Macquarie infrastructure group Analyst package 2008
CORPORATE INFORMATION
CONTACT INFORMATION
Directory
Secretaries of the Responsible Entity
Macquarie Infrastructure Group No. 1 Martin Place Sydney NSW 2000 Telephone (Australia): 1800 358 440 Telephone (Int’l): 61 2 8232 7248 Facsimile: 61 2 8232 4713 Email:
[email protected] Website: www.macquarie.com/mig
Christine Williams Dennis Leong
Responsible Entity for Macquarie Infrastructure Trust (I) and Macquarie Infrastructure Trust (II): Macquarie Infrastructure Investment Management Limited (MIML) ACN 072 609 271
Directors of Macquarie Infrastructure Group International Limited Rob Mulderig (Chairman) Jeffrey Conyers Dr Peter Dyer Mark Johnson
Secretary of Macquarie Infrastructure Group International Limited Roslyn O’Brien
Directors of the Responsible Entity
Disclaimer This information package (the Package), which includes the accompanying spreadsheet, has been prepared by Macquarie Infrastructure Group (MIG) which comprises of two Australian trusts: Macquarie Infrastructure Trust (I) ARSN 092 863 780 and Macquarie Infrastructure Trust (II) ARSN 092 863 548; and Macquarie Infrastructure Group International Limited (MIGIL), a Bermudan mutual fund company ARBN 112 684 885. Macquarie Infrastructure Investment Management Limited ACN 072 609 271 (MIIML) is the responsible entity of MIT(I) and MIT(II). MIIML is a wholly owned subsidiary of Macquarie Group Limited ACN 008 583 542 (MQG). Macquarie Capital Funds (Europe) Limited (MCFEL) registered number 3976881 is the adviser to MIGIL. MCFEL is a wholly owned subsidiary of MQG. The Package has been prepared in good faith to assist analysts in the development of their own models. The Package does not purport to forecast the asset value, income or distributions of MIG, nor the value, income or distributions of any other entity. No representation or warranty, express or implied, is made by MIG or any part of MQG (Macquarie) as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this Package. Any assumptions or forecasts contained in the Package are intended as a guide to analysts only. They do not represent forecasts of Macquarie nor any other party and are not intended to be a representation that the assumptions will occur. The recipient should do their own research and form their own judgment in relation to any assumption, forecast or estimate contained in the Package and not rely on any information in the Package as being either absolute or the likely outcome. The Package does not purport to list the assumptions or risks which may influence the valuation of assets of MIG. Any discussion of tax treatment is provided without warranty and for information only. The recipient should seek professional advice in respect of any taxation assumptions required to analyse MIG. Macquarie does not guarantee information provided is up to date, and does not accept any obligation to update the Package or to inform the recipient that the package is no longer up to date should new information become available. The Package remains the property of MIG and may not be reproduced in part or whole without the express written permission of MIG. None of the entities noted in this presentation is an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities. No part of the Package is an offer, invitation or recommendation for subscription or purchase of stapled securities. It does not take into account the investment objectives, financial situation and particular needs of the investor. Before making an investment in MIG, the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment adviser if necessary. Information in this Package, including any forecast financial information, should not be considered as a recommendation in relation to holding purchasing or selling, securities or other instruments in MIG. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts, by their very nature, are subject to uncertainty and contingencies many of which are outside the control of MIG. Past performance is not a reliable indication of future performance. These materials do not constitute an offer of securities for sale in the United States, and the securities referred to in these materials have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration.
Mark Johnson (Chairman) Paul McClintock Nicholas Moore David Mortimer, AO David Walsh John Roberts (alternate director to Mark Johnston and Nicholas Moore)
Registry Computershare Investor Services Pty Limited GPO Box 2975, Melbourne VIC 3001 Telephone: 1800 000 982 or 61 3 9415 4073 Facsimile: 61 3 9473 2500 Website: www.computershare.com
For further information on the MIG Analyst Package, please contact: Stuart Green Head of Investor Relations Tel: +61 2 8232 8845 E-mail:
[email protected] Victoria Hunt Investor Relations Manager Tel: +61 2 8232 5007 E-mail:
[email protected]
Contents Overview Macquarie Infrastructure Group Snapshot ... 3 Asset Portfolio ............................................... 5 MIG Investment Strategy ............................... 9 Valuation Policy ........................................... 11 Valuation of Toll Roads ................................ 14 Group Structure ........................................... 19 MIG Reporting ............................................. 24 Distributions ................................................. 26 On-market Buy-back ................................... 28 Securities on Issue ...................................... 29 Management Fees ....................................... 30
North America 407 ETR ........................................................ Chicago Skyway ........................................... Indiana Toll Road ......................................... Dulles Greenway ...........................................
36 43 49 56
South Bay Expressway ............................... 63
Europe M6 Toll .......................................................... 70 Autoroutes Paris-Rhin-Rhône ..................... 75 25th April/Vasco da Gama Bridges ............. 83 Warnow Tunnel ............................................ 89
Australia Westlink M7 ................................................. 94
Model Overview Structure of the Analyst Model ................. 100 Using the Analyst Model ........................... 104
Welcome to the 2008 MIG Analyst Package. This Package is designed to assist analysts and institutional/professional investors to understand MIG and its investments. The Package includes a set of background notes on MIG and on each toll road within the MIG portfolio as well as an Analyst Model that outlines a possible format for valuing MIG. The Analyst Model does not purport to forecast the asset value, income or distributions of MIG or any other entity. Any assumptions contained within the Package are intended to be a guide only and do not represent the forecasts of MIG or any entity in the Macquarie Group (collectively Macquarie) or any other entity. Macquarie does not represent that the forecasts will be achieved, the assumptions will occur or that the assumptions are reasonable, reliable or accurate. The recipient should do their own research and form their own view on any assumptions, forecasts or estimates contained within the Package. No part of the Package is to be construed as an invitation or recommendation to buy or sell any securities. No responsibility is accepted by Macquarie in respect of the accuracy of any statement or calculation within the Package.
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Macquarie Infrastructure Group
2008 Analyst Package
16 December 1996 A$7.2 billion1
Market Capitalisation Compound Annual Growth Since Listing
14.5%2
Size Relative to ASX
Top 401
Toll Roads in Portfolio
11
Number of Unitholders
46,0001 46%1
Securities Held Outside Australia Balance Date 1. 2.
30 June
As at 1 May 2008. Based on all capital raised, distributions paid and valuation (market capitalisation) from December 1996 to May 2008.
OVERVIEW
Date Listed
NORTH AMERICA
Table 1.1: MIG snapshot
Long-term growth potential
Predictable cash flows
X The combination of traffic growth and toll increases can produce solid revenue growth X Traffic growth often exceeds GDP X MIG’s toll growth is often at a minimum of inflation, mainly CPI+
X With relatively fixed operating costs and known mechanisms for toll increases, cash flows can be predicted with some certainty
Long-term assets
Sustainable competitive advantages
X MIG’s weighted average length of concessions remaining is 61 years1
X Development of competing infrastructure is a time consuming and costly process, hence new competitors face significant barriers to entry
Legally enforceable concession agreements X MIG invests in OECD and OECD-like countries with well developed legal systems
Increasing marginal benefit of service X Users’ growing real incomes tend to increase their value of time savings and hence, the attractiveness of using toll roads
High EBITDA margins which increase over time
Option value
X Operating costs are relatively small as a proportion of revenue X Relatively low ongoing capital expenditure requirements
X Traffic uplift from implementation/ growth of electronic tolling X Potential for concession extensions X Ability to increase road capacity
1.
EUROPE
MIG believes toll roads are an attractive asset class as they exhibit the following characteristics:
AUSTRALIA
Macquarie Infrastructure Group Snapshot
MIG was formed in July 1996 as the Infrastructure Trust of Australia and listed on the Australian Stock Exchange (ASX) on 16 December 1996. MIG is one of the largest developers and owners of toll roads in the world.
MODEL OVERVIEW
Overview
As at 31 December 2007.
2008 Analyst Package
Macquarie Infrastructure Group
3
MIG is managed by the Macquarie Capital Funds division of Macquarie Group Limited, which, together with its associated entities worldwide, is a diversified global provider of financial and investment advisory services headquartered in Australia with over 12,400 employees in 25 countries as at 31 December 2007. Through its relationship with Macquarie, MIG benefits from experienced management and continuous deal opportunities: X MIG has first right of refusal to future Macquarie sourced toll road deals in OECD and OECD-like countries X Macquarie is a global leader in advising on the acquisition, disposal and management of infrastructure assets X the Infrastructure division of Macquarie Capital Advisors has over 500 infrastructure professionals who provide deal origination and execution services on a global basis X the Macquarie Capital Funds division of Macquarie has over 590 infrastructure asset management professionals globally.
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Macquarie Infrastructure Group
2008 Analyst Package
Asset location
MIG’s interest
% of MIG portfolio1
407 International Inc
407 ETR
Toronto, Canada
30.0%
37%
Midland Expressway Limited
M6 Toll
Birmingham, UK
100.0%
30%
Eiffarie SAS
Autoroutes Paris-Rhin-Rhône (APRR)
France
20.4%
11%
Westlink Motorway Group
Westlink M7
Sydney, Australia
47.5%
8%
Toll Road Investors Partnership II LP
Dulles Greenway
Virginia, US
50.0%
4%
Indiana Toll Road
Indiana, US
25.0%
3%
Skyway Concession Company Holdings LLC
Chicago Skyway
Chicago, US
22.5%
3%
South Bay Expressway LP
South Bay Expressway
San Diego, US
50.0%
2%
Vasco da Gama Bridge
Lisbon, Portugal
30.6%
2%
Warnow Tunnel
Rostock, Germany
70.0%
Statewide Mobility Partners LLC
2
25th April Bridge Lusoponte Concessionária para a Travessia do Tejo SA Warnowquerung GmbH & Co, KG Total 1. 2.
OVERVIEW
Underlying assets
NORTH AMERICA
Investment vehicle
EUROPE
Table 1.2: MIG’s toll road portfolio
0% 100%
Based on 31 December 2007 MIG valuations. Effective interest in APRR. MIG holds a 25% interest in Eiffarie SAS.
AUSTRALIA
Asset Portfolio
MIG holds a direct interest in the majority of its toll road assets. In addition to its portfolio of toll road assets, MIG has a direct interest in Transtoll Australia Pty Limited. MIG’s toll road portfolio is outlined in Table 1.2.
MODEL OVERVIEW
Overview
2008 Analyst Package
Macquarie Infrastructure Group
5
Overview
Figure 1.1: Location of asset portfolio UK M6 Toll
Asset Portfolio (cont.)
FRANCE APRR
CANADA 407 ETR
GERMANY Warnow Tunnel
PORTUGAL 25th April Bridge Vasco da Gama Bridge
AUSTRALIA Westlink M7
Figure 1.2: MIG’s asset portfolio1 Indiana Toll Road 3%
Chicago Skyway 3%
Other 4%
Dulles Greenway 4% 407 ETR 37%
Westlink M7 8%
APRR 11%
M6 Toll 30% 1.
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Macquarie Infrastructure Group
UNITED STATES Dulles Greenway Chicago Skyway South Bay Expressway Indiana Toll Road
Based on 31 December 2007 MIG valuations.
2008 Analyst Package
MIG’s portfolio has the following features:
All toll road assets move progressively through a number of stages of development, collectively known as the toll road life cycle. Toll roads in the early stages of their life cycle have significant capacity for forecast cash flows to de-risk. Forecast cash flows de-risk as they become less dependent on future growth being achieved. Lower risk cash flows are more highly valued by investors, resulting in lower return requirements and increases in asset valuations. As shown in Table 1.3, the majority of MIG’s assets are currently in ramp-up and expected to benefit from asset re-rating in future.
X majority of assets in early stages of their life cycle X globally diversified, with assets in North America, UK, Europe and Australia X significant remaining concession terms for many assets X attractive mix of toll escalation paths and mechanisms.
OVERVIEW
Toll Road Life Cycle
NORTH AMERICA
Portfolio Characteristics
Construction
Ramp Up
Growth/Maturity
Construction time
Ramp-up rate
Impacts on traffic
Construction costs
Natural traffic/revenue level
EUROPE
Table 1.3: MIG’s toll road life cycle Risks
Initial traffic Ramp-up rate
AUSTRALIA
Natural traffic/revenue level
MIG Assets 407 ETR
APRR
M6 Toll
25th April Bridge
Westlink M7 Dulles Greenway Indiana Toll Road
MODEL OVERVIEW
Chicago Skyway South Bay Expressway Vasco da Gama Bridge Warnow Tunnel
2008 Analyst Package
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Figure 1.3: MIG’s portfolio characteristics1 Concession term remaining2
Geographic split Australia 8%
21—40 years 23%
North America 49%
>40 years 77%
UK/Europe 43%
Young and developing portfolio
Tolling mechanisms % of CPI 11%
Growth 11%
CPI 10%
CPI+ 6%
Ramp-up 89%
1. 2.
8
Based on 31 December 2007 MIG valuations. MIG's weighted average concession term is approximately 61 years.
Macquarie Infrastructure Group
2008 Analyst Package
Market-based 73%
In making an assessment of the required risk premium for an investment, MIG considers:
X is accretive to MIG’s portfolio internal rate of return (IRR) determined by security price; and X implies an equity risk premium at or above the level required to compensate for its asset and financial risks (refer to Table 1.4) X be consistent with the distribution policy of sustainability with increasing coverage of operating cash flows available for distribution X offer potential for increasing value through active management of operations and capital structure
Construction
6–8%
Ramp-up
3–6%
Growth/maturity
2–3%
X stage in toll road life cycle X robustness of traffic and revenue forecast (e.g. quality of data available for forecasting and the nature and extent of future uncertainties) X risk transfer in the concession agreement X contractual structure and transfer of risk to other parties, such as construction contractors X credit standing of counterparties X operational complexity (e.g. tolling systems) X project leverage X financing terms and conditions
X be located in OECD or OECD-like countries
X refinancing opportunities
X offer sustainable competitive advantages in a traffic corridor.
X country-specific risks
X equity market conditions X future network developments X assessment of equity partner(s) if applicable including terms of shareholders’ agreement X other specific risks and ability to mitigate such risks.
2008 Analyst Package
EUROPE
X generate a forecast return that:
Equity risk premium
OVERVIEW
Future opportunities for investment should:
Stage in life cycle
NORTH AMERICA
Table 1.4: Equity risk premium
AUSTRALIA
MIG Investment Strategy
MIG’s strategy is to invest in and develop quality assets that are accretive to the portfolio over the long term. Returns to security holders are expected to be in the form of both capital growth and distributions.
Macquarie Infrastructure Group
MODEL OVERVIEW
Overview
9
Overview MIG Investment Strategy (cont.)
Realised Toll Road Investments MIG has invested in, and actively managed, toll road assets for over 11 years. During that period MIG has: X reviewed more than 160 opportunities across over 20 countries X invested in 31 toll roads in 9 countries X realised interests in 20 toll roads (13 via Cintra), through both private and capital market processes
MIG has achieved IRRs in excess of 20% on all divestments/demergers to date. This solid performance has been a function of: X good initial acquisitions X active management of investments X strategic divestments/demergers. Details of previous divestments/ demergers are outlined in Table 1.5.
Table 1.5: MIG asset divestments/demergers Value (A$m)
IRR (%)
7 years
230
25
Oct 04
3 years
2,492
22
Dec 04
5 years
103
47
Hills Motorway
Mar 06
10 years
151
38
50% of US assets
Dec 06
0.5–4 years
1,060
21
Jul 06
5–9 years
1,074
27
Divestment
Date
Holding period
Transurban
Dec 03
Cintra Yorkshire Link
Demerger Sydney Roads Group Total
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2008 Analyst Package
5,110
X revenue (mainly derived from traffic and toll price forecasts) X operating and capital expenditure for the asset X macroeconomic factors such as inflation, interest rates and foreign exchange rates
Forecast equity cash flows are discounted using a rate derived by adding a risk premium to the prevailing risk-free interest rate for the country in which the asset is located. MIG uses the 10-year government bond rate, or its equivalent, as a proxy for the riskfree rate in the country in which the road is located. The risk premium for each asset is individually determined by MIG’s Board and reflects the uncertainty associated with each road’s cash flows. The risk premiums used for the valuation of MIG’s toll roads as at 31 December 2007 are listed in Table 1.6.
Table 1.6: MIG asset risk premiums as at 31 December 2007 Asset
Stage In toll road life cycle
Risk premium
407 ETR
Ramp-up
3.5%
M6 Toll
Ramp-up
4.5%
APRR
Growth
6.0%
Westlink M7
Ramp-up
5.0%
Dulles Greenway
Ramp-up
7.0%
Indiana Toll Road
Ramp-up
6.0%
Chicago Skyway
Ramp up
5.5%
South Bay Expressway
Ramp-up
7.0%
Vasco da Gama / 25th April Bridge
Ramp-up/Growth
2.8%
Ramp-up
5.0%
Warnow Tunnel
2008 Analyst Package
Macquarie Infrastructure Group
OVERVIEW
Forecasts for a number of variables are made by MIG in conjunction with various third party experts.
NORTH AMERICA
X the tax position of the asset.
EUROPE
A large number of variables are incorporated in the valuation models, including:
X the capital structure used to finance the asset
AUSTRALIA
Valuation Policy
MIG values its toll road investments using the Discounted Cash Flow (DCF) approach. This approach estimates the future cash flows expected to be generated by the asset and discounts them back to a present value. MIG revalues its investments every six months, with these valuations then used to calculate MIG’s Net Asset Backing (NAB). The change in NAB shows the increase (or decrease) in the directors’ valuation of each MIG stapled security.
MODEL OVERVIEW
Overview
11
Overview Valuation Policy (cont.)
Non-Concessionaire Assets While MIG’s mandate is to invest in toll road assets in OECD and OECD-like countries, it will also make investments in assets that are complementary to MIG’s core business. As at 31 December 2007, MIG has one such investment in Transtoll Australia Pty Limited (Transtoll). Transtoll provides hardware and software solutions to the tolling industry. Transtoll’s products include web-based violations enforcement processing, web-based account management systems and electronic maintenance and asset management systems.
The techniques used to value MIG’s non-concession investments depend on the nature of the investments. The valuation of MIG’s investment in Transtoll is based on the price at which a rights issue recently took place. In the absence of a transaction in Transtoll shares, Transtoll is valued based on an EBITDA multiple. The EBITDA multiple has been determined through benchmarking with companies in similar industry sectors listed on the ASX. Transtoll
Table 1.7: MIG’s Net Asset Backing 31 December 2007 A$m
NAB reconciliation Portfolio valuation (directors’ valuation)
10,208.8
+
Cash at balance date
-
Declared distribution at balance date
-
Base fees payable at balance date
(18.4)
Sundry debtors/creditors
10.7
+/=
Value of MIG Equity
/
No. of securities on issue (as at 31 December 2007)
=
Net Asset Backing
1,126.6 (241.5)
11,086.2 2,415.3 A$4.59 per security
Table 1.8: Events significantly affecting MIG’s NAB
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Macquarie Infrastructure Group
Six months to
Primary drivers for significant movements in NAB
31 December 2000
Financial close reached for the acquisition of M6 Toll. There was a significant revaluation of the asset post financial close
31 December 2004
Distribution of Cintra IPO proceeds – circa A$1.2 billion ($0.60/security)
24 July 2006
Demerger of mature Australian roads – circa A$1.1 billion ($0.38/security)
2008 Analyst Package
Adjustment for $0.60 Distribution of Cintra IPO Proceeds in December 2004
4.00
4.59
3.92 3.89 3.70 3.66
3.50 Adjustment for Demerger of ED, M4 and M5 Motorways via In-specie Distribution in July 2006
3.00 2.50
3.22 2.71
2.97 2.71
2.36 Adjusted NAB
2.00
The NAB at 31 December 2007 of $4.59 was calculated as outlined in Table 1.7.
1.00
1.05 1.04 1.03 Jun-07
Dec-07
Jun-06
Dec-06
Jun-05
Dec-05
Jun-04
Dec-04
Jun-03
Dec-03
Jun-02
Dec-02
Jun-01
Dec-01
Jun-00
Jun-99
Dec-99
Jun-98
Dec-98
Dec-97
Listing
Dec-96
Historical NAB for MIG is shown in Figure 1.4.
Jun-97
0.84 0.84 0.50 0.75 0.75 0.75 0.75
NORTH AMERICA
2.01 1.79 1.76
1.50
EUROPE
Figure 1.5: Historical security price performance vs MIG NAB 5.12
4.46
3.80
3.14 A$
AUSTRALIA
2.48
1.82
Jun 07
Dec 07
Jun 06
Dec 06
Dec 05
Jun 05
Dec 04
Jun 04
Jun 03
Dec 03
MIG Security Price
MODEL OVERVIEW
MIG Net Asset Backing
Dec 02
Jun 02
Dec 01
Dec 00
Jun 00
Dec 99
Jun 99
Dec 98
Jun 98
Dec 97
0.50
Jun 97
1.16
Dec 96
Large changes in NAB per security occur when there are substantial movements in the valuation of MIG’s net assets without a similar corresponding change in securities on issue (or vice versa). In three instances, events relating to a single asset have resulted in a large movement in MIG’s NAB. These are outlined in Table 1.8.
2.82
3.37
OVERVIEW
4.50
Dec-00
MIG’s NAB is calculated every six months based on updated investment valuations and noninvestment balances.
5.00
Jun 01
Net Asset Backing Per Stapled Security
Figure 1.4: Historical Net Asset Backing
Reported NAB (A$)
represents less than 0.1% of MIG’s asset portfolio by value as at 31 December 2007.
2008 Analyst Package
Macquarie Infrastructure Group
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Overview Valuation of Toll Roads
In general, the value of toll road investments is best determined by the DCF approach. This approach is preferred due to the relatively predictable nature of asset cash flows and the finite length of concessions. Toll road assets have the following cash flow characteristics: X large initial capital cost X revenue driven primarily by growth in traffic and toll price X low ongoing operating costs as a proportion of revenue X high financing costs as a proportion of revenue X relatively low ongoing capital expenditure as a proportion of revenue. As with other industries, the future cash flows available to equityholders for toll road assets can be determined using a cash flow cascade as outlined in Table 1.9.
The equity value of an investment is derived by discounting future cash flows to equity by an appropriate equity discount rate. The discount rate should reflect the inherent risk in the investment and is generally calculated by adding a risk premium to the risk-free rate of the country in which the asset is located. The equity value of a toll road asset changes as it moves through the toll-road life cycle. When a toll road is in construction, there is greater uncertainty on future traffic levels and thus a higher risk premium is used to value the investment. As the toll road proceeds through the life cycle of ramp-up, growth and then maturity, the uncertainty associated with future traffic levels decreases and a lower risk premium is applied. This reduction in risk premium (known as the re-rating process), coupled with the benefit of bringing forward future cash flows, results in a progressive increase in value as the toll road moves through its life cycle.
