on the right track: continuous improvement in p3 delivery...$180 million of new lanes in 2006/2007...
TRANSCRIPT
On The Right Track:Continuous Improvement In P3 Delivery
BMO Capital Markets Infrastructure & Utilities Conference
January 29, 2009
DISCLAIMER/DISCLOSURE
This presentation has been prepared by 407 ETR.The financial information presented is taken from quarterly and year-end statistics that have been disclosed publicly over 2006, 2007 and 2008.All financial amounts are shown in Canadian dollars unless otherwise indicated.Additional information relating to 407 ETR and or 407 International,
including the 2007 Annual Information Form dated January 31, 2008, can be accessed on SEDAR.The statements about expected future events and financial and operating results are forward-looking. Forward-looking statements may include words such as anticipate, believe, could, expect, goal, intend, may, outlook, plan, strive, target and will. These statements reflect internal projections, expectations, future growth, performance and business prospects and opportunities, and, as they are subject to a number of risks anduncertainties, you are cautioned not to put undue reliance upon such statements as they may differ from actual results and developments.
2
AGENDA
Current Global Economic Challenges
Implications for 407 ETR
2009 Toll Rate Changes
Recent and Planned Infrastructure Improvements
Key Financial Measures
Key Operational Measures
Continued Customer Service Improvements
Continued Efficiency Improvements
3
GLOBAL ECONOMIC CHALLENGES
4
GAS PRICES
5
Regular GasPrice (CAD c/L)
DECLINE IN DRIVING
6
Monthly US Traffic 2000 to 2008
2,500
2,600
2,700
2,800
2,900
3,000
3,100
Jan-0
0Ju
l-00
Jan-0
1Ju
l-01
Jan-0
2Ju
l-02
Jan-0
3Ju
l-03
Jan-0
4Ju
l-04
Jan-0
5Ju
l-05
Jan-0
6Ju
l-06
Jan-0
7Ju
l-07
Jan-0
8Ju
l-08
Date
Mile
s Tr
avel
led
INTERNATIONAL TOLL ROADS
7
Impact of economy and gas prices being felt on toll roads around the world
Foothill/Eastern Tollroads (Cal.) down 7% in Q4Chicago Skyway down 9.2% in Q4M6 Toll (UK) down 11.5% in Q4Indiana Toll Road down 16.4% in Q4Public Border Operators Association (11 border crossings in the Great Lakes/St. Lawrence area) down 12.4% in Q4
Including Ambassador Bridge down 22.9% in November and 19.3 % in December 08
While 407 ETR has been affected by the economy and poor weather, the economic impact has not been as dramatic as other concessions
407 ETR Q4 traffic down 1.5%
8
Weekday Trips by Month
225,000
250,000
275,000
300,000
325,000
350,000
375,000
400,000
425,000
Janu
ary
Febru
ary March
April
MayJu
ne July
Augus
t
Septe
mber
Octobe
r
Novem
ber
Decem
ber
Month
Num
ber
of T
rans
actio
ns
2003 2004 2005 2006 2007 2008
407 ETR TRAFFICAverage Workday Trips
IMPLICATIONS FOR 407 ETR
9
Demand for 407 ETR is still relatively strong, especially:In peak hoursAmong customers with transpondersIn specific sections (“zones”) of the highway
However, in mid- to late-2008, we started to experience:Less off-peak travelLess travel by video usersShorter trips – particularly by video usersDiffering demand in different sectionsTruck traffic down on all routesAs a result of Plate Denial, some customers are no longer using our highway
Contract provides flexibility to manage traffic volumes
2009 toll rates use different tools to address these issues
2008 – Three zones with two price levels
ZONE TOLLING CHANGES
10
2009 – Two zones with two price levels
PEAK VERSUS OFF-PEAK PRICING
11
Highest Peak Rate to increase by 3.1% from 19.25 to 19.85
Off-Peak Rate will be held at 2008 levels (i.e. 18.00 cents/km)
TRIP TOLL CHARGE
12
Introduction of a new Trip Toll ChargeCharged for every trip on the highwayBased on vehicle size:
25 cents for light vehicles50 cents for heavy vehicles75 cents for heavy multiple vehicles
Trip Toll Charge will:Offset decreases in average trip lengthReduce congestion caused by short tripsIncrease revenue opportunities
TARGETED FEE REDUCTIONS
13
Monthly Transponder
Lease Feereduced from
$2.55 to $2.50.Video Account Feereduced from $2.55
to $2.50.
