23 Jan 2009
Infratil’s Chief Executive, Lloyd Morrison has stepped down for a period of medical leave. Mr. Morrison has been diagnosed with leukemia and has started treatment. He is also taking leave of absence from his positions as director of Infratil, TrustPower and Auckland International Airport.
Chief Operating Officer, Marko Bogoievski, has been appointed as Chief Executive for the period of the medical leave and has also been appointed a director of Infratil.
Infratil and its banks have completed the regular annual review of one third of Infratil's bank facilities.
This has resulted in the $520 million of facilities being re-extended to the original three year term. The renewal means that the only material debt maturity or review Infratil (and its wholly owned subsidiaries) has to undertake over the next two years is the 2010 review of one third of the facilities.
At 31 December 2008 Infratil and wholly owned subsidiaries had $312 million of undrawn bank facilities and cash on deposit.
Infratil's facilities are provided by ANZ National Bank Limited, Bank of New Zealand, Commonwealth Bank of Australia, The Hongkong and Shanghai Banking Corporation Limited and Westpac Banking Corporation.
TrustPower had been granted resource consents for a 200MW wind farm on land near Lake Mahinerangi which feeds TrustPower’s Waipori Hydro Scheme. The location of the windfarm means that it will be able to be operated in conjunction with Waipori’s significant storage as well as being able to utilize existing transmission infrastructure. While these advantages will benefit the windfarm’s economics the decision to commit capital to the development will depend on projected electricity prices and the cost of imported plant and equipment, which has increased as the NZ$ has weakened.
TrustPower’s retail operations continue to benefit from recent increases in competition and customer numbers are up almost 3% since 30 September 2008. The agreement with Top Energy to purchase the increased output from the Ngawha geothermal power station also means TrustPower is well placed to increase its retail operations in that region.
TrustPower’s South Island hydro has good levels of storage for this time of year and generation in both North and South Islands has also been satisfactory.
December 2008 patronage was 11.5% higher than December 2007, a 6% increase when adjusted for comparable workdays and the timing of Christmas Day. Year to date (nine months), Northern Region patronage is 9% above the same period in 2007. On average, this growth is the equivalent of an extra 111 bus loads of passengers every day.
Over the month, patronage growth was strong on the corridor services, particularly Cross Town and the Eastern Isthmus (both up 11%), but was down on some inner city services and on the ferries, perhaps due to fewer visitors to central Auckland and the current economic environment.
After a contested tender process Fullers was contracted to provide ferry services between Auckland CBD and Half Moon Bay and Bayswater. The new contracts provide Fullers with increased income which was necessary as higher costs had resulted in the services previously operating at a loss.
Patronage increased 6.8% in December 2008 relative to December 2007, although growth was flat when the two periods are adjusted for workdays. Year to date (nine months), Southern Region patronage is 1.5% above the same period in 2007.
Valley Flyer continues to show strong growth with services such as Petone to Upper Hutt and Eastbourne to Wellington up over 15% on the same period in 2007. Go Wellington patronage was flat.
December’s relatively weaker performance than November may be a function of weather and seasonality, but the wider economic slow down and lower petrol prices are also likely to have had an impact. Government’s recent initiative to allow pensioners and veterans to travel free on off-peak public transport continues to be a benefit to these people who are clearly enjoying their improved mobility.
Over 40,000 Snapper cards are now on issue in Wellington and in December they were used on over 40% of GO Wellington’s trips.
83 merchants in Wellington are also accepting Snapper as a payment service and from this year’s Super 14, Westpac Stadium will be “Snapper powered”. Not only will Snapper be accepted by the Stadium’s merchants and season passes will contain a Snapper chip which will have all the functionality of a regular Snapper card as well as being the ground entry ticket. The single card will enable its holder to get into the ground, buy a half time snack and pay for the bus ride home.
Age enabling of the Snapper is also progressing and by the second term of the school year Wellington and Hutt students will be able to use Snapper (which are doubling as school ID) to get discount fares on the buses. By that time Snapper will also be generally available on the Valley Flyer services, including the popular Airport Flyer, New Zealand’s most successful airport public transport service.
Victoria Electricity had 383,000 customers at the end of calendar year 2008 (252,000 at the end of 2007). Moderate rates of growth are anticipated in coming months. In Victoria, the removal of price cap regulations for residential customers appears to have proceeded smoothly. Price movements at the start of 2009 vary, but as an indication, one large incumbent retailer recently raised prices by9%. This largely reflects underlying cost movements, particularly in gas. For Victoria Electricity, the most significant benefit is that it brings further certainty that Victorian prices will not sit artificially below costs, as is the case in some other markets. The Victorian gas market has been subdued over summer months with spot prices low by historical standards. This has affected all players with excess gas in summer, including Victoria Electricity. The risk of selling gas back into a low spot price is one of the factors taken into account in setting retail prices for gas.
