Downer Edi Limited · ASX:DOW
Downer Edi — Investor Day (June 2010)
71 slides from Downer Edi's investor day presentation, Jun 2, 2010
Slide 1: Downer EDI Limited Investor Day
DOWNER EDI LIMITED INVESTOR DAY 2 June 2010 2 = © @ D = © < 9 QD — @ a. =
Slide 2: Agenda
Agenda For personal use only CEO’s welcome Chairman’s welcome Waratah review & Asset impairment Waratah project Strategic update Q&A
Slide 3: CEO's welcome
For personal use only CEO’s welcome Geoff Knox CEO and Managing Director
Slide 4: Chairman's welcome
For personal use only Chairman’s welcome Peter Jollie Chairman
Slide 5: Our aim is Zero Harm
Our aim is Zero Harm For personal use only Lost Time Injury Frequency Rate 2.00 (per million hours worked) 1.80 1.60 1.40 1.20 1.00 1.00 0.80 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Lost Time Injury Frequency Rate 12-month rolling average A leading performance in safety 1
Slide 6: Waratah review
Waratah review For personal use only • Full review conducted by Peter Reichler, CEO Group Ventures, in consultation with independent advisors • Design development, review and approval processes far more involved than those envisioned at time of tender – commensurate impacts upon project procurement
Slide 7: Impairment charge
Impairment charge For personal use only • The Group takes a conservative approach to the management of its balance sheet • $70 million pre-tax impairment in H2 FY10 • Impairment charge relating to goodwill of $42 million relating to Works UK and New Zealand Consulting businesses • Impairment of othe
Slide 8: Waratah project
For personal use only Waratah project Peter Reichler CEO Group Ventures
Slide 9: Waratah Project timeline
Waratah Project timeline For personal use only Design & Procure Prove Deliver Achievements for the half What’s next? • Cardiff commissioned • PPTV running on network for integration testing • PPTV delivered to Auburn • Progressive delivery of next sets into Cardiff – Set 3 in June • PPTV commenced t
Slide 10: Waratah Project overview
Waratah Project overview For personal use only • Two-year bid phase – initially both single and double decks - final bids in 2006 for all double decks • 78 x 8 passenger car sets = 624 cars plus 2 spare driver cars; only 72 sets required for service • Combined finance, manufacture and maintenance th
Slide 11: Contract structure
For personal use only Contract structure
Slide 12: Reliance Rail legal structure
Reliance Rail legal structure For personal use only AMP Capital Investors International Public RBS Social Infrastructure Downer EDI managed funds Partnerships Limited (Australia) Trust 25.5% of shares 12.75% of shares 12.75% of shares 49% of shares & units & units & units & units 1,000 shares 1,0366
Slide 13: Key contracts
Key contracts For personal use only RailCorp Project agreements Reliance Rail Rolling Stock Through Life Support Maintenance Facility Design & Manufacture Contract Contract Works Downer EDI Ltd Contract (Guarantor) Downer EDI Rail Downer EDI Rail Downer EDI Rail Hitachi JV PPP Maintenance Hitachi Lt
Slide 14: Estimated Project cash flows
Estimated Project cash flows For personal use only NSW Crown All Figures Nominal $ Guarantee of Contractual Obligations Public Authorities (Financial Arrangements) Act Railcorp Milestones $0.2b (2006-2013) Availability Payments $9.5b (2010-2043) (CPI Indexed) ** Funding $0.137b (2006) Funding $1.9b
Slide 15: Downer's equity investment in Reliance Rail
Downer’s equity investment in Reliance Rail For personal use only • In December 2006, Downer invested $67 million in Reliance Rail representing 49% of total equity • Financial advisors considered Downer equity to be “best for bid” • Downer’s equity investment was fully funded at that time – i.e. no
Slide 16: Reliance Rail Ratings 2006
Reliance Rail Ratings 2006 For personal use only • Step-in/contract novation rights for non-performance by contractors (such as contractual breach or distress) • Ease of step-in for Railcorp if Reliance Rail does not perform/defaults • With Monoline support a AAA/Aaa rating • Excluding the Monoline
Slide 17: Reliance Rail Ratings 2006 to Current
Reliance Rail Ratings 2006 to Current What Has Happened Since 2006? For personal use only • The Global Financial Crisis exposed weaknesses in the Monoline model leading to their ratings downgrades and significant restructuring efforts overseen by insurance regulators • Reliance Rail debt ratings fel
Slide 18: What was the reason for Reliance Rail structure?
