Atlas Arteria · ASX:ALX
Atlas Arteria — Macquarie Atlas Roads — Investor Presentation (October 2017)
67 slides from Atlas Arteria's investor presentation, Oct 17, 2017
Slide 1: ASX Release: Investor Presentation – October 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
Slide 2: Macquarie Atlas Roads Investor Presentation October 2017
Macquarie Atlas Roads Investor Presentation October 2017
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
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
Slide 5: Contents
Contents 01 Overview 4 02 APRR 8 03 Dulles Greenway 31 04 ADELAC 42 05 Warnow Tunnel 45 06 Distributions 48 07 MQA Governance 52 Appendix 55
Slide 6: Overview
Overview 1
Slide 7: MQA portfolio
MQA portfolio Global infrastructure developer, operator and investor listed on ASX with market capitalisation of A$3.7bn1 MQA VIRGINIA, UNITED STATES Dulles Greenway EASTERN FRANCE APRR / ADELAC ROSTOCK, GERMANY Warnow Tunnel Warnow APRR ADELAC Greenway Tunnel 25.00%2 25.03%2,3 100%4 70% 20km 22km 2
Slide 8: MQA value proposition
MQA value proposition Continuing to generate long term value for MQA securityholders Providing investors with access to long-dated, MQA distributions (cps2) predictable and growing cash flows Recent focus on delivering growth from within 17.5% growth 23.53 existing portfolio ̶ Consolidation of e
Slide 9: 1H17 portfolio asset results
1H17 portfolio asset results Growth in traffic, revenue and EBITDA across all assets during 1H171 APRR ADELAC Dulles Greenway Warnow 8.7% 4.9% 6.0% 4.4% 4.3% 3.5% 3.6% 3.5% 2.7% 3.0% 2.7% 1.2% Traffic Revenue EBITDA Traffic Revenue EBITDA Traffic Revenue EBITDA Traffic Revenue EBITDA Continued lig
Slide 10: APRR
APRR 2
Slide 11: 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 18 Post 2023: annual tariff increase of 70% x CPI (ex. Tobacco) as per concession c
Slide 12: APRR Concessions
APRR Concessions APRR comprises three concessions MQA ownership1 25.00% APRR Concession Expiry: Nov 2035 Road Length: 1,895km AREA Concession Expiry: Sep 2036 Road Length: 408km ADELAC2 Concession Expiry: Dec 2060 Road Length: 20km2 1. Includes acquisition of an additional 4.86% interest in APRR whi
Slide 13: APRR Strategic location
APRR Strategic location APRR provides essential connectivity for major Western European and intra-France trade and tourism Trans-European trade • APRR acts as a vital transportation corridor located at the cross-roads of Western European trade IRELAND – Leveraged to European economic growth UK • Pro
Slide 14: APRR French economy
APRR French economy Resilient earnings demonstrated through economic cycles €m APRR EBITDA1 and France GDP growth2 1,750 6.0% 1,685 1,500 1,589 1,520 4.0% 1,475 1,428 1,250 2.0% 1,000 0.0% 750 1,399 1,265 1,326 1,208 1,244 (2.0%) 500 1,068 924 9413 974 1H 1H 841 888 1H 1H 1H 1H 831 872 730 791 694 7
Slide 15: APRR 1H17 results
APRR 1H17 results1 Traffic Light Vehicles Heavy Vehicles 2.7% VKTm VKTm +4.2% 9,400 +2.5% 1,850 11.2bn VKT 9,200 1,800 +3.7% +5.9% Revenue 9,000 1,750 +2.3% 3.5% 8,800 1,700 +1.9% +2.0% €1,156.0m 8,600 +0.5% 1,650 +2.1% 8,400 -1.5% 1,600 EBITDA 8,200 4.9% 8,000 1,550 €871.8m2 7,800 1,500 1H12 1H13 1
Slide 16: APRR Leveraged to economic growth
APRR Leveraged to economic growth APRR is well positioned to benefit from further improvements in French economic activity APRR Light Vehicles and Economic Indicators1,2 APRR Heavy Vehicles and Economic Indicators1,2 115 125 Light vehicle traffic Heavy vehicle traffic currently trending above 120 co
