Aurizon Holdings Ltd. · ASX:AZJ
Aurizon — Investor Presentation (June 2016)
39 slides from Aurizon's investor presentation, Jun 1, 2016
Slide 1: ASX Market Announcement: UT4 Final Decision Investor Briefing
Aurizon Holdings Limited ABN 14 146 335 622 For personal use only ASX Market Announcements ASX Limited 20 Bridge Street Sydney NSW 2000 BY ELECTRONIC LODGEMENT 1 June 2016 UT4 Final Decision Investor Briefing Please find attached for release to the market a copy of a briefing presentation to be made
Slide 2: UT4 Final Decision Investor Briefing
For personal use only UT4 Final Decision Investor Briefing June 2016 Alex Kummant – EVP Network Pam Bains – Aurizon Network CFO
Slide 3: Important notice
Important notice ONLYonly No Reliance on this document No offer of securities This document was prepared by Aurizon Network Pty Ltd (ABN 78 132 181 116) Nothing in this presentation should be construed as a recommendation of or an (referred to as “Aurizon” which includes its related bodies corporate
Slide 4: Overview
For personal use only Overview Alex Kummant – EVP Network
Slide 5: UT4 finalisation
UT4 finalisation ONLYonly Process Other matters beyond finalisation use › In light of the current economic climate and in order to provide › Post UT4 approval, a range of individual matters needs to be certainty for the industry and our shareholders, Aurizon will move implemented and managed under U
Slide 6: Final Decision – summary of key outcomes
Final Decision – summary of key outcomes ONLYonly Maximum Allowable Revenue › Overall maximum revenue of $3.925 billion over the period of the Undertaking (refer slide 10) (MAR) › Weighted Average Cost of Capital (WACC) - 7.17% True-up recovery process › The Final UT4 Decision highlights a net under
Slide 7: UT4 operational & contracting processes
UT4 operational & contracting processes Issue UT3 UT4 ONLYonly WIRP Pricing and N/A › WIRP capex partially deferred for pricing purposes. As Deferrals railings increase, Aurizon can seek QCA approval to recover deferred capex escalated at WACC › Socialisation of WIRP pricing across existing users us
Slide 8: UT4 operational & contracting processes
UT4 operational & contracting processes Issue UT3 UT4 ONLYonly Expansion Process › Aurizon commitment to fund expansions › No mandatory funding commitment: under $300m › Aurizon can fund at regulated return; or › Aurizon can fund at above regulated returns with QCA approval; or › Users can fund at r
Slide 9: Other policy matters
Other policy matters Issue UT3 UT4 ONLYonly Ring fencing › Rigorous regime to prevent discrimination › Revised regime with similar effect, but more detailed in favour of related operator and protect reporting and compliance obligations third party access data › Regime allows the use of the Aurizon G
Slide 10: UT4 Revenue outcomes
For personal use only UT4 Revenue outcomes Pam Bains – VP Network Finance
Slide 11: QCA Final UT4 Decision: MAR
QCA Final UT4 Decision: MAR ONLYonly Maximum Allowable Revenue (MAR) Total FY2014 FY2015 FY2016 FY2017 $m UT4 › This is a raw MAR, as published by Return on capital (WACC)1 346 347 415 420 1,567 the QCA and excludes Revenue Cap, true-up of prior year revenue use Return of capital (Depreciation) 280
Slide 12: QCA Final UT4 Decision: Volumes
QCA Final UT4 Decision: Volumes ONLYonly System Volumes FY2014a FY2015a FY2016f FY2017f Total UT4 Blackwater1 65.0 63.7 66.2 67.8 262.7 › FY2014 and FY2015 represent actual volumes railed use Goonyella 112.5 119.6 112.1 115.6 459.8 › FY2016 and FY2017 volumes are QCA regulatory forecast volumes not
Slide 13: UT4 Final Decision: Revenue true-up
UT4 Final Decision: Revenue true-up ONLYonly › The true-up represents the difference $m FY2014 FY2015 FY2016 FY2017 between the Final Decision System Allowable Revenue (SAR) and the Allowable Revenue before adjustments2 777 896 943 988 Transitional SAR for the relevant year Final Decision1 › Aurizon
