Transurban Group Ltd. · ASX:TCL
Transurban — Merger or Acquisition (May 2010)
70 slides from Transurban's merger presentation, May 10, 2010
Slide 1: Lane Cove Tunnel Acquisition and Capital Raising
For personal use only TRANSURBAN LANE COVE TUNNEL ACQUISITION AND CAPITAL RAISING 10 MAY 2010 1 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 2: Disclaimer
DISCLAIMER For personal use only This investor presentation (―Presentation‖) has been prepared by Transurban Holdings Limited (ABN 86 098 143 429) (―THL‖), Transurban International Limited (ARBN 121 746 825) (―TIL‖) and Transurban Infrastructure Management Limited (ABN 27 098 147 678; AFSL 246585) a
Slide 3: Disclaimer
DISCLAIMER For personal use only No cooling off rights Cooling off rights do not apply to an investment in New Securities. Financial amounts All dollar values contained in this document are expressed in Australian dollars unless otherwise stated. Totals may vary slightly due to rounding. The pro for
Slide 4: Pro Forma Financial Information
PRO FORMA FINANCIAL For personal use only INFORMATION Basis of preparation Certain financial information included in this Presentation includes pro forma adjustments. Pro forma adjustments are made to previously reported numbers of Transurban and Connector Motorways Group (as the owner of Lane Cove
Slide 5: Pro Forma Financial Information: Key Assumptions
PRO FORMA FINANCIAL For personal use only INFORMATION Key assumptions The following assumptions have been used throughout this Presentation in the preparation of pro forma financial information: Equity Raising Funding of acquisition Equity raised $542.3million Equity contribution $372.5million Trans
Slide 6: Agenda
AGENDA For personal use only 1. Overview 2. Lane Cove Tunnel acquisition 3. Funding arrangements 4. Detailed financials 5. Business update 6. Offer details 7. Appendices 6 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 7: Strategic Update: Delivering Value
STRATEGIC UPDATE DELIVERING VALUE For personal use only Key business drivers delivering value Second half First half Growth – M1 CityLink Lane Cove FY10 FY10 Upgrade, Capital Tunnel distribution EBITDA Beltway Express, M2 guidance 12.4% and M5 enhancements confirmed at 12 cents per security Diagramm
Slide 8: Transaction Overview
TRANSACTION OVERVIEW For personal use only Agreement to acquire the Lane Cove Tunnel (―LCT‖) for $630.5 million – Financial close targeted for June/July 2010 – Acquisition of assets and motorway concession deed $542.3 million fully underwritten accelerated renounceable entitlement offer – 1 for
Slide 9: Lane Cove Tunnel Strategic Value
LANE COVE TUNNEL STRATEGIC VALUE For personal use only Grows Transurban‘s Sydney network Strategic link in Sydney orbital network footprint – Key link in Sydney orbital network – Integration of operations with M2 to drive synergies Part of high traffic growth northern Sydney corridor – Expected
Slide 10: Lane Cove Tunnel Acquisition
For personal use only LANE COVE TUNNEL ACQUISITION 10 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 11: Lane Cove Tunnel: A Highly Attractive Asset
LANE COVE TUNNEL A HIGHLY ATTRACTIVE ASSET For personal use only Originally opened March 2007 – 3.6km twin tunnel tollway – Military Rd E-Ramp (―MRE‖) - originally called Falcon Street Ramp – Remaining concession of 27 years – Full electronic tolling – Quarterly escalation of tolls at CPI. Tolls a
Slide 12: Traffic: Robust Traffic Growth
TRAFFIC For personal use only ROBUST TRAFFIC GROWTH LCT Historical Average Annual Daily Traffic (AADT) Traffic growth (AADT) from first tolled traffic in 60 April 2007 until April 2010: – ‘000s Thousands 50 – LCT Compound AADT Growth: 7.3% Number of vehicles 40 30 – MRE Compound AADT Growth: 16.2%
Slide 13: Scope for Additional Cost Savings
SCOPE FOR ADDITIONAL For personal use only COST SAVINGS Opportunity to deliver savings… Initiatives to drive cost savings Lane Cove Tunnel Operating costs 1 $’M (Financial year ended 31 Dec) 2007 2008___ 2009____ Consolidation of head 1 Variable toll collection charges 2.6 5.6 5.4 office functions O
