Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — H1 2008 Earnings Presentation
57 slides from Challenger's earnings presentation, Feb 14, 2008
Slide 1: Challenger Infrastructure Fund Half Year Results Presentation
Challenger Infrastructure Fund Half Year Results Presentation – December 2007 Steve Bickerton - Chief Executive Lucas Barry – Chief Financial Officer 14 February 2008
Slide 2: Highlights – 6 months to Dec 2007
Highlights – 6 months to Dec 2007 Diversification • Acquisition of Southern Water • Inexus secured water licence • LBC commences Asia expansion Capital • Robust net asset value • Syndication of $580m acquisition debt facility • Successful 1:4 non-renounceable entitlement offer - $249m1 raised Growth
Slide 3: Key metrics
Key metrics Financial Performance1 Highlights • Inclusion of LBC Revenue $196.4m 264% • Continued growth from Inexus • Inclusion of LBC EBITDA $96.5m 129% • Southern Water contribution from 15 October 2007 • Continued growth from Inexus FY2008 DPU • Interim 2008 distribution of 14.5 cents per securi
Slide 4: Agenda
Agenda 1. 2008 Half Year Results 2. CIF Financial Performance 3. CIF Strategy 4. Growth Opportunities Appendices 4
Slide 5: 1. 2008 Half Year Results
1. 2008 Half Year Results Steve Bickerton - Chief Executive
Slide 6: Asset and valuation returns
Asset and valuation returns Asset Valuation as at Acquisition % Change IRR % since 31 December Price since Acquisition4 2007 Acquisition Inexus (£m) 239.8 152.0 57.8 27.8 LBC1 (€m) 218.5 214.7 3.8 12.5 Arqiva/NGW2 (£m) 126.0 113.9 12.1 14.7 Wales & West Utilities (£m) 41.5 37.3 11.3 12.3 Northern Ga
Slide 7: Net asset backing of $4.05 per security
Net asset backing of $4.05 per security Robust Net Asset Value (NAV) reflects: • Conservative refinancing assumptions on credit spreads • Change in risk premium due to current market uncertainty 3c 8c $4.10 $4.05 30 June 2007 NAV Asset Performance Forex Movements on 31 December 2007 Uplift Assets NA
Slide 8: CIF distributions
CIF distributions Distribution Profile • Full year guidance of 34c per security 45 40 5% • Increase of 6% on FY07 35 30 34.0 Cents per security • CAGR since acquisition of 9.3% 1 25 20 32.1 • Medium term distribution growth 15 guidance of 5% pa 10 5 14.2 • Maintenance of tax deferral 0 profile of ~
Slide 9: Increased portfolio diversification
Increased portfolio diversification Diversification by Asset1 30 June 2007 31 December 2007 LBC 17% Arqiva 22% LBC 24% Southern Water 34% Gas Distribution Networks 14% Inexus 26% Inexus 40% Arqiva 14% Gas Distribution Networks 9% Diversification by Revenue Type1 30 June 2007 31 December 2007 Competi
Slide 10: 2. CIF Financial Performance
2. CIF Financial Performance Lucas Barry - Chief Financial Officer
Slide 11: Income statement
Income statement $Am 1H08 1H07 Change Inexus EBITDA 25.8 23.6 2.2 LBC EBITDA 44.9 - 44.9 Investment income - non-consolidated assets 23.9 15.9 8.0 FX hedges realised gains 8.2 7.1 1.1 Operating expenses (1.0) (0.4) (0.6) Management fees (5.3) (3.9) (1.4) CIF consolidated EBITDA 96.5 42.3 54.2 11
Slide 12: Enhanced quality of asset distributions
Enhanced quality of asset distributions 100% 80% 60% 40% 20% 0% FY 07 FY 08F Cash Flow Debt Funded - Inexus Order Book Debt 12
Slide 13: Inexus
Inexus Asset Snapshot Financial Highlights CIF Ownership 80.4% £m 1H08 1H07 Change Date of Initial Investment Sept 2005 Revenue 19.9 15.4 29.2% Cost of Acquisition (£m)1 152.0 EBITDA 11.1 9.5 16.8% 239.8 EBITDA Margin 55.9% 61.9% (6.0%) 31 Dec 2007 Valuation (£m)1 % of CIF Portfolio2 26% IRR since A
Slide 14: LBC