Slide 14: Reconciliation of MAR to reported Access Revenue
Reconciliation of MAR to reported Access Revenue ONLYonly FY2014 FY2015 FY20161 FY20171 MAR to reported Access Revenue Actual Actual Estimate Estimate Access Revenue (AT1 to AT5) (ex. GAPE) 794 787 907 918 Approved Adjustments to MAR use Transitional tariff adjustment (70) - - - PERSONAL USE Flood C
Slide 15: Non-regulated Access Revenue
Non-regulated Access Revenue ONLYonly FY2014 FY2015 FY2016 FY2017 Non-regulated Access Revenue (ex. GAPE) Actual Actual Estimate Estimate Electric Traction Charge (EC) 50 40 44 52 Rebates (64) (56) (55) (53) use QCA levy 6 7 7 5 Non-Coal Access 13 13 10 10 PERSONAL USE Other - 8 2 1 personal Total n
Slide 16: Access Revenue Bridge
Access Revenue Bridge ONLYonly 73 1,202 105 use 26 8 6 6 1,114 32 3 6 32 105 PERSONAL USE 1,048 6 12 personal 17 62 951 For FOR FY14 Reg Rev Revenue Flood Non Reg FY15 Reg Rev Revenue Flood Non Reg FY16 Reg Rev Revenue Flood Non Reg UT4 FY17 Access Cap Claim Rev & Access Cap Claim Rev & Access Cap C
Slide 17: WIRP regulatory revenue profile
WIRP regulatory revenue profile ONLYonly FY2014 FY2015 FY2016 FY2017 $m Actual Actual Forecast Forecast Regulatory volumes (mt) - - 10.4 14.3 Estimated WIRP Capex for pricing ($m) - forecast - - ~640 ~640 Revenue ($m) – forecast (MAR equivalent) - - ~50 ~70 use **Aurizon estimate only. There is no “
Slide 18: Network RAB, capex & depreciation profile
Network RAB, capex & depreciation profile RAB roll forward for Capex Accounting depreciation ONLYonly pricing purposes 87% 569 use 281 350 PERSONAL USE 80 270 5.6 5.6 5 personal 4.6 3.0 290 288 270 265 260 220 FY10 FY15 FY16 FY17 FY15 FY16f FY17f FY15 FY16f FY17f For FOR Regulated Asset Base (RAB) $
Slide 19: Summary
For personal use only Summary Alex Kummant – EVP Network
Slide 20: Achievements and outcomes
FY2015 represents an all Achievements and outcomes time volume record Achievements Outcomes ONLYonly Volumes (Mtpa railed) Cycle Velocity (Km/Hour) +24% + 10% › 168mt Mar 2016 YTD volumes in line with record FY2015 250 25 Operational 200 › 200mt railed for YTD2016 achieved one day earlier than 20 Im
Slide 21: UT5 process
UT5 process ONLYonly › On 11 May 2016, the Queensland Competition Authority (QCA) issued Aurizon Network with an Initial Access Undertaking notice under section 133 of the QCA Act 1997 › The notice details that Aurizon Network has until 9 September 2016 (120 days) to submit a Draft Access Undertakin
Slide 22: Aurizon's on-going public engagement
Aurizon’s on-going public engagement ONLYonly - Increased Customer consultation CUSTOMER - Fair and efficient pricing use PERSONAL USE - Safe and reliable network Transitioning to a more personal OPERATORS - Ease of access balanced regulatory model will require engagement with a broad spectrum of -
Slide 23: Questions & Answers
For personal use only Questions & Answers
Slide 24: Additional information
For personal use only Additional information
Slide 25: Final Decision UT4 vs. UT3 MAR
Final Decision UT4 vs. UT3 MAR ONLYonly UT4 UT3 Mix of UT4 Mix of UT3 Maximum Allowable Revenue (MAR) $m Variance FY14 – FY17 FY10 – FY13 MAR (%) MAR (%) Return on capital (WACC)1 1,527 1,599 (72) 38% 52% Return of capital (Depreciation) 1,288 698 590 32% 23% use Inflation (515) (401) (114) (13%) (1
Slide 26: Aurizon Network Overview
Aurizon Network Overview ONLYonly Central Queensland Coal Network (CQCN) › The CQCN comprises 4 major coal systems and 1 connecting use system link serving Queensland’s Bowen Basin coal region: Newlands, Goonyella, Blackwater and Moura with GAPE the connecting system link PERSONAL USE › 2,670 kilome
Slide 27: History of the Regulatory Framework
History of the Regulatory Framework CQCN Regulation Overview UT4 Overview ONLYonly CQCN Regulation Evolution UT4 Development and Key Milestones Jun 2016 UT4 Implemented 2016 2016 Undertaking 4 (UT4) Apr 2016 QCA issued UT4 Final Decision 2016 use Dec 2015 Access Regime Certified 2011 QCA issued UT4
