Macquarie Infrastructure Holdings, LLC
Q1 2016 Earnings Call Transcript

Published: 3 May 2016

[Operator:]

Good day, ladies and gentlemen and welcome to the Macquarie Infrastructure Corporation First Quarter 2016 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 will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to our host for today Jay Davis. You may begin.

[Jay Davis:]

Thank you, Solingen, good morning everyone and thank you. Welcome once again to Macquarie Infrastructure Corporation’s earnings conference call, this one covering the first quarter of 2016. Our call today is being webcast and is open to the media. In addition to discussing our quarterly financial performance on this call, we published a press release summarizing the results and filed a financial report on 10-Q with the Securities and Exchange Commission. These materials were released last evening and copies may be downloaded from our Web site at www.macquarie.com/mic. Before turning the proceedings over to Macquarie Infrastructure Corporation’s Chief Executive Officer, James Hooke, 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 non-public 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. With that, it is my pleasure to introduce Macquarie Infrastructure Corporation’s Chief Executive Officer, James Hooke.

[James Hooke:]

Thank you, Jay, and thank you to those of you participating in our earnings conference call this morning. We appreciate you taking the time to join us for this update on the performance and prospects of MIC. The substantial volatility in global markets took stocks in the U.S., including shares of MIC, on quite a rollercoaster ride in the first quarter. On the positive side, we have seen a substantial recovery off the lows, although volatility persists. Interestingly to us the moves in our share price have borne absolutely no resemblance to the performance and prospects of our operating businesses. While the price of our shares was down as much as 28% then back up 28%, the actual cash generated by our businesses did nothing other than improve during the quarter. We started the quarter with a share price just above $70 and traded last week with a share price just above $70 per share. So rather than worrying about, what the markets will do today or tomorrow or next week, we remain focused on driving growth in cash generation from a portfolio of fundamentally sound businesses, operating in segments of the economy that are proven to be quite robust over the long-term. In the first quarter of 2016, our businesses performed consistent with our expectations and generated year-over-year increases in aggregate free cash flow of nearly 9%. Our three largest business, IMTT, Atlantic Aviation and Hawaii Gas all generated record EBITDA in the first quarter of 2016, none of them has ever had a better EBITDA quarter individually or collectively. The increase in free cash flow includes the impact of two pieces of noise this quarter, both of which had a negative impact on free cash flow per share calculations. The first had to do with warm winter weather that had a negative impact to some extent on each of these the IMTT and Atlantic Aviation. The second has to do with the timing of maintenance capital expenditures and taxes which you will recall were skewed substantially to the second half of the year in 2015. We can’t tell you what the results would have been had the weather been different, so we [waive] [ph] that one, we can tell you what the impact of the timing of maintenance CapEx and taxes was, however and we’ve developed, sorry, and had we deployed CapEx at the same rate this year as last and paid taxes at the same interval, the increase in free cash flow per share for the quarter would have been up, 10.4%, rather than the reported down one half of one percent, although the timing differences make per share comparisons with the first quarter of this year challenging we expect the differences to reverse out over the course of the year. But to be clear, we do expect some noise in the year-on-year comparisons at each quarter of 2016, as the timing of maintenance CapEx and taxes wash through our results. Consistent with this growth in free cash flow the Board has authorized the payment of a dividend of $1.20 per share in cash for the first quarter. Relative to our cash generation of $1.67 per share that’s a pay out of about 72% and a 12.1% increase over the dividend paid in the first quarter last year. Based on the performance of our business through the first four months of the year, we’re happy to reaffirm our dividend growth guidance and continue to expect to deliver a calendar year dividend in a range between $5 and $5.10 per share, all within the parameters of our targeted payout ratio. As I’ve said in the past, we prefer sturdiness over sexiness and that’s what our business has delivered in the first quarter. In our results press release and 10-Q published last evening, we reported $1.67 per share in proportionally combined free cash flow for the first quarter. That figure was down $0.01 per share versus the first quarter in 2015, although it was ahead of the consensus’ estimate of $1.64 per share for the quarter. The per-share decrease primarily reflects the timing of maintenance capital expenditures and taxes that I just summarized. But also the increase in the number of shares outstanding. These were partially offset by the increased contributions to EBITDA from all our segments. I’ll go a bit deeper into the aggregate results, as some of the same factors are echoed in the segment performance. Regarding the timing of maintenance CapEx, many of you will recall that in the first half of 2015, we deployed relatively little across our portfolio. The biggest factor was the implementation of enhanced policies and practices to plan and control maintenance capital expenditures at IMTT that saw us incur just 6.6% of full year maintenance CapEx at that business in the first quarter of last year. A similar level of investment in our other businesses notably Atlantic Aviation contributed to our deploying just 9% of full year maintenance CapEx in the first quarter of 2015. The relatively low level of maintenance CapEx created a headline uplift in free cash flow early in the year, that we flagged at the time would re-correct later in 2015. Maintenance CapEx accelerated in the second half of 2015, as we anticipated it would. As a consequence we expect the year-on-year comparisons to be more favorable in the second