Infratil Annual Report 2019 25 years of 25 years of sucessfully successfully balancing balancing growth and growth and resilience. resilience. What’s next? What’s next? Infratil’s first quarter of a To achieve this, Infratil’s investment century delivered exceptional approach has evolved since 1994 returns for shareholders. to entail: • Finding infrastructure opportunities The rewards came from finding where demand is growing and invest opportunities to invest in infrastructure where there is the prospect of fair businesses experiencing demand returns that compensate for risks and Kevin O’Connor Lloyd Morrison growing faster than the economy as Chair CEO endeavour, and sufficient scale to a whole, where the businesses could 1994–2003 1994–2011 warrant intensive management. sensibly and productively invest to meet the needs of their communities, and • Growing capacity and services to where there was financial resilience. meet customer and community needs. Delivering returns over the long-term requires survival over the long-term. • Ensuring funding and investment For that reason Infratil maintains diverse diversity so that changes in exposures; recognising that the future circumstances can be withstood David Newman Marko Bogoievski is uncertain and the pursuit of returns and opportunities taken. Chair CEO 2003–2013 2011–Present should always be balanced by the • Building long-term partnerships management of risk. with co-investors that have aligned Diversity also creates options as interests and values. the next windfall might come from The infrastructure investment market is a surprising place. competitive and has changed over the The last ten years have been kind last decade as ultra-low interest rates to investors. The NZX50 returned have obliged institutional investors to 14.3% per annum. The ASX200 10.4% shift part of their capital from bonds Mark Tume Chair into “bond-like” investments. This has per annum. Infratil 16.7% per annum. 2013– Present impacted the returns available on Over the full twenty five years to some low-risk infrastructure assets. 31 March 2019 Infratil’s shareholder As described in this Report, this has returns were a compound 17.5% enabled Infratil to create value by per annum, through capital growth developing and building infrastructure and a reliable growing dividend. assets which can be de-risked to provide investments for institutional investors. Balancing growth and resilience: Infratil’s allocation of its capital Sectors Balancing opportunities and risk means Renewable energy maintaining a core of robust cash- Data generating assets. Transport They may be proprietary and part of an existing business, Social/other such as Tilt’s wind farms which have income contracted several years into the future. Or they may be the bulk of a company’s activities, such as at Trustpower and Wellington Airport. From that base Infratil is able to invest in opportunities which offer the prospect of greater rewards albeit with greater measurable risk. Locations Growth/Resilience New Zealand Core Australia Core+ USA Growth 01 2 Infratil’s value add. Its reason for existing Investors have ample Infratil’s returns have been driven by Contents opportunities to buy shares in investing in areas of strong demand growth. While the economy as a whole energy companies, airports, Strategy. Governance. is expanding at about 2% per annum social and data infrastructure; People. Community 03 why invest through Infratil? some segments are growing much more rapidly; air travel, retirement living, FY2019 Financial summary. “The two most powerful warriors are renewable energy, electronic data and Group structure 10 patience and time.” Tolstoy. For most its transmission. Each offers growth and investors; buying, holding and reaping returns above the average, for the the benefits of low transaction costs foreseeable future. Reports of the Chief Executive and the Chair 12 and compound returns is a winning The current investment environment is formula. But Infratil can claim additional dominated by ultra-low interest rates. advantages. Its extensive research This has created an opportunity to 25 year anniversary. capability has made the company develop infrastructure assets which suit 10 years in graphs 20 good at assessing growth opportunities. the needs of institutional investors Its track record and scale means that seeking bond-like returns. As illustrated Financial summary for it gets to see a lot of opportunities and by Infratil’s experience with Australian shareholders & bondholders 24 it can commit considerable capital. student accommodation and US It is recognised as a good partner by renewable generation, a development Infratil’s businesses 32 the individuals and communities its approach to infrastructure can deliver businesses service, and by co-investors. significant gains and is another way in Financial statements which Infratil can add value for its & statutory information 59 shareholders. 03 Governance & Direction Infratil’s shareholders elect management contract to ensure that Paul Gough, Director. Independent. directors for three year terms the arrangement is fair to Infratil Appointed 2012. Last elected 2018 to represent them and to look shareholders. The board is always open As a Kiwi who works in London I’m very after their interests. to dialogue with shareholders about aware of how global events impact in Infratil’s management and other New Zealand and Australia. Directors: matters. However, there can be as many • Maintain a dialogue with different opinions as shareholders and In London I manage investments in shareholders. more complex issues need time and similar fields to Infratil’s, but often with more development risk. • Proactively participate in the expertise for proper consideration. formulation and evolution of the We would like to note the roles of the Achieving the best outcome requires Company’s strategy. investment team at the ACC and the the best from people. The focus on performance and people is consistent • Monitor strategy implementation, NZ Shareholders Association as with what I see at Infratil. financial performance, risks and advocates of good governance who legal compliance. have constructively engaged with the board and management. Their positive Alison Gerry, Director, Chair of the • Ensure effective articulation to suggestions have been appreciated Audit & Risk Committee. Independent. external stakeholders of strategy, and have resulted in the board making Appointed 2014. Due for re-election goals, risks and performance. changes to the way it governs the in 2019 • Maintain awareness of relevant Company. My experience in finance and risk societal and market developments. Further commentary on the role of the management helps me appreciate • Offer diversity of perspective and board, the credentials of directors and Infratil’s strategic opportunities and knowledge relevant to the Company. their remuneration are set out on pages threats; from financial markets, 113–120 of this annual report. technology, regulation and the natural Infratil has seven directors of whom environment. six are independent of management. They have been on the board for Left to Right: Executing strategy is in part about between two months and 13 years. allocating capital and in part about Peter Springford, Director. developing a culture which reflects Infratil’s directors are responsible for Independent. Appointed 2016. the value we place on our own people, monitoring the performance of Infratil’s Last elected 2017 our customers, and our communities. manager H.R.L. Morrison & Co (“Morrison I have been the leader of a major & Co”). Morrison & Co is a specialist industrial company based in Mark Tume, Chairman. Independent. manager of infrastructure investments New Zealand and Australia and of Appointed 2007. Last elected 2018 and performs this role for Infratil under industrial businesses in Asia, as well as an investment management agreement. My obligation is to maintain ties with the chair or director of companies Infratil benefits from having a Infratil’s diverse range of stakeholders which operate in New Zealand and in management team with great breadth and to ensure that the board is international markets. and depth of skills, however the board delivering on its responsibilities. must be vigilant about potential People are important; their safety; My experience in finance and on the conflicts of interest and satisfied that the need to act with integrity in boards of infrastructure companies the cost is reasonable relative to offshore markets just as we would in (Transpower, Kiwi Rail, NZ Refining) has alternatives. New Zealand; and that top operational given me an appreciation of the sectors performance and strong customer As recorded in last year’s Annual Report, in which Infratil operates and the relationships are key to long-term from time to time the board operational, regulatory and financial returns for shareholders. commissions external reviews of the risks it faces. 04 Marko Bogoievski, Director. Kirsty Mactaggart, Director. Humphry Rolleston, Director. Chief Executive. Appointed 2009. Independent. Appointed in 2019 Independent. Appointed 2006. Last elected 2017 and due for election in 2019 Retiring in 2019 As CEO of Morrison & Co I have the I have 25 years of financial market Since my appointment as an Infratil responsibility of ensuring our team is experience across multiple countries director I have applied my hands-on focused and active on the Infratil and sectors including those in which business