Macquarie Infrastructure Company has reported its financial results for the third quarter of 2014 including underlying proportionately combined Free Cash Flow of $1.37 (€1.01) per share, or an increase of 26.9% over the $1.08 per share generated in the third quarter of 2013.
The increase reflects the impact of the acquisition in July of 2014 of the 50% of International-Matex Tank Terminals (IMTT) it did not already own and the continued strong performance of the company’s operating businesses.
On 16 July 2014, MIC completed the acquisition of the 50% of IMTT that it did not already own. IMTT owns and operates 10 marine storage terminals in the US and is the part owner and operator of two terminals in Canada. The terminals store and handle a wide variety of petroleum grades, chemicals and vegetable and animal oils.
‘I’m particularly pleased with the progress we’ve made on the integration of IMTT, and Atlantic Aviation continued to exceed our expectations,’ says James Hooke, CEO of MIC. ‘The third quarter was a solid one for MIC. Although the costs associated with our transactions obscured the strength of our underlying cash generation, the increase in our quarterly cash dividend clearly demonstrates our confidence in our cash flow growth.’
MIC also announced that, following shareholder requests, it intends to evaluate a potential conversion from its current legal structure as a limited liability company to a regular, or ‘C’, corporation. For tax purposes, an LLC is eligible to be treated as a pass through entity (e.g., a partnership) or as a corporation. In 2007 MIC elected to be treated as a corporation, not as a pass-through, for income tax purposes. A conversion to a C corporation may make MIC attractive to a broader range of investors versus its existing legal structure as an LLC.
MIC announced that it is undertaking additional growth projects at both its IMTT and Hawaii Gas businesses over the next 12 to 18 months. IMTT will invest up to $43.0 million in the construction of additional storage capacity and related infrastructure at its chemical logistics facility near Geismar, LA. The projects are expected to add more than 250,000 barrels of storage capacity plus related pipeline, vapour controls and pump capacity, as well as increase dock capacity and capability. IMTT expects the projects to generate approximately $5.5 million of incremental EBITDA annually of which half was included in its results for the trailing twelve months ended 30 September 2014. The development is expected to be completed and in service in the second quarter of 2016.
MIC management also noted that changes in crude oil prices, whether up or down, do not appear to have any material impact on the earnings or outlook for IMTT. Conversely, the company’s Atlantic Aviation and Hawaii Gas businesses both benefit marginally over the medium term from lower fuel costs.
Hawaii Gas has filed an application with the Hawaii Public Utilities Commission indicating its intent to invest approximately $12.8 million to increase its use of containerised LNG to replace up to 30% of the synthetic natural gas processed and distributed by its utility operations. Regular deliveries of containerised LNG are expected to commence by late 2015.