half of 2016 all else being equal. We expect that 2016’s maintenance CapEx will be both lower than 2015 and more evenly distributed throughout the year. A similar issue played out with respect to income taxes. In the first quarter of 2015, our tax liability was relatively low as a result of the amount of deductible expenses incurred in the period including the performance fee. For those of you who are familiar with the accounting for taxes bear with me here. The tax liability recorded in the first quarter of 2016 reflects an assumption with respect to the taxable income that maybe generated over the course of the year. That assumption does not contemplate the positive impact and potentially lower taxes that investment in growth could have in the remainder of the year and of course we've discussed deployment of between $225 million and $250 million in growth capital and bolt-on transactions in the 2016 year. To better understand the results of operations for our businesses, we strip out the noise and the timing of the maintenance capital and taxes. If you spread maintenance CapEx evenly through the year of 2015 the year-on-year growth in free cash flow per share would have been approximately 9.1%. The increased tax liability transient though it maybe is worth $0.02 of free cash flow per share. Adding the $0.02 to the adjustment for the timing of maintenance capital expenditures suggests that the year-over-year increase in underlying free cash flow per share was actually 10.4% in the first quarter of 2016 compared to the first quarter of 2015. And that would be consistent with the contributions from the acquisition of BEC at various FBOs at Atlantic Aviation and the improved performance of most of our businesses over the year, but in particular the renewables portion of our CP&E segment. As I noted at the outset the relatively warm winter weather had an adverse impact from three of our businesses. Again while we can tell you -- we can't tell you what the result might have been we can say that the impact resulted in generation of less than we had expected in the case of BEC and less than prior years in the case of both IMTT and Atlantic Aviation. First the BEC was called upon to generate less electricity than we had expected. Second revenue and gross profit at IMTT were negatively impacted by reduced tank heating receipts and third, the icing revenue and gross profit at Atlantic Aviation were down substantially this year. The bottom line on the period was this. MIC’s financial performance for the first quarter was slightly ahead of the markets’ expectations. That's not to say in every business performed flawlessly that was certainly not the case. But in the aggregate we are happy with where we are but in absolute terms and relative to our expectations for the full year. On the basis of these results the MIC Board has authorized a dividend for the first quarter of 2016 of $1.20 per share. A payout of 72% of the cash generated during the period. The cash dividend will be payable on May 17, 2016 to shareholders of record on May 12, 2016. The dividend increase of 4.3% sequentially and 12.1% year-over-year is consistent with our guidance for the full year growth in cash dividend to between $5 and $5.10 per share. We are pleased to be able to reaffirm that guidance. Turning to our proportionately combined results for the quarter, revenue was down marginally one half of 1% primarily as a result of the decline in the price of jet fuel, naphtha gas feedstocks and propane all related to the year-over-year fall in the price of oil. At Atlantic Aviation for example, the average price of a barrel of oil or a gallon of jet fuel, was down roughly 39% in the first quarter of 2016 compared with 2015. It shouldn’t be news that revenue was down even though flight activity and most other operating measures improved year-over-year. The impact on revenue is of course a function of the past through nature of fluctuations in the price of these products by most of our businesses. It’s also the reason that we focus on gross profit as a better indicator of the health of the business. Gross profit remains the top-line we focus on in managing our businesses. We believe gross profit eliminates the noise associated with variations in the energy input costs and provides better insight into our ability to increase the volume of sales and margins on those sales by our businesses. Gross profit rose 9.3% year-over-year on the addition of BEC, improvements in the performance of Atlantic Aviation generally and a better performance by the assets in the renewable portion of our CP&E segment. Let’s drill down a bit further into the contribution to the gross profit by each of our businesses. Gross profit increased in IMTT but only slightly. Stable pricing and utilization rate at the high end of historically normal levels were partially offset by a couple of factors. Factors that have had an impact of the financial performance of the business in each of the past several quarters, in particular we again saw a year-over-year decline in heating revenue and in the contribution from OMI, IMTT’s spill response subsidiary formally known as Oil Mop. The reduction in heating revenue should not come as a surprise to anyone living in the Northeast this winter, it was quite mild and the need for heating to maintain minimum viscosity of heavy product was accordingly lower. And OMI’s contribution is variable almost by definition, it’s dependent on whether or not anyone puts any product any product on the ground or in the water that we need to clean up. We noted in our 10-Q that OMI’s EBITDA have historically been roughly -- have been as much as roughly $60 million in 2010 as a result of the firm’s involvement in the Macondo oil spill cleanup. On average however EBITDA from OMI has been approximately $3 million per year. In the first quarter of 2016, OMI made a negative contribution to IMTT’s EBITDA, as a result of the absence of any material clean up activity during the period. In fact the negative contribution was larger than the positive contribution for the whole of 2015. Excluding this negative IMTT’s EBITDA for the quarter, would have increased by closer to 6%. Apart from the heating and OMI, trading at IMTT has been and continues to be stable, pricing has generally been inflation linked, utilization is a little higher and new contracts have been entered into with duration consistent with those struck in the second half of 2015. I’ll discuss investment in the