Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — Investor Presentation (October 2005)
31 slides from Challenger's investor presentation, Oct 19, 2005
Slide 1: Challenger Infrastructure Fund 1:3 Non-renounceable Entitlement Offer
Challenger Infrastructure Fund 1:3 Non-renounceable Entitlement Offer 19 October 2005
Slide 2: Disclaimer
Disclaimer • The information in this document is provided for informational purposes only in relation to the marketing to certain wholesale investors of an Entitlement Offer for Challenger Infrastructure Fund (“CIF”) and is subject to change without notice. Nothing contained in this document constit
Slide 3: Agenda
Agenda 1. Executive Summary 2. Structure of the Entitlement Offer 3. Acquisition of Inexus 4. Detailed financial forecasts for CIF 5. Pipeline update 6. Timetable and contacts 3
Slide 4: 1. Executive Summary
‘ “1. Executive Summary €3 challenger ial Services Gro
Slide 5: Introduction
Introduction • On 1 September 2005, CIF announced it had successfully led a consortium in the acquisition of Inexus Group (Holdings) Limited (‘Inexus’) for an enterprise value of £464 million. CIF was the largest investor in the consortium with an interest of 80.4%. • As a result of the acquisition,
Slide 6: Inexus meets all of CIF's investment criteria
Inexus meets all of CIF’s investment criteria CIF investment criteria Inexus Commentary • Certainty for 98% of revenue from connections existing at 31 May 2005 until 2018 Regulated industry or near monopoly market • Revenues for new connections benefit from a high degree of position regulatory certa
Slide 7: Summary impact on CIF of Acquisition and Entitlement Offer
Summary impact on CIF of Acquisition and Entitlement Offer Diversification of CIF’s investment portfolio Increased forecast cash Distributions and targeted return Increased tax deferred proportion of Distributions CIF’s portfolio to deliver reliable cashflow Continued flexibility to pursue robust pi
Slide 8: Improved portfolio diversification towards growth assets
Improved portfolio diversification towards growth assets CIF’s asset mix Portfolio by Asset Portfolio by Sector Portfolio by growth profile Portfolio by ownership Wales & the West DN UK Gas DNs Classic utility Inexus UK IGT Majority-owned Minority stake 14% 27% assets 27% 54% 54% 54% 46% The ntl Bro
Slide 9: Returns being generated by CIF are attractive
Returns being generated by CIF are attractive • Indicative annualised cash return : — On New Class A Securities from Final Allotment Date to 30 June 2006: 13.6% p.a. — On Class A Securities from IPO and Entitlement Offer to 30 June 2006: 10.5% p.a. — Forecast distributions from Seed Assets and Inexu
Slide 10: 2. Structure of the Entitlement Offer
2. Structure of the Entitlement Offer
Slide 11: Overview of Entitlement Offer
Overview of Entitlement Offer • Issue of approximately 60 million New Class A Securities Offer size and • Approximately $210 million, fully paid eligibility • Offer open to Eligible Holders (at Record Date) in Australia and New Zealand • 1:3 pro rata Entitlement Offer, underwritten by JPMorgan • Fix
Slide 12: 3. Acquisition of Inexus
‘ 3. Acquisition of Inexus €3 challenger
Slide 13: Quality essential infrastructure asset with growth
Quality essential infrastructure asset with growth Market leadership • Almost twice the connections of nearest competitor • 47% IGT market share and Aligned & highly experienced complete national coverage Robust growth opportunities management team • CIF has retained and incentivised • Strong order
Slide 14: Inexus is the clear market leader in the UK IGT market
Inexus is the clear market leader in the UK IGT market • 47% estimated market share of Estimated market share of total IGT domestic new build connections (31 May 2005) existing IGT connections at 31 May 2005, nearly twofold its nearest Inexus GT C BCGL Other competitor 6% 21% • 464,000 gas connectio
Slide 15: Inexus' growth prospects are robust
Inexus’ growth prospects are robust • 17% CAGR in connections in the three years to 31 December 2004 • Stable forward order book, with 75% expected to be built in next three years Gas & electricity built connections (000s) Growth in annual forward order book (000s) Gas built Electricity built Gas Co
Slide 16: Inexus' growth prospects are robust (cont'd)
Inexus’ growth prospects are robust (cont’d) Dwellings completed in Great Britain • UK new build housing forecast to grow beyond 169,000 p.a. (last 5 years average) 200,000 5 year average – Meet housing shortages, particularly in the South of England 150,000 • Inexus’ estimated target market is appr
