Infratil Limited (IFT) Earnings Call Transcript & Summary

Good afternoon, and welcome to Infratil's 32nd Annual Shareholder Meeting. I'm Alison Gerry, your Board Chair. I can confirm that a quorum of shareholders is present and declare the meeting open. The minutes from our last annual meeting have been approved, and I'll take the Notice of Meeting for today's meeting as read. I'll start today's agenda with a brief overview of Infratil's progress in delivering value to shareholders in the areas the Board has been focused on. Infratil's CEO, Jason Boyes, will then provide his view on how Infratil and its portfolio companies are performing and the outlook from here. We'll then have an opportunity to put shareholder questions before moving to the formal resolutions and voting. Following the meeting, directors will be able to meet with all the shareholders that are here today over afternoon tea. Today's meeting is a hybrid format and we welcome those shareholders who have joined us here in the room in Wellington as well as those who have joined us online. This slide shows the virtual meeting platform. The boxes indicate where it takes to get a voting card and how to ask a question. But if you need any help, you can also call the number displayed in the blue bar at the top of the platform. So I'd like to introduce the rest of the Board to you. Joining me today in the room, we have Jason Boyes, Jason is Infratil's Chief Executive, and he is seeking reelection today. Andrew Clarke, Andrew has joined us from Melbourne and Andrew is a member of the Audit and Risk Committee. Paul Gough, Paul has traveled from London and is our longest-serving director, and he's a member of the Manager Engagement Committee. Kirsty Mactaggart, Kirsty is the Chair of the Manager Engagement Committee and is a member of the Audit and Risk Committee. Peter Springford, Peter is a member of the Manager Engagement Committee, enters retiring from the Board today after almost a decade, and we'd like to acknowledge his contribution in materially enhancing Infratil's growth. Peter has been a strong steward of shareholder capital, and we're very grateful he's agreed to remain as an adviser to the Board for a few more months as we welcome our new directors. Then we have Anne Urlwin and is the Chair of the Audit and Risk Committee. She is seeking reelection at today's meeting. We've announced 2 director appointments as part of our succession planning. Brad Banducci is here from Sydney and is joining the Board today, and he's -- you're going to hear from him shortly when he gives us his election talk. Unfortunately, our other new director, Tiffany Fuller, could not join us from Melbourne due to another long-standing Board commitment. Tiffany will officially join the Infratil Board after today's meeting and will seek election next year but Tiffany brings extensive experience in corporate finance and investment banking. We have other members of the Infratil team with us today, including Andrew Carroll, who recently has moved from Chief Financial Officer to the new role of Chief Operating Officer. This role was created because of Infratil's growth, and Andy is also a Director of One New Zealand. Matthew Ross, who recently was appointed Chief Financial Officer from Deputy Financial Officer; and Matt is also a Director of Wellington Airport. Lee Coker, who has been appointed Head of Invertor Investment and Corporate Development. We have Brendan Kevany, our Company Secretary, and we have representatives from our auditors, KPMG, and our legal provider and Chapman trip. The financial results were released back in May, so I'm going to provide a brief recap. Infratil delivered a strong performance in the financial year to the end of March, and this was underpinned by an 11% uplift in earnings to almost $1 billion. The valuation of our asset portfolio grew by 13% from $18 billion to more than $20 billion, and we lifted the dividend to $0.09 per share, up 2% on the prior year. These results underpin 1 of Infratil strengths, our geographic and sector diversity. Although our New Zealand businesses were largely constrained by ongoing softness in the domestic economy, but Longroad Energy and CDC are enjoying exceptional demand in their markets and sectors. The substantial investment we've been tending into those 2 businesses is beginning to deliver a strong trajectory of future growth. Infratil's strength lies in our commitment to active management, strategic clarity and long-term value creation. And during the year, we set 4 medium-term objectives, which are shown on your screen. These objectives were a response to Infratil's growing scale and maturity and the new challenges and opportunities this growth brings as we continue to drive shareholder value. And Jason will talk about our progress against these objectives in more detail. I do want to underline that we're very focused on the type and scale of assets needed in Infratil's portfolio to drive ongoing outperformance and growth. This year, you've seen significant progress in refining the portfolio, and this has been a substantial program of work with more to follow. This slide is a summary of the dashboard of the more specific activity the Board is monitoring closely. First and foremost, our cornerstone goal is to deliver shareholders 11% to 15% returns per annum after fees and taxes over a 10-year period. And this is based on share price growth and assuming that the dividends are reinvested. Our performance against this measure is 17% per annum in the decade to the end of FY '26. We -- on a 1-year basis, your return was just under 14%. And this was a very pleasing outcome when you consider the impact market concerns about AI investment and the Middle East conflict head on global markets throughout the financial year. These themes are continuing in the current financial year and underpin