Aurizon Holdings Ltd. · ASX:AZJ
Aurizon — Merger or Acquisition (October 2021)
31 slides from Aurizon's merger presentation, Oct 22, 2021
Slide 1: Acquisition of One Rail and Divestment of East Coast Rail
Acquisition of One Rail and Divestment of East Coast Rail 22 October 2021
Slide 2: Disclaimer
Disclaimer NO RELIANCE ON THIS DOCUMENT INFORMATION ON ONE RAIL AND EAST COAST RAIL 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)). It includes, or references or us
Slide 3: Agenda
Agenda 1 Transaction Overview Andrew Harding, Managing Director & Chief Executive Officer 2 Introduction to One Rail Bulk Clay McDonald, Group Executive Bulk 3 Introduction to East Coast Rail George Lippiatt, Chief Financial Officer & Group Executive Strategy 4 Transaction Funding and Process George
Slide 4: Transaction Overview
Transaction Overview Andrew Harding Managing Director & CEO
Slide 5: Highlights
TRANSACTION OVERVIEW Highlights Acquisition of One Rail with integration of One Rail Bulk and divestment of East Coast Rail through a demerger or trade sale Integrated above and below rail Increases Bulk’s Transformative business with share of haulage IRR exceeds acquisition increased revenue1 to ~4
Slide 6: One Rail operations
TRANSACTION OVERVIEW One Rail operations One Rail Bulk is an integrated rail business in central Australia. East Coast Rail provides coal haulage in Hunter Valley and Central Queensland ONE RAIL – OVERVIEW ONE RAIL BULK EAST COAST RAIL › Below Rail operator of Tarcoola to › Coal haulage in Hunter Va
Slide 7: Transaction summary
TRANSACTION OVERVIEW Transaction summary › Cash consideration of A$2.35 billion (plus ~$80m acquisition and divestment related fees) Acquisition of 100% of One Rail › Highly strategic and transformative acquisition for Aurizon and consistent with capital allocation framework 1 Australia › While seve
Slide 8: Opportunity for Aurizon Bulk
TRANSACTION OVERVIEW Opportunity for Aurizon Bulk Expansion into South Australia and Northern Territory and increased exposure to commodities associated with new economy markets INTEGRATED ABOVE AND BELOW RAIL EXPOSURE TO CENTRAL GREATER EXPOSURE TO NEW ECONOMY MARKETS SUPPORTED AUSTRALIA BY GLOBAL
Slide 9: Value created for Aurizon
TRANSACTION OVERVIEW Value created for Aurizon Consistent with our Bulk growth strategy aspiration to more than double EBIT by 20301 AURIZON BULK: UNDERLYING EBITDA2 (A$m) AURIZON HAULAGE REVENUE (FY21)3 Growing bulk $80 -4ppts business with new to 30% markets $220 Our aspiration to double the size
Slide 10: East Coast Rail
TRANSACTION OVERVIEW East Coast Rail Stable operating cash flows underpinned by long-term Hunter Valley take or pay contract Underpinned by long-term rail haulage contract with Glencore (to 2036) ✓ representing approximately 85% of projected coal volumes in CY2021 Average mine life of Hunter Valley
Slide 11: Introduction to One Rail Bulk
Introduction to One Rail Bulk Clay McDonald Group Executive Bulk
Slide 12: Highlights of One Rail Bulk
ONE RAIL BULK Highlights of One Rail Bulk Acquisition is aligned with Aurizon’s Bulk growth strategy and provides a step change in Bulk earnings INTEGRATED ABOVE AND BELOW RAIL BUSINESS AURIZON BULK: REVENUE2 ($Am) ✓ Leading provider of intermodal and bulk freight in South Australia and Northern Ter
Slide 13: Below Rail: Infrastructure
ONE RAIL BULK Below Rail: Infrastructure A critical piece of rail infrastructure to support long-term growth ambitions OVERVIEW TRACK INFRASTRUCTURE › Economic owner of two long term rail concessions covering 2,460km1 of track across South Australia and Northern Territory ⚫⚫⚫⚫⚫ Darwin › Revenue unde
Slide 14: Below Rail: Infrastructure
ONE RAIL BULK Below Rail: Infrastructure Acquisition almost doubles Aurizon's existing rail infrastructure Australian Rail Infrastructure Management (kilometres) 8,500km 6,600km 5,500km 5,130km 3,520km 2,670km 2,386km 2,460km 1,608km 1,700km 998km 1,000km 760km 611km 344km Roy Hill TasRail Fortescue
Slide 15: Above Rail: Bulk and Intermodal
ONE RAIL BULK Above Rail: Bulk and Intermodal Leading provider of intermodal and bulk freight in South Australia and Northern Territory One Rail Bulk: CY21 Revenue1 BULK › Diversified mix of bulk minerals and agriculture, hauling iron ore, manganese, gypsum, copper and grain › Insourced rollingstock
Slide 16: Greater exposure to new economy commodities
