Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — Investor Presentation (December 2006)
19 slides from Challenger's investor presentation, Dec 4, 2006
Slide 1: Market Release
MARKET RELEASE 4 December 2006, Sydney – Challenger Infrastructure Fund (ASX: CIF) has today announced an update of gas and electricity connection sales by Inexus, in which it owns an 80.3% interest. Both gas and electricity connection sales have continued to perform ahead of expectations, with resu
Slide 2: Inexus presentation, Australia, 4th-8th December 2006
4th – 8th December 2006 Australia Phil Gibb CEO, Inexus
Slide 3: Business Model
Business Model Inexus is the leading independent last mile gas and electricity owner and builder in the UK 2
Slide 4: Overview
Overview Long term predictable income streams indexed against inflation • Revenue • Derived from billing energy suppliers an availability charge to enable them access to their retail customers • Fully linked to inflation • Long term regulatory certainty in gas provides long term transparency and pre
Slide 5: Market Leader
Market Leader Marketing Marketing Direct sales Connection Business Unrestricted Direct of Gas of force/ Build growth focus is Geographic Construction Electricity own without 3rd new build Reach Model connections party UIP’s market Inexus (CIF) IEG/ GTC (BBI) ESP (ABN) Nationalgrid Transco Regional D
Slide 6: Inexus has a Competitive Pricing Advantage
Inexus has a Competitive Pricing Advantage The continually growing connections base reduces the unit operating cost, providing Inexus a pricing advantage when bidding against its competitors Annuity Stream per Connection Value creation per Connection % 600 400 400 " $# 200 -150 $# 0 ! -200 ! ( " % '
Slide 7: Gas Regulatory Regime – Stable
Gas Regulatory Regime – Stable Two basic pricing regimes: • Legacy Pricing: • Applies to connections before Jan 2004 • 86% of connections under legacy pricing regime • Fixed real price escalates at RPI until 2018 • After 2018 migrates to RPC regime (below) • Relative Price Control (“RPC”) Regime: •
Slide 8: Electricity Regulatory Regime - Evolving
Electricity Regulatory Regime - Evolving • BA1(equivalent to local DNO) is current pricing approach • Ofgem has consulted on BA1 replacement. RPC like options identified • Both BA1 and RPC rely on all-the-way price comparisons • Sticking point is pricing to boundary • Inexus refusing to agree RPC un
Slide 9: Gas and Electricity Sales Update
Gas and Electricity Sales Update Progress to Date Sales for Sales 10 months Budget to Oct 06 (Jan – Dec 06) Gas 67,596 65,00 Electricity 25,076 20,000 Total 92,672 85,000
Slide 10: Gas Connections Update
Gas Connections Update Progress to Date • Continue to maintain leading market share position Connections Outstanding Order Total in Ground Book Connections Sept ’05 323k 143k 466k Dec ’05 340k 142k 482k June ’06 365k 149k 513k Oct ’06 382k 164k 546k 9
Slide 11: Electricity Connections Update
Electricity Connections Update Progress to Date • Better than expected launch of electricity business • Seeing advantage of dual offering in contract win rates Connections Outstanding Total in Ground Order Book Connections Sept ’05 - 7k 7k Dec ’05 - 10k 10k June ’06 1k 20k 21k Oct ’06 1k 34k 35k 10
Slide 12: Economics of Electricity vs Gas
Economics of Electricity vs Gas Electricity connections subject to less competition pressures than gas connections as indicated by developer contribution •Construction of electricity connections by an independent provider is a newly developing market Hypothetical pricing example of a project for 500
Slide 13: Electricity Market
Electricity Market Total New Build 170,000 – 180,000 *Economy 7 Market 40,000 – 50,000 Available Market 130,000 Inexus 2005 Sales 10,057 Inexus 2006 Sales 25,076 (10 months to 30 Oct 06) Inexus 2007 Sales 30,000 (budget) *A proportion of the new build market comprises electricity-heated apartments.
Slide 14: New Developments
New Developments PRODUCT REMARKS Water / Waste Water • Licence application December 2006. • Expressions of Interest on 19K • 2007 launch Telecoms • No licence required • GPON networks. • 2007 launch Metropolitan •Infrastructure wrapper. •To include all of above plus roads etc. •Income from infrastru
Slide 15: New Developments - Market Size
New Developments - Market Size New products are more valuable with less competition No.of Connections Income / Annum/ Connection Gas Only 100 – 120k £35 Electricity 130k £38 Water 100k £40 Waste Water 100k £40 Telecoms 180k £80 14
Slide 16: Summary
Summary Progress since Challenger Acquisition September 2005 October 2006 Connections 322,455 382,962 Order Book 148,072 197,653 Total Portfolio 470,527 580,615 15
Slide 17: Summary
Summary Progress since Challenger Acquisition 2005 2007 Product Offering Gas Gas Electricity Electricity Water Continued Waste Water development of Telecoms future product offerings Metropolitan Others 16
Slide 18: Summary
Summary Consistently strong performance Sales of connections up by 26% CAGR (000s) 10 0 25 75 10 20 50 71 68 59 64 25 52 42 36 0 20 0 1A 2 00 2A 2 00 3 A 2 0 04 A 20 05 A 20 0 6B O C T 0 6A Built connections up by 25% CAGR (000s) 450 1 4 300 Electricity 382 386 Gas 340 150 290 242 188 152 0 2001A 20
Slide 19: Glossary
Glossary BA1 Current electricity regulation regime which caps the independent distribution network operator’s prices by the level of the incumbent distribution network operator’s prices DNO Distribution Network Operator (electricity) GPON Gigabite-Capable Passive Optical Networks GTC The Gas Transpo
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