Infratil Limited (IFT) Earnings Call Transcript & Summary

[Audio Gap] given the option to join today's meeting in person or online. And in addition to those in the room today, I'm very pleased to welcome those who are participating online through our virtual meeting platform provided by our registrar, MUFG Pension & Market Services. For those of you online, I'd like to also note that you are eligible to submit questions through the meeting platform. In Slide 3 of the presentation is a picture of the virtual platform with the arrow showing where to click to get a voting card and how to ask a question. And if you need any help, you can also call the number displayed in the blue bar at the top of the platform. I also advise the meeting that the members of the press and non-shareholders may be present. At the completion of the meeting, I invite those of you who are here in the room today to join Directors for refreshments. Before progressing on to the business of the meeting, I'd like to introduce you to your Directors. I'm Alison Gerry. I'm an Independent Director, the Chair of the Board and a member of the Audit and Risk, the Nomination and Remuneration Committee, which we call the NORMS 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. Jason is seeking reelection at today's meeting. Paul Gough joins us from London and is an Independent Director and a member of the NORMS Committee and the MEC and Paul is also seeking reelection at today's meeting. Peter Springford is an Independent Director and a member of the MEC. Kirsty Mactaggart is an Independent Director and Kirsty is Chair of the Management Engagement Committee and a member of the Audit and Risk Committee. Andrew Clark joins us from Melbourne. Andrew is an Independent Director and a member of the Audit and Risk Committee and the MEC. Anne Urlwin is an Independent Director and Anne is the Chair of the Audit and Risk Committee and a member of the MEC. And we also have Andrew Carroll, our Chief Financial Officer; Matt Ross, our Deputy Financial Officer; and Brendan Kevany, our Company Secretary in the room today. Gavin Silva and Ed Louden join us from KPMG and are our auditors. And in addition to your Infratil Directors, we also have with us Directors and Managers from our businesses here today. So, we have Peter Coman for Qscan, RHCNZ and RetireAustralia; Phillippa Harford for One NZ and Manawa Energy; Terry McLaughlin, CEO of RHCNZ; Matt Clarke, CEO of Wellington Airport; and of course, Jason Boyes, who's Director of CDC and the Chair of Longroad Energy. Now moving to the meeting proper. As the Notice of Meeting has been sent to all shareholders, I'm going to take that as read. Proxies have been lodged by 910 shareholders holding [ 552,958,056 shares, which represents 57.21% of ordinary issued capital, excluding the treasury shares. I also advise that the Board has confirmed that the minutes of the last annual meeting of 17th of August 2023 are true and correct record of that meeting. Before progressing onto formal matters, I'd like to reflect on an incredible 30 years and to touch on a few issues from last year. 30 years of 18.8% returns per annum after taxes and fees is an incredible track record and one which the Board and the Manager are very proud of and worked very hard to uphold. In 1994, Infratil broke new ground as well as the earliest listed infrastructure funds, reshaping the landscape of investment possibilities for individual investors. Today, we remain one of the few listed infrastructure funds. Infratil's vision has seen its lead the way in identifying new forms of infrastructure, whether in renewables, data centers or diagnostic imaging. And the secret to this enviable legacy of value creation has been the consistent seeding and unlocking of value. We've achieved this by identifying and delivering on embedded options within our portfolio, making great purchase and sale decisions, establishing new businesses and structuring bilateral deals as opposed to joining in competitive processes. Our Kiwi roots, leadership and culture have allowed us to operate in an understated and humble way, quietly doing our own thing, which is why this celebration of 30 years of success feels very special. I'd now like to share a video reflecting on 30 amazing years. [Presentation]

We think that's a great video. And you may have seen some of the media coverage this week as well about Infratil's 30 years. It's been fun to reflect and reminiscence on the successful deals, the ones that got away and even the ones that weren't as successful as we had planned. Hopefully, what you've taken away from the coverage is that it's our people who are at the heart of Infratil success. People are the key, whether it's around the Board table with Morrison, the management teams and employees within the investments or our investors, service providers and customers. Having the right people and culture is a key part of what allows us to deliver outsized returns. So, looking back on FY 2024 and the period since, I'll start with the equity raise. We were again thrilled with the support we received from shareholders. The offer was oversubscribed by about 3x to 4x in the placement and a similar amount in the retail offer. We again chose to use a combination of a placement and a retail offer with a higher retail limit 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 maintain their relative shareholdings. We were also particularly pleased to see the strong post-placement performance of the share price and those shareholders who participated in the placement continued to buy additional shares. The catalyst for the equity raise was the indication of new customer demand for CDC's data centers as well as the strong thematic tailwinds, which are providing significant growth potential across the whole of the Infratil portfolio. We have a fantastic opportunity at CDC to capture the rapid growth in AI-driven data demand and are pleased to support the CDC team to continue delivering world-class data centers. We remain excited about the substantial ongoing investment opportunities in our renewables and digital connectivity platforms. And we're going to continue to maintain discipline to prioritize the highest value opportunities for our shareholders. We're also very conscious that the portfolio is now significantly weighted towards digital and renewable energy and the concentration of CDC in our portfolio is particularly high. However, this level of concentration risk is not unprecedented. When we look back over 30 years, we've had investments which have made up even a larger portion in our portfolio. However, I would like to assure shareholders that concentration risk and portfolio mix are both matters that are under constant consideration. Next, I'd like to touch on several matters which the Board has received consistent feedback from shareholders. Our request for increased levels of disclosure and improved information on independent valuations. We understand that Infratil is a complex business, and we're continuing to work on ways to make it easier for investors and analysts. We understand that the independent valuations are a useful part of this process, but they do have limitations. So, we're taking steps to provide more information so that you can understand these limitations and how the valuations have been derived. This is a journey, but we agree we have got more to do. I'm proud to chair a high-functioning and well-balanced Board. We have strong capabilities and skills around the Board table and consistently challenge ourselves to make sure we're making the best decisions on behalf of the shareholders we represent. I'm also very pleased to be able to report that our Manager, Morrison, continues to perform strongly. There is healthy tension and constructive challenge between Morrison and Infratil, but we work well together. Shortly, we will come on to the formal part of the meeting, where I will cover the reelection of Paul Gough and Jason Boyes. Paul has been a Director for over 11 years. He brings a wealth of experience and knowledge to the Board table with his private equity experience being particularly relevant. Paul was also a part of the Board subcommittee that secured the positive changes to the management agreement that the Board and Morrison agreed last year. As a long-term investor, we think it's very important for Infratil that the Board has the right mix of Directors, including some long tenured Directors with strong institutional knowledge. Jason is a Morrison Partner and Infratil CEO and leads the management of Infratil. The Board values the direct involvement of the CEO in our decision-making and given Infratil's management model, we believe, having Jason as a Director bolsters the alignment between Morrison and Infratil. And as I said before, Jason is also a Director of CDC and Longroad Energy. I wanted to also mention that while this is our formal annual meeting, it's not the only time we meet shareholders. And in addition to normal investor and shareholder relation activities, Infratil remains one of the few NZX listed issuers that undertakes an annual retail roadshow. And this year, the usual format of presentations and Q&A ran across 17 meetings in 16 cities and towns across the length of New Zealand over a 4-week period and over 1,800 shareholders attended, which was fantastic. I'd like to conclude by reiterating my key message from previous years. This is why we've succeeded over the last 30 years and will continue to deliver for the next 30 years by investing in ideas that matter through consistency of approach, discipline and a continued focus on execution. So, I'd like to now hand over to Jason to present our Chief Executive report.

