Atlas Arteria · ASX:ALX

Atlas Arteria — Macquarie Atlas Roads — Investor Presentation (March 2017)

63 slides from Atlas Arteria's investor presentation, Mar 15, 2017

  1. Slide 1: ASX Release: Investor Presentation – March 2017

    Macquarie Atlas Roads Limited Macquarie Atlas Roads International Limited ACN 141 075 201 EC43828 Level 7, 50 Martin Place Telephone 612 8232 3333 The Belvedere Building SYDNEY NSW 2000 Facsimile 612 8232 4713 69 Pitts Bay Road GPO Box 4294 Internet: www.macquarie.com/mqa Pembroke HM08 SYDNEY NSW 11

  2. Slide 2: Macquarie Atlas Roads Investor Presentation March 2017

    Macquarie Atlas Roads Investor Presentation March 2017

  3. Slide 3: 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

  4. Slide 4: 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

  5. Slide 5: Table of Contents

    Table of Contents 01 Overview 4 02 APRR 12 03 Dulles Greenway 32 04 Other Assets 42 05 Distributions 46 Appendix 50 MACQUARIE ATLAS ROADS PAGE 3

  6. Slide 6: Overview

    Overview MACQUARIE ATLAS ROADS

  7. Slide 7: MQA portfolio

    MQA portfolio Global infrastructure developer, operator and investor listed on ASX with market capitalisation of A$2.8bn1 MQA Dulles Greenway M6 Toll APRR / ADELAC (70%) Warnow APRR ADELAC Greenway M6 Toll Tunnel 20.14% 20.15%2 100%3 100%4 70% 20km 22km 43km 2,323km 2km toll commuter commuter tolled

  8. Slide 8: MQA value proposition

    MQA value proposition Providing investors with access to long-dated, predictable and growing cash flows Strategy to grow distributions and enhance portfolio value Active asset Disciplined capital Investment Distribution management management opportunities growth Leveraging core Efficient and discipl

  9. Slide 9: Recent highlights

    Recent highlights MQA continues to successfully deliver on its strategy to increase returns to securityholders Positive Active Disciplined Aim to grow total Growth asset operational capital securityholder opportunities performance management management returns  Growth in traffic,  Ongoing cost con

  10. Slide 10: 2016 asset performance

    2016 asset performance Positive growth in traffic, revenue and EBITDA across all assets during 20161 APRR Dulles Greenway Warnow Tunnel ▲6.0% ▲8.8%2 ▲5.1%3 ▲5.1% EBITDA ▲7.8% EBITDA ▲6.3% EBITDA ▲3.7% Revenue ▲4.3% Revenue ▲1.6% Revenue Traffic Traffic Traffic  Network traffic growth continues to 

  11. Slide 11: Dulles Greenway acquisition

    Dulles Greenway acquisition In February 2017, MQA exercised its pre-emptive right to acquire the remaining 50% economic interest in the Dulles Greenway1 Acquisition Asset Strategic Summary Highlights Rationale • Acquisition of the remaining 50%  Important arterial route  100% ownership economic in

  12. Slide 12: Dulles Greenway acquisition funding

    Dulles Greenway acquisition funding Funding via a combination of equity, asset financing and corporate cash1 Corporate cash Asset finance facility US$115m US$200m • Existing corporate cash • Eight year bullet facility 25% • Non-recourse to MQA or other portfolio assets – secured only over MQA’s inte

  13. Slide 13: ADELAC acquisition

    ADELAC acquisition MQA increased its indirect interest in ADELAC from 10.04% to 20.15% through MAF2 The Acquisition • Existing 49.9% ownership through AREA Ownership Structure • MQA, in conjunction with other APRR MQA Other co-shareholders, acquired the remaining 50.1% interest and structured an acc

  14. Slide 14: APRR

    MACQUARIE tall APRR MACQUARIE ATLAS ROADS

  15. Slide 15: APRR overview

    APRR overview Concession  30 November 2035 (APRR) expiry  30 September 2036 (AREA)  31 December 2060 (ADELAC)1 Tolling  Up to 2023: annual tariff increase (February), linked to CPI (ex. Tobacco). Refer to slide 30  Post 2023: annual tariff increase of 70% x CPI (ex. Tobacco) as per concession c

