Atlas Arteria · ASX:ALX
Atlas Arteria — Investor Presentation (July 2018)
67 slides from Atlas Arteria's investor presentation, Jul 10, 2018
Slide 1: Atlas Arteria Investor Presentation July 2018
Atlas Arteria Investor Presentation July 2018
Slide 2: Important notice and disclaimer
Important notice and disclaimer Disclaimer Atlas Arteria (ALX) comprises Atlas Arteria Limited (ACN 141 075 201) (ATLAX) and Atlas Arteria International Limited (Registration No. 43828) (ATLIX). Macquarie Fund Advisers Pty Limited (ACN 127 735 960) (AFSL 318 123) (MFA) is the manager/adviser of ATLA
Slide 3: 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 4: Contents
Contents 01 Overview Insert divider title 5 3 02 A Insert APRR divider title 11 7 03 Dulles Greenway 34 04 ADELAC 43 05 Warnow 46 06 Distributions 49 07 ALX governance 54 08 Appendix 59
Slide 5: Overview
Overview O01
Slide 6: ALX portfolio
ALX portfolio Global infrastructure developer and operator, listed on ASX with market capitalisation of A$4.3bn1 ALX Portfolio EASTERN FRANCE APRR / ADELAC VIRGINIA, UNITED STATES ROSTOCK, GERMANY Dulles Greenway Warnow Tunnel APRR ADELAC Greenway Warnow 25.00% 25.03%2 100%4 70% 20km3 22km 2,323km3
Slide 7: ALX value proposition
ALX value proposition To generate long term value for ALX securityholders via investment in quality infrastructure assets providing access to long-dated, predictable and growing cash flows ALX Distributions (cps1) • Continued focus on growing distributions and enhancing 1H 2H Guidance 2 20% distribu
Slide 8: 2017 portfolio performance
2017 portfolio performance ALX’s portfolio continued to deliver growth in 20171 ▲2.7% Traffic APRR 85% of ALX EBITDA2 ADELAC 2% of ALX EBITDA2 7.0% 2017 portfolio asset performance 5.3% 5.8% 4.2% 3.2% 2.2% ▲3.9% Revenue Traffic Revenue EBITDA Traffic Revenue EBITDA Dulles Greenway Warnow 12% of ALX
Slide 9: 1Q18 portfolio performance
1Q18 portfolio performance Weighted average toll revenue up 5.4% and traffic up 3.4% for the March 2018 quarter1 on pcp APRR ADELAC Dulles Greenway Warnow APRR 6.6% 6.3% 4.8% 4.4% -4.3% 1.8% -6.5% 2.7% Traffic Toll revenue Traffic Toll revenue Traffic Toll revenue Traffic Toll revenue • Continued st
Slide 10: Macroeconomic environment
Macroeconomic environment ALX’s asset portfolio is positioned for a rising inflationary environment CPI-linked tolling ~74% of ALX debt is Long-dated debt Portfolio asset escalation1 benefits from currently fixed rate / maturities reduce deleveraging driven by a rising inflation rate hedged2 reducin
Slide 11: APRR
02 APRR
Slide 12: APRR Overview
APRR Overview 30 November 2035 (APRR) Concession 30 September 2036 (AREA) expiry 31 December 2060 (ADELAC)1 Up to 2023: annual tariff increase (February), linked to CPI (ex. Tobacco). Refer to slide 22 Post 2023: annual tariff increase of 70% x CPI (ex. Tobacco) as Tolling per concession c
Slide 13: APRR Concessions
APRR Concessions APRR comprises three concessions ALX ownership 25.00% APRR Concession Expiry: Nov 2035 Road Length: 1,895km AREA Concession Expiry: Sep 2036 Road Length: 408km ADELAC1 Concession Expiry: Dec 2060 Road Length: 20km1 1. APRR holds a 49.9% interest in ADELAC. ALX’s total indirect inter
Slide 14: 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 – Leveraged to European economic growth IRELAND • Provi
Slide 15: APRR Earnings stability
APRR Earnings stability Continued earnings resilience through economic cycles, with over 50 years of operating history and earnings growth APRR EBITDA1 and France GDP2 growth €m 1,800 6.0% 1,775 EBITDA CAGR 2001-2017: 1,685 1,600 4.8% 1,589 4.0% 1,520 1,400 1,475 1,399 1,428 1,326 1,200 1,244 1,265