Thank you, Alison, and [Foreign Language], good to see everybody here today. I'm still thinking about the video to be honest. The -- where to start. So, the 30 years, yes. Amazing to get to 30 years old, obviously. I think I couldn't add too much to Alison said, other than to thank everybody who's been with us on the journey along the way, shareholders, some of whom are in the room. Obviously, management teams and all the companies that actually met, I can see in the front row do all the hard work. And everyone who has contributed really to the journey along the way. When you think of it beginning with a visionary like Lloyd, the sort of master of option creation in Marko and then the Independent Directors with their constructive feedback that we receive who've been along the way. There's a lot to be proud of. Particularly that track record, I think, is something we're incredibly proud of, annually 20% over the total period of time is a really proud legacy that we're all incredibly focused on ensuring is honored and continues. And we believe there's an exciting future ahead as well. We think -- so starting slightly mundane after that video in some ways with FY '24, I think there was no exception as we talked about at the annual results. And it's always a little bit of a mix in these annual meetings of looking back, but updating on what the outlook really is since we last spoke to you in May. Focusing on FY '24, the highlights for me anyway were the strong operating performance out of the companies. We managed to come in a little bit above guidance and it was reasonably broad-based with strong performances from CDC, Wellington Airport and One NZ. There was also quite a lot of reinvestment for future growth, which is exactly how those results are achieved. You invest in 1 year and the results come in subsequent years. And that was split pretty much evenly between new investment by the holding company, Infratil, and investment by the portfolio companies. So, you saw -- I think it's about $2 billion was invested at the Infratil level and most of that obviously was the acquisition of the other half of One NZ for which we raised money. But there was almost an equal amount reinvested by the portfolio companies about $1.7 billion, I think, of CapEx in total in the end, most of which is funded by themselves off their own balance sheets or out of their own earnings. And that's really what lays the groundwork for future growth that we see ahead. That level of investment is actually continuing into this year, certainly at the portfolio company level. We're not doing another one that I know of just yet. So that's sort of how it works to give you a feel for it and it was a strong effort, I think, last year that's going to lay the groundwork for growth in the future. The main, I think, event since the annual results that if you say rule a line under last year with that very high-level summary, the main event since then has been the equity raise, obviously, that Alison mentioned, but kind of more fundamentally, the incredible acceleration of growth that CDC saw even since the annual result, which triggered the need for that equity raise in our mind. And with the market volatility that happens since then, every day we wake up, I think we're thankful that, that is done and behind us and we're set and ready to go to support what you'll hear. And a second is a continuing stream of strong demand for CDC services. We don't do equity raises lightly even though we have done 2 in the last 2 years. It's not actually what we're here to do, but we are happy that we did that one at that time. It was the right thing to do for something that extraordinary that is really happening within the portfolio. So, let me move ahead. This is a familiar picture of the portfolio. Many of you will have seen before. It shows the 4 kind of platforms or sectors that we're focused on across digital, renewables, health care and the airport. It's a blend, I guess, of core or lower-risk operating assets and then higher growth development assets for which we have higher return expectations, which is what we blend together to achieve our target return and obviously, the track record that we've mentioned before. One thing I would mention there would be Console Connect. That's one we don't yet own. That's a transaction we announced over a year ago now, actually. This is our partnership with Hong Kong Telecom to grow their international communications business. The teams are working really hard together with intent to close that transaction. But it is incredibly complex. There are many operational links that need to be built to separate out this business and many regulatory issues as well. We hope to close that before the end of the year, but it could easily slip into next year, I think I would point that out. Let's move into the portfolio companies, certainly the big ones, and this is the biggest, CDC, as we've mentioned. Everybody in the room will know and online, this has experienced incredibly strong demand from its customers for new build, essentially driven by their desire to build out their infrastructure for AI services and applications they want to provide to their customers. So, last year was a record contracting year. We signed over 200 megawatts of contracts. That includes reservations and they commenced construction of about 8 new data centers. And you can see at the moment on that slide, we have nearly 400 megawatts of data centers under construction. To put that into context. Before we started all that, we had 268 I think, megawatts of data centers. So you're sort of building the business again over the next 3 or 4 years that's taken Greg 15 years to get to where he's got to. So, an incredible acceleration. We also deepened our pipeline. So that's our ability to build data centers in the future. Usually, that looks like a plot of land that has access to power. And we announced around the same time as the equity raise, this new campus in Sydney that we call Marsden Park that is capable of taking over 700 megawatts of capacity for data centers. That's actually over 6 buildings. So, it's not one huge strip mall or anything. It's a lot of buildings that can be built in series. To give you a sense of that, I think T-wise, total capacity on the electricity grid is 540 megawatts, some might correct me, but 720 is like a T-wise and a bit, right? That's a huge amount of capacity that we expect to build over the next 5 to 10 years. So, that's a long-term stream of reinvestment, which would come with earnings after it as well. The big news that led us to then do the equity raise was that we were in advanced negotiations for this more than 400 megawatts of capacity. That's obviously a huge number, if 200 was a record last year, then we suddenly we were talking about 400 this year in quite a short space of time. Those negotiations are progressing well. We expect to sign the majority of those into contracts before our half year results announcement in November. So, look out for that with the balance to follow. And then sort of more generally, the strong demand that triggered that growth has continued with the company now in discussions for significant additional capacity over and above what I already talked about that we expect to talk about in future years as well. So, it doesn't look like letting up for CDC just at the moment and we feel incredibly positive about it. So, I mean that's on CDC just for now. One NZ is our second biggest asset and one we're incredibly proud of as well. If you look back to last year, we were happy with its operating performance is quite solid, particularly given how the macro environment in New Zealand had softened quite quickly in the second half of the year to come in with double-digit growth. We had reinvested some of that for the future. So, our outlook for this year is flat overall. But I'm happy to report that the performance to date this year, despite those soft conditions is still solid with -- particularly in areas like consumer mobile, which is a huge part of that business and in wholesale. So, we feel good about what the team are managing to achieve in the environment there as well. Our key strategic priorities there are on track as well and we've listed them out here or the high-level ones here. We are looking to separate the fiber business as we've talked about and that was launched, I think, a week or 2 ago called EonFibre, a little play on One, not on Elon. So, that is out there