Macquarie Infrastructure Holdings, LLC
Q2 2018 Earnings Call Transcript

Published: 2 Aug 2018

[Operator:]

Good day ladies and gentlemen, and welcome to the Macquarie Infrastructure Corporation Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions for how to participate will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I'd like to turn the conference over to Mr. Jay Davis, Head of Investor Relations. Sir, you may begin.

[Jay Davis:]

Thank you, and welcome to Macquarie Infrastructure Corporation's earnings conference call, this covering the second quarter of 2018. Our call today is being webcast and is open to the media. In addition to discussing our quarterly financial performance on this call, we've published a press release summarizing the results and filed the financial report on Form 10-Q with the Securities and Exchange Commission. These materials were released last evening and copies may be downloaded from our website at www.macquarie.com/mic. Before turning the proceedings over to Macquarie Infrastructure Corporation's Chief Executive Officer, Christopher Frost, let me remind you that this presentation is proprietary and all rights are reserved. Any recording, rebroadcast or other use of this presentation in whole or in part without the prior written consent of Macquarie Infrastructure Corporation is prohibited. This presentation is based on information generally available to the public and does not contain any material nonpublic information. The presentation has been prepared solely for information purposes and is not a solicitation of an offer to buy or sell any security or instrument. This presentation contains forward-looking statements. We may, in some cases, use words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this presentation are subject to a number of risks and uncertainties. A description of known risks that could cause our actual results to differ appears under the caption Risk Factors in our Form 10-K. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware, could also cause our actual results to differ. The forward-looking events discussed in this presentation may not occur. 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 after the completion of this presentation, whether as a result of new information, future events or otherwise, except as required by law. In addition to Christopher Frost, participating in today's call is Macquarie Infrastructure Corporation's Chief Financial Officer, Liam Stewart. At this time, it is my pleasure to introduce Macquarie Infrastructure Corporation's Chief Executive Officer, Christopher Frost.

[Christopher Frost:]

