Speaker 1: Kyoda. Welcome to Sheard Lunch, brought to you by Chas's
Speaker 1: with Business Desk. My name is Helen Madison and on
Speaker 1: the program today I'll be talking to Jason Boys, who's
Speaker 1: the CEO of Infrastructure Investment Company in fortil.
Speaker 2: Investing involves risk you might lose the money you start with.
Speaker 2: We recommend talking to a licensed financial advisor. We also
Speaker 2: recommend reading product of sclosure documents before deciding to invest.
Speaker 2: Everything you're about to see and here is current at
Speaker 2: the time of recording.
Speaker 1: Welcome Jason, thanks for hosting us at the Infantile HQ
Speaker 1: here in Wellington. Welcome now, Infatile. You are actually in
Speaker 1: the midst of your retail investor road show around the country.
Speaker 1: So how's that been going good?
Speaker 3: I think the team are in total on and today,
Speaker 3: so I haven't had a report back on how that's gone.
Speaker 3: But last week we had our first roadshow meeting ever
Speaker 3: in Fun Today. Over one hundred people turned up. Our
Speaker 3: chair Allison Gary is from Fun Today, so she presented
Speaker 3: at that so I think it was a I mean,
Speaker 3: are over one hundred people was a fantastic outcome. Hopefully
Speaker 3: everybody attended got something out of it.
Speaker 1: And then you've got a number of others around the
Speaker 1: country coming out.
Speaker 3: Yeah, I think we do ten or twelve around the country.
Speaker 3: I am doing Wellington and Auckland and we sort of
Speaker 3: split it between the team who are be going through
Speaker 3: the South londond I think next week, I expect.
Speaker 1: And I'm quite excited because actually there'll be one for
Speaker 1: Cheesy's investors this year, I'm told in July.
Speaker 3: Said so, no questions today, but questions in July are
Speaker 3: so bitter. Be on my toes for that. You better happy,
Speaker 3: too happy too.
Speaker 1: Now thirty years since and for twol became about, which
Speaker 1: is quite a milestone really for the company. There's been
Speaker 1: a number of people at the Helm and now you're
Speaker 1: at the helm. What would you say you've learned? But
Speaker 1: also what lessons you've learned from them in that time?
Speaker 3: Yeah? Thirty is is amazing, isn't it. We've had three
Speaker 3: CEOs obviously, Marco are now me. I think what have
Speaker 3: we learned? I mean a million things right, and a
Speaker 3: lot of we don't have a lot of turnover here
Speaker 3: at Morrison as well, so it's pretty hard to boil
Speaker 3: it all down into one or two things. I think,
Speaker 3: you know, the main lesson is it's never one or
Speaker 3: two things. It's actually always a million things that come
Speaker 3: together to make an investment either successful or unsuccessful, because
Speaker 3: we've had those as well. And really, I think the
Speaker 3: magic of the model really has been to have a
Speaker 3: team who's not, you know, embroiled in the day to
Speaker 3: day hand to hand combat of running an airport or
Speaker 3: selling mobile phone plans. You can sit above that and
Speaker 3: try and understand what are the what are the bigger
Speaker 3: things to be thinking about here, either now or for
Speaker 3: the future, and then trying to use our levers because
Speaker 3: we tend to control the businesses that we invest in,
Speaker 3: to position them well for those things over time. It
Speaker 3: is probably when I look back at the successes what
Speaker 3: really makes them stand out, and then when I think
Speaker 3: about the things that haven't gone so well, almost always
Speaker 3: I think if this as the cardinal rule now is
Speaker 3: to not fall in love with your assets to the
Speaker 3: extent that you hold on for too long. And everybody
Speaker 3: loves all of our assets. They're like your children in
Speaker 3: some ways. You know there's no favorites, but yeah, don't
Speaker 3: hold for too long. It's like the cardinal rule I think.
Speaker 1: Now Morrison Group actually managers or is the manager. Now
Speaker 1: that for a lot of people seems a bit strange.
Speaker 1: Can you can you unpack what that model is and
Speaker 1: then how common is that?
Speaker 3: So, yeah, it's not as common in this part of
Speaker 3: the world as it used to be. There was kind
Speaker 3: of a spata than when in for Too was put
Speaker 3: in place. It still is me common in property investing.
