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Infratil tips earnings at top of guidance range for current FY

Friday 24th August 2018

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Infrastructure investor Infratil sees earnings in the current financial year "bouncing around the top end of guidance," chief executive Marko Bogoievski told the company's annual meeting in Wellington.

At its investor day in April, the Wellington-based company gave guidance for earnings in the 2018/19 financial year of between $500 million and $540 million on an earnings before interest, tax, depreciation, amortisation, and fair value movements in financial instruments basis.

A snapshot valuation of the company's portfolio taken on Thursday this week for the financial year to date showed a return to shareholders of 14.6 percent after a muted previous three years of capital growth of just 4.4 percent a year. Returns have averaged 16.6 percent annually since the company was formed in 1994.

With a focus on infrastructure that assists decarbonisation, ports and transport, retirement, and data and telecommunications services, Bogoievski said Infratil's "core platforms are likely to generate in excess of $1 billion of capital deployment opportunities over the next three years". He made no mention of opportunities that might arise from a range of capital projects the New Zealand government is pursuing, such as light and heavy rail investments and large-scale residential housing construction.

He hinted that waste management was among areas that may interest Infratil in its pursuit of decarbonisation opportunities which, to date, have focused mainly on hydro, wind and solar electricity generation projects in New Zealand, Australia and the US. The company has announced a takeover bid for Tilt Renewables, a holder of wind and solar generation assets originally built up by 51 percent Infratil-owned Trustpower. The bid is in concert with 20 percent Tilt shareholder Mercury, the Auckland-based generator-retailer.

The appointment of Wellington-based Cameron Partners and its global partner, advisory firm Rothschild, to advise Tilt on the bid was announced today.

Referring to electricity generation opportunities in New Zealand, Bogoievski said at least $200 billion of new investment would be required to electrify the New Zealand economy during the next 30 years and that the government should "exercise caution", in its current review of the sector, to ensure that investment is encouraged.

Trustpower was "well-positioned to participate in further industry consolidation" following the sale of its Australian assets and the recent full takeover of King Country Energy.

Despite political turmoil in Australia, much of it related to the approach to climate change, electricity regulation and pricing, Bogoievski said Infratil remained confident that "the highest merit order" renewables options would be built there.

"Having a price on carbon and lowest cost delivery will deliver value," he said. "Whether that will be extremely valuable or more modest, time will tell."

Of its public transport unit, NZ Bus, Bogoievski said Infratil "continues to evaluate future ownership options to maximise value and stakeholder outcomes". NZ Bus lost substantial contracts in a shake-up of Auckland and Wellington bus services.

With respect to Wellington International Airport, the company had restarted the process of applying for resource consents to extend the runway to allow wide-body, long-haul jets to make direct connections to Wellington after a two-year delay. "A commissioning date in 2022 is plausible," Bogoievski said.

Implementing a New Zealand-style full continuum of care model in its Australian rest home portfolio, Retire Australia, was "proving to be a difficult exercise" that would affect performance, but its Canberra data centres were on track for "a 20 percent year-on-year ebitdaf run rate" in the current financial year.

Infratil shares last traded at $3.435, down 1 cent. They have risen 9 percent in the past 12 months.


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