What was the reason for Reliance Rail structure? RELIANCE RAIL PTY LTD For personal use only DECEMBER 2006 DEBT FINANCE REQUIREMENT $2.3BN 50% of Debt and Swaps Guaranteed by FGIC (UK) AAA/Aaa Reliance Rail Finance P/L Reliance Rail Finance P/L Standalone Debt and Swaps Standalone Debt and Swaps Rat
Slide 19: Reliance Rail Financial Guarantors
Reliance Rail Financial Guarantors For personal use only • Financial Guarantors/Monoline Insurers were key to optimising Reliance Rail’s funding objectives • Reliance Rail founded on AAA ratings with tolerance for spread risk • Delivered significant saving in financing costs and reduction in refinan
Slide 20: Reliance Rail Bank Debt
Reliance Rail Bank Debt For personal use only • In 2006, Reliance Rail secured a bank debt facility valued at $357 million to be drawn down progressively from June 2012 to fund the balance of its manufacturing obligations • The syndicate members of the bank debt facility are relationship banks to Do
Slide 21: Refinancing Reliance Rail Debt
Refinancing Reliance Rail Debt Reliance Rail Debt Profile All Years as at September For personal use only All Figures A$m 2006 2012 2015 2016 2017 2018 2019 2020 2021 2022 2023 2043 Bank Debt Not 357 RR Option to Extend BBSW+Margin Drawn 221 Floating Rate Refinancing Required if Options Notes RR Opt
Slide 22: Refinancing Reliance Rail Debt
Refinancing Reliance Rail Debt For personal use only • Debt matures in tranches • First maturity 2015 • Refinancing has hard and soft dates • Use of extensions means first refinancing in 2018 – cost of the extensions are below current debt spreads • In either instance RR has 3/5 years of operational
Slide 23: Strategic update
For personal use only Strategic update Geoff Knox CEO and MD
Slide 24: Strategic journey
Strategic journey For personal use only Successfully working on our clients’ critical infrastructure across the Asia Pacific region 18
Slide 25: Back-to-Basics Program
Back-to-Basics Program For personal use only 19
Slide 26: Empowering our People
Empowering Click our People to edit Master title style For personal use only Leadership team further Human Resources Initiatives strengthened Grant Fenn, CFO • Recruitment and workforce planning Eric Kolatchew, CEO Engineering • Talent and performance development Peter Reichler, CEO Group Ventures*
Slide 27: Client engagement
Clientto Click engagement edit Master title style For personal use only Retention of key clients Milestones for One-Downer Transgrid • Solid Energy mine services alliance, New Zealand ARTC Chorus • KDR Tram Franchise, Victoria Pacific National • Collgar Wind Farm, Western Australia BHP Billiton Iron
Slide 28: Optimise portfolio and performance
Optimise Click portfolio to edit Masterand titleperformance style For personal use only Realigned Group portfolios Achievements Matching competencies to core operating capabilities: • Strengthened leadership team - QCC Resources from Engineering to Consulting • Group-wide benchmarking - Projects fro
Slide 29: Optimising our portfolio and performance
Optimising our portfolio and performance For personal use only Market / Clients Downer Asia “One-Downer” Downer Asia “Infrastructure” 23
Slide 30: Optimising our portfolio and performance
Optimising our portfolio and performance For personal use only Extend reach of Aligned new areas current portfolio of focus Downer Group Today + 24
Slide 31: Summary
Summary For personal use only • Synergies program delivering benefits • A strong pipeline of tender opportunities supporting continued demand for our services • Work-in-hand of over $16 billion, preferred status on an additional $3.5 billion • Normalised net operating profit after tax growth for FY1
Slide 32: Q&A
For personal use only Q&A
Slide 33: Investor Day June 2010
For personal use only Investor Day 2 June 2010
Slide 34: Consulting
For personal use only Consulting Investor Day
Slide 35: Organisational Structure
Organisational Structure For personal use only SHARED SERVICES Finance Human Resources Legal & Commercial Marketing Australia & Asia Resources New Zealand Incorporating: Snowden Group Mineral Technologies QCC Resources 3
Slide 36: Enhancing differentiated capabilities across our sectors
Enhancing differentiated capabilities across our sectors For personal use only Water Buildings (Public Buildings, Social Infrastructure) Transport Urban (Road, Rail, Airports & Ports) Development Resources Industrial (Coal, Iron Ore, Mineral Sands, Metals) Energy Communications 4