now. That's a way of increasing the utilization and the focus on that business, which is buried within a mobile business. And we have an advantage over our competitors there because we have a huge fiber footprint, that 11,000 kilometers that is mentioned here. So that's on track. The SpaceX partnership is something we're quite excited about and the team are looking forward to launching those services when they're ready. And then a loyalty scheme that they've called Wallet, which is another important initiative for us to run as well. Essentially, if you look at all those things together, what they're doing is driving the simplification and cost out that we have talked about for a long time with this business and telcos all around the world have talked about, right, to drive out cost and to increase customer experience and so improve your yield. So, with the Wallet loyalty scheme, for example, you can simplify the number of plans you have down, you can move them to a much more efficient modern IT platform. And hopefully, through that, you get a lot less customer queries and complaints because the system is so much more modern and so much more simple for people to interact with. So that's kind of a first key step in getting to where we want to on that. SpaceX, for example, we have high hopes on and we think that and the EonFibre idea will help us create a differentiated enterprise offering that is not able to be replicated easily by our competitors because they are ours, again, to drive that margin improvement and to hit our target return for this asset that we talked about when we made the investment. So, happy to report those are all on track and those are things you should be asking us to continue to report back on as we stand up in front of you again. The last point to make here, I think, is that we're not making any compromises on the network. It's been -- it's won Best in Test again for the third year running, which is a fantastic achievement from the team in a difficult environment. And you can see that we've continued to kind of catch up investment, I think we've talked about in the past from things that haven't been done with those network upgrades. Last, the big 3, I think, is Longroad. So, this is a good one. This is a picture of the new battery Sun Streams 3. I saw a picture of the big battery in Melbourne. I think it's one of those blocks. So, this is an absolute enormous battery. It's 215 megawatts for 4 hours, so 860 megawatt hours roughly. That piece cost about USD 400 million, USD 500 million sitting in the desert is pretty cool. It does work. I'm happy to report. So that's what a big battery looks like anyway in the middle of a desert. The pace of development there is continuing to be incredibly quick. And if you remember, zooming out our ambition for this business really is to try and on average out to 2027 develop about 1.5 gigawatts per annum of projects. We didn't quite hit that last year. I think we got to 1.1 gigawatts. And we're on track to sign the revenue agreements for about 1.6 gigawatts, which was our target for this year by the end of the year. Unfortunately, 400 megawatts of that won't reach financial close, we think, until next year. So, we're going to be a little bit behind this year as well, but it's good to know the revenue arrangements are in place. And I'm happy to say that we're sort of above our target already for the revenue arrangements for what we hope to develop next year. I think we've signed or in negotiation about 1.6 gigawatts. So, you can sort of see there are ways that we will be on track. Maybe we'll be a little bit behind. We can catch up. We've got about another 1 gigawatts of options that could hit for next year that we're still working on. All in all, we feel pretty positive about hitting our target, but it's not in the bag, I would say. The U.S. elections is another kind of source of potential volatility for this one. That could result in changes to the environment for investing in renewables, particularly that signature piece of legislation Inflation Reduction Act over there. We think, overall, that shouldn't have a huge impact on us. It will be disruptive in the short term as people reorient whatever the new environment is. But when you stand back, electricity demand growth in the U.S. is incredibly strong because of all the things that are going on in their economy, including their version of data centers, right, which is Dwarfs, what we're talking about is CDC. So, we see the demand for the electricity is good. And in general, PPA prices and development margins are quite good as well. So, we still remain very positive about this investment over the medium term, no matter what happens in November. We also continue to see attractive opportunities to buy projects at very attractive returns, better than we can even develop at as smaller developers look to optimize their development portfolios and we're acquiring quite a large one that fits that bill as well. And that will complement our own greenfield development activity and is part of why we feel confident that we can hit our medium-term target there as well. We expect to commit some more equity to that business as we talked about at the full year and the equity raise to get us through to that sort of '26, '27 spot. Those are the big ones and then maybe just skip through some of the other ones. In the renewable energy space, this is a big business line for us. And although Longroad is the biggest one based in the U.S., very big market, our approach really is to diversify our exposure by investing in multiple markets so that if something terrible does happen in the U.S. and that market is, for some reason, closed to renewable investment, we have many other options around the world in markets that might be experiencing a totally different situation. And in that camp, I would probably focus on Gurin Energy, which is based in Southeast Asia. And we had talked at the Investor Day earlier this year and the full year, how they're working on a huge solar project that would import power into Singapore, which they have received conditional approval to build from the Singapore government. That is an enormous project. You've got the statistics there; 2 gigawatts of panels and 4.5 gigawatt hour battery. So, a multiple of Longroad projects sort of a couple of years of development at very least all in one head. The news here is that, that development has continued to progress in the way that we're happy with and they're continuing to target financial close at the end of 2026. I think there might be a regulatory update that we might expect before the half year that we'll update you on then. So that's good news. And again, quite uncorrelated from whatever might be happening in the U.S. or Europe where Galileo is. Worth mentioning Manawa as well. We're very happy with the result they printed last year. In the end, we thought an improved dividend and good focus on cost and reinvestment. We were happy with. Obviously, they weren't unharmed by the recent market volatility as they announced. We're happy with how the team reacted with that generally. We had a good session with them on that yesterday. And we hope to hear some updates from them. I think they have the AGM in a couple of weeks about how they've managed that hopefully towards the lower end of the guidance upgrade in terms of the impact of that going forward. I think, we'll move on from renewables to diagnostic imaging. Again, last year, very strong performance really with double-digit growth, obviously turning around from some difficulties, depending on which market you're talking about. There's a lot of nuances between these 2 businesses. Remember, RHCNZ is in New Zealand, Qscan is in Australia. But in general, we're quite happy with the overall performance of the businesses. A lot of focus on operations and efficiency and productivity. As those businesses experienced quite severe inflation like a lot of others in the health care sector through the last couple of years, but they're finding their way out. Investments in AI technologies across both of them to enhance workflow efficiency to benefit your customers in the way that they consume your services in a way that's convenient for them and also optimizes our efficiency because what that then enables is obviously a more sustainable business, but also our ability to reinvest in new clinics, which is really the heart of why we are in this space. And so you see the clinics were