expansion and upgrade of the business, in a few minutes. Gross profit generated by Atlantic Aviation rose by 3.4% in the first quarter of 2016, compared with the first quarter of 2015. The decline in the cost of jet fuel was offset by a correspondingly lower cost of services and an increase in flight activity and fuel margin. Atlantic also benefited from acquisitions of FBOs and to new hangars built or required during the past year. As I mentioned the icing gross profit suffered in the first quarter as a consequence of the relatively warm winter weather. At typically cold and snowy sites such as Pittsburg and Chicago, de-icing was down by 30% or more. Across the entire Atlantic network de-icing was off by more than 25%, and said differently core fueling operations were a bit stronger than suggested in the reported results, taking into consideration the negative impact of ancillary services like DIC. According to data published by the FIA, general aviation flight activity increased 1.8% in the first quarter of this quarter, compared with the first quarter in 2015. We continue to believe that increases in flight activity in this range, will generate even better growth in gross profit at Atlantic, as a result of its attractive network, up selling capability and positive share shift. The benefit of these factors is magnified though the P&L of the business. As illustrated in this result for the first quarter, a roughly 3.5% increase in gross profit contributed to an approximately 6% increase in both EBITDA and free cash flow, as a result of the operational leverage in this business. In essence, it doesn’t cost Atlantic very much at all to service the incremental traffic at this point. Trading at Atlantic through the first few weeks of the second quarter was good. Keeping in mind that the second quarter of the year is a shoulder quarter, it's generally too warm to ski and too cold to play golf in the Intermountain West, so there is a bit of seasonal sequential softness in the mix as tends to be the case each year at this time. However this year the ski resorts did a little better in April then they usually do as a result of the lite snow. A portion of the seasonal differences were offset with the timing of the Easter and past over holidays this year. Last year they overlapped at the end of March this year one was in March and the other was in April. The acquisition of BEC on April 01, 2015 was positive in that we enjoyed a full contribution for the business in the first quarter of this year. That contribution was however less than anticipated as a result of the unusually warm weather this year versus most years. Indeed in the first quarter of 2016 BEC was actually mildly dilutive to our free cash flow per share due to a relatively low level of dispatch for those of you who may be newer at our story BEC is a peaking natural gas power generation facility located in Bayonne, New Jersey, immediately next door to IMTT. Power produced by this plant is delivered into the New York City power market which is known as Zone J of the New York wholesale power market. BEC’s power is transmitted from its location in Bayonne by an underwater cable we own that runs through a substation in Brooklyn. A peaking power facility is able to adjust its power output to the fluctuations of electricity demand throughout the day and is called upon or dispatched to generate electricity quickly when the demand for power by the market exceeds the available baseload capacity. In New York City this typically happens when it's particularly hot or cold outside. As a result of the unseasonably mild winter temperatures in the first quarter BEC was called upon to generate relatively less electricity this year than in past years. The adverse impact was mitigated impart by the tolling arrangements in place a 62.5% of the plant’s capacity this toll portion generates revenue even when the plant isn’t cold upon to generate electrons. The untold portion the other 37.5% of the capacity is exposed to merchant risk and generates only a modest amount of capacity revenue when not dispatched. So although demand was relatively low by historical standards the tolling agreements kept BEC’s financial performance from declining to the same extent. Furthermore the unusual demand load on the grid this winter resulted in a higher need for ancillary services from quick response generators like BEC in order to ensure good stability. The additional revenues from providing these ancillary services also helped to offset BEC’s lower untold energy reserves. Conversely as there was some unseasonably cold weather in April preliminary results for the second quarter are ahead of our expectations. Yes the smaller than anticipated contribution may impact our segment results for the full year, no, the impact did not result in a revision to our guidance. On the positive side for CP&E we enjoyed a recovery in the output from our solar and wind projects versus the prior comparable period. As we know last year was a relatively poor year for both solar and wind resource from a solar and wind resource point of view as a result of the jet stream drifting south along the west coast. The jet stream has returned to its more normal route and the wind resource in the Pacific Northwest was much more reasonable at 94% of historical normal and solar resources were 106% of the historical average during the quarter. So there were swings and roundabouts in the CP&E segment in the first quarter. Not what we expected in terms of a contribution from BEC but better than we had estimated for the wind and solar projects. Keep in mind that the performance of BEC is typically seasonal and to that extent to the extent we have a hot summer in New York that would generally be a positive for us. It also means that you should not annualize the first quarter result. There are two other factors concerning the prospects of BEC that I would like to bring to your attention. The first has to do with capacity pricing. Power capacity prices for the New York City market are set by the New York independent system operator or NYISO. NYISO is not-for-profit-corporation and is responsible for managing the wholesale electricity grid in the state of New York. NYISO evaluates the availability and reliability of power supply. Forecasts demand, and conducts capacity auctions amongst other things. One of these auctions is the capacity strip auction for each of two six month periods every year, a winter period running from November to