Infratil spends $50M on Scottish airport

By Phil Boeyen, ShareChat Business News Editor

Monday 22nd January 2001

Utilities and infrastructure investor Infratil (NZSE: IFT) has bought a majority shareholding in Scotland's Glasgow Prestwick International Airport.

The company, which is the majority owner of Wellington Airport, is buying into the UK airport though a consortium with UK utilities investor, the Special Utilities Investment Trust.

Infratil is fronting up with £14.8 million (NZ$48.5 million) of the total purchase price of £26.1 million plus repayment of inter-company loans of £7.3 million. Special Utilities is providing £5 million.

The consortium will take a 90% stake in the airport with the remaining 10% to be owned by Omniport, a specialist local Scottish investor and service provider to regional airports which is paying £2.2 million for its share.

The rest of the purchase price is being funded through bank debt.

The airport is being bought from international transport group Stagecoach who purchased it in 1998 for £41 million. Stagecoach owns a number of transport services in New Zealand and at one stage was interested in buying Wellington Airport.

Infratil says Glasgow Prestwick is located around half an hour by road from Glasgow and last year handled over 900,000 passengers, but has significant spare capacity, with the ability to handle in excess of two million passengers. It says this could be increased to around three million without significant additional capital expenditure.

The airport has two runways able to handle long-haul wide-bodied aircraft and is sited on 340 hectares of land that Infratil says provides opportunities for commercial development of aeronautical and non-aeronautical facilities.

Prestwick is forecast to generate revenue of around £25 million in the year to the end of April 2001 with earnings before interest, tax, depreciation and amortisation at £3 million before abnormal items.

Infratil chairman, Kevin O'Connor, says the company will be looking for growth from its investment.

"From its current base we expect Prestwick to show sound earnings growth, given both the underlying prospects for further expansion in passenger and freight volumes and the scope for operating efficiencies."

The purchase of Glasgow Prestwick is Infratil's first offshore investment and represents around 10% of the company's investing portfolio.

Mr O'Connor says the acquisition flows from the in-house airport expertise of the company's manager, Morrison & Co, which has been involved in assessing a number of European airport investments over the last three years.

"By utilising this knowledge base, and working with local partners that add complementary skills, Prestwick provides an appropriate risk profile for Infratil's first offshore investment.

"It provides an exposure to the high growth UK regional airport sector which is benefiting from the increasing market share of low cost carriers in the European aviation market."

Mr O'Connor says the company will continue to review its total international exposure and, in the medium term, international investments are unlikely to exceed 20% of Infratil's total portfolio.

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