MONTHLY: IFT: Infratil Monthly Operational Update

26 Aug 2010 5:16 pm

IFT 26/08/2010 MONTHLY

REL: 1716 HRS Infratil Limited

MONTHLY: IFT: Infratil Monthly Operational Update

Infratil Monthly Operational Report

26 August 2010

Introduction Shareholders at Infratil's annual meeting briefly discussed and passed all resolutions. Chief Executive Marko Bogoievski noted that performance over the first third of the financial year had improved confidence about the 2010/2011 earnings guidance of $390 million to $430 million (7% to 18% uplift over 2009/10) and that the current environment is also providing attractive investment opportunities, such as Greenstone Energy. Infratil AGM presentation

Infratil is to list on the ASX on Monday 30 August under the ticker code IFZ, making its shares more accessible for Australian investors. Coincidentally Infratil's subsidiary Perth Energy (82% owned) commissioned its 120 MW power station at Kwinana. The site of this station is adjacent to two gas pipelines and two high-voltage transmission lines and is well placed for expansion once stage one has an operating record.

Infratil Infrastructure Property Infratil Infrastructure Property (IIP) and the Public Infrastructure Partners Fund (also managed by Morrison & Co) lodged proposals with the Crown to develop the National Convention Centre at IIP's Halsey Street site in the Auckland Viaduct Basin.

If this progresses IIP may sell its interest in this site to Auckland City with the Public Infrastructure Partners Fund undertaking the development in partnership with the City and Crown. Coincidentally the PIP Fund recently announced it was making a $39 million investment in the Melbourne Convention and Exhibition centre.

IIP is also progressing development options for its other land holdings at Stoddard Road and New Lynn in Auckland and Kilbirnie in Wellington.

TrustPower It must have been wet and windy over New Zealand April to June as TrustPower's wind and hydro generation were both up markedly on the same three months last year. South Australia conversely seems to have enjoyed a quiet spell with TrustPower's windfarm at Snowtown producing 14% less electricity than the same period in 2009.

Over the last 12 months TrustPower's residential customer numbers have fallen 3% and June quarter 2010 retail sales were down 7% versus the same period in 2009 while sales to commercial customers rose 6%. The state owned generators are particularly active competitors in the residential market.

Infratil Energy Australia Perth Energy, 82% owned by Infratil and part of the Infratil Energy Australia group, commissioned its A$120 million, 120 MW Kwinana Power Station.

The Western Australia Energy Minister Peter Collier cut the ribbon and noted that the station will help the State achieve its share of the national target of 20 per cent renewable electricity by 2020. "This will assist with increasing Western Australia's capacity to manage intermittent power on the grid from renewable energy sources, such as wind and solar. The station will also increase reliability of supply during high demand periods and add significant security during system emergencies through its capacity to quickly switch fuels from gas to diesel." Local media coverage from Perth now and abc.net

IEA Chief Executive Darryl Flukes noted that the station represented the outcome of a complex jigsaw of development applications, network, water and fuel agreements, leases and easements, financial arrangements, procurement and construction projects. While many people contributed, the finished power station was the product of Perth Energy managing director Ky Cao's vision and tenacity. He identified and contracted the site over a decade ago, built up Perth Energy's retailing business and convinced the investors. Also deserving thanks are CTEC for finishing construction bang on budget, the ANZ and ICBC banks who managed the financing very efficiently and the West Australian government which has progressed reform of the State's electricity industry providing confidence that prudent and innovative investors and operators will be rewarded.

Greenstone Energy Greenstone launched an issue of bonds paying 7.35% maturing in October 2016. The issue has been well received by the market with expressions of demand outstripping the initial $100 million target. All of the bond proceeds will be used to retire bank debt.

The bonds are an important test of the New Zealand capital market as they come from a major new issuer operating in a sector to which New Zealand investors have not previously been exposed. The company undertook a comprehensive information and briefing programme for banks and brokers and approximately 200 people attended presentations held in Auckland, Wellington, Christchurch and Dunedin. The Investment Statement has received considerable positive feedback.

Greenstone's operational performance has also been good with sales strong in both retail and commercial fuels. Backing this up the company has just announced the fourth new distribution site since its acquisition of the Shell business in April. Greenstone operates in an infrastructure intensive sector and growing throughput and investment can only occur in unison.

The New Zealand Refining Company announced its results for the six months to 30 June providing a positive surprise to the market as its volumes and margins were both up on the previous six months. Over the period approximately 30% of the refinery capacity was allocated to Greenstone. NZRC also published its forecasts for NZ fuel demand and its share of the consumption.