LBC Asset Snapshot Financial Highlights CIF Ownership 66.2% €m 1H08 Date of Initial Investment June 2007 Revenue (€m) 72.0 Cost of Acquisition (€m)2 214.7 EBITDA (€m) 27.6 31 Dec 2007 Valuation (€m)1 218.5 EBITDA Margin 38.3% % of CIF Portfolio2 17% Utilisation 94.9% IRR since Acquisition 12.5% Grow
Slide 15: Arqiva
Arqiva Asset Snapshot Financial Highlights1 CIF Ownership 6.3% £m 1H08 1H07 Change Date of Initial Investment August 2005 Revenue 223.3 164.0 36.2% Cost of Acquisition (£m)2 113.9 EBITDA 63.4 60.8 4.3% 31 Dec 2007 Valuation (£m)2 126.0 EBITDA Margin 28.4% 37.0% (8.6)% % of CIF Portfolio3 14% IRR sin
Slide 16: Northern Gas Networks
Northern Gas Networks Asset Snapshot Financial Highlights CIF Ownership 5.8% £m 1H08 1H07 Change Date of Initial Investment August 2005 Revenue 145.4 116.8 24.5% Cost of Acquisition (£m)1 36.4 EBITDA 58.6 31.9 83.7% 31 Dec 2007 Valuation (£m)1 40.7 EBITDA Margin 40.3% 27.3% 13.0% % of CIF Portfolio3
Slide 17: Wales & West Utilities
Wales & West Utilities Asset Snapshot Financial Highlights CIF Ownership 8.6% £m 1H084 1H075 % Change Date of Initial Investment August 2005 Revenue 106.9 86.8 23.2% Cost of Acquisition (£m)1 37.3 EBITDA 19.3 (1.5) Large 41.5 EBITDA Margin 18.1% (1.8)% 19.9% 31 Dec 2007 Valuation (£m)1 % of CIF Port
Slide 18: Gearing at the asset level
Gearing at the asset level Dec 2007 June 2007 $m $m Asset level proportional net debt 3,271.5 1,680.8 Fund level net senior debt 488.9 218.0 Total proportional net debt 3,760.4 1,898.8 CIF Assets under Management 2,087.1 1,351.0 Total proportional net debt to EV1 64% 58% Regulated Certainty of Reven
Slide 19: Debt maturity profile (proportional consolidation)
Debt maturity profile (proportional consolidation) • Proportional weighted average maturity of 12-13 years • Next major refinance point - March 2010 CIF Acquisition Facility 2,500 2,000 1,500 $AM 1,000 500 - FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 and beyond Northern Gas Netw
Slide 20: 3. CIF Strategy
3. CIF Strategy Steve Bickerton - Chief Executive
Slide 21: CIF strategy
CIF strategy • A diversified global portfolio of high quality infrastructure and utility assets • Investment criteria to identify high quality assets that have long-term, predictable cash-flows with the potential for capital growth • Investment goal to deliver a combination of attractive and growing
Slide 22: Diversified portfolio of high quality assets
Diversified portfolio of high quality assets • Diversification by asset class, Sector Diversification revenue composition and Liquid geography Storage 16% Water Services • Strong market positioning 36% Broad-casting – Inexus: maintaining leading 14% position in gas market – LBC: second largest indep
Slide 23: Long term predictable cash flows with growth
Long term predictable cash flows with growth LBC EBITDA (€m) – Historical and Forecast Inexus – Connections Growth 700,000 Forecast - Expansionary 70 Other order book Forecast - Existing 650,000 60 Historical Electricity order book 600,000 50 550,000 New Electricity Connections during period 40 500,
Slide 24: Optimal capital management
Optimal capital management Equity 2nd Instalment New Equity Raised 2nd Instalment 2500 Acquisition facility Undrawn Debt RPS Bridge Facility 2000 1500 Capital Raised $m 1000 500 0 1 2 Aug 05 Aug-05 Sep-05 Sept-05 Nov-05 Nov-05 Aug 06 Aug-06 Mar 07 Mar-07 Apr 07 Apr-07 Apr 07 Apr-07 Jul 07 Jul-07 Sep
Slide 25: Disciplined acquisition approach – Southern Water