April and a summer period spanning May to October. The result of the auction determines the rate that generator is participating in the auction will be paid for making capacity available during the sixth month long capacity period. In the summer of 2015, the rate was $15.50 per kilowatt month, for the summer of 2016 the rate is $10.99 per kilowatt month. Although we don’t have full visibility into the pricing model factors, we believe the roughly 30% reduction in the capacity price is a function of a revised NYISO assumptions with respect to the projected peak summer load, the procurement requirement to in-city supply and the liability of out of city supply and transmission imports. Now all of this is fascinating but what does it mean, in general it means, if utilization rates and costs were the same as last year, total plant revenue would be lower by virtue of the reduced capacity revenue component. Conversely if utilization rates are higher or costs are lower or both, total revenue could be less affected by the reduced capacity payments. It’s worth reiterating here that 62.5% of BEC’s capacity is contracted and will therefore see no impact from the change in capacity rates this summer. In short we can’t know precisely what the impact will be, but being conservative we assume it could be a modest negative, call it a mid single digit negative for EBITDA at BEC, if nothing else changes, that’s one issue, the second has to do with the recent decisions by the federal energy regulatory commission the FERC, that could offset the impact of the strip auction results in the future. The FERC decision involves the cost allocation methodology employed by PJM another independent system operator similar to NYISO, for sharing costs of regional transmission projects across users. One of these reliability projects was the Bergen to Linden Corridor Project in New Jersey, a $1.2 billion upgrade in transmission facilities feeding into the key transmission interfaces between the otherwise separate PJM and NYISO markets, these interfaces allow power to be exported to New Jersey and flow into the New York City grid. PJM’s cost allocation methodology, allocated over $600 million of the upgrade costs at Edison, Coned, the New York City utility, which along with others, subsequently filed complaints with the FERC. FERC’s recent orders denied these complaints. Yesterday Coned sent a notice to the public service corporation, indicating that it would not renew its firm transmission agreement with PSE. A response that was not surprising given that we understand it relieves them of $600 million in upgrade costs, while we don’t know the full extent of the impact of these decisions on future transmission agreements or in-city generation, we’re optimistic that they will have a positive impact on low cost generations such as BC, when they are fully reflected in the market next year. While these variables have added a modest level of uncertainty, we believe that in some they will have little, if any net impact on MIC’s performance on the full year. Some of you are probably wondering with all of this uncertainty and variability, why on earth would you be considering, constructing additional generating capacity within MIC and when I say some of you are probably wondering, I’m being a little disingenuous. One New York hedge fund very politely asked us with the included, what the heck, we were thinking. It’s a fair question and one that we think, thinking more and more about ourselves. Here is some of the factors, we have turned our minds to. Point one, the demands of power in New York City in North New Jersey, is holding steady, even with the addition of renewable generation that’s a energy efficiency and demand response. Newly released load and capacity forecasts from NYISO and PJM both forecast annual peak load growth in New York City and Northern New Jersey over the next decade. So the market will grow, point two, the available capacity particularly that is serving New York City is old the average age of the fleet in New York is over 40 years, plus there are questions around the continued operation of facilities such as Indian Point Nuclear Plant and further questions about the financial viability of certain older facilities if low prices persist. The third point, we believe we have a unique set of advantages relative to others, who might develop power generation servicing either market, a; we own the land on which the generation could be developed and such land has been permitted for use in power generation. B; we have access to low cost gas at any plant we might build and c; we can utilize a portion of the existing infrastructure and certain tax advantages to construct new generating capacity and up to a 30% discount to the cost of new construction in the New York City market generally. Anything we can build can be completed we believe at a cost that is well within the projected cost of new entry or current calculations by the new by the NYISO. Current calculations produce a threshold level of margins below which a developer would have no incentive to construct new generating capacity. Between the factors I just mentioned and the current calculations we have concluded that continuing to develop the expansion of BEC and in parallel a plant of up to 1 gigawatt on the IMTT property in New Jersey makes sense. It's not without risk but no investment is and at least at this point the risk reward trade off is such that these constitute an appropriate use of our resources. From a practical standpoint over the near term that means deployment of no more than a few million dollars in permitting design and related work streams. So that was a bit of a brain dump with respect to the performance and prospects of CP&E but we felt it was necessary and appropriate for you to have a high level view into some of the issues we are dealing with in the segment. I'm obliged to this point to give you a couple of bullet points on what's going on with Hawaii Gas. The Groundhog Day like aspect of moving forward with one of our LNG initiatives concluded last month. With the approval of the proposal by Hawaii Gas to offset 30% of its need for locally sourced naphtha based SNG with LNG. The HPUC noted in their approval of LNG that “fuel diversity can both insulate customers from volatility and oil prices and ensure continued service in the event of a local naphtha shortage integrate”. The LNG will be transported to Hawaii from the west coast in cryogenic containers, while