Infratil Limited (IFT) Earnings Call Transcript & Summary

I'd like to call the meeting to order and welcome you all to Infratil's 29th Annual Shareholder Meeting. I can confirm that under Infratil's constitution, we have a quorum and declared the meeting of shareholders properly constituted. Like last year, shareholders were given the option to join the meeting today either online or in person. And in addition to those of you in the room today, I'm very pleased to welcome you who have joined online through our virtual meeting platform provided by Link Market Services. For those of you online, I'd like to note that you're also eligible to submit questions. [Operator Instructions] I also advise the meeting that members of the press and non-shareholders may be present. At the completion of the meeting, I'd like to invite those in the room today to join the directors for refreshments. But before progressing onto the business of the meeting, I'd first like to introduce you to your directors. I'm Alison Gerry. I'm an Independent Director, the Chair of the Board, a member of the Audit and Risk Nomination and Remuneration Committee, which we refer to as the Noms Committee and the Management Engagement Committee, which we refer to as the MEC. Jason Boyes is a Non-Independent Director and is our Chief Executive. Kirsty Mactaggart is an Independent Director. Kirsty is the Chair of the MEC and a member of the Audit and Risk Committee. We have Anne Urlwin as an Independent Director, Chair of the Audit and Risk Committee and a member of the MEC, and Anne is seeking election at today's meeting. Peter Springford is an Independent Director and a member of the MEC and Peter is seeking reelection at today's meeting. Paul Gough joined us from London and is an Independent Director and a member of the Noms Committee, and the MEC. We have Andrew Clark, who joins us from Melbourne. Andrew is an Independent Director and a member of the Audit and Risk Committee and the MEC, and Andrew joined the Board last June. We have Phillippa Harford, our Chief Financial Officer; and Brendan Kevani, our Company's Secretary, both in the room with us today. Gavin Silva joins us from KPMG, and is our auditor, Josh Blackmore and Tom Jemsen joined from Chapman Tripp, our external legal advisers. In addition to your Infratil directors, we also have with us directors and managers from our businesses, either in person or online. Rachel Drew for Qscan in Wellington Airport; Phillippa Harford for Manawa Energy and One New Zealand; Terry McLaughlin for RHC Healthcare, and we have Jason here, who is the Director of CDC Data Centers and the Chair of Longroad Energy. So moving to the meeting proper. As the notice of meeting has been sent to all shareholders, I'm going to take it as read. Proxies have been lodged by 878 shareholders holding 454,054,076 shares, which represents 54.35% of the ordinary issued capital. I can also confirm that the Board has confirmed the minutes from the last annual meeting, which we held on the 25th of August 2022 as a true and correct record of that meeting. Before progressing to formal matters, I'd just like to reflect on another incredible year of accomplishments for Infratil by touching on 3 developments, which we have announced since the end of the financial year. The first 2, which were not covered in the annual report. The first was the acquisition of the other 49.9% of One New Zealand. The deal was a fantastic result, reflecting incredible effort and exceptional swift execution to achieve the best result for shareholders. There are many highlights with this transaction, but the 2 that we are most excited by is that full control provides us with increased business plan flexibility and a focus on long-term value creation under the 100% New Zealand ownership. Also from a portfolio construction perspective, the transaction strengthens Infratil's cash generative core provides stable and growing cash flows, which further supports Infratil's development platforms. And it's worth noting that no incentive fee is payable to the manager in relation to this transaction because it's a New Zealand asset. The second transaction was the associated equity raise and we were thrilled with the support we received from shareholders. Thank you. With the offer oversubscribed by 2x to 3x in the placement and a similar amount in the retail offer. We chose to use a combination of a placement and a retail offer because we think it provides the tightest pricing, quickest execution and time to settlement and is able to be structured to give the vast majority of our shareholders the opportunity to [ main ] the relative shareholdings if desired. Then finally, the amendments to the management agreement. Reflecting feedback and concerns from some shareholders in recent years, Infratil and Morrison & Co have agreed to amendments to the incentive fee provision in the management agreement. No changes have been made to the way that the underlying calculations are performed. Incentive fees can still only be earned on the international assets. The hurdle remains fixed at 12% and outperformance is calculated at 20% above that hurdle. However, these new amendments provide for the offsetting the impact of underperformance against outperformance between the 3 categories of incentive fees for international assets and the carrying forward the impact of underperformance for unrealized assets and in some limited circumstances for realized assets. The test for payment of deferred tranches of the annual incentive fee is replaced with what we call a proportionate reduction. And these amendments have been applied to the FY '23 incentive fees. Shareholders will have noted the increase in the director fee pool, which the Board has put forward for consideration this year. Infratil competes for directed talent, primarily in New Zealand and Australia, and we want to ensure that we can attract highly qualified, talented and committed directors. The pace and complexity of Infratil's investment activities requires a Board with the capability and commitment that is probably different from most of our peers on the NZX and ASX. We're a very hands on Board. Last year, we spent between 24 and 28 nights away, and that doesn't include the many ad hoc meetings that we require directors to attend at short notice. This year, we engaged EY to undertake a benchmarking exercise in order to assess the appropriateness of fees that are paid to directors and they selected a comparative sample of 20 organizations, half based in New Zealand and half in Australia. This makes sense given that more than 50% of our assets are now outside New Zealand. And if you remember, the last time shareholders approved an increase in the director fee pool was at the 2019 Annual Meeting. What we believe is fair and reasonable, and I can assure you that Infratil directors are committed to working hard on your behalf. And the resolution has also received the support of the New Zealand Shareholders Association. I'm really proud to cheer a high-functioning Board that works constructively and collaboratively with our manager and the intensity and effort of the last few months to deliver transactions, which I've just outlined, would not have been possible without a high degree of openness, trust and goodwill. Another area where the Board is particularly focused and management have done an incredible amount of work is in the area of sustainability. We are on the journey and looking forward to releasing our first sustainability report very shortly. And we're doing our best to establish good and repeatable processes while understanding complex data sense against the backdrop of new and evolving standards and practice. And in December 2022, Infratil and Morrison & Co committed to establishing science-based emission reduction targets. And these commitments have been registered with the science-based targets initiative. Before I conclude, I just wanted to mention that while this is our formal annual meeting, it's not the only time we meet shareholders. In addition to normal investor and shareholder relation activities, Infratil remains one of the few NZX listed issuers that undertakes an annual retail roadshow. I think many of you might have attended those sessions, and this year, the usual format of presentations and Q&A ran across 15 meetings and 14 cities and towns across the length of New Zealand. And I think we had close to 2,000 people to attend, which was fantastic. Next year, we're going to add a virtual meeting for those shareholders who live in towns that we don't physically visit. So I'd like to conclude by reiterating the key message from last year on how we deliver our strategy of investing in ideas that matter through consistency of approach, discipline and a focus on execution. So I'd like to now hand over to Jason to present the Chief Executive report.