ONE RAIL BULK Greater exposure to new economy commodities There are over 250 projects1 across South Australia and Northern Territory Commodity Demand Driver South Australia and Northern Territory Exposure SA & NT MINE PROJECTS1 Copper › Australia holds the second largest copper resources globally, w
Slide 17: Introduction to East Coast Rail
Introduction to East Coast Rail George Lippiatt CFO & Group Executive Strategy
Slide 18: Highlights of East Coast Rail
EAST COAST RAIL Highlights of East Coast Rail A highly cash generative business EXCLUSIVE HUNTER VALLEY HAULAGE RIGHTS REVENUE (A$m)1 230 ✓ Long-term rail haulage contract with Glencore to 2036 190 184 ✓ Minimum guaranteed volumes to 2034 with no commodity price risk ✓ Underpinned by lower cost, hig
Slide 19: Overview of East Coast Rail
EAST COAST RAIL Overview of East Coast Rail Haulage of approximately 30% of Hunter Valley export volumes BUSINESS OVERVIEW ONE RAIL CONTRACTED HUNTER VALLEY MINES › Exclusive hauler of export coal from Glencore managed mines in the Global Seaborne Thermal Coal Cash Margins4 Hunter Valley with an ave
Slide 20: Intention to divest East Coast Rail
EAST COAST RAIL Intention to divest East Coast Rail Divestment by demerger or trade sale PROCESS › Pursuant to s87b commitment provided to ACCC › Overarching objective is to maximise shareholder value › Divestment proposed to be undertaken within 18 months from completion SEPARATION CONSIDERATIONS ›
Slide 21: Transaction Funding and Process
Transaction Funding and Process George Lippiatt CFO & Group Executive Strategy
Slide 22: Shareholder returns
TRANSACTION FUNDING AND PROCESS Shareholder returns Projected to be EPS accretive with IRR exceeding share buyback1 ACQUISITION IS CONSISTENT WITH CURRENT CAPITAL ALLOCATION HIERARCHY › In-line with Aurizon’s disciplined approach to capital allocation – commitment remains to existing BBB+/Baa1 inves
Slide 23: Valuation considerations
TRANSACTION FUNDING AND PROCESS Valuation considerations Implied EBITDA multiple is inline with recent transactions RELEVANT TRANSACTION MULTIPLES1 VALUATION COMPONENTS 13.4x 11.2x 11.4x One Rail Bulk East Coast Rail 11.1x 10.5x 9.7x 9.3x Long-term growth expected Stable cash flows Integrated below
Slide 24: Funding certainty
TRANSACTION FUNDING AND PROCESS Funding certainty Fully underwritten committed debt facilities with ongoing commitment to BBB+/Baa1 ratings Aurizon: Net Debt2 DEBT FUNDING AUD, billions $5.4 › $1.93 billion increase in total bank debt for Aurizon Operations $1.9 $2.3 sourced from existing and new fa
Slide 25: Illustrative sources & uses
TRANSACTION FUNDING AND PROCESS Illustrative sources & uses Acquisition fully funded from existing resources and new committed debt facilities Sources A$m Uses A$m East Coast Rail debt 500 One Rail acquisition price 2,350 Aurizon Operations debt 1,930 Acquisition & divestment related fees 80 Total s
Slide 26: Divestment process for East Coast Rail
TRANSACTION FUNDING AND PROCESS Divestment process for East Coast Rail Divestment of East Coast Rail through a demerger or a trade sale, whichever creates greater shareholder value Demerger Trade sale › Requires shareholder and regulatory approval (~6-9 months) › Aurizon Operations debt to be reduce
Slide 27: Transaction timetable and next steps
TRANSACTION FUNDING AND PROCESS Transaction timetable and next steps Completion targeted for early CY2022 followed by East Coast Rail divestment process INDICATIVE TIMELINE October 2021 January 2022 April 2022 July 2022 October 2022 Partnership Interest Sale Agreement executed and transaction anno
Slide 28: Conclusion
Conclusion Andrew Harding Managing Director and Chief Executive Officer
Slide 29: Highlights
CONCLUSION Highlights Acquisition of One Rail with integration of One Rail Bulk and divestment of East Coast Rail through a demerger or trade sale Integrated above and below rail Increases Bulk’s Transformative business with share of haulage IRR exceeds acquisition increased revenue1 to ~40% Utilisi
Slide 30: Q&A
Q&A
Slide 31: Contact and further information
Contact and further information Chris Vagg James Coe Head of Investor Relations & Group Treasurer Manager Market Intelligence & Investor Relations +61 7 3019 9030 +61 7 3019 7526 Chris.Vagg@aurizon.com.au James.Coe@aurizon.com.au ASX: AZJ 31
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