Infratil Limited · NZX:IFT
Infratil — Investor Day (April 2019)
45 slides from Infratil's investor day presentation, Apr 10, 2019
Slide 1: Infratil Investor Day
Infratil Investor Day 10 April 2019
Slide 2: Portfolio reconstruction largely complete
Portfolio reconstruction largely complete Focus on divestment programme and enhancing the cash generative core • The rebuild of the Infratil portfolio effectively commenced in 2013/14 with sale of Z Energy and Lumo Energy • The establishment of significant renewables, retirement and data platforms o
Slide 3: Confidence around outlook has steadily improved
Confidence around outlook has steadily improved Transparency of new platforms and delivery of outcomes • We have maintained a consistent approach to investment over multiple market cycles – Focus on earlier stage opportunities in well researched areas where we have strong operating capability – Deve
Slide 4: The future looks promising
The future looks promising While there are gaps, the heavy lifting is substantially complete • We have now established a balanced portfolio capable of exceeding target equity returns, while operating safely between defined credit and liquidity parameters; – Portfolio will require ongoing active mana
Slide 5: Paul Newfield Portfolio Strategy
Paul Newfield Portfolio Strategy
Slide 6: Our portfolio reset is paying off for shareholders
Our portfolio reset is paying off for shareholders Outstanding returns delivered over short, medium and long term Infratil Share Price TSR Performance 4.50 Period TSR 4.00 1 Year 41.3% 3.50 5 Year 20.1% 3.00 10 Year 16.6% 2.50 Inception 17.5% 2.00 1.50 1.00 0.50 - 2009 2010 2011 2012 2013 2014 2015
Slide 7: What we said we would do
What we said we would do Last year we outlined a strategy to tighten the portfolio Investor Day 2018 Observations: What we said we would do: • Strong pipeline of re-investment options •1 Tighten the portfolio in our existing development platforms •2 Focus capital deployment on our • Portfolio comple
Slide 8: Tightening the portfolio
Tightening the portfolio Expect further activity in 2019 Conditional agreements reached on three …with three ongoing strategic reviews sales… Australian Social Infrastructure Partnership (‘ASIP’) • Aspire Schools • New Royal Adelaide Hospital 8 INFRATIL INVESTOR DAY 2019
Slide 9: ANU demonstrates the strategy in action
ANU demonstrates the strategy in action Case Study: ANU Student Accommodation Investment thesis (2016): • Cash generative core infra business (high single digit yield) • Capital upside from future development options • Early move into a large emerging PBSA opportunity Achievements under IFT ownershi
Slide 10: Focusing capital on our growth platforms
Focusing capital on our growth platforms Committing capital to our high conviction platforms Tilt Longroad CDC Capital committed1: Project Phoebe (315MW) Capital committed2: ~$280 million Rio Bravo (238MW) ~$150 million 1 Value of new equity purchases under offer in 2018 by IFT ($102.9 million) and
Slide 11: CDC exemplifies our growth infrastructure focus
CDC exemplifies our growth infrastructure focus Defensive infra characteristics + rapid growth in demand Investment thesis (2016): • Rapid growth in data consumption and shift to outsourced data centres • Significant opportunities for expansion • Competitively advantaged to service sensitive Governm
Slide 12: Our portfolio transition is well progressed
Our portfolio transition is well progressed Portfolio as at Investor Day 2018 CORE CASH GENERATIVE ASSETS Future retirement DMF assets and operational renewable assets Renewable Data Retirement & Emerging Energy Infrastructure Aged Care Platforms • Student accomm. • Social infra. 12 INFRATIL INVESTO
Slide 13: Our portfolio transition is well progressed
Our portfolio transition is well progressed Portfolio post 2018-19 “tightening” CORE CASH GENERATIVE ASSETS Future retirement DMF assets and operational renewable assets Renewable Data Retirement & Emerging Energy Infrastructure Aged Care Platforms 13 INFRATIL INVESTOR DAY 2019
Slide 14: Portfolio designed to deliver our return target
Portfolio designed to deliver our return target We remain committed to a ten year 11-15% TSR target Infratil Expected Leverage Management Return to Portfolio Returns Assumption Cost Shareholders 8 – 10% 11% - 15% Core Per annum Lower Risk Per annum Average Debt 1% of assets Funding 30% 11% - 15% Cor
Slide 15: Moving to a decluttered portfolio
