Offer of Fixed Rate 2023 Bonds 2 May 2016 Important Information and - - PowerPoint PPT Presentation

Investor Presentation Offer of Fixed Rate 2023 Bonds 2 May 2016

Important Information and Disclaimer

Page 1

Important Information

The offer of debt securities by Wellington International Airport Limited (WIAL or the Issuer) is made in reliance upon the exclusion in clause 19 of schedule 1 of the Financial Markets Conduct Act 2013 (FMCA). The offer of WIAL’s fixed rate bonds (2023 Bonds) is an offer of bonds that have identical rights, privileges, limitations and conditions (except for the interest rate and maturity date) as WIAL’s $75,000,000 unsecured, unsubordinated, fixed rate, interest bearing bonds maturing on 15 May 2021 which are currently quoted on the NZX Debt Market under the ticker code WIA020 (Existing Bonds). The 2023 Bonds are of the same class as the Existing Bonds for the purposes of the FMCA and the Financial Markets Conduct Regulations 2014. The Issuer is subject to a disclosure obligation that requires it to notify certain material information to NZX Limited (NZX) for the purpose of that information being made available to participants in the market and that information can be found by visiting www.nzx.com/companies/WIA. The Existing Bonds are the only debt securities of WIAL that are currently quoted and of the same class as the 2023 Bonds. Investors should look to the market price of the Existing Bonds (WIA020) (which have a fixed interest rate of 6.25% per annum) to find out how the market assesses the returns and risk premium for those bonds.

Disclaimer

This document does not constitute a recommendation by the Issuer, ANZ Bank New Zealand Limited (Organising Participant and Joint Lead Manager), First NZ Capital Securities Limited, Forsyth Barr Limited, Westpac Banking Corporation (acting through its New Zealand branch) (Together Joint Lead Managers), Trustees Executors Limited (Supervisor), nor any of their respective directors, officers, employees, affiliates or agents to subscribe for, or purchase, any of the 2023 Bonds. To the extent permitted by law, none of the Issuer, Joint Lead Managers or Supervisor nor any of their respective directors, officers, employees, affiliates or agents accept any liability whatsoever for any loss arising from this document or its contents, or

• therwise in connection with the offer or any person’s investment in these 2023

Bonds. This document is for preliminary information purposes only and is not an offer to sell

• r the solicitation of an offer to purchase or subscribe for the 2023 Bonds and no part
• f it shall form the basis of or be relied upon in connection with any contract or

commitment whatsoever. The information in this document is given in good faith and has been obtained from sources believed to be reliable and accurate at the date of preparation, but its accuracy, correctness and completeness cannot be guaranteed. A terms sheet (Terms Sheet) has been prepared by the Issuer in respect of the offer

• f the 2023 Bonds, which sets out how 2023 Bonds may be applied for.

Application has been made to NZX for permission to quote the 2023 Bonds on the NZX Debt Market and all the requirements of NZX relating thereto that can be complied with on or before the distribution of the Terms Sheet have been duly complied with. However, NZX accepts no responsibility for any statement in this

• document. NZX is a licensed market operator, and the NZX Debt Market is a licensed

market under the FMCA.

Agenda

• Business Overview
• Aeronautical and Commercial Business
• Capital Expenditure – Major Projects
• Capital Expenditure – Runway Extension
• Financial Results
• Regulatory Environment
• Treasury
• Key Credit Considerations
• Bond Offer Issue Terms & Timetable
• Questions?

Page 2

• WIAL employs approximately 94 of the 1,500 people

estimated to work at the airport

• 5.8 million passengers and 96,000 aircraft movements for

year ended 31 March 2016

• Passenger growth is driven by airline competition,

economic growth and propensity to travel

• Net profit after tax for year ended 31 March 2015 was

$9.7m

• EBITDAF before subvention payment1 for year ended 31

March 2015 was $82.1m

• $843m in total assets and $427m total liabilities as at 30

September 2015 (unaudited)

Business Overview – Gateway to capital and central region

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1959 TODAY

• 1. EBITDAF before subvention payment is a non-GAAP financial measure – refer to slide 9 for further detail.