the importance of back-end quality assets while remaining disciplined in the allocation of shareholder capital. And we're very cognizant of asset and sector concentration risk, particularly with CDC's strong growth. We have, therefore, spent time stress testing CVC's valuation to ensure we have a great understanding of this and how to mitigate it. CDC also secured a public investment credit rating from Moody's ratings in April, and this provides further support as well as a competitive advantage. In December, Infratil's inaugural BBB+ credit rating from S&P Global Ratings also recognized the strength, quality and resilience of our businesses. This has provided a welcome benefit in the form of greater funding flexibility and savings on our borrowing program. It also means we have very clear credit metrics to operate to. Another measure that we follow closely is our calculated net asset value or NAV per share after fees. Market views on value can differ from the independent or market-based valuations we use for portfolio companies. And this means, for example, the Infratil share price can lag our NAV per share where Infratil's valuations incorporate growth that is longer dated than equity markets are willing to value. And we saw this effect amplified across FY '25 and FY '26 with approximately a 25% discount to our assessed NAV. And market volatility was a significant driver of this discount. That discount has closed to about 15% at more recent share price levels, and we'll keep working to reduce this by helping our portfolio companies realize their growth opportunities and by communicating our insights on future value to the market. This communication is carried out through an extensive investor relations program, ranging from newsletters, which we send out to you through our growing schedule of global engagement with institutional investors. At the same time, we're implementing initiatives to help investors better understand our business. And these have included publishing valuation and fee models and continuing to enhance our disclosures. New reporting on CDC's future contractor capacity is a great example of the latter. ESG reporting is another focus because decisions grounded in responsible stewardship, a part of creating long-term value and managing risk. We ranked first globally in our sector and one ESG reporting providers' infrastructure asset assessment, and we were recognized as the top regional leader for our Asia Pacific by another ratings provider. I've already touched on portfolio strategy, and we'll leave Jason to go into more detail. However, I would note that portfolio company relationships and resourcing and an area that we are paying close attention to. For example, greater collaboration between portfolio companies is an area where we see the potential to unlock more synergies and value. And you've seen an example of this announced in the last week with Contact Energy and CDC exploring a New Zealand data center opportunity. One of the Board's key roles is to monitor the performance of our day-to-day manager, Morrison. While the people working for Infratil and Morrison employees, the Board retains oversight and makes key decisions on the strategic direction of the business. And this includes driving strong performance from Morrison with the evolving mix of qualitative and quantitative measures I've talked about. Infratil's draws on the global expertise that Morrison is growing across multiple infrastructure sectors. And this growth supports Infratil as well as Morrison's other clients and investment funds. And this global exposure is becoming increasingly important for Infratil as we seek larger and new sector investment opportunities. During July, Morrison announced a new strategic partnership with Sumitomo Sue Trust Bank. And we've had a few investors ask what does this mean for April? The simple answer is it does not change Morrison's management of Infratil or Morrison's investment in asset management responsibilities. As Morrison's largest client by assets under management, we feel we're very well positioned. Infratil management sees all ideas being terminated at Morrison and the Infratil Board sees relevant opportunities. This means we aren't excluded or limited for choice. Infratil may choose to invest on our own or alongside other Morrison clients as we did with the original investment in CDC and Longroad Energy. Morrison may also undertake transactions for other funds and clients that Infratil has elected not to participate in. The challenge for Infratil is more about balancing opportunities with our current priorities and the returns that we are seeking. There's a healthy attention in our relationship with Morrison and the management model encourages outperformance with incentive fees. In the recent financial year, Morrison did not achieve the required incentive fee hurdle of 12% asset valuation growth on non-New Zealand assets and instead, a negative $180 million amount will be carried forward into the FY '27 fee calculation and netted off against positive fees. The Board has recently commissioned an independent benchmarking report from PwC to review the fee model as well. And a summary of that report will be available on our website. The report found that shareholders get great value under our agreements with Marathon. The 12% hurdle for outperformance is a high bar compared to other similar investment managers. And as this chart shows from the benchmarking report, Infratil has performed extremely well for a very long time. More importantly, we believe the portfolio today is as well positioned as it's ever been to continue delivering strong returns to shareholders. These may be uncertain times, but they're also exciting times for ideas that matter. So I'll hand over to Jason now to tell you how we intend to continue to deliver that outperformance. Thank you.