Slide 17: Inexus' growth prospects are robust (cont'd)
Inexus’ growth prospects are robust (cont’d) • New business opportunity in electricity connections – Electricity sales twice that of gas business at same stage of development • Inexus is first to market with dual fuel offering – Inexus is the only active IGT in the UK licensed to provide a one-stop
Slide 18: Highly favourable regulatory regime
Highly favourable regulatory regime • 98% of gas revenues and 90% of contracted gas revenues from connections as at 31 May 2005 are fixed in real terms until 31 December 2018 (contracts signed prior to 1 January 2004) — Thereafter, the revenues migrate to Relative Price Control (“RPC”) and benefit f
Slide 19: Once built, connections are highly cash generative
Once built, connections are highly cash generative . . . • Excellent customer profile consisting Premium customer base (2004) of large UK gas shippers • Historically, strong EBITDA margins London energy Powergen • Majority of the cost base is Sc ottish power British Gas trading Other comprised of ov
Slide 20: Capex only committed after contract is secured
. . . with capex only committed after contract is secured • Capex is discretionary and revenue driven • Capex is only committed on an order once a contract is executed with the developer • The developer is typically responsible for excavation • Completion rate has been historically very high at 99.5
Slide 21: Detailed historical and projected financials for Inexus
Detailed historical and projected financials for Inexus Inexus pro forma financial summary (£’000) Inexus connections growth (‘000) Year end Year end 31 December 2002 2003 2004 2005F 31 December 2002 2003 2004 2005F Asset ownership 14,163 17,631 21,445 24,906 Connections built transportation income
Slide 22: 3. Detailed financial forecasts for CIF
3. Detailed financial forecasts for CIF
Slide 23: Sources and applications of Entitlement Offer proceeds
Sources and applications of Entitlement Offer proceeds Sources Amount Applications Amount (A$m) (A$m) First Instalment 105.0 Payment of interest on bridging 1.0 loans Second Instalment 105.0 Repayment of Challenger bridging 69.2 loan Part repayment of CBA and Calyon 28.2 bridging loans Estimated Ent
Slide 24: Expected return from Seed Assets and Inexus
Expected return from Seed Assets and Inexus 10 months to 12 months to All amounts in $ million, unless otherwise stated 30 June 2006 30 June 2007 Distributions from Seed Assets Arqiva 16.8 9.3 North DN 1.8 6.0 Wales & the West DN 7.8 10.3 26.4 25.6 Distribution from Inexus 9.2 34.4 Prior period dist
Slide 25: CIF forecast pro forma balance sheet
CIF forecast pro forma balance sheet As at 1 September 2005 All amounts in $ million Seed Assets Inexus Consolidated Assets Cash 8.1 17.9 26.0 Receivables 316.3 119.3 435.6 Work in progress - 9.7 9.7 Fixed Assets - 232.1 232.1 Available for sale financial assets 293.5 - 293.5 Goodwill - 992.5 992.5
Slide 26: CIF forecast income statement
CIF forecast income statement Directors’ forecast for the 10 months ending 30 June 2006 All amounts in $ million Seed Assets Inexus Consolidated Revenue Investment revenue - Arqiva 5.4 - 5.4 - North DN 1.7 - 1.7 - Wales & the West DN 7.8 - 7.8 Total Investment revenue 14.9 - 14.9 Transportation inco
Slide 27: 4. Pipeline update
| ger 4. Pipeline update
Slide 28: Global pipeline of investment opportunities remain robust
Global pipeline of investment opportunities remain robust • Challenger has identified significant investment opportunities North America UK Europe Australia •• Toll Tollroads roads •• PPP/PFI PPP/PFI •• Toll Tollroads roads •• Transport Transport Target •• Power Power •• Regulated Regulated •• Airpo
Slide 29: 5. Timetable & key contacts
€3 challenger 5. Timetable & key contacts
Slide 30: Important dates
Important dates Offer timetable PDS lodged 19 October 2005 Institutional Entitlement Offer opens 19 October 2005 Institutional Entitlement Offer closes 20 October 2005 Record date for Entitlement Offer 7.00pm on 24 October 2005 Retail Entitlement Offer opens 25 October 2005 Early Retail Acceptance D
Slide 31: Contact information
Contact information Challenger Infrastructure Fund JPMorgan Australia Limited Steve Bickerton Paul Ryan Chief Executive Tel: 612 9220 3158 Tel: 612 9994 7327 31
Challenger Infrastructure Fund — Investor Presentation (October 2005) on 6ix