#1A Auckland Airport Investment in North Queensland Airports 11 January 2010#2Contents • • Transaction Overview Investment Profile Fit with Growth Strategy North Queensland Airports Overview Investment Attractions - - - - Shared tourism objectives Upside potential Opportunity to add value Low future capital expenditure requirements Synergies with Auckland Risk diversification Compatible co-investors Appendices - Background to Cairns Background to Mackay Background to Tropical North Queensland Auckland Airport 2#3Transaction Overview • Purchase of 24.55% stake in North Queensland Airports (NQA), the operator of Cairns and Mackay Airports, for A$132.8m (NZ$166m) To settle on 13 January 2010, timing driven by vendor requirements Subject to NQA financier consents prior to settlement Initially funded from existing debt facilities Subsequently, the funding strategy is likely to involve a mixture of equity and debt consistent with Auckland Airport's current capital structure No impact on Auckland Airport existing credit rating of A- anticipated Good potential to work with Cairns as a strategic stepping stone to strengthen air services connections between New Zealand and Asia Rare opportunity to enter higher-growth Australian market and partner with key Australian airport investors Auckland Airport moved to secure this opportunity, having initially investigated it when North Queensland Airports was being privatised 12 months ago A measured step-out initiative for Auckland Airport in line with Growth Strategy announced earlier last year - modest investment representing ~5% of Auckland Airport total assets No material impact from this transaction on Auckland Airport dividends A Auckland Airport 3#4Overview: Cairns and Mackay locations QUEENSLAND Thursday Is Cape York Gulf of Cape Great Weipa o Carpentaria Carpentaria York Barrier Coral Sea 0- 200 km 0 120 miles •Cooktown Peninsula Reef Great Dividing Karumba Burketowno Normanton • Cairns OInnisfail SOUTH PACIFIC OCEAN NORTHERN •Townsville TERRITORY Mt Isa o Cloncurry Charters o Towers • Airlie Beach Winton o Boulia Range ☑Mackay Longreach o Emerald Bedourie • Barcaldine Rockhampton • Gladstone Windorah Bundaberg Birdsville o SOUTH AUSTRALIA Thargomindah Cunnamulla Charleville Roma Miles Noosa Heads Hervey Bay Caloundra Toowoomba Brisbane NSW Surfers Paradise A | Auckland Airport 4#5• Attractive Investment Profile Expected equity internal rate of return on Auckland Airport's investment in North Queensland Airports in the mid-teen percentages Purchase price slightly above price paid to State a year ago in the depths of the global financial crisis, and since then: The A$200m Cairns domestic terminal upgrade has largely been completed and a new strategic agreement with Jetstar has been announced High recent capex positions Cairns well for "capex-lite growth"- meaning cashflow is forecast to exceed accounting earnings Superior growth prospects of Cairns/Mackay Airports as tourism and economic conditions rebound and the full benefits of coming out of government ownership emerge Purchase price represents an implied prospective EV/EBITDA multiple higher than Auckland Airport's trading multiple, reflecting the turnaround growth outlook Likely to have small dilutive effect on Auckland Airport earnings per share which will improve as Cairns Airport recovers from downturn in direct international passenger numbers A Auckland Airport 5#6Fits with our step-out strategy Our highest value growth step-out option is to invest in other airports through which we can drive synergies with and volume. for our core business at Auckland Our main value driver is growth in international passenger volumes through Auckland Airport Asian tourism markets offer the greatest opportunity for long-term volume growth One key enabler to growing Asian traffic is improved air services connections While our ultimate goal is direct Asian connections with Auckland, an important parallel approach is to strengthen connections with other strategically located airports AUCKLAND AIRPORT MAXIMISING A OUR CORE FLIGHTPATH FOR GROWTH AUCKLAND AIRPORT A WIN-WINA FLIGHTPATH FOR GROWTH AUCKLAND AIRPORT A FIGHTING FIT FLIGHTPATH FOR GROWTH A A AUCKLAND AIRPORT Short-haul OPPORTUNITIES FLIGHTPATH FOR GROWTH AUCKLAND AIRPORT A LONG-HAUL OPPORTUNITIES FLIGHTPATH FOR GROWTH A A Auckland Airport CO 6#7North Queensland Airports Overview Operator of Cairns and Mackay Airports Privatised by Queensland Government approximately 12 months ago. Shareholders: Auckland Airport JP Morgan Infrastructure Investments Fund (advised by JP Morgan Asset Management) The Infrastructure Fund (Hastings-managed) Perron Investments 24.55% (acquired from Westpac Bank) 49.90% 20.12% 5.43% Shareholders holding more than 20% are entitled to appoint a director and have veto rights on major decisions Estimated and summarised North Queensland Airports balance sheet as at 31 December 2009: Equity Debt Other liabilities A $m A $m 489 Property, Plant, Equipment 577 365 Prepaid operating lease. 