Aurizon Holdings Ltd. · ASX:AZJ
Aurizon — Debt Investor Presentation (August 2019)
48 slides from Aurizon's debt investor presentation, August 2019
Slide 1: Aurizon Network - FY2019 Results Debt Investor Update
Aurizon Network - FY2019 Results Debt Investor Update August 2019
Slide 2: Disclaimer
FY2019 RESULTS Disclaimer NO RELIANCE ON THIS DOCUMENT NO OFFER OF SECURITIES This document was prepared by Aurizon Holdings Limited (ACN 146 335 622) (referred to Nothing in this presentation should be construed as a recommendation of or an offer to sell or a as “Aurizon” which includes its related
Slide 3: Agenda
FY2019 RESULTS Agenda 1 FY2019 Performance Overview – Aurizon Group 2 Integration Review • Legal and capital structure review 3 FY2019 Performance Overview – Aurizon Network 4 Funding and capital management 5 Q&A 3
Slide 4: Financial Performance – Aurizon Group
FY2019 RESULTS FY2019 Financial Performance – Aurizon Group
Slide 5: FY2019 highlights
PERFORMANCE FY2019 RESULTS FINANCIAL OVERVIEW PERFORMANCE – AURIZON GROUP FY2019 highlights Non Network EBIT (ex redundancy) $450m above top end of guidance, includes $20m doubtful debt recovery GROUP EBIT STATUTORY NPAT ROIC FREE CASHFLOW $829m $473m 9.7% $735m down 12% down 15% down 1.2ppt up 10%
Slide 6: Key financial highlights
FINANCIAL FY2019 RESULTS FINANCIAL PERFORMANCE PERFORMANCE – AURIZON GROUP Key financial highlights1 Results reflect reduced earnings in Network from the UT5 Final Decision, including the acceleration of the total FY2018 true up into FY2019 $m FY2019 FY2018 Variance › Revenue reflects the UT5FD, inc
Slide 7: Achievements to date
PERFORMANCE FY2019 RESULTS FINANCIAL OVERVIEW PERFORMANCE – AURIZON GROUP Achievements to date Execution of the strategy over the last two years has generated long term value for Aurizon shareholders Achieved Execute Ongoing De-risked Optimising Restructured fundamental Freight operational near term
Slide 8: FY2020 outlook
FY2019RESULTS FY2019 RESULTS FINANCIAL OUTLOOKPERFORMANCE – AURIZON GROUP & KEY TAKEAWAYS FY2020 outlook Group EBIT guidance $880m – $930m KEY ASSUMPTIONS › QCA approves UT5 customer deal during 1HFY2020 and an uplift in WACC from 5.9% to 6.3% assumed 2HFY2020 › Above Rail Coal volumes of 220 - 230m
Slide 9: Integration Review
FY2019 RESULTS Integration Review
Slide 10: Integration review
INTEGRATION FY2019 RESULTS INTEGRATION REVIEW REVIEW Integration review In June 2018 Aurizon announced it would review the benefits of remaining vertically integrated. The review concluded that the benefits of remaining vertically integrated outweigh separation at this time CRITERIA INTEGRATION SEPA
Slide 11: Legal and capital structure review
FINANCIAL FY2019 RESULTS INTEGRATION PERFORMANCE REVIEW Legal and capital structure review The objective of the review was to optimise the capital structure of the Group through a reorganisation of the legal entities under Holdings CURRENT LEGAL STRUCTURE PROPOSED LEGAL STRUCTURE BBB+/Baa1 Holdings
Slide 12: Implementation steps
FY2019 FY2019RESULTS FINANCIALREVIEW RESULTS INTEGRATION PERFORMANCE Implementation steps Required to effect the share transfer of Network and establish independence from Operations › Duty relief - Office of State Revenue (OSR) in Queensland (COMPLETED) › An application for duty relief on the propos
Slide 13: Financial Performance – Aurizon Network
FY2019 RESULTS FY2019 Financial Performance – Aurizon Network
Slide 14: Network snapshot