Slide 14: EBITDA Margin: The Opportunity
EBITDA MARGIN For personal use only THE OPPORTUNITY EBITDA margin of LCT is substantially lower than Transurban‘s other Australian toll roads Immediate growth through Transurban acquisition Future growth expected with Transurban focus on cost control, traffic growth and potential network enhan
Slide 15: Incremental Value Drivers: Further Opportunities
INCREMENTAL VALUE DRIVERS For personal use only FURTHER OPPORTUNITIES Revenue M2 – LCT corridor – growth drivers Benefits from planned network enhancements – Ability to co-ordinate approach to network planning with the RTA – Major enhancement to adjacent Hills M2 (under negotiation) • Planned Herr
Slide 16: Funding Arrangements
For personal use only FUNDING ARRANGEMENTS 16 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 17: Funding Arrangements
FUNDING ARRANGEMENTS For personal use only Acquisition to be funded through a combination of non-recourse debt in the Lane Cove Tunnel project vehicles and a portion of the proceeds raised under a fully underwritten accelerated renounceable entitlement offer (i) Entitlement offer Transurban to r
Slide 18: Pro Forma Sources and Uses of Funds
PRO FORMA SOURCES AND USES OF FUNDS For personal use only Sources $’million Uses $’million Entitlement Offer 542.3 Lane Cove Tunnel acquisition 630.5 Non-recourse Debt 258.0 Reduction in net debt 152.4 Transaction costs 13.1 Capitalised borrowing costs 4.3 Total sources of funds 800.3 Total uses of
Slide 19: Detailed Financials
For personal use only DETAILED FINANCIALS 19 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 20: Key Financial Metrics Strengthened
KEY FINANCIAL METRICS STRENGTHENED For personal use only Transurban FREE CASH AND PROFIT & LOSS (2009) Units Pro forma Reported Underlying proportional EBITDA $‘million 583.4 605.5 Proportional finance costs $‘million (280.5) (293.3) Underlying free cash flow $‘million 283.2 291.6 1 Underlying free
Slide 21: Pro Forma Proportional EBITDA Impact
PRO FORMA PROPORTIONAL EBITDA IMPACT For personal use only Transurban Lane Cove $’million (Most recent full year financial information) Adjustments1 Pro forma Reported Tunnel Reported Toll revenue 778.7 52.3 - 831.0 Fee revenue 46.7 7.5 (6.7) 47.5 Other revenue 18.3 - - 18.3 Operating costs (209.9)
Slide 22: Pro Forma Underlying Free Cash
PRO FORMA UNDERLYING FREE CASH For personal use only $’million (Most recent full year financial information) Transurban Lane Cove Tunnel 1 Reported Reported Adjustments Pro forma Cash flows from operating activities 320.0 (64.1) 79.3 335.2 Cash flows from operating activities – M1 and M4 (126.5) - -
Slide 23: Distribution Growth Remains
DISTRIBUTION GROWTH REMAINS For personal use only FY10 guidance The Board confirms FY10 distribution guidance with second half distribution forecast at 12 cents per security – New Securities issued as part of capital raising are eligible for the second half distribution Distribution policy Distr
Slide 24: Proportional Net Debt and Gearing
PROPORTIONAL NET DEBT AND GEARING For personal use only Acquisition and equity raising will have a negligible impact on Transurban‘s net debt and gearing Pro forma FY09 Senior Interest Cover Ratio to increase Proportional gearing based on market capitalisation to fall from 44.2% to 42.9% 31 De
Slide 25: Business Update
For personal use only BUSINESS UPDATE 25 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 26: Update on Change of Control Proposal
UPDATE ON CHANGE OF CONTROL PROPOSAL For personal use only On 5 November 2009, Transurban announced that it had rejected a proposal from Canada Pension Plan Investment Board (―CPPIB‖) and Ontario Teachers‘ Pension Plan (―OTPP‖) to acquire control of the Transurban Group through a scheme of arrangeme
Slide 27: Delivering Core Business Outcomes
DELIVERING CORE BUSINESS OUTCOMES For personal use only Traffic growth March quarter 2010 versus prior corresponding period Transurban Total Toll revenue ADT1 ownership % change % change CityLink 100.0% 11.0% 6.4% Hills M2 100.0% 15.0% 2.0% M1 Eastern 75.1% 5.0% 4.8% Distributor Westlink M7 50.0% 9.