Thank you, Jay, and thanks to those of you joining us this morning. Our call today will cover two primary topics. They are, one, an overview of MIC's financial results for the second quarter of 2018, results that were in line with our expectations. As part of this, we will provide an overview of our capital allocation priorities. And two, an update on our progress on returning IMTT to growth through the repurposing of existing capacity and repositioning of the business to capitalize on evolving trade and product flows. For those of you, who are not able to participate in our last call, let me provide some context by recapping our highest strategic priorities. The first is enhancing the infrastructure characteristics of our businesses making the more stable, predictable generators of free cash flow. The second is managing our capital even more efficiently. It includes the optimization of our portfolio of businesses and the effective deployment of growth capital across various projects and bolt-on acquisitions. The third is increasing MIC's balance sheet strength and financial flexibility putting the company in a position to take advantage of attractive opportunities and to weather periods of economic stress without relying on additional external capital. We advanced the number of initiatives in support to these priorities during the quarter. These included driving performance improvement in our operating companies and entering into an agreement for the sale of BEC. Before commenting on our results for the quarter, let me provide some additional color on the transaction for BEC that we announced last Sunday. We are pleased with the outcome both in terms of price realize and impacts on our ability to address our strategic priorities. The multiple of 2018 EBITDA on the sale price is clearly accretive to the EBITDA multiple inferred by our current share price. Above all, the sale significantly improves our balance sheet strength and financial flexibility. The sale will allow us to fund growth capital of approximately $300 million per year and sustain our dividend at the current level. The purchaser of BEC is an infrastructure fund managed by Morgan Stanley. The fund will acquire BEC for $900 million in cash and assumed debt. Closing is expected to take place in the beginning of the fourth quarter and be subject to customary approvals in closing adjustments. We expect the debt outstanding at closing will be approximately $243 million. Net of transaction fees and expenses, we expect to realize proceeds of approximately $650 million. We will update the market when the transaction is closed. We anticipate using a portion of the proceeds to paydown debt, including approximately $150 million on IMTT's revolving credit facility. An additional amount will be available to ensure that we are able to fund our growth capital from internal resources without incurring additional debt. Our ratio of net-debt to EBITDA is expected to be less than 4.5x at year end. To the extent we determine we have surplus capital, the MIC Board will evaluate the most effective means of returning that to shareholders. Overall, the sale of BEC is a good outcome that substantially strengthens our balance sheet and improves our financial flexibility. With the sale of BEC now agreed, we are continuing with our strategic review of the resilience of business. Turning to our results for the quarter. MIC generated adjusted proportionately combined EBITDA of approximately $171 million for the quarter, and adjusted free cash flow of over $126 million, both consistent with our expectations. At a high level, the performance of IMTT was consistent with our outlook for the business generally. Utilization averaged 86.1% for the quarter and the business generated $52.3 million of free cash flow. A portion of the year-over-year decline was attributable to the inclusion of deferred revenue related to the contract termination in June 2017. Like IMTT, Atlantic Aviation's performance for the quarter was consistent with our expectations for the full year. Continued growth in domestic general aviation flight movement supported good performance by Atlantic Aviation. Domestic GA flight movements increased by nearly 2% in the second quarter versus the prior comparable period. That's broadly consistent with the average annual growth over the past 9 years although below what it was in 2017. Atlantic Aviation recorded a comparable increase in same store EBITDA, excluding our FBO at Santa Monica Airport where the local authorities have elected to show in the runway. Atlantic Aviation also benefited from contributions related to acquisitions in 2017 and 2018. These results also reflect the contribution from Contracted Power that exceeded our expectations. Improved wind resources, the impact of the BEC expansion and more normal weather in New York, all contributed to the outcome. We also received development profits from the renewable project of approximately $6 million during the quarter. Lastly, the performance of our MIC Hawaii segment was below expectations. Our principle business, Hawaii Gas, performed in line with expectations and achieved a favorable outcome is the direct case. However, other businesses within this segment generated results that were below expectations. Based on the second quarter results, the MIC Board has authorized the payment of a cash dividend of $1 per share consistent with the guidance we provided earlier in the year. Along with the trends in trading through the end of July, these results give us confidence with respect to the outlook for the remainder of the year. In May, I described our plan to deploy approximately $300 million of growth capital this year. Growth capital includes both growth projects and bolt-on acquisitions by our existing businesses. Year-to-date, we have deployed or committed to deploy over $200 million of growth capital. Our priority focus on enhancing the infrastructure characteristics of our business means that we have been investing in growth projects rather than acquisitions. Naturally, growth projects have longer lead times prior to generation of incremental EBITDA versus acquisitions. We remain confident in our ability to find appropriate opportunities to deploy or commit to deploy $300 million in 2018. Recall that we started the year with commitment to deploy approximately $175 million in projects already underway and we added another $20 million of commitments for IMTT in May. The number of opportunities under evaluation has increased significant, particularly IMTT as customers look to take advantage of change in market dynamics and trade flows. We are now evaluating more than $650 million of projects of IMTT, up from $475 million last quarter. We anticipate finalizing agreements on a number of these projects between now and year-end. The sale of BEC will provide us with the means to fund our capital program over 2018 and 2019 from internally generated resources. At this point, I'll turn the call over to our Chief Financial Officer, Liam Stewart, who will provide some additional color on our financial performance in the second quarter and on our capital allocation strategies.

[Liam Stewart:]

