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MACQUARIE AIRPORTS Airport Privatisation – Sydney Airport Case Study Kerrie Mather – Chief Executive Officer 15 September 2004.

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Presentation on theme: "MACQUARIE AIRPORTS Airport Privatisation – Sydney Airport Case Study Kerrie Mather – Chief Executive Officer 15 September 2004."— Presentation transcript:

1 MACQUARIE AIRPORTS Airport Privatisation – Sydney Airport Case Study Kerrie Mather – Chief Executive Officer 15 September 2004

2 2 SPECIAL NOTICE Investments in Macquarie Airports (MAp) are not deposits with or other liabilities of Macquarie Bank Limited ACN , or of any other entity in the Macquarie Bank Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of Macquarie Airports Holding (Bermuda) Limited, Macquarie Airports Management Limited and Macquarie Investment Management (UK) Limited nor any member of the Macquarie Bank Group guarantees any particular rate of return or the performance of MAp, nor do they guarantee the repayment of capital from MAp. This presentation has been prepared by MAp based on information available to it. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law neither Macquarie Airports Management Limited, Macquarie Investment Management (UK) Limited nor any member of the Macquarie Bank Group, their directors, employees or agents, nor any other person accepts any liability for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it, including any liability arising from fault or negligence. GENERAL SECURITIES WARNING This presentation is not an offer or invitation for subscription or purchase of or a recommendation of securities. It does not take into account the investment objectives, financial situation and particular needs of the investor. Before making an investment in MAp, the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment adviser if necessary.

3 3 Agenda  MAp Background  Sydney Airport Privatisation — Sale Background — Sale Preparation/Process — Government Objectives — Macquarie Consortium — Investor Issues — Post Transaction Initiatives & Performance  Conclusions

4 MAp Background

5 5 Market CapitalisationA$3.0 billion Weighted Average Issue price$1.77 ASX 100 Top 60 Sydney 63.2% Rome 26.2% Bristol 4.3% Birmingham 6.3% *Weightings based on Directors valuations as at 30 June 2004 Passenger Throughput 70m p.a MAp Portfolio Composition* 6% 30% Dec Jul

6 Sydney Airport Privatisation

7 7 International pax share Domestic pax share Source :Major Airport Data Exchange, March 2002 FY YTD International includes domestic on-carriage Sydney 50% 17% 21% 2% 10%7% 22% 34% 28% 9% Freight 44% Sydney is the Major Gateway to Australia and the Major Domestic Hub

8 8 One of Australia’s Most Important Infrastructure Assets  Gateway to Australia - Handles 26m passengers p.a and 50% of all international visitors to Australia  Three runways and three terminals  One of the world’s oldest continuously operating airports  Contributes 2% to the Australian Economy and 6% to the NSW economy  $6.6 billion per annum to the NSW Gross State Product  Supplies about 8% of the Sydney labour market jobs  Contribution to economy is approximately 2.7 Olympic Games a year

9 9 Recognised as a World Class Airport  2004 – Airport of the Year (Top 10) – Skytrax  2004 – Best Airport Pacific Region – Skytrax  2003 – Airport of the year (Top 10) – Skytrax  2003 – No. 1 Australia International Airport – Airline Survey  2002 – Airport of the year (Top 10 ) – Sky Trax  2001 – World’s Best Airport in class – IATA, ACI  2000 – Australian Airport of the year – AAA

10 10 Background to Sale of Sydney Airport  The late 1990’s saw Australia become one of the world’s most prominent privatising nations  Government debt reduction was a major driver of privatisation  Previous privatisations have shown that assets in Government hands are never likely to perform on a sustainable basis as well as in private hands  Introducing greater efficiency is one of the main objectives of privatisation  Privatisation has also removed the need for Government to fund the modernisation and growth of this major infrastructure category in the future

11 11 Background to Sale of Sydney Airport  Phase  Phase  Phase  Melbourne$1,255m HK$6.903m  Brisbane$1,314m HK$7,227m  Perth$631mHK$3,470.5m  Adelaide$362mHK$1,991m  Canberra$66.5mHK$365.8m  Hobart$35.9mHK$197.5m  Coolangatta$103.6mHK$569.8m  Darwin/NT$110.1mHK$605.6m  Sydney$5,600m HK$30,800m $9,478.1mHK$52,130m

12 12 Government Preparation for Sale Regulatory review  Review transport policy  Regulatory issues  Environmental issues  Contractual issues  Industrial relations  Communication strategy Asset Review  Data aggregation  Analyse Government Policy  Review airport market  Identify Opportunities  Implication of regulation  Preparing asset for sale Sale Planning  Structure of Transaction  Method of Sale  Identify Potential  Investors  Valuations  Marketing Sydney Airport was a Large and Complex Sale

13 13 Sydney Airport Sale Process & Timetable  April 2001 – Shortlisted bidders selected to proceed to final and binding bids  September Airport sale deferred post September 11 and the collapse of Ansett on 14 Sept 2001  11 March Government announce sale process has recommenced  December 2000 – Scoping study advisor appointed  February 2001 – On recommendation of a scoping study the Commonwealth Government announced intention to privatise Sydney Airport via trade sale – indicative bids sought  12 June Three consortia submitted final and binding bids  25 June 2002 – Southern Cross announced as preferred bidder  28 June 2002 – Southern Cross Completes purchase of Sydney Airport Corporation shares