Slide 17: APRR 1H17 financial performance
APRR 1H17 financial performance Stable revenue growth with ongoing disciplined cost management Financial Performance (€m) Operational Update 1,600 74.9% 74.4% 75.4% 80.0% 70.6% 70.4% 71.0% Optimisation of toll collection through increased 1,400 70.0% use of automated transactions: 1,200 1,116.4 1,
Slide 18: Operating expenses
APRR Operating expenses Track record of continued EBITDA margin enhancement Progressive EBITDA margin improvement over ten years driven by increasing revenue and ongoing cost control Headcount (FTE)1 for 1H17 was 3,359 (1H16: 3,430) €m Operating Expenses €800 80.0% 70.7% 71.8% 72.4% 68.4% 69.2%
Slide 19: Ongoing initiatives
APRR Ongoing initiatives Ongoing initiatives have steadily improved automated toll collection Automated transactions reached 98.7% in 1H17 with ETC accounting for 58.7% of total transactions Continuing commitment to cost control and operational improvement Toll Collection Mechanisms 100% 5% 4% 3
Slide 20: Toll formulas
APRR Toll formulas Inflation-linked tolling and established regulatory regime underpin APRR’s highly predictable cash flows Concession benefits • Stable concession regime: In place for over 30 years • Predictable, inflation linked toll increases: Minimum contracted toll increase of 70% x CPI1 to con
Slide 21: Free cash flow reinvestment
APRR Free cash flow reinvestment Significant free cash flows invested into APRR for future growth APRR distributions are restricted to retained earnings1, however APRR has consistently €m APRR Profit vs APRR Cash Flow2 generated cash flows in excess of net profit 1,200 Excess cash is used to fun
Slide 22: Debt structure
APRR Debt structure Prudent debt structure with potential to improve overall APRR Group financing terms over time Simplified MARIL to APRR Debt Structure MARIL2 100% €150m acquisition debt facility MIBL3 7 year term to Oct 2024 50.01% Margin over Euribor €1,360m Eiffarie debt1 Refer to slide 2
Slide 23: APRR Group debt profile
APRR APRR Group debt profile Sustainable debt maturity profile with strong liquidity position • APRR investment grade credit rated A- Stable Outlook by both S&P and Fitch • APRR/Eiffarie Net Debt balance of €8.5 billion as at 30 June 2017; representing 5.0x Net Debt / EBITDA APRR/Eiffarie Pro Forma
Slide 24: APRR Group financing costs
APRR APRR Group financing costs Further interest saving opportunities remain over the medium term Opportunity to replace maturing APRR debt with lower-cost APRR/Eiffarie Cost of Debt2,3 facilities through 20191 ̶ APRR FY16 net interest decreased €44 million, or 16%, on FY15 APRR Fixed Eiffarie (ma
Slide 25: Eiffarie facility
APRR Eiffarie facility Eiffarie has a seven year term loan, with a maturity in February 2022 • Debt balance as at 30 June 2017: €1,360m • Margin: 90bps 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 Ma
Slide 26: Bond issues
APRR Bond issues APRR continues to benefit from favourable bond market conditions November 2016: €500m issued with a 1.25% coupon; January 2027 maturity November 2016: €500m issued with a 1.875% coupon; January 2031 maturity March 2017: €100m issued with a 0.34% coupon indexed-linked; April 20
Slide 27: Acquisition debt facility
APRR Acquisition debt facility Recent acquisition of an additional 4.86% interest in APRR partially funded by new MIBL debt facility MIBL debt facility provides significant covenant headroom and flexibility for MIBL and APRR Key terms of the Acquisition debt facility Size • €150 million – Euro den