Moving to a “decluttered” portfolio Smaller number of more substantial positions FY18 Portfolio Post “Decluttering” 8% 6% 26% 29% 10% 18% 10% 19% 20% 17% 23% Trustpower CDC RetireAustralia ANU ASIP Wellington Airport Tilt Renewables NZ Bus Perth Energy Longroad Property & Other 15 INFRATIL INVESTOR
Slide 16: Focusing on a few key sectors
Focusing on a few key sectors Renewable energy, data infrastructure and airports dominate FY18 Portfolio Post “Decluttering” 8% 8% 6% 10% 39% 23% 23% 47% 48% 17% 19% 20% 20% Renewable Energy Data Infrastructure Transport Energy Airports Retirement Australian Social Infrastructure Property & Other 16
Slide 17: Tapping growth opportunities beyond New Zealand
Tapping growth opportunities beyond New Zealand Current growth platforms are focusing investment offshore FY18 Portfolio Post “Decluttering” 38% 50% 46% 61% NZ AUS USA 17 INFRATIL INVESTOR DAY 2019
Slide 18: Maintaining a balanced risk vs return profile
Maintaining a balanced risk vs return profile Evolving mix reflects strength of current development platforms FY18 Portfolio Post “Decluttering” 7% 20% 30% 52% 63% 28% Core Core + Development 18 INFRATIL INVESTOR DAY 2019
Slide 19: Managing a dynamic portfolio
Managing a dynamic portfolio Key considerations shaping future portfolio mix Current growth and development platforms • Options held across multiple markets • Infratil controls the rate and prioritisation of development spend • Development platforms “manufacture” core infra assets Rate of growth of
Slide 20: Infratil Portfolio Strategy
Infratil Portfolio Strategy Key conclusions Infratil’s portfolio strategy remains consistent • Cash generating core assets supporting reinvestment in high returning growth platforms We have executed on the plan presented at last year’s Investor Day • “Portfolio tightening” is well advanced • Capital
Slide 21: Phillippa Harford Performance & Outlook
Phillippa Harford Performance & Outlook
Slide 22: Role of assets in the portfolio
Role of assets in the portfolio Development platforms supported by cash generating assets Current portfolio Role • Important role in cash generating core and source of imputation credits • Defensive characteristics as an essential service • Reliable GDP+ earnings growth and strong reinvestment optio
Slide 23: Trustpower
Trustpower Generation outlook remains strong • Solid generation outlook, supported by long-term trend towards electrification of transportation and industrial heat • Well placed to support the transition to a low-emissions and increased-renewable-electricity future • Differentiated retail strategy f
Slide 24: Wellington International Airport
Wellington International Airport High quality asset with GDP+ growth and attractive reinvestment options • $300 million five year investment programme completed in January 2019, with the opening of the Rydges hotel • Continues to provide reliable cashflows, supported by defensive characteristics • I
Slide 25: RetireAustralia
RetireAustralia Strong long-term investment thematic with near term choices • Population growth in the aging demographic supports the long- term investment thematic • Sector headwinds and execution challenges have resulted in a slow down in unit resales • Continuing demand for well-located villages
Slide 26: Phillippa Harford Performance & Outlook
Phillippa Harford Performance & Outlook
Slide 27: Asset valuation and drivers
Asset valuation and drivers Updated valuations reflect a high quality portfolio of assets Current portfolio Equity Value (NZD) Basis of Valuation $1,125m • Market Price as at 8 April 2019 $750m - $800m • 16x Multiple of forecast EBITDA (Auckland Airport >20x) $290m - $320m • 1x Multiple of Net Tangi
Slide 28: Asset valuation and drivers
Asset valuation and drivers Updated valuations reflect a high quality portfolio of assets Current portfolio Equity Value (NZD) Basis of Valuation • Independent Valuation as at 31 March 2019 • Includes A$42 million Infratil equity contribution in December 2018 • FY19 EBITDA run-rate A$90 million, inc
Slide 29: 2019 Updated Guidance
2019 Updated Guidance Underlying EBITDAF guidance range revised to $535-$545 million • Underlying EBITDAF guidance (year to 31 March 2019) revised to NZ$535-$545 million • Net increase in estimated contribution from CDC, primarily from receipt of CDC’s draft 31 March 2019 investment property revalua
Slide 30: 2019 Updated Guidance
2019 Updated Guidance Performance fees – movements from 30 September accrual September September March March $Millions Fair Value Accrued Independent Estimated Guide Fee Valuation Fee Canberra Data Centres 590 13.4 841 - 942 64 Longroad Energy 163 16.3 128 22 Tilt Renewables 470 - 650 - 785 2 Unreal