ADDITIONAL FY2019 RESULTS FINANCIAL INFORMATION PERFORMANCE – AURIZON NETWORK Network snapshot As at 30 June 2019 233 40+ three above rail million tonnes mines serviced operators $5.7b five 2,670km Regulated Asset export terminals railway track Base1 HAULAGE BREAKDOWN2 FY2019 (estimate) Thermal Coal
Slide 15: Network profit & loss
FINANCIAL FY2019 RESULTS FINANCIAL PERFORMANCE PERFORMANCE – AURIZON NETWORK Network profit & loss EBIT performance reflects the UT5FD, including $60m impact of the true up from FY2018. RAB rollover estimated value $5.7bn1 Revenue $m FY2019 FY2018 Variance › $60m recognised in relation to FY2018 UT5
Slide 16: Network Cash flow – free cash flow growth
FY2019 FY2019 FY2018 RESULTS RESULTS RESULTS FINANCIAL NETWORKPERFORMANCE NETWORK PERFORMANCE– AURIZON NETWORK PERFORMANCE Network Cash flow – free cash flow growth › Free Cash Flow has increased in $m FY2019 FY2018 FY19 mainly due to lower capital EBITDA - statutory 700 776 expenditure Working capi
Slide 17: Network balance sheet
FY2019 FY2019 FY2018 RESULTS RESULTS RESULTS FINANCIAL NETWORKPERFORMANCE NETWORK PERFORMANCE– AURIZON NETWORK PERFORMANCE Network balance sheet › Total current assets have decreased As at $m 30 Jun 2019 30 Jun 2018 largely due to decrease lower billed access revenue and Take or Pay. Total current a
Slide 18: Network Key Financial Metrics
FY2019 FY2019 FY2018 RESULTS RESULTS RESULTS FINANCIAL NETWORKPERFORMANCE NETWORK PERFORMANCE– AURIZON NETWORK PERFORMANCE Network Key Financial Metrics REVENUE EBIT VOLUMES 1500 (A$m) 1,262 (A$m) (mT) 1,178 1,219 1,108 1,118 600 250 226 230 233 215 226 980 1,012 506 211 1000 500 484 481 481 200 182
Slide 19: Network RAB, CAPEX and Depreciation profile
FY2019 FY2018RESULTS RESULTS FINANCIAL FUNDING PERFORMANCE – AURIZON NETWORK AND CAPITAL MANAGEMENT Network RAB, CAPEX and Depreciation profile RAB ROLL FORWARD CAPEX ACCOUNTING DEPRECIATION 93% 569 288 363 283 257 251 321 5.8 5.8 300 308 5.7 5.7 5.1 283 258 215 3.0 281 252 276 250 80 5 7 1 FY10 FY1
Slide 20: UT5 customer agreement
PERFORMANCE FY2019 RESULTS FINANCIAL OVERVIEW PERFORMANCE – AURIZON NETWORK UT5 customer agreement Through constructive engagement with our customers, Network has submitted a customer DAAU that delivers significant regulatory reform and a range of benefits for both Network and customers BENEFITS FRO
Slide 21: Network adjusted MAR bridge - Customer DAAU
ADDITIONAL FY2019 RESULTS FINANCIAL INFORMATION PERFORMANCE – AURIZON NETWORK Network adjusted MAR bridge - Customer DAAU Indicative Network adjusted MAR (Ex GAPE) for FY2019 to FY2023 based on the revised terms of the Customer DAAU INDICATIVE NETWORK ADJUSTED MAR* FY2018 – FY2023 ($M) ~954 ~953 ~5
Slide 22: UT5 Customer DAAU
FY2019 FY2019 RESULTS ADDITIONAL RESULTS FINANCIAL INFORMATION PERFORMANCE – AURIZON NETWORK UT5 Customer DAAU Under the DAAU there is a step up in WACC subject to achievement of predefined milestones. Certain variable components of WACC will be reset on 1 July 2023 to take account of prevailing mar
Slide 23: Funding and Capital Management
FY2019 RESULTS Funding and Capital Management
Slide 24: Funding update
FY2019 RESULTS ADDITIONAL FUNDING INFORMATION AND CAPITAL MANAGEMENT Funding update FY2019 FUNDING ACTIVITY KEY DEBT METRICS FY2019 FY2018 › Aurizon Finance cancelled existing bank debt Weighted average syndicated facilities and replaced with bilateral facilities 4.3 years 4.7 years maturity1 totall
Slide 25: Cashflow and shareholder returns
