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Infratil Results for the Nine Months ended 31 December 2007
19 Feb 2008
Infratil’s results over the third quarter were flat, which is consistent with the first half. Standout developments were registered at Wellington Airport and Infratil Energy Australia, which resumed growth in its energy retailing operations.
Shareholders will naturally be disappointed by the worldwide decline in equity values, which reflect both credit concerns in capital markets and apprehension about a weaker world economy. Fortunately, Infratil’s airports, energy and public transport operations are likely to be relatively resilient to the fallout. There are however real consequences.
At present Infratil’s businesses are investing in bus services, airport facilities, generation plant and energy retail growth, but the timing of these investments may be reviewed as the cost of capital rises and the value offered by other opportunities becomes more attractive. The bid for a partial take-over of Auckland Airport may also be decided by a contest between short-term share price considerations on the one hand versus long-term value on the other.
Underlining Infratil’s focus on delivering returns to its shareholders over the long-term as seen by the recent recruitment of senior executives to the management team.
Infratil’s earnings before interest, tax, depreciation, amortisation, realisations and impairments, and fair value movements of financial instruments ("EBITDAF") increased to $240.5 million from $101.3 million in the previous comparative period. The operating surplus was $85.7 million ($29.4 million) and the net surplus attributable to Infratil shareholders was $4.1 million ($62.4 million previously, higher predominantly from realisations).
The growth in EBITDAF continues to mainly reflect the consolidation of TrustPower from
31 December 2006, which also contributed to increases in depreciation and interest costs.
As has always been its policy, Infratil’s priority is growth in value rather than immediate period income.
LIABILITIES & RISK MANAGEMENT
Over the quarter Infratil raised $88 million through an issue of shares partly paid to $1 each. The second $1 instalment on these shares is due in July-August 2008.
As at 31 December 2007 net bank debt of Infratil and wholly owned subsidiaries made up 13% of capitalisation. Total debt, including Infrastructure Bonds, comprised 42% of capitalisation, reducing to 38% if the $88 million second instalment is included. Since 31 December 2007 Infratil has renewed its bank facilities to provide additional capacity and duration to its funding.
In addition to taking a conservative approach to its capital, Infratil has also purchased a small amount of insurance against falls in the value of the share market. This is designed to provide some protection should the fluctuations in the share market increase and to ensure there is appropriate focus on global market risk. Risk identification and management has been, and continues to be, a hallmark of Infratil’s approach.
was the stand out performer for the quarter with net profit up $5.9 million, 32% on a year earlier. This was driven by the launch of Pacific Blue’s services to Christchurch and Auckland and the robust competitive response of Air New Zealand and Qantas. In November and December 450,000 passengers travelled through the airport, up from 396,000 a year earlier. In January 2008 domestic passenger numbers were 30% higher than the same month in 2007.
For the nine months, EBITDAF was up 18% to $44.1 million. Passenger services income was $16.2 million with per passenger income $4.47 as against $4.05 for the year earlier period.
This increase in activity has only been possible because of the Airport’s investment in facilities and work continues on the enhancement of the terminals, car parking, bus access and runway, as well as the off-airport retail centre. Infratil Energy Australia group
(IEA) resumed the growth of its energy retailing operations, which had 252,765 billable accounts as at 31 December 2007, up 66,732 in the year to date. The resumption of profitable growth has been possible because retail tariffs have risen and wholesale energy prices have returned to more normal levels after being driven up by drought conditions in winter 2007. Prior to that occurring, IEA had been gaining 15,000 to 20,000 accounts a month and with growth once again underway, the next milestone is 300,000 accounts.
IEA’s 30MW Hunter peaker power station is on schedule for completion in March and work also progressed on the dual-fuel 120MW Perth generation station.TrustPower
continues to be a dominant influence on Infratil’s results, and value. For the latest quarter net profit was $15.8 million from $28.7 million a year earlier. While low generation from TrustPower’s hydro power stations impacted the quarterly result this was within normal bounds.
TrustPower’s investment in additional capacity progressed favourably. The South Australian windfarm was increased in size by approximately 10%, to almost 100MW, and remains on track for completion later this calendar year. Consenting progressed in respect of the 72MW Wairau and 46MW Arnold hydros and the 200MW Lake Mahinerangi and 240MW Kaiwera Downs wind schemes. Infratil Airports Europe
achieved good freight results at both Glasgow and Kent while passenger aviation activity was weak at both Glasgow and Lübeck. Work continues on marketing the airports to potential users with incremental progress against a backdrop of a weak European passenger aviation market. The group delivered a better financial result due to a one off benefit arising from a lease termination receipt. NZ Bus
passenger numbers continue to disappoint indicating the urgency of the service upgrades that are now underway. NZ Bus is actively engaged with Auckland and Wellington transport agencies and councils to deliver better public transport services and users will start to experience the outcome of these collaborations this calendar year.
Infratil’s businesses are performing well in creating long-term value for shareholders. The developments at Wellington Airport and Infratil Energy Australia were stand-outs during the last quarter. Infratil’s financial position is solid with bank facilities recently re-financed, very long term subordinated bond financing, additional equity to arise from the second instalment on the partly paid shares and, next year, the option expiry and some market-hedging protection. If capital market turmoil continues, the Company should be well positioned to take advantage of any discounted asset opportunities which arise.View the full annoucement of the results in PDF formatView the Financial Accounts (unaudited) for Nine Months ended 31 December 2007 in PDF format