Infratil Limited (IFT) Earnings Call Transcript & Summary

Hello, everyone. Welcome. I'm Jason Boyes, the Chief Executive of Infratil. As usual, I'm joined by Phillippa Harford, Chief Financial Officer. And we are here to present our interim results for financial year 2023. I'll click you through to this page. This sort of lays out where we're going to go in the presentation today. This presentation and our interim results report have been released to the New Zealand and Australian Stock Exchanges this morning. If you want to follow along, you can follow through this presentation as well. I'm going to hand over to Phillippa in a second to talk through the -- some of the highlights from our first half and then we're going to go through the things laid out here. So without further ado, I'd like to get through, I'll hand over to you, Phillippa.

Thanks, Jason. [indiscernible], everybody, and thank you for joining us. I thought we'd just go through some of the highlights for the period. As we did at the full year, we've got quite a bit of detail in the appendices. So people who want a bit more than what I talked through can go there. First thing to note is we've got a net parent surplus of $350 million for the period. Similar to the last prior period, a large chunk of that is actually coming through discontinued operations and reflects the gain on sale of the retail base. However, we're also seeing revaluations at CDC and its investment property. And as Jason is going to talk to later, we've had the 4 new data centers and CDC come online during the period, and that also is contributing to that net parent surplus. You may recall that from a guidance perspective, we refer to proportionate EBITDA. Our EBITDA for the period is $275 million. That's up about 10% from the prior period. We have strong contributions from Wellington Airport now that the covered recovery is underway, a nice uptick from Vodafone and a softer result for Manawa, that was old already having been released to the market late last week. Continuing theme for us is investment. We have recorded a proportionate investment of $471 million for the period. A large chunk of that is full CDC and through the data center construction, but we've also had CapEx within Vodafone for the 4G and 5G network. With that macroeconomic backdrop that we've got, we've got available capital of over $1.4 billion. That's a mixture of surplus cash of approximately $400 million. We've got bank facilities of $900 million. If we roll that forward and take into account what our known outgoings are at the moment, plus the proceeds from the tower transaction, which is going to see over $600 million coming back to us. That's where we get to the $1.4 billion. Shareholder returns, everybody is interested in that. Since the period from 31 March, we've got a shareholder return of 6.5%. That's in the context though of a 10-year average return of 20.5%, so well and truly within our 11% to 15% target. We are declaring a $0.0675 per share interim dividend, which is going to be fully imputed. So I'll hand back to you, Jason.