Shortly before Christmas, the Australian Government released the White Paper on the Carbon Pollution Reduction Scheme. There is a great deal of work to be done in understanding the full impacts, but of most immediate relevance to Victoria Electricity:
· Targets are lower than expected. 5% below 2000 levels by 2020 is the minimum target. A 15% reduction target is also foreshadowed, conditional on international agreements.
· The carbon price is likely to start low, with Treasury modelling suggesting $23/tonne. It is subject to a price cap of $40 (inflated by CPI) for the first 5 years.
·There is a very generous compensation package for low income households, which is means governments have no excuse to prevent the cost of carbon fully passing through into benchmark retail prices.
· There is also a strong compensation package for carbon intensive generators, which will minimise any short term disruption to the trading environment.
·The release of the White Paper is likely to result in greater certainty over the forward carbon price and increased liquidity in energy markets in coming months.
Perth Energy progressed the development of its 120MW dual fuel power station on the Kwinana industrial strip south of Perth. The A$120 million plant is expected to be available for dispatch by June 2010. Final conditions precedent relating to the project have now been completed and construction work has started.
The cost of construction is fixed and funding is to be provided from a A$75 million debt facility provided by ANZ Bank and equity which is to be primarily provided by Infratil.
Infratil currently owns 77% of Perth Energy and this shareholding is expected to increase as additional equity is provided to fund the Kwinana project.
The plant is a “peaker” and will be eligible to create capacity credits. In the WA market retailers are required to purchase capacity credits approximately equal to their retail load so the new station will complement Perth Energy’s retailing operations.
In December passenger numbers were down 4.5% compared to December 2007 and similar to November’s year on year comparison of -4.4%. For the full calendar year to date 4,521,348 domestic passengers used Wellington which was an 8% increase on 2007. The December decline on the trunk could have been more pronounced as this was the first full month to month comparison following Pacific Blue’s entry in mid November 2007, but December is a difficult month from which to gage trends because of its disproportionate forward bookings and family and leisure related travel. The numbers were also impacted by the withdrawal of a significant number of Qantas’s services to Auckland at the start of the month.
December produced a very pleasing increase of 7.2% in international passenger numbers versus December 2007. The growth is attributable to a large increase in capacity and passengers to Brisbane largely due to Pacific Blue introducing additional services, although both Air New Zealand and Qantas also added services from the previous year. Of the other major international routes, Sydney and Melbourne remained flat. For calendar year 2008, 605,617 international passengers used Wellington Airport, an increase of 0.4% on 2007.
Wellington Airport’s initial $50 million offer of 5 year 7.5% coupon bonds has been fully subscribed. The bond issue, used to repay bank facilities, will stay open for over-subscriptions of a further $50 million. To date the issue has raised $77million. Details and documentation are available on the Airport’s website
Glasgow Prestwick Airport
Infratil Airports Europe December 2008 operational figures are made available here.
December brings the year-to-date passenger total to 1,893,072 which is 2% behind the equivalent period in 2007.
Glasgow Prestwick handled 1,167 tonnes of freight during the month, down 59% year-on-year which is similar to November’s result. The year-to-date freight performance is down 36% on 2007 at 15,517 tonnes.
Management are responding to the challenging operating environment by reviewing activities with the aim of lowering costs. To minimize uncertainty for the Airport’s staff, the review is being undertaken as quickly as possible.
Growth in air travel and air freight are robust long term trends but both facets of the Airport’s operations are sensitive to economic conditions and can be expected to be depressed until there is a more general recovery. In the meantime costs and operations have to be aligned with revenues. The Airport is also continuing to work on attracting new services.
Kent International Airport
Kent International handled 2,554 tonnes of freight in December – down 37% on the same month in 2007.
Cargolux tonnage substantially increased against the prior year and EgyptAir performance was also up. However, this was offset by MK Airlines which was down by more than 50% against December 2007.
At 15,289 tonnes, the year-to-date freight performance is 28% down on the same period in 2007.
Lübeck Airport handled 43,079 passengers in December, up 24% against 2007 and 12% against November.
This result is driven mainly by the reintroduction of a Dublin service to the winter schedule and the new daily domestic service to Frankfurt Hahn.
Overall capacity was up by nearly a third in December compared to the same month in 2007, and the proportion of inbound passengers was high across all routes due to the Christmas markets in Lübeck.
The year-to-date passenger total of 424,342 is down 9% on the equivalent period in 2007.
Infratil is in discussions with the City of Lübeck about their shareholders’ agreement. Infratil owns 90% Lübeck Flughafen GmBh and the City 10%. When Infratil purchased its stake in the Airport it was granted the right to sell the holding back to the City in certain eventualities and the expiry of this agreement has lead to the need to undertake the discussions.
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