Slide 28: 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 45 187 93 €300m 343 303 27 54 39 215 240 €200m 210 171 168 172 104 123 127 €100m 110 122 115 102 115 108 94 93 92 96 95 €0m 2006 2007 2008 2009 2
Slide 29: Ongoing network investment
APRR Ongoing network investment APRR continues to focus on growing and improving its existing network Capex Projects Current Investment Projects Underway 2014-2018 Management Contract 2015 Stimulus Package E) A6 1) RCEA widening, interchange Auxerre near Mâcon FRANCE 2) A36 Sévenans 5) RCEA intercha
Slide 30: 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
Slide 31: French taxation – recent developments
APRR French taxation – recent developments APRR to benefit from recent regulatory tax changes1 APRR Group to benefit from reduction in French corporate income tax rate from 33.3% in 2016 to 28.0% by 20202 ̶ Including the additional social surcharge of +3.3%, APRR’s effective tax rate will reduce f
Slide 32: MAF Group governance structure
APRR MAF Group governance structure MQA’s interest in APRR is held through the MAF Group APRR is currently jointly owned by MAF Group and Eiffage APRR Shareholding Structure ̶ MAF Group is 100% managed by Macquarie under an Effective APRR Macquarie Third party advisory agreement interest: 25.00% M
Slide 33: Dulles Greenway
Dulles Greenway 3
Slide 34: 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
Slide 35: Dulles Greenway 1H17 results
Dulles Greenway 1H17 results1 Traffic Workday Traffic Non-Workday Traffic 1.2% ADT ADT 64,000 34,000 53,392 ADT +0.4% +3.4% +6.9% 33,000 62,000 +2.3% 32,000 Revenue 60,000 +4.3% 3.6% 58,000 +4.3% 31,000 US$46.7m +4.2% 30,000 56,000 +1.3% +0.4% 29,000 +0.4% 54,000 EBITDA 28,000 4.4% 52,000 27,000 US$
Slide 36: Dulles Greenway Traffic segmentation
Dulles Greenway Traffic segmentation Non-workday traffic reflective of continued demand for leisure and convenience travel. Overall traffic to be impacted by competing network improvements 110 Dulles Greenway Traffic Segmentation1 108 106 104 102 100 98 96 1H17 traffic performance vs pcp • Workday:
Slide 37: Dulles Greenway 1H17 financial performance
Dulles Greenway 1H17 financial performance Consistent growth in EBITDA driven by increase in revenue and operating efficiencies Financial Performance (US$m) Operational Update 81.0% 60 79.9% 80.4% Disciplined cost management continued to drive 77.9% 78.1% 78.1% 80.0% EBITDA margin improvement 50 4
Slide 38: Historical performance
Dulles Greenway Historical performance Recent EBITDA growth underpinned by ongoing regional development US$m Dulles Greenway EBITDA1 80 70 74.2 68.2 60 60 63.0 58.2 58.8 50 52.1 50 47.7 46.0 40 40 40.6 39.9 39.5 37.8 30 30 28.4 20 20 1H 1H 1H 1H 36.2 37.8 1H 1H 29.8 32.0 28.9 28.8 10 10 0 0 2005 200
Slide 39: Corridor development
Dulles Greenway Corridor development Well positioned to provide quality service and attract greater share of future corridor growth Dulles Greenway Corridor Local network factors and ongoing corridor construction works are anticipated to create some Leesburg volatility in traffic over the next 24-
Slide 40: Growth outlook
Dulles Greenway Growth outlook Loudoun County remains one of the fastest growing and most affluent counties in US1 Recorded highest Virginian county investment levels Loudoun County Investment Inflows2 in FY172 US$bn 4.0 Second-highest 2016 employment growth rate in 3.3 Virginia3 3.0 2.3 Highe
Slide 41: Structure