Good to see a bunch of familiar faces. And really, my pleasure to be here talking to you today in person and online. If you're here in person, you will have seen a wonderful Wellington day, much better than yesterday. So hopefully, that helped you get out. And that's good to see you Terry and I see Martin Harrington from the airport out the back. So if you want a [indiscernible] scan or sort you're packing out at the airport then those are the guys to talk to after this. Let's keep going. So I'm going to talk a little bit about the FY '23, financial year, of course, because it's the annual meeting for that period. But I'm going to talk more about how we have traveled since the end of that financial year and what we're thinking about in terms of the things that are here. So this is just a repeat of the slide we put up at our annual results announcement. And there, it shows our net parent surplus was actually down on the year before, even though it was an incredibly strong performance as we said at the time, and that was really just the difference between the sale of tilt and the operating performance of the year before. To see that momentum and the strong underlying performance that we talked about then and that everybody was so pleased with, you've got to look at that proportionate EBITDAF number, which was up over 10% on the year before. Remember, that was driven a lot by a really strong performance from the airport. A strong performance from CDC in terms of its growth profile, which we talked about for a number of years. And probably stronger-than-expected performance from ONE NZ, which had experienced a bunch of strong momentum in mobile revenues and profits in particular. So that was a pleasing result in the conditions that we had, if we think back over the last 18 months over that period, very volatile. Investment was still remained at elevated levels, and you should expect that sort of -- that's our proportionate share of investment across the group. You should probably expect that to continue at elevated levels for a long period of time. Available capital at that time was quite high, that's different now because since then, we've invested in ONE NZ, but I will come to the latest statistics on that. And the other 2 numbers, 14.2% shareholder returns. So that's the return you would have experienced holding the share through the period, 14.2%, which is sort of at the top end of our target return of 10% to 15%. But importantly, in the same period, the NZX50 returned about minus 2%. So it was quite a strong performance relative to the whole market as well, if you think back to that. CFO increased the dividend modestly. As a result of all that momentum, which you see there on the side, which is good to see as well. So that's a quick reminder. That meant at 31 March, and then we updated it for the acquisition of ONE NZ, the portfolio looks like this. And so remember, we divide our portfolio up into 4 key categories now: digital infrastructure, renewable energy, healthcare and the airport. And I think when we were talking last year at this AGM, digital was about 57%. Now it sits at 65% by value of the portfolio, representing a strong high conviction overweight position in our assets in that sector, but also the additional investment in ONE NZ since 31 March that Alison mentioned. Renewables is still a strong component and a strong focus, and I would expect that to grow as a proportion over time. It needs to do a lot of paddling to keep up with the digital side of the portfolio. But the way those businesses, the evaluation tracks over time, you would have seen you get these increments of value as our renewable development platforms mature and start proving that they can pump out projects at a certain cadence. And then like we saw with Longroad in the last year, you should see a jump in value. So I would not expect this picture to stay in this way forever. ONE NZ since the full year and since our full year results announcement, there's kind of been 2 main developments, ONE NZ and the associated capital raise, which Alison mentioned. I think this is just foundational critical infrastructure for a modern economy and for New Zealand. And it's exactly the type of infrastructure Infratil wants to be investing in and taking our position there to 99.9% is really the combination of 6, 7, 8 years' work, getting our small foothold on it and then getting the final piece done this year. So we couldn't be more pleased to be in the sector. As it happens, it's come at a time when the business is performing really well. The sector is performing well as well, and we're experiencing the benefits of that. We expect actually quite a strong uplift in earnings over the next period. So our guidance for this year for that business was again double-digit EBITDA growth. And that was driven by a combination of underlying momentum, particularly on that mobile side continuing and the continuation of business transformation initiatives, which really had the effect of reducing your cost to serve more or less the same amount of customers. But what's kind of more interesting now that we are in full control is what are the kind of medium- to long-term drivers of growth for this business that we can, with the management team, sit down and position the business for. And those look like further investments in mobile. They looked like continuing to grow in that ICT space that spark has had all on its own for so many years, while Vodafone was focused on being a mobile company. And also wholesale growth. So that means sharing our infrastructure with other providers of services in ways that incumbent telcos haven't necessarily done naturally in the past. The last piece, and it is only one of many pieces is the cost reductions we can achieve through simplifying our business processes. So a lot of commentary, I see and potentially we're guilty of oversimplifying the investment case for this investment is focused on the kind of cost out and the EBITDA margin expansion. But actually, there are many levers in this business that are going to be important to the future success of it, and we're excited to be in that space. The business is trading well in the first quarter so far. We're continuing to invest in the network. It was recognized as New Zealand's best mobile network for the second year in a row, which the team are really happy about because that required quite a lot of catch-up investment. And the brand change has gone really well, love it or not. It has been incredibly effective, and we're getting really great customer service, customer recognition metrics through what the team has done, and we couldn't have hoped for that to have gone better, I think. So we should be pleased about that. The second big thing since the full year