Macquarie Korea I F

1H 2015 financial results and asset performanc

RNS Number : 6979U
Macquarie Korea Infrastructure Fund
31 July 2015
 



 

 

31 July 2015

 

 

 

 

 

MACQUARIE KOREA INFRASTRUCTURE FUND

REPORTS HALF-YEAR FINANCIAL AND ASSET PERFORMANCE

FOR THE SIX MONTHS ENDED 30 JUNE 2015

 

Macquarie Korea Infrastructure Fund ("MKIF") today announced its interim financial results for the six months ended 30 June 2015 (the "Period"), together with its asset performance results for the Period. 

 

Highlights for the Period include:

 

§  The final interim distribution for the Period approved by the board of directors of MKIF today was KRW 210 per share.  This will be paid in cash on 31 August 2015 to MKIF's shareholders based on the record date of 30 June 2015.

 

§  On a non-consolidated basis, MKIF recorded revenue and net income of KRW 98.3 billion and KRW 61.9 billion for the Period, reflecting a KRW 7.8 billion of one-off performance fee1 Excluding the one-offs2 the revenue and net income increased by 12.6% and 15.2%, respectively, compared to the previous corresponding period ("pcp"). Revenue increase was largely due to KRW 8.0 billion of dividend income paid by Soojungsan Tunnel.  

 

§  On a weighted average basis3 actual traffic volume and revenues of the underlying assets increased compared to pcp by 8.7% and 8.3%, respectively. During the Period, the three newly opened assets4 reached approximately 77% of the Concession Agreement forecast volume, recording 10.1% of weighted traffic volume increase compared to pcp.

 

§  Key operational highlights of Busan New Port Phase 2-3 (BNP) include:

The total container handling volume of the New Port grew 7.2% in the Period on pcp, recording 6.34 million TEU5

BNP handled 0.62 million TEU for the Period, representing a 9.3% drop compared to pcp.  This was mainly due to the delay in commencement of some of the new Ocean 3 vessel services, all of which started calling at BNP as of July this year

Revenue and EBITDA increased by 4.3% and 15.6% in the Period compared to pcp, respectively, each recording KRW 33.4 billion and KRW 10.5 billion. This was due to the increase in tariff rates and further savings in operating expenses

Reflecting the delayed commencement of the new Ocean 3 services, revenue and volume forecasts for FY2015 were revised down from KRW 91 billion and 1.72 million TEU to KRW 88 billion and 1.63 million TEU, respectively. The EBITDA estimate for the year however moved up from KRW 36 billion to KRW 38 billion6

BNP starts the 3Q with a 12 month estimated forward service schedule of approximately 2 million TEU6,7

The capacity expansion from 1.8 million to 2.5 million TEU per annum was completed on time and on budget in May 2015

 

§  MKIF remains financially healthy with a conservative balance sheet position:

Proportionately consolidated cash balance8 of KRW 222.8 billion

Continued de-gearing of asset level debt with a weighted average maturity of 7.2 years

MKIF net debt of KRW 429.5 billion with no significant external financing needs until May 2018 9

Proportionately consolidated gearing10 of 34% with 60% of interest obligations at fixed rates11

 

§  Three local concession assets of MKIF are undergoing legal disputes with their respective government authorities, as shown in the following table: 

 

Assets

Case

Status

Government Authority

Baekyang Tunnel (BYTL)

Administrative order to reinstate the original capital structure at the time of the concession agreement signing

In October 2014, Busan District Court ruled in favour of BYTL and SICL. Busan City appealed the case to the Busan Appellate Court

Busan City

 

Soojungsan Tunnel (SICL)

Gwangju 2nd Beltway, Section 1 (KBICL)

Administrative order to reinstate the original capital structure at the time of the concession agreement signing

Undergoing the Supreme Court process

 

Gwangju City

Administrative order to suspend the MRG payment

Undergoing the Seoul Administrative Court process. Ruling is expected in the 3Q of 2015

 

Financial Results

(Unit: KRW million)