able to open within RHCNZ, the New Zealand business, focusing on underserved communities that haven't had access to these services, certainly not at the scale and the modern services that RHCNZ can provide, including Whangarei, they have 2 more clinics they've opened since then, and I think they're working on up to another 6 more around the country that will drop over the next couple of years to give you a sense of the investment that's happening there and what we're actually trying to achieve, right, and making these services more available across New Zealand. Within Qscan, they have their own version of that. They've actually done a lot of opening of new clinics before we bought it or just as we bought it. Their focus now is on digging into their existing network and finding out which ones to expand, which ones could take more investment, more modern facilities and you could earn yield off. So that's their approach to let brownfield development and that kind of yield optimization, which is a horrible term. But remember, what we're trying to do is create a sustainable business that they can reinvest. The incremental returns on the clinic are actually very attractive certainly towards the top end of our target range. So, it starts to look if you really fuzz your eyes not unlike renewable energy business where you take your cash and reinvest it in your teams plus returns as you build out that network, which we're very happy to do. The clinic gives you a good sense of that. Wellington Airport, a nice picture of it. The big news from a shareholder perspective there really was then finishing their 5-year repricing, which they do under the regulatory regime. We are very happy with the way that was conducted by our team, but also in partnership with our large customers put in place a new 5-year pricing regime that gets phased in over the 5-year pricing period. And you're seeing the sort of first results of that in the guidance that the team put out this year with about a 20% uplift in EBITDA. There's a little bit of pricing going forward in washing up some under-earning in the previous period that we agreed to while COVID was around and the way it was in those days. On the passenger side, good growth on the international side, still bouncing back, obviously. But it's not immune to the domestic conditions we're all living in. Domestic passenger numbers are down year-to-date and there are capacity issues as well. But for an airport investment, you might be exposed to those in the short term, depending on how passengers turn up compared to your forecast. But over the long term, you can generally smooth that out. So there's not so much of an issue for us, but I think it should be recognized, obviously, a big issue for our commercial tenants in and around the airport. What all that means with the new pricing in place, a very good earnings outlook is that the airport can now restart the development of the airport and around the precinct in accordance with that 2040 Master Plan that's been out there for a while. And so you'll see when you go out there that work on the apron. So, look at that lovely green golf course, the bit on the right won't be so green for too long. That development will start. There's a lot of resilience work that we'd all like to be continued to be done at the airport in and around the seaboard, which, again, all these things now enable, which is good for us and good for our customers as well. I should mention the council, they're still considering whether to proceed with the sale. I don't want to get anywhere near that until there's a real decision would be kind of our position, but obviously, we watch with interest and they're an important partner to us. Lastly for me on sustainability. You would have seen quite a lot of activity from us over the last couple of years. We've been focusing on sustainability-related metrics for a long time, but now we're really getting quite sharp into the point on a lot of them. The main ones, I think I would mention here would be our latest carbon climate-related disclosures, which was published. It was quite a big lift. And that's obviously getting ourselves ready and in line with the climate reporting standards that will become mandatory from next year. So, you'll see these from lots of companies going forward. That sees a couple of things that new report. So one, we're measuring our carbon footprint, which for Infratil because at the headco level, it's really the Board and our travel. It's really mostly about the emissions we financed, right? So that the things that our companies do that we're investing in. And if you wanted to get a kind of a feel for what your investment in Infratil finance is by way of carbon emissions. When you look at that report and do the math, about $1 million invested in Infratil would be equivalent to financing emissions from a Toyota Camry for about a year. So -- and I think it might be a hybrid as well. But anyway, just to give you a sense that it's actually doing pretty well, I think, as an investment. And our target is obviously to make that a lot better over time. So, you should watch that. The other new disclosures or evolving disclosures in that report are around our exposure to transition and physical climate risks. And this year, we've had quite a strong go at quantifying some of those risks and that will develop as well. But what it sort of says is, as you might expect, in an organized and decisive response, which if you're really optimistic, you think might happen to climate change. Obviously, we do best in that and so almost everyone, I would say. But kind of more interestingly, in some ways is the work that we've done on our physical transition risk. So, what is exposed to weather events. What is going to experience severe heat, fires, floods, those sorts of things. And what we've learned from doing quite a lot of work on that is that our diversified portfolio is diversified in a number of ways, but particularly geographically, is quite helpful in limiting the size of the impact you could experience from a single climate-related event. So, I think our analysis to date suggests that even in the worst case physical transition scenario in 2050, about 5% of our assets by value would be exposed to a severe climate risk. So that analysis will develop, obviously, we're learning how to do that. But it's sort of intuitive, right, when you think about how it's split around our portfolio is. So, let me conclude. We think our future is bright as the sunny Arizona day that you're seeing in front of you. Clearly, there's a fantastic opportunity at CDC that Alison has referred to. I don't need to bang on about too much. But there are actually substantial ongoing investment opportunities across all our platforms, as hopefully you've heard. We now have the capacity to address those as we think we should to optimize shareholder outcomes with the equity raise and the capacity we've talked about there. But we're closely monitoring the economic environment. There's a lot of volatility right, and we're all experiencing it here in New Zealand. So, we will definitely maintain discipline and make sure risks like the ones Alison mentioned around CDC and Inflation Reduction Act in Longroad receive the proper attention and managed properly. Our earnings outlook for FY '25 at this early stage remains consistent with the recent guidance we announced. And when we reflect on the past 30 years, we're very proud of our returns and solid growth we've delivered to our shareholders. Investment in our capability continues, which as Alison alluded to, as everything, it looks like bricks and mortar, but actually people build these things. And the Morrison team is now over 200 across all our key markets with operational and investment experience to drive our future growth. And on that front, I should mention also that during the year, Phillippa Harford actually stood down as our long-serving CFO, 8 years in that role and what a great run she had. So, thank you for that. And it's amazing to have her obviously leading the One NZ team and working with other companies as well. But in terms of investment capability, we're happy to welcome Andy Carroll as well. In his stead, who brings 30 years of experience in finance and operational capability as well, particularly in telecommunications, which is a big focus for us. So, there's a little vignette of the capability that's being built. I'll finish then, happy to take questions later.

