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Edited Transcript of IFT.NZ earnings conference call or presentation 16-May-19 10:00pm GMT

Full Year 2019 Infratil Ltd Earnings Call

Wellington May 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Infratil Ltd earnings conference call or presentation Thursday, May 16, 2019 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Marko Bogoievski

Infratil Limited - CEO & Director

* Phillippa Harford

Infratil Limited - CFO

* Tim Brown

Infratil Limited - Chair of Wellington Airport

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Conference Call Participants

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* Aaron Ibbotson

UBS Investment Bank, Research Division - Director & Research Analyst

* Andrew Rupert Pelham Harvey-Green

Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of Equities

* Grant Swanepoel

Craigs Investment Partners Limited, Research Division - Director & Head of Research

* Stephen Hudson

Macquarie Research - Head of Research

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Presentation

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Marko Bogoievski, Infratil Limited - CEO & Director [1]

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Okay. We've got the thumbs up. We're going to get going here in Wellington. So welcome, and good morning, everyone. I'm Marko Bogoievski, Chief Executive of Infratil. I'm joined with Phillippa Harford, our CFO. You'll be hearing from Phillippa in a moment.

So we've had a big week, right? We've had some discussions, I guess, on Tuesday morning regarding the acquisition of Vodafone New Zealand. I guess today's mainly about the full year result ended March 2019. At the end of the presentation -- we're going to sort of do it in 2 halves. At the end, we're going to go through the equity offer that we announced this morning as well and talk through just some of the details of that process as well.

All right. So we've got a bit to get through. For those on the line, we're on Slide 4, which is the full year overview. I mean I think one of the -- I don't know if it's good or bad actually that the Vodafone thing is out there because we have had such a strong year, right, and such a positive set of developments not just around operating performance and the P&L, but around valuation gains and investor understanding of some of these newer platforms. And so it's pretty obvious that the share price has responded very strongly as a result of that. And it's actually something we, I guess, had hoped for and anticipated. But it's really good to see it come through, right. There's multiple years of effort and repositioning the portfolio to get to this spot today. We couldn't be more excited really around what's happening in the data space and our positions particular in the Canberra Data Centres.

And if you look at renewables generally, both in Australia and New Zealand and now in the United States, we've got these tremendous sort of valuable sets of capability and pipeline, access to capital, flexible mandates. So sort of all the recipe, sort of the ingredients you need for long-term success in that market. And I think even this morning, Tilt had announced the formalization of the offtake deal with Genesis around a new wind facility in Waverley. I mean it just keeps -- sort of hits keep coming, right, and it's several positive sets of developments that we can see. We have reasonable visibility on for the foreseeable future, and that's a good place to be if you're in a business like ours. I mean some of the -- some of the headlines of this result, I guess, is actually quite strong underlying year-on-year performance when obviously you have to adjust for different configurations of the portfolio. That's why we sort of have this concept of continuing operations and businesses that are either scheduled for sale or have actually been sold. Phillippa is going to walk through that. A lot of capital's gone into this business, particularly on those platforms that I talked about. And that's the best -- also the best model, I think, where you've got high confidence around management teams and sectors to focus what available capital you have into the businesses you love the most, and that's sort of what we're doing.

Still resulted in $0.11 per share final dividend. I think that makes it $0.1725 for the full year, which is up slightly on the previous year. And as I said earlier, total shareholder return, so anything with a 40% type number you've got to be happy with, even though obviously the whole New Zealand market's been incredibly strong. And we've participated in some of that.

So that's sort of some of the context. I guess, Phil, you're going to walk through some of the financials?

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Phillippa Harford, Infratil Limited - CFO [2]

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Great. Thank you, Marko. So yes, as Marko indicated, we've actually had a very strong year from an underlying EBITDAF perspective. At the headline level, what you'll see there is we're showing an underlying EBITDAF of $539 million, which is slightly down on the prior year. However, when we're really looking to unpack what's been going on in the business, as you'd expect, we also need to back out what the impact of the performance fee is so that we can actually look through to the actual operating businesses and see how they're performing.

So when we take it back to that level, on a year-on-year comparison, we're actually seeing a report -- underlying EBITDAF of $581 million, which is up from $482 million in the prior period. In trying to think about what the main contributors to that are, I mean, CDCs, you can see where the growth is coming through from that, where it's spending its CapEx and how we're seeing the earnings uplift from there. We've had a very strong contribution from Tilt this year. Trustpower is continuing to deliver and as is Wellington Airport. And really that's where we want to talk a bit about how those businesses are operating.

The other thing to note really and a big highlight to the year is CapEx and investment that we've made. As you'd expect, a lot of that is coming through Tilt Renewables, CDC and also we've contributed a fair amount to Longroad. So we can walk through that later on in the presentation. When we actually get to an earnings per share basis, you'll see a decline at the bottom line. Effectively, the only thing to draw on that is really that that's the international performance fee coming through. So if we back that out, the movement's not what you'd see on the page.

So then looking at the result summary. As I said, very strong operating revenue for the year, up quite well from 2018. And as Marko said, we really are going to see that come through. We've got confidence in that for the outlook period as well. We've had a slight uplift in depreciation, which is mainly the Salt Creek addition into Tilt Renewables. And we've also seen an increase in tax expense, and that's primarily for Longroad-related tax expense at the Infratil level. And as Marko noted, we've actually got a few amount of discontinued operations for the period, which we'll speak to separately, but that basically includes Perth Energy, Snapper, our investment in ANU and our NZ Bus investment.

So turning now to Slide 7 and the international performance fee. We've last provided an update on this to the market as part of our -- I think it was actually just in advance of Investor Day in early April. Since then we've been through the finalization of our results for 31 March, and that's included finalizing the international portfolio incentive fee. The number has essentially come in within the range where we had guided with the final number of $102 million. Really to note from that is it is worth reflecting that, that performance fee assesses the assets and what's happened in those assets since we acquired them in 2017. So it's not actually a reflection of the movement in the value of those assets, say, in the current financial year. It does reflect what's -- a lot of what's gone on since we acquired them.

And really the other thing to note, I would like, I suppose, pull out is that we also during the week announced the ANU sale. We've now got through to the satisfaction of all conditions on that, and we're expecting AUD 162 million to come through to us, I think, on Monday.

So then turning now to Slide 8 and our CapEx. As I said, there's sort of a lot to talk about here, I beg your pardon, talking about EBITDAF. I've got ahead of myself. So really, the result from Trustpower, if you look at it from last year to this year, you'll see that it's declined, but last year really was one out of the box for Trustpower. It had very strong pricing, and it had very high generation volumes. So we're very happy with the result that Trustpower's produced in the current year.

Wellington Airport. It's actually gone over the $100 million EBITDAF number. So that's quite a highlight for us, and that's quite an increase from last year. Canberra Data Centres, looking at that result, a very -- what I would call a significant increase from the contribution that we had from that last year. And you'll see that actually is it's come through from some of the valuation uplift, but also it's actually filled out more of its data center capacity.