14 14 Sales Process: Options for Government  Trade Sale – Majority of equity  IPO – Majority of equity  IPO – Minority of equity  Hybrid – Minority trade sale and IPO

15 15 Majority Sale: Trade Sale or IPO  Maximise sale proceeds  Efficient process  Financial capability of purchaser  Trade sales have achieved highest EBITDA multiples  Most trade sale processes can be completed within 6 months  Government and advisers can test financial capabilities of bidders

16 16 Government Objectives  Sales Process  Maximise sale proceeds  An efficient and transparent process  Financial capability of purchaser  After Sale Marketplace  Government retains control in key areas: noise, security  Economic regulation to control price/quality  Development plans – mandatory requirement THE GOVERNMENT CAN ENSURE ONGOING CONTROL WHILST SELLING DOWN MAJORITY OWNERSHIP

17 17 Macquarie’s Sydney Airport Consortium Macquarie Managed Funds % Ontario Teachers – 5.0% Ferrovial – 20.9% Hochtief % MTAA – 2.4%  Macquarie Managed Funds have a 61.2% beneficial interest  Pensions Funds and Construction companies form significant shareholder base

18 18 Investor Areas of Focus  Ability to exercise influence over key areas of the business  Regulatory environment that supports initial and ongoing investment and rewards business improvements  Financial flexibility to develop an optimal funding structure that can evolve with the life cycle of the airport  Ability to promote airport to new airlines to increase the number of routes and services to promote increasing passenger numbers  Freedom to manage business operations to ensure maximum operational efficiency  Ability of the airport to negotiate commercial agreements with airlines etc to provide long term certainty for the airport & airlines

19 19 Key Areas of Focus Immediately Post Acquisition  Complete re-evaluation of all key areas of the business — Airline relationships and marketing plans — Retail performance benchmarking studies to confirm areas for improvement — Confirm long term capacity and capex requirements to develop long term investment and funding plans — Comprehensive line by line review of all costs and develop plans to optimise operational efficiency  Management and staffing review  Develop contingency plans to be implemented in the event of macro shocks

20 20 *-Includes both actual and announced services commencing in FY04/05 years ** - possible services stemming from expansion of air rights agreement Middle East14 NZ23 Pacific6 USA7 Hong Kong28 Other8 China5 Additional weekly Frequency91 Initiatives – International Airline Marketing

21 21 Initiatives – Domestic Airline Expansion  From late 2001 the Australian Domestic market has undergone significant change: — Collapse of Ansett — Qantas dominance of market increased by acquisition of Impulse- but — Successful launch of Virgin Blue added extra competition — Recent launch of Jetstar  Essential that Sydney Airport is able to promote greater domestic competition against a background of airline ownership of domestic terminals  Completed long term agreements with 5 airlines to use domestic terminal promoting growth in domestic market  Extensive review of domestic terminal to improve retail and commercial businesses to match evolving passenger mix

22 22 Initiatives – Retail, Food and Beverage and Foreign Exchange  Retail — Walk through Duty Free arrivals (July 2003) and departures (June 2004) completed — T2 retail upgrade – 31 retail/service outlets  Food and Beverage — T1 refurbishment of Food & Beverage areas adding new brands: Oporto; Starbucks; Wagamama; Asagao Sushi  Foreign Exchange — Re-tender of existing contracts — Increase number of outlets to improve penetration rates

23 23 Initiatives – Car parking, Property and Capacity  Car parking — Construction of 700 new domestic car parks — Introduction of a range of new products — MDP process for Multi Storey international car park  Property — Multi storey office development for Australian Customs Service recently completed — New developments for DHL Freight centre, Krispy Kreme Donut factory, F1 Accor Hotel — Outline plans for 70 hectares of surplus land  Capacity — Master Plan approved – 68m passengers by 2024 — A$2.3bn capital investment programme over the next 20 years

24 24 Financial Performance  In the last 2 years of privatisation, impressive operating results have been achieved  This was achieved in what was one of the most challenging aviation environments -Bali bombing, SARS and Iraq War Eight consecutive quarters of double digit earnings growth since acquisition

25 25 Conclusions  Australian Government decision to undertake sale of Sydney Airport by 100% Trade Sale achieved: — Maximum sale proceeds for Government from a rigorous competitive process — Improvements in business efficiency and service quality — A favourable environment to promote long term significant investment from new owners — Regulatory environment that encourages airport and airlines to develop long term commercial agreements without need for Government involvement  Macquarie consortium has been able to successfully transition the business into private ownership  Privatised airport has been able to absorb significant external shocks and play a leading role in promoting greater choice & travel experience for passengers

26 MACQUARIE AIRPORTS Airport Privatisation – Sydney Airport Case Study Kerrie Mather – Chief Executive Officer 15 September 2004


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