Disciplined acquisition approach – Southern Water CIF investment criteria Commentary • Clear and transparent regulatory framework established by Ofwat which has Regulated industry or near been successfully implemented for the last 17 years monopoly market position • Ofwat has an obligation to ensure
Slide 26: 4. Growth Opportunities
4. Growth Opportunities Steve Bickerton - Chief Executive
Slide 27: Growth outlook
Growth outlook - Focus on conservative capital management CIF - Focus on delivering asset performance - Build out of order book - Water & Fibre opportunities - Build of out new capacity - Significant demand for additional capacity - Potential synergy benefits with NGW - Capitalise on movement toward
Slide 28: Southern Water – Growth outlook
Southern Water – Growth outlook RCV Growth (%) Outlook 31 • Fastest growing of the 10 WaSCs, with 22 real RCV growth of 31% over current 16 15 14 regulatory period 12 10 10 10 7 • RCV increasing to £3.6 billion by March 2010 Northumbrian Thames Severn Trent Utilities Second highest annual average ta
Slide 29: Summary
Summary • Diversity through acquisitions • Existing assets performing strongly • Robust net asset value • FY08 distribution guidance of 34c per security reaffirmed • 5% medium term distribution growth reaffirmed 29
Slide 30: Questions
Questions
Slide 31: Contacts
Contacts Steve Bickerton Chief Executive Tel: 61 2 9994 7327 Email: sbickerton@challenger.com.au Jenny Warat-Hughes Investor Relations Tel: 61 2 9994 7663 Email: jhughes@challenger.com.au 31
Slide 32: Disclaimer
Disclaimer Information contained in this publication is current as at 14 February 2008 unless otherwise specified and is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“Challenger”), as Responsible Entity of the Challenger Infrastructure Fund (“Fund”). This doc
Slide 33: Slide 33
Slide 34: Challenger Infrastructure Fund Reporting Pack
Challenger Infrastructure Fund Challenger Infrastructure Fund Reporting Pack Challenger Infrastructure Fund Comprising: CIF Investment Trust 1 ARSN 114 139 703 CIF Investment Trust 2 ARSN 114 139 632 Responsible Entity Challenger Listed Investments Limited ABN 94 055 293 644 AFSL 236887
Slide 35: Disclaimer
Disclaimer This financial model has been prepared by Challenger Listed Investments Limited (ABN 94 055 293 644)(AFSL 236887) (‘CLIL’) as responsible entity of CIF Investment Trust 1 (ARSN 114 139 703) and CIF Investment Trust 2 (ARSN 114 139 632) which together form the Challenger Infrastructure Fun
Slide 36: CIF Group Assets Under Management
CIF Group Assets Under Management CIF Group %Δ $millions 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 31 Dec 2007 - 30 Jun 2007 Arqiva 285.7 298.0 127.1 127.4 118.9 (4.1%) North DN 92.4 92.0 96.6 94.4 85.2 0.4% Wales & West 94.1 91.8 96.4 96.6 87.2 2.5% Inexus 543.7 545.5 474.0 424.5
Slide 37: CIF Fund Distributions
CIF Fund Distributions CIF Fund Distributions Full Year $millions 2008F 2 2007 2006 1 Opening Cash Available for Distribution 6.7 8.8 - Investment Income - Arqiva 23.0 12.4 18.4 - W&W 8.3 7.1 6.9 - NOE 9.2 8.4 5.6 - Inexus 52.9 47.6 9.3 - LBC Terminals 31.6 - - - Southern Water 23.2 - - Cash Expense
Slide 38: LBC Key Financial Metrics
LBC Key Financial Metrics Performance metrics Six months ended 31 Dec 2007 30 Jun 2007 1 Revenue (€m) 72.0 11.5 EBITDA (€m) 27.6 3.7 EBITDA Margin (%) 38.3% 32.4% Utilisation (%) 94.9 95.7 Capex (€m) 33.1 4.3 Distributions paid to CIF (€m) 9.8 - EUR IRR since acquisition (%) 2 12.5% % Revenue contra
Slide 39: Inexus Key Financial Metrics
Inexus Key Financial Metrics Performance metrics Six months ended 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 Revenue (£m) 19.9 16.7 15.4 14.4 9.0 EBITDA (£m) 11.1 9.4 9.5 7.7 4.1 EBITDA Margin (%) 55.9% 56.5% 61.9% 53.7% 45.0% Distributions paid to CIF (£m) 11.0 5.6 13.7 - 3.8 GBP I