Table 1.9: Cash flow cascade Revenue
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Macquarie Infrastructure Group
-
Operating costs
=
Net operating cash flow (i.e. EBITDA)
-
Debt service obligations
-
Tax payments
-
Capital expenditure
+
Debt drawings
=
Cash flow available to equityholders
2008 Analyst Package
As an illustration, the value created through the re-rating process for the M6 Toll is presented in Figure 1.6.
Income statement
Revenue
519
Revenue
519
Expenses
(111)
Expenses
(111)
EBITDA
408
EBITDA
408
Interest and Other Expenses
(279)
Other Expenses
(2)
Net Interest Paid
(201)
Depreciation and Amortisation
Debt Principal Raised/(Repaid)
107
Tax Expense
(90) (72)
X Capitalising debt interest: The Income Statement does not distinguish whether interest payments have been capitalised or paid in cash. Thus for assets with capitalising debt facilities, the portion of interest capitalised does not have a corresponding cash flow impact.
Profit
60
0 (18)
Net Cash flow Available
132
Opening Cash Balance
92
Net Cash flow Available
132
Cash Available for Distribution
224
Cash Distributed to Equity
(120)
Closing Cash Balance
104
Figure 1.6: Value created through re-rating the M6 Toll 0.08
3,250
A$972 million returned via refinancing in August 2006
M6 Toll Equity Value
3,000
M6 Toll Risk Premium 2,750 2,500
0.07
7.50% 0.07 7.00%
7.00%
2,250 A$millions
X Depreciation: The initial capital cost in most cases is debt funded and interest generally capitalises during the construction period. Once the road is open for traffic, the net capitalised cost (both construction cost and capitalised interest) is depreciated across a specified period of time. In the early years of operation, the large initial capital cost results in significant depreciation charges to the Income Statement which do not have a corresponding cash flow impact.
0
EUROPE
Tax Paid
(69)
NORTH AMERICA
Net Capital expenditure Net change in Investments/ Reserves
Movements in Working Capital
The Profit/(Loss) measure in the Income Statement captures a number of non-cash items:
OVERVIEW
407 International – 2007 (C$m)
Cash flow cascade
0.06 6.50%
2,000
AUSTRALIA
A key valuation driver of toll road assets is their ability to generate free cash flows. In contrast to traditional industrial companies, the concept of accounting profit does not provide a meaningful proxy for free cash flow of toll road assets. The nature of toll road assets gives rise to the generation of free cash flows before accounting profit as illustrated in Table 1.10.
Table 1.10: Example of accounting profit vs free cash flows
0.06 1,750
6.00%
6.00% 0.05
1,500 5.50%
5.50%
5.50%
1,250
0.05 5.00%
1,000
5.00%
5.00% 0.04
750
4.50%
500
0.04 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Construction
MODEL OVERVIEW
Accounting Concepts: Accounting Profit vs Free Cash Flow
Ramp-up
Growth in value > 20% pa over 6 years 2008 Analyst Package
Macquarie Infrastructure Group
15
Overview Valuation of Toll Roads (cont.)
X Repayment of debt principal: These cash flows are not recognised in the Income Statement. X Capital expenditure: Under accounting standards, these expenses are generally capitalised to the cost base and depreciated over a specified period of time. For toll roads assets, capital expenditures are lumpy in nature and not evenly incurred during the concession period. As such funding is generally reserved in advance for such expenses. In analysing toll road assets, it is common practice to concentrate on Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) as a headline metric as it provides a meaningful proxy for cash flow generation.
Debt Financing Unlike traditional industrial companies, toll road assets have the ability to support higher levels of debt financing due to: X predictable and growing nature of future cash flow streams X minimal ongoing operating and capital expenses as a proportion of revenue. In general, toll road assets benefit from being able to leverage traffic growth into higher EBITDA growth. Growth in underlying traffic coupled with growth in toll prices translate to higher revenue growth which, 16
Macquarie Infrastructure Group
2008 Analyst Package
by keeping growth in costs to a minimum, result in even higher growth in EBITDA or operating cash flows. Growth in EBITDA for 407 ETR and the ability to leverage growth in traffic to operating cash flows are presented in Figures 1.7 and 1.8 respectively. As toll road assets mature and generate increased free cash flow, they are able to support increasing levels of debt. In such instances appropriate use of additional debt is an efficient means of financing as: X the cost of debt is generally lower than equity X this enables surplus proceeds from refinancings to be reinvested in capital improvements or returned to security holders. As toll road assets mature and derisk, the equity value of the asset increases (as illustrated through the M6 Toll in Figure 1.6). Therefore, the use of additional debt does not necessarily result in increased levels of gearing. The appropriate use of additional debt enhances equity value as it brings forward the timing of future equity distributions. Lenders to toll road projects generally use a Project Life Cover Ratio (PLCR) to assess the project’s ability to support debt. The PLCR reflects the number of times the current level of debt can be repaid within the term of the concession (the project life).
X maturity structure of debt tranches to diversify refinancing risk
Key terms of the transaction: X refinanced acquisition debt facilities with a £1.0 billion financing package
X ability to service principal and interest payments within the remaining concession term.
X committed £30 million Capital Expenditure Facility
Refinancing is an integral part of actively managing toll road assets and can add substantial value to equity holders. For example, in
X nine-year facility with 30-year interest rate hedging X rated BBB by Standard & Poor’s.
Outcome for MIG: X reduced credit margins and swap rates X significantly extended interest rate hedging – 100% covered for 30-years
OVERVIEW
August 2006 MIG refinanced its investment in M6 Toll increasing gross debt levels from £620 million to £1.0 billion.
X capitalising swaps resulting in better matching of cash flows over the life of the concession X increase in projected five-year average distribution of £4 million X five-year average Debt Service Cash Cover ratio increased from 1.7x to 2.8x
NORTH AMERICA
Since toll roads have a finite concession term, the use of additional debt must be analysed having regard to:
X project life cover ratio reduced from 5.9x to 3.2x
Figure 1.7: 407 ETR - increasing operating cash flow
X returned A$972 million via equity distribution to MIG.
500
Sensitivity to Interest Rate Movements
300
100
0 2002
2003 2004 Operating Expenses
2005 2006 EBITDA Total Revenue
2007
Figure 1.8: 407 ETR – leveraging traffic growth into higher EBITDA growth
16% 14%
5%
Traffic Growth (ADT)
2007 Revenue Growth
In the short term, hedging is generally used to reduce exposure to rising interest rates. MIG’s investments are relatively insensitive to short-term changes in interest rates as a significant proportion of the debt is hedged. Table 1.11 outlines current levels of hedging for MIG’s key assets (by value), including policy initiatives in place to manage exposure to movements in interest rates.
AUSTRALIA
Sensitivity to interest rate movements is an important consideration when valuing toll roads investments.
200
MODEL OVERVIEW
C$million
400
EUROPE
600
EBITDA Growth
2008 Analyst Package
Macquarie Infrastructure Group
17
Overview Valuation of Toll Roads (cont.)
In the longer term, toll road investments have a natural hedge to rising interest rates as there is some correlation between interest rates and inflation, i.e. they often move together. Rising interest rates increase the cost of capital (discount rate), decreasing the value of the
investment. However, higher inflation increases the valuation as toll road assets generally have inflation-linked toll pricing mechanisms. Table 1.12 illustrates the natural hedge to rising nominal interest rates for MIG’s two largest investments.
Table 1.11: MIG assets’ hedging position Hedging % as at 31 December 2007
Minimum required1 2
407 ETR
90% of all debt
100%
M6 Toll
75% of all debt
100%
APRR
75% of all debt
75%
Westlink M7
85% of senior debt
Dulles Greenway
80% of all debt
100%
Chicago Skyway
75% of senior debt
100%
Indiana Toll Road
100% of senior debt for 20 years
100%
2
98%
1. Minimum requirement stipulated by financing documents. 2. No stated policy, reflects view of Board and management.
Table 1.12: Natural hedge to rising nominal interest rates 407 ETR A$m Valuation at 31 December 2007 1
Interest rates +1%
Risk-free rate +1% Inflation +1%
2
3
Valuation Valuation uplift 1. Due to increase in debt servicing costs. 2. Due to increase in discount rate/cost of equity. 3. Due to increase in toll revenue as toll prices linked to inflation.
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3,770
M6 Toll A$m 3,026
(101)
(12)
(769)
(512)
1,085
916
3,985
3,418
215
392
MIT(I) is considered to be a “flow through” trust for the purposes of Division 6 of the Australian Income Tax Assessment Act 1936. MIIML, as responsible entity of MIT(I), will not be liable for income tax on the income of the Trust, provided that the income of MIT(I) is fully distributed to unitholders each year. Income distributed by MIT(I) to unitholders retains its character and therefore MIT(I) distributions may comprise different components (e.g. interest, dividend, capital gains, etc.).
MIT(I) (Australia)
Distribution of dividends and other free cash flow
Stapled
MIT(II) (Australia)
Distribution of dividends and other free cash flow
Stapled
MIGIL (Bermuda)
MIG Stapled Security
Assets
Assets
2008 Analyst Package
NORTH AMERICA
Taxation
Figure 1.9: MIG group structure Distribution of income and other free cash flow
OVERVIEW
MIG’s interests in toll roads are held via holding companies, in separate project vehicle legal entities. The debt borrowed by these project vehicles is on a non-recourse basis. MIG only makes use of debt facilities for short-term bridge financing.
EUROPE
Securities consisting of one or more investment vehicles managed by a third party are registered in Australia under the Managed Investments Act. MIG’s structure has been developed to facilitate the distribution of income and other surplus cash flows to security holders in the most efficient manner possible.
Debt Facilities
AUSTRALIA
Group Structure
MIG is a triple stapled security, consisting of a unit in Macquarie Infrastructure Trust (I) (MIT(I)), a unit in Macquarie Infrastructure Trust (II) (MIT(II)), and a share in Macquarie Infrastructure Group International Limited (MIGIL) as shown in Figure 1.9. Stapled securities are two or more instruments that are quoted and traded as if they are a single instrument. The responsible entity of MIT(I) and MIT(II) is Macquarie Infrastructure Investment Management Limited (MIIML) while MIGIL is advised by Macquarie Capital Funds (Europe) Limited (MCFEL). MIIML and MCFEL, together the Manager, are wholly owned subsidiaries of Macquarie Group Limited.
MODEL OVERVIEW
Overview
Assets
Macquarie Infrastructure Group
19
Overview Group Structure (cont.)
MIT(II) is a trading trust for the purposes of Division 6C of the Australian Income Tax Assessment Act 1936. MIT(II) may take controlling interests in the assets in which it invests, carry on a trading business itself or invest in a partnership or joint venture which carries on a trading business. A consequence of being a “Division 6C” trust is that MIT(II) is taxed as a company and is subject to tax at the corporate tax rate. This means that distributions from MIT(II) are akin to company dividends and may be franked. As of 1 July 2003, MIT(II) has been the head entity of a tax consolidated group. This means that MIT(II) will always be treated as a company even if it no longer meets the Division 6C tests. MIGIL (a Bermudian mutual fund company) is the ultimate holding company for MIG’s European and Canadian assets. Bermuda does not impose a tax on the income or capital gains of Bermudian companies. Distributions from MIGIL will generally comprise dividends.
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2008 Analyst Package
PFIC Treatment Under certain circumstances, US tax legislation seeks to tax US investors when they invest in foreign entities which predominantly make passive investments (defined as Passive Foreign Investment Companies or PFICs). In general, a PFIC is any nonUS corporation where 75% or more of its gross income for the year is passive income (interest, dividends, etc.) or where at least 50% of its average assets held during the year produce passive income. For stapled entities that trade as a single security (such as MIG), the legislation seeks to determine whether any of the stapled entities (i.e. MIT(I), MIT(II) and MIGIL) are PFICs. If an entity is deemed a PFIC, the US investor can be assessed on PFIC income without necessarily receiving distributions from the PFIC (i.e. taxable income without receiving cash). In determining whether entities are PFICs, a look through rule applies. Where entities have an interest of 25% or more, by value, of the stock of a subsidiary, the holding
OVERVIEW
entity is deemed to have earned and is deemed to own the relevant proportion of income and assets of the subsidiary. Stock of a less than 25% owned subsidiary is automatically treated as passive, and any income derived therefrom is passive income.
NORTH AMERICA
As it relates to MIG, MIG has recently updated its analysis and believes that for the year ended 30 June 2007 that MIT(I) and MIGIL are not PFICs but that MIT(II) is a PFIC.
EUROPE
The change in status for MIT(II) has arisen due to its sales of the Sydney toll roads (M4, M5 and Eastern Distributor) and 50% of its interests in US toll roads (Dulles Greenway, Chicago Skyway, Indiana Toll Road and South Bay Expressway). MIG will continue to monitor the situation. This analysis is subject to final legal sign-off.
AUSTRALIA
MIG takes no responsibility for investors or others who act on the information above. MIG recommends that investors or others affected should seek their own professional advice.
MODEL OVERVIEW
Investors who wish to confirm the PFIC status of these entities at 30 June 2007 and beyond should contact MIG’s investor relations department (see contact details).
2008 Analyst Package
Macquarie Infrastructure Group
21
Overview
Figure 1.10: MIG’s current structure
Group Structure (cont.)
Stapled
MIT (I) 100%
100%
Western Sydney Orbital Funding Trust
LMI WSO Holding No.3 Pty Limited
100%
Western Sydney Orbital Holding Trust
100%
47.5%
100%
7.5%
40.0%
FinCo (WSO Finance Pty Ltd)
MIG - Western Sydney Orbital Holding Company Pty Ltd*
Western Sydney Orbital Funding (Option) Trust
47.5%
47.5%
WestLink Motorway Partnership
8.5%
Nominee (WestLink Motorway Ltd)
39.0%
WSO Co (WSO Co Pty Ltd)
Stapled
MIG Investments Australia Pty Ltd*
100% 100%
MIG Indiana Holdings LLC 100% 49%
WestLink M7
MIG Holdings (US) LLC
Skyway Indiana Toll Road Dulles Greenway Transtoll South Bay Expressway APRR 407 ETR M6 Toll Warnow Tunnel Vasco de Gama & 25th April Bridges
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2008 Analyst Package
50%
Chicago Skyway Partnership 45%
Skyway Concession Company Holdings LLC 100%
Skyway Concession Company LLC
1%
Indiana Toll Road Partnership 49%
Statewide Mobility Partners LLC 100%
ITR Concession Company Holdings LLC 100%
ITR Concession Company LLC
OVERVIEW
MIT (II)
MIGIL
Stapled
100%
Macquarie Green Bermudian Holdings Ltd South Bay Expressway LP 100%
MEI
90%
MIBL Finance Luxembourg SarL
100%
MIT (II) Holdings Pty Ltd*
59.51%
10%
Macquarie Motorways Group Limited
100%
100%
Transtoll Pty Ltd Midland Expressway Ltd
100%
Macquarie Infrastructure (UK) Ltd
50.2% 100%
Macquarie Infrastructure Australia Pty Ltd* 50%
MIG Holdings 2 (US) LLC 50%
Dulles Greenway Partnership
30.61%
MAF Finance Sarl
Lusoponte Concessionaria para a Travessia do Tejo SA
50% +1
Macquarie Autoroutes de France SAS 50% -1
Financière Eiffarie SAS
European Transport Investments (UK) Ltd 100%
Macquarie Infrastructure Toll Route SA
100%
100%
70%
Macquarie Infrastructure Luxembourg SA
Warnowquerung GmbH & Co KG
100%
13.3%
100%
22.65%
77.35% 70%
Eiffarie SAS
100%
Shenandoah Greenway Corp (GP)
81.48%
Autoroutes ParisRhin-Rhône
0.1%
Toll Road Investors Partnership II LP
Warnowquerung Verwaltungsgesellschaft GmbH
Macquarie Infrastructure Canada Inc
MODEL OVERVIEW
MIG Investments 3 (US) LLC
NORTH AMERICA
50%
EUROPE
Macquarie Infrastructure US Pty Ltd*
AUSTRALIA
100%
30%
407 International Inc
* Members of Australian Tax Consolidated Group (Head Entity MIT(II))
2008 Analyst Package
Macquarie Infrastructure Group
23
Overview MIG Reporting
MIG prepares two reports which cover the operational and financial performance of MIG and its underlying assets. In addition to the statutory financial accounts, MIG provides a quarterly Management Information Report to assist analysts and investors in understanding MIG’s performance.
MIG Financial Statements The financial report for the year ended 30 June 2007 and the interim report for the half year ended 31 December 2007 are prepared under Australian Accounting Standards. Where MIG has a controlling interest in a toll road, the assets and liabilities of the concessionaire entity are consolidated into the accounts of MIG. These assets and liabilities include the road itself, the tolling concession (being the right to levy tolls) and non-recourse project level debt. MIG currently only consolidates Midland Expressway Limited (M6 Toll).
Table 1.13: MIG’s financial reporting
24
Macquarie Infrastructure Group
Report
Frequency
Description
Financial Statements
Semi-annual
X Statutory accounts as required for an ASX-listed reporting entity
Management Information Report
Quarterly
X Presents MIG’s key proportionally consolidated performance metrics and balance sheet items X Also presents MIG’s cash flows and investments at fair value without consolidating MIG’s controlled assets
2008 Analyst Package
Management Information Report OVERVIEW
The Management Information Report outlines: X MIG’s proportionate earnings, being the aggregation of MIG’s proportionate share of the financial results of each road asset based on MIG’s beneficial ownership interest
NORTH AMERICA
X details of traffic volumes across MIG’s portfolio of investments
AUSTRALIA
EUROPE
X a balance sheet and statement of cash flows that reflects transactions between MIG and each investment, disregarding the accounting concept of consolidation for investments in which MIG has a controlling interest. In the balance sheet, which is used to derive MIG’s Net Asset Backing, MIG’s investments in its controlled and noncontrolled assets are reflected at the MIG directors’ estimates of fair value.
MODEL OVERVIEW
In accordance with Australian Accounting Standards (AASB139), all non-controlled MIG toll road investments are recorded in MIG’s balance sheet at fair value. Fair value is the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction. A halfyearly assessment of the fair value of each non-controlled entity is made by the MIG Board, and revaluation movements are recognised in MIG’s Income Statement. Acquisition costs of all non-controlled MIG toll road investments are written off at the time of purchase.
2008 Analyst Package
Macquarie Infrastructure Group
25
Overview Distributions
MIG has confirmed distribution guidance of 20.0 cents per stapled security for the 12 months to 30 June 2008 and provided preliminary guidance of 20 cents per stapled security for the 12 months to 30 June 2009. This distribution guidance is subject to there being no material changes in the underlying cash flow forecast assumptions of the MIG business, including changes in proposed refinancings and the projected performance of the portfolio.
The key components may include: X Franked Distributions: Where Australian income tax has been paid within the MIG structure imputation (franking) credits may be attached. These franking credits are available to domestic MIG investors. Fully franked distributions are not subject to Australian dividend withholding tax when paid to MIG’s offshore investors. X Capital Gains: Capital gains made by MIT(I) on the disposal of assets form part of MIT(I)’s assessable income which will be distributed to security holders. As MIT(I) is a “flow through” trust, the capital gain generated on the sale maintains its character when the proceeds are distributed to investors. These capital gains will form part of security holders’
Components of MIG Distributions The classification of MIG’s distributions depends on how these funds have been derived. The components of MIG’s distributions can vary every financial year and are disclosed in its annual Tax Statement Guide.
Figure 1.11: MIG distributions 1,300 1,200 1,100 1,000 A $ millio n
900 800 700 600 500 400 300 200 100
Normal Distribution
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2008 Analyst Package
Cintra distribution
SRG in-specie distribution
Dec 07
Jun 07
Jun 06
Dec 06
Jun 05
Dec 05
Jun 04
Dec 04
Jun 03
Dec 03
Dec 02
Jun 02
Jun 01
Dec 01
Jun 00
Dec 00
Jun 99
Dec 99
Jun 98
Dec 98
Jun 97
Dec 97
-
X Foreign Distributions: Distributions made by MIGIL are classified as foreign distributions. These are not subject to Australian withholding tax when paid to MIG’s offshore investors.
OVERVIEW NORTH AMERICA EUROPE
X Tax Deferred: Tax deferred distributions do not form part of security holders’ assessable income for tax purposes. These distributions reduce the cost base of security holders’ investments for the purposes of Australian Capital Gains Tax calculations. In the event that these distributions reduce the cost base to zero, any excess will constitute capital gains. The CGT discount should be available for qualifying investors who have held their MIG securities for 12 months or more.
X Distribution Reinvestment Plan: MIG has traditionally offered investors the opportunity to reinvest distributions in additional MIG securities through a Distribution Reinvestment Plan (DRP). Only investors with a registered address in Australia or New Zealand are eligible to participate in the DRP. The security price for the MIG DRP is calculated as the average of the daily MIG Volume Weighted Average Prices (VWAPs) over the 10 trading day period ending no later than five trading days before the distribution payment date, which is then adjusted for any applicable discount offered. Under its constituent documents, MIG is able to offer a price discount of up to 10% for stapled securities issued under the DRP. MIG currently offers no discount on stapled securities issued under the DRP.
AUSTRALIA
assessable income, and the Capital Gains Tax (CGT) discount should be available for qualifying investors (broadly, individuals and superannuation entities).
MODEL OVERVIEW
MIG informs security holders of the actual components of its distributions in the annual Tax Statement Guide distributed in or around August each year. MIG recommends that all investors obtain their own tax advice in relation to the treatment of MIG distributions.
2008 Analyst Package
Macquarie Infrastructure Group
27
Overview On-market Buy-back
On 24 August 2006, MIG announced that the Australian Securities and Investments Commission (ASIC) had granted relief for MIG to undertake an on-market buy-back of up to A$500 million. This was the first time this relief had been granted for an Australian listed trust. The buy-back was initiated because MIG assessed that it was the most efficient way of distributing surplus cash and generating value for security holders. On 18 December 2006, following the successful completion of the sale of US assets to Macquarie Infrastructure Partners (MIP) and having received the required approvals from ASIC and MIG’s security holders, MIG announced that the buy-back would be expanded by a further A$500 million to a total of up to A$1 billion. On 15 January 2008, MIG announced the successful completion of the onmarket buy-back having bought back 292,218,706 stapled securities for a total consideration of $999,999,998.01. The price paid by MIG for stapled securities under the buy-back ranged between $2.90 (23 November 2007) and $3.88 (27 February 2007), with an average price of $3.42.