Thank you, Chris. Our adjusted EBITDA for the second quarter although down approximately $5 million year-over-year, reflected good performance at Atlantic Aviation and in the Contracted Power segment. These were offset by the decline in utilization at IMTT, consistent with our expectations and weaker than expected performance in the MIC Hawaii segment. The driver of the underperformance in the MIC Hawaii segment was the mechanical contract that we acquired in 2016. That business is a relatively slow portion of the segment and we are undertaking a review of all options with respect to that business. At an aggregate level for the quarter, free cash flow generation year-to-date was consistent with our expectations. Turning now to our outlook for 2018. We have made three adjustments through our guidance for EBITDA and free cash flow for the full year. First, as Chris mentioned, we are updating our EBITDA guidance to reflect the anticipated closing of the sale of BEC early in the fourth quarter. Second, as we indicated in the first quarter, we are recharacterizing a portion of the repurposing CapEx deployed by IMTT as maintenance CapEx, not growth CapEx. This has no impact on EBITDA but does have an impact on free cash flow. Graph, we are updating our guidance that incremental corporate costs incurred in relation to shareholder matters. As shown on Slide 9 of the supplemental materials, this moves to midpoint of our EBITDA guidance for the combination of our Contracted Power and Corporate segments down by $17.5 million. Our guidance for EBITDA, for our remaining operating segments is unchanged. In addition to the EBITDA adjustment related to the timing of the sale of BEC, we anticipate incurring approximately $12. 5 million has accelerated maintenance CapEx in conjunction with the sale. These expenditures will partially offset by interest savings of approximately $2.5 million. As shown on Slide 11 of the supplemental materials. The impact on our free cash flow guidance is an adjustment of approximately $37 million. In addition to the impact the sale of BEC and incremental corporate costs, we're also adjusting our free cash flow outlook by $10 million to reflect the repurposing costs at IMTT, that will now be classified as maintenance CapEx rather than growth CapEx. Taking all of these into consideration, we expect MIC to produce between $670 million and $705 million of EBITDA for the year, and free cash flow of between $480 million and $509 million. We further estimate that our full year payout ratio will remain below 70% of free cash flow. I also want to spend a moment on the tax consequences of the BEC sale. Together without otherwise taxable income for the year, the sale is expected to utilize substantially all of our remaining federal NOL. Although that could mean that we have a federal income tax liability in 2019, we are comfortable with the increased financial flexibility created by the sale of BEC means that it has no material impact on our ability to sustain our dividend. In fact, it is likely that expected capital deployment in 2019 will offset most, if not all, of any federal tax liability. Slide 7 in our supplemental materials, shows the amount of CapEx we've already committed to deploy next year. We estimate the total deployment of approximately $300 million of growth capital in 2019 would have had paid federal income taxes of around $58 million in that year. Turning to our balance sheet. MIC ended the second quarter with leverage of 5x net debt to EBITDA and pending the size of the BEC, leverage will be below 4.5x at year end. As of the end of the quarter, MIC had liquidity of approximately a $1 billion, primarily in the form of undrawn capacity on revolving credit facilities. The sale of BEC was substantially enhance our liquidity position clearly and having access to moving the $1 billion is important for a couple of reasons. First, the $350 million tranche of convertible notes of the MIC Holding Company will mature in mid-July 2019. We are working on options to permanently refinance those notes, but we have sufficient liquidity on our existing facilities if required. Second, it means that we have capital reach to fund the growth projects as Chris just said. Deployment of growth capital, particularly into opportunities could enhance the infrastructure characteristics of our businesses and provide a tax benefit remains a very high priority. Speaking of capital deployment, I want to share a few observations on our capital allocation policy. Our capital allocation policy speaks about the number of priorities. Our first priority is ensuring that our assets are adequately maintained. This is critical to the safety of our employees and our ability to deliver our products and services to our customers. Our second priority is maintaining a sustainable level of distributions to our shareholders and to increase those distributions when prudent to do so. We are confident in the financial health of the company and our ability to sustain the current level of distribution. Our third priority is investing in our existing businesses to grow free cash flow. Many of the projects we invest in and have the added benefit that's helping us to manage our future federal income tax liability. In addition, we seek to deploy capital and accretive acquisitions, primarily bolt-ons to our existing businesses that deliver economic value significantly in excess of their costs. A good example is the FBI latitude to Atlantic Aviation. We can