Thanks, Phillippa. It's a pretty robust sort of overall outcome. I thank you. I think you summarized that nicely, and we're pretty excited to take you through some of the detail of what's going on there in the next few slides. But let us zoom out a little bit and have a look at the portfolio as a whole. This slide should be familiar to you. It shows our focus on digital infrastructure, in particular, nearly 60% of the portfolio, but then across the other 3 kind of headline sectors of renewables, health care and, of course, the airport. In the period, the big changes here have been an increase in the proportion of the portfolio in renewables, I think we showed 17% of the annual, we're now 21%. That reflects the increase in the valuation of Longroad implied by the transaction we agreed and have now settled actually with Munich Re to invest in that platform. So that pushes that valuation up. Offsetting that a little bit is the reduction in the value of Manawa, reflecting the special dividend and the sale of the retail business, but also some of that soft result that Phillippa mentioned. On the digital side of things, there's actually a bit of an uptick in there, even though its percentage has reduced. That reflects that sale of Vodafone's passive mobile tower business, which happened at valuations a bit ahead of actually what we were predicting last time we showed you that picture. Looking ahead, I'd expect that to come back a little bit as the proceeds from that tower sale are distributed back to shareholders as Phillippa flagged. Also, you'll start to see a new interest in our new tower business there, 20% of that tower business Infratil has retained. So I think that kind of outlines a lot of the portfolio activity in the half. You can see at the bottom, we put our flags here to show the increasing global diversity, which is a real theme as well.  Before we head into the businesses, I wanted to give you an update on Infratil's sustainability strategy. We released that strategy in our annual report in May. We've been making strong progress trying to implement that over the half. It's a bit complex for Infratil because we're exposed to a number of sectors and they all have different needs. We're also not the sole owner of some of those businesses. So we need to work with our partners to figure out the right path for those businesses. But over the half, all of our -- or [ 10 ] of our portfolio companies, including Infratil itself, participated in the annual GRESB or GRESB infrastructure assessment, which is a globally recognized benchmarking system for measuring the sustainability efforts of infrastructure assets. And the detail of those outcomes are set out in our interim report, and it's showing solid progress as you'd expect in many areas. We've been doing that for a couple of years now. But also it identified some opportunities for further improvement, which we're working on as well. One of those, in particular, is the next work stream I wanted to update you on, which is our progress towards releasing our inaugural sustainability report next year. Underlying that has been quite a lot of work measuring our greenhouse gas emissions profile across all those various businesses, and we've landed a very robust and externally assured process for doing that now, which will be reflected in that report. And that will enable us to make some pretty ambitious but very robust emissions reduction targets in that report as well. So look out for that next year, it's a big work stream. It's been a big focus for Morrison & Co as Infratil manager as well. And of course, Morrisons closed leading all of this as the manager. It's fundamental to Infratil ambitions that Morrison & Co is leading that as well. Morrison & Co itself has been a signatory to the UN principles for responsible investment since 2010. So a heck of a long time and has been committed and very good at integrating sustainability assessments into the full investment process and was really acknowledged as I think one of a dozen or so responsible investment leaders in New Zealand by the Responsible Investment Association of Australasia. So it's a big focus. There's lots of work to do, and we'll continue to update you on that.  So let's go through the operating businesses and give you a feel for what's underlying that high level result Phillippa has talked about. The first one always CDC data centers, it's our biggest single investment. During the period, that result there reflects pretty much on track performance from what we predicted and guided at the start of the year with one slide exception. In the period, we have delivered those 4 data centers I talked about at the full year result. It's an additional 104 megawatts of capacity across Canberra, Sydney and Auckland. That takes our total built capacity to 260-odd megawatts. To put that in perspective, I think the entire New Zealand colocation and hyperscale data center capacity is estimated at around 40 to 50 megawatts now versus the 250-plus that CDC has. So it's a very big business and even the 100 that's been delivered over the period is a heck of a lot of capacity. Now there were some delays in getting those commissioned during the period. Lots of supply chain issues that had to be managed like everywhere else in the economy, I guess, they have come in within the cost budgets, but a little bit late, and that's meant some of our customers haven't been able to move in when we expected. So what we've done is tightened their guidance range, which we talked about actually a couple of weeks ago, it was released to the market, down about ZAR 10 million from ZAR 12 million to ZAR 220 million at the start of the year, we were guiding ZAR 220 million to ZAR 230 million. That's still up well over 30% at the midpoint of that range for the year. So still demonstrating that really strong underlying growth. Remember also that CDC's contracts are often very long-term contracts. So once you've got your customers in there, the revenue you have is very predictable. So we feel really confident about the trajectory from here, having opened those data centers. There's no better way to demonstrate that than that weighted average lease term that we talk about often, which is still well above 20 years, quite unique actually for data center businesses regionally and a real strength of our investment there. On sustainability, CDC is doing quite a lot of work on that as well. Actually, 70% of it is data centers power is from renewable energy. It's 100% in New Zealand. It's actually 100% in Canberra as well. So the real focus now is on New South Wales and what can be done there to kind of complete the picture and meet not only CDC's ambitions on sustainability, but also what its clients and us as its customers will require. Looking ahead, we had that Investor Day in Sydney that I talked about before, and we visited CDC's new facility outed at Sydney campus at Eastern Creek. I would characterize sort of Greg Boorer's description of how he's seeing the business is pretty bullish, backed by essentially a lot of indications of customer demand that he's seeing day-to-day in that business, which is great for us as investors. So we've started building our first Melbourne campus, which should be delivered in the middle of next year. The New Zealand data centers that we have built and are now commissioned are more or less full and they're starting work now on extensions to those data centers, more extensions that are more or less full as well. When we were at Eastern Creek, everybody could see that preparatory works for the next 2 data centers at Eastern Creek were well underway. And in fact, that preparatory work is now being completed. So the outlook is still really strong. Greg describes if we've delivered 4 data centers over the last period simultaneously, he's talking about doing at least that again over the next period. So look out, I think there will be -- he described in Auckland and New Zealand additional capacity land for capacity of up to 70 megawatts has been acquired. I would expect pretty imminently announcements about plans for actually developing some of that capacity, at least one additional data center pretty imminently. So look, after that is another sign of that confidence in the demand that's driving the buildout from here. Also mentioned that CDC has extended its debt facilities and completed its initial -- its very first USPP in the last few weeks. That's sort of extending the size of its bank facilities to meet that demand that we see. Also the tenure has