  16. Slide 16: APRR concessions

    APRR concessions APRR comprises three concessions APRR Concession Expiry: Nov 2035 Road Length: 1,894km AREA Concession Expiry: Sep 2036 Road Length: 410km ADELAC1 Concession Expiry: Dec 2060 APRR Road Length: 20km AREA ADELAC 1. APRR holds a ~50% interest in ADELAC, with an MQA proportionate holdin

  17. Slide 17: APRR 2016 results

    APRR 2016 results Strong operating performance resulting from continued growth across light and heavy vehicle traffic supplemented by the annual February 2016 toll increases 23.1bn VKT Light Vehicles Heavy Vehicles VTKm VTKm 20,000 3,500 +4.5% Traffic +3.7% +3.6% 19,500 3,400 €2,327.7m 19,000 3,300

  18. Slide 18: APRR earnings stability

    APRR earnings stability Resilient earnings demonstrated through economic cycles APRR EBITDA and France GDP Growth1 €1,750m 1,685 6.0% 1,589 1,520 €1,500m 1,475 1,399 1,428 4.0% 1,326 1,265 €1,250m 1,208 1,244 1,068 2.0% €1,000m 0.0% €750m (2.0%) €500m 924 9412 974 841 888 (4.0%) €250m €0m (6.0%) 200

  19. Slide 19: APRR traffic

    APRR traffic 23.1 billion vehicle kilometres travelled on the APRR network in 2016 Annual Total Vehicle Traffic (VKTbn) Quarterly Traffic Performance (VKTbn) 23.5 8.0 +3.7% 2012 2013 2014 2015 2016 23.0 7.0 22.5 6.0 22.0 5.0 21.5 4.0 21.0 3.0 20.5 2.0 20.0 19.5 1.0 19.0 0.0 2009 2010 2011 2012 2013

  20. Slide 20: APRR traffic correlation

    APRR traffic correlation Light vehicle traffic currently trending above growth in real household disposable income Heavy vehicle traffic remains correlated to French manufacturing and imports Light Vehicles and Economic Indicators1,2 Heavy Vehicles and Economic Indicators1,2 115 120 115 110 110 105

  21. Slide 21: APRR financial performance

    APRR financial performance Stable revenue growth with ongoing disciplined cost management 2016 Revenue Segmentation APRR Financial Performance2 80.0% €3,000m 70.7% 71.8% 72.4% 69.2% 70.0% 70.3% 2,328 €2,500m Light Vehicles 2,214 2,099 2,149 65% 60.0% 2,022 2,039 643 €2,000m 629 625 611 624 623 Other

  22. Slide 22: APRR operating expenses

    APRR operating expenses Operating expenses (excluding operating taxes) have decreased  Headcount (FTE)1 for 2016 was 3,414 (2015: 3,483) €m Operating Expenses €800 80.0% 70.7% 71.8% 72.4% 69.2% 70.0% 70.3% 67.0% 67.8% 68.0% 68.4% 64.0% €600 60.0% 232 229 236 240 264 258 275 292 329 231 301 €400 40.

  23. Slide 23: APRR operations

    APRR operations Improving operations through active management in 2016 Harnessing Technology Environmental Investment Customers and Employees \  97.5% of tolls collected via automated  Committed to invest €50 million in  Customer satisfaction ratings >95% transactions during 2016 green transporta

  24. Slide 24: APRR ongoing initiatives

    APRR ongoing initiatives Ongoing initiatives have steadily improved automated toll collection • Automated transaction reached 97.5% in 2016 with ETC accounting for 55.9% of total transactions • Continuing commitment to cost control and operational improvement Toll Collection Mechanisms 100% 5% 4% 3%

  25. Slide 25: APRR free cash flow

    APRR free cash flow Significant free cash flows invested into APRR for future growth • APRR’s distributions are restricted to retained earnings1 • APRR consistently generates cash flow in excess of net profit €m APRR Profit vs APRR Cash Flow2 1,200 Excess cash is used to fund: 999 1,000 1) Debt redu