Slide 28: Growing Value – LCT
GROWING VALUE – LCT For personal use only Attractive acquisition Capitalising on Sydney orbital network footprint Pricing reflects disciplined approach to acquisitions Enhanced medium term free cash flow FY10 distribution guidance confirmed, with second half distribution forecast at 12 cen
Slide 29: Offer Details
For personal use only OFFER DETAILS 29 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 30: Offer Details
OFFER DETAILS For personal use only Fully underwritten accelerated renounceable entitlement offer to raise gross proceeds of $542.3 million – 1 for 11 entitlement offer Offer price of $4.60 per New Security – 6.5% discount to last closing price (on 7 May 2010) – 6.0% discount to TERP – 8.4% disc
Slide 31: Offer Timetable
OFFER TIMETABLE For personal use only Date and times may be subject to change without notice. Institutional Entitlement Offer opens 10:00am (Melbourne Time), 10 May 2010 Institutional Entitlement Offer closes 11:00am (Melbourne Time), 11 May 2010 Institutional Bookbuild 11-12 May 2010 Announcement o
Slide 32: Key Risks
KEY RISKS For personal use only Risks This section discusses some of the key risks associated with investment in Transurban which may affect the value of Transurban securities. The risks set out below are not listed in order of importance and do not necessarily constitute an exhaustive list of all r
Slide 33: Key Risks
KEY RISKS For personal use only 1.2 Revenue collection • Tolling revenues depend on reliable and efficient tolling systems and operating and maintaining those systems in the manner expected. Any circumstances that have the effect of impairing such operation may result in revenue loss that may advers
Slide 34: Key Risks
KEY RISKS For personal use only 1.7 M5 enhancement • Interlink Roads Pty Limited (―Interlink‖), in which Transurban holds a 50% interest, has entered into a non-binding agreement with the NSW Roads and Traffic Authority in relation to the M5 enhancement project. • There is a risk that there may be d
Slide 35: Key Risks
KEY RISKS For personal use only 1.12 Use of leverage and access to debt • The use of leverage may enhance returns, but it may also substantially increase the risk of loss. Use of leverage may adversely impact Transurban when factors such as rising interest rates, severe economic downturns or deterio
Slide 36: Key Risks
KEY RISKS For personal use only 1.19 Liquidity risk • Transurban may invest in assets that are not listed on a stock exchange and for which there may only be a limited number of potential investors. 1.20 Joint Venture risks • Transurban holds a number of its interests in its companies and affiliates
Slide 37: Key Risks: Acquisition Risks
KEY RISKS For personal use only 2 . Acquisition risks 2.1 Completion and documentation risk • The acquisition of LCT is subject to satisfaction of a number of conditions precedent, including finalisation and execution of novation deeds for the novation of key project contracts. • There is a risk tha
Slide 38: Key Risks
KEY RISKS For personal use only 2.4 Reliance on information provided • Transurban undertook a due diligence investigation process in respect of LCT and was provided with the opportunity to review financial and other information. While the Transurban board considers that this review was adequate, the
Slide 39: Key Risks: Change of Control Risks
KEY RISKS For personal use only 3. Change of Control risks 3.1 Change of control • On 5 November 2009 Transurban announced that it had rejected an approach by two of its largest security holders, Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers‘ Pension Plan (OTPP), in respect of a
Slide 40: Key Risks: Offer and General Risks
KEY RISKS For personal use only 4. Offer and general risks 4.1 Underwriting risk • The Underwriting Agreement sets out various events, the occurrence of which will entitle the Underwriter to terminate the agreement. Accordingly, there is a risk that the Underwriter may terminate its obligations unde
Slide 41: Key Risks
KEY RISKS For personal use only 4.3 Market generally • The price of Transurban securities on the ASX may rise or fall due to numerous factors, including: (a) Australian and international general economic conditions, including inflation rates, the level of economic activity, interest rates and curren
Slide 42: Key Risks