FY2019 RESULTS ADDITIONAL FUNDING INFORMATION AND CAPITAL MANAGEMENT Cashflow and shareholder returns FREE CASH FLOW ($M) SHAREHOLDER RETURNS ($M) +10% 830 735 762 704 669 301 300 552 465 488 69 340 227 529 462 396 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Total Group Continuing operations B
Slide 26: Capital expenditure
FY2019 RESULTS FINANCIAL FUNDING PERFORMANCE AND CAPITAL MANAGEMENT Capital expenditure Capital result in line with guidance for FY2019. Non-growth capex forecast in line with long- term expectations CAPITAL EXPENDITURE1 FY2016 – FY2020 ($M) › FY2019 capex in line with guidance at 703 $495m (guidanc
Slide 27: FY2019 group and business unit capital expenditure
FY2019 RESULTS FUNDING AND CAPITAL ADDITIONAL MANAGEMENT INFORMATION FY2019 group and business unit capital expenditure ($m) 495 451 251 167 250 128 30 40 7 44 39 26 40 1 4 7 FY20191,2 Network1,2 Coal1 Bulk2 Intermodal Corporate Non Growth Growth 1. Includes capitalised interest 2. Net of externally
Slide 28: Additional Information Network
FY2019 RESULTS Additional Information Network
Slide 29: Central Queensland Coal Network (CQCN)
FY2019 RESULTS ADDITIONAL INFORMATION Central Queensland Coal Network (CQCN) CQCN comprises four major coal systems and one connecting system link (GAPE) servicing Queensland’s Bowen Basin coal region 29
Slide 30: Network volumes
FY2019 RESULTS ADDITIONAL INFORMATION Network volumes FY2019 FY2018 Variance Newlands 12.6 13.1 (4%) Goonyella 124.5 126.5 (2%) Blackwater/WIRP 64.9 62.7 4% Moura 13.6 11.1 23% GAPE 17.1 16.2 6% Total 232.7 229.6 1% Average haul length2 (kms) 248.8 247.7 - 1. Table represents coal tonnes hauled on t
Slide 31: Network revenue adjustment amounts (revenue cap)
FY2019 RESULTS ADDITIONAL INFORMATION Network revenue adjustment amounts (revenue cap) › Revenue adjustment amounts (RAA) are the difference by system between Aurizon’s Total Financial AT2-4 AT5 Total Actual AT2-5 Revenue and Allowable AT2-5 (diesel tariff) (electric tariff) Year $m $m $m Revenue ›
Slide 32: Reconciliation of billed MAR to reported access revenue
FY2019 RESULTS ADDITIONAL INFORMATION Reconciliation of billed MAR to reported access revenue FY2019 FY2018 $m Actual Actual Billed Access Revenue (AT1 to AT5) (ex. GAPE) 885 940 Approved Adjustments to MAR Flood Claim recoveries1 - 18 Revenue Cap (ex. GAPE and inclusive of capitalised interest) 44
Slide 33: Network financial and operating metrics
FY2019 RESULTS ADDITIONAL INFORMATION Network financial and operating metrics FY2019 FY2018 Variance Tonnes (m) 232.7 229.6 1% NTK (bn) 57.9 56.9 2% Operating Ratio 64.2% 60.6% (3.6ppt) Maintenance/NTK ($/’000 NTK) 2.3 2.2 (5%) Opex/NTK ($/’000 NTK) 12.4 13.0 5% Cycle Velocity (km/hr) 23.1 23.5 (2%)
Slide 34: Additional Information Coal Market
FY2019 RESULTS Additional Information Coal Market
Slide 35: Sustainability
FY2019 RESULTS ADDITIONAL INFORMATION Sustainability 2019 will be the third year of TCFD disclosure for Aurizon › Aurizon takes a direct approach to reporting environmental, social and governance (ESG) disclosures with the publication of the annual Sustainability Report › In August 2019, Australian
Slide 36: Future of Coal
FY2019 RESULTS ADDITIONAL INFORMATION Future of Coal Australian export coal is dependent on the global traded market, driven by regional demand in Asia and preference for higher quality coal AUSTRALIA COAL EXPORT VOLUME SPLIT: FY20191 INDIA: COKING (METALLURGICAL) COAL REQUIREMENTS3 Metallurgical Co
Slide 37: Australia FY2018 Coal Supply Summary