I think the only other thing I'd draw out and we'll talk to later is we've actually got a decline in the NZ Bus performance. I think that probably is not unexpected in terms of the operating challenges that it's had probably since the announcement of the sale in December, and we can talk a bit to that later on in the presentation. And the only other thing I think I'd draw out is Perth Energy. We've had a great performance from that business this year, looking at the contribution it's made of nearly $36 million in contrast to the negative contribution of $6 million in the prior year.

Yes, so then moving to capital expenditure and investment. A lot of that going on in the portfolio. As we talked about earlier, actually $679 million in total, which is split between capital that's been applied at the Infratil level and capital that's been applied within our investment companies. Tilt Renewables, you'll see that's coming through from Salt Creek, and also the significant project development has been the commencement of the Dundonnell wind farm. So that's well and truly underway now and we'll also see that flow through into FY '20. Canberra Data Centres though is really where you can see this -- the number shown on the page of $140 million represents our 48% stake in Canberra Data Centres. So you essentially need to more than double that to see what actually is going on in that business.

Just sort of running down the list. They've completed the Fyshwick 2 data center. They've commenced another data center in Canberra, which is the Hume 4. And really of most significance, they have now acquired a site in Sydney, and that's really enabled them to have an outlook for a significant footprint in that geographic sector. So where we see that coming from now is that site has capacity to essentially hold about 120 megawatts of data center. So that's great.

And then turning to distributions just quickly. As Marko mentioned, we've got a final dividend of $0.11 per share, which will be partly imputed. And in terms of our dividend outlook for FY '20, we indicated earlier in the week that we're expecting to maintain that dividend for FY '20 on a cents per share basis. So that's effectively holding steady at the $0.1725.

Now debt capacity and facilities. So what we've shown here on this slide is actually the position of the group at 31 March. Clearly, I bet we'll move on from then given the announcement that we made on Tuesday in relation to the Vodafone acquisition. But if we simply talk through what's happened in the last year, from a bond facility perspective, we actually did an issue in November of about $246 million which replaced $111 million maturing at the time. We're current -- as at 31 March, we were sitting on undrawn bank facilities of approximately $400 million at the wholly-owned group. And as we noted on Tuesday, we've entered into an acquisition facility in relation to Vodafone for $800 million. And what you'll see from the chart is that, that $800 million is split across essentially a 1-year facility and $200 million of more term facility. So that's going to help us manage that as we move through the acquisition process.

Over to you, Marko.

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Marko Bogoievski, Infratil Limited - CEO & Director [3]

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Okay. Thanks, Phil. Slide 12 for those that are following us online or on the phones. So we introduced this concept of sort of being explicit on target returns. This is -- there's no change to previous discussion around this slide. I think what's probably still moving is the market, right? That's the reality. If anything, it's probably got slightly more difficult to achieve those returns in each risk bucket, particularly the core area where there's still a weight of money globally pursuing lower risk assets.

And I think if you think about something like Vodafone New Zealand, what we're actually saying, it sort of straddles core and core plus in our minds in terms of risk profile around its underlying cash flow. So parts of this business are quite defendable, would respond well in poor economic conditions and you would expect to be linked to overall macro activity generally. And there's other parts that are clearly more speculative, more exposed to retail programs and technology. So -- and have upside risk as well.

So that's the way we think about it. The rest of those settings, I think, are pretty constant at the moment and feel appropriate for the sort of business that we run. We actually think our portfolio is currently balanced reasonably well, and we can close this acquisition in August or later this year. I think we're pretty well set to deliver those sorts of returns.

Valuations, Slide 13. I mean this -- I mean no one's pretending like this is a complete science, but it's a perspective on market values. And there is actually a lot of evidence across the board here either in listed markets or comparable acquisitions. And we've listed some commentary there by asset. I mean a few have gone through independent valuation exercises as part of this international portfolio incentive fee. And where that's the case, we've actually shown those values. Some are just straight listed values like Trustpower. So I think you can form a view. At the end there -- we don't publish an NAV, but it's fair to say we feel like the discount to NAV, if you look at the current share price, doesn't seem to be narrowing particularly. That's something that, I guess, we need to focus on over time.

So it's sort of hard to believe, isn't it, when we look at the slide -- chart on Page 14, which is -- and so we're thinking the share price is sort of lagging the actual real growth in NAV, or net asset values, although everyone would love a chart like that, right, for a while? I think we want to quickly flip through some of the operating businesses. I'm going to talk to a few and then we're going to hand it over to Phil and wrap it up.

Trustpower is on Slide 16. I mean Trustpower is well known to our investors. It's been around forever. It's -- interestingly, right, there was, I think, not unreasonable perspectives 2 or 3 years ago about the outlook for this business. And so it's performed incredibly well. It has participated obviously in their overall market appetite for defensive assets. But this is a -- it's also got operating performance that you overlay on top of that -- where it's done really well. They've reported their results already, so you would have seen hydrology impacts the numbers. So they've still had a year that's slightly better than average long-term hydrology, but quite a bit down on last year which was a spectacular combination of volume and high prices in a year where, I think, most integrated players benefited.

The retail performance, I think, is still interesting. They're eking out quite good gains from the sort of bundled retail strategy. You got to be reasonably happy with that. Part of the reason why those gains are there is because the proportion of customers taking more than one product continues to grow. Some commentary there in the middle of that slide that tells you where they're getting to. I think they're still focused on that. So some pretty tidy business that knows exactly what they're doing, can respond to most market conditions. And I think the guidance they have given is partly to do, again, with some perspective on hydrology going forward, and we like where those are at the moment.

Tilt is a bit different, right? Tilt is a -- Slide 17 -- a development vehicle that actually now has reasonably substantial operating assets that are contracted. So if you think back to our return slide and sort of profiles core, core plus and other risk profile, Tilt is a combination of those. So I wouldn't think it's one or the other. I mean it's built, Salt Creek. It's got a contract there that was successful and sort of the state auctions that led to the development of Dundonnell, which is one of the biggest facilities in Australia. And they took some merchant risk over and above what they achieved in the auction, and they subsequently closed the gap with another contract.

So these guys know exactly what they're doing. They've got a high-quality pipeline and the announcement this morning that, again, it looks like they'll get away another 130 megawatts in Waverley with, again, a very good facility that's got incredible wind resource. I think Genesis is seeing that as part of their sort of long-term package. So 20-year offtake deal, virtually unheard of. And building a big generation in New Zealand is something, again, a few years ago I think people thought was probably going to be reasonably unlikely. So North Island wind is probably one of the sweet spots, I think, in the New Zealand generation picture if you look out a few years.

