14 october 2004 - ipo presentation

8/8/2019 14 October 2004 - IPO Presentation

1/28

IPO Media Briefing

14 October 2004


2/28


3/28

3

Summary4

Project overview2

Investment highlights and IPO overview3

1 Introduction

Agenda


4/28

4

Introduction1


5/28

5

Introduction - Mitcham to Frankston

Project (MFP) ConnectEast Group

Independent Board

Dedicated management team

Single-purpose vehicle

ConnectEast Group comprises experienced and successful Australian-basedsponsors

Macquarie Bank (responsible entity)

Thiess and John Holland (design & construction)

Construction to commence prior to the end of 2004 and expected to be

completed, under a fixed time, fixed price contract, by the end of 2008


6/28

6

Introduction - Mitcham to Frankston

Project (MFP)

Low tolls - one of the lowest per km rates in Australia (approx. 18c) with a toll capof $4.43 for cars (adjusted for CPI)

Low tolls will minimise traffic diversion

In terms of design and construction and tolling technology, the MFP will be one ofthe most advanced toll roads in the world

Latest generation toll technology allows for greater flexibility

MFPs tolling system is designed to be fully interoperable with CityLink - there willbe no need for an extra tag

MFP is expected to become a key part of Melbournes south-eastern road

network and will contribute to the growth and amenity of the corridor

MFP will ease traffic congestion, reduce travel times and improve cross cityaccessibility

39 year concession - 4 years construction (approx), 35 years operation


7/28

7

Introduction - IPO

Attractive opportunity for investors

Annualised distribution yield for first year equal to 11.8% on Initial Instalment

Distributions of 6.5 per Stapled Unit per annum (expected to be fully tax deferred)during balance of Fixed Distribution Period (ending 31 March 2010)

Potential re-rating effect as observed on other greenfield toll road projects

Partly paid structure $0.55 at IPO and $0.45 12 months after Allotment

ConnectEast Group sponsors to become equity investors

Single purpose vehicle

Bid underpinned by robust and exhaustive traffic modelling

Competing routes are highly congested

Project risks have been minimised

Previous Australian greenfield toll roads have proven to be attractive investments


8/28

8

Project Overview2


9/28

9

The ConnectEast Consortium

Co-sponsor and equity provider, equity underwriter

Financial adviser

Track record of success in infrastructure and toll road sectors in Australiaand around the world

MacquarieMacquarie

Co-sponsor and equity provider

D&C JV partner

Turnover in 2003/04 of $2.4 billion and work in hand at end of 2004financial year exceeded $7 billion

Largest member of the Leighton Holdings Group, civil, mining and servicescontractor, contributing over 40% of group operating revenue in FY04

Proven track record in construction of major infrastructure projects

ThiessThiess

D&C JV partner

Diversified construction company with significant expertise in engineeringprojects including roads, bridges, tunnelling and underground construction

Turnover in 03/04 of $1.5 billion; 70% owned by Leighton Holdings

John HollandJohn Holland

Traffic expert

Global engineering consultancy with specialists in transport planning

Experience includes Melbourne CityLink and Cross City Tunnel

HyderHyder


10/28

10

The Mitcham-Frankston Project


11/28

11

Design of the MFP

39 kilometre toll road

Three lanes in each direction fromEastern Freeway at the northernend

Two lanes in each direction for6km at the southern end

Twin, 3 lane 1.5km tunnels atnorthern end connecting to EasternFreeway

Direct freeway to freewayconnections at:

Eastern Freeway

Monash Freeway

Frankston Freeway

Includes 17 major interchanges

Additional 6kms of non-toll feederroads

Ringwood and DandenongSouth Bypasses


12/28

12

Demographics of the MFP Corridor

Responsible for more than 40% of Melbournes manufacturing output and 35% ofits employment

Generates annual turnover from production activity of approximately $35bn

One of the last major land release areas for commercial activity

Car usage in the MFP Corridor

Level of car ownership higher than the rest of Melbourne (1.68 cars per household vs.1.49)