Slide 16: APRR 2017 results
APRR 2017 results1 Record earnings performance underpinned by continued growth across light and heavy vehicle traffic Light Vehicles Heavy Vehicles ▲3.2% VKTbn VKTbn Traffic 20.5 3.8 23.8bn VKT2 +2.8% 3.7 +5.9% 20.0 20.1 3.7 +3.6% 3.6 19.5 19.6 +4.5% 3.5 3.5 ▲4.2% 19.0 +2.6% 3.4 Revenue 18.9 +2.9% €
Slide 17: APRR French macroeconomic environment
APRR French macroeconomic environment APRR remains well positioned to benefit from further improvements in French economic activity Household disposable income and APRR light vehicle traffic1 Import, manufacturing and APRR heavy vehicle traffic1 120 130 115 120 110 110 105 100 100 95 90 90 80 2005 2
Slide 18: APRR Financial performance
APRR Financial performance Stable revenue growth with ongoing cost management 5 Year Financial Performance (€m) 2017 Financial Performance 72.4% 73.2% 71.8% Earnings performance attributable to traffic growth, 75% 3,000 70.3% 70.7% 70% favourable traffic mix (strong growth in heavy vehicle traffic
Slide 19: APRR 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 2017 was 3,362 (2016: 3,414) €m Operating Expenses €800 80% 71.8% 72.4% 73.2% 69.2% 70.0% 70
Slide 20: APRR Ongoing initiatives
APRR Ongoing initiatives Ongoing initiatives have steadily improved automated toll collection Automated transactions reached 98.9% in 2017 with ETC accounting for 57.6% of total transactions Continuing commitment to cost control and operational improvement Toll Collection Mechanisms 100% 5% 4% 3
Slide 21: APRR Operations
APRR Operations Commitment to enhancing operations and service Harnessing Technology Network Improvement Customers and Employees Optimisation of toll collection through Over 30km of motorway added to network Customer satisfaction ratings >95% automation in 2017: in 20172 and 20183 Named ‘Bes
Slide 22: APRR 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 23: APRR Profitability
APRR Profitability Record 2017 net profit, increasing 5.3% on 2016 and underpinning distributions to ALX Driven predominantly by higher revenue and net interest savings Partially offset by increased tax due to a one-off additional exceptional tax1 APRR Profit Waterfall2 (€m) 1 8 17 54 92 10 97 7
Slide 24: APRR 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 generated cash flows in excess of net profit. Excess cash is used to fund: 1) Debt reduction: Progressive reduc
Slide 25: APRR Debt structure
APRR Debt structure Prudent debt structure with potential to improve overall APRR Group financing terms over time Simplified ATLIX1 to APRR Debt Structure ATLIX €350m MIBL debt facility 100% Maturity in Oct 2024 Margin over Euribor2 MIBL3 Refer to slide 29 50.01% MAF4 Group 50% - 1 share €1,31
Slide 26: APRR Debt profile
APRR 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 €8.4 billion1 as at 31 Dec 2017; representing 4.8x Net Debt / EBITDA Over €3 billion of liquidity2 via
Slide 27: APRR Financing costs
APRR Financing costs Further interest saving opportunities remain over the medium term APRR/Eiffarie 2017 Cost of Debt2,3 Opportunity to continue to replace maturing APRR debt with lower cost facilities through 20191 ̶ €1.3bn of debt issued by APRR in 2017 at a weighted APRR APRR average cost of 1
Slide 28: APRR Bond issues
APRR Bond issues APRR continues to benefit from favourable bond market conditions March 2017: €100m issued with a 0.34% coupon, index-linked; April 2032 maturity May 2017: €500m issued with a 1.625% coupon; January 2032 maturity November 2017: €700m issued with 1.50% coupon; January 2033 matur