Slide 40: Inexus - Connections
Inexus - Connections Inexus Half Year 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 CAGR % Sales Gas 33,813 35,682 41,596 34,854 32,181 Electricity 12,132 11,563 17,078 10,537 4,828 Water 970 - - - - Fibre 970 - - - - Total 47,885 47,245 58,674 45,391 37,009 6.7% Gas Connections Openin
Slide 41: Arqiva Key Financial Metrics
Arqiva Key Financial Metrics Performance metrics 1 Six months ended 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 Revenue (£m) 223.3 198.8 164.0 184.6 138.8 EBITDA (£m) 63.4 66.5 60.8 69.2 52.9 EBITDA Margin (%) 28.4% 33.5% 37.0% 37.5% 38.1% Distributions paid to CIF (£m) 2.7 3.8 1.3 2
Slide 42: North DN Key Financial Metrics
North DN Key Financial Metrics Performance metrics Six months ended 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 1 Revenue (£m) 145.4 144.1 116.8 156.5 137.7 EBITDA (£m) 58.6 48.1 31.9 57.2 39.0 EBITDA Margin (%) 40.3% 33.4% 27.3% 36.5% 28.3% Distributions paid to CIF (£m) 2.9 0.9 2.6
Slide 43: Wales & West Key Financial Metrics
Wales & West Key Financial Metrics Performance metrics Six months ended 30 Sept 07 31 March 07 30 Sept 06 30 Mar 06 Revenue (£m) 106.9 147.0 86.8 157.3 EBITDA (£m) 19.3 53.8 (1.5) 64.7 EBITDA Margin (%) 18.1% 36.6% -1.8% 41.1% Distributions paid to CIF (£m) 2.6 0.3 2.0 0.9 Nominal RAV (£m) 1,297.2 1
Slide 44: CIF Capital Management
CIF Capital Management Debt 31 December 2007 Ownership (%) Gross Debt Cash Net Debt 1 Proportional Proportional $A millions Gross Debt Net Debt Arqiva 6.3% 5,991.9 (240.3) 5,751.6 378.7 363.5 North DN 5.8% 2,219.0 (2.7) 2,216.3 128.7 128.5 Wales & West 8.6% 2,373.6 (77.3) 2,296.3 204.8 198.2 Inexus
Slide 45: CIF Capital Management (Continued)
CIF Capital Management (Continued) Maturity profile - gross debt (local currency) 31 December 2007 FY 2008 1 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 and beyond Total millions Arqiva (£m) - - - - - - - 2,643.0 2,643.0 North DN (£m) - - 473.8 - - - - 505.0 978.8 Wales & West (£m) - - -
Slide 46: Consolidated Profit & Loss
Consolidated Profit & Loss 1 Statutory - Management Presentation CIF Group Half Year $millions 1H 08 2H 07 1H 07 2H 06 1H 06 2 Income Investment income 3 23.9 11.7 15.9 10.2 14.6 Transportation revenue 46.2 40.5 38.1 34.7 21.1 Tank storage revenue 126.2 18.4 - - - Total revenue 196.4 70.6 54.0 44.9
Slide 47: Statutory Consolidated Profit & Loss - 1H08 Segmented
Statutory Consolidated Profit & Loss - 1H08 Segmented 1H08 $Amillions Inexus LBC Southern Water Fund & Minorities Consolidation Income Investment income 1 - - 4.8 19.1 23.9 Transportation revenue 46.2 - - - 46.2 Tank storage revenue - 126.2 - - 126.2 Total revenue 46.2 126.2 4.8 19.1 196.4 Expenses
Slide 48: Statutory Consolidated Profit & Loss - 2H07 Segmented
Statutory Consolidated Profit & Loss - 2H07 Segmented 2H07 $Amillions Inexus LBC Southern Water Fund & Minorities Consolidation Income Investment income 1 - - - 11.7 11.7 Transportation revenue 40.5 - - - 40.5 Tank storage revenue - 18.4 - - 18.4 Total revenue 40.5 18.4 - 11.7 70.6 Expenses Cost of
Slide 49: Statutory Consolidated Profit & Loss - 1H07 Segmented
Statutory Consolidated Profit & Loss - 1H07 Segmented 1H07 $Amillions Inexus LBC Southern Water Fund & Minorities Consolidation Income Investment income 1 - - - 15.9 15.9 Transportation revenue 38.1 - - - 38.1 Tank storage revenue - - - - - Total revenue 38.1 - - 15.9 54.0 Expenses Cost of sales (3.