Commuter travel by car is also higher than the rest of Melbourne (85.6% travel to workby road vs. 75.6%)

Limited public transport infrastructure

More than half of Melbournes AM Peak trips are within or cross the MFP corridor

875,000

425,000

155,000

295,000

2003 AM PeakTrips

48%Rest of Melbourne

100%Total

18%Trips crossing into MFP Corridor

34%

% TripsDescription

Trips within MFP Corridor


13/28

13

Importance of the MFP

MFP will form a key part ofMelbournes road network

Only freeway standard north-south arterial road

Links key commercial, industrialand residential centres in theEast and South East corridor ofMelbourne (Mitcham,Frankston, Dandenong andRingwood)

Key commuter road in northand south

Intra-city arterial route in middlesection

Significant freight activity

anticipated Expected to substantially

reduce travel times andimprove travel time reliability

Make a valuable contribution tothe growth and amenity of the

MFP Corridor


14/28

14

Importance of the MFP

MFP expected to attract:

Business and industry takingadvantage of improved travelefficiencies

Households taking advantage ofreduced travel times to work

Service companies locatingcloser to new markets createdby relocation of households,businesses and industry


15/28

15

Design & Construction

Design and construction is relatively low risk compared to other Australian tollroad projects

Simple design characteristics

Reliance on existing technology and utilisation of proven building methods

Topography and geological conditions, particularly in relation to the tunnels

MFPs electronic, free-flow tolling system is designed to be fully interoperablewith Melbourne CityLink

Delivery of the MFP tolling system is incorporated under the D&C contract, andwill utilise latest generation tag and video-based tolling technology

Projected 49 month construction programme, with MFP operating on or before 30November 2008


16/28

16

Design & Construction

Design and Construction (D&C) to be undertaken by a 50:50 joint venturebetween Thiess and John Holland

Thiess and John Holland have entered into a Fixed Time, Fixed Price D&C

Contract (approx. $2.5 billion), thereby reducing risk to equity D&C Contractor is responsible for delivery of a fully operating electronic tolling

and customer service system

D&C Contract includes liquidated damages regime which compensates equity (in

most cases) for delays in construction for up to 12 months

Thiess and John Hollands obligations under the D&C Contract are supported bya parent company guarantee from Leighton Holdings (BBB+ rating)


17/28

17

Operation & Maintenance

The operation and maintenance of the MFP will comprise two main areas

Tolling and customer service

Roadside operations and maintenance

Tolling and customer service Retained in-house

Ensures ConnectEast Group maintains a direct relationship with its customers

Roadside operations and maintenance

Initial five year contract with Transfield Services Responsible for overall freeway operation and day to day maintenance of MFP

Substantially fixed price contract

Transfield Services is the O&M provider on Melbourne CityLink, Lane CoveTunnel and for the NSW Road Traffic Authority


18/28

18

Tolling Technology and Products

ConnectEast will feature the latest generation in tolling technology

Developed by SICE, a division of the largest infrastructure development group inSpain and one of the largest in Europe - 28 system installations in 18 countries

SICE recently supplied the tolling system for the Autopista Central Concession inSantiago, Chile, which has been through all of its acceptance testing and is readyfor operation

The system will be based on electronic tags and readers, as per Melbourne

CityLink, and is designed to be interoperable with CityLink

Greater use of the latest video tolling technology which provides moreaccessibility and flexibility for motorists

Features include:

Low toll rates (indexed to CPI)

Family friendly, neighbourhood toll discounts for cars

Discounts on weekends for cars

Fair and simple toll products

Low fees on accounts, including a fee free product


19/28

19

ConnectEast will issue Stapled Units for A$1 each $0.55 payable at IPO and$0.45 12 months after Allotment

ConnectEasts Stapled Unit structure is similar to other listed Australian toll roads

ConnectEast Management Limited (CEML), a wholly owned subsidiary ofMacquarie Bank, will act as responsible entity of ConnectEast Group

ConnectEast Asset Trust will hold the lease over the land and have the rightunder the Concession Deed to finance, design and construct the MFP