Dulles Greenway Structure 100% estimated economic interest held through ~86.6% subordinated loans and ~13.4% equity Simplified Structure US$175m asset financing MARIL MARL Eight year bullet facility Acquisition Finance Ability to capitalise interest Facility while Greenway is in Green distributi
Slide 42: TRIP II debt profile
Dulles Greenway TRIP II debt profile Fixed-rate debt profile at TRIP II; amortisation locked in until 2056 with no refinancing requirements TRIP II debt profile of five senior debt tranches with a balance of US$998.6 million1 – Bonds rated BBB- by S&P, Ba1 by Moody’s and BB+ by Fitch – Insured by
Slide 43: Asset finance facility
Dulles Greenway Asset finance facility May 2017 acquisition of remaining 50% interest partially funded using asset financing Asset finance facility improves MQA’s funding security and flexibility – Provides the ability to align debt service payments to Greenway’s distributions Key terms of the Ass
Slide 44: ADELAC
ADELAC 4
Slide 45: ADELAC Overview
ADELAC Overview Concession 31 December 2060 expiry Annual tariff increase (February): – Up to 2020: CPI + 1.7%1 Tolling – 2021-2030: CPI + 1.0%1 – After 2030: CPI1 25.03% (12.48% held through APRR and the Ownership remaining 12.55% held through MAF2) Held in conjunction with other APRR co-sh
Slide 46: ADELAC 1H17 results
ADELAC 1H17 results1 Financial Performance (€m) vs Traffic (ADT) Traffic Traffic performance underpinned by 29,283 3.0% 35 increased commuter 28,439 27,142 29,283 ADT usage 30 26,042 27,000 24,610 26.8 25.3 25 23.3 21.8 4.6 22,000 20.1 4.9 4.5 Revenue Performance attributed 20 4.7 4.3 17,000 6.0
Slide 47: Warnow Tunnel
Warnow Tunnel 5
Slide 48: Warnow Tunnel Overview
Warnow Tunnel Overview Concession 12 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 Lan
Slide 49: Warnow Tunnel 1H17 results
Warnow Tunnel 1H17 results1 Financial Performance (€m) vs Traffic (ADT) Traffic Traffic growth reflective of increased tourist 11,397 2.7% 7 12,000 11,097 usage 10,828 10,536 11,000 11,397 ADT 6 10,026 10,189 5.2 10,000 5.0 5 4.7 4.4 9,000 4.0 4.2 1.5 1.5 Revenue Performance supported 8,000 4 1.
Slide 50: Distributions
Distributions 6
Slide 51: MQA distributions
MQA distributions FY17 distribution of 20.0 cps MQA Distributions (cps) 23.5 1H17 distribution of 10.0 cps paid in April 2017 20.0 2H17 distribution of 10.0 cps paid in September 2017 18.0 16.0 13.2 FY18 distribution guidance of 23.5 cps Distributions underpinned by APRR earnings 5.7 Subject
Slide 52: 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 MQA = MAF2 Distribution 2H17 Receipt MQA Investors Managed Funds Multiplied by 50.01% Less Corporate Expenses 33.71%
Slide 53: Cash flow: APRR to MQA securityholders
Cash flow APRR to MQA securityholders Cash flow: APRR to MQA securityholders Eiffarie/Financière Eiffarie (€m) (100%) 2H15 1H16 2H16 1H17 APRR dividend 245 287 6401 326 add APRR tax instalments to FE 176 183 159 217 add Other2 (0) 0 (128)3 (7) less Eiffarie net interest (87) (86) (88) (86) less FE t
Slide 54: MQA Governance
MQA Governance 7
Slide 55: MQA governance
MQA governance MQA has majority independent Boards and independent Chairpersons MQA is managed/advised by Macquarie Fund Advisers Pty MQA Structure Limited (MFA) Macquarie Resources (Staff, premises, IT, etc) Management base fee calculated quarterly at 0.85%1 per annum on MQA’s market capitalisa
Slide 56: MQA performance
MQA performance MQA has outperformed its Benchmark by 862% since listing1 MQA vs Benchmark2 Performance Fees A$ m 6.50 MQA Market Volume (m) (RHS) 27.0 Five performance fees have been triggered to date: 6.00 MQA Share Price (LHS) 24.0 5.50 Benchmark (LHS) —2010 performance fee: A$12.5m 5.00 21.0 —