Great. [Foreign Language]. Pleasure to see you here this afternoon. Thank you for breathing the cold weather, and I hope you're staying warm at home online. Let me pick up where Alison left off at this at 31 March, really this year. I mean market volatility meant FY '26 was not quite the steady year we had hoped for. liberation Day, et cetera. However, since then, CDC's announcement of Australasia's largest ever data center contract in early May, more than made up for that. And that's the end of that graph here where you can see it spiking up. It was a transformational outcome and the share price reflected that with a significant increase. Alison talked about 17% 10-year return. But if you calculated our 1-year returns at mid-August, so taking that into account, -- the returns are almost 30% and our 10-year returns within 20%. So that's 20% shareholder return compound for 10 years, which is a fantastic track record, obviously. The strong increase in value reflects the rapid increase in earnings that CDC is now forecasting with that contract in place. CDC's EBITDAF, that's our preferred measure of earnings. For the current financial year, is expected to be between $680 million and $720 million. That's up from about $390 million last year. The following year, it is expected to rise to more than AUD 1 billion, so a massive acceleration. And then once CDC has built and is invoicing, it's 1 gigawatt and 1,000 megawatts of contracted capacity that will grow to about $2 billion on an annualized basis. So it's an incredibly fast-growing business now. And those are substantial numbers. And as this slide shows, CDC's data centers are substantial infrastructure. This is at Eastern crank. -- this year, CDC and Sydney. CDC expects to spend AUD 3.8 billion to AUD 4.2 billion in capital expenditure to build more data center capacity, excluding land, massive numbers. And in the recent June quarter, it added another 90 megawatts of operating capacity and doubled the capacity under construction to 88 megawatts, and that's really building to fulfill those large contracts that we've now reviewed. It's very important, though, and CDC is very focused on maintaining its social license to operate. It locates its campuses, as you can see in this photo, in industrial areas and invest in electricity network infrastructure, such as substations for its large-scale campuses and always has. Infratil also has extensive sector expertise in renewable energy, as you all know in the room here. development that CDC can draw upon to power its data centers. CDC is also a leader in minimizing water use. It's closed liquid cooling system has been installed across CDC facilities for more than 18 years. We first invested in CDC 10 years ago, actually, in 2016, and we're now well ahead of the investment case written early last year to lift our CDC shareholding to 49.7%, if you remember. So that contract brings us right to the end of that investment case. So we're in good shape. June's independent valuation put our share of CDC at more than USD 9 billion valuation, up from $7 billion a year ago, underscoring that. It's not all CDC, though. Our investment in Longroad Energy in the United States also began in 2016. So they're both 10 years old this year. This is some streams in Arizona. Like CDC, Longroad is starting to come of age. Electricity demand is surging in the U.S. Growth of between 30% to 40% is predicted by 2040, driven by data centers, but also electrification and reshoring of manufacturing. Longroad is responding by increasing its development cadence that's how much it builds every year to more than 2 gigawatts per annum. Near term, this is underpinned by their acquisition of a massive 2.8 gigawatts early-stage project that is making its way through its approvals. To give you a sense, it's probably twice as big as everything you can see on this picture here. And to give you another sense for comparison, New Zealand installed generation capacity is about 11 gigawatts. So they're building 20-odd-percent of that every year at Longroad. Regulatory support mechanisms for solar investment are in place until 2030, so we will still and even longer for batteries. And at the same time, strong power demand and prices have offset higher delivery costs, maintaining attractive development returns in that market. Solar and battery storage remain the lowest cost sources of new generation in many markets in the U.S., and we've agreed to provide a number -- a further USD 300 million of equity to Long Road to help accelerate its growth from here. Longroad is also seeing the positive effects of data center demand, as I mentioned. It is close to completing a 400-megawatt project to supply a meta data center but almost more interesting, it's established a team to develop further data center opportunities on its solar farms. So their initial work has identified up to 10 gigawatts. That's a stupidly big number in a lot of ways when you think CDC is a 1 gigawatt now. So 10 gigawatts of their existing and future development sites may also be suitable for data center development. So you can imagine an out in the visit here, there's lots of spaces for data centers that could be powered by those solar panels, for example. It's early days, but this could drive additional returns above Longroad's existing renewable generation plans and Longroad is considering what form this might take, including whether to partner with an established data center operator. no 1 partner. While the U.S. market remains attractive, some Asian and European markets have seen development returns compress. So project delivery and platform costs have increased along with complexity in time periods. So in Europe for Galileo, our European renewable energy business. This has been a reduction in valuation this year, as I mentioned in the annual report and a shift in its focus to fewer nearer-term projects in a smaller number of markets, so a focused strategy. In Asia, Gearing Energy is managing its prioritization of markets and opportunities carefully as well. Government approval for its large Indonesian solar project is also taking longer than we'd hoped for. So a lot of work going on in those businesses while the U.S. is really taking off. Alisa mentioned this before, but for a long time, we wondered if CDC should expand offshore to capture some of the oversales growth we see there. I just talked about in the U.S. But instead, we're seeing oversized overseas demand coming to Australasia, I mentioned those contracts before and much of that demand has been focused in Australia. But last week, we announced that 2 of our portfolio companies, Contact Energy, and CDC are exploring how they might satisfy that demand in Taranaki. Contact Energy brings existing network infrastructure in Stratford and existing renewable energy generation, and a substantial pipeline of new renewable energy projects as well, which could be relevant for that project. And then CDC obviously brings globally recognized data center expertise and sustainability credentials that sort of partnership, we think, makes great sense. And if the team can make the pieces fall into place, I think it really will meet our goal of delivering infrastructure ideas that matter, both for that region and I think, the country. So turning to the strategic objectives that we set last year and that Alison mentioned, I think we've made solid progress delivering against those objectives throughout the year. On the first one, while we always make an investment decision with a view to holding an asset for the long term and our track record speaks to that, I think. Our growth has driven us to refine our current portfolio more over the last couple of years. This means we are divesting those businesses unlikely to scale or deliver meaningful returns under our ownership. So today, we are more than $600 million towards our initial