Thank you, Jason. So, this is now an opportunity for discussion of the annual report for the year-ending 31 March 2024. And I'll first take questions or comments from those of you in the room and then we'll go to those that are submitted online. And when there is a question, it may be that I call on one of the Directors or management reps present to provide a response. And for the questions online, management are going to collect the questions and if there are multiple questions, we will aggregate them. So, if you wish to comment or raise a question in the room, would you also mind just waiting for a microphone to be brought to you and then clearly stating your name. So, happy to take questions in the room

Okay. fantastic. I mean it's certainly a very comprehensive update from Jason and a great video. [ Lou ] has offered to do a 1994 playlist of music. We could always do that if we need to fill in time. But how about we see if there are any questions online. Mark, are there any questions that are submitted?

Sorry. Thanks, Alison. Yes, we've got some good questions coming through. And as you say, some of them I'll aggregate because there some common ones. But the first one is from [ Stephen Kelleher ], and that's around if we can give a status or an update on the former New Zealand bus depot redevelopment in downtown Auckland.

Great. Okay. Well, I'm going to hand this one to Peter Coman as Peter has spent a lot of time working with New Zealand Bus. So, Peter, here is a microphone. And I think we'd love you to come out to the front and then you can look back at the camera and the people online can see you, too.

Thanks, Alison. Hopefully, this is an okay spot. So, the bus depot site in Auckland in Halsey Street, it's performing well. It's delivering a stable income yield to Infratil from the current improvements that we have. Most of the sites are occupied by NZ Bus for a bus depot. But we did develop several years ago, some of the site for a hotel and retail. That is nearly completely leased and is performing very well, particularly the car park down at Wynyard where there is very few cars or car parks available. We don't have any plans at the moment for further development of that site. And we will think about the options for divesting that property and time when the capital market conditions improve. Thank you.

Great. Thanks, Peter. So Mark, are there any more questions or comments online?

Yes, we've got a question from [ Jeffrey Gold ]. What are Infratil's plans with respect to Wellington Airport overall and specifically, Wellington City Council's plan to divest its shareholding?

I think we actually covered that in Jason's presentation. I think Jason said that we're really just watching the council process with interest, but anything further, Jason.

No.

No? Time will tell. Thanks, Mark. Any more questions?

There's 2 or 3 questions around the incentive fee basically around the justification on why are they so high?

Great. I love getting questions about the incentive fee because we really like paying performance fees to our Manager, Morrison, because that means that they have performed. And if you remember, we pay incentive fees only on international assets and only if there is performance above our hurdle rate of 12%. Above the 12% hurdle, shareholders retain 80% of returns, but it is 20% of the return is paid to Morrison as a performance fee. And if you remember, last year, we updated you on some of the positive changes we made to the management agreement. We feel -- even though it is a management agreement that dates back to 1994 and probably wouldn't be one that you would put in place today, if you're starting with a fresh piece of paper, but we really like the fact that we don't pay performance fees on New Zealand assets. We just pay them on international assets. And we have what we think is a relatively high hurdle rate of 12%. Jason, anything further to add?

No, I think if you were outperforming you would have a different conversation.

Yes, that's right. So, we weren't paying performance fees. I think that is a signal that Infratil would have to have a tough conversation with our Manager. And also just remember, it is quite complicated. But when we calculate the annual performance fee, we also pay that over a 3-year period. So, I think that answers that question. Mark, are there any other questions?

Yes, a few questions around data centers and how power intensive they are and a question around how will Infratil obtain reliable power to run these data centers. And will this power come from renewable resources.

Look, I think it's -- we love having Jason sitting as a Director on the CDC Board and so I think I'll pass this question to him.

