Adani Abbot Point Terminal has released its full year accounts to 31 March 2015. The terminal has delivered a solid financial performance which is in line with expectations. The result reflects the relatively stable nature of the terminal’s cash flows generated from its ‘take-or-pay’ user agreements
Adani Abbot Point Terminal (AAPT) has released its full year accounts for the year ended 31 March 2015 (FY15). The financial performance has been in line with expectations, reflecting the terminal’s stable cash flows generated from its take or pay user agreements.
Given the nature of the asset, being an infrastructure terminal tied to the export of coal, cash flow is one of the key determinants of credit performance. The company uses the cash flow cover ratio (CFCR) as a measure of its cash flow performance and as part of its debt covenants. Essentially, the CFCR represents the ratio of the terminal’s net operating cash flows to its senior debt servicing obligations over a particular reporting period. At FY15 this ratio was 2.54 times which means the company’s net operating cash flows exceeded its debt servicing obligations by 2.54 times in FY15. As a guide, this compares favourably to Sydney Airport’s most recent CFCR of 2.3 times.
The key points from the FY15 results are set out below. Note that the FY15 performance reflects almost fully contracted capacity at the terminal, and as such the FY15 result exceeds the prior year performance because terminal capacity during FY14 was still ramping up. FY16 will be the first full reporting year at which the terminal will be operating at its fully contracted capacity of 50 million tonnes per annum.
- Total revenue of $263.1m is up 22% on the prior year as a result of the ramp up in terminal capacity, with full year EBITDA of $191m in line with expectations
- CFCR of 2.54 times is comfortably above the lock-up and default ratio covenants of 1.40 times and 1.10 times respectively
- The company handled 28.4m tonnes of coal in FY15, up 30% from the coal handled in the previous 12 months. While this is less than the full 50m tonnes of available capacity at the terminal, the company’s infrastructure charges are based on the full contracted capacity of the terminal. As such, AAPT is not exposed to the volume risk of actual tonnes handled being less than contracted
- Financial leverage has increased as a result of the increase in debt over the year. As flagged in the new issue research report, total debt has settled at around $1.55bn following the FIIG bond and two US private placement bonds issued over the course of FY15. As a result, the issuer’s gearing ratio (debt / debt plus equity) has increased from 53% to 69%. Leverage as measured in terms of net debt / EBITDA was at a high 7.7 times, however, this is expected to reduce slightly to 7.4 times in FY16 with the resultant increase in earnings as the terminal reaches full capacity.
AAPT’s cash flow performance is in line with the rating agencies’ expectations. Its contracted revenue ramps up significantly over FY14 and FY15 in line with the ramp up in contracted capacity. Under their base-case scenario, S&P expects the senior cash flow cover ratio to increase to nearly 3.00 times by FY17.
Please speak with your FIIG representative if you are interested in investing in the Adani Abbot Point Terminal bond.