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Infratil Monthly Operational Report

5 December 2011

Introduction

Infratil's six month result to 30 September 2011 was announced, the webcast and presentation is available here. The interim report is available here and will be mailed to share and bond holders this week. The result was characterised as “no surprises” by analysts and none of the six brokers that follow Infratil changed their ratings.

The full year earnings guidance was reaffirmed at the same level given back in May.

The earnings outcome resulted in determination of a 3 cps interim dividend, an increase of 20%.

Infratil's goal is to provide its bond holders with a safe income and its shareholders with a high, risk-adjusted, return from dividends and capital appreciation.

In November Infratil opened an issue of 8% bonds maturing November 2017. The issue was primarily to refinance bonds which matured in November 2011 and to maintain the long-term profile of Infratil's liabilities. The issue is receiving the support of investors.

 

TrustPower

November saw both wholesale and retail electricity markets move towards more regular levels for both electricity prices and retail market activity. In November national hydro storage was exactly on average and wholesale spot electricity prices declined to 6.5c/kwh from approximately 9.5c/kwh in October. Electricity Authority figures indicate that 32,000 electricity customers changed supplier in October, down from 44,000 in June.

The average bid-offer prices on the ASX futures market for New Zealand electricity for the year from March 2012 are 8.4-8.7 c/kwh and for the following year 8.7-9.1 c/kwh. For the six months to 30 September 2011 average wholesale spot prices were slightly over 6.1c/kwh.

The Electricity Authority is supporting the development of a liquid market for electricity price contracts on the futures exchange and its report released in November indicates that bid-offer spreads were at efficient levels (5% spread). TrustPower trades balancing volumes in the ASX market as its customer base mostly aligns with its generation locations. TrustPower would face exposures were it to trade large volumes at the Otahuhu node, the exchange traded futures reference point.

 

Z Energy

Z delivered a satisfactory financial performance for the half year and reaffirmed its full year earnings guidance, notwithstanding weak economic conditions and high oil prices contributing to a challenging market.

Z’s marine fuels business has been disrupted by withdrawal of the refueling barge Awanuia as it was used to take off the oil from the stricken container ship Rena. The Awanuia is usually used by Z to transport fuel oil from the Marsden Point refinery to the Port of Auckland and fortunately the last of Rena’s oil was removed on 13th November and the Awanuia was released back to Z in time for the cruise liner season.

While the absence of the Awanuia was inconvenient for Z’s marine customers they recognised the priority importance of the salvage operation.

On land, the Z brand is now being rolled out nationally so that by mid-2012 all of the approximately 310 petrol stations and truck stops will be in new livery. In parallel, but at a slower rate due to physical constraints, the improved retail offer is also being introduced, starting with the larger sites.

One illustration of the trial nature of the initial ten Z service stations was the coffee. While it was extracted from freshly ground Arabica beans, feedback indicated that New Zealanders prefer a “stronger” brew and consequently the roast was changed to be more to customers’ taste. Feedback continues to be welcome on all aspects of the new Z stations and the service and product offering.

Change is also occurring within Z’s commercial division. In part this will entail better identification of customer needs, in part better understanding of the costs associated with individual supply contracts. While many commercial contracts are for relatively large volumes they also tend to be a number of years and it will take time for the impact of these initiatives to flow through.

The success of both retail and commercial fuels initiatives will also have relevance for Z’s requirement of port, storage and other infrastructure. At present the plan is to invest approximately $65 million in this area with the first project being the $25 million, 30 million litre, fuel storage upgrade at Port Lyttelton.

 

Infratil Energy Australia

Lumo’s customer base continued to incrementally expand to be up 2% since 31 March. The source of growth means that 23.5% of customers are now outside of Victoria, as against 20% a year prior.

Churn in Victoria has recently declined slightly, while continuing to rise in NSW.