  26. Slide 26: APRR cash flow to MQA

    APRR cash flow to MQA Potential to improve overall APRR group financing terms over time Simplified Holding Structure MQA 20.14% of free cash flow HoldCo debt – Margin 95bps HoldCo swap until June 2018 Eiffarie – Fixed principal repayments1 ‒ Average of €3,224m swapped (HoldCo debt) ‒ Fixed rate of 4

  27. Slide 27: APRR financing costs

    APRR financing costs Further interest saving opportunities remain over the medium term  APRR credit ratings updated by both Standard & Poor’s (S&P) and Fitch during 2016: – S&P upgraded rating from BBB+ (Stable Outlook) to A- (Stable Outlook) in November – Fitch revised rating from BBB+ (Stable Out

  28. Slide 28: APRR bond issues

    APRR bond issues APRR benefited from favourable bond market conditions during 2016, issuing €1.7bn of bonds under its EMTN program  June 2016: €700m issued with a 1.125% coupon; January 2026 maturity  November 2016: €500m issued with a 1.25% coupon; January 2027 maturity  November 2016: €500m iss

  29. Slide 29: APRR capital expenditure

    APRR capital expenditure Since 2006, €4.1bn has been spent to grow, improve and maintain the network Capital Expenditure €600m €500m 24 81 €400m 65 45 159 45 €300m 187 93 343 303 27 54 39 215 240 €200m 210 171 168 172 104 123 127 €100m 110 122 115 102 115 108 96 94 93 92 95 €0m 2006 2007 2008 2009 2

  30. Slide 30: APRR current investments

    APRR current investments Continued focus on growing and improving the existing network Network Investment Current Investment Projects Underway 2014-2018 Management Contract Stimulus Package 1) RCEA FRANCE interchange near Mâcon Start: 2016 Finish: 2020 2  Ongoing investment via Stimulus Package (€7

  31. Slide 31: APRR concession contract amendments

    APRR concession contract amendments Concession contracts amended via agreements with the French State Formalised 2015 – 2016 In-Principle Agreement 2017 Stimulus Package & Supplemental toll Changes to key In-Principle concession extension adjustments contractual terms Agreement  ~€720m capital inve

  32. Slide 32: APRR toll formulas

    APRR toll formulas Toll formulas 2016-2023  Supplemental toll increases in addition to the existing contractual toll increase formula; including toll increases as agreed under the 2014-2018 Management Contract  2013 land tax increase compensated via supplemental toll increases over 2016-2018: Supp

  33. Slide 33: APRR tax and ownership structure

    APRR tax and ownership structure French tax summary Ownership Structure  Effective corporate tax rate: 34.4% Third Party Other Macquarie MQA – Composed of 33.3% corporate tax rate + 3.3% Investors Managed Funds social surcharge 40.29% 27.16% 32.55%  Tax deductions available for 100% of Eiffarie ex

  34. Slide 34: Dulles Greenway

    Dulles Greenway MACQUARIE ATLAS ROADS

  35. Slide 35: Dulles Greenway overview

    Dulles Greenway overview Concession  15 February 2056 expiry  Up to 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 1 March 2017): – Peak: US$5.50 – Off-peak: US$4.55 Owne

  36. Slide 36: Dulles Greenway 2016 results

    Dulles Greenway 2016 results Strong traffic performance underpinned by continued corridor population growth and development 53,260 ADT ADT Workday Traffic ADT Non-Workday Traffic 64,000 34,000 +5.3% +1.6% Traffic +4.3% 62,000 33,000 32,000 60,000 US$91.7m 31,000 58,000 30,000 Revenue +7.8% 56,000 29

  37. Slide 37: Dulles Greenway traffic

    Dulles Greenway traffic Total 2016 traffic up 4.3% compared to pcp, with average daily traffic reaching 53,260 Annual Traffic Performance Quarterly Traffic Performance ADT ADT 54,000 60,000 +4.3% 2012 2013 2014 2015 2016 58,000 52,000 56,000 54,000 50,000 52,000 48,000 50,000 48,000 46,000 46,000 44

