Dear Securityholder,
Transfield Services Infrastructure Fund (TSI Fund) had a successful first full year of operations, delivering returns above the guidance in our Product Disclosure Statement (PDS).
TSI Fund has delivered a full year distribution of 17.7 cents per stapled security for the year ended 30 June 2008. The payment of this distribution reflects the strong performance of TSI Fund and is 0.6 cents above PDS guidance. The tax deferred component is 63 per cent.
Net profit after tax was $25.7 million, up 25 per cent on PDS guidance. Earnings before interest, tax, depreciation and amortisation were $92.9 million, up 17 per cent on PDS guidance. Net interest, operating capex and FY2008 distributions were fully funded from operating cash flow. TSI Fund also secured new debt facilities which are in place until 2011, mitigating exposure to fluctuations in the debt market.
Based on our distributions for the current year, TSI Fund is targeting growth in distributions of three per cent per annum for the medium term.
The strength of TSI Fund’s financial performance is underpinned by the substantially contracted revenue stream from our portfolio of essential infrastructure assets.
TSI Fund differs from other infrastructure funds in the market because of the benefits of our relationship with Transfield Services. Transfield Services is an expert asset management company and we have direct access to its market position and expertise in asset development, operations and maintenance.
Transfield Services holds a 49 per cent interest in TSI Fund, manages TSI Fund and is the preferred provider of asset management services for our wholly-owned assets. This creates strong alignment between the two organisations.
TSI Fund’s portfolio of essential infrastructure assets was strengthened with the addition of renewable energy assets in December 2007. We now have four wind farms in Australia and access to another 13 potential wind farms in joint development with Transfield Services. These are all high quality sites which position us for growth in the renewable energy sector in the medium to long term.
Our investment in wind energy assets will become increasingly attractive under the Australian Government’s proposed National Renewable Energy Targets Scheme and Carbon Pollution Reduction Scheme (CPRS).
Our power assets, with the exception of Loy Yang A, are substantially protected from CPRS impact by their contractual arrangements. Loy Yang A will be impacted if the proposed changes are implemented. The direction of the Australian Government’s Green Paper supports the long-term viability of the plant and TSI Fund’s investment. Loy Yang A is essential infrastructure that supplies one-third of Victoria’s power needs. It has the lowest carbon footprint of Australia’s brown coal generators.
We are working with the Australian government, industry associations and other stakeholders to provide input on the design of CPRS.
TSI Fund is well positioned to continue to perform strongly and deliver attractive returns to securityholders.
I would like to thank our people and the Manager, Transfield Services, for contributing to our successes during our first full year of operation.
Your Directors and I thank you for your support.
Yours faithfully,
Peter Young AM
Chairman