Six month to 30 June 2015

Six month to 30 June 2014

Revenue

98,314

90,711

Interest income

90,287

87,325

Dividend income

8,0001

3,3862

Other income

27

-

Operating Expenses

36,400

26,779

Management fees

17,494

14,530

Performance fee

7,8353

-

Interest expense

10,065

9,290

Other expenses

1,006

2,959

Net Income

61,914

63,932

EPS (KRW)4

187

193

Normalised Net Income5

69,749

60,546

Normalised EPS (KRW)4,5

210

183

 

1.      Paid by Soojungsan Tunnel

2.      One-off liquidation dividend income from CNE ABS SPC (tranche 3)

3.      Performance fee for the second quarter of 2015

4.      Based on the number of shares outstanding (331.5 mil shares)

5.      Excludes one-offs (2014: Liquidation dividend income from CNE ABS SPC (tranche 3) / 2015: Performance fee for the second quarter of 2015)

 

 

Traffic Results

 


2015 First Half

2015 2nd Quarter

Asset

Traffic (%)1

Revenue (%)2

Traffic (%)1

Revenue (%)2

Weighted average growth

8.7%

8.3%

7.9%

7.4%

1.      Percentage increase from the previous corresponding period, based on average daily traffic

2.      Percentage increase from the previous corresponding period, based on average daily revenue

 

 

For further information, please contact:

 

Jason Pak

Chief Operating Officer

Macquarie Korea Asset Management

+ 82 2 3705 8550

[email protected]

 

Ally An

Investor Relations

Macquarie Korea Asset Management

+ 82 2 3705 8565

[email protected]

 

This release is not an offer or solicitation for sale of the securities of Macquarie Korea Infrastructure Fund ('MKIF') in the United States or in any jurisdiction where any offer, sale or solicitation in respect of such securities is not permitted. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or in any jurisdiction where such offer or sale is not permitted. The securities of MKIF have not been registered under the Securities Act, and may not be offered or sold in the United States absent registration or exemption from registration under the Securities Act. There will be no public offer of the securities in the United States. 

Not for distribution in the United States or in any jurisdiction where any offer, sale or solicitation in respect of the contemplated securities is not permitted.

This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons").  Any securities will only be available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire any securities will be engaged in only with, relevant persons.  Any person who is not a relevant person should not act or rely on this document or any of its contents.

This release does not take into account the investment objectives, financial situation and particular needs of the investor. Before making an investment in MKIF, the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment adviser if necessary.

MKIF or Macquarie Korea Asset Management Co., Ltd.(MKAM) is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia).  The obligations of this entity do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL).  MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities.

Investments in MKIF are subject to investment risk, including possible delays in repayment or loss of income and/or capital investment. Neither MKIF, nor any member of the Macquarie Group companies, including MKAM, guarantees the performance of MKIF, the repayment of capital or the payment of a particular rate of return on MKIF securities.

This release contains forward-looking statements. All forward-looking statements are our management's present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

 



Appendix1. Financial results (Unaudited, non-consolidated basis) 

 

Statements of Financial Position

As at 30 June 2015, 31 December 2014 and 30 June 2014

 

            (Unit: KRW millions)


30 June 2015

31 December 2014

30 June 2014

Assets




. Invested Assets

1,638,253

1,681,571

1,658,766

      Cash & deposits

15,625

48,864

15,196

      Loans receivable

1,069,525

1,079,604

1,090,467

      Equity securities1

553,103

553,103

553,103

. Others

488,610

462,936

418,650

      Interest receivables

481,016

455,070

409,589

      Other receivables

2,395

2,368

2,347

      Deferred costs, net

5,199

5,498

6,714

Total Assets

2,126,863

2,144,507

2,077,416





Liabilities




      Accounts payables

2

1

1

      Management fee payable

8,977

8,277

7,396

Performance fee payable

7,835

-

-

      Other liabilities

1,455

1,636

1,444

      Long-term debt

195,141

208,565

140,557

      Bond

249,598

249,510

249,421

Total Liabilities

463,008

467,989

398,819





Shareholders' Equity




Share Capital

1,670,986

1,670,986

1,670,986

Retained Earnings (Losses)

(7,131)

5,532

7,611

Total Shareholders' Equity

1,663,855

1,676,518

1,678,597

Total Liabilities and Shareholders' Equity

2,126,863

2,144,507

2,077,416

1. Pursuant to the Financial Investment Services and Capital Markets Act, MKIF reports all its unlisted equity investments at acquisition cost. These are unaudited numbers and as such are subject to change

