Infratil considers bond issue to shift Shell debt

Infratil and the New Zealand Superannuation fund paid nearly $700 million for Shell's downstream assets in the April 1 deal. Photo / Paul Estcourt

Infratil is considering a bond issue to relieve some bank debt racked up in its Shell deal and is eyeing growth opportunities in the Australian energy market.

Infratil and the New Zealand Superannuation fund paid nearly $700 million for Shell's downstream assets in the April 1 deal. This will push Infratil's capital spending up from $193 million last year to as high as $460 million during the current year.

Chief executive Marko Bogoievski said a bond issue for Aotea Energy - the holding company of the operations bought from Shell - was a possibility although not essential.

"There's no need to get any [funds] - if you've got a three-year bank deal and can get five-year money priced right you would take it."

While it was early days, he said earnings from Shell were in line with expectations.

Based on historic performance, the company expects it to add $30 million to the bottom line in the current year.

Infratil yesterday announced a $29 million net profit for the year to March 31, compared to a $191 million loss the previous year.

Earnings across the company were 1.8 per cent higher at $363.3 million despite difficult economic conditions and the sale of assets.

Net debt of Infratil and 100 per cent subsidiaries was brought down by $382 million to $830 million.

Assets with an aggregate book value of $264 million were sold for $392 million. Infratil sold its holdings in Fullers Ferries, three Auckland bus depots, Lubeck Airport, Auckland Airport, and Energy Developments.

The company said earnings before interest, taxes, depreciation and amortisation, and revaluation of financial derivatives (ebitdaf) went up from $356.7 million the previous year.

TrustPower contributed $274 million in earnings, and Wellington Airport, $68 million.

Infratil Airports Europe had a $10 million loss and NZ Bus $29 million on sharply reduced fare income, due partly to industrial action in Auckland.

Infratil Energy Australia earnings dropped by almost $8 million to $8.8 million in spite of a big increase in customers from 371,000 to 411,000.

Bogoievski said power reform in Australian states and a consolidation within the sector created opportunities for Infratil.

"It creates some interesting options with two large players, AGL and Origin and a whole lot of smaller players like us looking to consolidate," he said.

"Where we're spending time looking for new assets is in Australia, customer bases or generation that would fit into our portfolio."

Other infrastructure investors had been knocked out of the picture by the global financial crisis which had left Infratil in a relatively strong position to buy assets.

Infratil had two new staff looking for new business development opportunities in Australia and a planned ASX listing later this year would expose the company to institutions with mandates to invest in Australian-listed stocks.

Although there has been speculation the NZ Bus business would be the next to be sold, Bogoievski said there were no current plans to do so.

Capital spending on NZ Bus would increase from $16 million to as much as $30 million with the bulk of it being spent in Auckland to meet service requirements.

Head of research at Forsyth Barr Rob Mercer said the result was in line with what had earlier been signalled and built very much on the solid performance of TrustPower and Wellington Airport.

He said it would not be a surprise if the company quit NZ Bus.

"I still think NZ Bus sits outside where the company is heading."

The performance of Shell would be closely watched during the year but appeared to be performing well compared to competitors.

"Shell looks to be well positioned and with investment behind it to improve its product while others are pruning back expenditure."

The company declared a final dividend of 3.75c per share fully imputed, payable June 25 to shareholders on the registry as at June 11.

Infratil shares closed down 1c at $1.67 yesterday.