  38. Slide 38: Dulles Greenway traffic segmentation

    Dulles Greenway traffic segmentation Higher growth experienced during workdays indicative of increased commuter usage and continued corridor growth 110 Dulles Greenway Traffic Segmentation1 108 Workday 106 Non-workday 104 Total 102 100 98 2016 growth vs pcp 96 • Workday: 5.3% 94 • Non-workday: 1.6%

  39. Slide 39: Dulles Greenway performance

    Dulles Greenway performance Adjusted EBITDA growth of 8.8%1, reflecting traffic growth, toll increases and disciplined cost control  Progressive traffic recovery since 2012; 4 year traffic CAGR of 3.5% – Average daily traffic in 2016 surpassed levels achieved in 2008 and 2009  During 2016, an exte

  40. Slide 40: Dulles Greenway operations

    Dulles Greenway operations Commitment to enhancing operations and service Harnessing Technology Community People and Safety  93.0% non-cash transactions in 2016,  Annual Drive for Charity campaign  Dedicated Virginia State Troopers up 1% on pcp has raised a total of US$2.7m who collaborate to max

  41. Slide 41: Dulles Greenway regional demographics

    Dulles Greenway regional demographics Loudoun County remains one of the fastest growing and most affluent counties in the United States1 Population with College Degree or Higher2 Household Income Distribution2 58.2% 25% Median: Median: 29.8% 20% US$54K US$123K 15% US Average Loudoun County 10% Loudo

  42. Slide 42: Dulles Greenway corridor growth

    Dulles Greenway corridor growth Well positioned to provide capacity as corridor develops  Greenway has two key competing routes, Route 7 and Waxpool Road – both received capacity upgrades over the last decade  As Loudoun County continues to grow, Greenway is well positioned to provide a quality se

  43. Slide 43: Dulles Greenway debt profile

    Dulles Greenway debt profile Fixed-rate debt profile at TRIP II for duration of concession, no refinancing requirements  Existing debt profile of five senior debt tranches with a balance of US$1,028.5 million1 as at 31 December 2016 – 100% fixed rate bonds; amortisation schedule locked in until 205

  44. Slide 44: Other Assets

    Other Assets MACQUARIE ATLAS ROADS

  45. Slide 45: 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 – IRR >25%: tolls remain fixed Tolling  Toll increases subject to toll application audit by the Land Ministr

  46. Slide 46: Warnow Tunnel - 2016 results

    Warnow Tunnel - 2016 results1 Warnow Tunnel continues to experience positive growth, with record traffic and EBITDA in 2016 18 Financial Performance (€m) vs Traffic (ADT) 14,000 11,537 ADT 16 11,358 11,537 11,272 12,000 10,917 Traffic +1.6% 14 10,281 10,738 12 10,000 10.7 10.1 €10.7m 10 8.8 9.0 9.5

  47. Slide 47: 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

  48. Slide 48: Distributions

    Distributions MACQUARIE ATLAS ROADS

  49. Slide 49: MQA distributions

    MQA distributions 1H17 distribution guidance 10.0 cps MQA Distributions (cps)  Expect to declare in late March 2017 with payment in early April following the receipt of ~€54m from FE in March 2017 Paid Guidance  Wholly from MARIL, anticipated to include foreign dividend and capital return componen

  50. Slide 50: MQA distributions

    MQA distributions APRR’s distributions to MQA are subject to a ~3 month lag post each half-year end APRR Ownership Structure Funds Flow Illustrative Timing Third Party Other Macquarie MAF2 Distribution 2H17 Receipt MQA MQA = Investors Managed Funds Multiplied by 40.29% Less Corporate Expenses 27.16%

  51. Slide 51: Cash flow: APRR to MQA securityholders

    Cash flow: APRR to MQA securityholders Cash flow: APRR to Eiffage and MAF2 shareholders Eiffarie/FE/MAF2 (€m) (100%) 1H15 2H15 1H16 2H16 APRR dividend 180 245 287 6401 add APRR tax instalments to FE 181 176 183 159 add Other2 413 (0) 0 (128)4 less Eiffarie net interest (93) (87) (86) (88) less FE ta