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2008 Analyst Package
Dec-96
No. of securities
Price (A$)
Cumulative
300,000,000
$1.00
300,000,000
Issue to Manager
18,000,000
–
318,000,000
31,800,000
$1.25
349,800,000
7,823,883
$1.48
357,623,883
119,211,526
$1.15
476,835,409
May-97
Private Placement
Aug-97
Dividend Reinvestment Plan (DRP)
Dec-97
1:3 Rights Issue
Feb-98
DRP
7,163,915
$1.22
483,999,324
Aug-98
DRP
11,695,388
$1.20
495,694,712
Feb-99
DRP
Mar-99
Private Placement
Aug-99
DRP
Oct-99
1:2 Rights Issue
7,547,463
$1.66
503,242,175
55,900,000
$1.60
559,142,175
11,601,860
$1.47
570,744,035
285,346,519
$1.50
856,090,554
Oct-99
Private Placement
12,804,420
$1.49
868,894,974
Feb-00
DRP
11,445,059
$1.35
880,340,033 890,390,966
Aug-00
DRP
10,050,933
$1.36
Feb-01
DRP
8,891,810
$2.381
899,282,776
Apr-01
Private Placement
58,000,000
$2.60
1
957,282,776
May-01
Private Placement
6,640,001
$2.601
963,922,777
Aug-01
DRP
5,408,875
$3.17
Sep-01
Institutional Entitlement Offer
409,692,677
Oct-01
Institutional/Retail Entitlement Offer
Feb-02
DRP
Apr-02
Institutional Placement
Apr-02
Institutional Entitlement Offer
May-02
Retail Entitlement Offer
Aug-02
1
969,331,652
$2.85
1
1,379,024,329
188,572,589
$2.851
1,567,596,918
3,960,861
$3.471
1,571,557,779
61,540,000
$3.251
1,633,097,779
180,484,959
$3.201
1,813,582,738
69,515,042
$3.201
1,883,097,780
DRP
9,771,131
$2.84
1,892,868,911
Dec-02
Manager Performance Fee
2,047,402
$2.97
1,894,916,313
Feb-03
DRP
6,371,778
$3.30
1,901,288,091
Aug-03
DRP
4,954,868
$3.50
1,906,242,959
Aug-03
Manager Performance Fee
20,131,790
$3.57
1,926,374,749
Feb-04
DRP
4,153,503
$3.28
1,930,528,252
Aug-04
DRP
4,549,794
$3.39
1,935,078,046
Aug-04
Manager Performance Fee
1,862,630
$3.27
1,936,940,676
Feb-05
DRP
227,949,622
$3.47
2,164,890,298
Aug-05
DRP
17,594,493
$4.09
2,182,484,791
Sep-05
Institutional Placement
174,418,605
$3.87
2,356,903,396
Sep-05
Manager Performance Fee
21,861,756
$4.19
2,378,765,152
Oct-05
Security Purchase Plan
26,731,829
$3.87
2,405,496,981
Feb-06
DRP
40,035,853
$3.40
2,445,532,834
Feb-06
DRP
29,966,556
$3.48
2,475,499,390
Aug-06
DRP
55,504,517
$2.66
2,531,003,907
Nov 06
Conversion of ReCNs2
165,048,894
$3.06
2,696,052,801
Oct 06–Jan 08 On-market buy-back3 (292,218,706) $3.424 2,403,834,095 1. Includes UK stamp duty paid by the MIG investor, in relation to shares in MEI. 2. MIG issued Reset Convertible Notes (ReCNs) to defer its equity contribution to the Westlink M7 project. The ReCNs were converted to MIG securities by ReCN holders in November 2006 at a price of $3.0581425 per security. 3. On-market buy-back of up to A$1 billion commenced on 3 October 2006 and was completed on 14 January 2008. 4. Weighted average price paid under the on-market buy-back.
2008 Analyst Package
Macquarie Infrastructure Group
NORTH AMERICA
Issue of securities Initial Public Offering
EUROPE
Date Dec-96
OVERVIEW
Table 1.14: Summary of securities on issue
AUSTRALIA
Securities on Issue
A summary of the dates and issue prices of MIG’s securities is set out below.
MODEL OVERVIEW
Overview
29
Overview Management Fees
Base Management Fees The base fee payable to the Manager is calculated on the following basis: X 1.25% per annum of Net Investment Value (NIV) up to and including A$3.0 billion X 1.00% per annum of NIV above A$3.0 billion and is payable quarterly in arrears.
Following security holder approval at the October 2006 MIG Annual General Meeting, the independent directors of MIG have the discretion for base fees to be paid in cash or applied to subscribe for new MIG stapled securities. The issue price for new scrip is the VWAP over the 10 trading days prior to the quarter end when the base management fee becomes payable.
Table 1.15: Base Management Fee calculation Key terms
Definition/Explanation
NIV
Market Capitalisation + Debt + Commitments – Cash
Calculation
Market Capitalisation
Volume weighted average closing traded MIG stapled security price x average number of stapled securities on issue
Calculated over last 10 trading days of each quarter ending 31 March, 30 June, 30 September and 31 December
Debt
Debt liabilities owed by any of the three stapled entities to external parties (excluding working capital liabilities)
As at quarter end
Commitments
Contractual future equity/quasiequity investment commitments
As at quarter end
Table 1.16: MIG Return
30
Macquarie Infrastructure Group
Key terms
Definition/Explanation
Calculation
MIG Return
((Closing MIG Accumulation Index – Opening MIG Accumulation Index) / Opening MIG Accumulation Index) * Opening MIG Market capitalisation
MIG Accumulation Index
ASAMIG (Bloomberg)
Calculated by S&P in accordance with recognised accumulation indice conventions (see below)
Closing MIG Accumulation Index
Average of the MIG Accumulation Index over the last 10 trading days of the current performance fee period
Opening MIG Accumulation Index
Average of the MIG Accumulation Index over the last 10 trading days of the prior performance fee period
Opening MIG Market Capitalisation
MIG VWAP over the last 10 trading days of the prior performance fee period
2008 Analyst Package
X if ((MIG Return – Benchmark Return) – Deficit)) is < zero, no performance fee is generated and the resulting Deficit is carried forward X calculated annually at 30 June.
Calculation of MIG Accumulation Index Under its constituent documents, MIG’s performance fees must be calculated in accordance with the MIG Accumulation Index published on Bloomberg (ASAMIG). This index is calculated in accordance with S&P’s accumulation index methodology. In summary, ASAMIG calculates the accumulated return for an IPO investor that reinvests all distributions at the closing price on the relevant ex-distribution date. Distributions paid by MIG have been recognised as ordinary distributions for the purposes of calculating the accumulation index with the exception of the SRG in-specie distribution in July 2006 and the special distribution paid from Cintra proceeds in December 2004.
Based on MIG’s closing security price of $3.15 on 21 July 2006, the 38.333 cps return equates to 12.17% ($0.38333/$3.15) of MIG’s capital. MIG securities are assessed to have only 87.83% of the capital value they did prior to the capital return. This should be reflected in a $0.38333 decrease in the MIG security price. To reflect that MIG investors have not suffered a diminution in value due to the capital return (e.g. $3.15 = $2.77 + $0.38 return), an adjustment factor must be applied to post-capital return security prices so that they
Deficits If the Benchmark Return exceeds the MIG Return during a performance fee period, the difference is defined as a Deficit. The Deficit is carried forward at its dollar value into future performance fee calculations. The MIG Return must exceed the Benchmark Return by more than any carried-forward Deficit before a new performance fee can be generated in subsequent years.
Table 1.17: Benchmark Return Key terms
Definition/Explanation
Benchmark Return
((Closing Benchmark Index – Opening Benchmark Index)/Opening Benchmark Index) * Opening MIG Market Capitalisation
Calculation
Benchmark Index
ASX 300 Industrials Accumulation Index – ASA47 (Bloomberg); XKIAI (IRESS)
OVERVIEW
Per the MIG constitutions, ASA47 is the index used in calculations
Opening MIG Accumulation Index
Average of the Benchmark Index over the last 10 trading days of the prior performance fee period
Closing MIG Accumulation Index
Average of the Benchmark Index over the last 10 trading days of the current performance fee period
Opening MIG Market Capitalisation
MIG VWAP over the last 10 trading days of the prior performance fee period
2008 Analyst Package
NORTH AMERICA
X calculated as: 15% x ((MIG Return – Benchmark Return) – Deficit))
The 60 cent component of the December 2004 distribution that related to Cintra IPO proceeds was also recognised as a capital return and incorporated into the MIG Accumulation index in the same manner.
EUROPE
X the Manager is entitled to 15% of the amount by which the MIG Return exceeds the Benchmark Return, after recouping any prior period Deficit
are comparable to pre-capital return security prices. This adjustment factor is applied by dividing postcapital return security prices by 87.83% (i.e. $3.15 = $2.77/87.83%).
AUSTRALIA
Performance fees payable to the Manager are calculated on the following basis:
The SRG in-specie distribution, valued at 38.333 cents per MIG stapled security, was recognised as a capital return and was treated differently from ordinary distributions when calculating the MIG Accumulation Index. The relative size of the capital return has been calculated by reference to MIG’s closing security price on the trading day prior to the ex-capital return date.
Macquarie Infrastructure Group
MODEL OVERVIEW
Performance Fees
31
Overview Management Fees (cont.)
Example Year 1: MIG Return: (Closing MIG Index / Opening MIG Index) x Opening Market Cap = ((110 – 100) / 100) x A$7.00 billion = A$700 million Benchmark Return: (Closing Benchmark Index / Opening Benchmark Index) x Opening Market Cap = ((120 – 100) / 100) x A$7.00 billion = A$1,400 million Calculation: A$700 million – A$1,400 million = –A$700 million Result: No performance fee generated, A$700 million deficit carried forward Year 2: MIG Return: ((121 – 110) / 110) x A$7.50 billion = A$750 million Benchmark Return: ((126 – 120) / 120) x A$7.50 billion = A$375 million Calculation: ((A$750 million – A$375 million) – A$700 million) = –A$325 million Result: No new performance fee, A$325 million deficit carried forward Year 3: MIG Return: ((132 – 121) / 121) x A$8.00 billion = A$800 million Benchmark Return: ((126 – 126) / 126) x A$8.00 billion = Nil Calculation: ((A$800 million – nil) – A$375 million) = A$425 million Result: New performance fee = 15% x A$425 million = A$63.75 million
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Macquarie Infrastructure Group
2008 Analyst Package
Similarly, the third instalment is payable if the MIG Accumulation Index outperforms the Benchmark Accumulation Index over the three-year period from the start of the Performance Fee Year to the end of the second year after the Performance Fee Year. If the performance criteria are not satisfied for an instalment of a performance fee, the instalment is forfeited by the Manager and cannot be recouped at a later stage. The forfeiture of the second instalment of a performance fee does not affect the calculation to determine whether the third instalment is payable to the Manager.
Table 1.18 illustrates the calculations required to determine whether second and third instalments of a performance fee are payable to the Manager.
Table 1.18: Benchmark return
Opening MIG Market Cap
Performance Fee Year
2nd Instalment Payable?
3rd Instalment Payable?
$5 billion
N/A
N/A
Opening MIG Accumulation Index
100
N/A
N/A
Closing MIG Accumulation Index
120
126
140
Opening Benchmark Accumulation Index
100
N/A
N/A
Closing Benchmark Accumulation Index
110
132
135
$150 million
N/A
N/A
= ((126 – 100) / 100) – ((132 – 100) / 100) = -6%
= ((140 – 100) / 100) – ((135 – 100) / 100) = 5%
Performance Fee Generated Instalment Calculation
Instalment Payable? (If calculation > 0)
Yes
No
Yes
Amount of Instalment
$50 million
NIL
$50 million
OVERVIEW NORTH AMERICA
Example
EUROPE
The second instalment is payable if the MIG Accumulation Index outperforms the Benchmark Accumulation Index over the twoyear period from the start of the Performance Fee Year to the end of the year after the Performance Fee Year. The Performance Fee Year is the year in which the performance fee is generated.
is the VWAP over the 10 trading days prior to the year end when the performance fee instalment becomes payable.
AUSTRALIA
Performance fees earned by the Manager are payable in three equal instalments. The first instalment is paid when the performance fee is generated. Payment of the second and third instalments is subject to meeting ongoing performance criteria.
When a performance fee instalment becomes payable to the Manager, the Manager can elect to apply the proceeds to a subscription of new MIG securities, subject to approval by the independent directors of the Manager and the independent directors of MIGIL, acting in the best interests of MIG security holders. All performance fees generated since 2001 have been reinvested in MIG securities. The issue price for scrip
MODEL OVERVIEW
Instalments
2008 Analyst Package
Macquarie Infrastructure Group
33
Overview Management Fees (cont.)
Historical Performance The MIG Accumulation Index has outperformed the Benchmark Accumulation Index since listing as demonstrated in Figure 1.12. Figure 1.12: Historical performance 900% 800% 700% 600% 500% 400% 300% 200%
Jun 07
Dec 07
Dec 06
Jun 06
Jun 05
Dec 05
Jun 04
Dec 04
Jun 03
Dec 03
Jun 02
MIG Accumulation Index
Dec 02
Dec 01
Jun 01
Jun 00
Dec 00
Dec 99
Jun 99
Jun 98
Dec 98
Jun 97
Dec 96
0%
Dec 97
100%
ASX 300 Industrials Accumulation Index
Historical performance fees generated and paid to the Manager are listed in Table 1.19. Table 1.19: Historical performance fees
1. 2.
34
Macquarie Infrastructure Group
Year to 30 June
Performance fee generated for the period
Instalments paid to Manager
1997
$17,818,449
1st, 2nd, 3rd
1998
–
–
1999
–
–
2000
–
–
2001
$207,353,321
1st, 2nd, 3rd
2002
$18,262,309
1st, 2nd, 3rd
2003
1
$197,048,794
1st, 3rd
2004
–
–
2005
$77,731,5312
1st
2006
–
–
2007
–
–
Only 1st and 3rd instalments paid to MIG amounting to $131,365,862. Only 1st instalment paid to MIG amounting to $25,910,505.
2008 Analyst Package
North America Chicago Skyway ............................................... 43 Indiana Toll Road .............................................. 49
OVERVIEW
407 ETR ............................................................. 36
Dulles Greenway ............................................... 56
MODEL OVERVIEW
AUSTRALIA
EUROPE
NORTH AMERICA
South Bay Expressway .................................... 63
2008 Analyst Package
Macquarie Infrastructure Group
35
North America 407 ETR
Asset Description 407 ETR is a 108 kilometre open access, all-electronic toll highway in Toronto, Canada. The asset was developed by the Ontario Government and opened to traffic in 1997. It was 69 kilometres in length on opening. 407 International Inc (407 International) acquired 407 ETR Concession Company Limited (407 ETR) from the Ontario Government in mid-1999 for C$3.1 billion. The highway was lengthened with the West Extension opening on 30 July 2001, and the East Partial Extension opening on 30 August 2001. These extensions were funded by 407 International at a cost of approximately C$550 million. The highway currently varies between four and 10 lanes (two to five lanes in each direction) and has the capacity to be expanded to up to 12 lanes in the future.
Concessionaire Ownership Structure 407 International owns the concession to operate 407 ETR. Prior to the Cintra IPO in October 2004, MIG held a 42.97% economic interest in 407 International (16.13% direct and 26.84% indirect). MIG completed an asset swap with Cintra prior to the IPO, where MIG exchanged an 11.99% interest in Cintra for an additional 13.87% direct stake in 407 International. This simplified MIG’s investment in 407 International to a 30.0% direct interest. Cintra and SNC-Lavalin (a Canadian engineering company) are the other shareholders in 407 International. Shareholders have pre-emptive rights should any other shareholder seek to sell their investment in the asset.
Figure 2.1: 407 ETR Proposed East Completion
ONTARIO
Markham
HIGHWAY 407
Oshawa Pickering
401
Brampton
Toronto
Georgetown
QEW
401
Lake Ontario
Milton
Oakville
Burlington Hamilton
NEW YORK STATE
36
Macquarie Infrastructure Group
2008 Analyst Package
Cintra
SNC
53%
30%
407 ETR can be expanded from its current capacity to the maximum capacity outlined in Table 2.1. 407 ETR’s current configuration is approximately 714 lane kilometres, with a maximum expandable capacity of 1,022 lane kilometres. In September 2007, 407 ETR completed a two-year project to add 100 kilometres of new lanes between Highways 401 and 404. The expansions were constructed down the centre median of the road and opened in stages as construction progressed.
Figure 2.2: 407 ETR ownership structure MIG
Road Configuration
17%
OVERVIEW
The debt of 407 International currently consists of a number of tranches of bonds, totalling approximately C$4.6 billion as at 31 January 2008. Under the terms of the lending documents, 407 International is able to increase its borrowings subject to satisfying specified coverage ratios and
maintaining its current credit ratings. This gives 407 International flexibility to increase debt levels as traffic and tolls increase. Debt service and other reserves, totalling approximately C$370 million, are required under the current lending documents. The reserves are a function of fixed amount requirements and forecasted operating projections.
NORTH AMERICA
407 ETR Financing Structure
Table 2.1: Road configuration
Distance (km)
Current capacity (lanes in each direction)
Maximum capacity (lanes in each direction
From
To
QEW
Highway 403
25.1
3
4
Highway 403
Highway 401
9.9
2
4
Highway 401
Highway 427
24.5
4
5
Highway 427
Highway 400
8.2
5
6
Highway 400
Highway 404
16.3
4
5
Highway 404
McCowan Rd
7.3
3
5
McCowan Rd
Markham Rd
Markham Rd
Brock Rd
Brock Rd
Highway 7
Total
2.1
3
5
13.9
2
5
0.8
2
2
AUSTRALIA
407 ETR
The opening of these lanes has increased traffic capacity through one of the busiest section of the road, assisting in relieving congestion on the surrounding network. Table 2.2 provides details of expansion to the 407 ETR since first opening in 1997.
MODEL OVERVIEW
Concessionaire
108.0
2008 Analyst Package
EUROPE
407 International Inc
Macquarie Infrastructure Group
37
North America 407 ETR (cont.)
38
Macquarie Infrastructure Group
Table 2.2: 407 ETR expansions Year
Segment
1997
C2
1998
C7
1999
Dir
Expansions/ Widening
Ministry approval
From
To
EB/WB
Hwy 410
Hwy 401
13km lane extension
EB/WB
Hwy 404
McCowan Rd
7km lane extension
13 Feb 98
C1
EB/WB
Hwy 401
Hwy 403
10km lane extension
18 Sep 99
1999
E1
EB/WB
2km lane extension
24 Jun 99
2001
W3
EB/WB
Hwy 403
Neyagawa
6km lane extension
17 Jun 01
2001
W2
EB/WB
Neyagawa
Bronte Rd
5km lane extension
29 Jun 01
2001
W2
EB/WB
Bronte Rd
Dundas
8km lane extension
18 Jul 01
2001
W1
EB/WB
Dundas
QEW
10km lane extension
30 Jul 01
2001
C1
EB/WB
Britannia Rd
Interchange opening
21 Aug 01
2001
E1
EB/WB
McCowan Rd
Interchange opening
21 Aug 01
2001
E1
EB/WB
Kennedy Rd
Interchange opening
29 Aug 01
2001
E1, E2
EB/WB
15km lane extension
30 Aug 01
2002
C7
WB
Entrance ramp
10 May 02
McCowan-Markham Link
Markham Rd
Brock Rd
Woodbine Ave
13 Dec 97
2002
C4
E
Mavis Rd
Exit opening
29 Aug 02
2002
C7
E
Woodbine Ave
Exit opening
8 Nov 02
2003
C4
EB
Hwy 427
Hwy 400
1 lane to each direction
26 Jun 03
2003
C4
WB
Hwy 400
Hwy 427
1 lane to each direction
26 Jun 03
2003
C1
EB/WB
Hwy 407
Hwy 403
Exit ramp
25 Nov 03
2004
C2
EB
Hwy 401
Hwy 410
1 lane to each direction
10 Nov 04
2004
C2
WB
Hwy 410
Hwy 401
2004
E1
EB/WB
2006
C4
EB
Hwy 427
2006
C4
WB
Hwy 400
2006
C5
EB
2006
C5
2006
C6
2006
1 lane to each direction
10 Nov 04
Interchange opening
17 Dec 04
Hwy 400
1 lane to each direction
31 Aug 06
Hwy 427
1 lane to each direction
31 Aug 06
Hwy 400
Yonge
1 lane to each direction
31 Aug 06
WB
Yonge
Hwy 400
1 lane to each direction
30 Sep 06
EB
Yonge
Hwy 404
1 lane to each direction
31 Aug 06
C6
WB
Hwy 404
Yonge
1 lane to each direction
20 Sep 06
2006
E1
EB
McCowan-Markham Link
1 lane to each direction
16 Nov 06
2006
E1
WB
McCowan-Markham Link
1 lane to each direction
16 Nov 07
2007
C3
EB
Hwy 427
Hwy 410
1 lane to each direction
3 Aug 07
2007
C3
WB
Hwy 410
Hwy 427
1 lane to each direction
3 Aug 07
2007
C2
EB
Hwy 401
Hwy 410
1 lane to each direction
6 Sep 07
2007
C2
WB
Hwy 410
Hwy 401
1 lane to each direction
17 Sep 07
2008 Analyst Package
Markham Bypass
Tolls are charged based on distance travelled and additional fees are levied for account maintenance, overdue accounts and for each trip by users without a transponder (electronic vehicle tags). The toll system is fully electronic and barrierfree. Instead of having toll plazas, the highway has a pair of overhead gantries at each entry and exit point. The majority of 407 ETR toll transactions are completed using a transponder, approximately 79% of transactions as at 31 December 2007 with over 850,000 transponders in circulation. The remaining transactions are completed via video tolling.
407 International carries a significant accounts receivable balance, reflecting collectable billed amounts that remain outstanding. 407 ETR provides for doubtful accounts based principally on historical collection rates and management’s expectation of success rates in plate denial. In addition to toll revenue, 407 International is able to charge account fees and interest on overdue accounts in accordance with the restrictions specified in the Concession Agreement.
OVERVIEW NORTH AMERICA
As a means of promoting toll account payment, 407 International can request the Registrar deny someone renewal of an existing licence plate or issuance of a new licence plate if they have any 407 ETR toll bills outstanding, in accordance with the Highway 407 Act (the Act). If a bill is outstanding for 35 days, a Notice of Failure to Pay will be sent to the customer. If payment has not been received 90 days later, the amounts owed will be referred to the Registrar. Upon referral to the Registrar, the customer will be sent a Notice of Plate Denial and the Registrar will place the customer in plate denial until all tolls, fees and interest referred to the Registrar have been paid in full.
EUROPE
Toll Revenue
Despite the use of video tolling, a small proportion of user trips remain unbillable, primarily due to being unable to identify customers through the video tolling system.
Plate Denial
AUSTRALIA
As part of traffic planning for the greater Toronto network, an eastern extension of 407 ETR has been proposed (the East Completion). The East Completion is expected to stretch from the eastern end of 407 ETR to Highway 35/115, with two adjoining links connecting to Highway 401, running through Whitby and Courtice. On 17 January 2005, the Minister of Environment approved the Terms of Reference for the Environmental Assessment study for the project. Once constructed, it is expected that the East Completion will be a catalyst for traffic growth on 407 ETR.
Toll revenue is collectable on a postpaid basis – customers are billed after using the road and are then required to pay within 37 days of being billed. There is a substantial level of complexity in the asset’s traffic monitoring and billing systems. To bill a customer for a trip, 407 ETR requires evidence of the customer’s entry and exit points.
