Atlas Arteria · ASX:ALX
Atlas Arteria — Macquarie Atlas Roads — Investor Presentation (March 2016)
55 slides from Atlas Arteria's investor presentation, Mar 7, 2016
Slide 1: Macquarie Atlas Roads Investor Presentation March 2016
Macquarie Atlas Roads Investor Presentation March 2016
Slide 2: Important notice and disclaimer
Important notice and disclaimer Disclaimer Macquarie Atlas Roads (MQA) comprises Macquarie Atlas Roads Limited (ACN 141 075 201) (MARL) and Macquarie Atlas Roads International Limited (Registration No. 43828) (MARIL). Macquarie Fund Advisers Pty Limited (ACN 127 735 960) (AFSL 318 123) (MFA) is the
Slide 3: Important notice and disclaimer
Important notice and disclaimer Japan These materials have been prepared solely for qualified institutional investors in Japan as defined under the Financial Instruments and Exchange Act of Japan (FIEA). They do not constitute an offer of securities for sale in Japan and no registration statement ha
Slide 4: Table of Contents
Table of Contents 01 Overview 4 02 APRR 8 03 Dulles Greenway 28 04 Other Assets 35 05 Distributions 38 Appendix 44 MACQUARIE ATLAS ROADS PAGE 3
Slide 5: Overview
1 Overview MACQUARIE ATLAS ROADS
Slide 6: MQA portfolio
MQA portfolio Global infrastructure operator and developer listed on ASX 200 with market capitalisation of A$2.3bn1 MQA (50%)2 (100%)3 (20.14%) (70%) Warnow Dulles Tunnel APRR Greenway M6 Toll 2,323km motorway 22km commuter Located in network in route into Germany and UK Eastern France Washington DC
Slide 7: MQA value proposition
MQA value proposition Delivering distribution growth and enhancing portfolio value MQA Distributions (cps) Guidance Distributions Distribution Capital 18.01 growth growth 16.0 13.2 9.0 Growth underpinned by improved operational performance of existing portfolio assets Progressive reduction in
Slide 8: 2015 results summary
2015 results summary Continued portfolio performance in 20151 Traffic Revenue EBITDA 2.9% 3.5% 4.4% Statutory results • 2015 profit from operations: A$85.1m (2014: A$50.6m loss) Portfolio highlights • Strong growth in traffic, revenue and EBITDA across all portfolio assets • Concession extensions ac
Slide 9: APRR
2 APRR MACQUARIE ATLAS ROADS
Slide 10: APRR overview
APRR overview Concession 30 November 2035 (APRR) expiry 30 September 2036 (AREA) 31 December 2060 (ADELAC) Tolling 2016-2023: annual tariff increase (February), linked to CPI (ex. Tobacco). Refer to slide 26 Post 2023: annual tariff increase of 70% CPI (ex. Tobacco) as per concession contr
Slide 11: APRR concessions
APRR concessions APRR comprises three concessions APRR1 Concession Expiry: Nov 2035 Road Length: 1,894km AREA Concession Expiry: Sep 2036 Road Length: 410km ADELAC (49.9%) Concession Expiry: Dec 2060 Road Length: 19km 1. On 31 January 2016, the Tunnel Maurice Lemaire (TML) concession was merged with
Slide 12: APRR snapshot
APRR snapshot Growth maintained through economic cycles APRR EBITDA1 and France GDP Growth2 €1,750m 3.0% 1,589 1,520 €1,500m 1,475 2.0% 1,399 1,428 1,326 1,265 €1,250m 1,208 1,244 1.0% €1,000m (0.0%) €750m (1.0%) €500m 1,068 (2.0%) 924 9413 974 841 888 €250m (3.0%) €0m (4.0%) 2001 2002 2003 2004 200
Slide 13: APRR milestones
APRR milestones Further value delivered through key achievements during the past 12 months In-principle agreement reached with Successful APRR bond issuances: Toll increases implemented on the French State: €1bn of bonds issued at or below 1.5%, 1 February 2016: APRR & AREA concession extensions rep
Slide 14: APRR traffic
APRR traffic Total 2015 traffic up 2.7% against pcp, reaching 22.2bn VKT Traffic Analysis 2015 Total Vehicles VKTbn 22.5 +2.7% 32% 22.0 LV 15% 21.5 HV Traffic Revenue 3% Other1 21.0 85% 20.5 65% 20.0 2009 2010 2011 2012 2013 2014 2015 Light Vehicles (LV) Heavy Vehicles (HV) VKTbn VKTbn 19.5 3.4 +2.9
Slide 15: APRR traffic correlation
APRR traffic correlation Light vehicle traffic remains correlated to real household disposable income Heavy vehicle traffic remains correlated to French manufacturing and imports APRR Light Vehicles and Economic Indicators1,2 APRR Heavy Vehicles and Economic Indicators1,2 110 110 105 105 100 100 95