 

 



Statements of Income

For the half-years ended 30 June 2015 and 30 June 2014

 

          (Unit: KRW million)


Six month to 30 June 2015

Six month to 30 June 2014

. Revenue

98,314

90,711

Interest income

90,287

87,325

Dividend income

8,000

3,386

Other income

27

-




. Expenses

36,400

26,779

Management fees

17,494

14,530

Performance fee

7,835

-

Custodian fees

163

165

Administrator fees

103

103

Interest expense

10,065

9,290

Other expenses

740

2,691




. Net Income

61,914

63,932

 

 



Appendix 2. Traffic and Revenue

 

1.       Traffic Volume and Traffic Revenue - Portfolio Summary

 

On a weighted average basis12, traffic and revenue increased by 7.9% and 7.4%, respectively, during the second quarter ended 30 June 2015 (the Quarter) when compared to pcp. On the same basis, traffic and revenue for the Period increased by 8.7% and 8.3%, respectively, on pcp. The highlights for the Period from the traffic results include:

 

§ The three newer toll road assets13 delivered stable traffic ramp-up with 10.1%14 growth on pcp

§ Traffic volumes of Incheon International Airport Expressway and Incheon Grand Bridge rose due to increase in residential population of Cheongna, Yeongjong and Song-do districts and growing number of airport passengers travelling to and from Incheon International Airport

§  Traffic volume across Machang Bridge increased significantly by 26.1% during the Period on pcp due to the new road connection (Yanggok-Wanam route of the national highway and Changwon-Busan Expressway: stage 2) from 13 October 2013 and a newly-built industrial complex in Changwon operating since June 2014

 

Traffic for each toll road asset is calculated as the average daily traffic volume. Except as stated otherwise, revenue for each toll road asset represents actual average daily revenue collected (excluding VAT). Actual revenue collected does not include minimum revenue compensation receivables from the relevant government authorities or toll-freeze compensations linked to CPI growth. Accordingly, revenue performance of the concession companies is not a direct guide to the revenue performance of MKIF. 

 

The revenue growth recorded by the concession companies in which MKIF invests reflects growth of traffic volume and inflation-linked toll rate increases, and may also be influenced by changes in the traffic mix, composed of heavy and light vehicles, for which different toll rates apply.

 


2015 Second Quarter

2015 First Half

% of MKIF

Portfolioc

Asset

Traffic (%)a

Revenue (%)b

Traffic (%)a

Revenue (%)b

Incheon International Airport Expressway

10.0%

6.3%

10.8%

7.4%

6.7

Baekyang Tunnel

4.9%

4.9%

4.4%

4.4%

0.1

Gwangju Second Beltway, Section 3-1

9.9%

10.0%

8.4%

8.5%

4.8

Gwangju Second Beltway, Section 1

9.5%

9.7%

9.2%

9.2%

12.8

Woomyunsan Tunnel

2.9%

3.1%

4.8%

5.0%

1.2

Cheonan-Nonsan Expressway

4.3%

4.3%

6.2%

6.2%

16.4

Soojungsan Tunnel

6.3%

6.2%

6.5%

6.5%

6.0

Machang Bridge

24.0%

24.9%

26.1%

26.8%

6.8

Yongin-Seoul Expressway

12.8%

12.9%

12.0%

12.1%

8.2

Seoul-Chuncheon Expressway

5.7%

5.6%

6.4%

6.2%

8.3

Incheon Grand Bridge

10.8%

10.7%

11.5%

11.2%

9.9

Weighted Average

7.9%

7.4%

8.7%

8.3%

-

a           Percentage increase from the previous corresponding period, based on average daily traffic

b          Percentage increase from the previous corresponding period, based on average daily revenue

c           Percentage based on total commitments by MKIF to all investments in the MKIF portfolio

 

 



2.         Traffic and Revenue - Individual Concession Company Performance

 

 

Incheon International Airport Expressway

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

60,273

66,327

10.0%

57,419

63,601

10.8%

Average daily revenue (1,000 won)