• Rated amongst the best airports for service quality in

Australasia (#2 in Australasia in 2015 ASQ annual survey)

• Most cost efficient of the major airports in Australasia
• NZ Airports (wholly owned by Infratil) 66% ownership

(since 1998) and Wellington City Council 34%

• wnership
• Long-term credit rating of BBB+/Stable Outlook (S&P)
• Light handed airport regulation
• $250m forecast infrastructure expenditure over next five

years ($125m aeronautical facilities)

Business Overview – High service quality and BBB+

credit rating

Page 4

Aeronautical Business – Consistent passenger growth and

proven resilience

• Aeronautical charges approximately 60% of total revenue
• Passengers (“pax”) mainly domestic (approximately 85%) with

high proportion of business travellers and passengers visiting friends/family

• Aeronautical charges reset at least once every five years under

Airport Authorities Act 1966 (AAA) – current prices set for 1 June 2014 to 31 March 2019

• Strong demand on main trunk and regional routes, driven by an

increase in Jetstar capacity and competitive response from Air NZ

• Trans-Tasman market is changing with Air New Zealand/Virgin

Australia and Qantas/Emirates alliances encouraging better connectivity with long-haul markets, and Jetstar’s recent launch stimulating point-to-point traffic

• Multiple new routes launched in last 18 months including:
• Fiji Airways commenced year-round service to Nadi
• Jetstar flying the Tasman (Gold Coast and Melbourne)
• Jetstar regional services to Dunedin and Nelson
• Singapore Airlines to commence 4x weekly service to

Singapore via Canberra from September Page 5

Last 10 years average pax growth 2.4% pa

Resilience to external negative events, e.g. pandemics, GFC, earthquakes and airline entry/exit

Commercial Business – New initiatives & capital investment

driving revenue growth

• Terminal Extension – 6,000sqm extension will meet future

pax growth and make way for new retail and food and beverage

• fferings in mid 2016
• Main Terminal Optimisation – existing terminal area to be
• pened up and optimised for retail, food and beverage, driving up

income per passenger with improved mix and high yield offerings

• Duty free contract tendered and under review – announcement

due shortly with expected uplift in revenue

• Multi-level car park (1,000 new spaces) – construction

commenced in February 2016 to support growth in the car parking business – scheduled for completion in late 2017

• Rydges Airport Hotel (4 star, 134 bed) – construction to start

in late 2016 (subject to final design and construction tender)

• Airport Retail Park – 2,400sqm expansion complete – new

tenants include World Market, Pet Centre, Chipmunks Playland and House of Beds Page 6

Capital Expenditure – $250m forecast over five years

Major Projects

• Expansion of the Main Terminal Building and Southern

Piers (in progress)

• Redevelopment of the land transport hub and parking

infrastructure including multi-level car parking building (in progress)

• On-site airport hotel (scheduled to commence late 2016)
• International arrivals expansion – consultation with airlines

to commence in 2016

• Runway and taxiway works (ongoing)
• Noise mitigation programme of local properties (ongoing)
• Major capex projects consistent with 2030 Master Plan –

further information available at www.wellingtonairport.co.nz/corporate/2030-masterplan

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Runway Extension – Applying for resource consent

• Development cost not included in $250m capex forecast
• 350 metre extension at circa $300m to accommodate long haul flights
• 80% of public submissions supportive in some form or another
• Required funding would be on commercial terms – likely to require

support from central and/or local Government

• Regulatory approval obtained from the Civil Aviation Authority –

currently being challenged by NZ Airline Pilots’ Association

• Filing for consent in late April – to be lodged with Wellington City

Council and Greater Wellington Regional Council

• At least a 10 year option to construct (subject to consent)
• Further information available at www.connectwellington.co.nz

Page 8

Financial Results – Strong pax growth in FY16

Most recent audited results – year ended 31 March 2015

• Net profit after tax of $9.7m
• EBITDAF before subvention payment1 of $82.1m – ahead of

budget but down $3.9m on prior year due to new aero pricing schedule from 1 June 2014