been extended as well, which is quite hard actually at the moment to do in a cost-effective way, but they have achieved it. I think the average tenure of our facilities has gone from sort of 3 to 6 years. I guess to sum up then, we do see this as continuing to be a strong source of growth for Infratil and one sort of in the short term and in the medium term. So definitely one to watch if you're interested in understanding the trajectory of the value of our company. I'll move on to the second biggest one, still in digital infrastructure, which is Vodafone and New Zealand. The big things over the period were the sale of its passive mobile tower assets, which we've talked about for $1,700 million, which is certainly well ahead of some analyst forecast, a very pleasing outcome. The other big news in the period was, of course, its plan to rebrand next year to one in [ Z ]. The idea behind one in Z is to, I guess, speak to the efforts the company is going through and we'll continue to go through to simplifying customers' experience of dealing with now Vodafone and the future one in Z, but also to talk to other parts of the market that actually Vodafone is not very well known for that as part of the strategy now, things like ICT and security. So we support that, and that will be rolled out at the beginning of next year. I think the other things to note over the period would be obviously that normalized EBITDAF operating performance is up $15.5 million or so from the prior period. That would exclude the cost of that tower transaction I mentioned, which are one-offs, but actually still includes costs being spent on the rebrand, which would be one-offs as well and also the cost of paying to use Vodafone's brand as well. Even including those costs, that $15.5 million is more or less on track with the guidance we gave at the start of the year a sort of 4% or 5% uplift in underlying EBITDAF and reflects continued strong mobile postpaid performance, both in terms of customer acquisition and ARPU, but also, of course, as borders have opened and roaming has resumed. They are also continuing to focus on controlling their cost base, which has been a big source of their EBITDAF margin expansion as well. They now, I think, have a pretty clear pathway to get their EBITDAF margin from the low 20s we when we brought it to the kind of 30s that Spark consistently achieves. I think through this period, we'll find that we've sort of got about halfway there. We'll see when we get to the full year result if we can confirm that. Within the business, the focus and investment on its embedded infrastructure has continued part of the towers transaction, but also part of the direct allocation of 5G spectrum that was announced sort of last month. We're going to see strong upgrades in our 4G and 5G networks. Even though at the moment, we were rated as the best network in New Zealand by an independent report. I think just to pause on that, direct spectrum allocated. I think it's a very positive outcome, obviously, for the industry, but an incredibly pragmatic and sensible approach from the government and potentially a good template to be used overseas as well. So very welcome. The simplification of Vodafone's IT systems continues, and a lot of progress has been made there leading to some of the service and organizational health scores that are mentioned here, which are real positive. The team has referenced a change in tack on that program from here rather than building a totally new system. They're now focused on, I think, improving some of the systems we've got, which have proven to be more resilient and certainly performing better than perhaps we initially expected. The work and the planning for that is continuing, and we should be able to give an update on that or we will be able to give an update on that at the full year about exactly what that means for the work done to date. I think that's it for Vodafone. So Vodafone, I think, is in a really good place. It will be and is a really important source of operating earnings for us as Infratil and will drive things like potential dividend growth in the future, so definitely one to watch meaningful in the portfolio. Let me quickly switch to renewables. Longroad Energy now our biggest exposure in this space, given the valuation implied by the transaction we completed now and agreed in the half with Munich Re's investment arm, MEAG. That implied quite a big uptick in the value of our investment in Longroad as we've announced before and demonstrated on this slide. Remember, the whole reason for that investment was to raise capital for Longroad to accelerate its development cadence from a little around 1 gigawatt a year to now closer to 1.5 gigawatts a year. The plan, as Paul laid out at the start of the year and still very much the case is developed to develop 4.5 gigawatts over the next 3 years to try and put that in some perspective. The installed capacity of generation in New Zealand is about 10%. So that is a big chunk of generation. It's sort of about 20% if you measure it by and the actual sort of electrons that are put out because obviously, the solar farms only produced during the day. So a really big and impressive set of plans. We're already developing 7 projects, 1.3 gigawatts this year, all across the state. So it's actually the biggest Longroad has ever built. Actually, the plan for next year is even bigger,1.5 gigawatts. What's been really pleasing in the half is with the passage of that Inflation Reduction Act, in the U.S., which was incredibly supportive for the renewable energy sector. We've seen a real acceleration in certainly the PPA market, so the market for selling the power for these projects, it's so important to get the project off the ground. And so what we're seeing now is that we have PPAs in place for all but one of the projects for this year, and we're in exclusive negotiations for the last one. And we're also an exclusive negotiations for all of the power for all of next year's projects as well, which is close to 6 to 12 months ahead of actually what we would normally plan. So, a real acceleration there. I think that means when we think about that transaction valuation when we think about the plan, net-net, the risk feels more to the upside than the downside there. I mean there are procurement pressures, the markets for solar panels and batteries and other key pieces of equipment remains really tight. But the team is navigating that really well. So in general, I think we're more positive even than the plan Paul laid out. It would be great to update you at the full year on that. In Renewables, a quick note on Manawa. They released the results the other day. David and Paul did a great job of outlining that. I won't repeat all that now. I can set to say it was obviously a soft result, both in terms of looking back, but also that short term with the elevated stay-in business CapEx that they flagged. I know the team is really focused on improving that business and [ bedding ] down what is a pretty new generation only business. We remain supportive of their efforts to develop new generation in New Zealand but we want to see how those compare to all the international opportunities we're seeing as well. So that's well known to the team and understandable as an Infratil investor as well. Those returns at the moment I need to be a bit adjusted for projects like the South Island battery, which introduced a bunch of risks that we don't see in other places. So a timely resolution to that would be helpful. And then last on renewables, and I'll hand back to you, Phillippa, just to zoom out a reminder of the global platform that we have now and we're developing. Galileo was the next sort of mature platform. They are seeing obviously strong demand for what they produce given the war in Europe. They're going to put the Irish pipeline actually that we developed in a joint venture with Vistas on the market this year. if that sells as we expect, we can expect to get maybe roughly half of everything we've put back into we've invested into that platform back. I think it will prove the Longroad luck kind of capabilities and outlook for that platform, which I know a lot of people are looking for. Hopefully, we should be able to update on that at the full year. It would be nice to see that one mature. Obviously, [ Gurren ] is behind it. We will also imminently announce our approach to reentry into Australia. That will look a lot like the other platforms you see on here, as you would expect. I'll finish there and have it to you.