CDC, Canberra Data Centres, Slide 18. This entity rightly had a lot of focus this year. It's -- I think it's been probably a major contributor to the re-rating we've seen in the Infratil share price, and part of that is just because the absolute size of this investment is significant in the portfolio. It's growing at 30%. There's not many infrastructure assets that look anything like this. And I think, more importantly, it's sort of the sector that we think is still relatively early in playing out. The trends are relatively early. The government's still progressively outsourcing their data center capability. They're hugely concerned about value, price, but also security and our ability to respond to their needs when we need it.

So that's exactly what that team is doing. It's delivering on its Microsoft relationship. As you know, that was one of the bigger developments in the last 12 months. Sydney, I wouldn't underestimate how important it was to identify that development site. These are like hen's teeth literally. And so this is an existing facility with a big greenfield footprint. So I think you can form a view about how that -- how they might play out the sort of capacity and what sequence they might build additional facilities. But the challenge has gone, I think, from selling capacity to just make sure we can build things on time and maintain our standards, which I'm sure that team will do. They've done a very good job on that.

Valuation, I think, still looks chunky, right, but still -- actually compared to some of the listed market comps in Australia, I think doesn't look that demanding. So I don't think we've been too aggressive in the way we thought about value there.

Longroad. Another one of our favorites. I think I'm getting some of the good ones here, Phil. That's the benefit of picking the order. So I mean this is, again, a slightly different entity from Tilt even. It's even more development focused. It tends to recycle capital more quickly. Some of you that would've attended the Investor Day would've seen that management team sort of explain their process. And so these are massive projects, right? They're sort of the largest sort of utility scale, wind and solar projects you could imagine.

That's not a typo at the bottom there. The current development pipeline, 8 gigawatts. It's -- obviously, not all of that necessarily gets built, but it's sort of a comprehensive demonstrated pipeline that's got progressive stages of development throughout North America. And we're -- what we've noticed, I guess, in the last 12 months is this team is winning sort of increasing share of revenue RFP. So by that, I mean corporates in particular who are looking to contract long-term renewable energy with -- top-tier players are looking at businesses like Longroad and say, "We want to do business with you." So -- and some of that is obviously around price and the fact that we've got access to sort of turbines and panels under massive supply agreements that are difficult for the second and third tier players to access. And some of that is just the fact that we're developing our reputation for delivering projects on time. And again, it feels like relatively early days even though that I think it's fair to say these guys are knocking the ball out of the park, right?

I still like this asset, but I'll give it to you, Phil.

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Phillippa Harford, Infratil Limited - CFO [4]

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Thanks. Thanks, Marko. Yes, I like Wellington Airport, too. So yes, just as I talked about a little bit earlier, the big thing for Wellington Airport is that we've actually exceeded now $100 million of EBITDAF for the year and really seen some impressive growth in customer numbers particularly on the domestic front. To sort of sit here and say that, that's the biggest increase in domestic customer growth over the last decade really does have to ask yourself what's happening in airports and how much all of us are traveling nowadays. So yes, that's really been good to see, and that's happening in the context also of the airport having just completed a 5-year $300 million CapEx program. That, in and of itself, is sort of no mean feat. If you -- we've all been through the airport and will have seen what's happened to the terminal. We've now seen the carpark completed. And we've also got a fully operational hotel out there, which is a great addition to what the Wellington Airport offers to its customers.

But turning to FY '20. Obviously, expecting another strong contribution from Wellington Airport. And certainly, having cash flows from the airport to Infratil and the reliability of those cash flows helps us make the investment decisions that we're making. In terms of the outlook and what we're going to see in the next year, probably see a reduction in the CapEx, which is probably not a bad thing from the airport's perspective. But we're also on hold a little bit as they go through the year, repricing of aeronautical and other services with the principal customers. Essentially, that was on target to have been in place by now but it's now being deferred later into 2020 so that the master plan of 2040 can be taken into account in that pricing. So we'll have more of an update on that as things go through. And as you will have seen no doubt, the application to the Environment Court in relation to the runway extension has now been actually withdrawn and will be resubmitted in 2020.

So then looking at NZ Bus. As I indicated earlier, we've seen a reduction in the contribution from NZ Bus. Largely, that reduction is from trying to implement the new Public Transport Operating Model contracts. We've also seen Bus extend its services into Tauranga. So we've had some additional costs come through with that. And essentially, the overall impact has been an EBITDA contribution of $17 million, which is down from about $33 million in the prior year.

So where we look to from here though, NZ Bus has actually just gone and acquired 71 double-decker buses, and you'll see those already in operation in Auckland and in Wellington. And as Marko indicated, we are progressing well through the sale process with Bus, and I'll give you a bit of an update on that shortly.

And then with RetireAustralia. The theme continues with RetireAustralia. We're very happy with our investment thesis. Hard to argue that the aging population is increasing. We like the idea that RetireAustralia has got something to offer to the market which goes beyond simply an accommodation service, and that business is working hard to make sure that the services it provides really do meet the needs of its residents.

So what we're going to see in FY '20 for RetireAustralia is we are going to see some of that development pipeline come through. That has been on pause for the last couple of years, and the reason for that is that we are trying to actually adapt our development pipeline to better suit the people who need more specialized accommodation facilities or more sort of an apartment-style care facility. So we are going to see some development come through in FY '20. And as we've indicated, part and parcel of that is actually making sure that we've got the services that complement those developments. So we're also making progress on that.

And then Perth Energy. I won't touch on this too much because it is under strategic review and I can't update on that, but it's actually a really good time to be in the market and talking to people about what's attractive about this asset. FY '19 was an exceptional turnaround year for the business. It's actually contributed $33 million of EBITDA to the group, which is a significant improvement from where we were last year. By and large, that is coming from 2 things. One is the position that it's been able to take on its LGCs, and that's bought for a benefit of about AUD 20 million for the year. But it's also worth noting that, that retail book and what Perth Energy has been able to do to its customers and the margins that it's getting from those customers, it's really made great improvements in that regard. So it's been able to focus on areas where it really can achieve a margin, and that's in both the electricity and in its gas book.

So then as I said, looking at the strategic reviews and just to give a bit of an update as to where we're getting. What with everything else going on, we've also had 4 strategic reviews underway, so quite a lot to get through. ANU, we can deal with quite quickly. As I said, we'll be getting proceeds from that on Monday.

NZ Bus, we agreed the sale of NZ Bus with Next Capital in December. Since then we've been working through a consenting process which is both an OIO and also change of control consenting process with the sort of key customers of NZ Bus. Those approval processes are ongoing. And in the meantime, essentially, what we've done as of 31 March is we've reestimated what we think the sales proceeds from that process will be. We've undertaken that based on our best available information at the moment. And where we've guided to in that regard is we're now estimating that our sales proceeds will be more in the range of $160 million to $170 million, and that's resulted in an impairment of our carrying value of NZ Bus of $27 million.