Slide 50: Statutory Consolidated Profit & Loss - 2H06 Segmented
Statutory Consolidated Profit & Loss - 2H06 Segmented 2H06 $Amillions Inexus LBC Southern Water Fund & Minorities Consolidation Income Investment income 1 - - - 10.2 10.2 Transportation revenue 34.7 - - - 34.7 Tank storage revenue - - - - - Total revenue 34.7 - - 10.2 44.9 Expenses Cost of sales (3.
Slide 51: Statutory Consolidated Profit & Loss - 1H06 Segmented
Statutory Consolidated Profit & Loss - 1H06 Segmented 1H06 $Amillions Inexus LBC Southern Water Fund & Minorities Consolidation Income Investment income 1 - - - 14.6 14.6 Transportation revenue 21.1 - - - 21.1 Tank storage revenue - - - - - Total revenue 21.1 - - 14.6 35.7 Expenses Cost of sales (2.
Slide 52: Statutory Consolidated Profit & Loss - FY June 07 Segmented
Statutory Consolidated Profit & Loss - FY June 07 Segmented FY07 $Amillions Inexus LBC Southern Water Fund & Minorities Consolidation Income Investment income 1 - - - 27.6 27.6 Transportation revenue 78.7 - - - 78.7 Tank storage revenue - 18.4 - - 18.4 Total revenue 78.7 18.4 - 27.6 124.6 Expenses C
Slide 53: Statutory Consolidated Profit & Loss - FY June 06 Segmented
Statutory Consolidated Profit & Loss - FY June 06 Segmented FY06 $Amillions Inexus LBC Southern Water Fund & Minorities Consolidation Income Investment income 1 - - - 24.7 24.7 Transportation revenue 55.8 - - - 55.8 Tank storage revenue - - - - - Total revenue 55.8 - - 24.7 80.6 Expenses Cost of sal
Slide 54: CIF Group Statutory Consolidated Balance Sheet
CIF Group Statutory Consolidated Balance Sheet 1 CIF Group $millions 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 Assets Cash & cash equivalents 91.5 127.4 171.5 36.6 66.8 Trade & other receivables 112.2 65.1 21.6 438.1 440.5 Investments 1,151.8 481.2 320.1 318.5 291.3 Property Plant
Slide 55: Statutory Consolidated Balance Sheet Segmented - Dec 2007
CIF Group Statutory Consolidated Balance Sheet 1 Segmented CIF Group As at 31 December 2007 ($A millions) Inexus LBC Southern Water Fund & Minorities Consolidation Assets Cash & cash equivalents 12.1 66.0 - 13.5 91.5 Trade & other receivables 25.8 62.7 - 23.8 112.2 Investments - - 680.1 471.7 1,151.
Slide 56: Statutory Consolidated Balance Sheet Segmented - Jun 2007
CIF Group Statutory Consolidated Balance Sheet 1 Segmented CIF Group As at 30 June 2007 ($A millions) Inexus LBC Southern Water Fund & Minorities Consolidation Assets Cash & cash equivalents 5.4 76.0 - 45.9 127.4 Trade & other receivables 20.7 43.4 - 1.0 65.1 Investments - - - 481.2 481.2 Property P
Slide 57: Securities on Issue
Securities on Issue CIF Group Number of securities (millions) 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 Total Ordinary Securities: Quoted (CIF) Opening 276.3 240.8 240.0 240.0 - Additions (+) i) Initial Public Offering - - - - 180.0 ii) Entitlement Offers 69.1 - - - 60.0 iii) Equit
Challenger Infrastructure Fund — H1 2008 Earnings Presentation on 6ix