Aurizon Holdings Ltd. · ASX:AZJ
Aurizon — Aurizon Network — Debt Investor Presentation (October 2013)
33 slides from Aurizon's debt investor presentation, October 2013
Slide 1: Aurizon Network Debt investor presentation
Aurizon Network Debt investor presentation October 2013
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 Introduction and overview 4 2 Network's strategy and key strengths 11 3 Australian coal industry 18 4 Regulation 22 5 Financials and capital management 28 3 3
Slide 4: Introduction and overview
Introduction and overview & 2 AURIZON.
Slide 5: About Aurizon Network
About Aurizon Network Aurizon Network (Network) controls, manages, operates and maintains the fixed rail infrastructure "below rail" assets on the Central Queensland Coal Network (CQCN) – Regulated Asset Base (RAB) of A$4.4 billion¹ – Rated Baa1/BBB+ (stable/stable) Network also delivers rail in
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: About the CQCN
About the CQCN The CQCN comprises 4 major coal systems serving Queensland‘s Bowen Basin coal region: Newlands, Goonyella, Blackwater and Moura and GAPE, a connecting system link – 2,667 kilometres network length – 44 operating coal mines serviced¹ Network's operations are governed by 99 year lea
Slide 8: Company history
Company history 2010 2012 2013 • Baa1 / BBB+ • Market cap: A$10bn1 QR Limited Aurizon Holdings • State of Queensland interest of 7.96%2 • Baa1 / BBB+ Aurizon Network • RAB: A$4.4bn3 2010 restructure 2010 IPO 2012 name change 2013 New Capital Structure and • Separation of • QR National listed on • "Q
Slide 9: New capital structure
New capital structure In June 2013, Aurizon Holdings implemented a Group overview new long term capital structure Aurizon Holdings Standalone debt facilities were established at the Limited Baa1/BBB+ Network level, supported by the below rail (ASX listed) regulated infrastructure assets Networ
Slide 10: Summary of A$MTN programme
Summary of A$MTN programme Issuer Aurizon Network Pty Limited (Network) Ranking Senior, unsecured, ranking equally with bank debt Moody's — Baa1 (stable outlook) Debt ratings S&P — BBB+ (stable outlook) Programme Australian Dollar Medium Term Note Programme Governing law Australian Dealers ANZ, BofA
Slide 11: Network's strategy and key strengths
Network's strategy and key strengths 11
Slide 12: Network's strategy
Network's strategy 1 Cooperative framework with the Aurizon Holdings Group – The Aurizon Holdings Group is vertically integrated, with Network providing access to the regulated below rail heavy haul infrastructure to supply unregulated above rail services 2 Commitment to the long term expansion and
Slide 13: Regulated revenues
Regulated revenues Coal volumes (mt) Revenue (A$m) +18% +9% 974 187 182 164 167 795 822 Revenue 764 protection mechanisms mitigates revenue risk if volumes are below forecast FY10 FY11 FY12 FY13 FY10 FY11 FY12 FY13 Regulated Asset Base (A$bn)¹ +33% EBITDA (A$m) +4% 62% Stable growth in RAB drives st
Slide 14: Revenue protection mechanisms
Revenue protection mechanisms Under the regulatory regime, Network is permitted to earn the Maximum Allowable Revenue (MAR). This revenue is protected from volume and patronage risk as set out below 1. Contractual "Take or Pay" provisions Entitles Network to recoup a portion of any lost revenue resu
Slide 15: Strong customer relationships
Strong customer relationships The CQCN delivers rail infrastructure to over 40 FY13 contract volumes operating coal mines in the Bowen Basin coal region (split by customer group) The mines are operated by a diversified group of coal miners including: 80% – Anglo American – BHP Billiton Mitsubish
Slide 16: Fully integrated offering to customers
Fully integrated offering to customers We are part of a vertically integrated rail service provider Network has entered into a number of agreements with Aurizon Operations, to facilitate access to skills and capabilities amongst the group The agreements allow Network to fulfil its regulatory obl
Slide 17: Network capacity expansion
Network capacity expansion CQCN capacity is currently fully contracted CQCN capacity under construction (mtpa) Going forward, we anticipate that growth projects, involving coal basins not linked to the CQCN today, will be developed and funded by Aurizon 76mt Holdings 310 Any decision to fund g
Slide 18: Australian coal industry
Australian coal industry & 2 AURIZON.
