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Infratil Monthly Operational Report

20 Mar 2009


In general, Infratil’s businesses are performing relatively well in a recessionary environment, but we continue to monitor conditions carefully.

On 24 February Infratil hosted its second Investor Day for investment analysts, institutional fund managers and others with an interest in Infratil’s businesses. The Investor Day provided insights into Infratil’s businesses, their key underpinning trends as well as financial forecasts.

Presentations were given by Infratil’s CEO Marko Bogoievski, the operating subsidiary chief executives and Alison Sander of Boston Consulting Group. Copies of these are available here.
The next Infratil Update newsletter will carry a summary of the Investor Day.

On 16 March Infratil’s managers Morrison & Co hosted a presentation by Chris Wood of CLSA who is ranked by industry polls as the number one equity strategist in Asia. His dissection of the genesis of the global financial crisis and its path from here pointed to the crucial role policy markers will play in the recovery. It may not give individuals, businesses and investors much comfort to know that their prospects over the next year or two rests in the hands of politicians. However, New Zealand government’s strategy has gained approval in the Wall Street Journal Asia which carried an interview with Prime Minister John Key in its 6 March edition. 

One recent initiative undertaken by Infratil has been the announcement that it may buy back some of its Perpetual Infrastructure Infratil Bonds (PiiBs).

A number of perpetual coupon reset securities are on issue in the New Zealand market and have been marked down in price because their coupons are reset annually from prevailing interest rates. Since their issue, the PiiBs’ coupon rates have been 9.0%, 10.3% and 6.9% respectively but at current interest rates the coupon rate next year would be about 4.5%. In due course it is likely that rates will rise and so too will the PiiBs’ coupon. In the mean time investors are shunning this type of security driving their price down. Infratil’s intention with its buyback is to make an investment at an attractive price and to incidentally support market liquidity.


The electricity supply for the winter of 2009 looks healthy as a result of strong spring inflows to the hydro storage lakes, reduced electricity demand and additional supply from the new 100MW geothermal plant at Kawerau. Hydro storage is 112% of average compared with 80% this time last year while national demand is 6% lower than last year due to reduced production at the Rio Tinto aluminium smelter caused by a transformer failure last November. The return of the 3rd pot line at the Tiwai point smelter was delayed as a result of weak aluminium demand and low prices but it is now expected to return in the next couple of months. Wholesale electricity prices are now around 3c/kWh compared with around 10c/kWh this time last year.

The Wairoa Community Development Trust was the Supreme Winner at the 2008/9 TrustPower National Community Awards for its “CACTUS courses”. CACTUS is a programme of physical training designed to extend a young person’s mind and physical capability. They run for eight weeks, and include physical routines, career education, motivational speakers and mentoring. The Supreme Winner was chosen by a ballot of panellists and the 24 voluntary groups who attended the Awards.

Infratil Energy Australia 

Customer numbers remained stable over February at 386,000 accounts. Spot electricity prices were volatile and both spot and contract prices softened as weather conditions eased. IEA’s price hedging functioned to expectations.

A number of encouraging political developments occurred over the month.

Queensland’s elections, to be held 21st March, are likely to result in a more constructive discussion about energy pricing regulation.

The NSW Government released it energy strategy which reconfirmed the intention by the end of 2009 to sell the State’s energy retail activities, trading rights in respect of state-owned generation, and the sites which have been developed for new generation plant.

It is hoped that the NSW moves will result in enhanced wholesale energy market liquidity, the avoidance of market dominance, and prices moving to fairly reflect supply and demand. The State’s decision to increase retail tariffs by 20% also signals the pro-market intentions, albeit most of the price rise flows through to network companies owned by the NSW Government and has little impact on the viability of generators and retailers in NSW. It does demonstrate political resolve to address the State’s artificially low electricity prices.

The Commonwealth Government released draft legislation on the Carbon Pollution Reduction Scheme (CPRS), the equivalent of New Zealand’s Emission Trading Scheme. The draft largely reflects the scheme flagged in the December White Paper in terms of emission reduction targets, scope and start date of 1 July 2010. However, there continues to be uncertainty about how the legislation will evolve in the Senate as the Labour Government will need support from amongst the opposition, the Greens, or independent senators.

The level of consensus on CPRS is diminishing due to the economic downturn (resulting in increased opposition from conservative parties and business groups) while environmental groups oppose compensation being paid to large emitters and the lack of recognition and reward for voluntary abatement measures.


Snapper now has 55,000 cards on issue with over 25% of the addressable Wellington population now choosing to hold a Snapper card as the way to use public transport and make retail payments.

The first trial of Snapper chips embedded in school identity cards is underway at seven Wellington schools. At present these cards can be loaded and used for payments as with a regular Snapper. It is hoped that by the start of Term 2 GO Wellington buses will offer age-based fares, which means that the school ID/Snapper (and a new junior Snapper which is soon to be released) will enable their holders to get child fares, including passes, on the buses.

The technology behind the seemingly small step to enable Snapper to become the one way to pay for a bus, train or ferry trip has proven to be challenging. Snapper is based on one of the world's most sophisticated and secure technologies, but adding products such as student, child or Super Gold bus fares in a cost efficient manner has required some real Kiwi ingenuity and smarts.

