Aurizon Holdings Ltd. · ASX:AZJ
Aurizon — Debt Investor Presentation (September 2014)
36 slides from Aurizon's debt investor presentation, September 2014
Slide 1: Aurizon Network European Roadshow
Aurizon Network European Roadshow September 2014 Presenters: Keith Neate (Executive VP and Chief Financial Officer, Aurizon Holdings) Erin Strang (Group Treasurer and VP Tax & Governance, Aurizon Holdings)
Slide 2: Disclaimer
Disclaimer No Reliance on this document This document was prepared by Aurizon Holdings Limited (ACN 146 335 622) (referred to as “Aurizon” which includes its related bodies corporate (including Aurizon Operations Limited and Aurizon Network Pty Ltd). Whilst Aurizon has endeavoured to ensure the accu
Slide 3: Agenda
Agenda 1 Overview 4 2 Credit highlights 10 3 Australian coal industry 17 4 Regulation 22 5 Financial performance and capital management 28 3 3
Slide 4: 1. Overview
1. Overview & 2 AURIZON.
Slide 5: About Aurizon Network
About Aurizon Network Aurizon Network controls, manages, operates and •Aurizon Holdings legal structure maintains the fixed rail infrastructure "below rail" assets of the Central Queensland Coal Network (CQCN) – Regulated Asset Base (RAB) of A$4.5 billion(1) Aurizon Market cap of A$10bn(2) Holding
Slide 6: Below rail infrastructure
Below rail infrastructure Traction Track power Signal Signalling/ Overhead/ Telecoms Power Signal phone Ballast Ballast Rail Structures Sleeper Super-structure Facilities Sub-structure 6
Slide 7: Company history
Company history 1865 2010 2011 2012 2013 2014 Aurizon • Baa1 / BBB+ (stable) QR Limited • Market cap: A$10bn(1) Holdings Aurizon • Baa1 / BBB+ (stable) Network • RAB: A$4.5bn(2) 1865 2010 Restructure 2011 2012 name change 2013 New Capital Structure 2014 • First railway line in • Separation of • Comp
Slide 8: About the CQCN
About the CQCN The CQCN comprises 4 major coal systems and 1 connecting CQCN system overview system link serving Queensland’s Bowen Basin coal region: Newlands, Goonyella, Blackwater and Moura with GAPE the connecting system link – 2,670 kilometres network length – Over 40 operating coal mines ser
Slide 9: Standalone capital structure
Standalone capital structure Aurizon Network operates as a separate standalone entity to Overview of Aurizon Network debt facilities • Aurizon Operations and Aurizon Holdings Senior syndicated debt facilities – Separate Board and Management team – Separate statutory financial reporting Facility Ma
Slide 10: 2. Credit highlights
2. Credit highlights & 2 AURIZON.
Slide 11: Credit highlights
Credit highlights 1 Strong underlying macroeconomic drivers support long term coal volumes 2 Regulated revenues within a stable and well established regulatory regime Revenue protection mechanisms limit exposure to counterparty and 3 volume risk 4 Experienced Board and management team 5 Long term cu
Slide 12: Strong underlying macroeconomic drivers support long term coal volumes
Strong underlying macroeconomic drivers 1 support long term coal volumes 1 Australia is the world’s largest exporter of seaborne coal 2 Close proximity to Asia gives Australia a competitive advantage Queensland has the largest coal resource in Australia 3 with a very long production life 4 Queenslan
Slide 13: Regulated revenues within a stable and well-established regulatory regime
Regulated revenues within a stable and well- 2 established regulatory regime Well established regulatory Stable regulated revenue base Well developed building block approach to 1 regime 2 3 revenue determination Over 90% of Aurizon Network revenue is The provision of transportation from track ac
Slide 14: Revenue protection mechanisms limit exposure to counterparty and volume risk
Revenue protection mechanisms limit 3 exposure to counterparty and volume risk Aurizon Network’s regulated revenue is protected through a combination of contractual and regulatory mechanisms that are included in the Access Undertaking and access agreements These mechanisms come into effect when
Slide 15: Experienced Board and management team
4 Experienced Board and management team Experienced Board and management team with strong strategic, operational and 1 financial management skills Strong track record of efficiently managing open access multi-user network and 2 successfully executing major coal network expansions Focused on continui
Slide 16: Long term customer relationships
5 Long term customer relationships FY14 contract revenues (split by Aurizon Network customers) In FY14, ~66% of our regulated coal access revenue was 66% derived from access agreements with Aurizon Holdings, while ~34% was derived from other above rail operators (including Pacific National) and mi
Slide 17: 3. Australian coal industry
3. Australian coal industry 17
Slide 18: Australia is the world's largest exporter of seaborne coal
Australia is the world’s largest exporter 1 of seaborne coal Australia is the largest exporter of seaborne metallurgical coal and second largest exporter of thermal coal(1) – Australia exported 336Mt of coal in FY2013, estimated at 80-85% of marketable production(1) Australia is the fifth larges
Slide 19: Close proximity to Asia gives Australia a competitive advantage
Close proximity to Asia gives 2 Australia a competitive advantage In FY2013, 79% of Australia’s metallurgical coal and 93% of thermal coal was exported to five countries (Japan, South Korea, Taiwan, China and India)(1) – Japan remains Australia’s largest export market – China and India are expecte
Slide 20: Queensland has the largest coal resources in Australia with a long production life
Queensland has the largest coal resources 3 in Australia with a long production life The Queensland coal industry is the largest in Australia, with more than 56bt of coal resource, including 37bt located in the Bowen Basin region serviced by the CQCN Queensland coal endowment (Reserves and Resource
Slide 21: Queensland's coal producers are globally cost competitive
Queensland’s coal producers are globally 4 cost competitive Rail is well placed to benefit from strong coal market volume demand dynamics (especially metallurgical coal), and in particular the demand for infrastructure that will accompany expanded coal mining activity in the region Metallurgical coa
