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Infratil Monthly Operational Report

26 October 2010


After six months of the financial year the first half has been notably positive. The seamless transition of Greenstone Energy to local ownership is a credit to the management team assembled by Mike Bennetts. It also reflects well on Shell who spent 100 years building a successful New Zealand business. Infratil Energy Australia's transition into an integrated nationwide Australian energy company was covered by the September Update.

At a more business as usual level, the accord reached between the Wellington leaders group and Air New Zealand and Pacific Blue is positive for the Capital's airport as is the growth in domestic air capacity signalled by Air New Zealand and Jetstar. NZ Bus chalked up good patronage support, and progress is being made with the development of a new national public transport contracting regime. Snapper is now on Wellington ferries, buses, taxis and 230 shops. TrustPower is on track with its Mahinerangi wind farm and the Emissions Trading Scheme ("ETS") has been introduced in New Zealand (at no cost to TrustPower which is 100% renewable).

The goal is to convert good operating reports into good financial outcomes and to capture further growth opportunities. Over the six months Infratil's management team were active in reviewing investment projects and the objective now is to ensure some come to fruition, while keeping up the good operational performance.

Infratil's interim results will be released on 16th November.


Greenstone Energy

The priority of Greenstone's first six months was for a smooth transition to local ownership, management and governance, with no disruption to customers. After six months the objective was being delivered, even through events such as the Canterbury earthquake.

Greenstone's service levels are reflected in growing market share in both commercial and retail fuels. In the twelve months to 30 September 2010 Greenstone's sales volumes are up 5% over the previous year while total national sales volumes were flat.

In the short term efficient provision of fuels largely means operating the company's infrastructure as well as the previous owners. Over the medium term it means investing in renewal, growth and improvements and Greenstone is developing a capital programme to match its growth targets. Even this year a number of investments have been undertaken; three new service stations, a new truck stop, storage facilities for commercial customers, a new 10 million litre storage tank at the Port of Lyttelton to improve supply reliability for Canterbury and a new point-of-sale system for the petrol stations and company-wide IT upgrade.

The half year also saw the introduction of the emissions trading scheme in New Zealand. At present fuel emission costs about 4 cents per litre which does not justify a switch in supply from mineral to biofuels, but it is a signal of future trends and biofuels are under review.



A relatively wet and windy winter and weak demand has kept wholesale electricity prices down. It is possible that total electricity consumption in 2010 will be below the level of 2009 which would make three years of decline (over the previous 35 years electricity consumption has not declined for more than one year). These market conditions and the SOE restructuring seem to be driving heightened retail competition with customer churn twice the level of two years ago.

TrustPower has maintained stable customer numbers over the last six months, but on a five year basis its share of the residential market has fallen to 11.5% from 12.5%. Over the same period the other privately owned generator/retailers have gone from 30.5% to 27.8% of the market.

At the end of October the Electricity Commission will be replaced by the Electricity Authority. The key difference is that the new regulatory agency has greater autonomy from the Minister as it is an independent Crown entity.

Construction of Stage 1 of the Mahinerangi Wind Farm is progressing to timetable, despite a period of heavy snow. The first water supplied under contract to Rangitata Diversion Race irrigators has flowed from the new TrustPower BCI pumping and irrigation project. Environment Court decisions on TrustPower's proposed Arnold and Wairau hydro generation schemes are also expected soon.

TrustPower completed a $75 million seven year bond at a yield of 7.1% per annum. The issue was led by Forsyth Barr.


Infratil Energy Australia

As highlighted in the September Update, IEA is transitioning into a national integrated energy company and recently launched the "Lumo" retail brand. The rationale for this was partly for greater simplicity compared to four state based brands, and partly it related to the intention to pursue national marketing campaigns, often involving other Australian organisations. National companies which operate loyalty schemes tend to seek partnerships with other nationally recognised companies. For instance in New Zealand Greenstone Energy partners with national supermarket chains to offer discounts.

Retail had low levels of net growth in September, largely as a result of higher industry churn levels. High levels of customer churn demand greater emphasis on targeted acquisition strategies, retention and win-back programmes. As a result, huge effort (and expense) is required just to maintain net customer numbers. The Lumo team are also continuing to work on ways to better address and rectify customer complaints so as to reduce long-term churn.

The 120MW Kwinana Power Station was commissioned in Western Australia and construction of the Port Stanvac facility is on track in South Australia. IEA will own 285MW of peaking generation capacity by the end of the year. In addition, there is an on-going review of options for additional generation development sites.

Over the six months wholesale electricity and gas markets were favourable with low prices for the former and firmer prices for the latter.


NZ Bus

For the half year patronage growth in the northern region was 3% and in Wellington/Hutt it was 4%. In both regions the growth trend is upwards. Wellington growth is encouraging after a flat period and increasing patronage is been experienced across a number of the main routes, in particular Karori, Island Bay, Miramar and Airport Flyer.