Slide 16: French lending environment
French lending environment Lending growth to non-financial corporations since mid-2014 suggests expansion of business activity Loans to Non-Financial Corporations (Annual Growth Rate)1 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 1. Bank of France: Dec
Slide 17: APRR performance
APRR performance Continued revenue growth despite absence of 2015 toll increase due to traffic growth and favourable traffic mix Quarterly Traffic Performance (VKTm) Financial Performance (€m)1 7,000 2,214 2,099 2,149 2,022 2,039 1,940 6,000 625 624 629 623 611 614 5,000 4,000 1,520 1,589 1,399 1,42
Slide 18: APRR operations
APRR operations Operating expenses (excluding operating taxes) have decreased Headcount (FTE)1 for 2015 was 3,483 (2014: 3,534) Operating Expenses (€m) 800 80% 70.0% 70.3% 70.7% 71.8% 67.0% 67.8% 68.0% 68.4% 69.2% 64.0% 600 60% 232 229 231 236 240 2642 258 275 2923 3013 400 40% 153 162 149 139 156
Slide 19: APRR ongoing initiatives
APRR ongoing initiatives Ongoing initiatives have steadily improved automated toll collection • Automated transaction reached 96.3% in 2015 with ETC1 accounting for over 54% of total transactions • Continuing commitment to cost control and operational improvement Toll Collection Mechanisms 100% 5% 4
Slide 20: APRR cash flow to MQA
APRR cash flow to MQA Potential to improve overall APRR group financing terms over time Simplified Holding Structure MQA HoldCo debt 20.14% of free cash flow – Margin 100bps HoldCo swap until June 2018 Eiffarie – Fixed principal repayments1 ‒ Average of €3,273m swapped – Six year term (to Feb 2021)
Slide 21: APRR free cash flow
APRR free cash flow FE distributions, and therefore MQA distributions, reflect only a portion of APRR free cash flow APRR consistently generates cash flow in excess of net profit. The excess is used to fund capex and debt repayments at the APRR level APRR Profit vs APRR Cash Flow1 (€m) 1,000 871 7
Slide 22: APRR financing costs
APRR financing costs Progressive reduction in average cost of debt APRR group net interest decreased €44m in 2015, 14% down from pcp, with further interest saving opportunities in the medium term APRR rated BBB+ (Stable outlook) by both Standard & Poor’s and Fitch Sustainable debt maturity pro
Slide 23: APRR bond issues
APRR bond issues APRR issued €1.0bn of bonds during 2015 €500m bond at 1.50% due 2024 €500m floating rate note at Euribor+70bps due 2020 APRR also signed a €275m loan facility with the European Investment Bank (EIB), at an average margin of 39bps over Euribor at the time of drawdown 6.0% APRR
Slide 24: APRR capital expenditure
APRR capital expenditure Since 2006, €3.8bn has been spent to grow, improve and maintain the network Capital Expenditure (€m) 600 500 24 81 400 159 65 45 300 187 93 343 303 27 54 39 215 240 200 171 104 123 168 172 127 100 110 122 115 102 115 108 96 94 93 92 0 2006 2007 2008 2009 2010 2011 2012 2013
Slide 25: APRR capital projects
APRR capital projects Continue to focus on maintenance and expansion of the existing network Capital expenditure guidance (real as at Dec 2015) – 2016-2020: average ~€370m p.a. (includes Stimulus Package and 2014-2018 management contract) – 2021-2035: average ~€180m p.a. Management Contract A. A6
Slide 26: APRR concession contract amendments
APRR concession contract amendments APRR and AREA concession contracts amended via formalised agreements with the French State Formalised August 2015 Formalised January 2016 Stimulus Package & Supplemental toll Changes to key Completion of TML concession extension adjustments contractual terms restr
Slide 27: APRR toll formulas
APRR toll formulas Toll formulas 2016-2023 • Compensation for the 2013 land tax increase via supplemental toll increases over 2016-2018; such supplements will be in addition to the existing contractual toll increase formula Supplemental toll increases (“X”) Applicable toll formula 2016 2017 2018 APR
Slide 28: APRR tax and ownership structure