42 35 Other 59 Goodwill 211 Total Assets 889 Total Shareholders' Equity and Liabilities 889 A | Auckland Airport Source: unaudited management information provided by NQA 7#8Cairns Airport Overview • Represents around ¾ of the purchase price Cairns, airport • • • • Australia's seventh busiest airport with 680,000 international pax, 3.0m domestic pax in FY09. Gateway to Tropical North Queensland, a major Australian leisure destination: - - Two World Heritage listed attractions (Great Barrier Reef and Wet Tropics Rainforests) Serviced by Qantas, Jetstar, Virgin Blue, Cathay Pacific, Air New Zealand, Continental Airlines, Air Niugini and Airlines PNG (and soon to be Pacific Blue) International pax volumes down from over 1m pa in 2007 to ~0.5m in FY10; partly due to decline in Japanese visitors (withdrawal of Qantas services, a general reduction in Japanese outbound leisure travel and a significant Australian dollar appreciation against the Yen) Well positioned to rebound and benefit from increasing Asian inbound tourism: Australia's closest east coast airport to rapidly growing Asian markets - - New long term strategic agreement with Jetstar with sights on Asia Recently-announced Australian Federal Government tourism and airline support packages and Queensland State Government tourism promotional initiatives Domestic passenger volumes grown strongly over the last decade and expected to maintain that growth trend Ample terminal capacity for international growth and close to completing a A$200m redevelopment of domestic terminal A Auckland Airport 8#9Mackay Airport Overview • • • • Represents around 14 of the purchase price An important regional airport, benefiting from the strong resources industry and location close to the Whitsunday Islands Access point to Bowen Basin, one of largest coal-mining regions in the world. containing over 70% of known coal reserves in Queensland 946,000 domestic pax in FY09 (passenger volumes have more than trebled since 2002) Serviced by Qantas, Jetstar, Virgin Blue, Tiger Airways and Regional Express Refer to Appendix B for further information A Auckland Airport Mackay Airport 9#10Routes A To UK/Europe Thailand Malaysia Narita (7) Japan Osaka China Commencing I April 2010 Hong Kong (6) Taiwan Singapore (7) Philippines Guam (3) Indonesia Port Moresby (17) Darwin (10) Papua New Guinea Ayers Rock (14) Alice Springs (7) Cairns Brisbane (77) Gold Coast (3) Perth (3) Sydney (66) Adelaide (4) Auckland (4) Melbourne (31) New Zealand | Auckland Airport Qantaslink Jetstar Virgin Blue ■■■■ Tiger Airways Caims Townsville MACKAY Major Domestic Flights International Routes *** ******* Gladstone Brisbane Sydney Melbourne 10#11Investment Attractions • Shared tourism goals • Good upside potential for investment Opportunity to add value. Low future capex requirements Synergies with Auckland • Risk diversification Influential and compatible co- investors A | Auckland Airport 11#12Forecast Asian Visitor Arrivals to Australia 17.0% 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% Total Asia Japan China Singapore South Malaysia Hong Korea Kong India Indonesia Other Asia Shared tourism goals Shared objective to drive passenger volume growth from high growth Asian markets Air services development is a major focus Australia has higher growth targets for Asian market: forecast 7.0% p.a. growth for Asian visitors to Australia 2009-2014, versus New Zealand 3.8% p.a. Australia is forecast to continue to grow strongly until at least 2018 - see chart opposite) • Cairns particularly well placed to benefit as tourism and economic conditions improve - Well located within 5-7 hours flying distance of China and a number of rapidly growing Asian tourism markets 2009-2018 CAGR A | Auckland Airport Source: Tourism Australia 12#13Good Upside Potential for Investment Opportunity to re-generate leisure traffic by targeting Australian and Asian low cost. carriers The Australian Government announced in December 2009 a package of air services. development initiatives • • Tourism marketing commitments (in excess of A$45m over 3 years) have been made Foreign airlines that make stopovers at regional international airports will be offered greater access to the four major gateway airports of Sydney, Melbourne, Brisbane and Perth Significant retail enhancement and longer term property development opportunities at both Cairns and Mackay Airports