utilize an additional point of presence to drive share of wallet across our remaining network. In aggregate, we anticipate investing approximately $300 million per year in a combination of growth projects and bolt-on acquisitions. The size of BEC gives us liquidity with which to fund these opportunities using internally generated resources. Achieving all three of these priorities requires us to maintain balance sheet strength and flexibility throughout the cycle. This is not simply a question of having inappropriate level of leverage but ensuring that we manage our maturity profile in a way that reflects the long-live nature of our assets. It is also important that we have good sources that debt funding across the MIC. Once we have addressed our capital allocation priorities and establish an appropriate level of financial flexibility, our Board will consider returning any excess capital to shareholders. Christopher Frost Thanks, Liam. I think it's helpful to understand the multiple priorities we are attempting to address in our capital allocation policy. Finally, I want to provide you with an update on our progress and returning IMTT to growth. As I've mentioned with the asset of the call, IMTT's performance during the second quarter was in line with our expectations. Storage utilization for the quarter averaged 86.1% for the month of June, utilization averaged 84.8%. The Neo cargo market remains challenging with respect to gasoline and distillates. This is a function of the shifting trade flows and the build out of capacity in that market. The Lower Mississippi River market is stable during the second quarter. Contract renewals were consistent with our expectations. We are seeing increasing activity in the chemicals, renewables, vegetable and tropical oil markets and expect IMTT to continue to find ways to expand its exposure to these products. Even, IMTT's year-to-date performance both operational and financial has been consistent with our expectations. At IMTT, we are repurposing up to 3 million barrels of capacity from service and heavy and residual oil through a combination of clean petroleum, chemical, vegetable and tropic oils. This process is expected to take until the end of 2019 and cost approximately $35 million. Of the 3 million barrels to be repurposed, 1.3 million barrels is expected to be completed this year. I'm pleased to report that 850,000 of these have been recontracted. We expect these barrels to be placed back into service towards the end of the year. We believe that IMTT is well placed to benefit from a change in the petroleum markets likely to occur as we approach the implementation of IMO 2020. IMMT's key terminals are able to provide any of the storage, binding and handling needs of the refining and shipping industries. In addition to repurposing storage capacity, we are repositioning portions of IMTT. By repositioning we mean; one, the construction of new capacities to customers for mainly non petroleum products; and two, improvement in infrastructure connectivity including pipelines, truck loading and rail access. Repositioning projects have longer lead times, typically 24 months compared with repurposing. As they involve new construction, they require relatively more capital. At this point, we believe that IMTT will deploy approximately 200 million over the next 2.5 years on repositioning projects. As of today, the value of the repositioning projects under evaluation, totals more than $650 million that could be completed at mid to high single digit EBITDA multiple, as we will be leveraging the existing asset base. For example, IMTT recently signed an agreement to develop approximately 200,000 barrels of new capacity for chemicals manufacturer. The project is expected to require the deployment of roughly $20 million in capital and can be placed into service late next year. Importantly, the capacity will be under contract for eight years following completion. In 2018, we expect IMTT to deploy between $10 million and $15 million on repositioning projects, much of that on activities such as engineering and environmental studies. As I've mentioned last quarter now that the repurposing of existing tanks nor the repositioning projects are new concepts. IMTT undertook a substantially similar repurposing with heavy and residual oil capacity in late 2012. And IMTT engages in the development of additional capacity and infrastructure connectivity on a regular basis. In summary, our priorities are clear and we are making good progress addressing them. We are enhancing the infrastructure characteristics of our businesses, such as they continue to generate stable and growing amounts of free cash flow. We are managing our capital even more efficiently including through monetizing certain smaller non-core assets. And we are increasing our balance sheet strength and flexibility. MICs performance in the second quarter was consistent with our expectations. The strength and the diversity of our portfolio was evidenced once again. The sale of BEC will increase MIC's balance sheet strength, and provide the financial flexibility for us to fund growth opportunities internally. The repurposing and repositioning of IMTT is taking hold. The majority of the capacity available for repurposing in 2018 has been reconstructed an attractive repositioning project has been secured. Thank you, once again, for your participation in our call today. And with that, I’ll ask the operator to open the phone lines for your questions.