was the partnership we announced with Hong Kong Telecom to invest in and ultimately own up to 80% of their business, which is called Console Connect. It's one of the top 3 software-defined networking businesses in the world, and it's the only one integrated with its own global backbone, fiberoptic network. Now what is a software-defined networking business? I've had a lot of people ask me that. The official answer comes from ChatGPT, would you believe it, which is actually incredibly effective. But it sort of -- it describes it as, in essence, a big switchboard where you can securely and efficiently connect different networks together. And you can do that through a software interface rather than having to switch out actually electronic components. So it is the modern way of configuring businesses networks to connect all of them together in a safe, secure way on a global basis. And it's revolutionizing the way network infrastructure is deployed and monetized around the world. It's a really important and critical piece of global connectivity infrastructure, and we're really happy to be able to invest in it. I've got the numbers there that we're going to invest over the next couple of years. I think the important things to know are that this is a really fast-growing space. That it represents a kind of global wholesale version of our digital infrastructure assets already. So you can think of it as a global extension of what we're already doing. And importantly, it is still subject to regulatory approvals. They are myriad and -- but we expect those to be navigated well, which would be a significant endorsement of the business model under our ownership, we think, and we hope to be able to close this business -- this transaction in the second half of next year. It's an important one to watch. Sustainability, I'll touch on. Alison mentioned as well, it's been an incredible amount of work done by the team and Lewis is here, who's led that work. We are about to issue our first sustainability report shortly as the official word, but it shouldn't be too long. There has been a lot of work done on identifying what the material issues are to Infratil and its stakeholders, which was actually a really interesting exercise to get a whole bunch of perspectives on what's interesting for all of you. We are focused on ensuring our reporting complies with the best practice international standards that are available today, which will stand us in good stead as a bunch of these reporting requirements become mandatory next year. So this has been a fantastic dry run. We're reporting on our emissions footprint for the first time, which we're quite happy about, but I'll let the report speak to itself. And kind of interesting in going through this process and watching Lewis and the team do it. It's definitely highlighted how important partnerships and collaboration are in this really quickly evolving and emerging space. It would not surprise me if the way that we're reporting these things now is quite different from the way we're reporting them in 3 or 5 years' time, and that's certainly much different from the way we used to talk about them 2 or 3 years ago. But luckily, within Infratil, the types of partnerships we can draw on are pretty powerful and unique. So Lewis has talked in the past about our investments, and we have up on here, Persephone and Jupiter, which are investments in software companies that we make through our Silicon Valley investment in Clear Vision. They are actually at the leading edge of providing software that enables you to pull this reporting together in the case of Persephone or analyze the climate risks of your portfolio in the case of Jupiter using cutting-edge technology. And those are partnerships that are really only available to us because of the forward-thinking investments that have been made. So look out for that. Debt capacity and facilities. I mentioned that available capital had changed since the 31 March results announcement. Here you can see that post the ONE NZ transaction, capital raise, some changes to our facilities and some bond raises, we're still at a really strong liquidity position up over $1 billion across the portfolio, which should be sufficient to support the growth that I'm going to talk about in a second. And then before we go to the portfolio, maybe just pause on how are we tracking so far this year and what's the investment environment. So how are we tracking so far this year, we are confirming our guidance today. Remember, that's quite a big leap from last year because of that acquisition of ONE NZ. So we've got ONE NZ's 49.95% of their earnings coming in now. But the first quarter trading performance from the key portfolio companies is providing us confidence to guide that our earnings are tracking towards the top half of the range we talked about at the start of the financial year. So that is a good start, particularly in the environment. Some good strong performance across the board, but I guess it's still early days. We're just one quarter in. And then so we're tracking really well. What's the investment environment like? Super interesting, I think. It's definitely evolving from the pandemic. But I would say that the kind of COVID -- second order effects, things like massive burst in travel, right? Automation that was accelerated, which probably in normal times would have taken a decade for people to swap out their old equipment. That's happened in 3 years, 5 years. The results are compelling and people are thinking, well, actually, this is a new way of working. Those sorts of things are definitely still driving a ton of interesting stuff from an investment perspective, I would say. Geopolitical tensions and climate change are still key investment themes as well, not going away and very strong. But I would say the emergence of generative AI, particularly for our digital infrastructure portfolio and kind of supercharging that COVID-19 effect and drive towards automation is a really key theme for us at the moment. What we're seeing with all those kind of tailwinds, I think, driving investments in certain areas is that growth capital requirements, particularly for renewable businesses and digital infrastructure businesses like data centers are through the roof. So you've got, on the one hand, say if you're building a renewable energy plant, now you'll probably need to provision a battery as well. That basically doubles the cost of your facility from what you were talking about before. You have in the data center space because we're seeing so much growth in demand, the amount of capital people are needing to put out the door to keep pace with their customers' demand is really high as well. So you've got this big uptick in capital requirements. But at the