FY2019 RESULTS ADDITIONAL INFORMATION Australia FY2018 Coal Supply Summary Coal Production Domestic Consumption Export All Coal Export (By Destination) All Coal Export (By Port) 118mt 157mt 450mt 68mt 382mt 89mt 120mt 31% 48mt 47mt 48mt 41% 67mt 23% 32mt 31% State Split State Split State Split^ 28mt
Slide 38: Coal Market | Australia
FY2019 RESULTS ADDITIONAL INFORMATION Coal Market | Australia AUSTRALIA: METALLURGICAL COAL EXPORT AUSTRALIA: THERMAL COAL EXPORT 250 $300 250 $150 Hard Coking Coal Price (USD/t) Thermal Coal Price (USD/t) 200 200 $200 $100 million tonnes million tonnes 150 150 100 100 210 183 $100 $50 50 50 0 $0 0
Slide 39: Coal Price | Coal Capital & Exploration Expenditure
FY2019 RESULTS ADDITIONAL INFORMATION Coal Price | Coal Capital & Exploration Expenditure HARD COKING COAL SPOT PRICE (US$/t FOB) THERMAL COAL SPOT PRICE (US$/t FOB) $300 $150 $250 $204 $200 $100 $80 $150 $100 $50 $50 $0 $0 Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Jun- Dec- Jun- Dec- Jun- Dec- J
Slide 40: Australia coal competitiveness
FY2019 RESULTS ADDITIONAL INFORMATION Australia coal competitiveness METALLURGICAL COAL CASH COSTS (US$/t, CFR INDIA, 2019) THERMAL COAL CASH COSTS (US$/t, CFR JAPAN, 2019) $160 $80 $140 $70 $120 US$/t US$/t $100 $60 $141 $127 $69 $70 $80 $112 $62 $63 $50 $59 $93 $60 $82 $40 $40 Russia Australia Can
Slide 41: Global Steam (Thermal) Coal
FY2019 RESULTS ADDITIONAL INFORMATION Global Steam (Thermal) Coal Trade (as a share of global production) has nearly doubled over the past three decades with Asian imports accounting for 15% of global production GLOBAL STEAM COAL (Production, Australia Export Volume, Trade Share (of global productio
Slide 42: Additional Information Regulation
FY2019 RESULTS Additional Information Regulation
Slide 43: Regulated asset base (RAB)
FY2019 RESULTS ADDITIONAL INFORMATION Regulated asset base (RAB) Network maintains a record of the value of its existing assets for regulatory pricing called the RAB ROLLFORWARD RAB › This represents the value of Network assets for regulatory purposes › Each year Network rolls forward the RAB adjust
Slide 44: Regulated Revenues within a stable & well-established Regulatory Regime
FY2019 RESULTS ADDITIONAL INFORMATION Regulated Revenues within a stable & well-established Regulatory Regime WELL ESTABLISHED REGULATORY STABLE REGULATED REVENUE WELL DEVELOPED BUILDING REGIME BASE BLOCK APPROACH TO REVENUE DETERMINATION WACC (return on › The provision of transportation services by
Slide 45: The CQCN Regulatory Framework Provide Revenue Protection Through a Building Block Approach
FY2019 RESULTS ADDITIONAL INFORMATION The CQCN Regulatory Framework Provide Revenue Protection Through a Building Block Approach MAXIMUM ALLOWABLE REVENUE REGULATORY REVENUE TOTAL ACTUAL REVENUE PROTECTION TESTS (FORECASTED) FOR EACH YEAR OF UNDERTAKING PERIOD AT1 Outside the revenue protection scop
Slide 46: Revenue cap with Take-or-Pay Protection
FY2019 RESULTS ADDITIONAL INFORMATION … with Take-or-Pay Protection Should Revenues Fall Short (With a Revenue Cap) ToP › Primary revenue protection mechanism available AT2 Train Paths to Aurizon Network Take-or-pay Revenue cap Take or pay AT3 Net Train Kilometres (NTK) mechanisms › Allows Aurizon N
Slide 47: Glossary
FY2019 RESULTS ADDITIONAL INFORMATION Glossary Metric Description Access Revenue Amounts received by Aurizon Network for access to the Network infrastructure under all Access Agreements AFD Access Facilitation Deed Average haul length NTK/Total tonnes Contract utilisation Total volumes hauled as a p
Slide 48: <4 AURIZON.
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