Snapper is now being approached by retailers who are signing up on the recommendation of other retailers that are gaining spend and reducing costs from the faster transaction times, increased foot-traffic and Snapper’s marketing. This is particularly benefiting Snapper’s deployment in Hutt Valley retail which is happening ahead of Snapper being available on the Valley Flyer buses.

In a recent New Zealand Herald article Snapper was the subject of a misinformed comment by the Chairman of the Auckland Regional Council who implied that it could not provide integrated ticketing and only worked on buses. In fact Snapper’s Korean T-Money system is currently used 26 million times a day on 10,000 buses, 350 trains, 40 ferries and 40,000 taxis reflecting several hundred operators and services. Its introduction in Wellington and intended roll-out in the Hutt has occurred with no tax or ratepayer funds.

New Zealand Bus 

Northern region patronage for February was 4.2% higher than February 2008, an increase of approximately 6.3% when adjusted for comparable days. Year to date growth is 8.2%. GoWest and MetroLink cross-town and central Isthmus services continue to perform very well.

In February the North Shore Busway had been open for a year and ARTA has indicated that 7,000 people are now travelling on it during the morning peak. They calculate this to be the equivalent of two lanes of car traffic indicating that it will be making a material impact to enhancing traffic flows from the North Shore and Hibiscus Coast.

New Zealand Bus’ North Shore services have also grown more than the regional average, however the restructure of services that occurred around the Busway has not resulted in everyone winning and reduced frequency on Beach and East Coast Roads has impacted patronage in those areas.
Unfortunately the northern region growth may now be running into pressures due to the priorities of public transport funding.

Southern region patronage for February was 6.3% below February 2008, negative 2.2% after adjusting for comparable days. Patronage on Valley Flyer services continues to show strong growth, but Wellington patronage wass disappointing. Many Go Wellington services at or around the peak times are at capacity and while the GO Wellington fleet is undergoing a major upgrade at present,  capacity has remained largely unchanged over the year due to funding constraints. Work is underway to improve efficiency and to see if customer behaviour can be chnaged to improve off-peak growth.
In the context of total Wellington region public transport growth of about 4% NZ Bus' flat southern region result is disappointing.

Northern passenger trips
February 11 months to 28 February 2009
2008 3,101,033 33,128,083
2009 3,229,977 35,835,697
Change 4.2% 8.2%
Southern passenger trips
February 11 months to 28 February 2009
2008 1,698,069 17,962,932
2009 1,591,563 18,072,278
Change -6.3%

Wellington Airport

Domestic passenger numbers in February were down 12.6% compared to February 2008. The approximately 9% decline when adjusted for comparable days was in line with January’s 9.9%.

The drop was due to  weak demand (presumably due to the economy), reductions in capacity by Qantas and because the comparisons are against the extraordinary growth in early 2008 following Pacific Blue’s domestic entry (February 2008 domestic growth was 21%).  Domestic passenger numbers are expected to reflect the softer economy until the commencement of Jetstar services in June provides some capacity stimulus.

For the eleven months of the year to date, 4,237,193 domestic passengers used Wellington,  a 6.5% increase on 2008.

International passenger numbers in February were 0.5% higher than the same month a year earlier (around 4% underlying increase).  A significant increase in capacity to Brisbane – up 64% on February 2008 - stimulated an increase in passenger numbers on this route. However, Sydney and Melbourne both experienced declines.

For the year to date, 557,056 international passengers used Wellington Airport, an increase of 1.5% on 2008.

Infratil Airports Europe 

Glasgow Prestwick Airport

Glasgow Prestwick handled a total of 137,654 passengers in February, down 17% on January 2008.  A general decline in aviation activity due to economic conditions has resulted in the majority of passenger services underperforming against the prior year.

Approximately 2,000 passengers beyond the usual did pass through the Airport when seven inbound British Airways long-haul flights were diverted due to weather problems at Heathrow.

The month’s performance has brought the year-to-date passenger total to 2,162,521 which is 3% down against the equivalent period last year. 

1,078 tonnes of freight transisted through Glasgow Prestwick in February, approximately the same as in January and 56% down on February 2008. 

Reflecting the reduced level of activity the Airport is undertaking a review of its operations which are expected to result in between 100 and 120 redundancies. The Airport employs around 450 people.

Kent International Airport

Kent International handled 2,519 tonnes of freight in February against 3,966 tonnes in February 2008, a 36% drop.
Cargolux recorded a significant year-on-year rise which was offset by a reduction in MK Airlines tonnage, mirroring recent months.
At 20,073 tonnes, the year-to-date freight volume is 31% down on the same period in 2007/08.

Lübeck Airport

Lübeck Airport handled 34,223 passengers in February, up 13% on February 2008.
The year-to-date passenger total of 490,672 is down 7% against the same period in 2007/08.

On 3 March 2009 the long awaited planning permission to develop and expand its facilitites was granted by the State of Schleswig-Holstein.

Trustpower Wellington Airport Infratil Property RetireAustralia CDC Data Centres Vodafone New Zealand Qscan Pacific Radiology Kao Data Longroad  Galileo Green Energy GmbH Gurīn Energy