a long time coming and ultimately a good thing for consumers on WAHU the decision has minimal near term impact on the performance of the business. The benefit of lower cost gas and transporting LNG to Hawaii is less expensive than producing SNG locally is to the benefit of rate payors not to the company. The approximately $13 million in initial CapEx associated with acquiring the containers and related assets is expected to be recovered in a subsequent rate case. And until the HPUC complete their analysis of the proposed acquisition of Hawaiian Electric by next year it's unlikely that Hawaii Gas will follow the general rate case before that case concludes. The gross profit produced by Hawaii Gas in the first quarter was up 4.5% on the prior comparable period. The improvement was the result of an increase in the volume of gas sold and a reduction in operating costs. The reported decline in free cash flow of Hawaii Gas reflected both an increase in maintenance capital expenditures and taxes. I would note that the provision for income taxes on the standalone P&L comprises a substantial component of federal income taxes. Keep in mind that federal income taxes at the operating company level are offsetting consolidation with the application of holding company net operating loss carry forwards. Expense management remains a focus across our entire portfolio, in that regard we've made changes in the management teams at some of our businesses to promote better cross business collaboration and further drive down back office costs. The two aspects at the forefront for us are leveraging a single technology platform and optimizing certain common functions both of which have become feasible only with the acquisition of the second half of IMTT in mid 2014, concerning capital deployment in the first quarter. Across all of our businesses we pull more than $59 million to work in quality growth opportunities and bolt-on acquisitions. These included buying out the 33% of IMTT’s Quebec terminal that we did not already own. Peer upgrades tank construction at IMTT Geismar new groundwater treatment facilities at IMTT Bayonne hangar and fuel farm construction at Atlantic Aviation and the completion of land purchases by Hawaii Gas among other projects. Speaking of investments in Hangars Atlantic Aviation completed construction of the largest general aviation hangar at LAX Airport in Los Angeles a couple of weeks ago. The 37,000 square foot facility is capable of handling five Gulf Streams including the latest G6 50 model, the facility was sold out, three years in advance of its construction. We’ve included a picture of this outstanding new addition to operations in Southern California in our supplementary materials. In addition to completing previously announced projects and moving others towards commercial operations, our team identified an additional $36 million in projects across all of our businesses that have been reviewed and added to our backlog. The new projects include additional tank construction, hangar construction, land purchases, peer developments and gas infrastructure construction. With the addition of these new projects our backlog of approved capital projects is now approximately $200 million. Given the pace of deployments in the first quarter, we remain very confident in our ability to deploy between $225 million and $250 million in growth capital projects and bolt on acquisitions in 2016. The $59 million we deployed in the first quarter in growth capital CapEx represents an annualized $236 million. Further we have historically seen an acceleration in the pace of growth CapEx deployment as the year progresses. The most obvious example of a bolt on acquisition is of course the purchase of incremental fixed based operations by Atlantic Aviation. As I’ve mentioned in the past, we’ve typically have 6 to 10 compositions underway at point in time with respect to potential FBO acquisitions. We continue to expect to conclude, 3 to 5 per year as we did in 2015, when we acquired operations in Orlando Florida, Carlsbad California and Salt Lake City Utah. A number of you have asked if we were interested in the facilities that signature flight services sold in connection with their acquisition of Landmark Aviation, the sale of six FBOs was acquired by the Department of Justice as a component of their consent to the merger. A sale of the facilities to KSL Capital Partners was announced on March 30, there is no question that we were and continue to be interested in establishing operations at certain of the airports in that group, at White Plains North of New York or Dallas outside Washington DC for example. As we have always said however, we were disciplined in our deployment of growth capital and the EBITDA multiple associated with that transaction, more than fourteen times EBITDA based on the publically files materials, was too much of a stretch for us and would not have created shareholder value, rather it would have been growth for growth’s sake. On the other hand it’s a useful data point relative to the value of Atlantic Aviation and MIC. On the maintenance CapEx side of the equation, the $10.4 million deployed in the first quarter was consistent with our expectations and guidance to approximately $55 million across all of our businesses in 2016. As is generally the case, there is some seasonality in the numbers, for example the 6.3 million deployed in IMTT in the quarter, roughly $25 million annualized is relatively lower to our expectations that IMTT will deploy between $30 million and $35 million in 2016. Mathematically we would expect IMTT to record maintenance CapEx spending averaging $9 million per quarter, for the reminder of the year, if they hit the midpoint of that guidance and the spending occurs evenly throughout the year. The only change in the capitalization of our businesses of note during the quarter had to do with Hawaii Gas a summary of the previously announced refinancing of the term loan and revolving credit facilities of that business is included in the long term debt footnote to our financial statements. In essence the cost of debt was reduced slightly but more importantly the maturity of the term loan was extended from August 2017 to August of 2021. We have no near term refinancing needs, we have holding company convertible notes that mature in the summer of 2019, but the next refinancing of operating company debt other than revolvers is not until the spring of 2020 when the term facility of Atlantic