At least in part this is believed to reflect the company's efforts to improve reliability and, on some Auckland routes, frequency. In central Auckland services continue to be disrupted by roadworks. While improved traffic flows through Wellington are on hold as work continues on the Manners Street busway. Wellington's previous Council are due great credit for bringing this about despite the cost and some opposition.

The local authority elections resulted in some changes in both regions, especially in Auckland. The new Mayor is a strong public transport advocate and the new Auckland Council transport agency combines functions which were once widely spread. Better public transport is widely seen as a likely outcome of the Auckland local government reforms.

In the meantime the Ministry of Transport review of bus public transport contracts continues to progress and the first of the new contracts should not now be far off. Without a new contracting regime investment and progress is difficult.

Northern Region

  September 6 months to 30 September 12 months to 30 September
2009 3,035,475 18,236,494 35,551,503
2010 3,166,799 18,762,727 34,988,437


2.9% -1.6%

Southern Region

  September 6 months to 30 September 12 months to 30 September
2009 1,776,661 10,342,643 19,760,217
2010 1,915,187 10,752,191 20,499,916
Change 7.8% 4.0% 3.7%

Operationally NZ Bus continues to make progress on its business performance and agreements have been signed with most staff through to 2012.


Snapper use is now increasing at a fast rate and people with Snapper cards are using them more often. In September Snapper transactions were up over 40% on the same month last year.

Snapper is now used on approximately 60% of GO Wellington and Valley Flyer bus rides and this is expected to increase with the greater value being offered by Snapper since cash fares increased on 1 October.

  • 135,000 Snapper cards were on issue as at 30 September, up from 120,000 at 1 April 2010.
  • 10 million transactions over the six months, from 7 million in the same period last year.
  • 230 retail outlets accept Snapper, from 200 as at 31 March.
  • Snapper partnered with Smartpay and TaxiCharge to develop and install a payment system on over 700 taxis in the Wellington region.
  • Two new cards were released, the Mini and the Sprat.
  • MySnapper online making the web applications accessible to all computers and operating systems. Four Wellington area self-service kiosks for people who prefer reloading their cards that way.
  • Passes for public transport.

  • Snapper now has 35 staff working on development and maintaining smooth operations.


    Wellington Airport

    Wellington is just days away from opening the international terminal. Since the new domestic terminal opened in 1990 the people of Wellington have developed affection for a gateway offering "the best of the region". Just as the smell of fresh coffee has become an icon of Wellington - it has become noticeable the instant passengers arrive in the terminal.

    The Rock is next. No one who flies internationally out of Wellington will have the slightest doubt as to where they are, nor that Wellington is somewhat unique.

    In the short term the main use of the new facilities will be for Tasman services, which is consistent with the on-going integration of the New Zealand and Australian air travel markets. Longer term the gateway will be Wellington's link with Asia.

    The integration of New Zealand and Australian air travel markets may have taken a step forward over the month with the new proposal of Air New Zealand and Virgin Blue to form an alliance linking their respective domestic New Zealand and Australian services. To address concerns about the alliance reducing competition on the Tasman, the airlines committed to minimum levels of capacity and growth on Wellington's three trans-Tasman routes. The Wellington stakeholder group endorses the airlines' new proposal and hopes that if it progresses that it will lead to a more vibrant Australasian air travel market.

    While the alliance was not subject to review by the NZ competition authorities, the Commerce Commission is continuing to develop new rules covering airport information disclosures. Infratil supports good, transparent disclosure, but has made a submission on the Commission's provisional views on how airport land would be valued in disclosures.

    September Domestic
    Total Passengers
    6 months to 30 September
    2009 371,096 49,941 2,514,938
    2010 386,403 52,498 2,559,691

    Operational figures

    In the six months to 30 September 2% more passengers used Wellington airport than the corresponding period a year prior. Regional passengers were up 4%, trunk routes were stable and international passengers rose 2%.

    In September domestic services had loads of 79% and international services were 80%.


    European Airports

    Glasgow Prestwick

    Passenger numbers were up 13% up on the same period last year. Increased capacity on sunshine routes continues to prove popular and airlines are achieving encouraging load factors and forward bookings.

    Freight volumes were 7% ahead of the prior year due to growth on US services.

    September Passengers Freight Tonnes Total Passengers
    6 months to 30 Sept
    Total Freight Tonnes
    6 months to 30 Sept
    2009 153,837 1,005 1,013,642 6,996
    2010 173,254 1,074 1,004,657 6,349

    Operational Figures

    Manston (Kent International)

    Freight tonnage was a third lower than the same month last year due to the demise of MK Airlines and the suspension of flights by Meridian. Flybe's Edinburgh passenger service continues to grow and they also launched a Manchester service in September.

    September Freight Tonnes Passengers Total Freight
    6 months to 30 Sept
    Total Passengers
    6 months to 30 Sept
    2009 3,086 133 16,631 4,048
    2010 2,053 3,935 13,505 16,890

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