same time, not everyone in these sectors has access to flexible capital that is available this time. If you're in a closed end and private equity fund and you generally rely on a lot of gearing debt to achieve your target returns, that debt is quite expensive and not always available at the moment. So it's a tough time for them. If you're in a corporate who's raised equity recently at really high multiples and then you're into a period where those multiples are just naturally low. It's actually really hard for you to bite the bullet and go out and raise equity to fund the growth ahead of you, or perhaps you're in a corporate structure where you're distributing all your free cash flow because some of these businesses are in those sorts of structures. Getting access to the capital to take these opportunities, maintain market share and maintain momentum is not universally available. And so for Infratil, when we look across our businesses, we are focused on maintaining a strong set of liquidity metrics. So that we can take opportunities that will arise to accelerate the growth of our existing investments, whether it's renewables in the U.S. or data centers in Australia or wherever. And we're also making sure we maintain those metrics in a strong position. So we can take advantage of opportunities to invest in critical infrastructure that's looking for growth capital at this time when actually it's reasonably scarce compared to other times when we've been investing anywhere. So as part of that, we are looking at additional renewable energy ideas beyond wind and solar, and that is things like hydrogen. It is, things like sustainable aviation fuel, sustainable shipping fuels, even carbon capture. There's a really interesting dynamic at the moment where there's not a lot of capital available in that period where you've built your first pilot plants, you know the technology works, but you want to scale to your first industrial scale facility. There's not a lot of capital around for that. The same tends to be dominated by venture capital. These seem to be industrials and big infra funds and the private equity capital in the middle is not necessarily there. And then last thing is, I think automation is kind of emerging as a really key theme, we think. And that's workforce shortages during COVID continuing. But actually, as you look forward in the world, we're going to run out of people. It's going to get scarce, and people are provisioning for that now. People are driving more for resilience. And generative AI is just kind of the one use case where automation is key. So investments like Console Connect, which is automating the orchestration of networks, which you could have used to be to run teams of 10 or 30 people to do. Now, you can do with one, right? And other investments like that are emerging and could continue to emerge over time. And that they kind of look like shared infrastructure or infrastructure as a service investments, I think, at the end of the day. And so Console Connect or our towers, things like that, I think, are really the tip of the iceberg of what could be available for a forward-thinking investor with capital and access to the right critical infrastructure. Those are the key themes when we work through the key parts of the portfolio. So CDC, as I said before, we are seeing, as everyone who follows us will be, data center demand is really exploding globally. Driven by hyperscalers rolling out AI, artificial intelligence, workloads across their existing cloud infrastructure. And so we see reports of as much capacity being signed in the U.S. in the first 6 months of this year as the previous 2 years in total. And we mentioned when we did the equity raise that CDC had received strong demand signals for additional AI-related capacity. And it has been very busy in the intervening period responding to that. What we feel now, having learned a lot more about how this infrastructure is going to be rolled out is that CDC is well placed to win AI workloads, given that we have large campuses. So these workloads are initially being rolled out in large multi-megawatt bundles, which will suit us because we tend to build 100-, 200-megawatt campuses. We can move quickly with available land and land with power, which is kind of the gating and driving item for a lot of the conversations that are being held around AI workloads and CDC is sitting on a lot of that. And then it's also become clear that there are benefits for the AI workloads to be co-located with your usual workloads and your usual data. Because the 2 systems talk to each other are an incredibly high bandwidth speeds. And if you can do that within a single data center over a single connection, then it's going to be much more efficient. So there are benefits of being co-located in an existing ecosystem we see. The first AI workloads have actually been deployed in our facilities, which has been a really interesting learning opportunity. And the confidence around the contracting of our first Melbourne facility, which is being built now, is going to allow us to commence construction of our second facility, we think, later this year. So watch the space, we'll be updating more on that on over for the half year. That's an important one. This is a familiar map. Now hopefully, this is the green where all our global renewables businesses are. And I'll start with Longroad. That continues in North America. That continues to grow really, really quickly. So they're building 1.3 gigawatts now and are close to closing the commencement of the build of a further 1.1 gigawatts. So say, call it, 2.4. Remember, New Zealand, the capacity of New Zealand's electricity system is 12 gigawatts. So these are quite significant facilities, quite significant build programs. We should expect that business to be focused on reaching its annual cadence of 1.5 gigawatts per annum, which we've guided to over the next 3 years. That is a really big focus for the team. And there's quite a lot of value for us in owning those facilities at the end, but also for Longroad and showing that it can consistently develop that level of capacity for the next 3 years. The -- what we're seeing in other renewables businesses in North America is that although the inflation reduction back there is really supercharging those businesses and is a really good tailwind. You do need access to flexible capital to meet those working capital requirements I mentioned. So a bunch more money needed to build pretty much the same sort of project. And also you need strong relationships with local suppliers to get access to local content, which enables you to develop on the most attractive terms. Not everybody is able to do that in that market for the reasons I mentioned before around capital, but also