Slide 28: QCA's approach to regulation
QCA’s approach to regulation ONLYonly The QCA takes a three step approach for determining the reference tariffs charged by Aurizon Network to CQCN users Step 1 Step 2 Step 3 use › RAB is approved by the QCA on a › ‘Building block’ approach adopted to › Reference tariffs determined annually, taking D
Slide 29: MAR building block methodology
MAR building block methodology ONLYonly RETURN ON CAPITAL › The maximum allowable revenue (MAR) is the total (Weighted Average Cost of Capital – WACC) revenue Aurizon Network is permitted to earn each year, use determined in accordance with the 'regulatory asset base' (RAB) and 'building block metho
Slide 30: Revenue protection mechanisms
Revenue protection mechanisms ONLYonly ToP › Aurizon Network’s regulated revenue is protected through a combination of provisions that are included in the QCA-approved access agreements AT 2 Train Paths › These mechanisms come into effect when revenue shortfalls occur due to actual tonnage Take-or-
Slide 31: Key Regulatory vs. Accounting adjustments
Key Regulatory vs. Accounting adjustments Adjustment item Explanation ONLYonly Shortfall/(Surplus) of AT1 › AT1 Revenue moves inline with volumes and is not protected by Take-or-Pay or Revenue Cap Forecast vs. Actual Take or Pay variations › Take-or-Pay charges are levied on the access holders, with
Slide 32: Access Facilitation Deeds (AFD) summary
Access Facilitation Deeds (AFD) summary ONLYonly › Access Facilitation Deeds are financing arrangements whereby customers fund Mine Specific Infrastructure (“MSI”) that is owned (i.e. operated, managed & maintained) by Aurizon › Historically MSI has included spurs, balloon loops and connections. How
Slide 33: Network revenue cap adjustments
Network revenue cap adjustments ONLYonly AT2-4 AT5 Total › Revenue cap is the difference by System between Aurizon’s Total Year (electric tariff) Actual Revenue (TAR) and System Allowable Revenue (SAR) $m $m $m and also includes rebates and energy cost variations. This is collected through a tariff
Slide 34: Wiggins Island Rail Project (WIRP) facts
Wiggins Island Rail Project (WIRP) facts ONLYonly › WIRP is a project designed to link mines in the Southern Bowen Basin with the new Wiggins Island Coal Export Terminal (WICET) at the Port of Gladstone and will increase the total capacity of the Moura and Blackwater systems by 27mtpa (30%). Total e
Slide 35: GAPE revenue overview
GAPE revenue overview ONLYonly Opex & Maintenance Costs › O&M are as per the Regulatory approved amounts › The return that Aurizon (O&M) › ROA is calculated using a Risk Free Rate (RfR) plus a earns on its GAPE assets fixed margin is known as the Maximum Capacity Revenue (MCR) Return of Assets › The
Slide 36: WACC variables across all regulated entities
WACC variables across all regulated entities ONLYonly Aurizon Network QR DBCT ACTO Gas Brookfield TPI Energex/Ergon~ Regulator QCA FD QCA DD QCA DD ERA FD ERA FD ERA FD AER FD Decision Date 28 April 2016 8 Oct 2015 22 Apr 2016 30 Jun 2015 18 Sep 2015 18 Sep 2015 29 Oct 2015 Averaging Period 20-day t
Slide 37: Example of socialisation in the event of a revenue shortfall
Example of socialisation in the event of a revenue shortfall ONLYonly Scenario: A Coal mine on the Goonyella System closes due to insolvency and the mine ceases all railings at 31 December (half way through the fiscal year) with no future railings to occur. The mine was forecast by the regulator to
Slide 38: Glossary
Glossary Defined Term Definition For personal use only Access Facilitation Deed Access Facilitation Deed (AFD) - financing arrangements whereby customers fund Mine Specific Infrastructure (“MSI”) (i.e. prepay construction cost) that is owned (i.e. operated, managed & maintained) by Aurizon Access Re
Slide 39: For personal use only
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