The other 2 strategic reviews to note is we are actually -- we have a conditional agreement for the sale of Snapper. We're expecting that we should be able to progress that relatively shortly. The conditions to that sale are essentially change of control consents from a couple of Snapper's key customers. And with regard to Perth Energy, as I said, it's a great time to be talking to the market about this business and what it's got to offer. That process is ongoing, and we're essentially expecting that we will come to a conclusion on that within the FY '20 year.

And then looking at the FY '20 outlook and our guidance. We provided earnings guidance to the market as part of our Investor Day. Really, the main update from that has been to give the market a view on what we think our guidance will look like if we progress with the acquisition of Vodafone. For the purposes of our guidance, we've assumed that the acquisition would take place from 31 August. So we're talking about a 7-month contribution to the business. The way we're proposing to guide for Vodafone is to bring in our proportion of underlying EBITDAF, and this will essentially put Vodafone in the same category of how we're looking to treat CDC for guidance purposes.

So bringing that in and building on the guidance that we gave in April, we've essentially, we set our guidance to an underlying EBITDAF of $635 million to $675 million. We've broken down the component parts on the slide. As you'd expect, we've got Trustpower and Tilt as per the guidance that they've provided. We've got CDC's share of -- a bigger part in Infratil's share of CDC's reported EBITDA for the year. And of note, our assumptions in relation to Longroad that the business is going to deliver 3 development projects in addition to Rio Bravo. As you can imagine, that sounds like a lot for that business to do. But there are several well-advanced projects for the net business, and we've taken the view that that's what we think they can achieve.

So the only other thing to note, I think, is that there's no incentive fees assumed in the outlook. And just for clarity, there were no assets [for what -- an initial] incentive fee would be payable next year. So essentially, we're really just talking about an annual performance fee assessment. So quite distinct from the initial incentive fee which occurred in the FY '19 year.

I think that's about it. Other than capital expenditure, you'll see still quite a large number coming through the year. And as you'd expect, some of that's going to be Tilt with its Dundonnell, and we've got a lot of CapEx going into CDC as well as other CapEx in the other parts of the business. So I think that's about it for me.

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Marko Bogoievski, Infratil Limited - CEO & Director [5]

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Okay. Thank you, Phillippa.

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Phillippa Harford, Infratil Limited - CFO [6]

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Thank you.

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Marko Bogoievski, Infratil Limited - CEO & Director [7]

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So just to wrap up this part of the presentation. So I think part of -- the activity levels are high. So some of that is on the divestment side, as Phillippa outlined. And I guess one of the things of our sort of business is whether it's sort of a larger or a smaller asset, actually, the amount of work usually doesn't change particularly. So the fact that we've got these 4 divestment or review processes undertaken actually is significant. And I think we should take the opportunity to thank the people in the operating businesses and at Morrison & Co, the manager, for the amount of effort that's gone on this year and the outcomes actually.

And so that obviously should slow down over time. I think what we're saying is once you get through that program, hopefully, close Vodafone New Zealand, portfolio -- what we're calling a portfolio reset is largely complete. I know that never really happens, but we've hit our target settings. It should deliver the sorts of returns we're after if they're well managed and protected and the capital that we have, the free cash flow that's generated from that portfolio, gets allocated to the priority platforms and they are the ones we've been talking about: renewable energy, data and communications, in particular. I would expect RetireAustralia to resume transmission around development as well, but the bigger numbers are going to those first 2 areas. So it is a more focused portfolio. I think whether simplification or decluttering, I think it's an easier portfolio to get your head around now, particularly if you think about the renewable energy and data and connectivity as 2 large buckets.

And the outlook, why we're so positive about the outlook is because the pipeline's there and existing platforms and ready to be hit in various stages of development. So this is really extraordinarily good visibility about these sorts of projects, particularly in the renewables and data center business. The one caveat I would say is that Longroad, in particular, has got quite lumpy timing. So whether it actually falls into this fiscal period or not sometimes is difficult to forecast. But if you took sort of a 2- or 3-year view, the foreseeability of the pipelines is unusually strong and clear.

So I think that's the message going forward. I think it's a reasonable segue into the offer that we're about to talk about. So the way I'd like to do it is go through the offer first and then maybe we can open up to questions either on the full year result or the offer at the end of the presentation.

So there's a slide titled entitlement offer and institutional placement, which is a separate presentation for those that are following on the phone or online. I think it's worth just recapping how we got here, right? I mean for those that were listening in on Tuesday, this is -- this doesn't have a number, but it's called transaction summary. For those that were following on Tuesday, you'd see that we try to put out some key messages about the formation of the consortium, how Vodafone New Zealand -- how we saw it fitting into our portfolio, why we were attracted to sort of the high-quality nature of its infrastructure and its sort of #1 market position particularly in mobile.

Behind that is sort of a strong house view around data and connectivity and how infrastructure investors can get access to those sort of growth rates and generate reasonable returns. And we think we've got the situation now, we've got a really strong partnership with Brookfield, who know what they're doing, who also have investments in communications broadly globally and that's how we got confidence around this asset. I think the price, I think we've sort of suggested it's a fair price. It's relative in terms of market values. I think it's a reasonable number to get going on, and there's a lot of work and potential benefits, I think if we execute well.

The funding package, which again goes particularly to the offer, is a combination of facilities that we've got available to us today, both existing facilities and an acquisition facility that was put in place prior to the transaction getting close to completion. It also includes some equity, and the equity is designed to target sort of long-run gearing levels. And so we sized the $400 million thinking about where we wanted the balance sheet, what our future costs on capital were likely to be and -- particularly in those renewable energy and data platforms, what some of the sort of probability weighted, conservative view on divestment proceeds and timing. And I guess behind all that is sort of the flexibility we have about how fast or how slow we go on the development platform.

So I've sort of almost said at every presentation, it really feels like this business has more levers than most to manage capital deployment. I mean that's why we're so keen on having a strong influence or control or outright ownership of assets so we can dictate the pace of development. And if we don't have outside -- or outright control, we have a relationship and a consortium with a partner who's got complete business plan alignment and that's the other important part of our portfolio consideration.

Next slide, regulatory approvals. I mean it is a conditional deal. We do feel confident about the conditions on both the Overseas Investment approvals and the New Zealand Commerce Commission application, but I think it's important in the context of an equity offer to highlight those again. So the -- and just to be clear, the Overseas Investment approval component relates to Brookfield's position in the New Zealand marketplace, and the Commerce Commission part relates to our control position and Trustpower, where they're also a participant in fixed line broadband. So there's reasons -- I think there's a strong basis for the Commerce Commission application being a positive one, a cleared one and that, I think, reflects the nature of the market where you've got open access to [courses] and other fixed line infrastructure and relatively low barriers to entry if you want to play in that space.

