Transurban Group Ltd. · ASX:TCL
Transurban — Merger or Acquisition (May 2006)
27 slides from Transurban's merger presentation, May 3, 2006
Slide 1: Pocahontas Parkway Investor Briefing
POCAHONTAS PARKWAY Investor Briefing 3 May 2006
Slide 2: Disclaimer
Disclaimer The Transurban Group is a triple stapled security listed on the Australian Stock Exchange comprising Transurban Holdings Limited (ACN 098 143 429), Transurban Holdings Trust (ARSN 098 807 419) and Transurban Limited (ACN 098 143 410). The responsible entity of the Transurban Holdings Trus
Slide 3: Overview
Overview • Good asset exhibiting strong revenue growth • Positive project economics based on conservative assumptions • Prudent financing to protect and later enhance distribution flow • Value accretive with significant potential upside • Operational foothold in strategic Virginia market
Slide 4: The Deal - Overview
The Deal - Overview • Total funding of US$611 m • Equity commitment up to US$191 m – US$136 million at financial close – Up to US$ 55 million over next 6 years • 70 / 30 split between debt and equity • Transurban has 100% of equity • Equity IRR of 12.6% • Financial close expected June 2006
Slide 5: Investment Rationale
Investment Rationale Long dated concession 99 years Fixed schedule to 2016, thereafter at the greatest Toll Escalation of 2.8% or CPI or real GDP Strong Land use potential – Wilton Farm, Curles Neck, Richmond International Airport Strategic position Provides only crossing of James River for 6 miles
Slide 6: Builds on Transurban skills
Builds on Transurban skills • Hands on owner and manager • Active engagement with local stakeholders as we do with Westlink M7 • Conservative traffic forecasting including land use analysis and willingness to pay assumptions • Tolling and operations to improve efficiency as we have with Hills M2
Slide 7: The asset and its potential
The asset and its potential
Slide 8: Pocahontas Parkway in ramp up phase
Pocahontas Parkway in ramp up phase • 14 kilometre, 4 lane toll road • Opened to traffic in 2002 • Hybrid of cash / electronic tolls • Average travel time saving of 15 minutes • CY 2005 AADT of 15,600 (increase of 6% on 2004) • CY 2005 revenue of US$11 million (increase of 22% on 2004)
Slide 9: Pocahontas Parkway – opening up Richmond
Pocahontas Parkway – opening up Richmond Richmond is the Capital of Virginia • Richmond-Petersburg area has a population of 1.2 million • Ranked in USA’s top 25 largest metro areas for doing business • Per capita income is 4.5% higher than the national average • Unemployment rate of 4.0%, under the
Slide 10: Growth from land use
Growth from land use • Wilton Farm and connecting areas − Construction starts mid 2006 with housing beginning mid 2007 − Over 3200 dwellings, 1185 acres − 200,000 sq ft commercial space − HH Hunt is one of Richmond’s largest developers − Road and connecting upgrades to adjacent areas − Chesterfield
Slide 11: Growth from land use
Growth from land use Richmond International Airport* • US$ 250 million terminal redevelopment • Federally funded road upgrade • High passenger growth, 7 carriers including Jet Blue Ç 8.2% in 2005 Ç10.0% in 2004 • Rapidly growing cargo capability − Over 1 million sq ft of apron − 142,000 sq ft of war
Slide 12: Daily Traffic
Traffic Growth 35,000 30,000 Daily Traffic 25,000 20,000 15,000 10,000 5,000 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Actual Forecast • CAGR – 2002 to 2006 – 11.1% pa • CAGR – 2007 - 2026 – 4.4% pa • CAGR – post 2026 – 1% pa
Slide 13: Strategic foundation in Virginia
Strategic foundation in Virginia Pocahontas Parkway – negotiated deal Capital Beltway HOT lanes – development agreement I-95/395 HOT lanes – preferred Operating Freeways Operating Tollways Planned Projects
Slide 14: The deal and its structure
The deal and its structure —
Slide 15: The Deal - Key Points
The Deal - Key Points • Negotiated deal • 99 year lease • 100% owned by Transurban • Equity commitment up to US$191 million • Financial Close expected June 2006 • Accept operations, maintenance and toll collection responsibilities • Construct the Richmond Airport Connector (subject to Federal Fundin
Slide 16: Toll Escalation
Toll Escalation • Fixed until 2016 1-Jan-06 1-Jan-08 1-Jan-11 1-Jan-13 1-Jan-14 1-Jan-15 1-Jan-16 Main Line $2.25 $2.75 $3.00 $3.25 $3.50 $3.75 $4.00 Ramps 0.75 1.00 1.25 1.50 1.75 2.00 2.25 Two axle vehicle, additional axles $1 per axle • After 2016, greatest of 2.8% or CPI or real GDP. 2.8% floor
Slide 17: Strong Project Returns
Strong Project Returns Base Case Nominal Equity Return 12.6% • Potential upside from – toll increases higher than 2.8% floor – longer term traffic growth exceeding 1% – refinancing • Nominal Project Return pre-financing – 8.6%
Slide 18: Sensitivity Analysis
Sensitivity Analysis IRR Base Case IRR 12.6% 2 year Wilton Farm Delay - 50 bps 50% Wilton Farm Build Out - 85 bps 2% increase in CPI + 132 bps 2% decrease in CPI - 2 bps 20% increase in operating costs - 28 bps 20% increase in major maintenance - 10 bps 5% increase in traffic + 58 bps 5% reduction i
Slide 19: Source of Funds
Source of Funds US$ millions Funding Source Senior Bank Debt 420 Non-recourse Equity contribution 191 Transurban DRP Total 611
Slide 20: Impact on Transurban
Impact on Transurban • Equity funded through distribution reinvestment plan • Near term distribution forecasts unchanged, longer term distributions to improve.
Slide 21: Use of Funds
Use of Funds US$ millions Bond Payout 487 Operational Enhancements 8 Development Fee and Costs 13 Finance and Arranging Fee 11 Major Maintenance Reserve 2 Reserves and Contingent Funding 90 Total 611
Slide 22: Risk Allocation
Risk Allocation • Compensation Events: – Competitive Transportation Facilities – Discriminatory Governmental Action • Pre-existing contamination protection • Toll flexibility to protect debt servicing • Revenue sharing – – after 6.5% real project IRR (debt and equity) – Equivalent to nominal equity
Slide 23: Richmond Airport Connector
Richmond Airport Connector • Obligated to build in event US$150 million Federal loan for project obtained • Construction costs capped at US$45 million • VDOT retains pre-existing environmental risk and cost • If Federal loan is obtained – funding mix alters, but project economics largely unchanged
Slide 24: Summary
Summary
Slide 25: Pocahontas Key Points
Pocahontas Key Points • Good asset with upside − Land use growth − Wilton Farm, Richmond International Airport − Commercial & residential • A solid foothold in USA − Operational basis − Enhanced relationship with VDOT • A value accretive deal − Positive project economics − Protect and later enhance
Slide 26: Transurban post Pocahontas
Transurban post Pocahontas • Top six toll road investor globally Pocahontas • Good assets 4% Westlink M7 • Measured growth 11% • Conservative Group gearing CityLink Hills M2 • Strong position in Virginia 31% 54% Asset Mix
Slide 27: Transurban
rban — transul