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Macquarie Korea I F (MKIF)

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Thursday 30 April, 2015

Macquarie Korea I F

1st Quarter Results

RNS Number : 8197L
Macquarie Korea Infrastructure Fund
30 April 2015
 

 

 

30 April 2015

 

 

 

 

MACQUARIE KOREA INFRASTRUCTURE FUND

REPORTS FIRST QUARTER 2015 FINANCIAL AND OPERATIONAL RESULTS

 

Macquarie Korea Infrastructure Fund ("MKIF") today announced its financial and operational results for the 1st quarter ended 31 March 2015 (the "Quarter").

 

Highlights for the Quarter include:

 

§  On a non-consolidated basis, MKIF recorded revenue and net income of KRW 52.9 billion and KRW 38.9 billion for the Quarter, an increase of 22.5% and 32.9%, respectively, compared to the previous corresponding period ("pcp"), largely attributable to the dividend income of KRW 8.0 billion from Soojungsan Tunnel

 

§  The toll roads businesses delivered traffic volume and revenue [1] growth of 9.6% and 9.2%, respectively, on pcp. During the Quarter, the traffic volumes of the three newer toll road assets[2] have reached approximately

 

          73.2% of the Concession Agreement forecast, compared to 70.7% recorded on pcp

 

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

-   The New Port[3] volume grew 7.4% on pcp, achieving approximately 3.09 million TEU of total container

 

     handling volume

-   Due to the scheduling delay of the new Ocean 3 vessel services for Korea, BNP's handling volume during the Quarter dropped to 0.32 million TEU, a 3.1% decrease on pcp

-   The revenue however was up by 4.8% to KRW 16.1 billion as a result of the increase in the tariffs

-   The revenue and volume target for FY 2015 remain unchanged at KRW 90.7 billion and 1.72 million TEU, respectively

-  BNP starts 2Q with an expected handling volume of about 2 million TEU for the next twelve months

The capacity expansion from 1.8 million to 2.5 million TEU per annum is complete and the new equipment will be ready for operation in May 2015

-   Cash management continues to be a key management priority during the ramp-up phase

 

§  MKIF remains financially healthy with conservative capital positions:

-   Proportionately consolidated cash balance[4] of KRW 227.3 billion

-   Continued de-gearing of asset-level debt with a weighted average maturity of 7.4 years

-   MKIF net debt of KRW 453.7 billion with no external financing needs until May 2018[5]

-   Proportionately consolidated gearing[6] of 36% with 58% of interest obligations at fixed rates[7]

-   MKIF's domestic credit rating is unchanged at AA (Stable)[8]

 

§  Machang Bridge received 2013 support payment of KRW 13.1 billion and overdue interest in February 2015.  With respect to the arbitration that Machang Bridge had filed to claim the overdue support payment, it received an award by consent from the arbitral tribunal of the International Court of Arbitration of the International Chamber of Commerce on 2 April 2015[9] 

 

§  Three local concession assets of MKIF are undergoing legal disputes with the 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 from 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 from 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

 

 

Financial Results1

(Unit: KRW million)


Quarter to 31 March 2015

Quarter to 31 March 2014

Revenue

52,917

43,208

Interest income

44,908

43,208

Dividend income

8,000

-

Other income

9

-

Operating Expenses

13,997

13,922

Management fee2

8,517

7,134

Interest expense

5,008

4,445

Other expenses

472

2,3433

Net Income

38,920

29,286

1. Unaudited, non-consolidated

2. Management Fee consists of Base Fee and Performance Fee. There was no Performance Fee for the Quarter

3. Including one-off expense incurred by writing-off MKIF's previous corporate loan facility arrangement fee by KRW1.6 billion

 

Traffic Results

 


Q1 2015 over Q1 2014

Asset

Traffic (%)1

Revenue (%)2

Weighted Average growth

9.6%

9.2%

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

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

For further information, please contact:

 

Jason Pak

Chief Operating Officer

Macquarie Korea Infrastructure Fund

+ 82 2 3705 8550

[email protected]

 

Ally An

Investor Relations

Macquarie Korea Infrastructure Fund

+ 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.



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

 

Statement of Financial Position

As at 31 March 2015, 31 December 2014 and 31 March 2014

 

             (Unit: KRW millions)


31 March 2015

31 December 2014

31 March 2014

Assets




Invested Assets

1,656,994

1,681,571

1,670,031

      Cash & deposits

26,097

48,864

24,274

      Loans receivable

1,077,794

1,079,604

1,092,654

      Equity securities

553,103

553,103

553,103

Others

473,375

462,936

402,296

      Interest receivables

465,582

455,070

392,412

      Other receivables

2,377

2,368

2,947

      Deferred costs, net

5,416

5,498

6,937

Total Assets

2,130,369

2,144,507

2,072,327





Liabilities




      Accounts payable

1

1

1

      Management fee payable

8,517

8,277

7,134

      Other liabilities

1,591

1,636

1,564

      Long-term debt

229,845

208,565

170,300

      Bond

249,554

249,510

249,377

Total Liabilities

489,508

467,989

428,376





Shareholders' Equity




Share Capital

1,670,986

1,670,986

1,670,986

Retained Earnings

(30,125)

5,532

(27,035)

Total Shareholders' Equity

1,640,861

1,676,518

1,643,951

Total Liabilities and Shareholders' Equity

2,130,369

2,144,507

2,072,327

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 may be subject to change

 



Statements of Income

For the quarters ended 31 March 2015 and 31 March 2014

 

          (Unit: KRW million)