Video Toll Chargereduced from $3.60
to $3.25.
SUMMARY OF TOLL RATE CHANGES
14
ü Continues the use of Zone Tolling
ü Increases difference between Peak & Off-Peak pricing
ü Uses new levers available under the contract, including the new Trip Toll Charge
ü Targeted reductions to fees to influence usage
We are fine-tuning our tolling structure, using the flexibility available in the
contract to maximize value.
CONSTRUCTION AND INFRASTRUCTURE
15
407 ETR has invested over $1.1 billion since 1999!
New Lanes Added By 407 ETRØ 420 new lane kilometresØ 74 new ramps
3 + 3 Lanes
2 + 2 Lanes
2 + 2 Lanes1 + 1 Lanes
2 + 2 Lanes
IMPACT OF NEW LANES
17
PLANNED CONSTRUCTION
18
$70 million of planned highway construction spending in 2009
1. E1 New Lanes:Addition of one new lane in each direction between Markham and York Durham Line
2. C7 Structures (404 to Markham):Widening bridges in preparation for new lanes in 2010
3. 401 Structures:Widening of both the EB and WB bridge structures at the 401/407 interchangeA very complicated project in 2009 and 2010 to allow new lanes in 2011
KEY FINANCIAL MEASURESRevenues (in $000's)
0
100,000
200,000
300,000
400,000
500,000
600,000
2004 2005 2006 2007 2008
Operating Expenses (in $000's)
0
20,000
40,000
60,000
80,000
100,000
120,000
2004 2005 2006 2007 2008
EBITDA (in $000's)
0
100,000
200,000
300,000
400,000
500,000
2004 2005 2006 2007 2008
Revenue/Trip and Expenses/Trip
0.001.002.003.004.005.006.007.00
2004 2005 2006 2007 2008(Q1-Q3 average)OpEx/Trip
Rev/Trip
19
DEBT MATURITY PROFILE
20
-
-
-
100
200
300
400
500
600
700
800
900
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040
Junior Bonds
Senior Bonds
Subordinated Bonds
Senior Amortizing Payments
Real Return Bonds
**
*
*Refinanced with bond offerings in January 2009(2012 add $300 senior, 2014 add $200 senior)
KEY OPERATIONAL MEASURES
21
Transponders In Circulation (000s)
0
100
200
300
400
500
600
700
800
900
1,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Transponder Penetration Percentage
60
65
70
75
80
85
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Unbillable Percentage
0
1
2
3
4
5
6
7
8
9
2000 2001 2002 2003 2004 2005 2006 2007 2008
2008 figures up to Q3
KEY OPERATIONAL MEASURES
22
Number of Escalated Complaints
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2004 2005 2006 2007 2008
Bills Mailed (000s)
0
5,000
10,000
15,000
20,000
25,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Number of Personal and Business Calls (000s)
0
200
400
600
800
1,000
1,200
1,400
1,600
2003 2004 2005 2006 2007 2008
CUSTOMER SERVICE EXCELLENCE
23
Winner of a 2008 Canadian Council for Public-Private Partnerships National Award for Excellence in Service Delivery
$180 million of new lanes in 2006/2007$40 million ETR Rewards loyalty program$110 million of customer service improvements
ISO 9001:2000 CertifiedNotified of certification on January 13, 2009Committed to continuous improvement and achieving the utmost Quality in the products and services we offer to meet the needs and expectations of our customers
CONTINUED SEARCH FOR EFFICIENCIES
24
RIN projectUsing MTO Registered Identification Number (RIN) to improve customer service, reduce number of bills going to customers (i.e. loose accounts), consolidate loose accounts, etc.
eBillingNumber of registrations continued to grow in 2008Over 80,000 customers receive electronic bills, reducing postage and paper costs and improving ability to communicate through email
Online ServicesPAC/PAD enrolments, online payments, online address changes and online transponder leases remain strong
“407 ETR’S MOST WANTED”
25
“Customer Drops Plate While Cops Wait”
Acura uses 407 with plate lowered several times.
One day, the exact same vehicle is spotted with the plate
raised, allowing 407 ETR to identify the driver.
OPP set up a “sting” at the commuter’s usual entrance and
usual morning drive time.
Vehicle is spotted by OPP with plate lowered and is pulled over by
the OPP on the highway.
Cable between back seat and plate is discovered.
Driver cut cheque for all outstanding tolls. Crime doesn’t pay!
QUESTIONS?
26