To encourage further customers to use transponders, 407 ETR has continued to waive the C$10 Transponder Activation Fee.
MODEL OVERVIEW
East Completion
2008 Analyst Package
Macquarie Infrastructure Group
39
North America 407 ETR (cont.)
Tolling The project documents that regulate the tolling of 407 ETR allowed for a maximum toll (the Toll Threshold) for calendar year 1999 (the Initial Toll Threshold) equal to C$0.11/km for light vehicles, C$0.22/km for heavysingle-unit vehicles and C$0.33/ km for heavy-multi-unit vehicles (including administration fees). The Toll Threshold is indexed every year at inflation. It is also permitted to increase in real terms by 1.5% in the first year and thereafter by 2.0% per annum until it reaches a total cumulative real increase of 30.0%. When the 407 ETR Central, West Extension and East Partial Extension sections were commissioned and opened along their full length, a base traffic flow (the Traffic Threshold) was established based upon peak-hour traffic over the 2002 year (the Base Year), for each of the 12 segments of the road. This Traffic Threshold grows at a rate of between 1% and 3% per annum (to a maximum of 1,500 vehicles per lane per hour), depending upon the traffic threshold level for that segment in the prior year. After Base Year, Tolls may be raised without limit under the Concession Agreement. However if observed peak-hour traffic flows for any segment during the year are less than the indexed Traffic Threshold, penalties are payable to the Province
40
Macquarie Infrastructure Group
2008 Analyst Package
of Ontario. The penalties are equal to the lesser of two times the toll revenue charges for that segment over the Toll Threshold, or two times the toll revenue multiplied by the percentage shortfall in actual traffic compared with the Traffic Threshold. In addition, penalties will be payable to the Province if: X average administration fees payable by transponder-equipped vehicles exceed C$60 per annum (in 1999 dollars) X video surcharges exceed a threshold equal to C$1.00 per trip (in 1999 dollars), escalating by C$0.50 per annum to a maximum of C$3.00 (in 1999 dollars) X toll charges and administration fees for single heavy units and multiple heavy units exceed two and three times, respectively, the toll charges and administration fees for light vehicles X non-peak-hour toll charges are set at higher levels than peak rate toll charges. Under the Concession Agreement 407 International also has the obligation to widen segments of 407 ETR when traffic volumes exceed a certain threshold. If more than one segment exceeds its threshold in a given year, only one has to be widened. The widening (by one lane in each direction) has to be completed over the subsequent two years. 407 International can
Table 2.3: Toll history for light vehicles
Heavy Vehicle Reward Program
Canadian cents/km Tariff
Peak
Off-peak
C$/Trip Night
Video
May 1999
10.00
7.00
4.00
1.00
Sep 1999
10.00
8.00
4.00
1.00
May 2000
10.50
10.50
5.00
1.50
Jan 2001
11.00
11.00
6.00
2.00
Jan 2002
11.50
11.50
11.50
2.65
Feb 2003
12.95
12.10
12.10
3.30
Feb 2004
13.95
13.10
13.10
3.35
Feb 2005
14.95
14.10
14.10
3.45
Feb 2006
16.25
15.50
15.50
3.50
Feb 2007
17.60
16.80
16.80
3.55
18.00
18.00
3.60
Feb 2008
19.25 (regular zone) 19.00 (light zone)
Peak Hours are weekdays between 6am and 10am and 3pm and 7pm. Off-Peak Hours are weekdays between 10am and 3pm as well as holidays and weekends. Night Hours are weekdays between 7pm and 6am. From 2002 Night Hours are classified as Off-Peak Hours.
On 1 July 2006, 407 International introduced a tiered savings program for heavy vehicles. The program reduces the video toll charge and provides toll rate reductions during night time, weekend and off-peak hours.
ETR Rewards Program On 1 February 2007, 407 International introduced a four year, C$40 million rewards program for frequent users of the 407 ETR. The tiered program provides customers with free 407 kilometeres and savings on their fuel price at certain fuel providers.
Table 2.4: Summary of performance Year to 31 December
2003
2004
2005
2006
2007
1,823.617
1,959.523
2,064.073
2,124.145
2,253.33
259,496
271,892
283,855
292,501
308,169
Total Revenue
341.696
380.239
420.258
455.678
518.933
Operating Expenses
102.081
103.052
104.005
103.009
111.284
EBITDA
239.615
277.187
316.253
352.669
407.649
70
73
75
77
79
OVERVIEW
On 31 March 2006, 407 International and the Ontario Government reached settlement regarding all existing disputes between the parties. In particular, the Ontario Government dismissed its appeals regarding 407 ETR toll setting and base year calculations.
NORTH AMERICA
Sectional (or zone) tolling was introduced as part of the most recent toll increase on 1 February 2008, differentiating peak hour tolls
Dispute Settlement with the Ontario Government
EUROPE
between the “Regular Zone” between Highways, 401 and 404, and the “Light Zone”, being the remainder of the highway. Historical and current tolls for light vehicles are presented in Table 2.3 (in Canadian dollars). Historically, distance-based heavy single-unit and multi-unit vehicle tolls have been two times and three times the light vehicle equivalent.
AUSTRALIA
voluntarily choose to expand more than one segment. 407 International can also elect to expand segments by more than one lane or expand in advance of the threshold requirement being triggered.
Vehicle Kilometres Travelled (m) ADT
MODEL OVERVIEW
Traffic
Financial (C$m)
EBITDA Margin (%)
2008 Analyst Package
Macquarie Infrastructure Group
41
Table 2.5: Asset snapshot and key metrics All financial amounts shown below are expressed in C$.
Senior debt
Asset
99-A1
$400 million fixed, 6.05%, Bullet, current pay, maturing 27 July 2009
4–10 lanes (2–5 lanes/direction)
99-A2
$400 million fixed, 6.47%, Bullet, current pay, maturing 27 July 2029
Central – June 1997 West Extension – July 2001 East Partial Extension – August 2001
99-A3
$300 million fixed, 6.75%, Amortiser, 5 year P&I holiday, maturing 27 July 2039
99-A4
$208.3 million Real Return Bond, 5.33%, 10 year P&I holiday, maturing 1 December 2016
99-A5
$208.3 million Real Return Bond, 5.33%, 10 year P&I holiday, maturing 1 December 2021
99-A6
$208.3 million Real Return Bond, 5.33%, 10 year P&I holiday, maturing 1 December 2026
99-A7
$208.3 million Real Return Bond, 5.33%, 10 year P&I holiday, maturing 1 December 2031
Location
Toronto, Canada
Length
108km
Size Opened to Traffic
Concession Ownership
MIG (30%); Cintra (53%); SNC-Lavalin (17%)
Commencement Date
6 April 1999
Term
99 years, 3 November 2098 expiry
Traffic and tolling Tolled Traffic
Both directions
Tolling Methods
Electronic tolling, on a per km basis 41 interchanges, 197 gantries
00-A2
$325 million Real Return Bond, 5.29% Amortiser, 5 year P&I holiday, maturing 1 Dec 2039
Tolling Classes
Light vehicles (cars, vans) Heavy Single Unit (single unit trucks, buses) Heavy Multi-unit (trucks with 1-2 trailers)
04-A2
$162.3 million, $13 million x change in CPI, 3.276%, maturing 27 July 2039
04-A3
Toll Levels (as at 1 February 2008)
Vehicle Class
$340 million fixed, 5.96%, Bullet, current pay, maturing 3 December 2035
07-A2
$625 million Senior Medium Term Notes, fixed 4.90% maturing 4 October 2010
08-A1
$250 million Senior Medium Term Notes, fixed 4.50% maturing 25 January 2011
Peak Rate Peak Rate Off-Peak Regular Light Zone Rate Zone (cents/ (cents/ (cents/ km) km) km)
Light
19.25
19.00
18.00
Heavy Single Unit
38.50
38.00
36.00
Heavy Multi-unit
57.75
57.00
54.00
Peak Periods
Weekdays: 6am–10am and 3pm–7pm
Non-Peak Periods
Weekdays: 10am–3pm and 7pm–6am All weekends and public holidays
Toll Escalation
Market-based
Video Charges
$3.60/trip for Light vehicles (in addition to tolls) $50.00/trip for Heavy vehicles (temporarily discounted to $15.00) (transponders are mandatory for heavy vehicles)
Account Fees
Non-transponder accounts $2.55/month Transponder accounts $2.55/month transponder lease fee ($21.50 transponder lease fee if paid annually in advance)
Interest on Overdue Accounts
Commences 37 days after bill is issued 2%/month (26.82% pa compound)
Transponder penetration (%)
2007 – 79.3% 2006 – 78.7%
Junior bonds 00-B1
$165 million, fixed, 7.00%, Bullet, current pay, maturing 26 Jul 2010, extendible to 26 Jul 2040 at 7.125% (bondholders option)
Subordinated bonds 06-D1
$480 million, floating rate subordinated notes, 3 month Canadian Dollar Bankers’ Acceptances Rate (CDOR) + 0.15%, maturing 26 February 2036
08-D1
$300 million, fixed subordinated note, 5.00% maturing 31 January 2011
Reserves Debt Service Reserves
As prescribed by Bond Indentures
Working Capital Reserve
Must maintain a minimum $10 million cash balance
O&M/R&R Reserve
25% of next 12 months O&M costs 25% of next four years Renewal and Replacement costs
2005 – 78.2% 2004 – 76.9%
Covenants
2003 – 75.6% Days Sales Outstanding
90-100 days
Capital expenditure assumptions (as at 31 Dec 2007 where year 1 = 2008)
42
Years 1–4
$259 million
Years 5–10
Average $49 million pa
Years 11–20
Average $54 million pa
Years 21–30
Rate Covenant
1.25x Senior DSCR
Distributions
1.35x Senior DSCR
Additional Debt
1.45x Senior DSCR
All Debt Rate Covenant
1.15x Senior and Junior DSCR
Taxation Provincial Income
14% (deductible for Federal income tax purposes)
Average $52 million pa
Federal Income
21%, reducing to 15% by 2012
Years 31–40
Average $52 million pa
Federal Income Surtax
1.12% reducing to 0% by 2008
Years 41–50
Average $66 million pa
Provincial Capital
0.3%, with $7.5 million exemption, reducing to 0% by 2012
Federal Capital
The 2006 federal budget reduced federal capital tax to 0% effective 1 January 2006
Macquarie Infrastructure Group
2008 Analyst Package
On 15 December 2006, MIG completed the divestment of 50% of its interests in its four US toll roads to Macquarie Infrastructure Partners (MIP) for a total consideration of US$825 million (A$1.05 billion). The sale price represented MIG’s NAB value for each asset as at 30 June 2006, rolled forward to transaction close. The price paid for 22.5% of Skyway was US$178.1 million (A$226.1 million).
Figure 2.3: Chicago Skyway ownership structure MIG
Cintra
MIP 22.5%
22.5%
55%
OVERVIEW NORTH AMERICA
Skyway Concession Company LLC (SCC) owns the concession to operate the Skyway for 99 years from January 2005. This entity was established by the 55:45 CintraMIG consortium that successfully acquired the Skyway from the City of Chicago, for US$1.82 billion, with the consortium being announced as preferred bidder for the Skyway in October 2004, and reaching financial close in January 2005.
EUROPE
The Chicago Skyway (Skyway) is a 12.5 kilometre, six lane mediandivided toll road south of Chicago that links the Indiana Toll Road (I-90), from the Illinois-Indiana state line, over the Calumet River into a junction with the Dan Ryan Expressway (I-94). The road contains 8.0 kilometres of elevated roadway pavement supported on embankment. The remaining 4.5 kilometres consists of various types of elevated bridge structures including overpasses, the Calumet River Bridge and viaduct sections.
Concessionaire Ownership Structure
AUSTRALIA
Chicago Skyway
Asset Description
Skyway Concession Company Holdings LLC 100%
Skyway Concession Company LLC Concessionaire
MODEL OVERVIEW
North America
Skyway
2008 Analyst Package
Macquarie Infrastructure Group
43
North America Chicago Skyway (cont.)
MIG currently owns a 22.5% interest in Skyway Concession Company Holdings LLC, (SCCH), which owns 100% of SCC. SCC is treated as a partnership for US tax purposes. The partners are assessed on the taxable profits/(losses) of the company.
X Mature in 2017, bullet payment at maturity
Skyway Refinancing
X Interest payable semi-annually in arrears
On 16 August 2005, the concessionaire successfully completed a US$1.55 billion refinancing. The refinancing was used to repay US$1 billion in acquisition debt, fund reserves, transaction costs and distribute US$373 million back to equity holders. Under the refinancing, two tranches of Rule 144A bonds, totalling $1.40 billion, were underwritten as set out below:
Characteristics of the Series A – Current Interest Bonds include: X Floating Rate Notes at LIBOR + 0.28%
X Fully swapped interest until maturity X All-in swap rate of 4.82% from years 1–9; 5.88% from years 10–17. Characteristics of the Series B – Capital Accretion Bonds include: X Floating Rate Notes at LIBOR + 0.38% X Mature in 2026 with amortisation beginning in 2019
X Series A – US$439 million Current Interest Bonds (CIBs)
X Along with the swap, repayment profile structured as a series of zero coupon bonds
X Series B – US$961 million Capital Accretion Bonds (CABs).
X Fully swapped interest until maturity
The borrowing entity in relation to these issues is SCC. Both tranches are monoline wrapped by Financial Security Assurance Inc. (FSA). A portion of the FSA premium was paid upfront with proceeds of the issue and the remainder is payable over the life of the bonds. The wrapped bonds carry ratings of Aaa by Moodys and AAA by S&P.
X Underlying swap rates range from 4.62% to 5.64% X Swap creates a fixed repayment profile over the life of the bond. In addition to repaying the acquisition debt and funding a return of capital to equity, proceeds from the bond issues were used to fund multiple reserves. These reserves include: X Operational Reserve – US$4 million
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Macquarie Infrastructure Group
2008 Analyst Package
Figure 2.4: Road configuration
St Lawrence Avenue
Dan Ryan
X Lender entitled to a portion of distributions until interest and principal are paid in full (50% of distributions in years 1–6; 100% thereafter) X Margins step up over time (2.50% in years 1–3; 2.75% in years 4–6; 3.00% thereafter)
73rd Street
X Fully swapped interest over the anticipated life of the issue.
87th Street
A St ntho ree ny t
MIG Investment Structure Initially, MIT(I) had contributed US$160 million of capital (all of which was returned to MIT(I) at the refinancing in August 2005) in MIG Holdings (US) LLC, with the balance of the equity funding provided by MIT(II) through MIG Investments Australia Pty Ltd. Under the USAustralia double tax agreement, dividends to MIG Investments Australia Pty Ltd are not subject to withholding tax. Further distributions
OVERVIEW
Slate St
X Final maturity in 2035
NORTH AMERICA
The Skyway is three lanes in each direction but converges to two lanes each way as it connects with the Indiana Toll Road (southern end) and the Dan Ryan Expressway (northern end via ramps). The toll plaza (up
EUROPE
In addition to the bond debt, subordinated debt in the amount of US$150 million was issued. The borrowing entity in relation to the subordinated debt is SCCH. The subordinated debt has the following characteristics:
Road Configuration
Toll Plaza
See Inset
AUSTRALIA
X Revenue Stabilisation Reserve – US$10 million.
to 19 lanes in total depending on configuration) is located just north of the Calumet River and incorporates a U-turn facility. In addition to the Dan Ryan and Indiana Toll Road connections, there are seven other entry and exit points along the length of the Skyway, five of which are north of the toll plaza. The Stony Island and Indiana Boulevard ramps are the busiest of these seven entry/exit points along the Skyway.
92nd Street
Toll Plaza
McDonalds U turns at McDonalds
In Blv dian d ap
oli
s
Indiana East-West Toll Road
1.
MIG has undertaken to clarify its position on FIRPTA. The outcome of its further investigations confirms that FIRPTA withholding is more likely than not to be required.
2008 Analyst Package
Macquarie Infrastructure Group
MODEL OVERVIEW
X Schedule 2 Works Reserve – US$80 million
to MIG, above dividends and after the repayment of contributed capital, are likely to be subject to FIRPTA withholding tax of 35%1.
Stony Island
X Debt Service Reserve – US$22 million
45
North America
Table 2.6: Maximum tolling schedule
Chicago Skyway (cont.)
1
Car toll (US$)
Base heavy vehicle toll (US$)1
1 Jan 2008
Greater of $3.00 or prior toll escalated by CPI from the date of the last toll increase
Greater of $1.80 per axle or prior toll escalated by CPI from the date of the last toll increase
1 Jan 2011
As above, minimum $3.50
As above, minimum $2.40 per axle
1 Jan 2013
As above, minimum $4.00
As above, minimum $3.00 per axle
1 Jan 2015
As above, minimum $4.50
As above, minimum $3.60 per axle
1 Jan 2017
As above, minimum $5.00
As above, minimum $4.20 per axle
1 Jan 2018 and annually thereafter
Prior toll increased by the greater of nominal GDP per capita, CPI or 2%
Prior toll increased by the greater of nominal GDP per capita, CPI or 2%
40% premium added during peak hours (4am–8pm)
Table 2.7: Toll schedule implemented on 1 January 2008 Toll class
Peak travel period 4am to 8pm
2 axles
$3.00
$3.00
3 axles
$7.60
$5.40
4 axles
$10.10
$7.20
5 axles
$12.60
$9.00
6 axles
$15.20
$10.80
7 axles or more
$17.70
$12.60
Tolling
Capital Expenditure
The Concession Agreement specifies the maximum toll schedule for the Skyway, as shown in Table 2.6.
The Skyway has been subject to a substantial capital works program since 2000. The City of Chicago spent approximately US$260 million up to the end of 2004, with the concessionaire required to complete a further US$70 million of capital expenditure by 2008 (primarily in 2006 and 2007). The Skyway’s capital works construction program for 2006–2007 consisted of nine bridge upgrades, four miles of roadway repavement and the reconfiguration of toll plaza lanes to improve traffic flow.
On 2 February 2005, tolls were increased from $2.00 to $2.50 for cars. Prior to this, the last car toll increase was in 1993. On 16 February 2005 a 40% levy was applied to heavy vehicle tolls between the hours of 4am and 8pm daily (calculated on a per vehicle basis). On 1 January 2008, toll rate changes were implemented for all vehicle classes on the Skyway and are detailed in Table 2.7. 46
Macquarie Infrastructure Group
Off-Peak travel period 8pm to 4am
2008 Analyst Package
The implementation of ETC has reduced the length of queuing at the toll plazas, in turn decreasing delays. Currently there are three ETC lanes (two dedicated ETC and one cash/ETC) in each direction and ETC transactions account for approximately 41% of all transactions for 12 months to 31 December 2007.
On 26 September 2005 Skyway expanded its ETC system to be interoperable with E-Z Pass transponders. E-Z Pass
OVERVIEW
Skyway implemented Electronic Toll Collection (ETC) in June 2005 with the installation of systems capable of accepting transactions via I-PASS transponders. The pre-paid electronic I-PASS transponders are used throughout Illinois, with over 2.9 million transponders in circulation.
NORTH AMERICA
transponders are used extensively across the eastern United States with over 16 million in circulation. E-Z Pass transponders are accepted by 23 agencies across 12 states.
Table 2.8: Summary of performance Year to 31 December
2003
2004
2005
2006
2007
43,962
43,290
43,165
44,448
44,667
3,770
4,797
5,257
5,945
4,736
47,732
48,087
48,422
50,393
49,403
Cars Trucks Total
EUROPE
Traffic (ADT)
Financial (US$m) 1
39.716
41.140
50.430
56.198
53.238
Other Revenue
0.054
0.051
0.049
0.042
0.036
Total Revenue
39.770
41.191
50.479
56.240
53.274
Operating Expenses
11.417
12.213
11.692
10.992
11.026
EBITDA
28.353
28.978
38.787
45.248
42.248
71
70
77
80
79
Toll Revenue
EBITDA Margin (%) 1.
2003/2004 revenue as per City of Chicago financial statements. 2005 revenue reflects collections since acquisition by MIG/Cintra in January 2005.
AUSTRALIA
The surrounding network of both connecting and competing routes has also been subject to capital works (maintenance and lane expansion) over the period to 2008. These works included lane expansions on the Dan Ryan Expressway (March 2006 to October 2007) and the Kingery/Borman Expressway (March 2005 to August 2007.
Electronic Toll Collection
MODEL OVERVIEW
Skyway roadwork began in May 2006, leaving a 2+2 lane configuration west of Exchange Avenue and a 2+1 configuration at the Marquette Road Viaduct. A moveable barrier was used to switch the two-lane configuration to the priority direction. These roadworks were completed on 25 September 2007.
2008 Analyst Package
Macquarie Infrastructure Group
47
Table 2.9: Asset snapshot and key metrics All financial amounts below are expressed in US$. Debt
Asset Location
Chicago, Illinois, US
Series A – Current Interest Bonds
Length
12.5km
Size
$439 million FRN
Size
6 lanes (3 lanes each direction)
Maturity
30 June 2017
Opened to Traffic
1959
P&I Profile
Bullet, current pay interest
Margin
Interest rate full swapped All-in rate of 4.82% to 2014 and 5.88% thereafter
Concession Ownership
MIG (22.5%); MIP (22.5%); Cintra (55.0)%
Commencement Date
24 January 2005
Term
99 years, 24 January 2104 expiry
Series B – Capital Accretion Bonds
Traffic and tolling Tolled Traffic
Both directions
Tolling Points
1 main toll plaza (up to 19 total plaza lanes depending on configuration)
Tolling Classes
Cars (2 axles) Heavy vehicles (3, 4, 5, 6, 7+ axles)
Tolling Levels
$3.00 for cars; $1.80/axle for heavy vehicles; 40% premium added to heavy tolls during peak hours. Rounded up to nearest $0.10 (per vehicle basis)
Size
$961 million FRN
Maturity
30 June 2026
P&I Profile
Amortises from 2019 to 2026
Margin
Capitalising interest payments, interest rate fully swapped Underlying swap rates rage from 4.62% to 5.64%
Subordinated Debt Size
$150 million
Maturity
30 June 2035
P&I Profile
Capitalising interest payments at the option of issuer Cash Sweep:
Last Toll Increase
1 January 2008
Tolling Methods
ETC, Cash
Toll Escalation
Refer to Table 2.6
Year
Traffic Mix
2004 – 90% cars, 10% heavy vehicles 2005 – 89% cars, 11% heavy vehicles 2006 – 88% cars, 12% heavy vehicles 2007 – 90% cars, 10% heavy vehicles
1–6
50%
7+
100%
Margin
Capital Expenditure Assumptions (as at 31 December 2007, where year 1 = 2008) Years 1–4
48
$74 million
Years 5–10
Average $1.2 million pa
Years 11–20
Average $7.0 million pa
Years 21–30
Average $21.4 million pa
Years 31–40
Average $13.3 million pa
Years 41–50
Average $7.4 million pa
Macquarie Infrastructure Group
Distribution DSCR Covenant
% of Distributions to Hold Co
Year
Margin
1–3
2.50%
4–6
2.75%
7+
3.00%
1-year look-back 1.60x 2-year look-forward 1.60x Cash flow sharing with subordinated debt
Taxation State Income Tax
7.3% (Deductible Federal Income Tax)
Federal Income Tax
35%
Alternative Minimum Tax
20%
FIRPTA
35%
2008 Analyst Package
In December 2006, MIG completed the divestment of 50% of its interests in its four US toll roads to Macquarie Infrastructure Partners (MIP) for a total consideration of US$825 million (A$1.05 billion). The sale price represented MIG’s NAB value for each asset as at 30 June 2006, rolled forward to transaction close. The price paid for 25% of ITR was US$197.8 million (A$250.7 million).
