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Auckland Airport may require balance sheet support in the second half of 2018-2022 period

Tuesday 1st August 2017

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Auckland International Airport said it may need balance sheet support toward the end of the 2018-2022 period as it implements a massive $1.9 billion infrastructure investment programme that includes a new runway by 2028.

"Although we have a robust balance sheet, given the size and nature of the capital plan, we will need to consider our capital funding options through the course of the next five years," it said. It noted this is subject to a number of "future uncertainties" and said it will take action "prudently ahead of financial triggers." 

In early June the airport operator published its new landing charges for the July 1 to June 30, 2022 period. According to the company, its new prices for the 2018-2022 financial years will target a return on investment of 6.99 percent.  It is committed to retaining its target A- long term credit rating from Standard & Poor's, which is why it may require balance sheet support, it said. 

As at 30 June 2016, Auckland Airport had around $1.9 billion of debt comprised of a mix of bank debt, commercial paper, fixed and floating rate bonds and US private placement bonds across various tenors, with an average cost of funding of 5.09 percent, it said. It expects that cost to reduce slightly and is forecasting a cost of debt of 4.52 percent for 2018-2022.

The latest figures published today include "total regulated activities," which include aircraft and freight services, along with those specified passenger terminal activities subject to leases or licences where the relevant assets and operating costs can be isolated from the assets and operating costs associated with aeronautical pricing activities. 

The total capital expenditure, including the other regulated activities, is $1.9 billion, it said.  Key projects include construction of a domestic jet terminal, the second runway, as well as the expansion of the international check-in, public dwelling and border processing areas to improve processing and reduce queuing time as well as the expansion of the international terminal baggage reclaim hall.  

Regarding the new runway, it currently expects it to be required by 2028. Based on an opening date of 2028 it expects earthworks to start around 2020 or 2021. If the construction is confirmed, it will introduce a runway landing charge of $1.19, excluding GST, per passenger at that time, it said.

Its net operating revenue in nominal terms - excluding the runway land charge - is forecast to be $334.4 million in the 2018 financial year and $401.8 million in the 2022 financial year. 

The shares slipped 0.2 percent to $6.945. 


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