368,817

392,071

6.3%

352,852

379,052

7.4%

Note:    Opening of Cheongna IC in July 2013 still contributes towards traffic growth as the residential population of Cheongna and Yeongjong districts rose. Revenue growth was lower than traffic growth as additional growth was driven by small vehicles travelling shorter sections of the road, paying lower tolls

 

Baekyang Tunnel

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

73,146

76,707

4.9%

72,183

75,324

4.4%

Average daily revenue (1,000 won)

52,493

55,069

4.9%

51,779

54,069

4.4%

Note:      Toll collection system, which allows payments to be settled by Hi-Pass card, was installed on the outermost lane in February 2015 and an additional Hi-Pass lane opened in March 2015 adjacent to the existing innermost Hi-Pass lane

 

Gwangju Second Beltway, Section 3-1

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

34,218

37,614

9.9%

33,223

36,004

8.4%

Average daily revenue (1,000 won)

36,168

39,797

10.0%

35,079

38,058

8.5%

Note:      Traffic and revenue increased compared to pcp as state-owned enterprises, including Korea Electric Power Co., Ltd, have relocated their headquarters to Naju Innovation City to the south-west of Gwangju

 

 

Gwangju Second Beltway, Section 1

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

42,727

46,779

9.5%

40,835

44,589

9.2%

Average daily revenue (1,000 won)

45,165

49,560

9.7%

43,152

47,143

9.2%

Note:      Lane expansion of Gwangju-to-Hwasoon road, completed in November 2014, contributed towards traffic and revenue growth

 

 

Woomyunsan Tunnel

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

27,311

28,106

2.9%

26,240

27,504

4.8%

Average daily revenue (1,000 won)

58,987

60,791

3.1%

56,661

59,474

5.0%

Note:      Traffic and revenue increased compared to pcp as the residential population of Woomyun district increased upon completion of a new apartment complex

 

 

Cheonan-Nonsan Expressway

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

46,724

48,753

4.3%

45,405

48,230

6.2%

Average daily revenue (1,000 won)

390,063

406,838

4.3%

379,310

402,648

6.2%

Note:       Traffic and revenue increased compared to pcp due to growing traffic inflow from Nam-Pungse IC, which opened in July 2014

 

 

Soojungsan Tunnel

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

45,141

47,999

6.3%

44,376

47,274

6.5%

Average daily revenue (1,000 won)

32,996

35,044

6.2%

32,403

34,511

6.5%

Note:       Opening of the Hi-Pass toll collection system in January 2014 still contributes towards traffic and revenue growth as enhanced accessibility and convenience continue to draw additional traffic

 

 

Machang Bridge

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

25,811

32,013

24.0%

23,999

30,255

26.1%

Average daily revenue (1,000 won)

57,509

71,838

24.9%

53,445

67,768

26.8%

Note:      A new road connection opened in October 2013 and traffic continues to grow as drivers become aware of the benefits of the bridge's routes. In addition, a newly-built industrial complex, which started operation in June 2014, in Changwon contributes towards commuter traffic growth

 

 

Yongin-Seoul Expressway

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

75,825

85,494

12.8%

72,893

81,649

12.0%

Average daily revenue (1,000 won)

135,953

153,431

12.9%

130,677

146,477

12.1%

Note:       Traffic and revenue increased compared to pcp due to increased traffic from Yongin area's residence occupancy. Average daily traffic volume up to the end of the Quarter was 87% of the CA forecast

 

 

Seoul-Chuncheon Expressway

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

41,232

43,586

5.7%

38,025

40,464

6.4%

Average daily revenue (1,000 won)

262,963

277,674

5.6%

241,891

256,874

6.2%

Note:       Average daily traffic volume up to the end of the Quarter was 80% of the CA forecast

 

Incheon Grand Bridge

Category

PCP

Year on Year

Q2 2014

Q2 2015

% change

1H 2014

1H 2015

% change

Average daily traffic (vehicles / day)

34,478

385,211

10.8%

33,083

36,874

11.5%

Average daily revenue (1,000 won)

178,030

197,102

10.7%

171,401

190,679

11.2%

Note:       Traffic volume and revenue rose due to increase in residential population of Yeongjong and Song-do districts and growing number of airport passengers travelling to and from Incheon International Airport. Average daily traffic volume up to the end of Quarter was 78% of CA forecast

 

 

3.       Prior Period Compensation Payments Received from Government Authorities

 

The concession companies may receive revenue compensation payments from the relevant government authority in addition to revenue received from traffic. Generally, revenue compensation and other compensation payments are received within 6 to 18 months after the end of the year to which they relate.