Thanks, Jason. Thanks, everybody. So yes, I'm just going to have a quick one for the remaining businesses. Wellington Newport is actually already released its results so I won't spend too much time on that. But starting with the Diagnostic Imaging, I think our first reflection is that it is interesting to see the way that the different portfolio companies are recovering from COVID. I think as we talk to Vodafone and its roaming and I'll talk to Wellington Airport later, you can see quite a hefty cadence in terms of debt recovery. But our headline in relation to diagnostic imaging is that it's actually rebounding slower than we would have expected. I think our data points in that regard are quite extensive. We've got over 140 clinics. We're not just talking about New Zealand. We've also obviously got Qscan with an eye to the Australian market and how that's behaving. Obviously, we've also been looking at the listed comps in terms of the Australian market as well. So, where we've seen that come through is essentially the Australian operations, patient referrals are trailing our budget by about 13%. New Zealand is slightly behind that, trailing its budget by 11%. In some respects, we think that those are the same themes. We've essentially got lower patient referrals. As you can imagine, those operations are also having to deal with ongoing issues, whereby you've got staff who are often covered, and we're having to restrict services in some occasions. Part of the Qscan operation and the impact that we're seeing, though, is also related to significant weather events in Australia. They've had a lot of flooding and clearly, that impacted some of their clinics during the period as well. As a backdrop, however, I think it's worth reminding ourselves that the underlying health issues that are effectively causing the need for diagnostic imaging remain present. So it's our view that, that demand for diagnostic imaging will return and that we will at least see it come back to pre-COVID levels. I think the challenge at this stage is to know exactly how that will play out for the balance of FY '23. Because of that, what we've done is we've reduced our guidance range for the platform to $160 million to $170 million. We'll just see how that plays out for the balance of the year. As you can imagine, though, from a platform perspective, we just remain focused on being prepared for that rebound. It's fair to say that it's not always easy to ramp up and be able to meet that demand if it comes back quickly. But we've been investing in new clinics. We've had the acquisition of Envision in Western Australia that actually bought 23 new radiologists so that our radiologists are now over 300 radiologists across the platform. We've also had new clinics opened in New Zealand, and we're really pleased to announce that we will be opening a new clinic in [ Whangarei ] in middle of 2023, which we see as a significant development for the Northland area. So the people who need those services won't need to travel to Auckland going forward. So that's a good thing. I think it's also just worth noting how much capital we have been able to deploy through that platform, and we do see that as a meaningful benefit that having Infratil as a shareholder has been able to bring to those operations. So then moving to RetireAustralia. I think it's worth putting this investment into context. As you'll be aware, we have got a strategic review underway of that business, and that remains ongoing. But fundamentally, from our perspective, it really is a business that's just going from strength to strength. The reason that we had initiated the strategic review is really has much to do with the size of the asset and the part that it can play in the portfolio. So, what we see though in terms of performance as you can see on the slide, we've got an underlying profit of over AUD 31 million. That's up nearly 40% from the prior period. A lot of that comes through from the unit price increases that they've been able to generate or support within the market and the corresponding impact that, that has on our deferred management fees. But if you look at the other key performance indicators, we've got strong resales. We've got capacity, [ I beg your pardon ] we've got utilization of 93%, which is effectively as much as saying that we're full. Also, we've got waiting list in over 20 of the 27 villages that RetireAustralia [ looks like ].  Now, the other thing to note about this business is you know a lot of that is actually coming from its purposeful decision to make sure that it's focusing on the particular segment of the market. It started that transition about 2 years ago, almost just on the brink of COVID really. And what we are seeing is that the market and potential residents are identifying with that, and they value the offering that [ IOS ] is talking to them about. So that's been really pleasing. Very quickly, development is ongoing in with RetireAustralia. We've got new lanes that we've purchased in Brisbane. We're also looking at developing Lane Cove in Sydney, and that pipeline just keeps extending as the team look for opportunities in the right places. As I signaled, the strategic review was ongoing, as you would expect, we've got an eye on how well the business is performing. We want to make sure that the decision we make is in the best interest of shareholders. Nothing to report at this stage, but we'll keep you updated as we go. Now, Wellington Airport, as I said, they've actually already come out with the results, so we won't spend too much time on that. I think in contrast to Diagnostic Imaging, it's been a really strong recovery from COVID within the domestic passenger network. I think towards early September, we were at about 93% of domestic capacity. So that's a great signal for the way that, that airport is placed within the New Zealand context and its emphasis on domestic. As you can imagine, though, we have seen international come back a little bit slower than domestic. That's largely due to the airline's ability to bring those services back to Wellington. Thus suffering, I suppose, like anyone in terms of staff and actually the process required to get the aircraft back in the sky as well. At a headline level, I think it's worth noting, though, we've got forecast EBITDA of $80 million to $85 million for FY '23. That's a long way from what was effectively 0 EBITDA for the month of April in 2020. To put that in context, pre-COVID, the airport had EBITDA of just over $100 million. So really good to see it coming back to those kind of levels. Looking forward for Wellington Airport, just to note that we've got [ PAC5 ] negotiations starting next year. The airport is obviously very focused on understanding what its CapEx envelope needs to be and then obviously feeding through that into the negotiations with the airlines.  So now I'll just briefly talk about financial position and outlook before we head to Jason. As I said earlier, there's more detail in the appendices if you want to go through some of the line by line and how the business are performing. One thing we wanted to call out was the accrual of international portfolio incentive fees at the half year. As you would expect, we've got to do it a call for the purposes of our financial statements. The accrual for the period is about $124 million. That's largely as a result of the Longroad capital was and the introduction of MEAG into the shareholder base for Longroad. There has been an increase in net fee for Longroad or the estimated fee for Longroad. That's a bit of a mixture of foreign exchange and also how we have calculated the hurdle. In any event, though, it's just worth noting that this is an accrual what's actually more relevant as where those valuations land at 31 March 2023. Those independent valuations will determine the ultimate outcome. And just to remind people, if there was an annual incentive fee payable, it's divided into 3 tranches with the remaining 2 tranches only being payable if the valuations hold up. Then for completeness, worth noting that Qscan will actually fall into the initial incentive fee calculation this year. At this stage, we're not expecting that there'll be an incentive fee in relation to Qscan. But as I said, that's essentially going to be determined at 31 March based on an independent valuation at that time. Then in dividend I won't spend too much time on that other than to note that we are continuing to be confident that we can support a modest CPS growth in the dividend and the outlook. That will reflect an increase in cash flows from the likes of CDC in Vodafone and also contributions from Wellington Airport as it recovers from COVID. We've decided that the dividend reinvestment plan won't be activated for this dividend. Now just to wrap up on the capital position for the period. I think as I indicated at the beginning, we've got a very strong capital position at 30 September. Our gearing is well below the target levels of about 30%, just shy of 14 at 30 September. We've got available cash, which will be further supplemented from the TowerCo transaction, which we expect to settle in the next couple of months. We've also got very strong available bank debt facilities. So all in all, we are forecasting $1.4 billion of available capital, which is a great place to be, given the current economic environment, but also as we look to see what opportunities that environment might create for us. And just for completeness, we've got $100 million of bonds maturing in December. Given that capital position, we've made the decision that we will not issue bonds for that maturity. So holders of that IFT 240 bond will receive cash in redemption. Then just to wrap up before I hand to Jason FY '23 guidance update, we are essentially slightly narrowing the range, taking off $10 million at the top end with a revised guidance of $510 million to $540 million. People would have already seen the Manawa guidance update. We've also reduced our diagnostic imaging guidance, as I spoke to. So, it's now at the $160 million to $170 million. We've also slightly narrowed the CDC data centers range as Jason talked to. So, with that, I'll hand over to you, Jason.