target of $1 billion. of investments seem to come in billions in this speech on. This has come from -- the sale of our stake in Fort South, if you remember, retire Australia and our property business and the sale process is underway for our radiology business in Australia Qscan as well. Importantly, I think looking ahead, we expect to continue refining the portfolio in the medium term. Another goal onto the next objective is to balance our operating cash flows and dividends in the medium term are pretty important. -- sign of the sustainability of the business. Income from our portfolio companies began to increase in the last financial year, and that narrowed our operating cash flow deficit after cash dividends to $90 million from, I think it was $120 million in '25. So we are getting there, and we feel like we're on track to close the gap completely. On New Zealand and Wellington Airport plan important role as cash flow generators always have. And with optimization of those businesses expected to continue to drive distributions. Both businesses have been pretty resilient despite weak macroeconomic conditions and sector challenges. And then importantly, to really finish the job on closing that gap, we expect CDC and Longroad to generate sufficient returns to fund their own investment, but also distribution to Infratil. So watch this over the next 18 to 24 months, I think. Next objective, the growth of CDC and Longroad is also helping meet our objective of diversifying our shareholder base. wider ownership beyond New Zealand, we believe will benefit all investors over time by deepening the pool of potential investors and liquidity in the stock. And over the last year, were included in the S&P ASX200, which has boosted offshore trading in several more Australia-based analysts have initiated coverage as well. So now about a dozen analysts published research on Infratil, which is a really important way to get investors interested. We do have more work to do on helping investors understand our model and having fewer portfolio companies. What I mentioned before, will help with that, we think. And then lastly, we're always scanning for new infrastructure businesses is really the blue 1 that's on the screen there. But for now, we believe our strongest opportunities are adjacent to our existing data center and renewable businesses. Longroad's exploration of data center opportunity is a prime example of where we're spending most of our time looking for new investment ideas at the moment. Let's have a look at portfolio composition. The blue is digital infrastructure, and this chart shows that the growth and composition of our portfolio over the decade. And our core investment themes haven't really changed that much in that time. We continue to see the strongest opportunities in data centers and renewable energy, as I said before, we think they can help meet our target returns in a way that is reflected in the share price is important for us as shareholders, that is at scale, and that growth can be supported by internally generated cash flows, which is important as well. size in our portfolio, it's a big chunk of that blue. It means that some investors do ask and they should when we might sell it to reduce any potential concentration risk. Our view at the moment is that we remain comfortable with this position and scale in the portfolio today. Approximately half of CDC's valuation as relatively low risk comprising lengthy leases of mostly new cutting edge data centers to some of the world's most creditworthy customers. So that's not going to let you down that part of the valuation. The rest is growth. And we constantly monitor the growth prospects of data centers around the world. They are at that kind of picks and shovels layer of today's digital world, housing the compute capacity that enables the cloud and AI services we hear a lot about. Infratil had portfolio concentration and our high conviction investments in the past. It's actually how we drive value. Our focus is on sifting through the noise around AI, and there's a lot of it to understand what really matters for our existing businesses. We do that every day. And we're in a good position to do that. We see demand and customer behavior firsthand at CDC, we're at the edge of that. And then we see the implications for energy demand through Longroad Energy and our other energy businesses. And then we're seeing the practical applications as well as that of AI at scale and like on NZ or our teleradiology businesses. So cross-referencing all that, we think gives us a good picture of where CDC's trajectory will go. Just a bit of a sidebar. These guys here. This image is a timely reminder of our philosophy to invest wisely in ideas that matter. -- and taking a long-term approach to creating value. It was posted online just the other week to Mark Morrison's founding back in 1988 that features the Infratil Board at the time, including Lloyd Morrison, second from the left there. looking happy at 1 of Trustpower's original wind farms around 20 years ago. Wind farms were, by no means, mainstream infrastructure back at that time, look at those turbines, my goodness. Now they are the and we see data centers becoming mainstream infrastructure in the same way. From those early days, the push from Lloyd was for Infratil to be brave and ambitious. And we're still aspiring to do that. and to do things that haven't been done before, and we're constantly looking for new ways to add shareholder value, but this involves taking calculated risk and backing our view of the future, as I just described. While there is a lot of hype that needs to be screened out, it is clear we are still in the midst arguably near the beginning of 1 of the largest technological developments and infrastructure build-outs. We're likely to see in our lifetimes. I think it's pretty clear it's going to be transformational just like railroads, electricity and the Internet have before. And it will be hugely important to a country's ability to innovate in the future as well, which I think would have got Lloyd's smiling as well. You get a chocolate fish, if you can name the guy on the furthest left, I didn't know him -- so you can come and see me afterwards and claim then, if you lane. Let's just look ahead to finish up. As Alison said, prior years of investment are beginning to produce a significant step up in returns. This year, we've guided to a 21% increase in proportionate operational EBITDAF from FY '26. That's on a like-for-like basis at the midpoint, excluding corporate costs because that brings in the share price, which should don't really control. Looking further ahead, as I said, CDC and Longroad are, we think, 2 hugely exciting businesses with lots of opportunity. We need to focus on helping them maximize and execute the opportunities in front of them to the best of our ability, and that's what's going to drive value for all of us. Infratil is well positioned to support that growth. and our divestments are adding extra capacity to strengthen the balance sheet as well. But at the same time, we need to keep an eye on the future and identify the next large-scale growth businesses. We're continuing to drive operational performance across the portfolio, and there's always plenty to be done doing all of that at the same time. Things may not happen as quickly or as predictably as we'd like, but maintaining our capital discipline throughout that as important as ever. I think we all feel as a Board and certainly as a management team, we are in a great position and have a great fortune to have fantastic investment opportunities in front of us. For an active investor like Infratil, there are choice, having those choices are what really matters when it comes to creating shareholder value for the long term. So thank you for your attention. I'll hand you back to you, Alison Gerry.