 

There are outstanding MRG receivables for the remaining to be paid for some of the assets and negotiation is underway with the relevant government authorities to expedite the overdue payments.

 

(Unit: KRW million)

Asset Name

MRG  receivable for 2014

Outstanding amount1

Amount

   Received        amount

Due date without additional interest

Incheon International Airport Expressway

    99,406

-

February 2016

99,406

Baekyang Tunnel

      6,536

3,910

April 2015

10,4712

Gwangju Second Beltway, Section 1

     21,906

-

December 2015

63,2803

Gwangju Second Beltway, Section 3-1

       6,715

-

December 2015

6,715

Woomyunsan Tunnel

       4,435

-

February 2015

17,0084

Cheonan-Nonsan Expressway

     53,296

-

February 2016

53,296

Soojungsan Tunnel

11,575

10,627

April 2015

3,7515

Machang Bridge

      6,984

6,984

February 2015

-

Yongin-Seoul Expressway

            15 

-

February 2016

21

Seoul-Chuncheon Expressway

   7,299

-

February 2016

7,299

Incheon Grand Bridge

10,979

-

February 2016

10,979

1. Including all unpaid and overdue compensations

2. Unpaid amount from 2010 to 2014 (2010: 1,894mil, 2011: 1,321mil, 2012: 1,958mil, 2013: 2,673mil, 2014: 2,625mil). Deferred interest is currently in effect and payment of the remaining amount is under negotiation with Busan Metropolitan City (BMC)

3. Unpaid amount of 2012 and 2013 (2012: 20,261mil, 2013: 21,113mil) Gwangju Second Beltway, Section 1 (KBICL) received an administrative order from Gwangju Metropolitan City (GMC) notifying it of the suspension of MRG payment (the Order). KBICL filed a lawsuit to Seoul Administrative court for cancellation of the Order

4. Unpaid amount from 2011 to 2014 (2011: 2,713mil, 2012: 4,255mil, 2013: 5,605mil, 2014: 4,435mil). Deferred interest is currently in effect and payment of the remaining amount is under negotiation with Seoul Metropolitan City

5. Unpaid amount from 2011 to 2014 (2011: 935mil, 2012: 926mil, 2013: 943mil, 2014:947mil).  Deferred interest is currently in effect on the remaining amount and negotiation is underway with BMC

 

 



[1]. For details of the performance fee for the second quarter, please refer to MKIF disclosure on 1 July  2015 

[2]. 2015: KRW 7.8 billion of performance fee for the second quarter of 2015

    2014: KRW 3.4 billion of liquidation Dividend from CNEC ABS SPC (tranche 3)

[3]. On a weighted average basis based on revenue size of each asset and the MKIF's equity interest in each concession company

[4]. Yongin-Seoul Expressway, Seoul-Chuncheon Expressway and Incheon Grand Bridge

[5]. Five container terminals, including BNP, that operate within the New Port of Busan

[6]. Actual performance may vary from the forecast provided by BNP  

[7]. Considering the currently scheduled regular calls

[8]. Proportionately consolidated cash balance (including MKIF cash balance of KRW 15.6bn)

[9]. KRW 60 billion 5-year fixed rate bonds scheduled to mature in May 2016

[10]. Gearing = MKIF Net Debt/( MKIF Net Debt + MKIF market capital(3-month average)), where MKIF Net Debt = Proportionate net debt from assets + Corporate net debt. Excludes shareholder loans

[11]. Hedging (Fixed) = Proportionately consolidated MKIF net debt adjusted for fixed debt / Proportionately consolidated MKIF net debt

[12]. On a weighted average basis based on revenue size of each asset and the MKIF's equity interest in each concession company

[13]. Yongin-Seoul Expressway, Seoul-Chuncheon Expressway and Incheon Grand Bridge

[14]. Weighted average traffic volume growth compared to pcp 


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