APRR tax and ownership structure Tax consolidated group Ownership structure Availability of tax deductions for 100% of Eiffarie expenses and debt interest Third Party Other Macquarie MQA Investors Managed Funds Availability of tax deductions for 75% of FE 40.29% 27.16% 32.55% shareholder loan in
Slide 29: Dulles Greenway
3 Dulles Greenway MACQUARIE ATLAS ROADS
Slide 30: Dulles Greenway overview
Dulles Greenway overview Concession 15 February 2056 expiry 2014-2020, tolls escalate by greater of: – CPI +1% – Real GDP – 2.8% Tolling By application to the SCC thereafter Current tolls for mainline plaza two-axle vehicles (effective 23 February 2016): – Peak: US$5.35 – Off-peak: US$4.40 O
Slide 31: Dulles Greenway traffic corridor
Dulles Greenway traffic corridor Well positioned to provide capacity as corridor develops Dulles Greenway has two key competitors – Route 7 and Waxpool Road Competing roads received considerable capacity upgrades Dulles Greenway Corridor since 2005, diverting traffic away from Dulles Greenway Ro
Slide 32: Dulles Greenway traffic analysis
Dulles Greenway traffic analysis Strong growth in off-peak traffic in 2015 Highest growth rates observed during off-peak periods on weekdays, reflecting increased leisure and convenience travel Dulles Greenway Traffic Segmentation1 2 104 Peak (weekdays) Non-Peak (weekdays) Weekend 102 100 98 96 94
Slide 33: Dulles Greenway corridor growth
Dulles Greenway corridor growth Corridor traffic expected to further increase with regional growth Loudoun county is one of the fastest growing and most affluent counties in the US, with the 4th fastest population growth and the highest median income in 20141 Employment, population and housing u
Slide 34: Dulles Greenway performance
Dulles Greenway performance A combination of higher traffic volumes and toll increases have led to consistent growth in EBITDA State Corporation Commission toll review finalised in September 2015; remains subject to appeal 2016 toll increase approved; implemented 23 February 2016 Distribution
Slide 35: Dulles Greenway financing
Dulles Greenway financing Debt 100% fixed rate bonds, amortisation schedule locked in until 2056 No refinancing requirements Dulles Greenway Debt Maturity Profile (US$m) 500 250 Total debt service amount to be used in DSCR calculations1 489 Maturity profile for external debt as at 31 December 2015
Slide 36: Other Assets
4 Other Assets MACQUARIE ATLAS ROADS
Slide 37: Warnow Tunnel
Warnow Tunnel Concession 15 September 2053 expiry Tolling linked to pre-tax equity IRR – IRR <17%: tolls may rise at a rate higher than inflation – IRR 17%-25%: tolls linked to inflation – if IRR >25%: tolls remain fixed Tolling Toll increases subject to toll application audit by the Land Mini
Slide 38: M6 Toll
M6 Toll Concession 31 January 2054 expiry Tolling Market based tolling Ownership 100%1 Length 43km Bypasses the city of Birmingham and the M6 motorway, one of the most congested Location / motorways in the UK strategic attraction Significant industrial, housing and economic development o
Slide 39: Distributions
5 Distributions MACQUARIE ATLAS ROADS
Slide 40: MQA distributions
MQA distributions 1H16 distribution guidance of 9.0 cps MQA Distributions (cps)2 Expect to declare in mid March 2016 with payment by March end 9.0 Wholly from MARIL, anticipated to include foreign dividend and capital 16.0 return components1 13.2 FY16 distribution guidance of 18.0 cps confirmed
Slide 41: MQA distributions (cont'd)
MQA distributions (cont’d) MQA distributions supported by cash originating from APRR APRR APRR Profit APRR Profit Profit 1H 2015 2H 2015 Eiffarie +Tax Grouping 2H 2015 1H 2016 - Debt Service Eiffarie Cash Flow Eiffarie Cash Flow MQA 1H 2016 2H 2016 + Other Receipts - Corporate Expenses MQA Distribut
Slide 42: Cash flow: APRR to MQA security holders
Cash flow: APRR to MQA security holders Cash flow: APRR to MQA security holders Eiffarie/Financière Eiffarie (FE) APRR dividend A add APRR tax instalments to FE B add Other1 C less Eiffarie net interest D less FE tax payments/provisions E Distributable cash F=A+B+C–D–E less Debt repayment G Cash ava