Thank you, Jason. We'll now move to shareholder questions on our updates and the financial results. There'll be an opportunity later in the meeting to ask questions about today's resolutions. So in this part of the meeting, if we could keep our questions about the company update and our financial results. So let's start with written questions received ahead of the meeting and then move to questions in the room, and then we will follow with online questions. So our first question submitted to comes from shareholders, Brian and to resale and they ask, when are we going to get an increased dividend in relation to the share price. So dividends is something that we discussed at length at the Board. and we have seen the dividend incrementally growing broadly in line with inflation, We don't have a formal dividend policy. And that's because our focus is very much on delivering value for shareholders through share price growth. So my advice to shareholders who do want to have a higher dividend is potentially to sell small portions of your shares and create the dividend that you would like to see. Okay. So that was the only 1 that we have submitted online? Are they -- sorry, before yes, we're going to move to questions in the room. -- if you would like to wait for a microphone to come to you, clearly state your name, and then please ask your questions.

Yes, Michael Shroff, shareholder. I guess this is a question. Jason might like to answer as the face of the company. So these data centers now maybe today or certainly in the future, data centers are going to become a lightning rod for protest, not just from Waco Green is, but from ordinary citizens who happen to be living in the vicinity of data centers. So maybe you could say a bit about how Infratil is looking to -- I know you said something already, but maybe you could flesh it out. And I'm also interested in what Brad would have to say, if anything, from what the state of players like over in Australia.