• Copies of WIAL’s Annual Report are available at:

www.wellingtonairport.co.nz/corporate/financial/financial-reports Unaudited results for the six months ended 30 September 2015

• Net loss after tax of $8.9m (unaudited) – subvention payment of

$39.5m paid in June 2015

• EBITDAF before subvention payment1 of $41.8m – an increase of

$1.4m on the comparative six month period Current year ended 31 March 2016

• International pax +15.8% on a capacity increase of 18.0%
• Domestic pax +4.7% with additional capacity and increased loads
• Additional new routes announced in year
• Jetstar – Nelson (3 per day) and Dunedin (3 per week)
• Fiji Airways – Nadi (2 per week)
• Singapore Airlines – Singapore via Canberra from September

2016 (4 per week) Page 9

Financial Position $ million 31 March 2014 31 March 2015 30 September 2015

(unaudited) Cash and bank 28.9 22.3 4.8 Current assets 13.9 13.9 13.1 Non current assets 799.5 805.3 825.1 Total assets 842.3 841.5 843.0 Debt funding 273.7 273.9 299.1 Deferred tax 92.2 92.1 90.8 Other liabilities 36.1 37.4 36.8 Total equity 440.3 438.1 416.3

• 1. EBITDAF before subvention payment is a useful non-GAAP financial measure as it shows the contribution to earnings prior to non-cash items such as depreciation and amortisation and fair value adjustments, and before the cost
• f financing, subvention payments and taxation. It is calculated by adjusting net (loss)/profit after taxation for the period for the subvention payments and for items that are non-operating such as interest, taxation, depreciation,

revaluations and impairments.

Regulatory Environment

• Aeronautical business subject to limited competition

and light handed Information Disclosure (ID) regulation

• Commercial (non-aeronautical) business – subject

to competitive market and not regulated

• WIAL may set aeronautical prices following

consultation with its substantial airline customers under the AAA every 5 years

• Aeronautical charges currently in place for 1 June

2014 to 31 March 2019

• Commerce Commission (CC) monitors Wellington,

Auckland and Christchurch Airports under Part 4 of the Commerce Act

Page 10

Regulatory Environment – ID regime in place since 2010

• Regulatory outcomes monitored by the ID regime, covering

returns, service quality, efficiencies, investment and innovation

• WIAL publishes its annual and price setting disclosures in

accordance with the ID regime

• CC is currently undertaking its seven yearly statutory review
• f the ID regime. Final decision on the input methodologies is

due for release in December 2016

• Ministry of Transport is undertaking a review of the Civil

Aviation Act 1990 and AAA to ensure they are up to date and fit for purpose

• MBIE undertaking a review of the effectiveness of the ID

regime

• Active engagement with regulators and stakeholders

Page 11

Treasury

Debt Maturity Profile

• Bank debt refinanced in 2014 with total $100m facilities, $70m

maturing in June 2018 and $30m in June 2019

• Growth capex funded by operating cash and debt facilities

Treasury Management Policy

• Minimum liquidity requirements of committed capex plus 6 months opex
• Refinancing strategies provided to the Board at least 12 months before

maturity, and agreed not less than 2 months before maturity

• Policy provides delegation to Management via Treasury Committee to

actively manage treasury risks with reporting to the Committee

• Policy last updated in October 2015 and renewed at least every 3

years, or earlier as required

• WIAL’s long term credit rating BBB+

Financial Covenants

• Favourable headroom across banking covenants(*)

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(*) Retail bond covenants: total interest bearing debt less than or equal to 70% of TTA, and total secured debt less than or equal to 10% of TTA

Banking Covenants

31 March 2014 31 March 2015 30 September 2015

External Liabilities less than 60% of Total Tangible Assets (TTA) 35.7% 35.8% 38.4% EBITDA/External interest > 180% 413.9% 427.0% 432.2% Senior Debt/EBITDA < 6 times 3.26 3.43 3.68 Net Tangible Assets > $100m $544m $542m $520m