where they've been procuring their equipment in the past. And so what we're seeing is for those that can like Longroad and can develop. The development margins are quite strong, if not increasing in this period. It's not unusual to hear in the U.S. market at the moment. And we wouldn't be surprised if there is some consolidation in the future that some of these smaller platforms will find it quite difficult. And the business -- the industry may consolidate, I think, around a smaller group of larger players. I think it reinforces the strategy we started a year ago, right? We talked to you about retaining projects and growing more scale to be more financially resilient through episodes like this. This is an underscoring, but it really was the right choice and as a choice being followed by other successful players in that market as well. We can quickly flip through the others, which are much less mature. So Galileo in Europe, that is well established now. What we're seeing there is that a lot of those markets, it's more attractive to sell the projects before you build them. And actually, that's what Galileo has been doing. So once you've got your land, you've got a development approval, say, and you've sorted out who's going to connect you to the grid. In that market, it's more attractive generally to sell those projects, and they're doing that. They've executed some of those sales, and they're doing that with some other ones at the moment. And we're finding that's able to be done at attractive economics that are consistent with our original investment case, which is nice to have that confirmed. And puts the business, I think, in a really good place to establish itself in a way that will turn up more meaningfully in the Infratil portfolio. That brought some new partners into their offshore wind projects and actually secured a PPA in Italy as well. So all good things happening there. Gurin Energy is in Asia, that's earlier in its life cycle, but it has been traveling quite well. They have commenced construction of their first facility, a solar facility in the Philippines, which may sound kind of scary. But remember, this team has built a lot of facilities actually in the Philippines. They have a dozen people on the ground there. And this is very familiar territory for them and nice to be starting in the market, they know really well. It's the first facility, the group Infratil has built outside Australia and New Zealand and the U.S. So we're hopeful to see that come out of the ground. The economics for that facility look in line with our original investment case and all the power from that facility has already been contracted and sold to a counterparty. They continue to develop their pipeline. So they've won PPAs and government auctions in Thailand as well, which is a newer market for them, and they're continuing to build out their pipeline in other countries as well. So the trajectory is good. Meant we established quite recently, they're continuing to build up their pipeline nicely. And then Manawa in New Zealand also actually has a really interesting pipeline of renewable energy opportunities. The assets are operating really well. And we can see them now in a phase where the retail sale is done and they can think quite deeply about how best to optimize their options and their long-term value with a good set of renewable development options and a quite well-performing operating portfolio under the hood. That's renewables. Diagnostic Imaging as our businesses here in New Zealand and Australia. So volumes of performance in New Zealand has actually been really good, right, Terry? They've come back and recovered well, better than expected. In Australia, it's a bit slower. But actually, in terms of revenue because of what's happened on pricing, they're in an okay spot. Our focus for the platform is on ensuring that we can leverage our scale to when, really, and that's making big IT investments that are difficult for smaller operators to do. Investing in our capability and our people in ways only platforms of the size of ours can do and provide things like national service offerings to [indiscernible] and others that others will not be well placed to do immediately. Will's managing still a bunch of inflationary pressures coming through those businesses in terms of technician and wage costs and things like that. We're continuing to build out projects selectively to ensure that the growth that we had in our original investment case is still tracked. So they're on track to meet their EBITDA guidance and going fine. Quickly on the last 2, RetireAustralia and Wellington Airport. RetireAustralia continues to operate really well. On track to sell between 520 and 560 units we've got on here. I don't think there's a time when anyone stood up here and said something like that, let alone completing 254 new units. So training is fantastic. Occupancy is actually really strong compared to others you might have heard of in Australia, and they continue to build out their development pipeline as well. So they're really well placed. Wellington Airport have recovered really well from the pandemic. We're still lagging a bit right, 85%, but hopefully, we can get that up there. I know the Women's World Cup would have been good. The big story there to track is what happens to pricing that's with the Commerce Commission. Effectively now they consulted on some changes to the input methodologies one part of which, in particular, we had -- took issue with along with a bunch of the other airports, that's going through the process. You better to track that through what is reported on Auckland Airport in particular, and we'll be close behind, I think. So in summary, the trading has been good in this first quarter, right? We feel good about the performance. We are thinking about the top half of our guidance, not the bottom or below it at all, given what's happened to date. So that is a really pleasing start to the year in a difficult environment. Secondly, it does sort of feel like a portfolio for our times in a lot of ways with really strong exposures to that kind of COVID-19 second order impacts I talked about to generate AI and the way we're going to be increasingly living our lives over the next few years. We are seeing really interesting emerging themes in terms of opportunities to accelerate our businesses as long as we maintain the access to flexible capital. But also new emerging opportunities to extend and get effort on critical infrastructure for the future that will be interested and looking at as well. We remain positive with hopefully the right balance of optimism and skepticism for you. So that's it for me. And are we taking questions now. I can happy to take some questions or please take questions. Thank you.