Slide 22: 4. Regulation
4. Regulation & 2 AURIZON.
Slide 23: Regulatory framework
Regulatory framework The CQCN operates under a stable and well established regulatory regime – The CQCN is regulated by the QCA and provides open access to all accredited rail operators The form of regulation is a conventional revenue cap – Aurizon Network can earn a set return on its asset base
Slide 24: QCA's approach to regulation
QCA's approach to regulation The QCA takes a three step approach for determining the reference tariffs charged by Aurizon Network to CQCN users Step 1 Step 2 Step 3 RAB is approved by the QCA on a ‘Building block’ approach adopted to Reference tariffs determined annually, taking Depreciated Op
Slide 25: Growth in Aurizon Network's RAB
Growth in Aurizon Network's RAB Aurizon Network’s RAB over time • QCA determines Aurizon Network's access pricing based (A$bn) on the estimated value of the RAB +45% Growth in RAB RAB value of A$4.5bn (excluding assets subject to access driven by facilitation deeds) as at June 30, 2013, was appr
Slide 26: UT4 submission
UT4 submission Aurizon Network submitted its original UT4 proposal on April 30, 2013, with a revised negotiated proposal re-submitted on August 11, 2014. A draft revenue decision is expected to be issued by the QCA by the end of September 2014 and the policy (including tariffs) in mid-December 201
Slide 27: Indicative timeline for UT4
Indicative timeline for UT4 We currently expect UT4 to be confirmed by the QCA by June 2015 Mar 13 Apr 13 Sep 13 Dec 13 Apr 14 Jun 14 Sep 14 Jun 15 QCA & customer QCA Extended UT4 Stakeholder consultation QCA consultation consideration development briefing period consideration (commences June) April
Slide 28: 5. Financial performance and capital management
5. Financial performance and capital management 28
Slide 29: Financial performance and operating metrics
Financial performance and operating metrics $70m over-collection of FY14 vs revenue will be returned to the Historical financials (A$ millions) FY12 FY13 FY14 FY13 customers in 1H FY2015. Upon approval of UT4, new tariffs will Total assets 4,392 5,033 5,378 7% be adjusted to recover any revenue fo
Slide 30: Capitalisation and credit metrics
Capitalisation and credit metrics Strong balance sheet with a commitment to maintaining a strong investment grade credit rating Credit metrics do not reflect the benefit of higher revenues from increased throughput due to the impact of transitional tariffs Capitalisation (A$m) Jun-13 Dec-13 Jun-14
Slide 31: Strong financial position and ratings stability
Strong financial position and ratings stability Stable credit ratings • Debt maturity profile (as at 30 June 2014) • No change to credit ratings both at Group and Aurizon Network is committed to prudent capital management through the diversification of funding sources and adequate Aurizon Networ
Slide 32: Summary
Summary 1 Aurizon Network services globally competitive mines 2 Stable and well established regulatory regime leads to stable cash flows 3 Ongoing commitment to a strong investment grade credit rating 32
Slide 33: Appendix
Appendix & 2 AURIZON.
Slide 34: Experienced Board and Management teams
Experienced Board and Management teams Board John Atkin Alex Kummant John Cooper Non-Executive Chairman Director, Non-Executive Director Executive Vice President Mr. Atkin has more than 30 years’ experience in financial Mr. Kummant has more than 25 years’ experience in the North Mr. Cooper has more
Slide 35: Experienced Board and Management teams
Experienced Board and Management teams Aurizon Network management Clay McDonald Simon Smart Vice President, Network Operations Vice President, Commercial Development Mr. McDonald has 15 years’ experience in the transport and logistics sector Mr. Smart has over 35 years of operations, supply chain ma
Slide 36: Glossary
Glossary AU Access Undertaking CQCN The Central Queensland Coal Network Bt Billion tonnes DAAU Draft Amending Access Undertaking Gamma The average percentage value of imputation credits to equity holders, as attributed by the QCA in the relevant access undertaking GAPE Goonyella to Abbott Point Expa
Aurizon Holdings — Debt Investor Presentation (September 2014) on 6ix