Slide 37: Client mix
Client mix New Zealand Australia For personal use only Gov t Dev elopers 9% State Gov t Local Govt 11% 61% Private Clients 33% Local Gov t Priv ate 14% Dev elopers 56% Central Govt Others 6% 10% Snowden Asia Gov t Ministries & Depts 31% Gov t Stat Downer Divs Boards 6.2% 17% Mining & Explorat ion Co
Slide 38: Capability matrix
Capability matrix Water Transport Resources Energy Building Urban Industrial Communications Development For personal use only Systems Potable Systems Wastewater Catchment Flood & Stormwater/ Management Water Integrated Road Rail Marine Airports Iron Ore Coal Bauxite Metals Precious Base Metals Miner
Slide 39: Points of presence
For personal use only Points of presence 7
Slide 40: Engineering
For personal use only Engineering Investor Day
Slide 41: Downer Engineering
Downer Engineering Market Sectors Business operations Geography Infrastructure Asia / Emerging For personal use only 13% 11% New South Wales Oil & Gas / 30% Petrochecmical Projects Western Australia 9% 13% 35% Resources 52% Power 11% Contracting 65% Energy Victoria 26% 13% Queensland 22% Business op
Slide 42: Enhancing our capabilities to manage larger scale work
Enhancing our capabilities to manage larger scale work and expanded skills For personal use only CURRENT Services Profile Key Themes PROPOSED Services Profile Contracting and Projects •Targeting of wider Projects Power Systems client base with enhanced business development and Structured combination
Slide 43: Developing capability aligned with markets
Developing capability aligned with markets For personal use only EPCM Maintain/ Feasibility FEED Alliances Construction Operate Renew JV’s ALIGN WITH MARKETS Resources Coal Quality Coal Consulting Projects SMP Fabrication Plant Mineral sands Mineral Technologies Projects Mechanical Downer Group Iron
Slide 44: Capability matrix
Capability matrix Contracting Power Systems Projects For personal use only Mechanical Electrical Instrumentation By Market Generation Renewable Minerals Technology Project Management QCC Resources Resources & Mining Transmission Sub-stations Distribution Commercial & Maintenance Maintenance Maintena
Slide 45: Points of presence
For personal use only Points of presence 13
Slide 46: Mining
For personal use only Mining Investor Day
Slide 47: Diversified service offering
Diversified service offering For personal use only Market Sectors Commodity Type Geography Other Other Victoria 2% 7% 5% Mining Services Iron Ore New Zealand 17% 9% 6% Queensland Gold Western Australia 46% 11% 20% Coal Mining 73% New South Wales 83% 21% Notes: Charts reflect FY10 revenue to 30 April
Slide 48: Points of presence
For personal use only Points of presence 16
Slide 49: Delivering whole-of-lifecycle mining solutions to our clients
Delivering whole-of-lifecycle mining solutions to our clients For personal use only Our capabilities Our clients 9 Open-cut mining Australia Overseas 9 Underground mining AngloGold Ashanti BHP Billiton 9 Exploration drilling BHP Billiton Iron Ore Codelco 9 Crushing services BMA Coal Ok Tedi Mining 9
Slide 50: Opportunity-rich competitive landscape
Opportunity-rich competitive landscape For personal use only Market share concentration Basis of competition Industry globalisation • Concentration is high • Return to more sustainable • Investment capital is • Two major players competition levels mobile • Competition also with • New markets are evo
Slide 51: New Zealand
For personal use only New Zealand Investor Day
Slide 52: Downer New Zealand
Downer New Zealand For personal use only United Kingdom 5% Pacific 4% Engineering New Zealand 21% Works New Zealand 70% Note: Chart reflects FY10 forecast revenue 20
Slide 53: Providing essential services to our Infrastructure partners
Providing essential services to our Infrastructure partners For personal use only Other Telco's 3% Telecom NZ/Chorus 16% Local authorities 39% New Zealand Transport Agency 23% Other Government contracts Other Indirect Government 4% 9% contracts 6% Note: Chart reflects FY10 forecast revenue 21
Slide 54: Offering a broad range of services to Transport, Water and Telecommunications
Offering a broad range of services to the Transport, Water and Telecommunications sectors For personal use only Other 13% Unitied Kingdom Road maintenance 5% 32% Pacific 4% Facilities management 5% Telecommunications Road construction 16% 8% Products 8% Energy/Ports/Airports Water maintenance constr