Thanks, Phillippa. Let me try and sum up and then we've got some time for some questions, as usual. I guess from the half, you've seen a lot of portfolio transactions, towers, MEAG, which demonstrate the embedded optionality we look for in our businesses and paths to showing kind of substantial value creation at various stages of the life of our assets. There are others of those within the portfolio still to be worked on. If I look at the performance, we feel that it's a pretty robust set of numbers given obviously, inflationary pressures out there, which is what you'd expect from more or less an infrastructure portfolio, but good to see that coming through and the headline numbers and the overall growth that we're seeing. That's underpinned by the quality of our investments, but it also helps us continue to have confidence in the investment thesis in the sectors that we're invested in. We have that strong capital position Phillippa outline, which feels great and a volatile environment, just to manage that, but also to take advantage of opportunities to invest and what could be quite attractive entry points, certainly relative to win the market was quite a lot harder. So that is a nice feature to have. Looking ahead, I would expect the global diversity of our portfolio to increase right as those renewables platforms we talked about continue to grow as CDC continues to build out its pipeline. But also as we look to continue to invest, to diversify some more in digital infrastructure and also, I think, in health care as well in a volatile environment. I'll leave you with that thought. We continue to remain confident about our platform and those investment opportunities. So with that, perhaps, we've got time for some questions. Operator, are there any questions?