Slide 29: APRR MIBL debt facility
APRR MIBL debt facility MIBL1 debt facility put in place in October 2017 to partially fund the acquisition of an additional 4.86% interest in APRR, refinanced and upsized May 2018 €150 million original facility refinanced and increased to €350 million in May 2018 Part of the proceeds from the in
Slide 30: APRR Capital expenditure
APRR Capital expenditure Since 2008, €3.7bn has been spent to grow, improve and maintain the network €m Capital Expenditure 498 500 81 432 407 398 405 400 358 350 62 65 159 45 187 285 289 93 300 27 261 303 54 39 240 240 200 210 171 168 172 104 123 127 100 115 102 115 108 96 95 103 94 93 92 - 2008 20
Slide 31: APRR Capital projects
APRR Capital projects Continued investment into growing and improving the existing network Additional sections added in last three years 50km, or 2% of network, added in last three years APRR has added 44km under the 2014-18 Management Contract and 2015 Stimulus Package over the last three years:
Slide 32: APRR 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 & concession Supplemental toll adjustments Changes to key In-Principle extension contractual terms Agreement Compensation for 20
Slide 33: APRR French taxation update
APRR French taxation update APRR to benefit from recently announced changes to French taxation APRR Group to benefit from reduction in French corporate income tax rate from 33.3% to 25.0% by 20221 ̶ Including the additional social surcharge of +3.3%, APRR’s applicable tax rate will reduce from 34.
Slide 34: Dulles Greenway
03 Dulles Greenway
Slide 35: 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 SCC1 thereafter Current tolls for mainline plaza two-axle vehicles (effective 3 March 2018): ̶ Peak: US$5.65 ̶ Off-peak: US$4.65 Own
Slide 36: Dulles Greenway 2017 results
Dulles Greenway 2017 results1 Workday Traffic Performance Non-Workday Traffic Performance ▼1.3% Traffic ADT ‘000s ADT ‘000s 52,555 ADT2 64 34 +5.3% +1.6% +0.1% -1.6% +6.4% 62 62.4 33 33.2 33.3 61.4 32.7 60 +5.0% 32 ▲1.3% Revenue 59.3 +4.4% 58 31 US$92.2m +2.6% 30.7 56 56.5 30 +1.3% +2.0% 55.1 29.4 5
Slide 37: Dulles Greenway Performance
Dulles Greenway Performance Continued earnings growth, despite reduced traffic levels 2017 traffic impacted by surrounding network changes and construction works (refer slide 39) Continued revenue and EBITDA growth, largely attributable to March 2017 toll increase of ~2.8% 81.4% EBITDA margin,
Slide 38: Dulles Greenway Operations
Dulles Greenway Operations 100% operational control provides strengthened commitment to enhancing operations and service Harnessing Technology Operational Improvement People and Safety Optimisation of toll collection through 81.4% EBITDA margin No lost time injuries in 2017 increased use of au
Slide 39: Dulles Greenway Corridor development
Dulles Greenway Corridor development Local network developments have resulted in continued traffic volatility Corridor Network Changes 2016-2017 Growing western-end 15 Removal of traffic signals congestion due to along Route 7 up to junction increased merging PM with Route 28, improving traffic from
Slide 40: Dulles Greenway Loudoun County growth outlook
Dulles Greenway Loudoun County growth outlook Loudoun County remains one of the fastest growing and most affluent counties in the US1 Highest Virginian county investment levels for FY172 Loudoun County Investment Inflows2 US$bn Highest 2017 employment growth in Virginia3 4.0 3.3 Second highest
Slide 41: Dulles Greenway Structure