[Operator:]

[Operator Instructions] Our first question comes from Ian Zaffino with Oppenheimer. Your line is now open.

[Ian Zaffino:]

Hi, thank you. Can you guys just give us a view on when my eyes goes through? What happens to all of the products that have been stored? What are your reviews there? What happens to rate? And where do utilizations go once that goes through? Thanks.

[Christopher Frost:]

Hey good morning, it's Chris. So you've asked the question regarding IMO 2020?

[Ian Zaffino:]

Yes, yes, sorry. Yes.

[Christopher Frost:]

So, look, in the supplemental slides that we published this morning, we provided a little bit more background as to how we see Lower Mississippi exposure to the heavy and residual oil market following the repurposing. As we've talked about in the last call, that we now repurposing up to 3 million barrels of capacity, which is currently being used to store heavy legit. That will effectively take out 25% of IMTT's capacity. The remaining capacity, say sort of 9 million barrels is going to be used to store some of the sort of the sub-categories within the heavy and residual oil market. And what we sort of estimate is that around two thirds to three quarters of the product will be stored there is unrelated to the issues surrounding IMO 2020 and will be used in refinery feedstock and other sort of industrial demand. So we have a degree of comfort that our remaining heavy and residual exposure is right-sized.

[Ian Zaffino:]

Okay. And maybe touch on Bayonne to an exposure there? Thanks.

[Christopher Frost:]

We sort of mentioned in the prepared remarks that Bayonne, particularly with respect to gasoline and distillates, remains challenging given some of the sweet changing trade flows as well as being overtanked. I would say though that the IMTT is performing in line with expectations both from the utilization and from a financial point of view. With respect to Bayonne gasoline distillates, we don't have any material contract renewals coming up this year. So therefore, confident with respect to their utilization view, and if anything remarks see us a slight pickup, particularly as the distillates stocks are refueled.

[Operator:]

Thank you. And our next question comes from Tristan Richardson of SunTrust. Your line is now open.

[Tristan Richardson:]

Good morning, gents. Just a quick question. Liam, following up on your commentary about sort of determining the appropriate level of financial flexibility, I mean, can you talk about post-pro forma for BEC. Where you see the appropriate level of leverage for MIC today? I mean, I think pro forma for BEC, we see leverage roughly in the mid-4s. And then you talked about proceeds from sale not used for debt reduction. Just kind of curiously where you think leverage goes?

[Liam Stewart:]

Well, it's a good question. I think in terms of the existing portfolio is once we have BEC divestiture spend. We think about the appropriate level of leverage has been and, obviously, as I said, dependant on the mix of businesses in the portfolio in the 4.25x to 4.5x line. So I think in terms of the commentary on excess capital, so why we think about it, we have line of sight over commitment and sort of $200 million for the rest of the year today. At IMTT, we have roughly $650 million of capital projects that we're evaluating. And so on average, I think, where we’re going to come out is we deploy $600 million as of next two years into those projects. When we think about excess capital, we really think about, one, my tiding balance sheet strength and flexibility, and that's not just a question of leverage, it's a question sort of what products we have, what's the maturity stuff we brought. Two, funding all of that $600 million of potential capital spend for the next two years with internally generated rated resources; take it up sustainability of the distribution as well. And then to the extent, there was excess capital once we accommodated that and really once we reconfigured on TT and positioned it onto a growth trajectory. That would be the point of which we would determine there'd be excess capital.

[Tristan Richardson:]

That's helpful. Thank you. And then just following up on your comments about the use of the NOL, and potential tax payments in 2019 that you've identified roughly $15 million. Does that interesting if there include the impact of capital deployed for 2018 and up presumptive capital deployment for 2019. Or is that …

[Christopher Frost:]

It really includes the impact. If you think about the all forward the BEC sale together with taxable income we’ve generated from operating the business this year, $300 million of capital on average across the next two years. We’ve made some assumptions around the composition of that capital getting highs into service and assuming we're able to accomplish spots of those, then that should say us how the federal income tax liability from a cash taxes perspective next year in the $15 million line. So clearly given that sort of power trajectory like tying up sort of less than 70% of free cash flow, it makes the sort of 2% 3% impact to the overall payout ratio. So we are more than capable of accommodating that cash tax payment within the parameters of the existing capital allocation policy.