OVERVIEW NORTH AMERICA
On 23 January 2006, the 50:50 MIGCintra consortium, Statewide Mobility Partners LLC, was announced preferred bidder for the ITR concession with a purchase price of US$3.8 billion. ITR Concession Company LLC (ITRCC) entered into a concession agreement with the Indiana Finance Authority (IFA) to operate the ITR for 75 years from financial close on 29 June 2006.
EUROPE
The Indiana Toll Road (ITR) is a 252.7 kilometre, limited access, divided highway in Indiana, US. The road spans northern Indiana, from its border with Ohio to the Illinois state line near Chicago, feeding directly into two toll roads at the state lines – the Chicago Skyway in the west and the Ohio Turnpike in the east. For its westernmost 37 kilometres adjacent to the Illinois border, it runs through the urban region surrounding Gary, Indiana. The remainder of the road is effectively inter-urban, providing a principal link between Chicago and the east coast.
Concessionaire Ownership Structure
Figure 2.5: Indiana Toll Road
AUSTRALIA
Indiana Toll Road
Asset Description
MODEL OVERVIEW
North America
2008 Analyst Package
Macquarie Infrastructure Group
49
North America Indiana Toll Road (cont.)
Figure 2.6: ITR ownership structure MIG
MIP 25%
25%
Cintra 50%
Statewide Mobility Partners LLC 100%
ITR Concession Company Holdings LLC 100%
ITR Concession Company LLC Concessionaire
Indiana Toll Road
MIG has a 25% direct interest in Statewide Mobility Partners LLC, which in turn has a 100% interest in ITRCC. Statewide Mobility Partners LLC is treated as a partnership for US tax purposes.
Financing Structure Three tranches of bank debt were used to fund the ITR acquisition: X US$3.2 billion acquisition facility X US$150 million liquidity facility to fund early period interest payments (undrawn at close) X US$665 million capex facility to fund expected capital expenditures to June 2015 (undrawn at close).
50
Macquarie Infrastructure Group
2008 Analyst Package
In addition to funding the purchase price and transaction costs, proceeds from the acquisition facility were used to pre-fund a US$100 million revenue stabilisation reserve (RSR). The RSR can be used to meet debt service obligations in instances where there are insufficient funds post drawing the liquidity facility. If the RSR is not required to fund debt service obligations, semi-annual distributions to equity in equal instalments are permitted over 3.5 years, subject to certain performance requirements.
MIT(II), through MIG Investments Australia Pty Limited, has contributed a net US$374 million of capital through the subscription for Class A shares in MIG Indiana Holdings LLC. Under the US-Australia double tax agreement, dividends to MIG Investments Australia Pty Ltd are not subject to withholding tax. Further distributions to MIG, above dividends and after the repayment of contributed capital, are likely to be subject to FIRPTA withholding tax of 35%.1
1.
The ITR operates an ETC and cash closed barrier tolling system on the western end (between Milepost 1 and Milepost 23) and an ETC and cash ticket system on the eastern end (between Milepost 24 and Milepost 153), as shown in Figure 2.7. ETC was introduced to the barrier system in June 2007 and currently accounts for approxmately 40% of transactions on the barrier system. ETC implementation was completed on the ticket system in April 2008 ahead of schedule. There are six toll plazas in the barrier system with a total of 49 plaza lanes. There are 14 toll plazas on the ticket system with a total of 65 plaza lanes. The busiest toll plaza, Westpoint, is located at Milepost 1 just south of the Chicago Skyway. Westpoint has a total of 14 toll plaza lanes (four of which are tidal). The two mainline ticket system toll plazas, Portage (Milepost 24) and Eastpoint (Milepost 153), have a total of 12 and 10 lanes, respectively.
MIG has undertaken to clarify its position on FIRPTA. The outcome of its further investigations confirms that FIRPTA withholding is more likely than not to be required.
2008 Analyst Package
OVERVIEW
Post the announcement of the MIG-Cintra consortium as preferred bidder for the ITR concession, the Government of Indiana (the State) committed to freeze passenger vehicle tolls until ETC was implemented along the full length of the ITR. To compensate the concessionaire for lost revenue, the IFA is obligated to make monthly “make-whole” payments to ITRCC. The amount of these payments is the difference between tolls actually collected from passenger vehicles during the toll freeze period ($0.03 per mile) and tolls that would have been collected from passenger vehicles had tolls been raised as originally set out in the Concession Agreement ($0.051 per mile). The IFA deposited US$60 million into an escrow account, controlled by ITRCC, to fund these monthly payments during the toll freeze period.
NORTH AMERICA
The ITR is primarily two lanes in each direction, with small sections of the barrier system expanded to three lanes in each direction. There are 19 interchanges along the length of the ITR.
EUROPE
MIG Investment Structure
Tolling
AUSTRALIA
Debt service obligations are borne by ITR Concession Company LLC and must be satisfied prior to making distributions to its members.
Road Configuration
MODEL OVERVIEW
Prior to financial close, ITRCC entered into a series of swap positions to hedge the current and future interest rate exposure stemming from the bank debt obligations. Under the swap arrangement, interest rates have been effectively fixed to a set schedule for 20 years, gradually stepping up from 3.15% in year one to 11.29% in year 20 (including swap margin). On average, 97% of forecasted project debt is hedged over the first 20 years of the concession.
Macquarie Infrastructure Group
51
North America Indiana Toll Road (cont.)
ETC was implemented along the full length of ITR in April 2008 and thus prompted the end of the toll free period. However, following the toll freeze period and the subsequent increase in passenger vehicle toll rates, the State has agreed to provide a cash rebate program extending a discount to ETC passenger vehicle users until 2016. The concession agreement stipulates the maximum through-trip toll rates for a full length journey across the Indiana Toll Road, as shown in Table 2.10. In applying these maximum permissible toll levels, the concession agreement specifies that any increase in the toll level charged should be allocated to each segment of the road such that the highest per mile increase does not exceed three times the lowest per mile increase.
MP 24
Capital Expenditure In the 1980s, the IFA initiated an aggressive improvement program in which seven new interchanges were constructed and opened between 1980 and 1986. Since 1995, more than US$80 million in road improvements have been completed and infrastructure capital expenditure has averaged US$22 million per year. The State maintained the condition of the road via a comprehensive improvement program. As set out in the Concession Agreement, ITRCC is obligated to comply with Mandatory Expansion Requirements. These include: X implementing barrier-controlled Electronic Toll Collection within two years of financial close of acquisition
Figure 2.7: ITR road configuration
MP 157
MP 1
52
Macquarie Infrastructure Group
2008 Analyst Package
X expanding to three lanes in each direction between Milepost 10.6 and 14 and lowering the road elevation to accommodate the flight path of Gary Chicago International Airport, by the end of 2010. Table 2.10: Maximum tolling schedule (full length trip) Car Toll (US$)
Five-axle toll1 (US$)
1 April 2008
$8.00 2 ($4.70 before “make-whole” rebate)
$27.30
1 April 2009
$8.00
$32.00
1 July 2010
$8.00 toll increased by the greater of 8.2% or the percentage increase compounded annually of the CPI Index and nominal GDP per capita, whichever is greater, over each of the past four calendar years
$32.00 toll increased by the greater of 8.2% or the percentage increase compounded annually of the CPI Index and nominal GDP per capita, whichever is greater, over each of the past four calendar years
Prior toll increased by the greater of 2% or the percentage increase of the CPI Index and nominal GDP per capita, whichever is greater, over the past calendar year
Prior toll increased by the greater of 2% or the percentage increase of the CPI Index and nominal GDP per capita, whichever is greater, over the past calendar year
1 July 2011 and annually thereafter
OVERVIEW
Electronic Toll Collection Under the Concession Agreement, the concessionaire was required to implement an ETC system across the ITR within two years of financial close. ETC was introduced to the western end of the barrier system (between Milepost 1 and 23 toll plazas) on 25 June 2007 through the i-Zoom system (compatible with EZ-Pass). ETC currently accounts for approximately 40% of toll collection on these barrier system toll plazas.
NORTH AMERICA
In addition to ongoing bridge and road maintenance requirements, the concessionaire is required to expand segments of the road if they should fall below a predefined Level of Service (LOS). Each year the ITRCC is required to conduct a traffic study to determine if the minimum LOS is being met.
Capital works (maintenance and expansion) are expected to be a substantial cash outflow over the life of the ITR concession. However, these works are expected to have a limited impact on overall traffic.
EUROPE
X expanding to three lanes in each direction between Milepost 14 and Milepost 15.5 by the end of 2008
ITRCC is currently in the process of implementing these Mandatory Expansion Requirements.
Works commenced in September 2007 to implement ETC on the ticket system and were completed in April 2008.
AUSTRALIA
X expanding to three lanes in each direction between Milepost 18.5 and Milepost 20.27 by the end of 2007 (completed)
MODEL OVERVIEW
1. Heavy vehicle tolls levied based on the combined number of axles on the vehicle. Five-axle vehicles are the most common type of heavy vehicle traveling the ITR. 2. The IFA is obligated to make monthly “make-whole” payments to ITR Concession Company LLC during the toll freeze period as if the through-trip car toll was 5.1 cents per mile. The toll freeze period will end the earlier of the implementation electronic tolling collection or two years after financial close.
2008 Analyst Package
Macquarie Infrastructure Group
53
North America Indiana Toll Road (cont.)
Table 2.11: Summary of Performance Pre-acqusition
US$m
12 months to 30 June 2004
Post-acquisition
12 months to 30 June 2005
6 months to 31 Dec 20063
12 months to 31 Dec 2007
Ticket (Average daily full-length equivalent trips) Cars
n/a
n/a
16,757
14,773
Heavy Vehicles
n/a
n/a
10,585
10,404
Total
n/a
n/a
27,343
25,176
Cars
n/a
n/a
89,581
85,405
Heavy Vehicles
n/a
n/a
10,466
8,684
Total
n/a
n/a
100,047
94,089
87.980
72.128
143.380
7.042
3.229
7.569
Barrier (Average daily transactions)
Financial (US$m) Toll Revenue Concession Revenue
7.025
1
Other Revenue
0.598
0.791
-
92.662
95.813
75.357
Operating Expenses
32.239
EBITDA EBITDA Margin (%)
Macquarie Infrastructure Group
1
Total Revenue
1. 2. 3.
54
85.039
2
2
35.289
21.066
40.724
60.423
60.524
54.291
110.742
65.2
63.2
72.0
73.1
Per IFA financial statements, includes adjustments. Excluding “Major Expenses, Repairs and Renovations”. 2006 Financials represent from June 2006 acquisition to 31 December 2006
2008 Analyst Package
0.517 151.466
Table 2.12: Asset snapshot and key metrics All financial amounts below are expressed in US$. Asset
Debt
Location
Northern Indiana, US
Acquisition Facility
$3,248 million
Length
252.7km
Liquidity Facility
$150 million
Size
4–6 lanes (2–3 lanes/direction) 1956
Capital Expenditure Facility
$665 million
Opened to Traffic
Term
9 years
P&I Profile
Interest only bullets
Debt Margin
Years 1–5
0.95%
Years 6–7
1.10%
Years 8–9
1.25%
Years 1–4
3.00%
Year 5
3.25%
Years 6–7
3.50%
Years 8–9
4.00%
Years 10–20
4.75%–11.14%
Years 1–20
0.15%
Concession Ownership
MIG (25%); MIP (25%); Cintra (50%)
Commencement Date
29 June 2006
Term
75 years, 29 June 2081 expiry Swap Rates (Excluding Margin)
Traffic and tolling Tolled Traffic
Both directions
Tolling Points
Westpoint – Mainline Barrier (14 lanes) Portage – Mainline Ticket (12 lanes) Eastpoint – Mainline Ticket (10 lanes) 5 Additional Interchange Barrier Plazas 12 Additional Interchange Ticket Plazas
Tolling Classes
Toll Levels (2008)
Swaps Margin
Cars (Commuter User Program) Cars (2 axles) Heavy vehicles (3, 4, 5, 6, 7+ axles)
Taxation
$4.70 per through-trip for cars (State makewhole to $8.00 per through-trip); $27.30 per through-trip for five-axle vehicles
Rounding
Rounded to nearest $0.01 if collected using ETC; to the nearest $0.10 if not collected using ETC
Last toll increase
1 April 2008 (heavy vehicles)
Tolling Methods
ETC/cash closed barrier system on western end; ETC/cash ticket system on eastern end
Toll Escalation
Refer to Table 2.10
Traffic Mix
2004 – 83% cars, 17% trucks 2005 – 82% cars, 18% trucks 2006 – ticket 59% cars, 41% trucks barrier 89% cars, 11% trucks 2007 – ticket 59% cars, 41% trucks barrier 89% cars, 11% trucks
State Income Tax
8.5% (Deductible for Federal Income Tax)
Federal Income Tax
35%
Alternative Minimum Tax
20%
FIRPTA
35%
Capital expenditure assumptions (as at 31 December 2007, where year 1 = 2008) Years 1–4
$292.3 million
Years 5–10
Average $40.1 million pa
Years 11–20
Average $83.5 million pa
Years 21–30
Average $183.1 million pa
Years 31–40
Average $214.7 million pa
Years 41–50
Average $239.7 million pa
2008 Analyst Package
Macquarie Infrastructure Group
55
North America Dulles Greenway
Asset Description The Dulles Greenway (Greenway) is a 22 kilometre operating toll road located in northern Virginia, west of Washington D.C. It runs from Dulles International Airport through Loudoun County to Leesburg. Currently six lanes wide (at the Main Line Toll Plaza), the road has the potential to be expanded up to 12 lanes.
Concessionaire Ownership Structure TRIP II, a limited partnership, owns the concession to operate the Greenway until 15 February 2056. In late August 2005, MIG entered into an agreement to invest US$533 million (A$711million) for an 86.7% economic interest in TRIP II and a 100% direct interest in the General
Figure 2.8: Dulles Greenway
56
Macquarie Infrastructure Group
2008 Analyst Package
Partner. The General Partner has day-to-day responsibility for the management and operation of the concession. The initial investment is comprised of two subordinated loans secured against 86.7% of the limited partner interests in TRIP II, as well as two long-dated call options to acquire these same 86.7% interests. These interests are currently held by the Shenandoah Group and AIE LLC. This investment reached financial close on 9 September 2005. On 29 September 2005, MIG invested a further US$84.5 million to acquire the remaining 13.3% direct interest in TRIP II from Kellogg, Brown and Root (KBR). Following this acquisition, MIG had a 100% economic interest in the Greenway.
Figure 2.9: Investment structure MIG 50%
OVERVIEW
MIP 50%
Call Options over remaining 86.6% equity interest in TRIP II
Shenandoah Greenway Corporation
Shenandoah & AIE
(General Partner)
13.3%
(Limited Partner) 86.6%
0.1%
NORTH AMERICA
TRIP (II) Concessionaire
Dulles Greenway
Financing Structure
EUROPE
The existing debt profile consists of five tranches of senior debt, including two from a 1999 refinancing and three from a 2005 refinancing. The current details of the debt profile are outlined in Table 2.13.
AUSTRALIA
In December 2006, MIG completed the divestment of 50% of its interests in its four US toll roads to Macquarie Infrastructure Partners (MIP) for a total consideration of US$825 million (A$1.05 billion). The sale price represented MIG’s NAB value for each asset as at 30 June 2006, rolled forward to transaction close. The price paid for 50% of the Greenway was US$355 million (A$450 million).
Table 2.13: Debt profile
Senior Current Interest Bonds Series 1999A
Mix (%)
Average yield1 (%)
35
3.7
7.14
Senior Zero Coupon Bonds Series 1999B
469
50.2
7.21
Senior Accreting Interest Bonds Series 2005A
164
17.5
5.43
Senior Accreting Interest Bonds Series 2005B
63
6.7
5.70
Senior Callable Zero Coupon Bonds Series 2005C
204
21.8
5.59
Total
935
100.0
6.19
Reserve Accounts (including Improvement Reserve)
145
Total Net Debt
790
1.
MODEL OVERVIEW
Series
Balance at 31 Dec 2007 (US$m)
Weighted average yield for remaining redemptions for series 1999B, 2005B and 2005C
2008 Analyst Package
Macquarie Infrastructure Group
57
North America Dulles Greenway (cont.)
Road Configuration The Greenway opened to traffic in September 1995, six months ahead of schedule. The tollway provides the only limited access route from Dulles International Airport to Leesburg in Loudoun County. At its eastern end, the Greenway connects with the Dulles Toll Road (DTR). The DTR, which opened in 1984, is also approximately 22 kilometres in length and extends from the Greenway terminus, intersects the Capital Beltway at Tysons Corner and ends at Interstate 66 in Falls Church. When combined with the DTR, the Greenway provides the only limited access route through the rapidly growing Dulles Corridor. The Greenway has seven toll plazas, including a main line toll plaza (with 18 lanes) and six tolled ramps. Interchange 2 at Battlefield Parkway/ Route 654 is untolled. Originally constructed as a four-lane limited access highway, the Greenway was expanded from four to six lanes
58
Macquarie Infrastructure Group
2008 Analyst Package
between the Claiborne Parkway interchange at Exit 5 and the Main Line Toll Plaza (during 2000-2001) and between the Claiborne Parkway interchange at Exit 5 and Leesburg (during 2006). The Dulles Greenway is designed to allow for future expansion, as the right of way is located on land that was acquired by TRIP II fee simple or through an easement agreement with the local airports authority. A typical section of the Greenway is 250-feet wide, providing future lane widening potential. It also includes a minimum 40-foot median designed to accommodate potential future mass transit development.
In September 2007 the SCC issued a final order in respect of the toll schedule application for the Greenway filed in July 2006. The SCC order substantially approved the application on its terms. The new approved toll schedule, which includes congestion management pricing during the peak periods, is detailed in Table 2.15.
5
Rte 7
DULLES GREENWAY
OVERVIEW
Figure 2.10: Greenway road configuration
RTE 607
Additionally, effective 1 October 2007, the SCC approved changes to the toll rates for vehicles with three or more axles. These are as follows:
RTE 28
RTE 659
RTE 625
NORTH AMERICA
RTE 641
RTE 772
RTE 646
RTE 606 US-50
Main Line Toll Plaza
DULLES TOLL ROAD
X four-six-axle vehicles will pay the three-axle rate plus an amount equal to 50% of the two-axle rate for each additional axle X six or more axle vehicles will pay the six-axle rate.
EUROPE
X three-axle vehicles will pay twice the two-axle rate
Washington Dulles International Airport
AUSTRALIA
The tolls on the Dulles Greenway are set, on application, by the Virginia State Corporations Commission (SCC) under the Virginia Highways Corporation Act (1988). This legislation allows applications for a change in toll ceiling to be lodged by the concessionaire, third parties, or the SCC itself. The most recent application was filed by the concessionaire in July 2006 and was approved in September 2007.
Section 56-542 of the Virginia Highway Corporation Act (1988) stipulates that toll rates must be set at a level that: X is reasonable to the user in relation to the benefit obtained X will not materially discourage use of the roadway by the public X will provide the operator with no more than a reasonable rate of return as determined by the SCC.
MODEL OVERVIEW
Tolling
Historical tolls are presented in Table 2.14.
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North America Dulles Greenway (cont.)
Table 2.14: Toll history Weekday Car toll (US$)
Date of toll change
Weekend
Truck toll (US$)
Car toll (US$)
Truck toll (US$)
Car discount for ETC (US$)
March 1996
1.00
2.00
1.00
2.00
–
July 1997
1.15
2.30
1.00
2.00
–
September 1999
1.40
2.80
1.00
2.00
0.25
April 2000
1.65
3.30
1.25
2.50
0.25
September 2002
1.90
3.80
1.50
3.00
0.10
Peak1
Off-Peak1
September 2004
2.40
4.80
2.00
January 2006
2.70
5.40
2.50
5.00
–
July 2007
3.00
6.00
2.80
5.60
–
Weekday
4.00
0.10
Weekend
Ramp Tolls (July 2007) Ramps 7 and 8
3.00
6.00
2.80
5.60
–
Ramps 3, 4, 5 and 6
2.30
4.60
2.30
4.60
0.45
1.
2.
Peak period refers to weekdays from 6am–9am and 4pm–7pm. Off-peak period refers to all other weekday hours, as well as weekends and public holidays. Peak and off-peak tolling was used from September 2004 to December 2005. All other toll schedules have been based on a weekday/weekend day differential. For three-axle vehicles. For four, five, six or more axle vehicles will pay the three-axle rate plus an amount equal to 50% of the two-axle rate for each additional axle up to the sixth axle.
Table 2.15: Newly approved toll schedule Maximum 2-axle toll for all off-peak traffic
Maximum congestion management toll (applicable only to weekday traffic in peak period and direction)
1 January 2009
$3.40
$4.00
1 July 2010
$3.70
$4.50
1 January 2012
$4.00
$4.80
From date
Note: Weekday peak traffic is defined as 6am–9am eastbound and 4pm–7pm westbound.
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2003
2004
2005
2006
2007
52,272
60,618
61,217
57,445
55,276
33.108
40.725
45.433
55.295
55.925
Traffic (ADT) ADT Financial (US$m) Toll Revenue Other Revenue
0.265
0.272
0.140
0.341
0.489
Total Revenue
33.373
40.997
45.573
55.636
56.415
Operating Expenses
13.635
13.815
17.227
14.999
16.514
EBITDA
19.738
27.182
28.346
40.637
39.901
59.6
66.7
62.4
73.0
70.7
EBITDA Margin (%) 1.
1
2005 Operating Expenses include an additional US$1.4m in costs related to the refinancing that occurred in March 2005.
OVERVIEW
Year to 31 December
NORTH AMERICA
The Greenway has come to the end of a US$72 million capital improvement program. These works included construction of an additional lane in each direction for the westernmost seven miles of the road, the widening of the main line toll plaza from 14 to 18 lanes and the construction of two new interchanges (Interchange 2 at Battlefield Parkway/Route 654 and Interchange 3 at Shreve Mill Road/Route 653). An agreement with MWAA and TRIP II has been executed regarding the construction of a ramp from the Greenway to the Dulles Airport whereby TRIP II has passed its construction obligations through to MWAA. Construction is anticipated to start in the first half of 2008.
