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Infratil Monthly Operational Report

2 December 2009

 

Introduction

Infratil announced its results for the six months to 30 September 2009 and indicated it was well placed to continue earnings growth from existing core businesses and from the redeployment of capital. Over the period operating earnings rose, $215 million of assets were sold ($152 million of the proceeds were received after 30 September), $104 million was invested in existing activities and the net debt of Infratil and wholly owned subsidiaries was reduced $105 million.

Infratil also announced that it had partnered with the New Zealand Superannuation Fund to become the preferred buyer of Shell Oil's New Zealand energy distribution business and stake in New Zealand Refining. This is New Zealand's largest fuel distribution business. It has predictable and favourable long term prospects, is available at a sensible price, and is in an industry where Infratil has good knowledge. Shell commenced operation in New Zealand in 1912 and its sale reflects the oil and gas industry's trend to separate resources from distribution/processing.

A fully imputed dividend of 2.5 cents per share is to be paid on 11 December 2009 to shareholders as at 4 December 2009.


Infratil Interim Results

 

TrustPower

TrustPower also announced another record result. TrustPower is also undertaking an issue of five and seven year bonds.

Government has passed legislation requiring that electricity generators emissions from 2013 be fully permitted. The full introduction of emission pricing for generators will follow a two year phased start. The legislation means that the cost of thermal (in NZ mainly gas-fired) generation will rise, probably by 1 to 2 cents per kWh. TrustPower's own costs will not change as its renewable generation emits no greenhouse gas so the higher prices will be a net benefit. In addition the higher prices will accelerate TrustPower's generation construction programme.

 

Infratil Energy Australia (IEA)

Customer accounts continued to grow slowly in October with high churn in Victoria affecting all retailers. After declining all year, customers are also increasing again in Queensland.

The operational changes to better manage and monitor credit quality are proving to be effective with bad debt issues reducing. Victorian spot gas prices remain low which continues to be a drag. Electricity spot prices have been volatile with extreme temperatures in NSW and South Australia, events for which IEA is fully covered.

Infratil lodged an Expression of Interest in the NSW State energy privatisation. No sooner had the process started than it was disupted with the resignation of the State's Ministers of Finance and Energy who were meant to be responsible, however, nominally the process is proceeding as planned. There are three types of assets on offer:

  • three energy retailers - Energy Australia, Integral Energy and Country Energy;

  • five "gentrader" rights, each of approximately 2000-3000 MW, although there are suggestions that the structure of gentrader contracts may change again;

  • seven sites consented for generation. Four gas sites of 300-800MW,and three coal/gas sites of 700-2000MW.

Infratil is considering the potential benefits of these assets but at present the development sites look least encumbered by proposed commercial and regulatory arrangements. NSW has electricity retail tariffs controlled at artificially low levels which is an impediment to putting a value on both generation and retailing operations. The NSW Independent Pricing and Regulatory Tribunal is due to issue a draft determination for 2010 - 2013 in December and this may signal an improvement in the commercial viability of the industry in that State.

The Kwinana power station project in Western Australia remains on track. The State's Independent Market Operator has recently issued the draft price review for capacity certificates in 2012-13. The prices are a reasonable increase over current levels but there is still an extensive process to be followed before the final price is known.

IEA also announced an intention to undertake construction of a 65MW expansion to its existing 20MW diesel peaking power station at Lonsdale near Adelaide. If this progresses it will be operating before the end of 2010 and would enable IEA to increase its retailing operations in South Australia where it currently has approximately 30,000 accounts.

 

NZ Bus

Patronage in Wellington and the Hutt Valley is almost unchanged on last year, which reflects considerable improvements in recent months after a weak start to the year. Greater Wellington Regional Council published figures showing that its contracted public transport is the one of the very few in New Zealand where over half the operating cost is paid by fares. In most regions tax/rate payer funding pays over 50% of the cost. This calculation only covers subsidised services so completely unsubsidised services such as the Airport Flyer further improve the fare/subsidy ratio.

Patronage in the Northern Region was adversely affected by October's industrial actions which meant many services did not run. Agreement has now been reached with the unions and by July 2011 the top base hourly rate for drivers will have increased $2.00 or 12% from $16.75/hour to $18.75/hour. The employment contract is for the period to July 2012. The inconvenience to passengers is deeply regretted by Company and staff alike. The Auckland Regional Transport Authority took a pragmatic and constructive role through the period and this was appreciated. The attempt by some local politicians to grandstand the issue was generally harmful.