And it might be we get Jason to comment on Australia, too, because today was Brad's first day sitting around the Board table. So I don't expect him to be an expert on social license in Australia just yet. -- but feel free to ask him next year. But Jason, can you cover these.

Yes. Thank you for the question, I'm just going to call us but -- it's a really important mine. I think both as people who work here and the shareholders to make sure we're doing a good job, continuing to do a good job with all our development activity. Actually, we've had processes a lot of renewable energy development sites over many years for the business as well. So I think we're well used to the types of things you need to do in order to make sure that things -- I put it as being a good neighbor, to be honest, but the things that you're doing around your developments in line with certainly best practices and beyond it. The key for CDC, I think, to think about is where we're building the data centers to something you raised about the neighbors. I think being outside residential areas being in industrial areas as much as you can, having buffer zones around them are really important ways to develop and it's very similar actually for the solar and battery projects you could see on the screen, right, you're building a long way away from people so that you don't have neighbor issues. But the team, I think, are at the edge of what a very good data center looks like as well with their closed Lukewater calling system is a real calling card of that business even globally. But they will continue to need to improve their design as well and be receptive to feedback, and we should expect that to happen. I think we're seeing it happen all around the world though. So from a customer perspective, they are all trying to build good data centers and be good corporate citizens as well. So I'm not so worried from a demand or investment perspective that that's going to mean New Zealand or Australia are disadvantaged relative to the rest of the world for this investment. I think the trick for CDC is to make sure it's as current as we can be and what the best way to build these data centers is and our experience in some areas, that water, we're ahead of the game and with a very strong development set of expertise within CDC, plenty of expertise to adjust designs and incorporate the kind of latest and greatest sort of what's needed for these facilities in the future. When I zoom back from that, it still is critical infrastructure for a country. Countries in the future will really struggle without this infrastructure available. It's very economically important for jurisdiction to have this. So I think our approach is more trying to make sure we're solving all the problems that people are raising in a reasonable way. And the last of those pieces is really the energy pieces and to make sure that you're able to bring energy on. So it's not taking energy away from other critical uses. And 1 of our advantages, that's what we do for a day job as well and Infratil making sure we're getting the time and all those things lined up, will be important, but you can be assured that we're very focused on it. Environment in Australia, others might be -- it's the same as here and the same as in the U.S., right? These things rightly get a lot of focus the big infrastructure investments, and they take up a lot of space and a lot of money. The good thing for us, I think, in New Zealand is the new Zen were to benefit from everything cities is learning in that jurisdiction and bring it here.

Hi. My name is Jim Coyle. I'm a shareholder. And my question sort of fits into the renewable bucket. My wife and I watched a fascinating interview on -- I think it was YouTube. -- last night with -- on the spin-off, Tim Grosse was being interviewed, and he was extolling the potential for generating energy in the toll pool volcanic zone area. And so my question is about is there some interest from Infotel in that. We're talking about what was described as a super critical geothermal potential that could change everything. So yes, the question is -- are you guys aware of that? Is that something that you could be potentially investing in and exploring in the future because it sounds really exciting. So we're talking about New Zealand being 1 of the 3 places on the planet where there's a room of hot magma sufficiently close to the surface to mine basically comment funding there's a really interesting knowledge talks about.