Table 2.16: Summary of performance
EUROPE
Capital Expenditure
MODEL OVERVIEW
AUSTRALIA
The capital works program has been primarily funded through the Greenway’s Improvement Fund, which was funded with US$117 million as part of the 2005 refinancing.
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Table 2.17: Asset snapshot and key metrics All financial amounts below are expressed in US$. Asset
Senior debt
Location
Virginia, US
Length
22km
Size
6 lanes
Opened to Traffic
September 1995
1999A
36-year current interest bond, semi-annual coupon, 7.14%, maturing 15 February 2035
1999B
Zero coupon bonds, 7.21%, mature over a range of dates from 2003 to 2035
2005A
Accreting interest bonds, 5.43%, compounded semi-annually, legal maturity in 2045 – with early redemption scheduled for between 2006 and 2021
2005B
Accreting interest bonds, compounded semiannually, 5.70%, legal maturity in 2043 – with early redemption scheduled for between 2022 and 2035
2005C
Zero coupon bonds, 5.59%, with maturities between 2036 and 2056
Concession Ownership
MIG (50%); MIP (50%)
Commencement Date
6 July 1990
Term
15 February 2056 expiry
Traffic and tolling Tolled Traffic
Both directions
Tolling Points
1 main line toll plaza 6 Interchanges
Tolling Classes
Cars (2 axles) Heavy vehicles (3, 4, 5 or 6 or more axles)
Covenants Equity Lock-up Ratio
Toll Levels: Main Line Plaza and Ramps 7,81
Ramps 3, 4, 5, 6
2-axle vehicles: $3.00 weekday, $2.80 weekend 3 to 6-axle vehicles: twice 2-axle toll and 50% 2-axle toll for each axle > 3-axles > 6-axle vehicles: at 6-axle toll
Taxation State Income Tax
6% (Deductible for Federal income tax)
Federal Income Tax
35%
Alternative Minimum Tax
20%
FIRPTA
35%
Credit card payment: 2-axle vehicles: $2.30 (weekday and weekend) 3 to 6-axle vehicles: twice 2-axle toll and 50% 2-axle toll for each axle > 3-axles > 6-axle vehicles: at 6-axle toll ETC Payment 2-axle vehicles: $1.85 (weekday and weekend) 3 to 6-axle vehicles: twice 2-axle toll and 50% 2-axle toll for each axle > 3-axles > 6-axle vehicles: at 6-axle toll
Last toll increase
2-axle vehicles: 1 July 2007 3-axle vehicles and above: 1 October 2007
Tolling Methods
ETC, Cash, Credit Card
Toll Escalation
Refer to Tolling section, Tables 2.14 and 2.15
1. Greenway motorists that travel through the Main Line Toll Plaza onto the DTR, or from the DTR onto the Greenway, are charged the DTR toll in addition to the Greenway toll. The toll levels shown above reflect the Greenway toll only. The current DTR toll is $0.50.
Capital expenditure assumptions (as at 31 December 2007, where year 1 = 2008) Years 1–3 (2008–2010)
62
Total $29.3 million
Years 4–13 (2011–2020)
Average $19.6 million pa
Years 14–23 (2021–2030)
Average $3.8 million pa
Years 24–33 (2031–2040)
Average $1.9 million pa
Years 34–43 (2041–2050)
Average $26.3 million pa
Years 44–51 (2051–2056)
Average $4.3 million pa
Macquarie Infrastructure Group
1.25x
2008 Analyst Package
In December 2006, MIG completed the divestment of 50% of its interests in its four US toll roads to Macquarie Infrastructure Partners (MIP). MIP agreed to pay MIG US$48 million as well as contribute a further US$93 million to fund construction completion in order to acquire a 50% interest in SBX. The sale price was calculated based on MIG’s 30 June 2006 valuation for SBX, rolled forward to transaction close at the valuation IRR and adjusted for equity contributions during the intervening period.
In conjunction with construction of SBX, two other sections of untolled, government-funded road have been constructed to link SBX into the wider San Diego road network.
Concessionaire Ownership Structure The SBX concession was awarded by the State of California Department of Transportation (Caltrans) to South Bay Expressway Limited
The SBX shareholder structure at construction completion (after MIP has completed all necessary equity contributions) is shown in Figure 2.12.
Figure 2.11: South Bay Expressway 8
5 SR125
805
8
OVERVIEW NORTH AMERICA
South Bay Expressway (SBX), formerly known as SR 125 South, is a 13.9 kilometre, four-lane toll road that runs north from adjacent to the Mexican border to just south of Route 54 in Bonita. The road opened to traffic on 19 November 2007 and provides an alternative route east of the increasingly congested State Route 805 and Interstate 5 in the San Diego region of California.
EUROPE
Partnership (SBXLP) in 1991. In September 2002 MIG acquired an 81.6% stake in SBXLP. In May 2003 MIG acquired the remaining 18.4% of SBXLP. SBX was MIG’s first investment in the United States.
AUSTRALIA
South Bay Expressway
Asset Description
94
San Diego
CALIFORNIA 805 54
MODEL OVERVIEW
North America
5
Pacific Ocean
SBX Chula Vista
75
905
MEXICO
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North America South Bay Expressway (cont.)
Figure 2.12: South Bay Expressway ownership structure MIG
MIP 50%
50%
SBXLP Concessionaire
South Bay Expressway
MIG Financing Structure SBX construction has been financed through a combination of senior debt, TIFIA debt and equity contributions. Further details on these funding sources are provided below.
US$400 million senior debt facility The senior debt facility can be drawn up to US$400 million to fund construction completion but equity must be contributed to reduce the facility to a maximum of US$340 million at conversion (as defined in the Senior Debt Credit Agreement). Conversion is expected to occur in early 2008.
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Transportation Infrastructure Finance and Innovation Act (TIFIA) debt facility In 2003 SBX was selected by the US Department of Transportation (USDOT) for financial support under the TIFIA program, which is designed to encourage investment in transportation infrastructure. SBX is the first ever privatised toll road to receive a loan under the TIFIA program. The TIFIA facility has been drawn down to meet 33% of “eligible TIFIA costs” throughout construction and is now fully drawn. The term of the TIFIA debt facility is 38 years (including construction). The limit is US$140 million (excluding capitalised interest). The interest rate is fixed at 4.46% per annum for the life of the facility. The interest rate has been calculated by adding five basis points to the prevailing State and Local Government Securities (SLGS) rate at financial close in 2003. The SLGS rate used has a similar maturity to the TIFIA debt facility.
Despite the attractive TIFIA interest rate, it is expected that SBX will refinance this facility to avoid cash flow sharing.
OVERVIEW NORTH AMERICA
The concession limits the total real return on capital invested (debt and equity) to 18.5%. MIG’s analysis suggests that this limit is not a constraint even under significant upside scenarios. Forecast project IRR (ungeared, post tax) at financial close was in the range of 11–12% and the forecast post-tax equity IRR at financial close ranged from 15–20%.
EUROPE
X 50% of any refinancing proceeds in excess of the initial senior loans must be used to repay the TIFIA facility.
MIG executed an Equity Funding Agreement at financial close in 2003 that requires a minimum of US$133.4 million of equity to be contributed to the project. As part of the sale to MIP in 2006, MIP now has responsibility for all remaining contributions required under this agreement. US$58 million of this amount is earmarked to fund reserve accounts and working capital on opening, with the balance used to meet construction costs and to pay down the senior debt facility at conversion.
AUSTRALIA
X Cash flow sharing commences after equity has received US$32 million in distributions. The sharing percentage starts at 25% of cash flow available to equity and increases by 5% each year until the facility is repaid
Equity contributions
MODEL OVERVIEW
It is USDOT policy that the facility should be repaid in order to promote the reallocation of this subsidised capital from mature projects to new transport lending opportunities. As a result, the TIFIA loan agreement requires the repayment of the facility through a cash sharing mechanism:
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North America South Bay Expressway (cont.)
Road Configuration SBX is currently two lanes in each direction. The design of the toll road allows for it to be expanded to three lanes (southern section) or four lanes (northern section) in each direction to meet future increases in demand, as shown in Figure 2.13. Tolls can be paid using cash or a FasTrak electronic transponder. Two untolled sections of road have been constructed at the northern end of SBX. The first is the “Connector”, a 2.0-mile (3.2-kilometre), four-lane section that links the northern end of SBX (just north of the Mt Miguel Road interchange) with State Route 54. At the intersection between the connector and State Route 54, the “Gap” has been constructed - a freeway-to-freeway interchange, which has included the reconstruction and expansion of an existing section of State Route 54, as shown in Figure 2.14. In recognition of the strong community support for the road, SBX offered free travel for every motorist from opening on 19 November 2007 until 2 December 2007. Motorists with a FasTrak electronic tolling account continued to drive free until midnight 13 January 2008.
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From 14 January 2008, all traffic is tolled in both directions. The main toll plaza is located just south of the proposed Lonestar Road interchange. Entering northbound traffic and exiting southbound traffic is tolled at each of the five interchanges along the route.
Tolling The current toll rate for a full length trip along SBX for two-axle vehicles (autos, light trucks and motorcycles) is $3.50 for FasTrak and $3.75 for cash users. For other trips, toll rates vary depending upon the entry/exit points used. Vehicles with three or four-axles pay two times the two-axle toll rate and five-axle and greater vehicles pay three times the two-axle toll rate. SBX is able to set marketbased toll rates throughout the concession period.
Figure 2.13: Road configuration
Figure 2.14: Gap and Connector Initial Construction 4 lanes: SR-905 to SR-54 Ultimate Construction 6 lanes: SR-905 to Olympic Pkwy 8 lanes: Olympic Pkway to SR-54
54
54
SA N
AL MIGU
RD IG MT M
Gap Connector SBX
OVERVIEW
Jamacha Rd
125
125
RD UEL
BONITA ise rad Pa
H
ST
ST EA
K PAR PIC OLYM
Valley Rd 54
ROAD
125
Silverwater Reservoir
Future Rock Mountain Interchange
Y WA
CHULA VISTA
Future Lone star Rd Interchange
Interchanges Initial Construction Future Interchanges
BROWN FIELD 905
Future Lonestar Rd
h ut So
Ba
ew re yF
ay
Future Roads Future Highways Under Construction
OTAY MESA RD
905
USA
AUSTRALIA
Mexico
MODEL OVERVIEW
OTAY MESA
EUROPE
805
ES
NORTH AMERICA
D CANYON R
LA K
Sw ee twa r Rd te
EGR APH
LA MEDIA RD
TEL
OTAY
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Table 2.18: Asset snapshot and key metrics All financial amounts below are expressed in US$.
Construction senior debt
Location
San Diego, California, US
Size
$400 million
Length
13.9km
P&I Profile
Capitalising
Size
Currently 4 lanes (2 lanes/direction) on opening; but expandable to 6 lanes (southern section) or 8 lanes (northern section) based on traffic requirements
Term
Conversion (expected to occur in early 2008)
Swaps
100%
Swap Base Rate
3.82%
19 November 2007
Margin
1.625%
Commitment Fee
0.50% on undrawn amounts
Repayment
Converts to Senior Term Debt Equity contribution to reduce balance to maximum $340 million at conversion
Opened to Traffic
Concession Ownership
MIG (50%); MIP (50%)
Commencement Date
3 December 2007
Term
35 year term, 2 December 2042 expiry
Traffic and tolling Tolled Traffic
Both directions
Tolling Points
Main toll plaza Five sets of interchange ramps (tolling entering northbound traffic and exiting southbound traffic) Capacity for two future interchanges
Tolling Classes
2–axle vehicles (autos, light trucks and motorcycles), 3–4 axle vehicles, 5–axle vehicles
Toll Levels (for a fulllength trip)
2–axle vehicles: $3.50 FasTrak/$3.75 cash 3–4 axle vehicles: 2x 2–axle rate 5–axle vehicles and greater: 3x 2–axle rate
Tolling Methods
Cash, ETC
Operating Expenses (as at 31 December 2007) Forecast Operating Expenses over Concession
Senior term debt Size
Maximum $340 million
Commencement
Conversion
Term
15 years
P&I Profile
Interest only until 31 December 2010, then cash sweeping commences
Swaps
US$320 million hedged to 31 Dec 2011, then unhedged
Swaps Rate
3.82%
Margin
Year 1–7: 1.75% Year 8–15: 2.25%
Repayment
Refinanced prior to cash sweep
TIFIA debt Size
$154 million including capitalised interest as at 31 December 2007
Term
38 years
Drawdowns
To meet 33% of TIFIA-eligible costs until fully drawn
P&I Profile
Capitalise until end of the fifth year of operations Interest only until end of the thirteenth year of operations
All-in Rate
4.46%
Cash Sweep
As discussed above
Repayment
Refinanced prior to cash sharing
Average $9.2 million pa
Capital expenditure assumptions (as at 31 December 2007) 2008–2018
Average $5.4 million pa
2019–2029
Average $10.7 million pa
2030–2040
Average $2.8 million pa
2041–2042
Average $0.5 million pa
Taxation
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Macquarie Infrastructure Group
State Income Tax
8.84% (Deductible for Federal income tax)
Federal Income Tax
35%
FIRPTA
35%
Alternative Minimum Tax
20%
Possessory Interest Tax
1.10%
2008 Analyst Package
Europe Autoroutes Paris-Rhin-Rhône ........................... 75 25th April/ Vasco da Gama Bridges ................. 83
MODEL OVERVIEW
AUSTRALIA
EUROPE
NORTH AMERICA
Warnow Tunnel- ................................................. 89
OVERVIEW
M6 Toll ................................................................ 70
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Europe M6 Toll
Asset Description The M6 Toll is a 42 kilometre six-lane toll road that bypasses a congested stretch of the M6 Motorway near Birmingham, in the United Kingdom. The M6 Toll fully opened to traffic on 14 December 2003 and is the UK’s first and only privately-developed user-pays toll road.
Concessionaire Ownership Structure In October 1999, MIG purchased a portfolio of infrastructure investments from Norwegian conglomerate Kvaerner ASA, including a 50% interest in Midland Expressway Limited (MEL), the concessionaire for the M6 Toll. This transaction reached
Figure 3.1: M6 Toll ownership structure MIG 100%
MEI 100%
MMG Inter-entity Loan
100%
MEL Concessionaire
M6 TOLL
Figure 3.2: M6 Toll
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Bank Debt
OVERVIEW
X 30-year fixed interest rate swap for £1,000 million of debt starting at 1.00% per annum in 2006 with a swap credit margin of 37bps (fixed over entire term) increasing to 8.50% in 2025 then a plateau rate of 7.92% until 2036
M6 Toll Financing Structure
A proportion of the funds drawn on the term facility has been on-lent by MMG to MEL to repay MEL’s existing external debt.
The current ownership and financing structure of the M6 Toll is illustrated in Figure 3.1, following a refinancing of the senior debt facility in August 2006. MIG’s investment in the M6 Toll is structured via shareholder loans and direct equity interests in the project vehicles. Distributions from MEL are subject to taxation at the group level in the UK, before being repatriated to MIGIL.
MEL also has a land fund liability in the form of an indexed annuity payment to the UK Government (similar to a CPI Bond). This liability represents MEL’s obligation to repay the Government for land acquisition costs incurred in developing the M6 Toll. The balance accrues interest at 6% per annum real, with new costs added up to 2010. The land fund is fully repaid at December 2053.
NORTH AMERICA
X rated BBB by Standard & Poor’s.
EUROPE
financial close on 29 September 2000, with all regulatory approvals and financing in place. At this time MIG also acquired an additional 25% of MEL, increasing its ownership to 75%, and an option over the remaining equity. In June 2005, MIG exercised this option and purchased the remaining 25% of MEL from a subsidiary of Autostrade SA, a large Italian motorway owner and operator.
AUSTRALIA
The external debt is held via Macquarie Motorways Group Limited (MMG). The key terms of the debt package are as follows: X term loan facility of £1,000 million X capex facility of £30 million
MODEL OVERVIEW
X the facilities have a nine-year term with bullet repayments, however a progressive cash sweep applies from year six onwards
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Europe M6 Toll (cont.)
Figure 3.3: M6 Toll road configuration M6
A5
A38
A460
A34
Cannock
Lichfield T7 T6
T8
T5
A5
Proposed M54 Link
A51 A38
M54
T4
Tamworth A5
A452
M6
Walsall
Sutton Coldfield
T3 M42
A452
T2 A38
M5
M6
T1
A38(M)
Birmingham M6
M42
Road Configuration The M6 Toll is three lanes in each direction, and has nine entry and exit points. There are two 10-lane main toll plazas (one for traffic travelling in each direction) plus tolling points on four of the eight junctions. The southern end of the M6 Toll commences at the merge of the M42 and M6, two of the busiest motorways in the UK. The northern end of the M6 Toll merges with the M6 just south of Cannock, allowing motorists to avoid congestion on the M6 around Birmingham.
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Users are able to pay tolls using cash, credit card or an electronic tag. Tag penetration has stabilised at approximately 10%. The M6 Toll Concession also includes a Motorway Services Area (MSA), which is currently leased and operated by Roadchef.
Tolling Under the M6 Toll Concession Agreement, MEL has the right to increase tolls at any time as long as toll reviews take place no more than twice a year. There are six categories of tolled vehicles, motorcycles, cars, cars and trailers, van or coach, HGV or coach and HGV with more than six-axles.
Additional Works Concurrent with the refinancing, MIG entered an agreement with the UK Government to invest up to £112 million into the West Midlands road network. Specifically, MIG has undertaken to: X contribute up to £70 million (in 2006 pounds) towards the cost of construction of the M54-M6-M6 Toll Link Road (M54 Link Road) X contribute up to £10 million (in 2006 pounds) towards enhancements to the M42 slip road access to the southern end of the M6 Toll X operate and maintain the above two network enhancements for the duration of the concession period.
Intermediate plazas (T3, T4, T5, T6)
Main plazas Vehicle type
Class
Day toll (£)
1
1,2
Night toll (£)
1
Day toll (£)
1,2
Night toll (£)
Motorcycles
Class I
2.50
1.50
1.50
1.00
Cars
Class II
4.50
3.50
3.50
2.50
Cars with trailers
Class III
8.00
7.00
8.00
7.00
Vans
Class IV
9.00
8.00
9.00
8.00
HGVs
Classes V and VI
9.00
8.00
9.00
8.00
1. 2.
OVERVIEW NORTH AMERICA
Table 3.1: Toll schedule from 1 January 2008
Tag account holders receive a 5% discount on tolls. Night tolls effective from 11pm–6am.
Table 3.2: Summary of performance 6 months to
Dec 2004
Jun 2005
Dec 2005
Jun 2006
Dec 2006
Jun 2007
Dec 2007
50,941
44,089
45,457
43,572
52,874
45,119
46,665
EUROPE
The current toll schedule from 1 January 2008 is presented in Table 3.1.
will prevent congestion problems anticipated to occur over the medium term. In November 2007, a contract for M42 improvement works was signed and construction works commenced in January 2008. Discussions are ongoing with the Highways Agency to develop the M54 Link Road.
Traffic (ADT) Total Financial (£m) Toll Revenue
21.976
20.670
25.058
23.471
29.440
27.978
29.400
Other Revenue
1.270
0.633
1.021
0.979
1.110
1.278
1.281
Total Revenue
23.246
21.303
26.079
24.450
30.550
29.256
30.681
5.733
5.517
5.726
4.607
4.598
4.016
3.811
17.513
15.786
20.353
19.843
25.952
25.240
26.870
Operating Expenses EBITDA EBITDA Margin (%)
75
74
78
81
85
87
AUSTRALIA
M6 Toll reached its 10-millionth customer in mid-August 2004. MEL announced that the discounted introductory rates would remain in place for cars and motorcycles at intermediate plazas. In addition, a 5% discount on tolls for electronic tag account holders commenced from June 2005.
The network enhancements will deliver improvements to the accessibility of the M6 Toll within the greater road network in the Midlands. The new M54 Link Road will provide direct access from the existing M54 motorway to M6 Toll. In addition, the improvements to the M42 slip road
88
MODEL OVERVIEW
As an initiative to encourage patronage, MEL offered a discounted toll schedule for the first 10 million vehicles.
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Table 3.3: Asset snapshot and key metrics All financial amounts shown below are expressed in £. Asset
Capex facility
Location
Birmingham, UK
Size
£30 million
Length
42km
Term
9 years
Size
6 lanes (3 lanes/direction)
Repayment
Bullet
14 December 2003 (full opening)
Margin and cash sweep
As for term facility
Opened to Traffic
Concession Ownership
MIG (100%)
Commencement Date
31 January 2001
Term
Hedging overview
53 years, 31 January 2054 expiry
Traffic and tolling Tolled Traffic
Both directions
Tolling Points
Main toll plazas (2 x 10 lanes) plus 4 junctions
Tolling Classes
Motorbikes, cars, car and trailers, van or coach, HGV or coach, HGV with more than six axles
Last Toll Increase
1 January 2008
Toll Levels
Refer to Table 3.1
Night Tolls
Refer to Table 3.1. Apply daily from 11pm–6am
Tolling Methods
Cash, credit cards, ETC
Toll Escalation
Market based Toll increases limited to twice a year
Current Traffic Mix
Motorcycles 0.24%, cars 92.00%, car and tailer 0.44%, van or coach 4.40%, HGV or coach 2.91% HGV with more than six axles 0.01%.
Capital expenditure assumptions (as at 31 December 2007, where year 1 = 2008) Years 1–10
Average £9.1 million pa in normal expenditure and average £7.3 million pa expenditure for M54 Link Road and M42 slip road access
Principal
100% of term facility and capex facility
Term
30 years
Swap Margin
0.37%
Swap Rates (not including margins)
1.00% from 2006 until December 2010 stepping up in 0.25% increments on a semi-annual basis to 8.50% in 2025, then immediately reducing to a flat rate of 7.92% until 2036
Cash Sweep To Service Swap
Year 1
£2 million
Year 2
£5 million
Year 3
£10 million
Year 4
£10 million
Year 5
£10 million
Inter-entity loan Principal
£599 million
Interest Rate
9.00%
MMG shareholder loan MEI Loan Principal
£576 million
MEI Loan Interest Rate
6.00%
MIGIL Loan Principal
£132 million
MIGIL Loan Interest Rate
12.00%
Years 11–20
Average £5.8 million pa
Years 21–30
Average £4.6 million pa
Years 31–40
Average £7.5 million pa
UK Income
28%
Years 41–46
Average £2.2 million pa
VAT
17.5%
Taxation
Term facility Size
£1,000 million
Term
9 years
Repayment
Bullet
Debt Service Reserve
1/6th of the next three years’ debt service (initially £12 million)
Margin
Year 1
0.90%
Years 2–5
0.80%
Years 6–7
0.95%
Years 8–9
1.10%
Credit margins above are for BBB rating and are subject to a rating dependent pricing grid Cash Sweep
Rating
74
Years 1–5
0%
Year 6
40%
Year 7
60%
Year 8
80%
Year 9
100%
BBB (Standard & Poor’s)
Macquarie Infrastructure Group
2008 Analyst Package
OVERVIEW
Autoroutes Paris-Rhin-Rhône (APRR) is a toll road company listed on the Euronext which until 2006 was majority owned by the French State. APRR is the concessionaire of a motorway network located in the east of France. APRR consists of three separate concessions: APRR, Autoroutes Rhône Alps (AREA) and the Maurice Lemaire Tunnel (together APRR Group). Under the concession agreements, the APRR Group is entitled to construct and/or
NORTH AMERICA
toll a total of 2,279 kilometres of motorways. Of the total concessioned network, 53 kilometres are still to be constructed and opened to traffic in 2008–2012, and the 11 kilometres Maurice Lemaire Tunnel is due to reopen in 2008. With 2,215 kilometres of motorways in operation (1,821 kilometres APRR and 394 kilometres AREA), the APRR Group is the second largest motorway network in France, with 28% of the network, and fourth largest in Europe.
