IFT - Infratil

[Rif-Raf]

Few observations of presentation:

International Infrastructure Assets
- There is huge demand for new assets to be built around the world $1000 billion p.a I think was mentioned.
- Despite the falls in stock markets, they don't believe there has been any change in the of value infrastructure assets.
- There is a huge wall of institutional funds looking to make investments in infrastructure assets e.g. Canadian Teachers Pension Fund
- Listed infrastructure assets are very cheap and expect more privatisation as they are out of kilter with what the assets are changing hands for.
- Airports assets are changing hands at 24x EBITDA. eg If Wellington was put up for sale it would be worth several times the $600m it is in their books for.

Trustpower
- Very bullish on this company due to the renewable exposure and pointed out 50% of their assets are in this company.
- Higher prices of electricity expected in NZ due to world gas prices and carbon and TPW will reap the higher prices which will go straight to its bottom line
- TPW has had a 1 in 20 year season that has knocked $15m off its result for this year, yet $600m taken off the SP.
- Also lots of investment in new generation in latest year has held the current years result back, but will reap big returns in coing years.
- They see wind generators as big beneficiaries going forward

Inf Energy Aus
- Very upbeat on whats been achieved here and see the model being rolled out in all the other states in Aussie.
- Profits more longer term here as they are following a path of growing the business.

Airports
- See a continuation of the long term (40 year) trend continuing for deacdes of increasing traffic
- Air traffic growth historically runds at double GDP growths
- Despite current concerns of fuel and soft economic times at worst generally results in a temporary halt in the trand and it catches back up the following years
- They say analysts tend to only look at a very small window to make forecasts in this industry, however they are forecasting based on the huge growth in aircraft scheduled to come onstream etc.
- Wellington they are very pleased with.
- Europe airports they concede are a bit of a drag on profits, but will benefit from the long term trends eventually.

NZ Bus
- The investment has been frustrating for them due to the government which has meant the timeline to get increase value has lenthened
- Despite the above, the investment pays its way and is quite profitable
- Value will eventually be created once the government stops bungling

Auckland Air
- Believe this is a very undervalue investment, for reasons mentioned earlier with long term trends
- They wanted Dubai to be involved as they would have added value rather than just paid $.
- Cullen intervention has meant the cost of their investment is $40m more than it may have been.
- They can't believe the incompetence of Cullen in the way he created the airport fiasco.

Energy Developments
- Not mentioned - average results

Austral Pacific
- Conceded a bad investment

Funding
- Very Robust debt position.

Acquisitions
- Focussed mainly on new investement in subsidiaries. See buying their shares as one of the best investments for them.

All in all very positive but not reflected in share price

[Toddy]

Thanks Rif-Raf.

I asked the question at the time re Austral Pacific as I thought that NZO offered more opportunities at a 'cheaper' entry price.

I think that the price has been driven down by offshore investors exiting as the kiwi falls.

On a positive note the weather could not be worse for NZ out until Monday. Enough rain is forecast to fill the lakes up, so TPW should be able to start clawing back some of the profit down grade.

[Rif-Raf]

Thanks Rif-Raf.

I asked the question at the time re Austral Pacific as I thought that NZO offered more opportunities at a 'cheaper' entry price.

I think that the price has been driven down by offshore investors exiting as the kiwi falls.

On a positive note the weather could not be worse for NZ out until Monday. Enough rain is forecast to fill the lakes up, so TPW should be able to start clawing back some of the profit down grade.

He was embarrassed to talk about Austral as it was someone from the audience that asked. He said that part of the logic was as it was a gas play it provided a partial hedge to TPW as the higher the price of gas the more valuable TPW becomes.

Yes, the rain this week has already helped out a bit and if there's a lot more to come then perhaps the TPW downgrade warning may not be needed.

Another point is that I had read the annual report last night and felt the presentation tonight reflects a far more bullish tone than what the annual report portrays. That gave me a lot of confidence. I was also very impressed with Tim Brown, he really had his finger on the pulse.

[Toddy]

Its good to see that the Councils are managing the Public Transport and making decisions that have to be made.


WELLINGTON COMMUTER FARES TO RISE 10PC
1 July 2008
COLIN PATTERSON

WELLINGTON's regional councillors have decided in secret to raise bus, rail and ferry fares by an average of 10.2 per cent.

The rises -- to take effect on September 1 -- were approved in a public-excluded session during a council meeting yesterday.

Councillor Nigel Wilson moved that the matter be discussed with the public and media present but failed to get a seconder.

Council chairwoman Fran Wilde said higher fares were needed to cope with rising oil prices, which had added $2.4 million to the costs of the council's bus contracts.

Other rising costs also played a part.

"Our rail contract has cost us $2.5 million more this financial year, largely because of higher labour-related costs. We're also paying more to maintain our infrastructure, such as bus shelters, car parks, and trolley-bus wires."

Rounding up and a policy of raising fares by 50c increments meant that some fares would not change while others would rise by substantially more than the average.

The city section fare in downtown Wellington remains $1. But the 50c child concession has been abolished.

Though the one-zone fare remains $1.50, fares for zones two, three and four will rise 50c to $3, $4 and $4.50 respectively.

The four-zone fare rises by $1 to $5.50. The $1 increase applies for all subsequent zones.

An adult single train fare between Wellington and Masterton will rise to $15, from $14.

Children's fares for zones one, two and three stay the same but rise 50 cents for subsequent zones.

Porirua, Upper Hutt Valley, Kapiti Coast and Wairarapa commuters will pay $8 more for their 10-trip concession tickets.

Monthly rail passes for commuters from these areas who travel to Wellington will rise by $24, with Masterton commuters paying the most -- $360.

Council public transport design and development manager Brian Baxter said the increases would not apply to commercial services, such as the Airport Flyer bus.

The Wellington Cable Car was also unaffected.

And though fare rises were expected to reduce patronage, Mr Baxter said that drop was expected to be temporary.

That depended, however, on what happened to petrol prices.

After the previous fare increase -- 15 per cent in September 2006 -- there were complaints from commuters who said they had not been told.

Mr Baxter said the council was planning a communications campaign to ensure public transport users were well informed about the latest rises.

"We've learnt a few lessons from last time."
©2008 Fairfax New Zealand Limited
Dominion Post

[POSSUM THE CAT]

Just as usual they get some increase in patronage. So they decide they can rip them off some more. So back to cars.

[QOH]

Any suggestions on what it might be.

[COLIN]

Any suggestions on what it might be.

My guess is that it is something to do with AIA.
A "material announcement" they said.

[COLIN]

Well, that was a bit of a fizzer.
Energy Developments represents less than 5% of IFT's assets. It seems to have had problems with its West Kimberley development which has had huge cost over-runs.

[POSSUM THE CAT]

Read article in papers re appeal on NZ BUS court case

[Toddy]

Well, that was a bit of a fizzer.
Energy Developments represents less than 5% of IFT's assets. It seems to have had problems with its West Kimberley development which has had huge cost over-runs.

ENE has some first class assets but has be held back by second rate management over the years. A number of their projects have been mis-managed and an even greater number have not even got off the ground.

IFT obviously thought that there was value here as they have invested over a number of years including recent times. However, they are not confident enough to make a full take over offer and the market has lost confidence in ENE.
Breaking up ENE and selling off assets will realise amounts far creater than the current SP has priced in.