KEY RISKS For personal use only 4.7 Taxation • Transurban is structured as a stapled group comprising two companies and a trust which trade as a single stapled security. The Australian taxation laws apply to each of these entities separately. Changes to tax legislation (including in goods and servic
Slide 43: International Selling Restrictions
INTERNATIONAL SELLING RESTRICTIONS For personal use only Canada This document and the securities described therein may only be distributed in Canada (or to residents thereof) to ―accredited investors" as defined in National Instrument 45-106 "Prospectus and Registration Exemptions or, if they are pu
Slide 44: International Selling Restrictions
INTERNATIONAL SELLING RESTRICTIONS For personal use only France This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code mo
Slide 45: International Selling Restrictions
INTERNATIONAL SELLING RESTRICTIONS For personal use only Ireland The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by the Irish Financial Services Regulatory Authority or any other Irish regulat
Slide 46: International Selling Restrictions
INTERNATIONAL SELLING RESTRICTIONS For personal use only Japan The New Securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the "FIEL") pursuant to an exemption from the registration
Slide 47: International Selling Restrictions
INTERNATIONAL SELLING RESTRICTIONS For personal use only People's Republic of China The information in this document does not constitute a public offer of the New Securities, whether by way of sale or subscription, in the People's Republic of China (excluding, for purposes of this paragraph, Hong Ko
Slide 48: International Selling Restrictions
INTERNATIONAL SELLING RESTRICTIONS For personal use only United Arab Emirates Neither this document nor the New Securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor has
Slide 49: International Selling Restrictions
INTERNATIONAL SELLING RESTRICTIONS For personal use only United States This document does not constitute an offer, invitation or recommendation to subscribe for or purchase any security. In particular, this document does not constitute an offer to sell, or solicitation of an offer to buy securities
Slide 50: Appendix – Pro Forma Financial Information
For personal use only APPENDIX 1 – PRO FORMA FINANCIAL INFORMATION 10 MAY 2010 50 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 51: Pro Forma Profit and Loss
PRO FORMA PROFIT AND LOSS For personal use only Transurban Lane Cove Tunnel 1 $’million (Most recent full year financial information) Adjustments Pro forma Audited Audited Toll revenue 678.3 52.3 - 730.6 Fee and other revenue 60.6 7.5 (6.7) 61.4 Other Revenue 390.6 1.3 5.5 397.4 Total revenue 1,129.
Slide 52: Pro Forma Balance Sheet
PRO FORMA BALANCE SHEET For personal use only $’million (31 December 2009) Transurban Non-recourse 1 2 Reported Entitlement issue project debt Lane Cove Tunnel Pro forma Assets Cash and cash equivalents 228.9 529.2 253.7 (630.5) 381.3 Intangible assets 7,783.3 - - 651.5 8,434.8 Property plant and eq
Slide 53: Pro Forma Proportional Gearing Impact – Detail
PRO FORMA PROPORTIONAL GEARING IMPACT - DETAIL For personal use only CALCULATED ON NET DEBT Transurban (A$’million) (31 December 2009) Reported Lane Cove Tunnel Entitlement issue Pro forma Market value 7,144.8 - 529.2 3 7,674.0 Net Debt 5,665.5 258.0 2 (152.4) 4 5,771.1 Enterprise value 12,810.3 258
Slide 54: Transurban – Reconciliation of Statutory P&L to EBITDA
TRANSURBAN - RECONCILIATION OF STATUTORY P&L TO EBITDA For personal use only REPORTED FOR THE YEAR ENDED 30 JUNE 2009 Interest & finance fee FX gain Offset construction revenue moved moved from accounting Reallocation of Transurban Other revenue to net finance other Net business disclosure under cap
Slide 55: Transurban – Reconciliation to Proportional EBITDA
TRANSURBAN – RECONCILIATION TO PROPORTIONAL EBITDA For personal use only REPORTED FOR THE YEAR ENDED 30 JUNE 2009 30 June 09 $’million EBITDA based on statutory results 479.5 Less: M1 EBITDA attributable to Minority Interest (13.7) Less: M4 EBITDA attributable to Minority Interest (45.3) Add: M5 Pro
Slide 56: Transurban – Proportional Finance Costs
TRANSURBAN - PROPORTIONAL FINANCE COSTS For personal use only REPORTED FOR THE YEAR ENDED 30 JUNE 2009 30 June 09 $’million Statutory finance costs (161.4) Less: M1 net finance (revenue)/costs attributable to Minority Interest (1.6) Less: M4 net finance costs attributable to the Minority Interest 2.