Slide 43: Cash flow: APRR to MQA security holders (cont'd)
Cash flow: APRR to MQA security holders (cont’d) Cash flow: APRR to MQA security holders Eiffarie/Financière Eiffarie (€m) 1H14 2H14 1H15 2H15 APRR dividend 241 209 180 245 add APRR tax instalments to FE 196 147 181 176 add Other1 (2) (1) 412 (0) less Eiffarie net interest (118) (120) (93) (87) less
Slide 44: MQA free cash flow
MQA free cash flow Cash flow: APRR to MQA shareholders FY 2015 APRR free cash flow (€m) 825 Eiffarie net interest (€m) (180) Eiffarie/FE opex (€m) (1) Tax grouping (€m) 236 Consolidated free cash flow (€m) 880 MQA’s proportionate share in € (20.14%) (€m) 177 MQA’s proportionate share in A$ (20.14%)1
Slide 45: Appendix
A APPENDIX MACQUARIE ATLAS ROADS
Slide 46: Register analysis
Register analysis1 Macquarie2 18% 2 Other Foreign Lazard Institutions Asset Mgt 14% 9% Goldman Sachs Group 8% Retail 10% Other Australian Institutions 41% 1. Register data as at 29 January 2016. Substantial shareholdings based on most recent notices (as of 25 February 2016). 2. Macquarie’s principal
Slide 47: MQA governance
MQA governance MQA has majority independent Boards and independent Chairpersons Base fee calculated quarterly on market capitalisation MQA Structure Macquarie Market capitalisation Base management fee1 Resources Up to A$1.0bn 1.75% (Staff, premises, IT, etc) Plus: More than A$1.0bn 1.00% 100% MQA
Slide 48: MQA performance
MQA performance MQA has outperformed its Benchmark by 625% since listing1 Three performance fees have been calculated to date MQA vs Benchmark – 2010 performance fee: A$12.5m $4.50 21.0 MQA Market Volume (m) (RHS) – 2011 performance fee: A$50.1m MQA Share Price (LHS) – 2014 performance fee: A$58.2
Slide 49: Consolidated income statement
Consolidated income statement Statutory accounts Year ended Year ended Revenue includes M6 Toll management fee, A$m 31 Dec 15 31 Dec 14 interest income and Warnow Tunnel services fees Revenue 2.6 2.1 Full 2014 performance fee expensed in the year Performance fees - (58.2) ended 31 December 2014
Slide 50: Consolidated balance sheet
Consolidated balance sheet Statutory accounts As at As at Investments in associates includes APRR and A$m 31 Dec 15 31 Dec 14 Dulles Greenway accounted for using the equity method Current assets 83.6 31.0 Current liabilities includes the third instalment of Investments in associates 808.0 835.4
Slide 51: Cash flow summary
Cash flow summary Available cash (A$m) Year to Year to Distributions from Financière Eiffarie (FE) of 31 Dec 15 31 Dec 14 €28.6m in March 2015 and €56.6m in September Opening balance – 1 January 30.1 17.7 2015 Distribution from APRR 130.3 96.6 US$25.0m received following ITR sale. Net receipt fo
Slide 52: Traffic and toll revenue performance
T ffi and Traffic d toll t ll revenue performance f Quarter vs pcp Asset Change Ch Year to 2015 Year to 2014 vs pcp Mar 15 Jun 15 Sep 15 Dec 15 APRR Light Vehicle VKT (millions) 18,906 18 423 18,423 2 6% 2.6% 1 8% 1.8% 2 7% 2.7% 3 1% 3.1% 2 7% 2.7% Heavy Vehicle VKT (millions) 3,330 3,237 2.9% 1.9%
Slide 53: Eiffarie facility – key terms
Eiffarie facility – key terms Eiffarie has a six year term loan with a one year extension Debt balance as at 31 December 2015: €1,470m Margin: 100bps above Euribor Eiffarie Loan Repayment Profile (€m) Year 30-Jun 31-Dec 2015 - 30 2016 30 40 2017 40 50 2018 50 60 2019 60 70 2020 70 80 20211 80 80
Slide 54: Asset debt metrics and debt ratings
Asset debt metrics and debt ratings Net debt/ EBITDA/ As at 31 Dec 151 Gross debt Cash Net debt EBITDA Interest DSCR Lock-up Hedging APRR/Eiffarie2 €m 10,196.8 1,492.0 8,704.8 5.48x n/a n/a n/a 98.8% - APRR €m 8,726.8 1,281.2 7,445.5 4.69x 5.78x n/a n/a n/a - Eiffarie €m 1,470.0 210.8 1,259.2 n/a n/
Slide 55: APRR profit
APRR profit 28% growth in earnings mainly driven by higher revenue and net interest savings APRR Profit (€m) €550m 9 44 539 €500m 14 17 9 19 10 26 50 12 €450m 56 65 442 420 D&A, provisions, other 1 D&A, provisions, other €400m Income tax 2,3 Operating taxes Operating taxes Net profit 2013 Net profit
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