Investment rationale, next slide. I think it is important to restate that, I mean, capital is fungible, I get that, but the offer's largely sized too, based on an assumption that we close this transaction. It's a business that, as I said earlier, is a mix -- all these communication integrated businesses are really a mix of different businesses, some low risk, some higher risk. But when they're well managed and they've got leading market positions, you get quite a lot of predictability and long-run cash flows. I think you still have to work hard. It's not actually really mainly about revenue growth. It's a lot to do with the way you can reduce the amount of capital in your own business and achieve productivity and efficiency gains. And in the long run, it's also about reducing or managing the amount of capital that goes into the aggregate market.

So again, big fixed cost infrastructure, you want to sort of rightsizing for the market you're operating in and the customers you're delivering services to. And when you are the market leader, you can get a lot more confident about long-run industry structure than, say, if you're a peewee, a small player in the market where it's more difficult to think about those sorts of things and get confident.

We've got an experienced management team. We're really impressed with Jason Paris. Hopefully, some of you saw him in action on Tuesday. Pretty smart guy, good team -- knows, I think, what he wants to do, has that relevant experience in Spark. And a lot of the early stuff, business plan is not really just a playbook out of Spark. It's what most well organized, thoughtful telcos are actually going through, that sort of transition where you're trying to deal with all your old legacy systems and create the sort of brand-new infrastructure. That's actually quite a low cost, flexible way of delivering future products and services. That's what they're doing. So we do think they're the #1 operator and should stay there if we support them appropriately.

Next slide is really more about our portfolio is transformative. I mean anytime you're writing an equity check that's over $1 billion, it's a big deal, right? And for us, it's particularly a big deal. You can see the point I made earlier that sort of the Infratil portfolio starts looking a bit like a renewable energy and a data and connectivity portfolio. We're not understating our positions in Wellington Airport and other assets though -- and retirement. That's still important. But I think it is a slightly easier portfolio to get your head around and maybe a few less sectors post that divestment program we talked about.

The funding details. I mean they are important. We, on the next slide there, detail how we actually end up meeting the total consideration. It's a combination really of equity from both parties and use of debt. On the right-hand side, it's really the part that's relevant for today. So it's a $400 million offer split between a $300 million entitlement offer and a $100 million institutional placement. We are drawing down $400 million on the acquisition facility, I mentioned earlier, and we are using some existing headroom in our existing facility. So our total consideration is $1.029 billion.

And so the debt breakdown, I mean, on the next slide. This is a -- it's a -- this slide is really just designed to give you a bit of a view about what the balance sheet looks like post-closing. And you can still see that -- with the $400 million facility, you can get a feel for how much headroom we've got. Now the idea is at the end of this program, you're still comfortable and can support, alongside your existing cash flows, all the sort of foreseeable activity we've got out there. And yes, so we're still confident with the $400 million being the right number.

On the equity funding side, I think this is the final -- second final page, there's details there about the actual components of the offer. So 1 for 7.46 pro rata accelerated renounceable entitlement offer. That's quite a mouthful. So approximately 100 million new shares, approximately $4 a share. You can see the discounts to market, and you can see the other important information on that, which includes a record date, participation in the dividend that we announced and who's underwriting the offer.

And the timetable, I guess, is important as well. That's the final page, where again these sort of processes have a slightly -- have sort of a 2-stage part of them where institutions participate early on and retail gets to complete their decision-making over the next couple of weeks or so.

So I'll end there. Perhaps I could start with questions in the room if there are any, and we could then go to the telephone. Are there any questions in the room? No? Okay. No one's had enough coffee obviously. Operator, can -- are there any questions hanging on the phone line?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question today comes from Andrew Harvey-Green with Forsyth Barr.

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Andrew Rupert Pelham Harvey-Green, Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of Equities [2]

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A couple of questions, more -- especially around the results and I guess a couple of first questions around guidance. Wellington Airport guidance, are you able to give us a feel for what you're looking at for FY '20 just given, I guess, you've got carpark and hotel contributions coming through, which will hopefully give it a slightly higher growth number for FY '20, I assume?

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Marko Bogoievski, Infratil Limited - CEO & Director [3]

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Phillippa?

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Phillippa Harford, Infratil Limited - CFO [4]

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Yes, that's right, Andrew. We haven't actually separated out guidance for Wellington Airport at this stage because they haven't released guidance to the market. But certainly, with the full addition of a contribution from the carpark and the hotel, we would expect to see some uplift, but that's really all I can say at this stage.

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Andrew Rupert Pelham Harvey-Green, Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of Equities [5]

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Okay. And in terms of the Vodafone number, is that just a simple pro rata of the Vodafone guidance from 31 August onwards, and then I guess if you included any sort of one-off costs that you might incur in that number as well?

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Phillippa Harford, Infratil Limited - CFO [6]

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Yes, Andrew, it is an underlying EBITDAF guidance number. So essentially, there will be some adjustments to that to reflect, say, separation and transition costs. And as you were saying, that what we've done is if we assume a 31 August completion, we've taken our share of that sort of guidance range for the period to 31 March 2020.

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Andrew Rupert Pelham Harvey-Green, Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of Equities [7]

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Okay. Next question here is just around an update, I guess, as much as anything else RetireAustralia and I think Alison, in terms of chief executive, she left a wee while ago. Is there any update in terms of replacing her?

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Marko Bogoievski, Infratil Limited - CEO & Director [8]

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We -- this is Marko, Andrew. We are close to that, but we're not in a position where we can confirm that announcement. So I think we're pretty happy with the way that process has ended up, and I think we're going to have a high-caliber person to sort of show to the market very shortly. We have got the Chairman of RetireAustralia here somewhere. Where is he? Is there anything you want to add to that? No? Okay. I'm getting a thumbs up. So you were pretty close, Andrew.

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Andrew Rupert Pelham Harvey-Green, Forsyth Barr Group Ltd., Research Division - Director & Senior Analyst of Equities [9]

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Okay. And last question for me, I guess, is just around we've got the Tilt announcement with Waverley going (inaudible), I guess, was expected. Any initial thoughts on funding of that wind farm? I mean are you expecting Tilt will be able to do that itself? Or are we -- are they going to be needing additional equity? What's sort of your initial thinking around that?

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Marko Bogoievski, Infratil Limited - CEO & Director [10]

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[Are there any thoughts]?

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Phillippa Harford, Infratil Limited - CFO [11]

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Well, certainly, when Tilt undertook the equity raise for Dundonnell, we did think at the time about whether or not it would be good to size that equity up for Waverley as well. But essentially, where we've got to is that Tilt has a view that they can fund that development from their own balance sheet. So at this stage, we're not expecting to need to contribute additional equity into Tilt for Waverley.

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Operator [12]

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Your next question comes from Grant Swanepoel with Craigs.