ConnectEast Pty Limited will have day-to-day responsibility for operating andmaintaining the MFP

Corporate Structure


20/28

20

Board of ConnectEast

The Board of ConnectEast will comprise seven directors four independentdirectors, two Macquarie representatives and one Thiess representative

Two independent directors already appointed with two further independentdirectors currently being sought

Mr Tony Shepherd Independent Chairman and Interim Chief Executive Officer

Brings relevant expertise from Transfield and setting up Transurban to develop CityLink

Deputy Chairman Transfield Services Limited

Dr Max Lay Independent Director

Formerly held senior positions in VicRoads and past President of the RACV and AAA

Independent Reviewer on Melbourne CityLink

Dr Ray Wilson (Thiess)

Executive General Manager Infrastructure & Corporate Services at Thiess

Director Lane Cove Tunnel

Mr David Roseman Director (Macquarie)

Head of Macquaries Infrastructure Advisory business in Australia and New Zealand

Mr Ed Sandrejko Director (Macquarie)

Highly experienced in the Australian toll road market


21/28

21

Investment highlights and IPO overview3


22/28

22

Financing of the MFP and use of

funds

3,7953,795Total

2951

444

5541

2,502

$million

290

297

1,120

2,0881

$million

Development & Financing Costs(up front and ongoing)

Equity Raised via DRP

Specified ReservesDeferred Equity Tranches

Coupon and Interest CostsEquity Raised in the Offer

Construction cost

Uses of FundsSources of funds

Bank debt

1 Based in interest rates as at 30 July, 2004. These balances will be impacted by the interest rates that will be set at Financial Close


23/28

23

Equity Financing ($1,707 million)

Total IPO equity of approximately $1,120 million

$616 million IPO equity

$504 million Final Instalment

Partly-paid structure with $0.55 payable on subscription and the balance of $0.45payable 12 months after Allotment

Thiess and John Holland will together contribute a Deferred Equity amount of$260 million (on top of IPO equity) upon Construction Completion

D&C equity contributed at $1.15 per Stapled Unit

Deferred Equity will be subscribed for in fully paid Stapled Units and secured by Lettersof Credit (A rated or better)

Macquarie Bank will contribute a Deferred Equity amount of $30 million 12

months after Allotment (approx. half of its advisory and sponsorship fee)

Underwritten Distribution Reinvestment Plan (DRP) will contribute approximately$297 million during construction period


24/28

24

Structure of the IPO

Fully underwritten fixed price offering

IPO raising $1,120 million ($616 million initial instalment) comprises

Institutional offer already completed with a core group of high quality institutions

Broker Firm offer via each of the Joint Lead Managers in Australia and New Zealand,with a priority for Victorian investors

General Retail offer Australian residents only with priority for Victorian residents if offeris oversubscribed


25/28

25

Equity Returns

Distributions for the first 12 months equate to an annualised distribution yield onthe Initial Instalment of 11.8%

Distributions (supported by cash reserves and DRP underwriting) of 6.5 cents perStapled Unit per annum during the Fixed Distribution Period of approximately 5.5years (until March 2010)

Distributions will be paid

Semi-annually during the Fixed Distribution Period

Quarterly post Fixed Distribution Period

Distributions during the Fixed Distribution Period are expected to be largely taxdeferred

Potential for re-rating as greenfield project risks (construction & tolling and traffic)fall away


26/28

26

Issue Timetable*

* Subject to change

Stapled Units expected to commence trading on ASX

on a normal settlement basis 16 November 2004

Stapled Units expected to commence trading on ASXon a deferred settlement basis 11 November 2004

Retail Offer (including Broker Firm) closes 4 November 2004Retail Offer (including Broker Firm) opens 22 October 2004


27/28

27

Summary

Strong and independent company - board andmanagement

Construction and project risks have been minimised

Attractive opportunity for investors

Potential for re-rating once construction is completeand traffic ramp-up commences


28/28

28

Questions

14 october 2004 - ipo presentation

Documents