Subsequent to the service interruptions passenger numbers are taking time to recover and are now running at about 2% less than the same time last year

Northern passenger trips October 7 months to 31 Oct 12 months to 31 Oct
2008 3,190,500 21,425,530 34,139,703
2009 2,248,493 20,484,987 34,609,496
Change -29.5% +4.2% +1.4%
Southern passenger trips October 7 months to 31 Oct 12 months to 31 Oct
2008 1,560,891 12,175,451 19,959,853
2009 1,698,808 12,041,451 19,898,134
Change +8.8% -0.1% -0.3%
 

Snapper

Over October Snapper staff spent time in Seoul with Korean Smart Card Company on the development of the next set of features for cardholders.

In addition to working on a range of new devices and features, KSCC is also developing its system so that it can be readily interoperable with others. This will allow many different stored value cards to be used for many different functions, even if those functions are provided by different companies.

Already in Wellington there are school students with Snapper chips inside their IDs and Stadium members with Snapper chips inside their season tickets. In due course a great many loyalty, identification, access and payment functions will be combined into a single card, toggle or stick-on.

The possibility of a taxpayer funded competitor to Snapper remains under development by ARTA and the New Zealand Transport Agency. Snapper supports NZTA establishing a national standard for ticketing systems and believes that the resulting system should be charged to operators on normal commercial terms and operators should be free to choose systems based on normal commercial terms. It would be impossible for Snapper if a taxpayer funded competitor was to be made available free of charge (or heavily subsidised) or was a required device for operators providing contracted public transport services.

It would be a mockery if NZTA had a national ticketing standard on the one hand but then required all public transport operators to use the one state owned ticket on the other.

 

Wellington Airport

In October international passengers were up 4.9% on a year prior (up 2.3%YTD) while domestic passengers were down 5.1% (down 5.9% YTD).

Regional services remain those most adversely affected by the recession having reduced at more than twice the rate of shrinkage on trunk services.

  Oct Domestic Oct International Total Passengers
7 months to 31 Oct
2007 347,165 53,319 2,731,384
2008 408,803 53,301 3,114,010
2009 388,046 55,928 2,959,054

Operational figures

Passengers on Wellington's main international service, Sydney, increased 12% over October 2008, with a 6.2% increase in capacity (available seats) following the commencement of Pacific Blue's three services per week in September. For October, Brisbane passengers were up 3.2% and Melbourne's 2.1%.

Sydney's growth again demonstrates the potential for airline competition to grow demand.

In October average airline loads (the percentage of seats sold) were over 78% for both domestic and international services, which was up on last year and indicates close management of capacity by the airlines

On November 1, Wellington Airport held an open day to celebrate its 50th anniversary. Over 15,000 people enjoyed the festivities provided by the Airport and the many other stakeholders who use its facilities, including the airlines, border agencies, and local aviation supporter Peter Jackson.

 

Glasgow Prestwick

  Oct Freight Tonnes Oct Passengers Total Freight
7 months to 31 Oct
Total Passengers
7 months to 31 Oct
2007 2,617 228, 893 18,406 1,591,604
2008 1,448 212,441 13,051 1,584,628
2009 1,167 152,163 8,163 1,165,805

Operational Figures

152,163 passengers used Glasgow Prestwick Airport in October, 28% less than a year prior, in line with recent trends. The winter schedule commenced at the end of the month which saw the commencement of four new sunshine destinations - Alicante, Arrecife (Lanzarote), Las Palmas (Gran Canaria) and Palma.

The full summer 2010 schedule is now on sale which will see the launch of a further new route, Ibiza, from March 2010. Advance bookings continue to perform well for summer 2010 sunshine destinations.

Freight volumes for October were up on the prior month at 1,167 tonnes which is a 19% reduction on the prior year.

Kent International Airport

  Oct Freight Tonnes Oct Passengers Total Freight
7 months to 31 Oct
Total Passengers
7 months to 31 Oct
2007 4,173 2,078 13,485 13,453
2008 1,235 483 10,009 10,830
2009 3,174 0 19,805 4,048

October freight volumes at Kent were 3,086 tonnes, more than double the figure of a year ago. Kent International is continuing to build on its excellent first six months, which is traditionally the slower half of the year for UK importers using the airport.

 
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