I'll hand the questions out. Okay. So this is now an opportunity for a discussion of the annual report for the year ended 31 March 2023. And I'm first going to take questions or comments for those of you in the room, and then we'll go to online. [Operator Instructions] So if there are no questions or comments from those of you in the room, we will ask Mark Flesher to read any of the questions submitted online. So Mark, are there any questions?

Thanks, Alison. Yes, we have a couple of questions. First one is from [ Trevor and Beverly Moses] [indiscernible]. The question is as a result of the recent overseas investments and full control of Vodafone, what is the company's current debt level and bank facilities to support this?

Great. Thanks for that question. So I will ask Phillippa Harford, our CFO and also our Chair of One New Zealand to answer that question.

Thank you, Alison. Yes. So as you will appreciate, at the time, we did the ONE NZ acquisition. We were also very mindful of trying to make sure that we had adequate capital to do everything that was clearly going on in our portfolio. And as you can see from what Jason said, there's plenty of it. So in addition to undertaking that equity wise, at that time, we already had significant undrawn bank debt. What we did at the time was we put in place additional bank debt. That is due and still available. It's about $1.1 billion. You'll have seen actually recently, we also went to the bond market and raised about $150 million of new debt. So at the moment, net bank available facilities are about $1.1 billion. Our drawn -- total drawn debt that's both across bank and bonds is about $1.7 billion. The other thing I'd note, though, is our gearing is at about 17% at the moment. So that -- we're comfortable with that level of gearing. But at the same time, we feel like we've got good liquidity available if we do have opportunities. And we also think that the platform has got plenty of opportunity for us to use some of that cash. or available capital.

Mark, are there any other questions?

There is. We've had a couple of similar questions, so I'll paraphrase. It's around the Vodafone fine that was received or announced in the last week or so and the questions around what were the consequences internally and what measures have been taken to assure this won't happen again.

Thanks, Mark. I think that's one for me, too. I think the first thing to note is that the activity that the fine relates to actually occurred before Infratil-owned Vodafone, what was Vodafone back then. You might recall we bought our stake in 2019. One thing I would say, which will be pleasing to the audience is that we were aware of the issue when we acquired Vodafone. It was specifically considered as part of our due diligence. And as you would expect, we anticipated that it unfortunately might end where it ended. So we were alive to that issue and took that into account when we acquired that initial stake. Following on from that, however, in terms of how and what we would like -- what we do to make sure that, that doesn't happen again. Clearly, it's something that is very important to both the ONE NZ Board and also to Infratil into the management team and Jason Paris as a CEO. I think the biggest thing about it is as excited as people can be about what their ambition is for the business, in terms of people who like the campaigns and believe in what -- we have to make sure that we've got good governance and review processes in place. So that before ONE NZ makes statements of [indiscernible], we're comfortable that we can back that up and deliver what we say we can deliver. I think I would say, though, that, as I said, this was a pre-Infratil matter. I can't actually say how many individuals were involved. We've simply taken it on and we're more focused on how we deal with it going forward.

Mark, the next question.

The next question comes from Fabio. What are the top 3 risks faced by the business over the next 3 to 5 years? And any relevant mitigating strategies you might have and what are the 3 top opportunities to increase profitability?

Okay. Jason might -- give Jason that one.

It's a good framework for thinking about investing. So the top risk is access to capital, as I was kind of alluding to, both for the survival of the platform, but for taking on opportunities. So there was a reason we're banging on about that and why Phillippa had talked about it as well. The -- there is a lot of growth within the business that those businesses rely on to retain management teams, maintain momentum and ultimately be profitable in the future. And so the thing we focus on as a Board a lot, is our credit metrics. The reliability of the cash flow that we are relying on to meet debt and other obligations. And ensuring we have ample access and ample reserves of available liquidity. So that is actually for as long as I've been here, the single biggest risk to Infratil and continues to be and is a major focus of the Board. I think given the focus of the portfolio and digital infrastructure, both from a valuation perspective, but potentially from a demand perspective, it's hard to look past the continuation of the growth in data creation and use and their traffic through data centers like the ones we own and mobile networks like the ones we own, right?. There's a bunch of the capital in the portfolio tied up in exactly that trend. So -- that's a pretty big one, I would say. And the last one would be probably CapEx. From a business perspective, a lot of our value relies on building new stuff. And so the ability of our teams to manage CapEx builds within this environment and continue to develop at attractive rates of return is really important. And it's been pleasing through one of the most difficult periods. We'll have experienced in our provisional careers that but for the most part, the teams have formed really well from that perspective. Big opportunities, probably talked a lot about those already, but I think accelerations in data centers and renewables and being able to address that in a period where not everyone else can feels like a really big opportunity for us. And potentially, there's a big opportunity, again, if we maintain that access to growth capital to get our foot on critical infrastructure for the future at a time when perhaps we don't really have any right to put Console Connect in that category. But hopefully, there are others that emerge in that space as well.