Prices for calendar 2012 electricity have also continued to rise, slightly. Forward prices are now about 1c/kwh higher than earlier in the year. This may reduce the potential for new entrants to take advantage of falling wholesale prices to push their retail offers against incumbent retailers that are locked into legacy prices for their energy purchases

Lumo Customer Numbers

  Victoria
Electricity
Victoria Gas SA
Electricity
Queensland
Electricity
NSW
Electricity
October 2010 201,432 135,860 33,482 49,062 1,836
March 2011 192,198 127,804 36,447 50,408 1,977
September 2011 191,663 127,047 39,225 52,548 3,917
October 2011 192,179 127,191 40,263 52,513 5,077
October mkt churn 26% 24% 21% 22% 15%
 

NZ Bus

Patronage growth accelerated in Auckland and stabilised in Wellington. Because of the timing of school holidays and the RWC it is difficult to draw direct comparisons, but the trend is positive including on services unlikely to have benefitted from RWC events.

In October NZ Bus commissioned its new Onehunga depot as the base for over 200 people (operators and support staff) and 100 buses. It has a body shop, fully equipped workshop, gym, drivers’ room and training, office and meeting facilities. The new depot is a substantial investment intended to ensure that both equipment and staff are able to provide bus services that are reliable, convenient, frequent, comfortable and good value.

Before Government embarked on the election campaign Cabinet did not provide the final endorsement to the new public transport contracting regime, but implementation is still anticipated in early 2012.

Greater Wellington Regional Council initiated consultation on its transport and bus public transport plans, which it is hoped will lead to patronage growth after a period of relatively stable passenger numbers.

Northern passenger trips October 7 months to 31 October 12 months to 31 October
2010 3,092,977 21,855,704 35,832,921
2011 3,362,852 23,068,239 37,687,561

Southern passenger trips October 7 months to 31 October 12 months to 31 October
2010 1,669,893 12,422,084 20,471,001
2011 1,676,523 12,315,772 20,252,951
 

Wellington Airport

October was dominated by the international surge associated with RWC. While the 26% increase in traffic was a boost, the extra 16,000 passengers largely went through the Airport on 3 days, and it may be that overall traffic was adversely impacted. This certainly seems to have occurred in the domestic market where anecdotal indications are that business travel was postponed to avoid paying RWC prices for travel and accommodation. Both domestic and international services had average loads of about 78% of capacity.

Over the first 7 months of the financial year the pattern of traffic continues to be strong on international and flat on regional and trunk except to and from Christchurch which is down.

Boeing flew is 787 new generation aircraft into Auckland to show it off to invited guests while ANA began services with their first 2 deliveries of this aircraft, between Narita and Hong Kong. ANA is to receive 16 of the B787 by March 2012. Boeing has 821 orders for this aircraft, the largest number ever received for an aircraft before its first delivery.

Wellington Airport and its major airline customers continue to consult on the aeronautical charges that will pertain from April 2012, details are carried on the Airport’s website

Wellingtonians voted for the new Miramar sign and gave overwhelming support for a sign which gave humorous homage to the region’s famous winds.

Operational figures

  October Domestic
Passengers
October International
Passengers
Total Passengers
7 months
to 31 October
Total Passengers
12 months to 31 October
2010 374,286 59,491 3,016,729 5,173,350
2011 386,387 75,849 2,987,136 5,105,512
 

European Airports

Glasgow Prestwick’s passenger traffic continues to be impacted by Ryanair’s reduced services while freight services have been adversely affected by the weak economy.

In Kent freight activity was boosted by good demand for fruit and vegetables air freighted in from Africa.

  October Passengers October Freight Tonnes Passengers 7 months to 31 October Freight Tonnes
7 months to 31 October
2010 177,280 1,186 1,181,815 7,535
2011 141,002 1,012 993,263 6,876

Operational Figures

  October Freight Tonnes October
Passengers
Freight Tonnes
7 Months to 31 October
Passengers
7 Months to 31 October
2010 2,475 4,157 15,987 21,047
2011 2,726 3,553 16,538 28,725
 
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