[Tristan Richardson:]

And then just lastly from me, we appreciate the enhanced kind of operating metric disclosure on IMTT is helpful. I'm curious where you see the 1.3 million barrels on the repurposing initiative. Is that all Lower Mississippi River? Is that across all of IMTT? And if so, what kind of roughly split?

[Christopher Frost:]

No, the 3 million barrels that we've identified for repurposing Lower Mississippi, and the 1.3 that we've identified this year or we're undertaking this year is Lower Mississippi.

[Operator:]

Thank you. And our next question comes from Jeremy Tonet with JP Morgan. Your line is now open.

[Unidentified Analyst:]

This is [indiscernible] for Jeremy. Could you share any color on the Macquarie Groups targeted ownership and holding period for the MIC shares that it's purchasing?

[Christopher Frost:]

The sort of the short answer is that we don't know what their intentions are. But I think, the sort of the share repurchases should be viewed as the support for the company, the strategy that we've outlined and the progress that we’re making on executing on that strategy.

[Unidentified Analyst:]

And then on the storage utilization, you mentioned going to the low-80% range and then recovering to low-90% range. Can you share more color on the timing of the ramp maybe the inflection point of the low-80% timing?

[Christopher Frost:]

Yes, happy to do that. As you've sort of rightly point out that we anticipate in the year at the low-80% range and then look to sort of build that up back to the low-90s in 2020. As I've sort of talked about, we've identified the 1.3 million barrels that we're repurposing currently and sort of successfully contracted over 800,000 of those. We anticipate that we'll have all of that 1.3 under contract by year-end, which will come online at the end of the year or at the beginning of next year. That adds around 2.9% to utilization say from an 80% standpoint. We also indicated in our last call that we have 1.6 million barrels associated with the refinery, which pulls out of contract at the end of the year. IMTT is working along with the operator of that refinery to find the alternative usage of that. And if that comes back online, we anticipate that will add another 3.6% to utilization. We then also have the barrels that we will repurpose next year, say another 1 million, which would add around 3.2% to utilization. And then, I think, as we approach the introduction of IMO 2020 there was an expectation amongst many in industry that the market will move back into contango and therefore there will be market recovery. And not so much necessarily whether that comes from fixed oil, but I can go also demand for storage that has the capability for blending, but also the demand for storage for some of the products that will have to be used in the refining processors for the refiners in the Lower Mississippi in order to produce the low distil of diesel fuel.

[Unidentified Analyst:]

And just one, last one. MIC in the past has talked about adding a fifth vertical to diversify the business further. Just curious on how you plan to approach that portfolio diversification following the BEC sale? Thank you.

[Christopher Frost:]

I think this is sort of outlined over the last couple of quarters. I think our focus very much at the moment is investing in our existing businesses around building out the infrastructure characteristics of those. I think that that is the sort of the focus at the moment. We remain opened to looking at other verticals, but we sort of see that the greatest opportunities to drive earnings and drive increases in free cash flow. Some of the opportunities presented at IMTT and Atlantic.

[Operator:]

Thank you. And our next question comes from TJ Schultz with RBC Capital Markets. Your line is now open.

[TJ Schultz:]

First on the $650 million IMTT projects under evaluation. Can you expand on business development capabilities you have within IMTT? And how those projects are being sourced just kind of average size of the deals? Are there any larger scale type projects? How far or long are you in evaluating some of those projects? Just any color that gives you comfort to accelerate the gross spend at IMTT to levels you indicate would be helpful.

[Liam Stewart:]

Happy to do that. And I think the first point is that both the respositioning and repurposing are not necessarily things, which are new to IMTT's wheelhouse. They are, in some respect is part of their core business as well as handling and storing products on their 45 million tanks. On Slide 7 of the supplemental materials, we've set out the projects what we're sort of currently have under consideration, will be aggregate total. I would sort of say the projects vary in size, clearly the repurposing of tanks we’re estimating sustained around sort of $35 million over the next two years. I think in terms of some of the new capabilities, which is really the infrastructure connectivity. We're looking at projects, which may range in size from $25 million, say up to $75 million. And then with the repositioning or building new tanks, again, those sort of the projects vary in size, probably from around $20 million to $50 million.

