Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — Corporate Update (April 2009)
36 slides from Challenger's corporate update, Apr 21, 2009
Slide 1: Challenger Infrastructure Fund — Southern Water Update
challenger £3 Sydney Level 15, 255 Pitt Street Sydney NSW 2000 Australia GPO Box 3698 Sydney NSW 21 April 2009 www.challenger a au Telephone 02 99: 000 Facsimile 02 99 7 Mr. Ben Wacher Adviser Issuers (Sydney) ASX Markets Supervision Pty Ltd PO Box H224 Australia Square SYDNEY NSW 1215 Dear Mr. Wach
Slide 2: Important Notice
IMPORTANT NOTICE Information contained in this publication is current as at 21 April 2009 unless otherwise specified and is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“CLIL"), as Responsible Entity of CIF Investment Trust 1 (ARSN 114 139 703) and CIF Invest
Slide 3: Southern Water Update
Southern Water Update April 2009 Les Dawson – Chief Executive Officer, Southern Water Steve Collins – Group Treasurer, Southern Water
Slide 4: Southern Water
Southern Water Les Dawson CEO 2
Slide 5: Disclaimer
Disclaimer This presentation is directed to and intended for investors in the company and for no other person. No persons should act or rely on it. The company makes no representation as to the accuracy of forecast information. This report should not be relied on as a guide to future performance, an
Slide 6: Agenda
Agenda Overview Performance review 2008/09 - Highlights Operational Capital delivery PR09 4
Slide 7: Overview
Overview / 5 ==. Southern —= Water
Slide 8: Overview of UK water sector
Overview of UK water sector Issue Description Industry structure & Industry comprises 10 water and sewerage companies (WaSCs) and 12 water only participants companies (WOCs) in England and Wales Scotland and Northern Ireland have different structures Company structure Companies are vertically integr
Slide 9: Southern Water Services - Company Description
Southern Water Services - Company Description SWS is the seventh largest water and wastewater services company in England and Wales Turnover £698m at 31 March 2009 RCV £3,399m at 31 March 2009 2.3 million water customers, and 4.3 million wastewater customers Area of 10,550 sq km serviced by SWS in t
Slide 10: Overview of Water supply and Wastewater
Overview of Water supply and Wastewater 8
Slide 11: SWS Board
SWS Board Mike Welton Chairman David Golden Steven Marshall Les Dawson Jason Zibarras Independent Independent CEO Non-executive Director Non-executive Director Non-executive Director Robert Armstrong Cheryl Black Howard Goodbourn Philip Peters Independent Independent Finance Director Non-executive D
Slide 12: Regulatory framework
Regulatory framework 25 years (rolling) licence to operate a monopoly business Established methodology for 5 yearly price reviews Sufficient funding for an efficient company to deliver regulatory contract Maintain investment grade credit rating to fund the business – Moody’s shadow rating Baa1 – Acc
Slide 13: Regulatory Framework - Funding
Regulatory Framework - Funding Building blocks methodology SWS capital Ofwat allowed structure Ofwat RAV revenue Surplus Equity Real return 40% equity on capital* Co Co st st of of d eq eb ui t ty Tax Weighted Asset average cost maintenance t d eb of capital (CCD + IRC) Debt t of s Co 60% debt Opera
Slide 14: Business update on key initiatives
Business update on key initiatives Delivered during 2006/07 Delivered during 2007/08 New SAP billing system Capital outputs delivered Off-shoring of transactional, Continued improvement in non core activities wastewater compliance –IT managed services Maintain post drought –F&A leakage levels –parts
Slide 15: Performance review 2008/09 – Highlights
Performance review 2008/09 – Highlights 13
Slide 16: 2008/09 – Highlights
Performance review 2008/09 – Highlights Improved Overall Performance Assessment (OPA) score £300m bond issue – 3x oversubscribed and spreads better than any WaSC bond issue around the same time Cash management initiatives to protect compliance and shareholder value Reference point of index linked sw
Slide 17: Operational
Performance review Operational 15
Slide 18: Overall Operational Performance (OPA)
Performance review Overall Operational Performance (OPA) Improvement from 10th (joint) to 6th Maximum Forecast Available 2006-07 2007-08 2008-09 Water Supply - Levels of Service Inadequate pressure (DG2) 38 35 35 35 Supply Interruptions (DG3) 38 32 37 36 Hosepipe Bans 25 19 24 25 Water Quality 50 49
Slide 19: Regulated asset performance
Performance review - operational Regulated asset performance 2007 2008 Water underground Stable Stable assets Water above ground Stable Stable assets Sewerage underground Marginal Marginal assets Sewerage above ground Deteriorating Stable assets 17
Slide 20: 2008/09 – Customer Services Performance
Performance review - operational 2008/09 – Customer Services Performance 07/08 07/08 Current Performance industry Performance average Billing contacts reply within 97.20% 97.26% 99.70% 5 days (DG6) Response to written 64.80% 93.20% 99.90% complaints within 10 days (DG7) Meter reads within 1 year 99.