Aviation comes due. At quarter end excluding the fully amortizing debt backed by our renewables portfolio, MIC was levered at 4.1 times net debt to trailing 12 month EBITDA. The 4.1 times leverage is a level that we and we believe the ratings agencies are comfortable with and will permit us to maintain our investment grade rating. That said, we’ve a total of more than $1.1 billion available on undrawn revolving credit facilities that provide MIC with substantial financial flexibility. It remains an important part of the MIC story that we don’t need to access either the debt or equity markets to fund our growth plans. The combination of the retained capital and drawings on existing credit facilities will commit us to fund our forecast $225 million to $250 million per year in growth projects in each of 2016 and 2017 without issuing new equity or securing new debt facilities. And assuming we deploy the capital in projects with returns at least as good as those we've achieved historically out leverage would remain within the balance needed to maintain our investment credit rating. In all I would characterize our balance sheet as a source of strength, particularly in the current environment, so what do the first quarter results mean in the context of our guidance for 2016. In short it means we remain confident in our ability to increase our cash dividend to between $5 and $5.10 for the year up by roughly 12% to 14% on our 2015 result. We remain confident in the cash generating capacity of our businesses and in our ability to deploy additional resources effectively. MICs’ first quarter financial results were consistent with our expectations and targets for the full year. Our focus in 2016 is to put in place growth projects and initiatives that will allow us to continue to grow our free cash flow per share trajectory in 2017 and 2018. To that end we feel we are making good progress on a number of fronts with each of our businesses. In essence we continue to view MIC as an attractive total return opportunity. That is a portion of the expected return on investment in our shares will be in the form of capital depreciation associated primarily with the visibility into increasing amounts of cash our businesses can generate and a portion will be in the form of a growing cash dividend. Implied in the current price is a total return of approximately 20% assuming a rate of growth and cash generation comparable to that we've seen over the past eight years and frankly even if you don’t believe that rate is sustainable you have to have a pretty dark view of the world for the current share price to make much sense. And in that vein let me alleviate one more concern for you. The reinvestment of base and performance fees if any in additional shares is by definition by dilutive, helpful from a cash flow perspective but a hurdle that we have to overcome with respect to an increasing share count. At the end of April the performance fee deficit we carried forward was approximately $2 billion down from the 2.4 billion we mentioned during our call in February. That means that MIC’s total return since that since then exceeded that of the benchmark index but what it really means is that we still have a whole lot of value to recreate before any performance fee could be generated and potentially any shares issued on the reinvestment of those fees, which leads me to reiterate our priorities with respect to creating value. Priority or principle number one do no harm in capital allocation. It's better to do nothing than do something done. You create value impart by not destroying value. We continue to evaluate acquisition opportunities but to this point we find investments in our existing businesses more attractive. Principle two return a portion of the available resources to earnings of the company and let them decide if and when to redeploy that capital in the business. I'm confident in our ability to generate sufficiently attractive risk adjusted returns that we will attract additional capital when and if we need it meaning in short our dividend policy is unchanged. Principle fee invest prudently in the long term health of the business. I think our growth CapEx deployments in the first quarter were very good examples of this. In summary MIC’s results for the first quarter were largely a continuation of the stable performance for which the asset-class in known. There was a modest amount of variability and performance attributable to the weather but nothing we view as a long term issue at this time. On the strength of this performance the MIC Board has authorized a dividend for the quarter of $1.20 per share or 12.1% above that which was distributed in the first quarter of 2015. We continue to progress with the deployment of capital and attractive growth projects and to replenish the pipeline of opportunities with additional projects. Importantly the projects that we expect to complete over the next few years can be funded using existing resources. They do not require access to debt or equity capital markets. Our balance sheet remains healthy and we’ve no material needs in refinancing needs. Aggregate leverage is well within our target range and consistent with what we believe will enable us to maintain our investment great credit writing. On the ground that our operating companies trading through the first few weeks of the second quarter has been good and consistent with our expectations. We’re excited about the opportunities in front of us and pleased with the performance of our business to-date. We look forward to seeing many of you next week at our Investor Day, we’ll be taking a look at the operations of IMTT in Bayonne, the BEC facility there and our recently renovated Atlantic Aviation FBO in Teterboro. You will also have a chance to hear from the heads of our operating companies and to meet some of the folks, who are making good things happen at each of our businesses. If you would like to join us, please register in advance for the event. Give Jay Davis a call for the details. Lastly this being an election year, please remember to vote. In this case vote your shares in MIC, we will conduct our annual meeting of shareholders on May 18th, it’s a virtual meeting as has been our custom for the last few years, but we still appreciate having a healthy turn out among eligible shareholders, with that I’ll ramp up the prepared portion of our call and turn our proceedings over to our operator who will open the phone lines for your questions.