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Grant Swanepoel, Craigs Investment Partners Limited, Research Division - Director & Head of Research [13]

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You've been very, very busy. First question on Longroad. You indicate that there's going to be 3 development gains in FY '20. If you can give some sort of color on what those gains could -- or a quantum of those gains? But more importantly, in the past, we could have considered those sort of [one-off] gains as showing up the dividend. Should we not consider any of those gains as reducing the debt over time?

My next question is on CDC, and it's more a carryover from your Strategy Day and -- because it hasn't been adjusted at this year-end result. In December, the outlook for CDC was $120 million run rate for FY '20. When you bought Sydney, this was changed to $135 million. But at the time of your Strategy Day, the comment was that 35% of this was Sydney. So in effect, Canberra went from $90 million run rate in '19 to just over $100 million in '20. Is this a downgrade? Or is this a move of Hume 4 into the following year?

Next question, just in terms of your incentive fee. I'm still struggling on Tilt. You're saying that the starting date is 28th of the 10th when the share price was $2.25. But I calculate that your incentive fee uses about [$2.5] in its starting point in order to get the $2 million gain. Can you talk through how that starting point was come up with?

And then my final question is on this Voda deal, just on Trustpower. If the third option of selling retail is brought about, how do minorities affect the ability to do this?

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Marko Bogoievski, Infratil Limited - CEO & Director [14]

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Geez, Grant, I think your questions are longer than my presentation. So the first one, if I can remember them, so Longroad development gains, I mean, I think it's quite a hard question to answer. I think I was trying to say that in the presentation. So if you look at what happened with Phoebe, we ended up with quite a large development gain. There's sensitivity around those outcomes. So when you come to the market with these completed projects, either at financial close or at commercial operations day, they're quite sensitive to the equity IRRs that are being bid by the purchasers and by the energy price curves that the buyers are using when they're sort of forecasting returns post the contracted period. And -- yes, you can do the math yourself, it's actually very, very sensitive. So you could -- for a $50 million development gain like [Midpoint], you could easily see a $20 million outcome or a $19 million outcome.

So -- and then there's the timing issue around when exactly those sort of processes close. One of the things we've always said around Longroad is that we are not pushed to -- forced -- or forced to do anything in any sort of time frame. So we'll market a product when it's ready. And if we think there's good competitive tension, we'll offer it. If we don't, we can wait and hold. So that's sort of -- we don't want to lose that flexibility. So I'm sorry, it's not like the answer you'd need to plug a number into a model, but it's the reality of being in that business.

And therefore, it also makes it hard to sort of factor in those outcomes into your distribution profile. I think that was the second part of your question. So when -- clearly, we're starting to get into a more normalized state with Longroad even though we're still relatively early. So we're getting more confident about supporting long-run dividends. So when we say we can support a constant nominal DPS, that's our best estimate today. If we can do better than that, obviously we will share that with shareholders. We will look -- compare it to other capital -- uses of capital at the time. Phil, there was -- what was the other question?

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Phillippa Harford, Infratil Limited - CFO [15]

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A question around CDC.

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Marko Bogoievski, Infratil Limited - CEO & Director [16]

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Yes, around CDC. I didn't actually understand the question.

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Phillippa Harford, Infratil Limited - CFO [17]

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I think your question was, Grant, whether or not the guidance that we're giving for FY '20 suggests that there's been a walk back from what we thought we would be delivering in Canberra. And I think the question was given what we are expecting from Sydney, is -- did that mean that our view of the development pace in Canberra had changed? And I think we can certainly confirm that there hasn't been a change in view of the pace of development in Canberra. CDC is well advanced in the developments that it's doing there. So effectively, that -- there wasn't intended to be a suggestion that, that would be otherwise. I suppose at the end of the day, we also want to see the guidance range that we believe can be achieved and also doesn't put undue pressure on the business. So we've set that guidance at a level that we think is appropriate, and we'll let the market know as we get through the year.

I think as importantly for CDC, now that the business is understood more, what we'd like to do is move away from the run rate description of how the business is performing and actually just talk about its reported EBITDA. Certainly, from an Infratil perspective, that's the way we're going to [bring it into] its guidance. So whilst clearly run rate EBITDA was a really important measure for how we value the business and how the market will value the business, the sort of headline number we'll be looking to focus on from a guidance perspective will just be our share of reported EBITDA.

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Marko Bogoievski, Infratil Limited - CEO & Director [18]

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And the question about the Tilt...

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Phillippa Harford, Infratil Limited - CFO [19]

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Performance fee?

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Marko Bogoievski, Infratil Limited - CEO & Director [20]

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Yes.

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Phillippa Harford, Infratil Limited - CFO [21]

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I think that point, essentially, Grant, your question was how we came -- how we determined the costs that we're bringing into for Tilt. And just to confirm that the process was actually agreed with the Infratil Board and with external advice as to how Tilt should be brought into that calculation, and I believe it was this 30-day VWAP?

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Marko Bogoievski, Infratil Limited - CEO & Director [22]

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I can't remember.

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Phillippa Harford, Infratil Limited - CFO [23]

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I think it was like a 30-day VWAP. But I can confirm for you, Grant, separately outside of the call.

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Marko Bogoievski, Infratil Limited - CEO & Director [24]

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So [Matt], have you got the actual number? Do you remember what that starting cost price was?

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Unidentified Company Representative, [25]

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Yes. It's about (inaudible).

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Marko Bogoievski, Infratil Limited - CEO & Director [26]

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Yes, and...

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Phillippa Harford, Infratil Limited - CFO [27]

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Was it 30-day VWAP, [Matt]?

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Marko Bogoievski, Infratil Limited - CEO & Director [28]

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[2.4], Grant. We can pick that up offline if that's easier for you. On that last question you had, do you mind repeating it? It was about Trustpower retail in the context of the Vodafone transaction, Grant?

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Grant Swanepoel, Craigs Investment Partners Limited, Research Division - Director & Head of Research [29]

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Sure, Marko. And thanks, Phillippa, for understanding my questions. The question was there's 3 options to get over the potential block with the ComCom, and 1 of them is to sell Trustpower's retail business. My question was this has now been potentially -- I know that you could have sold the retail business any time over the last few years. But potentially, this has been brought about because of your deal with Vodafone, and therefore Trustpower minority issues might be on the -- be negatively impacted by a sale of the retail because you would then be [the potentially fourth] seller. So what I was asking you is do the minorities have any ability to push back on that if that did occur?

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Marko Bogoievski, Infratil Limited - CEO & Director [30]

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Well, let's just step back a little, right? The context here is that we -- I think we explained why we're having to make a Commerce Commission application. We are confident about assuming a positive outcome on that process. So that's the sort of starting point, and that's based on sort of our own assessment of the situation and sort of dealing with the professionals that understand what the Commerce Commission is worried about and thinking on these days. There is a mechanism in the sale and purchase agreement that was required by the vendor to get absolute certainty that this thing was going to close one way or another, and we've laid those out. They don't actually write at all to our preferences. We actually like Trustpower. We'd like it to stick around our portfolio.