Your first question comes from Owen Birrell from RBC.

Just got, I guess, a couple of questions. The first one on CDC. In Australia, we've had some very major data security concerns following the [indiscernible]. I'm just wondering whether you have seen any sort of increase in less activity and what the approach to security has changed at CDC. If so, have we seen any change in the cost required to undertake security activities? That's the first question.

I'll take that. It has been increasing. We're obviously mainly a provider of the passive infrastructure, the building around it, but we need to secure our own building systems, and we're involved in the provision of connectivity in some cases. That means we have actually increased our investment in our own cybersecurity capabilities. So we have a new senior person from Telstra actually who's now on board and is focused on making sure CDC continues to be right at the front of that. So yes, there is some additional executive costs, but nothing too much beyond that, Owen.

Excellent. Look, just a second question for me. Just looking at the asset valuation that you've put through with these results. Just wondering whether there's been any revisions to the wax that have been used in those valuations. I'm just keen to understand, I guess, which assets have seen the wax change and proportionally between assets, which ones have seen a greater change than others?

Do you want to comment on that, Pip?

Yes. I think it's worth noting that the starting proposition in some of those independent valuations probably had higher, for example, with free weights, then perhaps we would have seen in the market or there would have been a market observation on. So it's not always a straight look through to what's happening in the market versus the way an independent valuation approaches it. So, we will definitely see some movement, and it will depend on an asset-by-asset basis asset. So clearly, independent valuers take their own view on that. But I wouldn't say that the movement has been as much necessarily as you would expect, given that they weren't really at the same point to start with.

I mean the big one is obviously CDC, Owen, and that is a more recent valve. So that's a 30 September [ valve ], which was obtained for various purposes within the company. The risk-free rate has moved in that maybe 40 points, I want to say. That's why that is flat that valuation, you'll see more or less from the start of the year. So that is some risk-free rate coming through. There's no change in Longroad because we're still really using the transaction valuation. I would expect maybe something to come through in the valuation there but we've also had the tailwinds of the Inflation Reduction Act and the factors I've talked about before. So I would guess those will offset, but we will see. Those are probably the most meaningful ones that I would comment on now. Some of the other valves are, I think, more 30 June ones, to give you a feel for it.

So what you're saying CDC... So you've seen real gone through but most of the others is still coming?

Exactly. Exactly..

Your next question comes from Aaron Ibbotson from Forsyth Barr.

I have 2 questions, if I may, and then one last one as well. But firstly, just on Manawa, I'm just curious to hear from you, from Infratil's perspective, how you think about this 1.7%, if I'm correct, gigawatt pipeline. Do you find New Zealand an attractive place to develop relative to elsewhere opportunities? What's your time frame? How do you think about that? They felt quite long dated when I listened to Manawa.

Yes. I can answer that first, if you like, before your next question, Aaron. I think that's right. I think the economics are a little clear. We develop offshore at hold-to-maturity returns that are solidly double digits, so kind of low teens, which is we're used to develop as well. Maybe that's compressed a little bit, which maybe you can risk adjust. So we're sort of waiting to see where they can. I think we believe they could develop at those returns. CapEx is up but there are pockets of really strong demand for that power. I think it will be very much project by project, having a project in the right place at the right time to trigger an investment at the type of returns we're seeing overseas. I think that's still actually a feature overseas as well. It's just that it's happening on a much bigger scale, so Longroad can do it across such a big continent at a higher cadence. I don't think it's necessarily different here. I think there are pockets of demand that we think perhaps Manawa can tap into and get a good return, but we haven't seen those offtake arrangements yet, so it couldn't confirm it. I think that does probably mean it's a bit more long dated.

Okay. Secondly, I'm just going to be a little bit boring here and try to understand what has happened to the valuation of Longroad. So you published sort of $640 million on your August release, pre-money post tax and sales costs. And now if I got it right, I get to maybe something like $550 million or $440 million for us September exchange rate. So that seems to me that it's down by $75 million plus/minus. But you said that you haven't changed anything. So I'm just trying to understand that if you or someone can help me out with that.

Yes, I think we've had a look at that this morning, and you might have got something. I think the difference there will be some money that was put in pre-completion to restructure the company. If you remember, for example, some of the projects we owned in different proportions than our Longroad holdings. Those will all merged back into one entity. So that to wash all that up, I think that's the gap about the 80. So nothing happening here...

Well, that's a different gap. Is that a different game? So I guess that's how we get from $927 million down to whatever the $600 million, but... Okay, we can take it offline.

That is the number that we haven't really shown before because obviously, we're still figuring that out, but -- and it's not a big gap. But there's nothing else underlying has changed to give you some comfort.

Okay. Fine. And then maybe finally, just my usual question, where do you find-- assets have moved quite a lot around the world year-to-date. But also over the last 6 months, some meaningful dislocation. I'm always curious to hear where you see the biggest dislocations maybe or maybe not around the world and by some asset class if you have anything to share with us?

