MIC Overview of the MIC Hawaii Segment December 2017 1 1. The contents of this presentation reflect financial and operating information through the period ended September 30, 2017, as reported on the Company s Form 10-Q which was filed with the Securities and Exchange Commission on November 1, 2017.
Important Notice This presentation provides a summary of the MIC Hawaii reporting segment of Macquarie Infrastructure Corporation (MIC). The purpose of this presentation is to provide external parties, including current and prospective investors and research analysts, an overview of MIC Hawaii and its key operating characteristics. For a complete discussion of MIC Hawaii s operations, actual results, performance, prospects, opportunities, and risks, this presentation should be read in conjunction with the Company s Form 10-Q, filed on November 1, 2017, and other materials filed with the SEC subsequently. This presentation by Macquarie Infrastructure Corporation (MIC) is proprietary and all rights are reserved. Any reproduction, in whole or in part, without the prior written consent of MIC is prohibited. This presentation is based on information generally available to the public and does not contain any material, non-public information. The presentation has been prepared solely for informational purposes, it is not a solicitation of any offer to buy or sell any security or instrument. This presentation contains forward-looking statements. Forward-looking statements in this presentation are subject to a number of risks and uncertainties, some of which are beyond our control. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. A description of known risks that could cause our actual results to differ appears under the caption Risk Factors in our Form 10-K filed with the SEC on February 21, 2017 and other materials filed with the SEC subsequently. Additional risks of which we are not currently aware could also cause our actual results to differ. These forward-looking statements are made as of the date of this presentation. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. Macquarie Group consists of Macquarie Group Limited and its worldwide subsidiaries and affiliates. MIC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and its obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MIC. Use of Non-GAAP Metrics In addition to our results under U.S. GAAP, we use certain non-gaap measures to assess the performance and prospects of our businesses. In particular, we use EBITDA excluding non-cash items, Free Cash Flow and certain proportionately combined financial metrics. Proportionately combined financial metrics reflect our proportionate interest in our wind and solar facilities. We define EBITDA excluding non-cash items as net income (loss) or earnings the most comparable GAAP measure before interest, taxes, depreciation and amortization and non-cash items including impairments, unrealized derivative gains and losses, adjustments for other non-cash items and pension expense reflected in the statements of operations. EBITDA excluding non-cash items also excludes base management fees and performance fees, if any, whether paid in cash or stock. We define Free Cash Flow as cash from operating activities the most comparable GAAP measure which includes cash paid for interest, taxes and pension contributions, less maintenance capital expenditures, which includes principal repayments on capital lease obligations used to fund maintenance capital expenditures, and excludes changes in working capital. Please review our Form 10-Q and press release, filed on November 1, 2017, for a complete discussion of our use of non-gaap metrics. PAGE 2
MIC Hawaii Business Overview MIC Hawaii focuses on providing low cost, clean, reliable energy to customers in Hawaii Comprises Hawaii Gas and other smaller businesses engaged in serving the Hawaiian energy complex Hawaii Gas comprises a regulated gas utility and an unregulated liquefied petroleum gas (LPG) distribution business Operates the state s only government franchised gas utility Processes and distributes gas to customers across Hawaii s six main islands Solar facilities, located on Oahu, were placed into service in 2016 Critchfield Pacific, a design-build mechanical contractor, acquired in 2016 Net Income 1 Key Statistics $28.4 million Kauai Geographic Footprint EBITDA excluding non-cash items 1 Cash from Operations 1 $63.2 million $36.3 million Oahu Headquarters SNG Manufacturing Plant Solar Facilities Molokai & Lanai Free Cash Flow 1 $38.2 million Net Debt/EBITDA excluding non-cash items 1,2 3.0x Solar Hawaii 1. For the twelve months ended September 30, 2017. EBITDA excluding non-cash items and Free Cash Flow are non-gaap measures. 2. Excludes renewable businesses in MIC Hawaii segment. PAGE 3
MIC Hawaii Hawaii Gas Processes and distributes synthetic natural gas, liquefied natural gas, and liquefied petroleum gas Operates the only gas processing plant in Hawaii Serves primarily Oahu Utility Products distributed via pipeline Regulated by the Hawaii Public Utilities Commission Fuel cost pass through mechanism Filed rate case in Aug 2017 Non-Utility Distributes liquefied petroleum gas Sources LPG supply from off-island producers and a local refinery Majority of customers located on islands other than Oahu Product is distributed primarily by truck and via centralized cylinder exchange Manages LPG costs with a hedging program running through 2019 Product Overview Synthetic Natural Gas (SNG): Converts naphtha into SNG SNG is similar in chemical composition and heating value to natural gas Liquefied Natural Gas (LNG): Utilizes cryogenic containers to transport LNG to Hawaii as a backup fuel for the SNG utility distribution system Anticipated to complete $13.9 million project to replace up to 30% of SNG gas demand with containerized LNG by end of 2017 Liquefied Petroleum Gas (LPG): A generic name for a mixture of hydrocarbon gasses, typically propane and butane Residential and commercial applications are similar to that of SNG and LNG Renewable Natural Gas (RNG): Engaged in initiatives to develop RNG In July 2017, received contract approval from regulators to off-take biogas from Honolulu s wastewater treatment facility; anticipate project completion in late 2018 PAGE 4
Therms (Indexed to 100) MIC Hawaii Hawaii Gas Fundamentals Stable financial performance supported by favorable economic, business characteristics Stable results have been supported by: Regulatory framework permitting pass through of fuel costs in the utility segment A focus on margin and contract management at the unregulated segment A portion of non-utility segment volumes are contracted for multi-year periods which reduces customer churn Long term volume growth linked to: Tourism Population growth (including military) Government spending New construction Share shift from electricity to gas 2016 visitor arrivals grew an estimated 3.0% y/y, reaching an all-time record level 1 State unemployment has consistently remained below the national average Weather has a minimal impact on overall demand (e.g. minimal heating demand) 105 100 95 90 85 80 75 70 65 60 Gas Volumes 2 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1. As reported by the Hawaii Department of Business, Economic Development, and Tourism. 2. Reflects utility and non-utility volumes PAGE 5
MIC Hawaii Growth Capital Expenditures MIC Hawaii has invested more than $90 million in growth projects, acquisitions since 2006 1 Recently approved investments include: Replacement of 30% of naphtha feedstock for Hawaii Gas s SNG plant with LNG Pipeline construction for biogas off-take from Honolulu wastewater treatment facility Additional investments in Hawaii have included: Waihonu solar facilities, comprising 7MW of generating capacity Acquisition of Critchfield Pacific, a design build mechanical contractor focused on energy efficiency Evaluating opportunities to develop a scalable state-wide LNG import, storage, and distribution program to supply multiple end markets 1. As of December 31, 2016. PAGE 6