Dulles Greenway Structure 100% estimated economic interest held through and ~13.4% equity and ~86.6% subordinated loans1 Simplified Structure ATLIX ATLAX2 Green Bermudian ALX US Holding Holdings Companies 100% 100% US$1,029m3 TRIP II senior debt Loans1 Five senior bond tranches Dulles Greenway Oth
Slide 42: Dulles Greenway 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$1,029.3 million1 ̶ Bonds rated BBB- by S&P, Ba1 by Moody’s and BB+ by Fitch ̶ Insured b
Slide 43: ADELAC
04 ADELAC
Slide 44: ADELAC Overview
ADELAC Overview Concession expiry 31 December 2060 Annual tariff increase (February): – Up to 2020: CPI + 1.7%1 – 2021-2030: CPI + 1.0%1 Tolling – After 2030: CPI1 – Current average car tolls (effective 1 February 2018): €22.94c/km 25.03% (12.48% held through APRR and the remaining 12.55% held
Slide 45: ADELAC 2017 results
ADELAC 2017 results1 5 Year Financial Performance (€m) vs Traffic (ADT) ▲2.2% Traffic Traffic performance 29,381 ADT underpinned by increased 70 28,751 29,381 weekday commuter usage 27,524 26,238 25,179 27,000 54.4 60 51.4 47.8 50 44.4 9.7 22,000 41.5 9.6 9.1 8.9 ▲5.8% Performance attributed to
Slide 46: Warnow
05 Warnow
Slide 47: Warnow Overview
Warnow 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 Toll increases subject to joint approval of the Tolling Federal Ministry o
Slide 48: Warnow 2017 results
Warnow 2017 results1 5 Year Financial Performance (€m) vs Traffic (ADT) ▲1.5% Traffic Traffic growth reflective of increased usage and 11,715 11,358 11,537 11,715 ADT 14 12,000 construction activities on 10,738 10,917 competing routes 11,000 12 11.2 10.7 10.1 10,000 9.5 9.0 10 3.3 9,000 3.2 2.8 8,
Slide 49: Distributions
06 Distributions
Slide 50: ALX distributions
ALX distributions Full year 2018 distribution guidance of 24.0 cps1 ALX Distributions (cps) • Representing a 20.0% increase on 2017 distribution paid and an increase on previous guidance2 1H 2H Guidance 1 24.0 • Distributions underpinned by APRR earnings FY distribution 12.01 • Subject to asset perf
Slide 51: ALX distributions
ALX distributions APRR’s distributions to ALX are subject to a ~3 month lag post each half-year end APRR Ownership Structure1 Funds Flow Illustrative Timing Other Macquarie ALX = MAF2 Distribution 1H18 Receipt Third Party Investors ALX Managed Funds Multiplied by 50.01% Less Corporate Expenses 33.71
Slide 52: Cash flow: APRR to ALX securityholders
Cash flow: APRR to ALX securityholders Cash flow: APRR to ALX securityholders Eiffarie/Financière Eiffarie (FE) APRR dividend A add APRR tax instalments to FE B add Other1 C less Eiffarie net interest D less FE tax payments/provisions E Distributable cash F=A+B+C–D–E less Debt repayment G Cash avail
Slide 53: Cash flow: APRR to ALX securityholders
Cash flow: APRR to ALX securityholders Cash flow: APRR to ALX securityholders Eiffarie/Financière Eiffarie (€m) (100%) 2H15 1H16 2H16 1H17 2H17 APRR dividend 245 287 6401 326 365 add APRR tax instalments to FE 176 183 159 217 222 add Other2 (0) 0 (128)3 (7) 74 less Eiffarie net interest (87) (86) (8
Slide 54: ALX governance
O07 ALX governance
Slide 55: ALX governance
ALX governance On 15 May 2018, ALX securityholders voted in favour of a proposal to internalise management ALX Structure (until May 2019) • ALX to remain managed/advised by Macquarie Fund Advisers Pty Resources Macquarie Limited (MFA) until May 2019 (unless terminated earlier) (Staff, premises, IT,
Slide 56: ALX performance
ALX performance ALX’s last performance fee was triggered on 30 June 2018 ALX vs Benchmark1 Performance Fees $7.00 18.0 • Six performance fees have been triggered: ̶ 2010 performance fee: A$12.5m 16.0 $6.00 ̶ 2011 performance fee: A$50.1m 14.0 ̶ 2014 performance fee: A$58.2m $5.00 ̶ 2016 performance