NZ Bus The NZ Bus staff voted to accept the terms negotiated by the company and the Wellington Tramways and Manufacturing and Construction Workers unions. Most driving and maintenance staff now have employment agreements until 2012 for Valley Flyer and 2013 for GO Wellington. Along with the Auckland agreements reached last year this means stability in employment relations through to 2013 and continued focus on improving services.

The engagement achieved with the Wellington unions is also a positive platform to progress other initiatives in health, safety and training.

Ongoing discussions between Ministry of Transport and NZTA officials, representatives of regional transport agencies and operators has yet to produce a concrete outcome for the intended new contracting regime. However progress is being made and the new regime should start to be implemented later this year.

Patronage over the first four months of the financial year was up 2% in both Auckland and Wellington (about 350,000 more trips). In July this momentum was maintained in Wellington while Auckland patronage was flat.

As seems to be the norm, individual route performance varied markedly and at times it has been difficult to isolate the factors lifting or depressing usage. Tertiary and senior use remains strong, but factors such as Wellington commuter rail irregularities have flowed through to all public transport as commuters have reverted to their cars. Northern Region July 4 months to 31 July 12 months to 31 July 2009 2,973,092 11,977,944 35,602,022 2010 2,957,965 12,195,153 34,679,413 Change -0.5.% 1.8% -2.6% Southern Region July 4 months to 31 July 12 months to 31 July 2009 1,737,561 6,817,300 19,710,093 2010 1,767,436 6,953,618 20,226,686 Change 1.7% 2.0% 2.6%

Snapper Trials were undertaken with the first group of taxis and implementation of Snapper payment capability in Wellington cabs is on track to be installed over the next month. Six taxi companies, two bus lines and the Wellington ferries will all be accepting Snapper. Which leaves only the Cable Car, trains and Newlands and Mana buses awaiting better ticketing arrangements. The next fillip for Snapper arrives on 1 October when Greater Wellington's adjustments to fares increases the benefit of using Snapper rather than cash.

The table below summarises the fare changes and shows that except for City and One Zone fares, in every other instance a bus patron can save money switching from cash to Snapper even though the average fare increase is about 10%. The new fares reflect the higher GST.

Wellington Airport Over the first four months of the financial year passenger numbers rose 1% relative to the same period in 2009. In July, passengers were up 2% relative to the year prior despite 2% less airline capacity. Year to date domestic passenger numbers are 1% ahead of the same period last year on 2% less capacity. In July domestic load factors were 77% as against 74% a year prior and domestic passengers were flat relative to the same month last year. Auckland and Christchurch traffic were down but this was offset by a 9% increase in passengers on regional services. Regional capacity increased 2% with extra frequencies on the Nelson and Queenstown routes.

International passengers were up 1% over the four months on a 4% capacity lift. In July international passengers were 11% higher than the year prior with Melbourne passenger numbers increasing 8%, Sydney by 15% and Brisbane by 7%. Relative to the same month last year international load factors were 2% higher.

The announcement by Pacific Blue that it is to withdraw its two B737 from domestic services from October was a disappointment, but the disruption will be minor as the airline currently only flies between Wellington and Auckland three times a day and Wellington and Christchurch twice daily. It is expected that Air New Zealand and Jetstar will increase services to maintain the overall level of services. Jetstar has already announced that it will be introducing two further A320 to New Zealand domestic services.

Pacific Blue continues to provide Australian services to six New Zealand cities and Wellington Airport anticipates continuing to work with the airline on its connections with Sydney and Brisbane. Pacific Blue remains an important part of New Zealand's international air links.

July Domestic July International Total Passengers 4 months to 31 July 2008 401,877 52,397 1,793,705 2009 388,595 49,004 1,678,870 2010 389,808 54,256 1,696,555

Operational figures

European Airports Glasgow Prestwick Passenger numbers were up 3% in July relative to the same month last year. Glasgow's sunshine routes continue to perform well with strong load factors and forward bookings.

Freight volumes were up 1% in July relative to the same month last year. July Passengers Freight tonnes Total Passengers 4 months to 31 July Total Freight 4 months to 31 July 2009 191,940 1,027 678,914 4,759 2010 197, 198 1,033 640,433 4,046 Operational Figures Manston (Kent International) Freight decreased in July relative to June mainly due to the unexpected cessation of Meridian Airlines combined with aircraft technical problems causing diversions for two other inbound flights. A smaller crop harvest in Kenya has also lead to lower tonnages being exported to the UK. Edinburgh passenger numbers continue to be strong and slightly ahead of expectations.

July Freight Tonnes July Passengers Total Freight 4 Months to 31 July Total Passengers 4 Months to 31 July 2009 3,637 1,440 10,409 2,484 2010 2,319 3,259 9,442 9,351 End CA:00198921 For:IFT Type:MONTHLY Time:2010-08-26:17:16:19

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