Slide 21: Wastewater performance
Performance review - operational Wastewater performance 2004 2005 2006 2007 2008 Failed works (consent failures) 18 14 15 3 3 Pollution prosecutions 14 8 6 2 4 Category 1 pollution incidents 3 5 2 1 1 Category 2 pollution incidents 15 9 13 6 4 Category 3 pollution incidents 213 193 336 260 214 Bathi
Slide 22: Water performance
Performance review - operational Water performance DG2 (Properties with Low Pressure) - 297 properties in 2008/09 versus Ofwat target of 530 DG3 (Interruptions to Supply) – 0.25 versus Ofwat target of 0.30 Security of Supply – 100% achieved for 2007/08 Water quality at customer taps and reservoirs i
Slide 23: Health, Safety & Environment
Performance review - operational Health, Safety & Environment 2005/06 2008/09 Reduction Injuries 271 90 67% LTA 47 20 58% RIDDOR 25 10 60% Day Lost 812 263 68% ROSPA Gold Medals Continue ISO 14001 – Achievement “The supply of water and treatment of wastewater including management of capital projects
Slide 24: Field Data Collection System – Business Drivers
Performance review - operational Field Data Collection System – Business Drivers Optimise field staff productivity - improved by 16% Step change in data quality and control Right person at the right job and at the right time Reduced Carbon footprint 35,000 extra jobs done over a year ROI less than 1
Slide 25: Offshore Partners in India
Performance review - operational Offshore Partners in India Delhi Wipro - Finance and Accounting Mumbai TCS - HR, Training Kolkata TCS - Correspondence CSTP Pune TCS - Engineering Hyderabad Wipro - ITMS Bangalore Atkins - Engineering Chennai Wipro - IT Help Desk Trivandrum RRD - Correspondence 23
Slide 26: Capital delivery
Performance review Capital delivery 24
Slide 27: The AMP4 Capital Programme
Performance review – capital delivery The AMP4 Capital Programme Capital Expenditure 2005 – 2010 (2007/08 price base) Environmental improvements £756m Water resources and growth £132m Flooding and service improvements £102m Maintaining treatment works £647m Maintaining mains and sewers £200m 25
Slide 28: Capital Delivery
Performance review Capital Delivery After four years – we remain ahead of programme Delivery - AMP4 year to date • 158 outputs required • 176 delivered Nutrient schemes complete and compliant Margate and Broadstairs scheme complete and compliant Brighton & Hove scheme received local planning approva
Slide 29: PR09
PROQ / a ==. Southern —= Water
Slide 30: Strategic Direction Statement
Strategic Direction Statement - a 25 year perspective An environment to live in, enabling economic growth Water service • Universal metering by 2015 • Leakage – progress towards single figure % • Resilience of performance – 100% drinking Water Quality Wastewater • Reduction of properties at risk
Slide 31: Financial outputs
PR09 Final Business Plan Financial outputs Current Cost Profit & Loss and Financail Indicators AMP4 AMP5 £m 2007/08 2010/11 2014/15 Turnover 610 691 762 Operating Costs 196 217 241 Capital Charges 229 262 288 Operating Profit 175 212 231 Regulated Capital value-year end 3,122 3,509 3,900 Pre-tax cos
Slide 32: Prices and average customer charges
PR09 Final Business Plan Prices and average customer charges Prices (‘K’s’) 2010-11 2011-12 2012-13 2013-14 2014-15 Total Average Thames 9.7% 2.4% 3.1% 2.7% 2.0% 21.3% 3.9% South West 7.1% 3.5% 3.0% 1.8% 1.8% 18.3% 3.4% Northumbrian 5.6% 5.6% 5.6% 0.0% 0.0% 17.8% 3.3% Southern 5.3% 3.2% 3.2% 3.0% 0.
Slide 33: Programme for 2010 - 2015
PR09 Final Business Plan Programme for 2010 - 2015 (£m) Water Wastewater IRE 125 128 (Infrastructure Renewals Expenditure) MNI 174 615 (Maintenance Non-Infrastructrue) Quality 37 641 ELoS 21 110 (Enhanced Levels of Service) Growth 192 113 Sub total 549 1,607 Programme Total 2,156 31
Slide 34: Quality programme
PR09 Final Business Plan Quality programme A programme driven by European legislation Defined by the Environment Agency The largest quality improvement programme in the UK £678m investment 32
Slide 35: 2010:2015 Regulatory Timeline
2010:2015 Regulatory Timeline 33
Slide 36: Competition
Competition Accounting separation – reporting requirement only from 2009/10 – 9 business segments including Retail Reduce threshold for large users – 50ml ~ 5ml during 2009 – 5ml ~ 1ml during 2010 Ofwat/”Cave” review – Retail competition (non-domestic customers only) in 2012 – Legal separation? – Bu
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