Tranz Rail Infratil's only loser

By CHRIS DANIELS

Infratil has reported a solid half-year net profit of $19.6 million, up from $17.5 million the year before, but has told shareholders they will have to wait for their dividend.

Revenue rose from $81.6 million to $84.6 million.

Infratil enjoyed watching its investments in Glasgow Prestwick airport, TrustPower, Port of Tauranga and Wellington International Airport grow, with the only dark cloud being the shrinking value of its 7.2 per cent stake in Tranz Rail.

Despite the good six months, a lack of imputation credits means the company will not be paying an interim dividend, preferring to wait until increased taxable profits from TrustPower and Wellington airport allow it to pay out a fully imputed final dividend.

Chairman Kevin O'Connor described the airport's performance as steady, but referred to the continuing dispute with airlines over landing charges.

The airport has been negotiating with its airline customers to increase prices after their five-year agreement expired in July and airlines agreed to a 10 per cent interim increase.

"One milestone was Sir Ian Barker's decision in his arbitration on WIAL's valuation methodologies. He found in favour of WIAL and implicitly against the position adopted by the Commerce Commission," said O'Connor.

The valuation of Wellington airport's assets has been a point of dispute since the commission's "out of the blue" finding that it was making excessive profits.

"WIAL's current approach to valuation is no different to that followed when the Crown was the majority shareholder and the commission's position is tantamount to expropriation."

Infratil may, however, be turning to the commission for help if Qantas is successful in its attempts to buy an equity stake in Air New Zealand.

The chairman's report says Wellington airport faces the potential of the two airlines colluding to "reduce competition, increase airfares and impact passenger growth".

Infratil's investment in Tranz Rail has been a poor performer over the past six months, its value dropping from $31.5 million to $13.8 million.

"The investment has been held pending implementation of Tranz Rail's new business plan, which appeared likely to result in an uplift of profitability and value," said O'Connor.

"There is little doubt that Tranz Rail has objectives that if met will see its value increase.

"Whether the objectives are attainable will depend on the unity, focus and skill of Tranz Rail's workers and the restoration of credibility with major customers."

O'Connor said the environment was a difficult one for investors, and Infratil's response was to be cautious, yet keep looking for opportunities, with its focus on emerging airports and the renewable energy sector.

In June it paid $48.5 million for a 9.9 per cent stake in the Australian energy company EDL, which builds and operates scale power stations that use rubbish to create gas.