Slide 19: Australian coal industry overview
Australian coal industry overview Australia’s coal export destinations FY20123 Australia is the fourth largest producer of coal in the world, and is the Metallurgical coal largest seaborne exporter of metallurgical coal. Rail infrastructure is essential to the coal industry as it is the primary mode
Slide 20: Queensland coal reserves
Queensland coal reserves The Queensland coal industry is the largest in Australia, with more than 46bt of coal resources, including 25bt located in the Bowen Basin region serviced by the CQCN Source: Queensland Exploration Council 20 20
Slide 21: Well positioned to compete for long term coal demand
Well positioned to compete for long term coal demand Australia is a high quality producer of metallurgical and thermal coal The Queensland coal industry is involved predominantly in the export of high quality metallurgical coal, almost entirely from the Bowen Basin – The coal mines that the CQCN
Slide 22: Regulation
Regulation & 2 AURIZON.
Slide 23: Current regulatory framework
Current 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 – 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 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, taking into Depreciated Optimal Replacement
Slide 25: Growth in Network's RAB
Growth in Network's RAB QCA determines Aurizon Network's access pricing RAB (A$bn) based on the estimated value of the RAB +44% RAB value of A$3.1bn as at June 30, 2011 Growth in RAB 4.4 driven by (approved by the QCA) commissioning 4.3 of GAPE Value of the RAB determined by: – Opening balance
Slide 26: Recent UT4 submission
Recent UT4 submission Network submitted its UT4¹ submission on April 30, 2013 Key elements of UT3 have been retained in UT4, to ensure continuity and stakeholder confidence in the regulatory regime Changes proposed include: – Removal of the mandatory investment threshold for Network to fund pr
Slide 27: Indicative timeline for UT4
Indicative timeline for UT4 We currently expect UT4 to be confirmed by the QCA by June 2014 Mar 13 Apr 13 Sep 13 Dec 13 Apr 14 Jun 14 UT4 Stakeholder 1 QCA & customer QCA Extended QCA consultation consideration 2 consultation 3 4 development briefing consideration (commences June) period April 30, 2
Slide 28: Financials and capital management
Financials and capital management 28
Slide 29: Financials and operating metrics
Financials and operating metrics Historic financials (A$ millions) FY10 FY11 FY12 FY13 FY13 vs FY12 Total assets 3,343 3,838 4,392 5,033 14.6% Regulated Asset Base 3,004 3,089 4,286 4,447 3.8% Revenue 764.1 795.0 821.5 973.5 18.5% EBITDA 438.6 418.4 452.2 603.4 33.4% Tonnes (m) 186.5 164.0 166.7 182
Slide 30: Capitalisation and credit metrics
Capitalisation and credit metrics Strong balance sheet, with gearing levels broadly consistent with the QCA's assumption of 55% Debt to RAB Capitalisation (A$m) Jun-12 (Pro-Forma) Dec-12 (Pro-Forma) Jun-13 Cash 0.2 0.2 22.7 Debt 2,200 2,200 2,197 Equity 1,763 1,763 1,820 Credit metrics (A$m) Jun-12
Slide 31: Capital expenditure
Capital expenditure Capex spend related predominantly to GAPE and Historic growth vs. maintenance capex (A$m) Blackwater electrification projects through FY11 to FY13 709 697 54 Major growth projects currently in progress are WIRP Stage I and Goonyella System Expansion 152 Funding for growth p
Slide 32: Funding and capital management
Funding and capital management Network has obtained credit ratings from Moody's (Baa1 stable) and S&P (BBB+ stable), which are identical to the ratings of Aurizon Holdings Network is committed to maintaining strong investment grade credit ratings going forward Gearing levels are broadly consis
Slide 33: Summary
Summary 1 Regulated revenues within a stable and well-established regulatory regime – Access charges represented 94.6% and 90.6% of revenue for FY13 and FY12 respectively 2 Revenue protection mechanisms limit our exposure to patronage and volume risk – Under the regulatory regime, we benefit from co
Aurizon Network — Debt Investor Presentation (October 2013) on 6ix