[Operator:]

Thank you. [Operator Instructions] And our first question comes from Jeremy Tonet from JPMorgan. Your line is now open.

[Jeremy Tonet:]

I was just hoping if we could pick up on the topic that’s been discussed in the past with regards to M&A opportunities out there across your verticals and maybe more specifically looking at the mid stream space and just one update on how the grieving process has gone over the course of the year, it seems like the bounce in WTIs might have breathed new life in to some of the participants there, just wondering what insights you might be able to share with us?

[James Hooke:]

Yes, look I would say and let me, these remarks would be both similar for both the midstream sector and the renewable power sector. We have seen a, we continue to see deal opportunity at both -- in both of those sectors, whether it’s asset opportunities or platform opportunities, the asset opportunities in one set are easier to assess and typically come with less wrinkles, but they also come at a higher price expectation, and I’d say the bid-ask spread remains, though I would say we are probably seeing more progress there in the renewable space than the midstream space, in terms of narrowing of bid-ask spread. I think in terms of platform acquisitions of sort of whole of company acquisitions there is two things that we struggle with that, there is a bid-ask spread but there is also the more we dig into some of these businesses there has been a sort of under investment and what I’d call operating infrastructure and operating performance, stuffs that we in some cases think we’d need to add a little bit of investment in some of the things we have looked at. I would say your overall characterization of midstream is having had a sort of April showers May flowers, I’ve seen the, remember reading somewhere in terms of the increase in the commodity price, our personal view is, is that that is pretty short lived, I think what it may have done is however moved some of those midstream players who feel like they have just dodged a bullet, to be more inclined to transact at reasonable levels than less, so, I’m actually a little more optimistic about our scope and potential to deploy capital in the middle of this year in one of those two spaces, so I’d say across the board in each of our four verticals, we’re looking at interesting bolt-on opportunities and acquisition opportunities at the moment and we’re in the relatively nice position of essentially, if we had to ration capital between opportunities across those four sectors rather than chase stuff, so I would say and it may seem counterintuitive given where you have seen some MLP process bump to I’m a little more optimistic about deal potential now than I was probably on the six to eight weeks ago.