Yes, it's a very good question -- it's a very good question. Thank you. I think when we -- if you look at the way the data center business has moved over time, a lot of it has been about sort of connectivity, but it's very -- and then there was a period very recently where it was availability of chips, the modern chips people needed was a shortage. But now or certainly very much in 2 or 3 years' time, it will be 100% of power, availability of power. And so a huge part of CDCs, might think of it as defensive moat or certainly what it tries to achieve is finding sites that will have that power. And so, I mentioned Marsden Park before, 720 megawatts, we're working on that site for nearly 3 years. So, a lot of, nearly 3 years, right? So, you don't just find these sites. And yes, I think I will get power. You spent heck of a lot of time working on these sites, working on the grid connection and figuring out whether you'll be able to connect and get the power you want. So that's a huge part of the development before you even start really building. I think it's going to become the case that potentially developing renewable energy or certainly having partnerships that will enable you to do that could become a core part of the business model for a data center operator. And with our Morrison hats on and certainly we talk about it at the Infratil Board, when we look at data center businesses in other countries, which we do because it's an interesting sector for us, in places like Asia, parts of the U.S., developers are bringing their data centers with the power project stapled to it, if you like, because they know that's going to be a key component for that. So, I would expect that trend to continue. It's not there in Australia yet, but it will come. Luckily, from an Infratil perspective and I think for CDC, we obviously have a wealth of experience across our group in renewable energy development. So, we feel well placed to build or contribute that capability or create those partnerships if we need to and that will be a focus. So, I think that's a trend to watch over time and something the CDC Board and the CDC management team are very aware of. From a sort of renewable energy perspective, it will need to be renewable on a time frame, right? Because from an Infratil perspective, we have committed to Science Based Target Initiatives. So, we need to achieve those. Our companies having committed to those targets themselves by, I think, 2030 and CDC being our biggest investment will need to have a plan for doing that as well. So in New Zealand, that's not such an issue most of the time and we can procure certified green power because of our natural advantages. In places like New South Wales, renewables will need to be developed to enable us to get to that target for there as well. But fundamentally, in Australia, they have incredibly good resource. Most of their issues are transmission, which will alleviate itself over time. So, we feel confident that we can hit those targets in that time frame as well. Yes.

Great. Thanks, Jason. Mark, any more questions from the online audience?

So, we have a question from shareholders, [ Donald and Myra Faller ]. When can shareholders be rewarded with increased dividends in comparison to increased share value?

Yes. The Board has spent a considerable amount of time discussing our dividend. What we're trying to balance is paying dividends to shareholders or keeping that money and reinvesting it in the opportunities in our portfolio. But we are very cognitive of the fact that we also haven't had many imputation credits to attach to those dividends. And so closely watching this space. But I might hand over to Andy Carroll, our CFO, who's done quite a bit of work on future dividends.

Yes, good morning. Thanks for the question. I think you covered it very well. Thank you, Alison. Probably just one other point where dividends have been growing in nominal terms for a number of years now. So, there is modest growth in the dividend. But ultimately, the objective is to maximize total shareholder return. So, it is balancing it.

Great. And perhaps I'd just also like to encourage shareholders who might like a larger dividend is you can manufacture it that yourself. So, you could -- particularly if you're a customer of one of those low-cost platforms, share trading platforms, you could actually sell a few shares extra and generate a dividend, if you so wished. So yes, thank you. Mark, any more questions?

Yes, a question from [ Ian Johnson ] around New Zealand EU Free Trade Agreement. Does this open new possibilities for Infratil?

I think the EU NZ Free Trade Agreement is fantastic for New Zealand, but we probably don't have many businesses in our portfolio that are going to be trading and impacted by this new agreement. So, I don't see any material change to our opportunity set, but it is great from a New Zealand perspective to have these trade agreements and certainly will impact some of -- positively impact some of our New Zealand companies. Any more questions?

We have a couple of questions on One New Zealand and around the new Wallet loyalty scheme and how successful that is at the moment.

Great. And the Board had a demonstration of that at one of our recent Board meetings, but I will pass that over to Phillippa Harford, our Chair of One NZ.

Thank you, Mark. Yes, One NZ launched the Wallet scheme probably about 2 or 3 months ago. I think it's worth noting that it's a really key component of the simplification that they're undertaking. So, as you can imagine, we've talked about it before, telcos have a very, very vast almost spiderweb of technology. So, part of the Wallet idea is to help us to undertake that simplification. So, the big message really is that we're trying to get customers to move from, say, old plans to new plans. One way of us trying to do that is through this Wallet. I don't know how many of you are One NZ customers. If you are, I would encourage you to go and have a look at your Wallet. It's been rolled out quite slowly, but the idea is essentially, if you are on a really old plan, One NZ is going to talk to you and say, hey, how about you move to this new plan and as part of doing that, we're going to put a balance on your Wallet and you can use that to go and buy a new phone. So, if you think about it from a One NZ shareholder point of view, the more we can simplify our IT, the lesser it costs us to run it, the better that is for customers as well because we provide them a better customer experience. We're probably about, I would say, as I said, 3 or 4 months into a 2-year project. So, quite a bit to go yet. But I think early indications are that customers like what they see. Their platform is quite easy to use. It will do things even like tell you how much you could trade your phone and forth. So, if you're looking to buy a new phone, it will say how much if it's worth $300 or -- and then One NZ will buy that phone off you and you put that money towards a new phone. And of course, the cool thing about that is those phones are then recycled and resold. So pretty well so far, Alison. And I think it serves a number of purposes as well as trying to get that customer engagement.

Thanks, Phillippa. It sounds like a good reason to switch if you're not a One NZ customer. Mark, any further questions?

Yes, we've got a question from [ Andrew Myers ]. Infratil has very few peers in New Zealand based on performance. Who are your infrastructure investment competitors in Australia and the globe? And how you're keeping an eye on it?

Look, a very good question. So, the Infratil Board had a recent Board meeting where we delved into perhaps the secret sauce of our success, what allowed us to be successful and to deliver these fantastic returns. We want to make sure that we're learning from lessons from the past. And in that exercise, we also did some peer-comparison of other infrastructure funds to see how our performance compared. We also tried to manufacture a synthetic Infratil portfolio. If you made a group of other listed stocks and put it together, would have Infratil outperformed that synthetic composition. I personally can't remember the names of those funds. And I don't know if we do want to disclose who we were comparing our performance to. But all I really, I suppose, like to tell shareholders is that we're not sitting on our laurels. We're always trying to see who is best-in-class. Why are they best-in-class. We're pretty close, I would say. And I think it's interesting, particularly if you take a long time period, I remember the chart, which we discussed at the Board and some of the peers were neck and neck with us, but then fell off a cliff in the last sort of year, whereas our diversified portfolio did continue to perform well. But Jason, can you remember any of the names you want to comment?

