scots College, Queen Margaret College, Wellington Girls College,
Wellington East College, Wellington High School and Rongotai College
who have Snapper school IDs can now use their cards to get child
fares on GO Wellington buses.
This is the second public transport product loaded on the Snappers
after the standard discount on cash fares that have been available
Over the next three months Snapper will gradually provide all the
other fare products (passes and other age enabled tickets) currently
accepted on GO Wellington and Valley Flyer buses. Wellingtonians
are almost at the end of the era where a bus pass which accidentally
goes through the wash spells disaster.
Snapper has also introduced "Hot Listing" for cards so
that someone who loses their Snapper can have it cancelled and the
balance transferred to a new card. Customers are making good use
of this service, with over 80 cards hotlisted in the last month.
4,413,612 trips were provided in April.
In absolute terms almost 600,000 less than in April 2008, but the
previous year included a contribution of over 360,000 from Fullers
which was sold in early April and when the two comparison months
are adjusted for working days (23 last year, 20 this year) patronage
actually rose about 2.5%.
Good growth continues to be achieved in Auckland and the Hutt, while
Wellington remains flat, and is the focus of management.
As is the norm for public transport, the regulatory regime remains
under development with the Minister of Transport announcing a review
of the Public Transport Management Act and ongoing reviews of procurement
regimes in both Auckland and Wellington.
An optimal public transport regulatory regime would incentivise
operators to efficiently deliver popular services while ensuring
that regional transport agencies can direct services to meet network
and transport efficiency objectives at the least cost to rate and
tax payers. The current regime is not "win:win" and building
a genuine partnership model has proven to be difficult.
The new Government has made it clear that only initiatives jointly
promoted by transport agencies and operators which can achieve an
economic benefit cost efficiently will garner support.
|Northern passenger trips
||12 months to 30 April
|Southern passenger trips
||12 months to 30 April
In April, 386,000 domestic passengers
used Wellington Airport, 9% less than in April 2008. However April
2009 was still 11% higher than the numbers recorded in April 2007.
Over the January-March quarter 10% fewer domestic passengers used
Wellington than the same period in 2008. This period of soft activity
reflects the uncertain economy, the run-off of Pacific Blue's market-entry
stimulation which boosted the earlier period, and reduction of Qantas
June's commencement of domestic services by Jetstar is expected
to generate some additional activity as will the introduction by
Pacific Blue of the 104 seat Embraer 190 E-Jet to regional service.
International passengers increased to 55,770, 14.8% higher than
April 2008. Capacity has been substantially increased to Brisbane
(up 36.8% relative to April 2008) and Melbourne (+17.5%) while Sydney
services also experienced an increase in passengers notwithstanding
no material change in capacity.
Wellington Airport released its 2030 draft Master Plan setting out
the Airport's development vision for the period and indicated the
works that will be required to accommodate 10.5 million passengers
a year, which is the level forecast for 2030. The cost of the infrastructure
build is approximately $450 million which implies a similar rate
spend to the last decade. Most of this expansion relates to more
people travelling within the region, but some long haul is also
The draft 2030 Master Plan is available on the airport
website and feedback will be accepted until 30 August 2009.
(Operational Figures) handled 160,419 passengers in April down
19% on April 2008 following on from the January-March quarter which
was 12% down on the same period in 2008. On a rolling twelve months
basis Glasgow Prestwick hosted 2,274,442 passengers down 6% on the
previous 12 month total. Glasgow Prestwick handled 1,216 tonnes
of freight during April, 58% below April 2008.
Kent International Airport freight
volumes in April were 2,006 tonnes, 34% less than a prior year.
Lübeck Airport had an excellent
start to the financial year with passengers 55% up on April 2008
due mainly to a new daily Palma service which has drawn travellers
from the main Hamburg core catchment. Loads on other routes were
also up on the prior year perhaps suggesting a regional trend towards
low cost services.
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