flavours australian prodes DESPREADING T 免稅店Duty Free STO AND DUTY FREE A Auckland Airport 13#14Opportunity to Add Value • Auckland Airport will be the only shareholder of Cairns/Mackay which is an airport operator • Auckland Airport's support will be required for major decisions including changes to the business plan • North Queensland Airports management welcome Auckland Airport's involvement and look forward to developing opportunities together • · Potential to contribute world-class expertise in route development, retail and property development Opportunities to leverage relationships with suppliers, contractors and corporate service providers on a multi-airport basis WORLD AIRPORT WINNER SKYTRAX AWARDS 200 A | Auckland Airport 14#15Low Future Capex Requirements A$200m domestic terminal redevelopment at Cairns is close to completion with no substantial capital expenditure expected for a number of years thereafter • Direct international passenger volumes are currently ~50% of what they were at their peak, so substantial capacity in existing international terminal Overall capital expenditure required to support projected growth in passengers is low A | Auckland Airport 15 OPAL#16. · . Synergies with Auckland While North Queensland Airports has been valued as a stand-alone investment we believe there is significant synergy potential Air services development: encourage airlines to use Cairns as a 'stepping stone' to strengthen connections between Auckland and Asia . Currently 16 international airlines flying to airports on Australian eastern seaboard do not fly to NZ • Tourism marketing: leverage the dual-destination attraction of Tropical North Queensland and New Zealand • Of the 700,000 overseas visitors annually to Tropical North Queensland, only a small proportion fly onto NZ NZ outbound travel: only 9% of New Zealanders travelling to Queensland currently visit Tropical North Queensland • Within five years the potential benefits to Auckland Airport are estimated to be at least ~100,000 additional pax pa – delivering incremental EBITDA of ~NZ$2.0-2.3m pa - which will deliver over $100m annual benefit to the NZ economy. A | Auckland Airport TRANS TASMAN ASIA EUROPE MIDDLE AMERICAS PACIFIC ISLES UMESTIC 16#17• Risk Diversification Whilst the investment represents only 5% of Auckland Airport's total assets it does provide an element of risk diversification by: • exposure to the higher growth Australian tourist and Queensland resources economies • North Queensland Airport's revenue is 100% unregulated (c.f. Auckland Airport ~53% regulated) A | Auckland Airport 17#18A Influential and Compatible Co-investors We are investing alongside two experienced long-term investors: • • - Hastings is the leading Australian multi airports investor. Hastings- managed funds have significant investments in other Australian airports Perth, Gold Coast, Darwin and Melbourne which have combined pax of ~47.3m pa JP Morgan Asset Management's Infrastructure Investments Group is a major infrastructure/airport investor with a global footprint and funds under management in excess of US$3bn #Hastings Funds Management Limited J.P.Morgan Asset Management Auckland Airport 18#19Appendix A Background to Cairns Airport A | Auckland Airport 19#20• Additional Information on Cairns Airport Cairns Airport is located approximately 7 km from the Cairns CBD The key driver of passengers is tourism, with a smaller secondary driver of mining/business Cairns Airport is the closest airport on Australia's east coast to a number of rapidly growing Asian markets. For example, flying time to Hong Kong is approximately 7 hours, to Singapore is approximately 6 hours. The airport has direct flights to all Australian capital cities with the exception of Hobart and a high number of regional destinations are also serviced from Cairns Aeronautical and other charges are determined by negotiation. with airlines and are not currently regulated (the ACCC will only intervene in cases of abuse of market power) No curfew, operating 24 hours, 7 days a week. Was owned by Cairns Port Authority until January 2009, when it was sold by the Queensland State Government to the IIF/TIF/Westpac/Perron consortium. A Auckland Airport 20#21Cairns Airport Facilities Cairns Airport has a main north-south runway (3,196m) and a smaller cross runway (925m) for general aviation. The international terminal is a 3 level building with a total floor area of 25,419m² A major A$200 million redevelopment of the domestic terminal (which will bring the total floor area of the terminal to 37,545m2) is due for completion in the second half of 2010 and will accommodate significant future growth The international apron has 9 stands, 5 