We're currently exposed to that in a couple of ways. One, through our investment in Contact Energy, which was the largest geothermal generators in the world actually, and they're definitely focused on the potential for that and maybe some geothermal could power a data center in stated, for example. So we're definitely focused on it. We also have through our Clearvision venture capital investment investments in the U.S. focused on next-generation geothermal scanning technology that uses RADAR to find geothermal resource in a much more reliable way than it used to be in the past. So I would say, yes, we are very interested. The scalability of geothermal, I think, is the question on most people's minds on what time frame, how quickly will it get to a scale that would displace something like solar and battery. I think our current view is it's very good in particular locations, but that in a lot of places, solar will continue to be the fastest and cheapest way to develop.

Any more questions in the room?

Brian Busby, I'm a shareholder. Have the fires in Europe had any effect on Galileo. I know they haven't been specifically in Italy, but they are certainly very fierce. So I've just come back from the U.K., and it's 1 of the hottest summers I can ever remember.

Yes. It's crazy orders. I haven't heard of anything actually specifically for Gala.

38 degrees in London last week. So yes. very hard. It looks as if we don't have any more questions in the room. So Mark, can you read out questions which have been submitted online?

We have a question from David Langford is Infratil's long-term goal to be a predominantly data center and so alone. Solar cell solar.

Okay. Look, I think we often get asked about the concentration risk in that portfolio because CDC is performing so well and differently, meaning that they have an increased portion of our portfolio. And I think you might have also heard from Jason, that this is a once-in-a-lifetime potential investment opportunity. So we're very comfortable with our investment in -- so it's the data center piece and also very comfortable with our renewables investments, particularly long road, but Galileo, Garin and our smaller Mentor renewables business in Australia. That doesn't mean to say that we're not looking at lots of other ideas. And it's a shame we can't publish those ideas and show you how many things we have considered. And today, we had our Board meeting this morning, and even there were many ideas that we talked about as well. So when we have more insight into other investments will bring them to you. But at this stage, I think it's fair to say that the real drivers of shareholder value are going to come from Longroad and CDC anything further, Jason?

No, I think it's possible to extrapolate in a straight line to that, but the world really doesn't that work that way. And we continue to look at millions of options.

Question from Stephen Maine. Having announced the appointment of Tiffany Fuller and Brad Banducci to the Board on 18th of June. Why have we waited until the day after the meeting for Tiffany to take up our appointment effectively removing the opportunity for shareholders to give here a mandate. -- and leaving here serving for a year without voting support from shareholders. A board commitment is now excuse. You don't have to physically attend the AGM to run for election.

Right. Thank you for your question. It is really disappointing to Tiffany and to the importable Board that she can't be with us today. She had a long-standing Board commitment in Australia. And so we did consult with the New Zealand Shareholders Association to ask advice on how best should we do this? -- should we have her stand for election today, but not have shareholders have the ability to ask questions and we were advised that it probably makes more sense to have Tiffany join the Board from tomorrow and have her stand for election and be able to answer questions next year. Next question, Mark.

We have a question from Phil Cuneo. What contingency plans does Infratil have in place for when the AR bubble boost?

Yes. Well, if you could let me know the date that would be really helpful. But because of the concentration risk, we do talk about, well, what there is, for example, a significant pullback the valuation of CDC. And what would that mean for CDC's credit metrics, its ability to fund itself in the future? And what would that mean for Infratil and our own credit metrics. And so we have done stress testing exercises on theoretical scenarios so that we know that we have sufficient liquidity to be able to support volatility that comes through from sentiment in the AI space.

A similar question from Peter Calero. -- sometime over the next several years, is there a danger of overbuild in data centers I heard 1 U.S. commentator recently saying the U.S., many datas will ultimately be turned into pickleball courts. How will we know it is time to sell data centers just as we got out of Tilt Renewables.

Yes, very interesting. I don't know if pickable was going to be the best fit. But Jason, any thoughts on that.