Yes. I think when, there are [indiscernible], right, when you look around, particularly in the listed space, the one that's been around for a long time is a U.K. listed company called 3i Infrastructure. And that there -- the way they approach investing, particularly towards the growth end of the infrastructure sector is very similar to ours, I think. And so if you're looking for a peer that wouldn't be the worst one in the world. There's another U.K. one, it's called HICL, HSBC, that's right. That's the -- at the more core end of infrastructure, but that's a listed here as well. Yes, single-digit return type thing. But maybe I don't know if you blended the 2 together, actually you can try this maybe you get something that looks like us, but again, externally managed, but there's not 1 million. When you then do the peer comparison, the other ones we look at were things like conglomerates, when you go around the world, there are countries particularly Sweden and places in the U.S. where you have conglomerates, people that are blending assets together and essentially trying to compound returns by reinvesting cash flow either within the existing businesses or from other businesses in growth areas, targeting kind of mid-teens plus returns. They don't have an external manager. So, they're different. But yes, if you wanted to do research on conglomerates, that might be another way to compare investment approaches and the types of returns you could get for doing kind of what we're doing.

Great. Thank you. Any further questions?

So, one last question from [ Ross Carlson ]. And it's a follow-up question on CDC and whether they use solar panels on their roofs? And also do they capture water run-off at the facilities?

Which business is that?

CDC.

CDC. We don't use a lot of solar on the roof yet, but we will. It's not -- because it's so variable, it's not useful really for our customer workloads, but we think we can use it for our own corporate workloads in the office spaces with battery. So, they will do that. I don't know the question on the water run-off. But I do know that our data centers don't use water for cooling customer equipment. It is used, but it doesn't evaporate and that's the issue with some data center. Cooling technologies they rely on evaporating water to create a cooling effect. Ours all stays in a closed loop. So, once you've filled up the tanks and the data center using the same water over and over again. But I'll find out on the water.

Interesting. Great. And we have one question in the room.

Thank you, Alison. Oliver Mander from the New Zealand Shareholders Association. Just a curious question as to how the -- what is the percentage of shares that are held now by retail shareholders? And how is that evolved over the last couple of years, particularly with the equity raise structures that have occurred?

Great. Retail shareholders and particularly New Zealand retail shareholders, a very important part of our cap table. And I will get to Andy to perhaps check my math, but I think it is still in the 40s. It might be like 42% or 44%.

4-0.

4-0, 40%. It slowly is decreasing over time, but that is a very slow progress. And we're just very excited to be able to have that ongoing support from our retail shareholder base. If you remember back when we had the takeover offer from AustralianSuper, the strong support from our New Zealand Shareholders, including retail shareholders was just very pleasing to see.

Thank you, Alison.

Great. So, I don't think we have any more questions, so we can now move to the formal part of the meeting. So, my fellow Directors and I intend to vote all discretionary proxies that we've received and for which we are permitted to cast a vote in favor of the resolutions as are set out in your Notice of Meeting. I remind shareholders of the voting restrictions that are outlined in the Notice of Meeting and note that even though a voting restriction may apply, the person may act as a proxy or voting representative for a person who's qualified to vote on Resolution 3 or 4 in accordance with that person's expressed instructions. For those of you in the room, you should have received your voting card when you registered, but please put up your hand if you haven't got that 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 is to consider the reelection of Directors. The listing rules require that Directors must not hold office without reelection past their third annual meeting following the Director's appointment or 3 years, whichever is longer. So accordingly, today, we have Paul Gough and Jason Boyes retire and being eligible, offer themselves for reelection. So, if we move to Resolution 1, the first resolution is the reelection of Paul Gough as a Director. Paul is retiring by rotation and putting himself forward for reelection. Paul's credentials are outlined in the Notice of Meeting. So, I'd like to now invite Paul to address the meeting.

Thanks, Alison. Just check -- there we go. Hi, everyone. I'm Paul Gough. And as Alison mentioned, I've had the pleasure of representing you as an Independent Director of Infratil since December 2012. So, one of the longest-serving Directors up here. Over that period, I've got to witness a lot of things. Obviously, I've seen the company see some wonderful opportunities and you've heard about many of those today, but also navigate through some pretty interesting challenges and risking -- sorry, investing after all, is a pretty risky business. And that's always been done, though, with the best -- looking for the best outcome and best value for shareholders. And I'm pleased to say that the team's track record continues. From my perspective, it's probably the broadest and deepest bench of talent that I've seen since I've been on the Board of Infratil. And so that fills me with very positive thoughts in terms of how the future looks. It's obviously been a tremendous few years in terms of how the business has performed. But I'm equally, if not more excited about what the next few years have to hold for Infratil. You've heard hopefully from Alison and Jason today that we are well positioned to continue benefiting from some of the biggest ideas and megatrends that exist in the investing world today. So, it's pretty exciting stuff. I'm delighted to offer myself for reelection today. As a reminder, I'm a Kiwi that grew up in Auckland, studied down in Otago, worked in Wellington for a few years before I hit it off with my way around the world and I ended up in the U.K. So, I've been in the U.K. for 25-plus years. And for the vast majority of that time, I've been involved with the private equity business called STAR Capital. Today, I run and jointly own that business. We've invested several billion euros across Europe, often in a lot of the same sectors that Infratil looks at. And as a result of that, obviously, I've sat on the Boards of quite a few companies in similar spaces; transport, logistics, energy and other infrastructure-related businesses. So, that's sort of breadth experience, together with a fairly long career in fund management, some of the skills that I can bring, hopefully, to the Infratil role. And I'm excited, as I mentioned, as to what the next few years offer. If reelected, I remain committed to ensuring that Infratil remains agile, innovative and focused on the long-term growth and value creation for shareholders, also work to uphold the highest standards of corporate governance and make sure we're well positioned to thrive in an ever-changing market landscape. Thank you for your trust and consideration. I look forward to continuing to represent your interest as an Independent Director and fellow shareholder. Thank you.

Thank you, Paul. I now propose that Paul Gough be reelected as a Director of the company. Are there any matters for discussion or questions concerning the motion relating to Paul's election? I think we have Oliver Mander in the room.

Thank you, Alison. Paul, you've clearly been a Director of Infratil for some time and you clearly have some skills and capabilities that are really valuable to the Board. You have been on the Board for some time. How does that -- is there any indication that you can offer around how Infratil will replace your skills for the benefit of shareholders to avoid any succession risk at the time that you may choose to part from the Board?