  52. Slide 52: Appendix

    Appendix MACQUARIE ATLAS ROADS

  53. Slide 53: MQA register analysis

    MQA register analysis1 Retail Macquarie2 13% 12% 2 Yarra2 8% Other Foreign Institutions 16% 2 Lazard 10% Other Australian Institutions 41% 1. Register data as at 28 February 2017. 2. Substantial shareholdings based on most recent notices (as of 28 February 2017). MACQUARIE ATLAS ROADS PAGE 51

  54. Slide 54: MQA governance

    MQA governance MQA has majority independent Boards and independent Chairpersons  Base fee calculated quarterly at 1.00%1 per annum on MQA Structure MQA’s market capitalisation Macquarie Resources  Performance fee calculated each 30 June as 15% of (Staff, premises, IT, etc) MQA’s outperformance of

  55. Slide 55: MQA performance

    MQA performance MQA has outperformed its Benchmark by 729% since listing1 MQA vs Benchmark2 2016 Performance Fee A$ m $6.00 21.0  For the 12 months to 30 June 2016, MQA MQA Market Volume (m) (RHS) outperformed its Benchmark by 63.2% $5.50 MQA Share Price (LHS) Benchmark (LHS) 18.0  This outperform

  56. Slide 56: Consolidated income statement

    Consolidated income statement Statutory accounts Year ended Year ended  Revenue includes M6 Toll management fees, A$m 31 Dec 16 31 Dec 15 Warnow Tunnel services fees, interest income and the reversal of the impairment recorded in Revenue 70.6 2.2 2011 relating to Dulles Greenway Share of net profit

  57. Slide 57: Consolidated balance sheet

    Consolidated balance sheet Statutory accounts As at As at  Current assets are mainly comprised of cash A$m 31 Dec 16 31 Dec 15  Investments in associates includes APRR and Current assets 224.2 83.6 Dulles Greenway accounted for using the equity method including reversal of Dulles Greenway Investme

  58. Slide 58: Cash flow summary

    Cash flow summary Year to Year to  US$103.9m received following Chicago Skyway Available cash (A$m) 31 Dec 16 31 Dec 15 sale Opening balance – 1 January 65.4 30.1  Distributions from Financière Eiffarie (FE) of Proceeds received from sale of Chicago Skyway 137.3 - €42.2m in March 2016 and €41.8m i

  59. Slide 59: Traffic and toll revenue performance

    Traffic and toll revenue performance Change Quarter vs pcp Asset 2016 2015 vs pcp Mar 16 Jun 16 Sep 16 Dec 16 APRR Light Vehicle VKT (millions) 19,581 18,906 3.6% 7.1% 0.7% 3.6% 3.3% Heavy Vehicle VKT (millions) 3,481 3,330 4.5% 3.9% 8.0% 2.7% 3.4% Total VKT (millions) 23,061 22,236 3.7% 6.5% 1.8% 3

  60. Slide 60: APRR profit

    APRR profit 25% profit growth in 2016 driven predominantly by higher revenue and net interest savings APRR Profit Waterfall (€m) 11 27 2 44 10 671 114 10 44 9 539 19 9 65 D&A, provisions, other D&A, provisions, other 420 Operating taxes2 Operating taxes Net profit 2014 Net profit 2015 Net profit 201

  61. Slide 61: Eiffarie facility – key terms

    Eiffarie facility – key terms Eiffarie has a seven year term loan, with a maturity in 2022  Debt balance as at 31 December 2016: €1,400m  Margin: 95bps 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 2021 80 80

  62. Slide 62: Asset debt metrics and debt ratings

    Asset debt metrics and debt ratings As at 31 Dec 161 Gross debt Cash Net debt Net debt / EBITDA EBITDA / Interest DSCR Hedging Actual Default Actual Default Actual Lock-up APRR and Eiffarie2 €m 10,769.0 2,142.7 8,626.3 5.12x n/a n/a n/a n/a n/a 99.9% - APRR €m 9,369.0 2,092.6 7,276.3 4.32x 7.00x 7.2

  63. Slide 63: Dulles Greenway distributions

    Dulles Greenway distributions Positive cash flow generating, with potential to commence distributions from December 20181 TRIP II Distribution Tests 2016 Distribution Test Results  TRIP II is subject to two annual distribution tests, both US$m MCR Test ACR Test tested annually on 31 December Net To

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