And perhaps I'd just add that as well as spending a lot of time on strategy and performance against our key milestones. The Infratil Board also is very focused on risks and compliance obligations. Yesterday, we had our order and risk committee and examined in detail the heat maps from not just the Infratil business, but also down to the portfolio entity businesses .and also spent quite a bit of time discussing the impact of the required sustainability reporting and what that's going to do to our risk profiles and just making sure that we do have appropriate mitigants in reporting processes in place. So thank you. Next question.

There are no more questions. Thanks, Alison.

Okay. Great. Well, thank you for that. So we will now move to the formal part of the meeting. My fellow directors and I are going to -- sorry, we intend to vote all our discretionary proxies we've received and for which we are permitted to cast the vote in favor of the resolutions as set out in the notice of meeting. And I'll just remind shareholders of the voting restrictions, which are outlined in detail in your notice of meeting. And note that even though a voting restriction may apply, the person may vote as a proxy or voting representative for a person who is qualified to vote on resolution 3, 4 or 5 in accordance with that person's express instructions. And for those of you in the room, you should have received your voting card when you registered, but please do put up your hand if you haven't got a voting card and someone will come and assist you. Each resolution set out in the notice of meeting is to be considered as an ordinary resolution and must be approved by a simple majority of the eligible votes cast by shareholders. The first set of resolutions for shareholders to consider is the election of directors. The listing rules require that directors must not hold office without reelection past the 3rd Annual Meeting following the director's appointment or 3 years, whichever is longer. So accordingly, we have Peter Springford retiring and being eligible offering himself for reelection. In addition, as Anne Urlwin was appointed by the Board following the 2022 Annual Meeting and is also required to retire and stand for election at this meeting. So Resolution 1. The first resolution is for the reelection of Peter Springford as a Director. As I said, Peter is retiring by rotation and is putting himself forward for reelection, and the Board unanimously supports his reelection. Peter's credentials are outlined in your notice of meeting. And I'd just like to now invite Peter to address the meeting.

[Foreign Language] Good afternoon, ladies and gentlemen. I've been an Independent Director of your company for nearly 70 years and have enjoyed the challenges and all the things that have been accomplished during that time. We're very fortunate to have a small, diverse, hard-working Board to support the high-performing management team from Morrison & Co. And I'm happy to add to diversity certainly in terms of age. Since I was last elected, we've invested in renewables in Asia and Europe, digital imaging in New Zealand and Australia, data centers in the U.K., and that's in addition to the top-up of 100% of One New Zealand. And subject to regulators, our exciting investment in data connectivity, Console Connect. Some of the highlights for me include our fight to resist the takeover of maneuvers from Aussie Super and the tweaks we've made to the management agreement. Next week, I retire from my other public company commitment as a Director of Zespri, but I am still a shareholder and Director in a number of smaller private companies. As you might remember, my previous experience includes working internationally and being involved in capital-intensive industries. Our Chair public companies in New Zealand, Australia, Hong Kong and Singapore. I know that many investors are long-term investors looking for opportunities in businesses which are sustainable in how they operate, not just in the industries they're in, but also in the social and environmental commitments. And that is supported by a vision to invest in ideas that matter. Infratil benefits from this focus and I believe this will contribute to us all as shareholders continue to experience excellent returns. Finally, I thank my fellow directors for encouraging me to seek reelection. And I thank you for this opportunity to seek your support for my election to the Infratil Board for a third term to continue to represent your interests. Thank you very much.

Thank you, Peter. I now propose that Peter Springford be reelected as a Director of the company. Are there any matters or discussion concerning this motion? I can't see any questions in the room. Mark, are there any questions online?

There are no questions, Alison.

Great. Thank you. So please mark your voting cards in the way you wish to vote by ticking for against or abstain next to Resolution 1 on the voting card. [Voting]

So let's move to Resolution 2. Resolution 2 is for the election of Anne Urlwin as a director and is required to retire at this meeting and is putting herself forward for election. The Board unanimously supports her election and Anne's credentials are outlined in your notice of meeting. So I'd like to now invite Anne to address the meeting.