Ultimately, that will be up to people other than me. But I think, as Alison mentioned at the start, I think the Board spends a lot of time on succession planning more generally, looking at what a good Board looks like and the mix of skills and diversity involved in that. I'm biased, of course, but I believe that having someone that has some sort of funds management and/or investing expertise is quite useful. And I'm sure there are plenty of other people that do have that expertise by the New Zealand, Australian markets or even more broadly and can also offer an international perspective. And I think we've got a runway to be able to find people like that.

And just to be clear, we do recognize the capability.

Yes. I think as a Board, we're always looking at the skills and capabilities sitting around the table and want to plan for changes. So that's a big piece of the work that we undertake each year. And we're probably going to look at that next March and just work out who still wants to be here. What are the skills, what are the gaps, what are the future requirements that we might need to have around the Board table. So, thanks for the question, Oliver. And I have another question over here.

Yes. Kevin Baker. Just a comment, Alison, rather than a question. Paul, I think you've got a few more rotations in you. And you're still looking very young. So, I don't think you should hang up your sleeves yet.

Thanks for that, Kevin. And I have been talking to institutional shareholders about how the Board thinks about tenure on the Board. And we do try to have, say, 1/3 of the Board newer, perhaps less than 4 years, have a group of Directors say, 4 to 8 years. And then I do expect to have a few Directors like Paul that may stay on the Infratil Board for quite some time because they have fantastic institutional knowledge and bring that skill base to the Board. But it is a balance and one that we look at. So, it may be that Paul tries to take out Duncan Saville's record of being on the Board for 22 years. Perhaps not. So, I think we can move to this resolution. So, if you could mark your -- I think we've got, yes, mark your voting card in the way that you wish to vote by ticking for, against or abstain next to Resolution 1. So, let's move to Resolution 2 for the reelection of Jason Boyes as a Director. Jason is required to retire at this meeting and is putting himself forward for reelection. Jason's credentials are outlined in your Notice of Meeting. And I'd now like to invite Jason to address the meeting.

Thank you, Alison. I've probably heard enough from me. But on this particular topic, it is -- I'm very happy to offer myself reelection. It is an unusual structure and for a lot of companies, right, for an executive to be on the Board. But Infratil is slightly unusual in that respect. From one perspective, this has always been the case for Infratil having the Chief Executive as a Director. For another, actually, as Paul outlined in his background is more or less the same for us. I spend most of my time on Boards of our portfolio companies working with management teams, helping them seek strategy, helping guide CEOs dealing with succession. So, being in a Board environment is actually my day job, and it feels very familiar to be in that Board environment with the Board. Alison also outlined, there is constructive friction or however, you put it, it's quite nicely put, I think, between the Manager and the Board, and that would be the case with any executive company, by the way, in that sense. But it is quite valuable, I think, for -- in a situation where the Manager is external from Infratil for the person who's leading the Managers' effort to be in the trenches, I think, with the Directors, considering the same Director's duties, considering a legal requirement, but also a very familiar feeling to be thinking about the interest of all shareholders when working in that Board mode. I think it also creates an opportunity for the Board when necessary to create a more collegial environment where we are actually all Board members speaking as fellow Directors. And so I think taking that away, when we thought about it, actually, when I became CEO, certainly, my perspective was taking those options away having learned from the master option creation himself, Marko, taking those options away, it's probably not a sensible move given the environment we're heading into, which is sort of more volatile, more exciting, but certainly more risks to be thought about every day. So that would be mine kind of summary of why I think it actually really does make sense for Infratil and certainly served it well in the past and I'm very happy to form that role. Thank you.

Great. Thank you. I now propose that Jason Boyes be reelected as a Director of Infratil. Are there matters for discussion or questions concerning this motion? Mark, are there any questions online?

There are no questions.

Great. Thank you. So, please mark your voting card in the way you wish to vote by ticking for, against, abstain next to Resolution 2 on the voting card. Resolution 3. This is to provide the Board with the option to pay all or part of the third installment of FY 2023 Annual Incentive Fee, which could be payable in May 2025 by issuing shares to Morrison instead of paying cash. Resolution 3 is not seeking shareholder approval to pay the fee. The fee is payable, is an existing obligation under the management agreement. But what the resolution deals with is how Infratil pays the fee. At present, if the fees become payable, they can only be paid in cash. Resolution 3, if passed, allows the Board to have the option to pay some or all of the fee using Infratil shares if the Board chooses to do so. And if the Board does choose to do that, the price at which the shares would be issued is 98% of the average market price at that time. We don't 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 based on what the Board believes is in the best interest of Infratil and its shareholders, having regard to market conditions and Infratil's own circumstances at that time. Are there any matters for discussion or questions concerning the motion? Mark, can I check if there are any questions online?

There are no questions.

Great. Thank you. So, please mark your voting card in the way you wish to vote again by ticking for, against, abstain next to Resolution 3. Resolution 4, very similar, is to provide the Board with the option to pay all or part of the second installment of the FY '24 Annual Incentive Fee, which could be also payable in May 2025 by issuing shares to Morrison instead of paying cash. As with Resolution 3, Resolution 4 is not seeking shareholder approval to pay the fee, the fee if payable is an existing obligation under the management agreement. But the resolution deals with how Infratil can pay that fee. Similarly, we don't know today if the Board would exercise the option to pay the fee by having Infratil issue shares. That will be a decision that the Board will need to make at that time. Are there any matters for discussion or questions concerning this motion? Mark, are there any questions online?

No questions, Alison.

Thank you. So, please mark your voting card for this resolution in the way you wish to vote by again taking for, against or abstain next to Resolution 5 (sic) [ 4 ]. So, our final resolution for shareholders to consider is Resolution 5, and it is the remuneration of Infratil's auditor, KPMG. KPMG are automatically reappointed as auditors pursuant to Section 207T of the Companies Act 1993. However, the meeting is required to authorize Directors to set the audit fee. And now I propose that the Directors are authorized to fix the remuneration of the auditor. Are there any questions for the Board concerning this motion? Mark, is there any questions online?

No questions.

Great. Thank you. So, please mark your voting card in the way you wish to vote again by ticking for, against or abstain next to Resolution 5 on your voting card. So, ladies and gentlemen, our registry, MUFG will move through the room now with ballot boxes to collect your voting cards. 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].