I think what surprised me, I mean, you have views on this Phillippa. What surprised me in Europe is with interest rates going up, we were worried that the buyers are for renewable assets would push up as well, threatening the kind of power pricing economics that you'd assume going in. What we've seen is utilities really piling in to get capacity and really holding up those buyers, which is why we're doing what I mentioned in Ireland. So that feels like a dislocation. It doesn't feel necessarily fundamental economics driven. But who knows when that will end as well. I definitely describe that as a dislocation. A little bit curious to me in the data center space is how valuations are holding up in private transactions. We keep looking to find a readjustment of views, and we're not finding that. We're still seeing 30-plus type multiples and getting kicked out of processes at that level. I guess that's a good feeling for our existing investments, but it's still a little bit puzzling, I would say, in some markets. I don't know if you would add thing there.

Yes, I think the only thing I'd add is when we look at our portfolio, we feel that it's relatively well positioned from an inflationary impact point of view and that we should see that come through to those valuations as well.

I think that the other thing to look for, which might be a dislocation in the buyers' favor are kind of sensitive assets that should be owned either with local partners or the kind of 5 eyes or 7 eyes or whichever kind of alliance lens you want to put on it, definitely seeing that in some processes that are happening in Europe and other things around the world. So in our minds, there might be a little bit of a theme there of that club of nations and investors from them having kind of privilege access maybe to some of those assets, which we're working on.

Your next question comes from Phil Campbell from UBS.

Just a couple of questions from me. Just on the CDC valuation, Jason, I noticed that obviously, the range, the low and the high had widened out. Just wondering if you can make any comments on that.

I can take that. I think nothing untoward [ FL ]. We have actually got a new valuer for CDC this period. Essentially, we've got a value rotation process, and that's to CDC and all of its shareholders. That will simply be a factor of what range that new value has set for the period.

Okay. Great. Then just a second one on Qscan, I just wanted to get your views on -- it looks as though there could be some kind of changes to the licensing around MRIs and the kind of rural or regional areas, which then could translate into those licenses kind of been taking off in more urban areas. So I was just kind of curious to see what you kind of thought the impact on Qscan was as a result of that?

I'm not aware of anything coming through on that, Phil. I can certainly ask that question and come back to you, if that's okay.

I think the one thing we have talked to about there is because we're kind of a community-focused provider, not in hospitals. We should be the type of provider that should benefit from that. But again, you sort of need to see the details. I think if you were focused on hospitals -- maybe there would be an issue Yes. So that's what I've heard from the team on that, but not too much more recently, Phil.

Okay. Great. And then just the last one just on Vodafone. So just when I look at the guidance, because I think it's unchanged, but it looks as though it does include the rebrand because obviously, I probably didn't have that in my numbers. So I'm not sure how much the rebranding cost of it was like $10 million or $20 million, I suppose, you effectively got compared to previous forecasts of an upgrade there. Is that the right way to think about that? Or missing something?

Yes. No, that's right, we haven't disclosed the cost of that year. Obviously, that's still washing through, but you'll get an update on that at the full year for sure, but that's definitely the way to think about it.

Okay. Awesome. Great. Thanks.

Your next question comes from Nevill Gluyas from Jarden.

I'll start with 3 questions perhaps. Just wanted to your guidance for the year ahead, can you give us any kind of commentary color around the contributions you expect to Longroad as that starts to tick up in EBITDA over time. I mentioned there's sort of a degree of contribution that we haven't expected in the past starting to come through with in the second half sort of contribution to FY '23 and similarly for RetireAustralia. Second question, I just wondered if you could sort of clarify the maths, the gross amount to get you to your net $614 million post balance date Telco fund repatriation. And really just a third one, very interested in the sort of imminent potential reentry into Australia. I'm just trying to get a sense, partly of scale, but also of approach, whether this is a small entry with the kind of organic tail or whether it's a bit bigger.

On Longroad, do you have the second half contribution in your head?

I don't , so...

Yes. So we can get that through just the second half of this year, but you should definitely see that increase over time at the Investor Day at the start of this year, Paul talked about targeting $400 million to $500 million EBITDA once that buildup program has been completed. That's still very much in that plan. Obviously, that's a really massive number. I think our plan heading into kind of Investor Day next year probably is to try and lay that in a bit more detail for people. So it feels a little more real. But obviously, at 37.5% of that is -- that will be quite a different level of contribution than we've seen in the past. You had a question on RA?

Yes. I think on RA we're continuing to expect that the performance in the first half carries to you to the second half. They will be considering whether or not their unit pricing needs to be readjusted and I mean an upward adjustment given the demand that they're seeing for the product. So we think that the on track to continue with the [indiscernible]. I think one thing to note is availability of stock, clearly, it's more of a challenge than it used to be. That's obviously reflected in the waiting list. So we'll just have to watch the space as to how that plays out for the next 6 months.

Do you want to pick up a...