[Jeremy Tonet:]

That's very encouraging. Would you be able to share any thoughts on potential size of what we're talking about here?

[James Hooke:]

Tempted though I am to disclose massive size EBITDA multiple for a deal we haven’t concluded I won't be lured down the path by the siren song of Jeremy Tonet asking me to how to disclose that. I would say that as I sort of emphasize in our remarks that we will be able to fund the - what we are looking at I think we will be able to fund without equity or debt.

[Operator:]

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

[TJ Schultz:]

Just on the new growth CapEx of or projects of 36 million that you added to backlog, I think you touched broadly on the focus, but if you could provide any more specifics on the type of new projects you're adding in this environment and types of returns and contracts you are getting on that new capital that would be helpful?

[James Hooke:]

Yes, so I would describe it as very similar in profile to what we've done historically the sort of IMTT projects consistent with what we've seen in the past - Atlantic projects that are consistent with what we've seen in the past and that's probably the two key areas where we've added new stuff to the backlog. I think to the extent that you are sort of are getting at in one sense where do I feel like the energy complex is in relation to additional growth we’re feeling a little more I would say optimistic around that at the moment. I think the interesting thing for us as I have been listening to other peoples’ earnings calls where they have announced the sort of halving in their backlog or the cancellation of projects or the look at the projects we've managed to put on hold I’d say that is completely the opposite to where we are at. We've actually added to our backlog and we are finding new opportunities I think part of the reason for that is with our balance sheet we have access to capital so we haven’t have to go through out list of projects and see who can we cancel without, I want to choose the right word, without upsetting almost have our own hedge fund excluded a moment there, whose projects could we add without upsetting we've actually been looking. So I'd say the return profile on growth CapEx projects for us is of actually of no difference to what we’ve seen. I was pleased that IMTT on the growth CapEx side for this quarter in the first quarter of this year if you look at growth CapEx obviously we added the one third of the Quebec terminal we didn’t own and we were pleased to sort of buy that, that now means essentially we own 100% of all of our terminals with the expectance of the 20% stake we have in the operating terminal in Newfoundland it's just better to have that but even if you exclude the acquisition there IMTT growth CapEx was up 134% on the first quarter last year. Now they are now huge numbers but the fact the growth capital deployed sort of doubled or more than doubled in terms of what we get in the first quarter and that we added to the backlog at IMTT that led to me being pleased. We have ample opportunities for growth projects at Atlantic Aviation; the real issue we are facing at Atlantic Aviation is how to temper the growth of capital that we deploy in that space so that we keep Atlantic at the right scale across our portfolio relative to its size to others, but Atlantic Aviation has a lots of opportunities. And you are pleased with the capital opportunity that has finally opened up in Hawaii with our ability to deploy growth CapEx on LNG. Very pleased now that we've had two LNG applications approved by the PUC, remember that no one else is bringing LNG into Hawaii and we've now had two successful claims and I think that will help us keep positioning and transitioning Hawaii going forward and there are some other projects we are looking. So I’d say the growth projects are of a similar sort of return profile to historical, similar counterparties in nature and the world feels like it's come a little more unclogged for us.

[TJ Schultz:]

Just one, second one kind of housekeeping, I think there's still a $67 million deferred performance fee payable this summer. I guess, just trying to get an update, is that to be sold in cash or if you can just give me color there? Thanks.

[James Hooke:]

No, so the, essentially that’s to be settled in stock at the stock price which is the 30 day [ZVOP] for the June month and that will be settled in early July, that is the sort of default that we’re under actually how that will be resolved and I would envisage that it will be resolved that way.

[Operator:]

Thank you. And I would now like to turn the call back over to James Hooke for any further remarks.

[James Hooke:]

Okay, with that I thank everyone for taking the time in our call today, in addition to our Investor Day we will be on the road participating in number of conferences and road shows over the next couple of months and I’m sure we’ll be seeing many of you at those events. Jay will likely be in touch with you either way and if not Jay then Mike Hacke will be. Mike has joined us from the sell side at Barclays, where he has been covering MIC for the past three years and Mike will be working with both Jay and Liam and myself, and we’re happy to have him as part of the MIC team. I would like to thank everyone at our portfolio companies for the effort that they have put in during the first quarter. I would like to thank our lenders, who remain key business partners to us as we grow our businesses and finally I would like to thank our shareholders for the patience and continued support they have shown on the business during a volatile, economic and equity markets environment. Thank you and have a good day.

[Operator:]

Ladies and gentleman, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day.