Slide 57: Transurban – Proportional Taxation Paid
TRANSURBAN - PROPORTIONAL TAXATION PAID For personal use only REPORTED AS AT 30 JUNE 2009 30 June 09 Proportional tax paid includes $’million Corporate 0.5 M1 Eastern Distributor (6.7) Hills M2 1.4 M4 (13.0) M5 (16.5) Transurban US (3.3) Westlink holding companies (0.8) Total (38.4) 57 NOT FOR DISTR
Slide 58: LCT – Reconciliation of Statutory P&L to EBITDA – 2009
LCT - RECONCILIATION OF STATUTORY P&L TO EBITDA - 2009 For personal use only Normalisation of Reallocation of non- Interest revenue Maintenance Lane Cove Tunnel Financial Guarantor $’million recoverable toll and moved to net provision Pro forma Audited fees and associated fee revenue finance costs a
Slide 59: LCT – Reconciliation of Statutory P&L to EBITDA – 2008
LCT - RECONCILIATION OF STATUTORY P&L TO EBITDA - 2008 For personal use only Reallocation of Interest Normalisation of Normalisation of Maintenance Lane Cove non-recoverable revenue RTA Financial Guarantor $’million provision Pro forma Tunnel Audited toll and fee moved to net compensation for fees a
Slide 60: LCT – Reconciliation of Statutory P&L to EBITDA – 2007
LCT - RECONCILIATION OF STATUTORY P&L TO EBITDA - 2007 For personal use only Reallocation of non- Interest revenue Normalisation of Maintenance Lane Cove Tunnel $’million recoverable toll and moved to net RTA compensation provision Pro forma Audited fee revenue finance costs for Stage 2 works adjust
Slide 61: Appendix – Reporting Methodology
For personal use only APPENDIX 2 – REPORTING METHODOLOGY 10 MAY 2010 61 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 62: Statutory Reporting
STATUTORY REPORTING For personal use only Includes 100% of the results of Transurban controlled assets – CityLink – Hills M2 – M1 Eastern Distributor – M4 (concession ended 15 February 2010) The after-tax results of non-controlled assets are ―equity accounted‖1 – M5 (50%) – DRIVe (75%) – DRIVe h
Slide 63: Proportional Result
PROPORTIONAL RESULT For personal use only Provides a better reflection of operating performance of business Proportional reporting is based on Transurban‘s ownership of assets – Aggregates individual P&L from each asset (multiplied by Transurban‘s percentage ownership) and Transurban Corporate
Slide 64: Transurban – Management Reporting Adjustments – One Offs
TRANSURBAN - MANAGEMENT REPORTING ADJUSTMENTS – ONE OFFS For personal use only REPORTED FOR THE YEAR ENDED 30 JUNE 2009 EBITDA Cash Effect 30 June 09 30 June 09 $’million $’million Loss on ConnectEast Investment (22.4) - Onerous lease provision (4.2) - Restructuring costs - 10.6 DRIVe and CBE financ
Slide 65: Appendix – Lane Cove Tunnel Visual
For personal use only APPENDIX 3 – LANE COVE TUNNEL VISUAL 10 MAY 2010 65 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 66: Lane Cove Tunnel
LANE COVE TUNNEL For personal use only 66 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 67: Military Road E-Ramp
MILITARY ROAD E-RAMP For personal use only 67 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 68: Appendix – Glossary
For personal use only APPENDIX 4 – GLOSSARY 10 MAY 2010 68 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS
Slide 69: Glossary
GLOSSARY For personal use only Term Definition AADT Average annual daily traffic ASIC Australian Securities and Investment Commission ASX Australian Securities Exchange or ASX Limited or the financial market which it operates as the case requires CAGR Compound annual growth rate Connector Motorways
Slide 70: For personal use only
For personal use only 70 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO U.S. PERSONS