Slide 57: Existing management agreements
Existing management agreements There are two external management agreements with Macquarie 1) ALX management / advisory agreements APRR Shareholding Structure • Macquarie contracted to provide management/advisory services to ALX until May 2019 (unless terminated earlier) Third party Macquarie ALX in
Slide 58: Update on internalisation
Update on internalisation Following approval by ALX securityholders on 15 May 2018, ALX has proceeded recruiting an internalised management team and establishing appropriate infrastructure • CEO Elect, CFO Elect and General Counsel Elect (contractor) have been appointed Recruitment • Recruitment is
Slide 59: Appendix
O8 [Appencin
Slide 60: Proportionately consolidated financial performance
Proportionately consolidated financial performance Actual Pro forma Actual A$m year ended 31 Dec 17 year ended 31 Dec 161 Change vs pcp year ended 31 Dec 162 Proportionate revenue 878.2 845.7 3.9% 778.4 Proportionate operating expenses (225.4) (223.0) (1.1%) (209.2) Proportionate EBITDA from road as
Slide 61: ALX statutory accounts
ALX statutory accounts Statutory accounts for the year ended 31 December 2017 Statutory accounting • ALX equity accounts all assets except Dulles Greenway, which is now controlled and consolidated following the acquisition of the remaining 50% estimated economic interest in May 2017 Equity accountin
Slide 62: Consolidated income statement
Consolidated income statement Statutory accounts 12 months ended 12 months ended 31 December 2017 31 December 2016 ALX Dulles ALX ALX A$m Corporate Greenway7 Total Total Total revenue and other income 395.81 77.2 473.0 70.6 Share of net profits of associates 188.02 - 188.0 330.0 Performance fees (8.
Slide 63: Consolidated balance sheet
Consolidated balance sheet Statutory accounts As at As at 31 December 2017 31 December 2016 ALX Dulles ALX ALX A$m Corporate Greenway4 Total Total Current assets 40.41 83.8 124.2 224.2 Investments in associates 1,483.3 - 1,483.3 950.9 Tolling concessions - 2,189.7 2,189.7 - Goodwill - 58.7 58.7 - Ot
Slide 64: ALX corporate cash flow summary
ALX corporate cash flow summary Available cash (A$m) 2017 2016 1. Distributions from Financière Eiffarie (FE) of €54.8m in Opening balance – 1 January 223.4 65.4 March 2017 and €47.1m in September 2017. Proceeds from Chicago Skyway sale - 137.3 2. Transfer of 100% ordinary equity interest in the M6
Slide 65: Traffic and toll revenue performance
Traffic and toll revenue performance Change Quarter vs pcp Asset 2017 2016 vs pcp Mar 17 Jun 17 Sep 17 Dec 17 APRR Light Vehicle VKT (millions) 20,124 19,580 2.8% (1.1%) 5.8% 2.9% 3.2% Heavy Vehicle VKT (millions) 3,686 3,481 5.9% 5.9% 2.5% 7.1% 8.2% Total VKT (millions) 23,810 23,061 3.2% 0.1% 5.2%
Slide 66: Asset debt metrics
Asset debt metrics As at 31 Dec 171 Gross Cash Net Net debt / EBITDA / DSCR Hedging debt debt EBITDA Interest Actual Default Actual Default Actual Lock-up APRR and Eiffarie2,3 €m 10,267.1 1,821.0 8,446.0 4.76x n/a n/a n/a n/a n/a 106.3% - APRR €m 8,957.1 1,800.9 7,156.2 4.03x 7.00x 10.03x 2.20x n/a
Slide 67: ALX register analysis
ALX register analysis1 Retail Lazard 2 6% 10% Yarra Capital 2 6% Other Foreign Institutions 24% Macquarie Group 2 7% Fidelity 2 6% Magellan 2 5% Other Australian Institutions 36% 1. Register data as at 31 May 2018. 2. Substantial shareholdings based on most recent notices (as of 5 July 2018). Page 6