So mechanically, we can address the SPA requirements by addressing Trustpower's involvement in retail. That is the actual Commerce Commission bright-line issue. Or if we wanted to, deal with Trustpower itself, both sound quite unattractive, right? And both, if we head into the Trustpower situation, would have to be driven by the independent directors and Trustpower. So it's -- that's something that we've thought about and believe have sort of set risks that are acceptable given the primary considerations we're having on the Commerce Commission application. So that's the way we've thought about it, Grant.

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Operator [31]

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Your next question comes from Stephen Hudson with Macquarie Securities.

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Stephen Hudson, Macquarie Research - Head of Research [32]

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Just a couple of quick ones for me. Just briefly on CDC, can you just reconcile the carrying value of CDC and the midpoint of the independent valuation range? I'm sure there's a simple explanation, but there's a difference there and I missed what direction are for the change or for the differences. Secondly, again on CDC, you've disclosed a little bit of information about the EBITDA margin, and I think there's been a sort of a small change over the year. I just wondered if you can talk through whether or not that's sort of an indigestion issue or if there's something else going on there.

And then maybe one for you, Marko, just in terms of the dividend, the flat dividend for FY '20. Can we expect, given your comments on sort of the mix of core, core plus and development assets that you now have and that's at sort of a stable state, whether or not we could sort of expect to see a resumption of that kind of 5% sort of dividend growth that you've talked about in the past from FY '21?

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Marko Bogoievski, Infratil Limited - CEO & Director [33]

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Okay.

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Phillippa Harford, Infratil Limited - CFO [34]

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I can deal with the first one if you like.

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Marko Bogoievski, Infratil Limited - CEO & Director [35]

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Okay.

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Phillippa Harford, Infratil Limited - CFO [36]

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Yes, so with regard to the carrying value of CDC and the difference between that and what we're showing as the independent valuation, they really are 2 fundamentally different processes. So for the purposes of our financial statements, what we do is we actually bring CDC in as an investment and associate. What that means is we don't fully consolidate CDC. We only bring in basically our share of our investment and we then move that or change that to reflect the earnings from that investment less the distributions we receive from it. So really, if you start from that position, you'd start with the -- our original investment in that of about AUD 400 million in 2017, and we've seen movement since then for our contribution -- or their contributions to us as associate income less any distributions we've received.

So that's quite a relatively narrow construct in terms of the way in which we build out the carrying value of our investment in CDC. Now in contrast, what we've undertaken at 31 March 2019, and as was required as part of the management agreement, is CDC has actually been independently valued. That looks at what the value of that investment is as at 31 March, really applying what you'd call a typical valuation DCF approach and taking into consideration what its developments have been since acquisition, what its customer base is looking like and what the outlook for that business is. So it's that approach that has driven the valuation that you'll see on the international performance fee table and really trying to reconcile that to what the carrying value is for financial reporting standards. You could try to undertake it. But essentially, we're not comparing apples with apples.

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Marko Bogoievski, Infratil Limited - CEO & Director [37]

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There was a follow-up question about margins, I think.

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Phillippa Harford, Infratil Limited - CFO [38]

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Yes, follow-up question. Could you just clarify what your question was on margin, sorry?

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Stephen Hudson, Macquarie Research - Head of Research [39]

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Look, you disclosed what the revenues are for CDC in Aussie dollar terms and you disclosed your EBITDA obviously and I think that's sort of gone from about 66% EBITDA margin last year to about 63% this year and I just wondered if that was a sort of a digestion/indigestion issue. Obviously, I'm just interested in why that's fallen away.

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Phillippa Harford, Infratil Limited - CFO [40]

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Sorry, [Matt], what was that?

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Unidentified Company Representative, [41]

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(inaudible)

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Phillippa Harford, Infratil Limited - CFO [42]

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Sorry, if you don't mind, I will just come back to you on that. I don't think really fundamentally what we're seeing is any change in the operating sort of assumptions around that business. So certainly, there's nothing coming through that would suggest to us that margins are being squeezed. But I can come back to you separately on that.

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Marko Bogoievski, Infratil Limited - CEO & Director [43]

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Stephen, on your last question about demand profile, I think obviously we're cautious about any sort of distribution commentary. I think we're trying to be clear about what you'd expect for the next 12 months. And after that, I guess, it depends on what our sort of uses of cash and capital really relate to. I think if everything was static, you're going to get -- it partly reflects sort of a transition phase and implementing sort of and incorporating Vodafone into the portfolio. So it will be a period post that when -- Vodafone actually looks to us to be quite an attractive yielding sort of asset and normalized long-term basis and should add, everything else being equal, should add to our ability to continue DPS growth. But saying much more than that at the moment is a little bit hazardous, I think.

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Operator [44]

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(Operator Instructions) Your next question comes from [Rayne Brader] with First NZ Capital.

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Unidentified Analyst, [45]

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I have 3 questions. I might do them one at a time just for simplicity. My first question is in regards to what capital commitments are going to be required by Infratil over the next 12 months, particularly in relation to CDC and Longroad?

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Phillippa Harford, Infratil Limited - CFO [46]

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Yes, sure. So CDC, I can probably start with. Really, at the time that CDC undertook the acquisition of a data center site in that footprint in Sydney, it actually went out and we said it's [debt] sizing. So essentially, at this stage, unless we have a material development within CDC beyond what we've got in our current forecast for FY '20, we're not expecting to have to contribute capital to CDC. I think there's a small residual amount that's outstanding in relation to the initial amount we put in around December. But really other than that, certainly based on the forecast they've provided to us, the CDC CapEx and its development for FY '20 will be self-funded.

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Marko Bogoievski, Infratil Limited - CEO & Director [47]

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Yes, and similar with Longroad, you might know or recall that we've got USD 100 million development equity in that vehicle that's committed by both partners. That's sufficient, we think, to accommodate the likely development activity this year. And there's also USD 150 million letter of credit facility which supports that whole program. That's also sufficient, we think. So we're not expecting anything outside of that. And if it is, it's for the same reasons Phil just said on CDC, there'll be some inorganic idea that we think we want to address.

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Unidentified Analyst, [48]

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And there's no other capital commitments likely by the other subsidiary?

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Phillippa Harford, Infratil Limited - CFO [49]

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There'll be other capital commitments for subsidiaries. For example, at this stage, we are expecting to provide more capital to RetireAustralia. But certainly, when we've looked to the acquisition of Vodafone New Zealand and looked to our capital commitments, it's really in part how we've sized this -- as Marko said, how we've looked to size the acquisition facility to give us that capital flexibility after the transaction to meet the capital needs of the portfolio. But really beyond -- so there's always going to be capital required in our businesses, and certainly that's what we expect and that's what we like to see because that typically means that -- investing in projects that are going to generate returns for us. But really nothing that you'd point to in the realms of what we've seen recently. If you think about Tilt Renewables and really even, as I said, even CDC, we injected $50 million on -- in about December, but that was really Sydney related.