Slide 57: Appendix
Appendix A
Slide 58: Proportionately consolidated financial performance
Proportionately consolidated financial performance Actual Pro Forma Actual A$m 6 months ended 30 Jun 17 6 months ended 30 Jun 161 Change vs pcp 6 months ended 30 Jun 162 Proportionate revenue 387.3 373.8 3.6% 378.0 Proportionate operating expenses (92.4) (92.8) 0.4% (95.4) Proportionate EBITDA from
Slide 59: Consolidated income statement
Consolidated income statement Statutory accounts 6 months ended 6 months ended 30 June 2017 30 June 2016 MQA Dulles MQA MQA A$m Corporate Greenway7 Total Total Total revenue and other income 391.71 17.4 409.0 3.1 Share of net profits of associates 81.72 - 81.7 210.83 Performance fees (8.0)4 - (8.0)
Slide 60: Consolidated balance sheet
Consolidated balance sheet Statutory accounts As at As at 30 June 2017 30 June 2016 MQA Dulles MQA MQA A$m Corporate Greenway4 Total Total Current assets 56.81 66.5 123.3 224.2 Investments in associates 737.6 - 737.6 950.9 Tolling concessions - 2,254.1 2,254.1 - Goodwill - 59.7 59.7 - Other non-curr
Slide 61: Pro-forma balance sheet information
Pro-forma balance sheet information Including recent APRR acquisition Basis of Preparation MQA prepares its financial statements in accordance with Australian Accounting Standards. The accounting policies upon which the pro-forma balance sheet has been prepared are set out in the 2016 Macquarie At
Slide 62: Pro-forma balance sheet
Pro-forma balance sheet Including recent APRR acquisition MQA reported Settlement of Impact of Issue of New debt MQA pro-forma As at 30 June 2017 (A$m) balance sheet Performance Fees Acquisition share capital facility balance sheet Current assets Cash and cash equivalents 122 - (659) 442 216 121 Rec
Slide 63: MQA corporate cash flow summary
MQA corporate cash flow summary Available cash (A$m) 1H17 1H16 Opening balance – 1 January 223.4 65.4 1. Distribution from Financière Eiffarie (FE) of €54.8m in March 2017 (1H16: €42.2m). Proceeds from Chicago Skyway sale - 137.3 Distribution from APRR1 77.1 62.7 2. Received a final management fee o
Slide 64: Traffic and toll revenue performance
Traffic and toll revenue performance Change Quarter vs pcp Asset 1H17 1H16 vs pcp Sep 16 Dec 16 Mar 17 Jun 17 APRR Light Vehicle VKT (millions) 9,322 9,097 2.5% 3.6% 3.3% (1.1%) 5.8% Heavy Vehicle VKT (millions) 1,845 1,771 4.2% 2.7% 3.4% 5.9% 2.5% Total VKT (millions) 11,167 10,868 2.7% 3.5% 3.3% 0
Slide 65: Asset debt metrics
Asset debt metrics As at 30 Jun 171,2 Gross Cash Net Net debt / EBITDA / DSCR Hedging debt debt EBITDA Interest Actual Default Actual Default Actual Lock-up APRR and Eiffarie3 €m 9,775.4 1,233.2 8,542.2 5.0x n/a n/a n/a n/a n/a 106.7% - APRR €m 8,415.4 1,186.1 7,229.3 4.2x 7.0x 8.5x 2.2x n/a n/a n/a
Slide 66: MQA proportionate gearing
MQA proportionate gearing Continued disciplined approach to capital management MQA’s pro-forma proportionate net debt / EBITDA is 6.7x following completion of the recent APRR acquisition MQA Proportionate Net Debt / EBITDA1,2 14x 13.1x MQA pre APRR Acquisition 12.8x 12.5x 12x MQA (post APRR Acquis
Slide 67: MQA register analysis
MQA register analysis1 Retail 12% Macquarie 2 2 16% Other Foreign Institutions Yarra Capital 2 16% 7% Lazard 2 11% AMP 2 5% Other Australian Institutions 33% 1. Register data as at 31 August 2017. 2. Substantial shareholdings based on most recent notices (as of 30 September 2017). MACQUARIE ATLAS RO
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