My name is Anne Urlwin, and it's a real pleasure to be here today with you at my first Infratil Annual Shareholders' Meeting. I joined the Infratil Board earlier this year as an independent director and have chaired the Audit and Risk Committee since that time. I put myself forward for election on the basis that I believe I can make a positive contribution to Infratil. I feel that I have the relevant skills appropriate experience and importantly, the capacity to help Infratil achieve its many goals and objectives. A bit of background about me. My executive and management background is as a chartered accountant and an executive in finance and risk and of course, in governance. I have been very, very fortunate to have had governance roles and met with many high-performing New Zealand companies, including Summerset Group Holdings, Tilt Renewables, Chorus and Meridian Energy. My nonlisted company governance experience includes as a former Director of Queenstown Airport and as Chair of National Commercial Construction Group, Naylor Love. I am currently the Chair Elect of Precinct Properties, the Audit Committee Chair of Vector and Chair of the Safety and Sustainability Committee of Ventia. Many of which are very relevant to Infratil's diverse portfolio. I have a passion for sustainability and its focus on long-term value creation meeting society's expectations for sustaining our natural capital, our environment. Our social and human capital with thriving communities and safe healthy and engaged top teams of top talent and of course, our physical and financial capital. And physical capital includes resilient and sustainable infrastructure. And Infratil's portfolio focus on many aspects of that infrastructure, be it energy, digital, health as it invests in ideas that matter. Sustainability is a key component of Infratil's social license to operate and access to capital to deliver long-term value to you as investors. It was a thrill and a privilege to be appointed to the Infratil Board earlier this year, and I humbly seek your support for my election. I look forward to representing you and thank you for the opportunity to address you today. I'm certainly happy to answer any questions you may have of me, and I look forward to meeting many of you here today. Thank you.

Thank you, Anne. I now propose that Anne Urlwin be elected as a Director of Infratil. Are there any matters for discussion or questions concerning this motion? I can't see any in the room. So Mark, can I check if there are any questions online?

Yes, we have a question from Barry Lindsey for Anne. I just wondered whether you plan to become a shareholder in Infratil noting that all your fellow directors are existing shareholders?

Yes, I can answer that. I did have the opportunity to participate in the recent equity raise. So absolutely pleased to now be a shareholder of Infratil.

Thanks, Anne. Are there any other questions, Mark?

No other question.

Right. Thank you. So please mark your voting card in the way you wish to vote by ticking for, against or abstain next to resolution 2 on the voting card. [Voting]

Resolution 3. Payment of the FY 2022 incentive fee by issuing shares. So Resolution 3 is to provide the Board with the option to pay all or part of the third installment of the FY 2022 annual incentive fee, which could be payable in May 2024, by issuing shares to Morrison & Co instead of paying cash. Resolution 3 is not seeking shareholder approval to pay the fee. The fee if payable is an existing obligation under our management agreement. But what the resolution deals with is how Infratil pays the fee. So at present, if the fees become payable, they can only be paid in cash. However, if Resolution 3 is passed, the Board has the option to pay some or all of the fee using Infratil shares as the Board chooses to do so. And if the Board chooses to do that, the price at which the shares are going to be issued as 98% of the average market price at the time. Now we don't know today if the Board would exercise the option to pay the fee by having Infratil issue shares. That's a decision that the Board will need to make at the time based on what the Board believes is in the best interest of Infratil and its shareholders having regard to market conditions and import circumstances at that time. Are there any matters for discussion or questions concerning this motion? Mark, can I check if there are any questions online.

There are no questions online.

Great. Thank you. So please mark your voting cards in the way you wish to vote by ticking for, against or abstain next to Resolution 3 on the voting card. [Voting]

Resolution 4, very similar. This is for the payment of the FY '23 incentive fee by issuing shares. This resolution is to provide the Board with the option to pay all or part of the second installment of the FY 2023 annual incentive fee which again, could be payable in May 2024 by issuing shares to Morrison & Co instead of paying cash. And as with Resolution 3, Resolution 4 is not seeking shareholder approval to pay the fee. The fee is an existing obligation under the management agreement. But what the resolution deals with is how we pay the fee. Similarly, we do not know today if the Board would exercise the option to pay the fee by having Infratil issue shares. That is a decision that the Board will need to make at that time. Are there any matters or questions concerning this motion? Mark can I check if there's anything online.

There are no questions online.

Great. Thank you. So please mark your voting cards in the way that you wish to vote by ticking for, against or abstain next to Resolution 4 on the voting card. [Voting]

Resolution 5. Director fees. Resolution 5 is to increase the maximum aggregate remuneration pool available for payment to all directors for each financial year commencing on or after the 1st of April 2023 from $1,329,375 to $1,525,500 per annum plus GST or VAT as appropriate, which will be divided among the directors as the Board determines. Are there any questions for the Board concerning this motion? Mark, can I check if there are any questions online?

There are no online questions also.

Thank you. So please mark your voting cards in the way you wish to vote by ticking for, against or abstain next to Resolution 5 on your voting card. [Voting]

Final resolution, Resolution 6, the auditor's remuneration. So this resolution for shareholders to consider is the remuneration of Infratil's auditor, KPMG. KPMG are automatically reappointed as auditors pursuant to Section 270 of the Companies Act 1993. However, the meeting is required to authorize directors to set the audit fee, and I now propose that directors are authorized to fix the remuneration of the auditor. Are there any questions for the Board concerning this motion? Mark, can I check if there are any questions online.

No questions. Thanks.

Great. Thank you. So again, please mark your voting cards by ticking for, against or abstain next to resolution 6 on your voting card. [Voting]

So ladies and gentlemen, our registry, Link Market Services is going to move through the room with ballot boxes to collect your voting cards. And then we would love you to join us for refreshments, if you're here in the room, those of you online, I'm sorry, you missed out. But this concludes the business of the meeting. Thank you so much for your attendance. We will be announcing the results of the poll and closing the meeting through the market later today or tomorrow. [Foreign Language]. Thank you.