Key Credit Considerations - Stable and predictable cash flows

Strong Competitive Advantage Stable and Predictable Regulatory Environment

• Gateway to New Zealand’s second most populous region
• Key regional infrastructure – high barriers to entry
• Commercial business subject to competitive market and not

regulated

• Historic cash flows have been stable and predictable
• Historic long term trend for passenger growth
• Supportive and financially stable shareholders: 66% majority
• wned by NZ Airports (Infratil) and 34% by Wellington City

Council

• Aeronautical business regulated under AAA and ID regime
• ID regime effective December 2010 (undergoing 7 yearly review)
• Active working relationship with regulators
• Resilient passenger numbers and commercial operations support

capital expenditure program for future growth opportunities

• S&P issuer rating BBB+/Stable Outlook

Financial and Economic Resilience

Page 13

Bond Offer Issue Terms

Page 14 Issuer Wellington International Airport Limited Description Unsecured, unsubordinated fixed rate bonds 2023 Bonds are not guaranteed by any Subsidiary of WIAL or any other person Maturity 12 May 2023 Issue Amount Up to NZ$50m, with ability to accept oversubscriptions up to NZ$25m Issuer Credit Rating BBB+ (Stable Outlook) Standard and Poor’s There will be no specific issue rating for the 2023 Bonds Interest Rate The interest rate will be the sum of the Issue Margin and the Base Rate. However, WIAL has agreed that the Interest Rate will not be less than 4.25% per annum. Indicative Issue Margin 1.55% – 1.65% per annum Interest Payments Semi-annually in arrears in equal amounts on the 12 May and 12 November of each year up to and including the Maturity Date. Brokerage 0.50% Brokerage and 0.25% Firm Commitment Minimum Application Minimum $10,000 holding then $1,000 increments Joint Lead Managers ANZ Bank New Zealand Limited, First NZ Capital Securities Limited, Forsyth Barr Limited and Westpac Banking Corporation (acting though its New Zealand Branch) NZX Quotation Application has been made to NZX to quote the 2023 Bonds on the NZX Debt Market under the code WIA030

Bond Offer Issue Terms - Continued

Page 15 Change to Interest Rate If, on any Test Date, Total Interest Bearing Debt exceeds 60% of Total Tangible Assets, then the Interest Rate for the next Interest Period shall increase by 0.50% per annum over the original Interest Rate. Financial covenants WIAL shall ensure that, on each Test Date: Total Secured Debt <= 10% of Total Tangible Assets Total Interest Bearing Debt <= 70% of Total Tangible Assets Early Redemption WIAL may elect to redeem, some or, all of the 2023 Bonds by giving written notice to the Supervisor and the Holders of the 2023 Bonds no later than five Business Days prior to any Record Date. Such notice must be given at a date not less than 25 Business Days before the Maturity Date. On early redemption, WIAL will pay to Holders of the 2023 Bonds the greater of: a) the Principal Amount plus accrued interest (less any withholding taxes and other deductions); and b) the average price, weighted by volume, of all trades of 2023 Bonds through NZX over the 10 Business Days up to the fifth Business Day before the relevant redemption date (except that if 2023 Bonds have not been sold through NZX on at least five of the 10 Business Days referred to above, the average price will be determined by an independent adviser selected by the Supervisor and approved by the Issuer). Holders of the 2023 Bonds have no right to require WIAL to redeem their 2023 Bonds prior to the Maturity Date, except following an Event of Default. Cross default No cross default with banking facilities Event of default if WIAL cannot pay debts as they fall due (same as banking facilities and wholesale bonds maturing June 2019 and 2020)

Bond Offer Timetable

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Date Action

2 May 2016 Offer opens 2 May 2016 Investor presentation and call, 3.30pm 6 May 2016 Offer closes – bids due 12pm 6 May 2016 Allocations and Rate Set 12 May 2016 Issue Date 13 May 2016 Expected Quotation Date 12 May 2023 Maturity Date

Questions?