Slide 55: Growth opportunities in an established market
Growth opportunities in an established market For personal use only New Zealand 2010 2015e Growth market segment $m $m $m Maintenance - Road 800 900 100 - Water 180 200 20 Construction - Road 1,300 1,500 200 - Water 900 1,400 500 - Energy/Ports/Airports 1,500 1,800 300 Telecommunications 540 600 60
Slide 56: Competitor analysis
Competitor analysis For personal use only Telecommunications Traffic Management Minor Construction Concrete Products Technical / Asset Emulsion Supply Bitumen Supply Asphalt Laying Water Services Fire Protection Major Projects (Commercial / Asphalt Plants Maintenance Management Management Management
Slide 57: Points of presence
For personal use only Points of presence 25
Slide 58: Rail
For personal use only Rail Investor Day
Slide 59: Delivering the best global technology solutions to our clients
Delivering the best global technology solutions to our clients For personal use only Downer EDI Rail Delivery Model 27
Slide 60: Delivering new build and ongoing maintenance support
Delivering new build and ongoing maintenance support to our client base For personal use only Customers Segments Parts & accessories Passenger Other Reliance Rail maintenance Freight build Passenger build Pacific National Queensland Freight Rail maintenance Charts reflect FY2010 forecast revenue 28
Slide 61: Significant long-term recurring revenues
Significant long-term recurring revenues For personal use only Duration of passenger and freight maintenance contracts • Maintenance revenue contracted over the medium 10+ years to long-term • Strong work-in-hand for 3-10 Years passenger and freight product • Pipeline of opportunities in excess of $
Slide 62: Underlying growth drivers remain
Underlying growth drivers remain For personal use only Freight: Growth in resources continues. Recovery in Intermodal market. Fleet replacement. Rail Infrastructure Investment. Passenger: Growth in passenger led by high fuel costs, road congestion, parking constraints and population growth. Fleet re
Slide 63: Strategically located to meet our clients needs
Strategically located to meet our clients needs For personal use only 31
Slide 64: Australian market leader delivering whole-of-life solutions
Australian market leader delivering whole-of-life solutions to our clients For personal use only •Client-tailored •Optimised for •Best practice •Joint venture • Australia wide rail solutions safety, reliability narrow and with coverage and availability standard operators (22 sites) •Broad range gaug
Slide 65: Works Australia
For personal use only Works Australia Investor Day
Slide 66: Revenue base highly leveraged to Government spend
Revenue base highly leveraged to Government spend For personal use only Federal 10% State 37% Local 21% Approx. 50% of Private driven by direct government expenditure Private 32% Note: Chart reflects FY10 forecast revenue for Works Australia 34
Slide 67: Supplying a range of interdependent services within Road and Rail
Supplying a range of interdependent services within the Road and Rail sectors For personal use only Bitumen/ Stabilisation Emulsions 2% 2% Sealing 10% Asphalt manufacting and contracting 30% Road maintenance 18% Pav ement rejuv enation Rail maintenanace 2% 5% Land dev elopment 6% Rail construction M
Slide 68: National business with a broad service offering
National business with a broad service offering For personal use only Roading Services and Specialist Civils - Revenue by region Western region 30% North eastern region Specialist Civils 38% Rail 13% 20% Road Services 67% Vic, Tas, SA, NT 32% Note: Charts reflect FY10 forecast revenue for Works Aust
Slide 69: Positive three-year outlook for Australian markets
Positive three-year outlook for Australian markets For personal use only Road pavement products and services Road maintenance Water Rail projects and maintenance Civil construction Outlook based on Downer internal estimates 37
Slide 70: Competitor analysis
Competitor analysis Pavement rejuvenation For personal use only Road maintenance Land development Minor maintenace Rail maintenance Civil construction Water - Pipelines Road sealing civil services Rail Projects Stabilisation Bitumen Asphalt Downer Works Boral Fulton Hogan Bilfinger Berger Services T
Slide 71: Points of presence
For personal use only Points of presence 39