Quarter Ended 31 Mar 2015

Quarter Ended 31 Mar 2014

Revenue

52,917

43,208

Interest income

44,908

43,208

Dividend income

                       8,000

-

    Other income

9

-




Expenses

13,997

13,922

Management fees

8,517

7,134

Custodian fees

81

82

Administrator fees

51

51

Interest expense

5,008

4,445

Other expenses

340

2,210




Net Income

38,920

29,286

 

 



Appendix 2. Traffic and Revenue

 

1.       Traffic Volume and Traffic Revenue - Portfolio Summary

 

On a weighted average basis[10], traffic and revenue increased by 9.6% and 9.2%, respectively, during the first quarter (the Quarter), when compared to pcp. Traffic growth of the portfolio during the Quarter was largely attributable to:

 

§ The three newer toll road assets[11] delivered stable traffic ramp-up of 10.3% growth on pcp

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

§  Traffic volume across Machang Bridge increased significantly by 28.5% during the Quarter 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, revenues for each toll road asset represents actual average daily revenue collected (excluding VAT). Actual revenue collected does not include minimum revenue compensation payments receivable from the relevant government authority or the toll freeze compensations related to the CPI growth. Accordingly, revenue performance in 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 to the traffic mix, between heavy and light vehicles, for which different toll rates apply.

 


2015 First Quarter

% of MKIF

Portfolioc

Asset

Traffic (%)a

Revenue (%)b

Incheon International Airport Expressway

11.6%

8.7%

6.7

Baekyang Tunnel

3.8%

3.9%

0.2

Gwangju Second Beltway, Section 3-1

6.7%

6.8%

4.2

Gwangju Second Beltway, Section  1

8.9%

8.7%

12.9

Woomyunsan Tunnel

6.9%

7.1%

1.3

Cheonan-Nonsan Expressway

8.2%

8.1%

16.6

Soojungsan Tunnel

6.7%

6.8%

5.7

Machang Bridge

28.5%

29.0%

6.9

Yongin-Seoul Expressway

11.2%

11.3%

8.3

Seoul-Chuncheon Expressway

7.3%

6.9%

8.3

Incheon Grand Bridge

12.2%

11.8%

10.0

Weighted Average

9.6%

9.2%

-

a           Percentage increase from prior corresponding period, based on average daily traffic.

b          Percentage increase from prior 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

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

60,846

54,534

11.6%

Average daily revenue (1,000 won)

365,887

336,709

8.7%

Note:       Opening of Cheongna IC in July 2013 still contributes towards traffic growth as the residential population of Cheongna and Yeongjong districts rose. Traffic volume growth was higher than revenue growth since the volume growth is driven by small vehicles travelling shorter sections of the expressway.

 

Baekyang Tunnel

Category

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

73,926

70,352

3.8%

Average daily revenue (1,000 won)

53,058

51,057

3.9%

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

 

Gwangju Second Beltway, Section 3-1

Category

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

34,376

32,216

6.7%

Average daily revenue (1,000 won)

36,300

33,979

6.8%

Note:       Traffic and revenue for the Quarter 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

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

42,374

38,921

8.9%

Average daily revenue (1,000 won)

44,698

41,116

8.7%

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

 

Woomyunsan Tunnel

Category

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

26,895

25,156

  6.9%

Average daily revenue (1,000 won)

58,142

54,308

7.1%

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

 

Cheonan-Nonsan Expressway

Category

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

47,702

44,072

8.2%

Average daily revenue (1,000 won)

398,412

368,439

8.1%

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

 

Soojungsan Tunnel

Category

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

46,541

43,603

6.7%

Average daily revenue (1,000 won)

33,973

31,804

6.8%

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

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

28,478

22,167

28.5%

Average daily revenue (1,000 won)

63,653

49,336

29.0%

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

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

77,761

69,929

11.2%

Average daily revenue (1,000 won)

139,447

125,342

11.3%

Note:       Traffic and revenue for the Quarter 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 79% of the CA forecast

 

Seoul-Chuncheon Expressway

Category

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

37,308

34,782

7.3%

Average daily revenue (1,000 won)

235,843

220,585

6.9%

Note:       Average daily traffic volume up to the end of the Quarter was 68% of the CA forecast

 

Incheon Grand Bridge

Category

Year on Year

1Q 2015

1Q 2014

% Change

Average daily traffic (vehicles / day)

35,522

31,672

12.2%

Average daily revenue (1,000 won)

184,184

164,699

11.8%

Note:       Traffic volume and revenue rose due to increase in residential population of Cheongna and Yeongjong 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 72% 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

-

April 2015

14,3822

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

-

April 2015

14,3795

Machang Bridge

6,984

6,984,

February 2015

-

Yongin-Seoul Expressway

15

-

February 2016

22

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 2013 (2010: 1,894mil, 2011: 1,321mil, 2012: 1,958mil, 2013: 2,673mil). 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 2013(2011: 935mil, 2012: 926mil, 2013: 943mil).  Deferred interest is currently in effect on the remaining amount and negotiation is underway with BMC

 



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

2. Yongin-Seoul Expressway, Seoul-Chuncheon Expressway and Incheon Grand Bridge

[3] .Five container terminals in the New Port area of Busan including BNP

4. Proportionately consolidated cash balance (including MKIF cash balance of KRW 26.1bn)

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

6. 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

7. Hedging (Fixed) = Proportionately consolidated MKIF net debt adjusted for fixed debt / Proportionately consolidated MKIF net debt

8. Rated by NICE Investors Service on 6 April 2015

[9]. For details of the award by consent, please refer to MKIF disclosure on 6 April 2015 

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

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


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