Figure 3.4: APRR Group Paris
APRR
Toul
Melun
Mulhouse Dijon
Cosne-sur-Loire Bourges
EUROPE
AREA
Troyes
SWITZERLAND Oyoman Genève Clermont-Ferrand
Lyon
Abertville
ITALY
Chambèry Valense
AUSTRALIA
Autoroutes Paris-RhinRhône
Asset Description
MODEL OVERVIEW
Europe
2008 Analyst Package
Macquarie Infrastructure Group
75
Europe Autoroutes Paris-RhinRhône (cont.)
Concessionaire Ownership Structure In June 2005, the French State announced a process to sell its 70.2% interest in APRR. A consortium consisting of French contractor Eiffage, MIG and Macquarie European Infrastructure Fund (MEIF) (the Consortium) was announced preferred bidder for APRR in December 2005. In addition to the 70.2% interest acquired from the French State, the Consortium acquired a further 4.4% interest in APRR from Eiffage in February 2006. In March and April 2006 the Consortium extended its offer to the remaining shareholders via a standing offer. At the conclusion of the standing offer the Consortium had secured a further 6.8% interest giving it a total interest of 81.48% in APRR. The Consortium acquired the 81.48% of APRR through a company called Eiffarie. Eiffage has a 50% interest plus one share in Eiffarie and Macquarie Autoroutes de France (MAF) has a 50% interest minus one share in Eiffarie. MIG has a 50% interest plus one share of MAF and MEIF has a 50% interest minus one share in MAF. MIG’s effective interest in APRR is 20.37%.
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MIG’s Investment Structure MIG has invested €276.3 million in APRR. This consists of €127.2 million of equity (via MAF) and €149.1 million of shareholder loans (via MAF Finance). The loans have an interest margin of 4.50% over Euribor. The loans are structurally subordinated where interest is only payable to the extent cash is available, otherwise capitalised.
Management Contracts In 1994 the French State set up a system of multi-year contracts, called Contrats d’Enterprise or management contracts, under which companies holding motorway concessions are committed to financial objectives and toll rate conditions in addition to those specified in the concession agreement. In practice the management contract sets forth the capital expenditure programs to be implemented as well as toll escalation rates for the term of the contract. It is possible for a capital expenditure program agreed within a specific management contract to take longer than the term of the contract.
MIG 50% + 1 share Equity plus Shareholder Loans in same proportion
50% - 1 share Equity plus Shareholder Loans in same proportion
Financière Laborde (Eiffage Sub)
Eiffage SA
Shareholder Loans in same proportion as Eiffage equity
MAF Finance
MAF
Equity contribution 50% + 1 share 50% - 1 share
Shareholder Loans in same proportion as MAF equity
Finanèiere Eiffarie 100%
NORTH AMERICA
MEIF
OVERVIEW
Figure 3.5: APRR investment structure
Eiffarie 81.48%
APRR/AREA signed their first management contracts with the French State for the period 1995– 1999. From 2000–2004, APRR and AREA did not operate under a management contract.
Under the current management contract APRR is required to undertake significant capital works between 2007 and 2013. The capital works program is primarily focussed on maintenance and expansion of the existing network. It also includes construction of 53 kilometres of new motorways. The “Growth” portion or capital works relate primarily to widening existing roads and the construction
of new roads. The “Growth” capital expenditure program has been agreed with the French State as part of the 2004–2008 Management Contract and is, therefore, compensated by the respective extra increase in tolls. These investments will be predominantly funded using the revolving credit facility (see Financing Structure) in the short term and it is envisaged that longer term financing will be put in place to fund medium term expenditure.
EUROPE
Capital Expenditure
Minorities
MODEL OVERVIEW
For the APRR and AREA concessions, near term operations are governed by the 2004–2008 management contract. This management contract took effect on 8 November 2004 and will expire in November 2008. Post November 2008, if a new management contract is not executed, then operations will continue to be governed by the current concession agreement.
18.52%
AUSTRALIA
APRR
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77
Europe Autoroutes Paris-RhinRhône (cont.)
Financing Structure The Consortium’s bid was financed via debt and equity at the Effarie level. As part of the acquisition the Consortium, through control of APRR, also assumed the existing debt at the APRR level. Eiffarie Debt The debt at Eiffarie consists of a seven-year €3,860 million term facility (as at June 2007). The interest margin on the facility is a function of asset leverage and ranges from 0.40% to 1.20%. This facility is partially repaid via a cash sweep. It is envisaged that this facility will be refinanced before the commencement of the 100% cash sweep. APRR Debt APRR has approximately €5.5 billion of debt provided by Caisse Nationale des Autoroutes (CNA). Prior to privatisation of APRR, the French Government used the CNA as the financing vehicle. The CNA raised
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funds by issuing government backed bonds and lent to the motorway companies on the same terms. APRR’s outstanding CNA debt is predominantly fixed rate and will be materially amortised by 2018. The European Investment Bank provided a further €100 million of debt in January 2007 to cover capital expenditure. In addition to this, the Consortium has arranged a €1.8 billion revolving credit facility and a €500 million sevenyear bank facility to refinance 100% of the CNA maturities and a portion of capital works in the early years of operation. The €500 million bank facility was arranged in August 2007 on better terms than the existing debt it replaced. APRR has also put in place a €6 billion Medium Term Note program (EMTN) with a prospectus lodged on the Luxembourg Stock Exchange on 3 October 2007. This new source of financing will serve to replace the CNA loans as they mature and contribute to the financing of investment programs in the longer term.
Table 3.4: Tolling classes Number of axles
Maximum weight
Predominant vehicle type
1
=3.5 tons
Multi-unit Heavy Vehicles
Taxation
Tolling
At present Eiffarie holds less than 95% of APRR and as a result cannot consolidate results for tax purposes. Therefore APRR is unable to offset its taxable profits with losses, arising primarily from interest expense at Eiffarie. However the losses in Eiffarie do not expire and can be used in future if Eiffarie is able to increase its interest in APRR above 95% and form a tax consolidated group.
APRR and AREA Concessions
Interest payments on shareholder loans are not subject to interest withholding tax. Dividends paid by MAF should not be subject to dividend withholding tax under the EU Parent Subsidiary Directive.
On 1 October 2007, motorway tariffs for Class 1 vehicles rose by an average of 0.92% on the APRR network and 0.75% on the AREA network. For Class 4 heavy goods vehicles, the average price increases were 1.93% on the APRR network and 2.55% on the AREA network. The current Management Contract for the two concessions expires in November 2008 and allows:
X if a new Contrat d’Enterprise is agreed, tolls will be allowed to increase by a percentage of the increase in CPI ex Tobacco for both APRR and AREA X if a new Contrat d’Enterprise is not agreed, toll escalation is ruled by the decree no. 9581 of 24 January 1995, and in accordance with the provisions of the motorway concession agreements. This decree stipulates that the minimum toll increase for the concessionaires is 70% of the increase in CPI ex Tobacco.
X APRR Class 1 tolls to be increased at 85% of CPI ex Tobacco plus 0.845% X AREA Class 1 tolls to be increased at 80% of CPI ex Tobacco plus 0.11%.
2008 Analyst Package
MODEL OVERVIEW
Dividends paid out of APRR are subject to the conventional accounting restrictions and can be paid from current period profit, distributable reserves, retained earnings and share premium.
There are five tolling categories on the APRR and AREA concessions, as outlined in Table 3.4. Tolls charged on the two networks are governed by the Management Contract.
Post November 2008, there are two potential scenarios:
NORTH AMERICA
Motorcycles
EUROPE
5
OVERVIEW
Height
AUSTRALIA
Category
Macquarie Infrastructure Group
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Europe Autoroutes Paris-RhinRhône (cont.)
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Macquarie Infrastructure Group
Table 3.5: Tolling Schedules
APRR
Management contract 2004-2008
Price per km for Class 1 as at 1 October 2007
5.54 euro cents (exc. VAT)
Escalation of Class 1 Toll
85% CPI (ex Tobacco) + 0.845% (Changes take effect on 1 October each year)
Escalation of Class 2 Toll
Multiple of Class 1 toll Increasing linearly from 1.15x (in 2003) to 1.55x (in 2008)
Escalation of Class 3 Toll
Multiple of Class 1 toll Increasing linearly from 2.33x (in 2003) to 2.45x (in 2008)
Concession contract 2009-2032 Minimum annual price increase of 70% of CPI ex Tobacco (Changes take effect on 1 February each year)
Escalation of Class 4 Toll
Multiple of Class 1 toll Increasing linearly from 3.22x (in 2003) to 3.38x (in 2008)
Escalation of Class 5 Toll
0.6x Class 1 toll
The next management contract must provide minimum annual price increase of 85% of CPI ex Tobacco
AREA
Management contract 2004-2008
Concession contract 2009-2032
Price per km for Class 1 as at 1 October 2007
7.57 euro cents (exc. VAT)
Escalation of Class 1 Toll
80% CPI (ex Tobacco) + 0.11% (Changes take effect on 1 October each year)
Escalation of Class 2 Toll
1.55x Class 1 toll
Escalation of Class 3 Toll
Multiple of Class 1 toll Increasing linearly from 2.04x (in 2003) to 2.14x (in 2008)
Escalation of Class 4 Toll
Multiple of Class 1 toll Increasing linearly from 2.759x (in 2003) to 2.90x (in 2008)
Escalation of Class 5 Toll
Multiple of Class 1 toll Decreasing linearly from 0.53x (in 2003) to 0.50x (in 2008)
2008 Analyst Package
Minimum annual price increase of 70% of CPI ex Tobacco (Changes take effect on 1 February each year) The next management contract must provide minimum annual price increase of 80% of CPI ex Tobacco
Maurice Lemaire Tunnel The Maurice Lemaire tunnel has been closed to traffic since April 2004 due to the implementation of an extensive investment plan in order to comply with new safety regulations issued by the French Government. The tunnel is expected to re-open by the end of 2008.
Class 1
7.00
Class 2
15.00
Class 3
30.00
Class 4
50.00
Class 5
5.00
Table 3.7: Traffic mix for 20061 % of total group traffic
Vehicle class Class 1
78.2%
Class 2
4.3%
Class 3
2.2%
Class 4
15.0%
Class 5
0.3%
2007 traffix mix data not reported by APRR at the time of publication
Table 3.8: Summary of performance 12 months to 31 December
1
2
2004
2004
2005
19,958
19,958
1,468 42
2
2
OVERVIEW
Tolling category
1.
2
2006
2007
19,989
20,247
20,810
1,468
1,525
1,624
1,753
45
46
46
50
1,510
1,513
1,571
1,670
1,803
(565)
(572)
(597)
(602)
(595)
Traffic Vehicle Kilometres Travelled (m) Financial (€m) Toll Revenue Other Revenue Total Revenue Operating Expenses EBITDA EBITDA Margin (%) 1. 2.
945
941
974
1,068
1,208
62.2
62.2
62.0
64.0
67.0
Presented in French GAAP Presented in IFRS
MODEL OVERVIEW
In order to re-establish the financial rebalance of the concession, the French State and APRR have
Toll price (real Dec 2003 €, including VAT)
NORTH AMERICA
There are five tolling categories (equivalent to that of APRR and AREA) on the Maurice Lemaire and toll prices are also governed by the FRA. After the tunnel resumes service, the toll prices as specified by the FRA will be as detailed in Table 3.6.
Table 3.6: Maurice Lemaire tolling schedule
EUROPE
APRR has in place a toll discount program (CAPLIS) for Heavy Goods Vehicles (Class 3 and 4). The CAPLIS program currently offers a maximum discount of 15% and 16% on the APRR and AREA networks respectively. To comply with an EU directive, the CAPLIS discounts must be reduced to a maximum of 13% by 2008, with potential for further reductions in the discounts offered.
signed a Financial Rebalancing Agreement (FRA) in 2003. As part of this agreement, the French State conceded APRR a 44-year extension of the Maurice Lemaire concession from 2022 to 2068.
AUSTRALIA
Toll price adjustments under both the Management Contract and Concession Agreement are implemented annually. The price adjustment is a function of the change in the CPI ex Tobacco since the anterior price adjustment. Table 3.5 outlines the toll escalation formula for other tolling categories.
2008 Analyst Package
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81
Table 3.9: Asset snapshot and key metrics All financial amounts shown below are expressed in €. Asset
Debt
Location
France (East)
CNA Debt
Length
APRR: 1,821km (33km remaining to be completed) AREA: 394km (1km remaining to be completed) Maurice Lemaire: 11km to reopen 2008
Size
€5,450 million (June 2007)
Term
Materially amortised by 2018
P&I Profile
Fixed amortization profile
Margin
All-in rate starting at 6.01% in 2006, reducing to 5.32% by 2013
Concession Ownership
APRR: MIG (20.37%); MEIF (20.37%); Eiffage (40.74%); Minorities (18.52%) Eiffarie: MIG (25%); MEIF (25%); Eiffage (50%)
Term
APRR and AREA: 31 Dec 2032 expiry Maurice Lemaire: 31 Dec 2068 expiry
Revolving Credit Facility Size
€1,800 million (June 2007)
Term
7 years
Margin
Years 1–5: 0.35% Years 6–7: 0.45%
Traffic and tolling Bank Debt
Tolled Traffic
Both directions
Tolling Classes
Refer to Table 3.4
Last Toll increase
1 Oct 2007 – APRR & AREA
Toll Levels
Refer to Table 3.5
Tolling Methods
Cash, credit cards, ETC
Toll Escalation
Refer to Table 3.5
Toll Discount
Size
€500 million (June 2007)
Term
7 years
Margin
0.25%
Eiffarie (Bid Co) Debt
CAPLIS (HGV Discounts) at October 2007: APRR – 15% AREA – 16%
Size
€3,866 million (June 2007)
P&I Profile
Interest only with partial amortisation via cash sweep
Margin
Year 1: 0.90% The remaining years are based on the below leverage (Net Debt/EBITDA) grid:
The company also has some frequent user discounts for the subscribers of the Liber-T ETC system (only light vehicles)
Year
>10
9–10
8–9
7–8
1.1 metres
2
Light Goods Vehicles
3
=>1.1 metres
3
Single-unit Heavy Vehicles
4
=>1.1 metres
=>4
Multi-unit Heavy Vehicles
Motorcycles/Cars
Table 3.11: Toll discounts Crossing/month
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Macquarie Infrastructure Group
Via Verde discount
Via Card discount
1–12
0%
13–70
70%
70%
>70
100%
100%
2008 Analyst Package
10%
Table 3.12: Toll history 2007
2008
Class
25th April €
Vasco da Gama €
25th April €
Vasco da Gama €
25th April €
Vasco da Gama €
25th April €
Vasco da Gama €
25th April €
Vasco da Gama €
25th April €
Vasco da Gama €
1
1.05
1.85
1.10
1.95
1.15
2.00
1.20
2.10
1.25
2.20
1.30
2.25
2
2.65
4.50
2.75
4.65
2.85
4.75
2.95
4.90
3.05
5.05
3.15
5.20
3
3.90
6.70
4.05
6.95
4.15
7.10
4.25
7.30
4.45
7.60
4.55
7.80
4
5.05
8.75
5.25
9.05
5.40
9.25
5.55
9.50
5.80
9.85
5.95
10.10
Distributions
Third Crossing
Lusoponte is incorporated in Portugal. Any interest payments made to MIG (via its shareholder loans) are subject to tax in the UK, while any dividends will be taxexempt.
Under its concession agreement, Lusoponte has the exclusive right, and obligation, to construct and operate any proposed Tagus River crossings downstream from the Vila Franca de Xira Bridge (approximately 25 kilometres upstream from the Vasco da Gama Bridge). The concessionaire is entitled to be restored to an 11.43% real return
Table 3.13: Summary of performance Year to 31 December
2003
2004
2005
2006
2007
150,150
154,052
156,282
154,550
155,013
77,278
77,953
78,990
78,132
78,415
Traffic (ADT) 25th April – both directions 25th April – northbound Vasco da Gama – both directions
64,325
67,495
65,509
64,848
65,814
Vasco da Gama – northbound
30,925
32,346
31,476
31,301
31,799
Revenue
69.794
75.231
75.459
75.507
83.518
Operating Expenses
12.061
13.039
12.027
11.709
11.925
EBITDA
57.753
62.192
63.432
63.798
71.593
83
83
84
85
86
Financial (€ million)
EBITDA Margin (%)
MODEL OVERVIEW
Lusoponte’s equity distributions are limited to retained profits, so that any distribution cannot result in negative retained earnings. The return of Lusoponte’s Suprimentos equity (supplementary capital contributions) does not reduce the company’s retained earnings and is limited to distributable equity (surplus capital plus retained earnings).
(based on the original base case model agreed at the signing of the GFRA) if the construction of another crossing negatively impacts its projected returns. Construction of a third crossing does not appear to be viable without a substantial contribution from the Portuguese Government.
OVERVIEW
2006
NORTH AMERICA
2005
EUROPE
2004
AUSTRALIA
2003
2008 Analyst Package
Macquarie Infrastructure Group
87
Table 3.14: Asset snapshot and key metrics All financial amounts shown below are expressed in €. Asset
Senior debt
Location
Lisbon, Portugal
Size
€104.28 million (as at 31 December 2007)
Length
18km (13km of bridge structures and 5km linking bridges to the wider road network)
Term
5 September 2019
P&I Profile
Amortising
Margin
0.80%–0.85% to 5 March 2006
Size
25th April–6 lanes (3 lanes/direction) Vasco da Gama–6 lanes (3 lanes/direction)
Opened to Traffic
25th April–1966 Vasco da Gama–Mar 1998
0.90%–0.95% to 5 March 2012 1.00%–1.10% to 5 September 2019
Concession Ownership
Vinci (30.9%); MIG (30.6%); Somague (17.2%); Mota Engil (13.8%); Teixeira Duarte (7.5%)
Commencement Date
24 March 1995
Term
35 years, 31 March 2030 expiry
DSCR Threshold
1.4x
Senior Lock-up
1.2x
Debt service reserve Size
Taxation
Traffic and tolling
Portuguese Corporate Tax Rate
26.5%
VAT on Tolls
5%
VAT on other items
21%
Tolled Traffic
Northbound only (into Lisbon) 25th April does not toll traffic during August
Tolling Points
Both Bridges – 1 main toll plaza
Tolling Classes
4 (refer to Table 3.10)
Last Toll Increase
1 January 2008 (annually)
Tolling Methods
Cash, debit cards, proximity cards, ETC
Size
€34.9 million
CPI
Repayment Profile
Subject to positive Book Equity Value (sum of Share Capital, Suprimentos, Retained Earnings and Legal Reserve)
Toll Escalation
Suprimentos contributed capital
Toll Discount
Available for proximity card and ETC users
Current Traffic Mix
Class
25th April
Vasco da Gama
1
89.6%
84.4%
Dividend Distributions
Subject to positive retained earnings
2
9.0%
11.9%
Return
11.43% real (related to concession obligations)
3
0.2%
0.7%
4
1.2%
3.1%
Equity
Capital Expenditure Assumptions (as at 31 December 2007, where year 1 = 2008) Years 1-5
Average €2.2 million pa
Years 5-15
Average €4.4 million pa
Years 15-24
Average €2.8 million pa
EIB Facility Size
€264.063 million (as at Dec 2007)
Term
5 Sep 2021
P&I Profile
Amortising
Interest Rate
Fixed at 9.31% to 5 Sep 2019; 9.41% thereafter
Guaranteed Margin
0.80%–0.85% to 5 Mar 2006 0.85%–0.90% to 5 Mar 2012 0.90%–1.00% to 5 Sep 2019
Guaranteed DSCR Threshold
88
6 months debt service (interest and principal)
1.4x
Macquarie Infrastructure Group
2008 Analyst Package
X a 19 kilometre journey via untolled roads through the Rostock central shopping precinct. This route can be subject to delays of up to two hours during peak periods.
EUROPE
Figure 3.8: Warnow Tunnel
OVERVIEW
X ferries, which take more than 15 minutes to complete the crossing
NORTH AMERICA
Warnow Tunnel is a four kilometre toll road located in the city of Rostock in north-eastern Germany. At the time of investment, Rostock was the largest of seven Baltic ports and the fourth largest German port. The Warnow Tunnel opened to traffic in September 2003. The road includes a 0.8 kilometre tunnel under the Warnow River. This river divides the city, with most residential areas located on the western side
and most of the industrial areas on the eastern side, including a power station, bulk goods terminal and growing retail precinct. Alternative options to cross the river include:
WARNOW TUNNEL
AUSTRALIA
Warnow Tunnel
Asset Description
MODEL OVERVIEW
Europe
2008 Analyst Package
Macquarie Infrastructure Group
89
Europe Warnow Tunnel (cont.)
Concessionaire Ownership Structure
group Bouygues. Bouygues was the construction contractor and is a fellow sponsor of the project. WQG is managed by the general partner, Warnowquerung Verwaltungsgesellschaft mbH (the Manager). The Manager has unlimited liability and has also been capitalised by ETI and BTP in the ratio of 70:30.
Warnowquerung GmbH & Co. KG (WQG) owns the concession to operate Warnow Tunnel for 50 years from construction completion. A 20-year extension to the original 30-year concession was formally granted by the City of Rostock in February 2007.
Financing Structure
WQG is a limited partnership, with two limited partners, European Transport Investments (UK) Ltd (ETI) and Bouygues Travaux Publics SA (BTP). ETI has a 70% equity interest in WQG and BTP has a 30% interest. The limited partners are the economic beneficiaries of the project. ETI is 100% owned by MEI Limited, while BTP is a subsidiary of the French construction
Construction was completed in 42 months through a DM305 million (approximately €155.9 million) fixed-time fixed-price contract with Bouygues. Both the dimensions of the tunnel and the construction techniques employed are similar to those used for the Sydney Harbour Tunnel.