of which are served by aerobridges. The domestic apron has 14 stands, and will have 5 aerobridges following completion of the domestic terminal redevelopment The international terminal has 225 parking spaces. Following completion of the domestic terminal redevelopment there will be approximately 1,000 domestic parking spaces The international terminal provides approximately 3000m² of retail space with significant opportunities for enhancement. Following completion of the domestic terminal development, the domestic terminal will have an improved retail offering with 21 tenancies There will be 328 rental car bays following completion of the domestic terminal redevelopment A Auckland Airport 21 221#22Recent Developments for Cairns Airport Jetstar increased services; - - Reintroduction of 4 flights a week between Cairns and Osaka, commencing in April 2010 Addition of 18 additional flights a week between Cairns and Sydney, Melbourne, Perth and Adelaide Pacific Blue have announced they will be flying twice a week direct between Cairns and Auckland commencing in March 2010 In November, Cairns Airport announced a long-term strategic agreement with Jetstar, which is structured to incentivise international passenger growth prospects for the Tropical North Queensland region - Includes a working group with Tourism Tropical North Queensland, Tourism Queensland, Tourism Australia, the Queensland Government and Jetstar to ensure marketing efforts are maximised and to develop a forward plan for route development opportunities In December, the Australian Federal Government announced important new initiatives to help make regional international airports, such as Cairns Airport, even more attractive ports of call for international airlines and tourists Foreign airlines that make stopovers at regional international airports will be offered greater access to the four major gateway airports of Sydney, Melbourne, Brisbane and Perth In future bilateral negotiations, foreign airlines will be offered greater "beyond rights" from regional international airports to New Zealand and/or the Pacific Islands (subject to agreement by those countries). Auckland A Airport 22#23Cairns Airport Passenger Numbers • Overall passenger numbers declined 4.0% in 2009 to 3.7 million due to a decline in international passengers, particularly from Japan Overall CAGR between 2003 and 2009 of 3.0%, driven by strong growth in domestic passengers offsetting a decline in international passengers It has been estimated that 40% of passengers who travel on the Cairns Airport domestic network are international passengers who, due to the limited direct international services into Cairns Airport, transit or stopover at other Australian capital city airports. 3.5 m 3.0 2.5 2.0 1.5 1.0 0.5 A 2003 2004 Source: Cairns Port Authority Auckland Airport Domestic International 2005 2006 2007 2008 2009 2003-09 CAGR % Domestic 6.0% International (5.4%) Total 3.1% 23#24Cairns Historical Financials A$m, financial year to June FY06 FY07 FY08 FY09 CAGR FY06-09 Revenue 61.3 63.0 66.4 57.6 (2.1%) Expenses* EBITDA * (14.2) (15.7) (18.2) (20.5) 13.0% 47.1 47.3 48.2 37.0 (7.7%) Non- Aeronautical 40% FY09 Revenue Breakdown Aeronautical 60% Property Rentals 28% Retail and Advertising 35% Ground Transport 37% Total Revenue A$57.6m Total Non-Aeronautical Revenue A$23.1m *Source: NQA. FY06-08 under public ownership Cairns Airport was part of Cairns Port Authority and not a standalone airport and the above results do not include any allocation of corporate costs. FY09 figures are estimates and represent a combination of the financial results of the three different ownership regimes and are inclusive of corporate costs. A | Auckland Airport 24#25A Appendix B Background to Mackay Airport | Auckland Airport VH-ZLH STACARIERIRPORT 25#26• A Additional Information on Mackay Airport Mackay is an important regional centre in North Queensland and has a population of around 90,000 Mackay Airport is located approximately 5 km from the Mackay CBD and served approximately 946,000 passengers in FY09 The key driver of passengers is coal mining/business, with a smaller secondary driver of tourism (given proximity to over 74 Whitsunday Islands and Central Queensland) The major mines in the Bowen Basin coalfields are typically within 2 to 2.5 hrs driving time from Mackay. Strong economic growth in the region since coal prices began to rise rapidly in 2002, has seen passenger numbers more than treble in the last 8 years Mackay Airport has direct flights to Brisbane, Sydney, Melbourne and a number of regional destinations in Queensland Aeronautical and other charges are determined by negotiation. with airlines and are not currently regulated (the ACCC will only intervene in cases of abuse of market power) No curfew, operating from 5:15am to 9:00pm, 7 days a week Auckland Airport Qantaslink Jetstar Virgin Blue Tiger Airways Caims Townsville MACKAY Gladstone OSydney Melbourne Brisbane 26#27• • • • Mackay Airport Facilities Mackay Airport has a main runway (1,981m) and a smaller cross runway (1,344m) for general aviation The terminal is generally single storey and contains a 500m2 concourse area, a 815m2 departure level and a 450m2 outdoor seating area 13 check-in desks and 6 car rental desks • 2 baggage carousels (45m each) The aircraft parking aprons have been designed to accommodate up to A320, E190 or B737-800 on Bays 1 to 4, Dash 8-300 / 400 on Bays 1 and 5 and a B767 on bay 1a The airport has approximately 1,030 car parks for the public, staff and car rental companies There are currently 2 retail outlets at the airport, with significant opportunities to expand the offering MACKAY HIRPORT A Auckland Airport 27#28Mackay Airport Passenger Numbers • • 1.0 m 0.8 0.6 0.4 0.2 A Passenger numbers at Mackay increased 13.0% in 2009 to 940,000 passengers Overall CAGR between 2003 and 2009 of 17.1%, driven by the development of the Bowen Basin coal fields and the associated impact of the "fly in - fly out" workforce 2003 Source: Mackay Ports 2004 2005 2006 2007 2008 2009 Auckland Airport 2003-09 CAGR % Domestic 17.1% 28#29Mackay Historical Financials A$m, financial year to June FY06 FY07 FY08 FY09 CAGR FY06-09 Revenue 9.9 12.0 14.1 16.2 17.8% Expenses EBITDA (4.1) (4.7) (4.8) (5.0) 6.8% 5.8 7.3 9.3 11.2 24.5% FY09 Revenue Breakdown Non- Aeronautical 30% Aeronautical 70% Property Retail and Rentals Advertising 10% 10% Ground Transport 80% Total Revenue A$16.2m A | Auckland Airport Total Non-Aeronautical Revenue A$4.9m *Source: NQA. FY06-08 under public ownership Mackay Airport was part of Mackay Port Authority and not a standalone airport and the above results do not include any allocation of corporate costs. FY09 figures are estimates and represent a combination of the financial results of the three different ownership regimes and are inclusive of corporate costs. 29#30A Appendix C Background to Tropical North Queensland | Auckland Airport 30#31Overview of Tropical North Queensland The Tropical North Queensland region (covering approximately 270,000 km2) is internationally recognised as a premier tourist destination Tropical North Queensland has an estimated population of approximately 262,000 and attracted more than 2.2 million overnight visitors in FY09. According to Tourism Queensland, visitors spent over $2.4 billion in the Tropical North Queensland region during 2009 Key Tropical North Queensland attractions include the Great Barrier Reef; Wet Tropics rainforests, and tropical island retreats More than 11,000 guest rooms, representing 5.1% of all guest rooms in Australia Thursday Island & Weipa A | Auckland Airport Gulf of Carpentaria Cape York Peninsula NT WA SA Coral Sea Great Barrier Reef Cooktown Port Douglas Cairns Outback Tourism Region Northern Tourism Region Tourism Region Highway SLA boundary International Airport Town Source: ABS Cat. No. 1353.0 (Integrated Regional Database). QLD NSW ACT VIC 600 kilometres TAS 31#32A TNQ tourism market • • • · In 2008/09, around 24% of holiday visitors to Australia had a stopover at Tropical North Queensland during their time in Australia, ranking third behind Sydney and Melbourne The region is also a highly popular destination for Australians, receiving over 1.5 million domestic overnight visitors and over 2 million day trip visitors during 2009 Tourism Australia is predicting strong tourism growth for Australia from India (14.8% 2008-2018 CAGR), China (10.3%) and a number of other Asian countries Tropical North Queensland has an opportunity to benefit from this predicted growth and decrease its historical reliance on Japan. Approximate FY09 Breakdown of Visitors to Tropical North Queensland by Country of Residence Other 31% Japan 18% Canada 4% China 5% New Zealand USA 5% Germany 7% 12% United Kingdom 18% | Auckland Airport Source: Tourism Australia, International Visitor Survey 32#33Australia has higher ambitions than NZ for Asian tourism growth Asia NZ Asia Aus Sources: Tourism New Zealand and Tourism Australia figures and forecasts 2,021,000 2,018,000 3,060,000 2,893,000 2,702,000 2,524,000 2,348,000 2,236,000 2,210,000 2,231,000 2,124,000 2,078,000 2,117,000 2,159,000 2,042,000 1,917,000 544,474 432,801 463,519 489,580 529,516 519,560 512,084 502,422 450,049 404,620 434,180 461,920 489,210 515,600 542,740 364,000 2000 2001 2002 2003 2004 Auckland A Airport 2005 2006 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f 2015f