[TJ Schultz:]

Okay. Thanks. I appreciate that. Just switching gears. Did you mention a strategic review for renewables business; is that something you plan to sell?

[Liam Stewart:]

We mentioned on our last call that we're undertaking a review of Contracted Power. And now with the sale of BEC, I think we're focused on what the powerful it is for the renewables platform. And we are sort of separating, as you know, we have 10 operating renewables as well as a number of relationships with developers. And so we will sort of continue to have a look at that. I think that the question for us is whether we see the ability to grow the operating renewables platform given where pricing is currently. If the Board determines that, is not the case, then it would seem appropriate to exit that business.

[TJ Schultz:]

Okay. And then by selling BEC and exiting that business, you all have talked in the past about having opportunities to build power assets either [indiscernible] from talent within IMTT -- or in Virginia. So just what is kind of the strategic direction for those options are that land moving forward?

[Liam Stewart:]

I would sort of say those projects are opportunistic.

[TJ Schultz:]

Okay. And what about -- I'm sorry, go ahead.

[Liam Stewart:]

No, I just want to – I think we would sort of see them as being opportunistic, given the land that we have, but it's not a core focus.

[TJ Schultz:]

Okay. And have you revisited airport privatizations this year at all including Westchester?

[Liam Stewart:]

I'm sorry, didn't catch the question?

[TJ Schultz:]

Yes, you guys talked last year about potential airport privatizations as part of a growth strategy including at Westchester. Just curious if you guys have revisited that at all?

[Liam Stewart:]

Hi TJ, it is Liam. As you know there was a change of -- so we were awarded tenders for Westchester. There was a change of commissioner who in the middle of the tender process, while we're still the selected bidder that process is effectively on hold for the time being. I think to Chris' point too whether it's sort of additional privatizations, additional verticals or opportunistic development, power, additional power plants on land adjacent to IMTT. The key focus of our capital program at the moment is really around supporting the infrastructure characteristics of the existing portfolio or not to predominantly focused on IMTT, the repurposining and the repositioning, and that reconfiguration, which should see IMTT return to growth. I think, as we said those other things we'll evaluate opportunistically but they are sort of in the current circumstances not ones that are consuming massive amount of bandwidth through the time.

[Operator:]

Thank you. And our final question in queue is from Jonathan Reeder with Wells Fargo. Your line is now open.

[Jonathan Reeder:]

Most have been asked, but can you comment directionally where you see consolidated EBITDA coming in for 2019 relative to '18? Obviously, the sale of -- 100% of BEC creates a significant year-over-year headwind?

[Liam Stewart:]

It's a good point. We haven't initiated guidance for the full year Jonathan, but I think as we've numerated on the slide. How do we own BEC for a full year? This year the step-down from '18 into '19 would be in that $52 million range as well. So I think we'll come back to that when we initiate guidance for the full year in terms of what the consolidated outlook is, but in terms of setting a mark and relative to the contribution of BEC, if you think about the full year contribution from it is being $52 million, that should be the adjustment that you make to the starting point.

[Jonathan Reeder:]

I think you're saying 52?

[Liam Stewart:]

Yes, 52.

[Jonathan Reeder:]

Okay. And then I guess just on a relative growth basis going off of the midpoint of the current base, I mean, about 7% growth. So I guess on a year-over-year basis, if they're coming in somewhere around this year it sounds like a reasonable year of kind of underlying growth there. Is that fair?

[Liam Stewart:]

Yes, so we've got, as I said in the start, we've an initiated guidance relative to 2019. And I think we'll do that sort of -- as we customarily do either in conjunction with the fourth quarter results release or in advance of that if we like to go earlier.

[Operator:]

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back over to Christopher Frost for any closing remarks.

[Christopher Frost:]

Thank you for participating in our conference call today. In the weeks ahead, we'll be on the road meeting with investors and analysts. We look forward to speaking with many of you during that time. And of course, we'll update you with our financial performance for the third quarter in early November. Good morning.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude your program and you may all disconnect. Everyone have a great day.