Slide 31: 2020 Outlook
2020 Outlook Underlying EBITDAF guidance range set at $510-$540 million FY20 Underlying EBITDAF guidance range from continuing operations set at $510-$540 million • Trustpower EBITDAF guidance of $205-$225 million • Tilt EBITDAF guidance of A$122-$129 million • CDC’s reported EBITDA - Infratil’s sha
Slide 32: Moderate gearing and funds available
Moderate gearing and funds available Capital structure positioned to maintain flexibility for investment ($Millions) March 2019 • Total Infratil bonds on issue were extended following the November 2018 maturity of Net bank debt (cash on hand) 45 $111 million, which was replaced with two issues Infra
Slide 33: Jason Boyes New investment
Jason Boyes New investment
Slide 34: Future portfolio choices
Future portfolio choices Available capacity can be used to support existing platforms or create a new one FY20F Portfolio Available capacity and forecast divestment proceeds Trustpower Wellington Airport RetireAustralia Other CDC Tilt Renewables Longroad 34 INFRATIL INVESTOR DAY 2019
Slide 35: Future portfolio choices
Future portfolio choices Looking for new investment opportunities Investment opportunities Cash generating core Extending growth platforms New opportunities • A number of core assets • Significant development • Continuing to invest to realised underway in existing identify the next platform • Portfo
Slide 36: Replace and top-up the cash generating core
Replace and top-up the cash generating core Keeping the portfolio in balance • Some core assets realised • Left to run, the portfolio will become underweight core • Imputation credits helpful, but not critical • Issues are finding value and managing portfolio complexity 36 INFRATIL INVESTOR DAY 2019
Slide 37: Extending growth and development platforms
Extending growth and development platforms Optimising existing and new opportunities • Development rate in existing growth and development platforms • Extending existing platforms to other jurisdictions • Actively seeking renewable energy development opportunities beyond the US • Extending Retiremen
Slide 38: A case study for extending to other jurisdictions
A case study for extending to other jurisdictions Longroad Energy could be a template for future extensions Investment thesis is apparent elsewhere too • Strong sector tailwinds • Aligned with existing operational capability • Jurisdictional diversification • Increased scale for origination and proc
Slide 39: Establishing a renewables platform in Europe
Establishing a renewables platform in Europe Rationale looks just as strong as Longroad Opportunity in Europe looks attractive • If anything, stronger sector tailwinds than the US, with more regulatory support – Late 2018, IHS Markit forecast 140GW of renewables build in the EU by 2021 vs 75GW in th
Slide 40: New opportunities
New opportunities Continuing to invest to identify the next platform • Potentially long lead times, however, Infratil’s track record is built on being “ahead of the pack” • Looking beyond renewable energy to decarbonisation more broadly – Alternative fuels, carbon capture and storage • Changes to th
Slide 41: Appendices
Appendices INFRATIL INVESTOR DAY 2019
Slide 42: Canberra Data Centres Valuation
Canberra Data Centres Valuation Additional valuation information Valuation Principles Key valuation metrics March 2019 • The fair market valuation of IFT’s 48.2% share of CDC as at 31 March 2019 is between NZ$841 – $942 million • The independent valuer adopted a Discounted Cash Flow (“DCF”) valuatio
Slide 43: Longroad Energy Valuation
Longroad Energy Valuation Additional valuation information Valuation Principles • The fair market valuation of IFT’s share of Longroad as at 31 March 2019 is NZ$128 million Key valuation metrics March 2019 • The independent valuer adopted a sum-of-the parts valuation approach to assess the fair mark
Slide 44: International Portfolio Incentive Fees
International Portfolio Incentive Fees Additional information Overview • The International Portfolio comprises all Non-New Zealand Entities, being Infratil Limited (‘Infratil’) portfolio entities with more than 50% of their assets domiciled outside New Zealand. The International Fund Management Agre
Slide 45: International Portfolio Incentive Fees
International Portfolio Incentive Fees Additional information 1. International Portfolio Initial Incentive Fee • Every 31 March, it is necessary to determine whether Infratil has any International Investments which have been held continuously by the Company “from a date between (and including) the t