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Marko Bogoievski, Infratil Limited - CEO & Director [50]

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There's also capital potentially that comes back around. So we just saw on Friday that Trustpower now has a special dividend, as an example. I think that might be the end for a while for those guys, but it's just an example of what can happen as well.

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Unidentified Analyst, [51]

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Okay. That's cool. And my second question is in regards to the sales pricing from NZ Bus. I know that you previously announced it would be between $218 million and $240 million, and it's now $160 million to $170 million. So if you could just provide a bit of color as to what that $75 million reduction kind of relates to.

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Phillippa Harford, Infratil Limited - CFO [52]

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Yes. The reduction's actually not at that level because the first amount was always going to be subject to how much CapEx had been spent by NZ Bus versus how much sort of CapEx was assumed within the SPA. So I think really where you need to look to is the impairment that we've put through for the FY '19 year, and that's probably what we would call our best estimate of where we see the movement in sale proceeds. So really when we get to the completion of the transaction, what we'll need to do is look at how much CapEx we committed to in that business versus how much we've actually spent between signing the SPA and getting to completion.

But -- so really, rather than focusing on what we'd said were gross proceeds and what we're now sort of indicating to, what I would instead recommend is that you simply look at the impairment that we've put through, which is roughly $27 million, and that's our best estimate of where we see the variation in sales proceeds. The thing to note though is really what's moved is the earn out part of that process. That earn out process actually goes through to 30 June. So we're actually in full flight there, and that's really why all we can do at this stage is say this is where we see the business trading now, this is where we expect it to be trading through to completion and on that basis, this is our impairment as at 31 March.

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Unidentified Analyst, [53]

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Okay. And my final question today is in regards to debt. So firstly, wondering if you could provide any color in relation to the covenant in relation to the new acquisition debt? And then noting that, that $600 million is a 1-year facility and do you have plans at this stage to repayment sort of in the lines of a retail facility or something?

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Phillippa Harford, Infratil Limited - CFO [54]

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Yes. Okay. Well, the good news on that is actually part of that $600 million facility is effectively dealt with through the equity raise that we announced today. The purpose of going through the acquisition facility to the level we did was to give us absolute certainty that we could execute the transaction regardless of our comfort levels about the way that the equity market might have been performing at the time when we wanted to go. So it's obviously really pleasing to get to this morning and know that we're not going to need to draw down that acquisition facility in full. And so if you look at that $600 million of 1-year term, we really only -- we only will be drawing down $200 million.

And putting some context into how we see that playing out within the next 12 months, we've got very active sale processes underway. At the moment, we've got NZ Bus. We've got Perth Energy. So clearly, the way in which those transactions play out will have an impact on how we pay down that [bridge]. So yes, and I think you also had a question around covenants. Essentially, nothing's special about this agreement -- or I beg your pardon, this facility. The facility has been set on the same terms of all of our other banking arrangements with regard to covenants. So nothing of note.

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Unidentified Analyst, [55]

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Are you able to provide any of the sort of existing covenant flavor?

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Phillippa Harford, Infratil Limited - CFO [56]

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No. No, sorry. Thanks.

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Operator [57]

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Your next question is from Aaron Ibbotson with UBS.

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Aaron Ibbotson, UBS Investment Bank, Research Division - Director & Research Analyst [58]

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Just 2 quick clarifications, if I may. I know it was asked before, but on Wellington Airport, this is quite significant with a hotel and the parking lot. So even if you don't provide any guidance on EBITDA, could you just clarify that -- what the structure will be? Basically it's a Rydges Hotel? Will you consolidate the whole cost on revenues and pay them a fee or something? Or how will that work? And similarly, with the parking, this quite significant so it would just be great to understand a little bit around what the key moving parts are.

And then finally, I know you talked at length about CDC and there were some questions about run rate, et cetera. But should we then understand your answer to the previous question that the run rate of $135 million at end of FY '20, which incidentally fits quite well with the $110 million EBITDA guidance, is sort of still in place even if you don't want to reiterate it, but there's no reason to believe that, that $135 million that you mentioned on the Capital Markets Day is still in place for run rate at end of FY '20?

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Marko Bogoievski, Infratil Limited - CEO & Director [59]

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Yes. So I'll deal with the easy one first. So that's definitely still in place, if not feeling -- I'm a bit more optimistic than that. So there's no change in temperature or tone about CDC, right? We think this thing's pumping full speed, gaining momentum. Those guys are just executing, and so we're not trying to suggest anything else. There's still increasing momentum in that business, and we'll update the market when we can, right?

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Phillippa Harford, Infratil Limited - CFO [60]

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I think actually just to be clear, our preference to move to our share of EBITDA was essentially that it takes out the impact of revaluations, makes it a lot easier for us to be clearer to the market about what it is we're guiding to on CDC and to bring it into our guidance range with more confidence because even if you just look at what's gone on in the last financial year, clearly, revaluations will have a significant impact on CDC. And actually net, net, that's a very significant favorable impact for Infratil. But what we've decided to do is actually -- and just to be clear, that was consistent with our accounting treatment of CDC, which was that we needed to bring in our share of the net profit after tax.

So we started at that place. We used to say let's bring it in on that basis. The difficult thing about that is we're trying to provide guidance on a number which reflects revaluations, which in that business is a very material component of the result. So in order to make it easier for us and also easier for the market to understand how it is that we're bringing CDC in, it's on that basis that we've gone to a proportionate share of EBITDA and that's just going to be a straight reported EBITDA and you'll see that come through our annual report and everybody will understand what the number is. But as Marko said, that's got nothing to do with moving our views on run rate EBITDA. We're simply trying to give greater sort of clarity on how it is we're guiding to a number.

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Marko Bogoievski, Infratil Limited - CEO & Director [61]

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And Tim, do you want to correct those Wellington Airport questions?

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Tim Brown, Infratil Limited - Chair of Wellington Airport [62]

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The carpark is just part of the Wellington Airport business. So when you pay to park, the airport gets the revenue and all of the costs associated with the carpark are borne by the airport. And the airport, in respect of the hotel, it's pretty much exactly the same scenario. The involvement of Rydges is that they have managers and they get paid a fee for managing the hotel.

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Marko Bogoievski, Infratil Limited - CEO & Director [63]

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Okay. Thank you, Tim. Well, thank you. I'm going to wrap it up here, unfortunately. If there's other questions, I guess you'll know how to get hold of us.

I do appreciate the attention. It's been a huge week, right? I think a lot of people looking forward to the weekend even if they don't get one. So -- well, we do. Thanks, everyone, on the phone and here in Wellington. Thank you.

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Phillippa Harford, Infratil Limited - CFO [64]

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Thank you.