The answer is partially yes. I think on overbuild, but the question is where and will that affect our business I think I can only really point back to the remarks we made in our opening, right? We're building data centers that are leased out for long periods of time to the most creditworthy counterparties in the world, and that's more than half the valuation of CDC, which if you step back from it, is not a particularly bubbly or challenging valuation, I didn't think, overall. So I'm not worried so much about CDC's data centers and the enormous amount of cash flow that comes out of that business if it just stopped with the contracts we have announced today, it's $2 billion and the cash flow, along with the work Alison mentioned around the balance sheet work that we've done about to write out any volatility, I think, will leave us in very good position with very high-quality, long-term assets. I think a lot of the overbuild if there's an overbuild happening would be happening somewhere in the U.S. for a shorter type of data center that probably isn't going to be that relevant to the kind of long-term leased infrastructure we've got in Australia. I think we still keep a lot of an eye on what is the demand outlook for the output of these facilities. And if somebody is saying they're going to build them in space, and I think everything on the ground is probably going to be used up before we put 1 in space. So all of these things that we're looking at for the long-term demand, I think, are what gives us confidence that the type of infrastructure we are building will have a place in most scenarios.

Great. Is there any other question, Mark?

A question from Patel. I'd like to know if there's any valuation hit expected from our One New Zealand value carried in the box as we've seen a large sector lost value in New Zealand. So if we write off, if any, and the timing being affected by the CTC valuations at micro and hence, fees kick in to our advisers, Morrison. Can you also elaborate on One's business and carrying market value?

Mike, Andy, do you want to have a go that we have Andy as a Director of One and recently with our CFO. Do you want to put them -- I don't know if you can put the questions on the screen here to, Mark, so that -- you'll see the...

So the 1 in Z carrying value is something that is tech year. And you look at forward earnings, and we remain very comfortable in the outlook in. Independent valuation is something slightly different and the market forms its own view on 1 in Z's value relative to the independent valuation -- the performance of MNOs in New Zealand is not all the same, but we remain very comfortable in the outlook for One NZ.

Thanks, Andy. Any other question, Mark?

Lindsay Preser airlines willing to use Wellington the airport for wide-body jets.

I might answer that question because I'm on the board of EMC launch. I think they're talking about long haul, though, aren't they? Look, Matt Clark, our CEO of Wellington Airport with the work that they have done on the runway, where they have extended it through a reset safety mechanism that if you're taking off, you might see at the end of the runway, I think, does give them the theoretical ability to have wide-body its come to Wellington, but an airline does need to see demand before they are willing to commit to that schedule. But I think it's a very positive development that Wellington Airport has executed. Next question?

Question from Anne here. Thank you for outlining our ESG considerations. Does Infratil ensure it avoids exposure to illegally occupied Palestine territories or has Infratil considered utilizing the United Nations backed principles for responsible investment.

Look, we take our sustainability and ESG program very seriously. And we have an exclusion list of investment areas where we have no interest investing in. But I might actually, we've got our Chief Sustainability exit here, Luis Tang in the front row. So we might ask Luis to comment on the -- thank you for the question. I always love getting a sustainability question. you'll see the exclusion policy on the website on Infratil's website. And it does say that we invest in geopolitically stable regions I think that would probably preclude Palestine and Israel and the several areas around that region. And the question on PRI and Morrison, who manages Infratil's investments has been a signatory to PRI, which means Morrison commits to integrating ESG factors into its investment process. So Morrison has been a signatory to that framework since 2010. Great. Thanks, Luis. Is there another question, Mark?

I got a question, it might be 1 for Matt. On Page 34 of the annual report, it would appear that in the total equity and liabilities figure of $18.1 billion, the figure of $8.5 billion in equity is $1.1 billion less than the $9.6 billion reported as liabilities. Can you explain how this is good management of Infratil.

I will hand over to Matt, our CFO.

Thanks for the question. I've understood that correctly. It's that our equity is a positive number. And even if it is outweighed by liabilities, and that means that we have assets that are by far in excess of our liabilities.

Yes. That's great answer the question. So I think we're comfortable in that position. You can always contact us at the e-mail address on the Infratil website, if you'd like further information. Any further question, Mark?

We have a question from Peter Claro. In his presentation, Jason, our CEO, compared data centers to railroads. Most of the railroad investors went break because they overbuilt. Is that what adjacency is happening to the data center world in the end in is rare comparison the right one.

Maybe no. I don't tend to get a break on this one. Good point there. Next question.

Question from Dominic Lane. There is a significant outage -- sorry, there was a significant advantage at 1 New Zealand service early in the year that highlighted the lack of redundancy in the network has just been addressed.