Figure 3.9: Concessionaire ownership structure MEI Limited 100%
European Transport Investments (UK) Ltd
Bouygues Travaux Publics SA 30%
70%
Warnowquerung Verwaltungsgesellscaft GmbH General Partner 70%
Warnowquerung GmbH & Co. KG Concessionaire
Warnow Tunnel
90
Macquarie Infrastructure Group
2008 Analyst Package
30%
Debt Restructure In December 2005, WQG and its banks agreed to restructure the loan to WQG. Under the terms of the restructuring agreement, the €147 million in senior loans together with the present value of interest rate swaps were converted into 3 tranches of debt: X Tranche I – €52.5 million X Tranche II – €41.1 million X Tranche III – €68.3 million. Tranche III was structured to be qualified as legally subordinated debt and will only pay principal and interest to the extent that cash is available.
Tolling Tolls for all vehicle categories are set as a function of the base car toll. For the first year of operations, the offpeak (non-summer) base car toll was set at €2.00. For subsequent years of operations, tolls can be set using a formula where, if the forecast pre-tax equity IRR is between 17% and 25%, the tolls for the following year may rise by inflation only. If the forecast pre-tax equity IRR is greater than 25%, toll levels must remain fixed. If the forecast pre-tax equity IRR is less than 17%, tolls may increase by
Table 3.15: Toll schedule
Since opening, Warnow Tunnel traffic has been significantly below MIG’s investment case. Due to this performance, MIG reduced the value of its investment in Warnow Tunnel to nil in December 2003. MIG’s current valuation of its investment in Warnow Tunnel is A$3.0 million (as at 31 December 2007). MIG is currently pursuing a series of initiatives to improve the performance of the asset: X active involvement in transportation planning for the area X supporting activities that promote the area as a business development site and holiday destination. ETC (incl VAT) (€)
Cash (incl VAT) (€)
Category
Vehicle type
All year round
Winter
Summer
1
Passenger car, motorcycle
1.70
2.00
2.80
2
Passenger car, minibus, small transporters
2.38
2.80
4.00
3
Truck (2-axle)
5.10
6.00
8.50
4
Truck (>2-axle)
6.80
8.00
11.00
5
Bus (>16 seats)
8.50
10.00
13.00
2008 Analyst Package
OVERVIEW
Current Performance NORTH AMERICA
X €40.8 million of equity contributions from MIG (70%) and Bouygues (30%). Equity was contributed progressively throughout construction of the project.
The current toll schedule for Warnow Tunnel is presented in Table 3.15.
EUROPE
X €29.3 million of German and European Union subsidies
The Warnow Tunnel has two lanes in each direction. The main toll plaza, located on the eastern side of the tunnel, has four lanes in each direction plus one tidal lane (nine in total). The tidal lane can switch directions to accommodate additional traffic volumes during peak periods. Electronic toll collection is available in all nine lanes, although two lanes are dedicated to ETC.
more than the rate of inflation. Based on current projections, the equity IRR for the investment is zero, so tolls can be escalated at a rate greater than inflation if the concessionaire chooses to do so.
AUSTRALIA
X €147.0 million senior debt facility. This facility has a 25-year term, with a one year interest-only period following construction completion
Road Configuration
Macquarie Infrastructure Group
MODEL OVERVIEW
Funding for the project was provided from the following sources:
91
Table 3.16: Asset snapshot and key metrics All financial amounts shown below are expressed in €. Asset Location
Rostock, Germany
Length
4km
Size
4 lanes (2 lanes/direction)
Opened to Traffic
September 2003
Concession Ownership
MIG (70%); Bouygues SA (30%)
Term
50 years from construction completion, 15 September 2053 expiry
Traffic and tolling Tolled Traffic
Both directions
Tolling Methods
1 main plaza (9 lanes in total – 4 lanes in each direction plus 1 tidal lane)
Tolling Classes
5 (refer to Table 3.15)
Toll Levels
Refer to Table 3.15
Toll Escalation
Refer to Tolling section
Capital expenditure assumptions (as at 31 December 2007, where year 1 = 2008) Years 1–10
Average €0.25 million pa
Years 11–20
Average €1.11 million pa
Years 21–End
Average €1.28 million pa
Debt (as at 31 December 2007) Tranche I
€52 million
Facility Term
31 Dec 2029
Margin
0.75%
Tranche II
€34 million
Facility Term
Sep 2053 (concession end)
Margin
3.00%
Tranche III
€75 million (legally subordinated tranche)
Facility Term
Sep 2053 (concession end)
Margin
1.50%
Taxation – Gewerbesteuer (GEWST) Tax Rate
15.05%
Non-Deductible Interest
25%
Application of Losses
60% of taxable income over a threshold of €1 million
Taxation – Korperschaftsteuer (KST) Tax Rate
15.83%
Application of Losses
60% of taxable income over a threshold of €1 million
Taxation – Other VAT
92
19%
Macquarie Infrastructure Group
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Australia Westlink M7 ....................................................... 94
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Australia Westlink M7
Asset Description Westlink M7 is a 40 kilometre toll road in the west of Sydney, Australia, which links the M2 Motorway at Baulkham Hills in the north, the M4 Motorway at Eastern Creek, and the M5 Motorway at Prestons in the south. It forms a major part of Sydney’s 110 kilometre orbital network. The road is two lanes wide in each direction, and bypasses 48 sets of traffic lights. Westlink M7 opened to traffic on 16 December 2005 and is a fully electronic road with tolls charged on a per-kilometre basis. Tolls are capped for trips longer than 20 kilometres.
Concessionaire Ownership Structure Westlink Motorway Group (WMG) is a stapled entity comprised of a general law partnership, Westlink Motorway Partnership (WMP), and a limited liability company, WSO Co. Pty Limited (WSO Co.). WMG is owned by MIG (47.5%), Transurban (47.5%) and Leighton Contractors (5.0%). WSO Co. is the concessionaire of Westlink M7. WSO Co. is a trading company for the purposes of the Income Tax Assessment Act and
Figure 4.1: Concessionaire ownership structure 8.5%
MIT (I)
MIT (II)
Partnership interest and SLNS 47.5%
Shares
39.0%
Stapled
Westlink Motorway Partnership
WSO Co. Sub lease Concessionaire
Westlink Motorway Group
Westlink M7
Crown Lease/Property/Assets
Figure 4.2: Westlink M7 M2 LANE COVE TUNNEL
Blacktown Parramatta
GORE HILL FREEWAY
M7 M4
SYDNEY HARBOUR BRIDGE/TUNNEL
Sydney Bankstown Liverpool
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M5
M5 East
CROSS CITY TUNNEL EASTERN DISTRIBUTOR
X A$47 million for an additional 5% interest at road opening (16 December 2005) X A$34 million for an additional 2.5% interest in September 2006. Westlink’s equity funding is provided primarily in the form of Shareholder Loan Notes, with only a nominal amount of issued share capital. Shareholder Loan Notes accrue interest at a rate of 11.93%, but interest is only paid to the extent that there is cash available for distribution. If no cash is available for distribution, the interest is capitalised.
Reset Convertible Notes MIG funded its A$392 million equity investment in Westlink M7 by issuing Reset Convertible Notes (ReCNs) to Ontario Teachers Pension Plan (OTPP).
Westlink currently has a senior debt facility of A$1,250 million. Key terms of this facility are summarised below: X interest only facility with a weighted average tenor of 4.8 years X weighted average interest margin of 0.63% X interest rate hedging in relation to 100% of the face value of the debt to 30 September 2008 and 85% to 31 December 2015 X facility was upgraded from BBBto BBB by Fitch in December 2007. An inter-entity loan has been established between WMP and WSO Co. This facility accrues interest at 14.75% per annum and is repayable with any excess cash available within WSO Co. (after the payment of operating expenses and taxation obligations).
2008 Analyst Package
In December 2007, Westlink obtained lender approval for the early release of the ramp-up and other cash reserves accumulated following the strong performance of the motorway since opening. The release was six months ahead of schedule and resulted in a distribution of A$87.4 million being paid to Westlink shareholders, of which A$41.5 million was received by MIG. Westlink is expected to make regular quarterly distributions to shareholders going forward, subject to ongoing debt service coverage tests.
OVERVIEW NORTH AMERICA
X A$392 million for an initial 40% interest at financial close (14 February 2003)
Westlink Motorway Group Financing Structure
EUROPE
MIG funded its equity contribution in three stages:
WSO Co. leases WMP’s land and property assets in order to operate Westlink M7. Under the terms of the lease, WSO Co. is required to make lease payments to WMP. To the extent that WSO Co. has insufficient cash flows to meet required lease payments, these payments will accrue and be payable in subsequent periods. Both the lease and the inter-entity loan facilitate the release of excess cash in WSO Co. to investors without the need for WSO Co. to have accounting profits, subject to any Corporations Law requirements being met.
AUSTRALIA
MIG Investment Structure
On 13 November 2006, OTPP exercised their right to convert all outstanding ReCNs into MIG stapled securities. On 15 November 2006 MIG issued 165,048,894 MIG stapled securities at $3.0581425 per MIG stapled security to OTPP in accordance with the terms of the ReCNs Deed Poll.
MODEL OVERVIEW
is taxed at the corporate rate. Dividends from WSO Co. are subject to the availability of accounting profits. The partners of WMP are assessed on their respective share of the taxable income or losses of the partnership.
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Australia Westlink M7 (cont.)
Road Configuration Westlink M7 is two-lane dual carriageway with a wide central median available for the development of future public transport initiatives. The motorway links directly with the M2 Motorway, the M4 Motorway and the M5 Motorway. Westlink M7 has 44 toll gantries and 17 interchanges which provide for 148 possible trip combinations.
Tolling Westlink M7 opened to traffic on 16 December 2005. On opening, the road operated toll-free for the first month from 16 December 2005 to 15 January 2006. There is only one vehicle tolling category for Westlink M7. Tolls are charged on a per kilometre basis
(31.67 cents/km inclusive of GST as at 1 January 2008), with a maximum toll per trip (A$6.33 inclusive of GST, as at 1 January 2008). Westlink M7 is a fully electronic road. Commuters are able to use transponders and casual user (video tolling) products to pay tolls. WMG has outsourced key operational functions. General road operations and maintenance has been outsourced to Westlink Services, a joint venture between Leighton Contractors and Abigroup, for the life of the concession. Tolling and customer management services have been outsourced to Roam (a wholly owned subsidiary of Transurban) for a minimum of 15 years. Both of these contracts are fixed price (plus indexation of costs) and provide for a reset to market price at regular intervals.
Table 4.1: Summary of performance Traffic (ADT)
Jun-06
Dec-06
Jun-07
Dec-07
Cars
76,623
82,655
87,080
94,663
Trucks
13,954
16,383
17,730
18,922
Total
90,577
99,038
104,810
113,585
Average Trip Length (km) Average Daily Revenue Vehicle Kilometres Travelled
15
16
15
15
1,141,434
1,268,590
1,339,464
1,451,068
Financial (A$m) Toll Revenue
47,900
62,582
66,960
74,956
Operating Expenses
(21,018)
(14,436)
(15,348)
(19,209)
EBITDA
26,883
48,146
51,612
55,747
EBITDA Margin
56.1%
76.9%
77.1%
74.4%
Road was open for part year from 16 December 2005 to 30 June 2006. Tolling commenced on 16 January 2006.
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MODEL OVERVIEW
AUSTRALIA
EUROPE
NORTH AMERICA
OVERVIEW
Figure 4.3: Westlink M7 road configuration
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Table 4.2: Asset Snapshot & Key Metrics All currency values are in Australian dollars unless otherwise stated. Asset
Senior debt (external)
Location
Sydney, Australia
Tranche I
$500 million
Length
40km
Facility Term
21 December 2010
Size
4 lanes (2 lanes / direction)
Margin
0.55%
Opening to Traffic
16 December 2005 (tolling commenced 16 January 2006)
P&I Profile
Bullet
Tranche II
$500 million
Facility Term
21 December 2012
Margin
0.65%
P&I Profile
Bullet
Tranche II
$250 million
Facility Term
21 December 2015
Both directions
Margin
0.75%
Tolling Points
44 gantries – 4 main line; 40 ramps
P&I Profile
Bullet
Tolling Classes
1 tolling category
Toll Levels (inc. GST)
$0.3167/km (1 January 2008 dollars including GST) Total toll/trip capped at $6.33 (1 January 2008 dollars including GST)
Concession Current Ownership
MIG (47.5%); Transurban (47.5%); Leighton Contractors (5.0%)
Commencement Date
14 February 2003
Term
34 years, 14 February 2037 expiry
Traffic and tolling Tolled Traffic
Toll Methods
Electronic tolling – transponders, casual user products
Toll Escalation
CPI quarterly in arrears
Capital expenditure assumptions (as at 31 December 2007) 2008–2014
Average $0.14 million pa
2015–2024
Average $1.22 million pa
2025–2037
Average $3.01 million pa
Reserves Debt Service Reserve
Swaps % Swapped
100% of total debt until 30 September 2008; 85% 1 October 2008 to 31 December 2015
Swap Base Rate
Period
Corporate Tax Rate
Period
Amount
Dec 2005–Sep 2010
$100.5 million pa (average over the period)
Sep 2010 onwards
Grown at lower of 10% pa and revenue growth rates from September 2010
Payment Frequency
Quarterly (to the extent cash is available, otherwsie interest accrues)
Inter-entity loan
6.12%
Sep 2008–Dec 2012
6.05%
Sep 2012–Dec 2015
5.84%
Outstanding balance at 30 June 2007
$437.2 million
Interest Rate
14.75% pa
Payment Frequency
Quarterly (to the extent cash is available)
50% of face value
GST
10%
Operating phase loan notes Size at opening
$980 million
Outstanding balance as at 30 June 2007
$1,183 million
Interest Rate
11.9% (payable from available cash otherwise interest capitalised)
BBB
Macquarie Infrastructure Group
30%
Valuation of Franking Credits
Credit rating
98
Dec 2007–Sep 2008
Taxation
Sub Lease
Fitch
6 months interest expense
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Model Overview Structure of the Analyst Model ....................... 100 Using the Analyst Model ................................. 104
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Model Overview Structure of the Analyst Model
The Analyst Model has been prepared using Microsoft Excel. The model currently contains 18 worksheets, including 10 asset worksheets, as outlined in the diagram below. The purpose and contents of these worksheets are described briefly in Figure 5.1 below.
Asset Summary This worksheet provides an overview of each asset in MIG’s portfolio. The sheet provides a summary of the key asset valuation metrics together with graphical illustrations of operating performance.
Assets
Fund Summary This worksheet provides an overview of MIG at the corporate level. The sheet also provides a summary of the key MIG level cash flows and valuation metrics.
Each of the 10 asset worksheets has unique characteristics, however, where possible, the worksheets follow the generic format outlined below:
Figure 5.1: Analyst Model structure Asset Economics
MIG Cash Flow Data Sheet
Asset
Fund Summary Asset Summary
Asset
Table 5.1: Summary section
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Section
Key outputs
Cash Flow Cascade
X Summary of the asset cash flows
Key Valuation Metrics
X EBITDA multiple, term remaining, leverage, prospective yield, EBITDA growth
2008 Analyst Package
Key assumptions
Cash Flow Cascade
X Summary of the asset cash flows
Key Valuation Metrics
X EBITDA multiple, term remaining, leverage, prospective yield, EBITDA growth
Investment Assumptions
X Ownership percentage X Concession term
Economic Assumptions
X Macroeconomic variables as drawn from the Economics sheet
Economic Escalators
X Escalation indices based on economic assumptions
Traffic Assumptions
X Traffic levels X Traffic growth X Traffic mix
Toll Assumptions
X Current toll levels X Toll escalation mechanism
Other Revenue Assumptions
X Supplementary revenue derived by concessions in addition to toll revenue
Operating Expense Assumptions
X Major operating expenditure categories X Escalation of operating expenditure categories
Capital Expenditure Assumptions
X Major capital expenditure categories
Financing Assumptions
X Specifics of current debt facilities including term, amortisation period, base rates, margins and swaps X Specifics of refinancing facilities (as appropriate)
Reserve Assumptions
X Specifics of required reserves, including Debt Service Reserves (DSR), capital expenditure reserves, ramp-up reserves as appropriate
Re-gearing Assumptions
X Re-gearing based on DSCRs
Taxation Assumptions
X Income and capital taxation rates
MODEL OVERVIEW
AUSTRALIA
EUROPE
NORTH AMERICA
Section
OVERVIEW
Table 5.2: Assumption section
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Model Overview Structure of the Analyst Model (cont.)
102
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Table 5.3: Calculation section Section
Key calculations
Operations
X X X X X
Interest Revenue
X Interest earned on cash and reserve accounts
Capital Expenditure
X Capital expenditure incurred (in nominal terms)
Debt
X X X X
Debt Service Coverage Ratio
X Cash flow available for debt service, including revenue, expense and tax cash flows as appropriate X Debt service
Reserves
X Required reserves X Withdrawals/Deposits
Taxation
X X X X X
Cash
X Summary of cash flows during period X Cash available for distribution to equity X Cash distributed to equity
Equity
X Equity contributions X Distributions of contributed capital, inter-entity loans, inter-entity leases, construction loans, shareholder loans, dividends, share buy-backs
Valuation
X Cash flows to equity X Value attributed to franking, FIRPTA and other credits (as appropriate) X Risk-free rate X Risk premium
Key Metrics
X EBITDA multiple, term remaining, leverage, prospective yield, EBITDA growth
2008 Analyst Package
Toll revenue Other revenue Operating expenses EBITDA EBITDA margin
Current facilities Refinancing facilities Regearing facilities Refinancing/re-gearing costs
Taxable income Income tax Capital tax Franking account (as appropriate) MIG cannot provide tax advice to users. Users should seek independent advice in relation to any tax issues
MIG Cash Flow
NORTH AMERICA
OVERVIEW
This worksheet outlines the cash distributions expected from MIG’s assets as well as all MIG-level cash flows (including fees payable to the Manager). This worksheet allows the user to determine MIG’s cash reserves at each balance date and the size of possible distributions to MIG security holders.
Economics
MODEL OVERVIEW
AUSTRALIA
EUROPE
This worksheet contains all general macroeconomic assumptions used by the asset worksheets, including inflation, interest rates, risk-free rates and foreign exchange rates.
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Model Overview Using the Analyst Model
It is essential that users activate the Analysis ToolPak option within Microsoft Excel in order to operate the Model. Cells that are coloured with a light grey background in the Analyst Model are input cells. Users must enter appropriate values into all input cells in the Model. When assessing the inputs to be entered in the Model, it is imperative that users adhere to the conventions within the model: X values currently entered in input cells are for illustrative purposes only. Users must assess the appropriateness of values for all input cells throughout the Model X with the exception of growth assumptions, all amounts, regardless of whether they represent inflows or outflows to the asset or entity, should be entered as positive values. The Model will convert the inputs as required X inputs are to be entered in the units specified. Unless otherwise stated, dollar values are in the home currency of the relevant asset or entity, in units of one thousand X all dates are to be period ending unless otherwise specified.
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Other assumptions within the Model are outlined in blue. These reflect actual or accepted values for different variables. These should not be changed by the user. Certain historical information (primarily traffic, revenue and operating expenses) has been included to increase the Model’s useability. This information is outlined in red in rows where the user is required to provide forecasts for the relevant variable.
CORPORATE INFORMATION
CONTACT INFORMATION
Directory
Secretaries of the Responsible Entity
Macquarie Infrastructure Group No. 1 Martin Place Sydney NSW 2000 Telephone (Australia): 1800 358 440 Telephone (Int’l): 61 2 8232 7248 Facsimile: 61 2 8232 4713 Email:
[email protected] Website: www.macquarie.com/mig
Christine Williams Dennis Leong
Responsible Entity for Macquarie Infrastructure Trust (I) and Macquarie Infrastructure Trust (II): Macquarie Infrastructure Investment Management Limited (MIML) ACN 072 609 271
Directors of Macquarie Infrastructure Group International Limited Rob Mulderig (Chairman) Jeffrey Conyers Dr Peter Dyer Mark Johnson
Secretary of Macquarie Infrastructure Group International Limited Donna Phillips
Directors of the Responsible Entity
Disclaimer This information package (the Package), which includes the accompanying spreadsheet, has been prepared by Macquarie Infrastructure Group (MIG) which comprises of two Australian trusts: Macquarie Infrastructure Trust (I) ARSN 092 863 780 and Macquarie Infrastructure Trust (II) ARSN 092 863 548; and Macquarie Infrastructure Group International Limited (MIGIL), a Bermudan mutual fund company ARBN 112 684 885. Macquarie Infrastructure Investment Management Limited ACN 072 609 271 (MIIML) is the responsible entity of MIT(I) and MIT(II). MIIML is a wholly owned subsidiary of Macquarie Group Limited ACN 008 583 542 (MQG). Macquarie Capital Funds (Europe) Limited (MCFEL) registered number 3976881 is the adviser to MIGIL. MCFEL is a wholly owned subsidiary of MQG. The Package has been prepared in good faith to assist analysts in the development of their own models. The Package does not purport to forecast the asset value, income or distributions of MIG, nor the value, income or distributions of any other entity. No representation or warranty, express or implied, is made by MIG or any part of MQG (Macquarie) as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this Package. Any assumptions or forecasts contained in the Package are intended as a guide to analysts only. They do not represent forecasts of Macquarie nor any other party and are not intended to be a representation that the assumptions will occur. The recipient should do their own research and form their own judgment in relation to any assumption, forecast or estimate contained in the Package and not rely on any information in the Package as being either absolute or the likely outcome. The Package does not purport to list the assumptions or risks which may influence the valuation of assets of MIG. Any discussion of tax treatment is provided without warranty and for information only. The recipient should seek professional advice in respect of any taxation assumptions required to analyse MIG. Macquarie does not guarantee information provided is up to date, and does not accept any obligation to update the Package or to inform the recipient that the package is no longer up to date should new information become available. The Package remains the property of MIG and may not be reproduced in part or whole without the express written permission of MIG. None of the entities noted in this presentation is an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities. No part of the Package is an offer, invitation or recommendation for subscription or purchase of stapled securities. It does not take into account the investment objectives, financial situation and particular needs of the investor. Before making an investment in MIG, the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment adviser if necessary. Information in this Package, including any forecast financial information, should not be considered as a recommendation in relation to holding purchasing or selling, securities or other instruments in MIG. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts, by their very nature, are subject to uncertainty and contingencies many of which are outside the control of MIG. Past performance is not a reliable indication of future performance. These materials do not constitute an offer of securities for sale in the United States, and the securities referred to in these materials have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration.
Mark Johnson (Chairman) Paul McClintock Michael Carapiet David Mortimer, AO David Walsh John Roberts (alternate director to Mark Johnston and Michael Carapiet)
Registry Computershare Investor Services Pty Limited GPO Box 2975, Melbourne VIC 3001 Telephone: 1800 000 982 or 61 3 9415 4073 Facsimile: 61 3 9473 2500 Website: www.computershare.com
For further information on the MIG Analyst Package, please contact: Stuart Green Head of Investor Relations Tel: +61 2 8232 8845 E-mail:
[email protected] Victoria Hunt Investor Relations Manager Tel: +61 2 8232 5007 E-mail:
[email protected]