Yes, the $614 million. I think the main thing on that, Nevill, is, as we've talked about, gross proceeds from the transaction was $1,700, we can come back to you about the breakdown, but essentially after transaction costs, all of those proceeds are being distributed to the shareholders. What's worth noting for Infratil though, of course, is that we're also investing to buy the 20% stake in Towerco. In fact, we've already done that, and we're yet to receive the proceeds. So we'll have had our capital outlay in October to buy our 20% stake in Telco, and we're now just awaiting the capital return from Voda and the $614 million reflects that net capital return.

Yes. So $850 million minus transaction costs is 0.2, give you the number, I think. Australia.

Okay. So it's not net of your investment in target?

Yes. That is it is net.

It is net, yes. It is right. Again, it's just incredibly geared. So it's not a large number. Yes, the gearing definitely helps.

Yes, it's brilliant. In Australia.

Yes. So it's not like buying origin or anything like that if you're asking the -- it is definitely more a development platform very similarly sizes. I think to the other ones, we're down on Clayton here in-house now and some people they have a lot of belief and trust. It is very focused on, I think, building up a greenfield pipeline, which will be a bit long dated, but also looking around being probably a little more flexible in terms of water addresses finding other ways to enter into what is quite a complex market. So they will look at all sorts of things that are floating around there that don't have a kind of necessarily a natural home in the sort of super fund kind of large-scale platform kind of place you can emerge in. So a little bit like go alone that way, more joint development agreements, stuff like that, things that you'd expect a lean, nimble player to try and be able to address below the kind of line of sight of the big behemoths.

That's very clear. I would suggest that the Origin transaction would suggest those us multiple are still hanging around. Any sort of synergy with Trustpower or Manawa, I should say, out of that -- or would you run them quite separately?

They'd be run quite separately, but there definitely could be -- there's [ Qs ] in Australia and Aussies in New Zealand. So I actually wouldn't rule that out. There are actually proving to be synergies across the group. Actually, the Manawa team. I spent a few weeks on the road visiting all our other platforms and learning a lot. So at the very least, there'll be that. But you could see work capacity and I think capability flow between those 2 platforms a bit more freely at this side of the world.

Your next question comes from Wade Gardiner from Craigs Investment Partners.

Just a couple of questions from me. First of all, on Telco, I was just interested when you were talking about RetireAustralia and the reason why you would look at a review there. One of the things you mentioned was scale. When the Telco investment is going to be smaller, the price, I would argue, was fairly hefty and you're not -- you don't have control. So why are you in it?

Yes. I think it's a fair question. We sort of blend it together with our Vodafone investment. We kind of think of it in terms of the portfolio scale, it's kind of fine. We thought the forward IRR on that investment was quite solid, compared very favorably to the Wellington airport or maybe even Manawa these days. So fine in terms of its return outlook, even though I acknowledge the price was higher than we expected. We don't know in the long term where necessarily the most accretive investment or value will accrue in the telecommunication system. So it felt like an option that was easy to have. In terms of our influence, because we're obviously a major player in its only customer, even though we only have 20% shareholder interest, we have an outside influence, I would argue, compared to what that 20% conveys. Then finally, if all of that proves unnecessary and we need to get rid of it, we think these sorts of stakes are highly liquid because they're highly sought after as the process shows. We've got enough liquidity, we think, from seeing how other players who buy these assets, think about it to move that on if we absolutely had a total change of heart as well. So I guess that's the kind of full set of reasons why hanging on to it felt like a good idea at the time and something we could address later on if we wanted to.

Okay. My next question, just in regards to the CDC valuation. I mean, I understand there's a new value there, but can we get some color on, first of all, what [ Wakli ] applied, but probably more importantly, what they've actually included there in terms of development, I think there's been some uncertainty in the past when you've increased that valuation as to what has actually been included in terms of those developments versus greenfield?

So I don't have a wage, but we can talk about cost of equity maybe. I think we've shown that in the annual report was what they do remember is they sort of do a blend. So a lower cost of equity for the more contracted ones, a higher one for things in development and an even higher one for things that are in development yet. I think in the annual report, you might even have it in front of you, we talked about a blend of around 9 and a bit. They're up over 10 now, just to give you low teens. So that has moved in line with that, both at risk-free rate increase, and I think some more future-dated construction coming into the pipeline relative to where the previous valuation was. I don't have at my fingertips built versus future megawatts, which I think is the kind of split you're looking for. It doesn't include -- I can tell you that it doesn't include the Auckland stuff we're talking about and perhaps we should come back and confirm that split because I think that's kind of what you're looking for and how that fits relative to the pipeline Greg was talking about. So let me take that away. I know it...

It'd be nice to know that we're not going to get sort of these surprises where the value is certainly is to include an extra 300 megawatts, for example, that we didn't realize wasn't included in the past.

That's a good surprise, I guess, to have. But yes, and to be fair to them, that can be driven by customer conversations that can be quite lumpy, but at least you'll have a base right to start from. So let us refresh that.

Thank you. There are no further questions at this time. I'll now hand back for closing remarks.

Great. Well, thanks, everybody, for your attention and your questions. Hopefully, that's helpful. We'll give you back the rest of your day. Good to see you.