Speaker 3: So the model is if people don't know there is
Speaker 3: a company with an independent board of direct is that
Speaker 3: if you're an Infratil shaholder, you'll own shares in. But
Speaker 3: there's no employees of Infratill like there would be of
Speaker 3: fishrom Pocal Healthcare or some of these overreat companies. The
Speaker 3: employees are all employed by Morrison, which is a privately
Speaker 3: owned investment manager. It's owned by the staff and largely
Speaker 3: Alloyd's of State actually, and we work for Morrison, and
Speaker 3: we essentially provide the sort of executive team functions of Prattle,
Speaker 3: which is overseen by the board on a day to
Speaker 3: day basis actually around the board table and when we're
Speaker 3: thinking about budgeting. It all would all look very familiar,
Speaker 3: but essentially the management team sits outside the company. The
Speaker 3: main difference really is that Morrison can have other clients,
Speaker 3: whereas you know, if you're this CEO of one in
Speaker 3: z if you're docent Paris, you reallyantly work for one
Speaker 3: in zed C and I hope. So whereas with Morrison,
Speaker 3: we have worked with New Zealand Supernovation Fund, Australia's Future Fund,
Speaker 3: a number of other clients who've ended up being great
Speaker 3: partners for infantele and investing. But that's really the difference.
Speaker 3: That's not so common here anymore. But actually it's pretty
Speaker 3: common in the UK. There is a class of investments
Speaker 3: called investment trusts, which were all more or less structured
Speaker 3: this way, and it was kind of that model that
Speaker 3: Lloyd imported into New Zealand and for various tax reasons,
Speaker 3: actually ended up in a company format. But yeah, so
Speaker 3: not unique, but certainly not as common here as it is,
Speaker 3: say in the UK.
Speaker 1: They've mentioned Lloyd Morrison a few times. He's the late
Speaker 1: Lloyd Morrison, and he did actually set up infratill way
Speaker 1: back in the day. Would you say his aspirations have
Speaker 1: been realized?
Speaker 3: I don't know. He's quite ambitious guy, right, So that
Speaker 3: I suspect that's a pretty high bar that we're all
Speaker 3: continually trying to live up to he He described it
Speaker 3: what he hoped for Infantoo before he passed away, as
Speaker 3: as creating a great New Zealand company is what he said,
Speaker 3: which leaves quite a bit of room for interpretation. But
Speaker 3: I think what he is capturing there is, you know
Speaker 3: there are it's more than a fund where you sort
Speaker 3: of pop in a few investments, like if you're doing
Speaker 3: your own investing and you sort of mix a match
Speaker 3: and you come out with a financial return and that's happy.
Speaker 3: His aspirations for Intole were much higher than that. A
Speaker 3: company that and you sort of saw this when he
Speaker 3: was alive, you know, was relevant to New Zealand and
Speaker 3: other markets if possible. When he advocated for the stock
Speaker 3: exchange not to be sold for various things that were
Speaker 3: going on with airlines and the flag, those were the
Speaker 3: levels of his aspirations for a tool. And I think
Speaker 3: we're sort of still working I think on that part
Speaker 3: of his vision. How can you have kind of a
Speaker 3: broader place in people's hearts and minds than just like
Speaker 3: a spreadsheet.
Speaker 1: And also, I mean eighty percent of the business is Australasian.
Speaker 1: Still you call yourselves a global and structure investment company,
Speaker 1: but actually a lot of it still is based here.
Speaker 1: But I suppose is that always? Is that always what
Speaker 1: you're hoping to have.
Speaker 3: Or I think that's more just where we've come from,
Speaker 3: which is a strength. So the more mature businesses will
Speaker 3: be at home, the things where we're willing to take
Speaker 3: more risk will tend to still be at home. First. Really,
Speaker 3: where we want to take the investment portfolio is a
Speaker 3: kind of a more global version of what you see today.
Speaker 3: So could we have larger data seend the businesses offshore.
Speaker 3: I think that would be interesting from an investment perspective,
Speaker 3: And certainly we have every right, I think, given what
Speaker 3: we've achieved so far and this part of the world,
Speaker 3: to try to do that. And you can sort of
Speaker 3: see that in renewables as well. Right, we've had huge
Speaker 3: history with our words TrustPower now monor energy tilt that
Speaker 3: came out of it definitely earned the rider. I think
Speaker 3: to try that offshore and long Road in the US
Speaker 3: is the early sort of signs that maybe we can
Speaker 3: translate off that offshore, and we've got a few other
Speaker 3: ways to try and integrate that model to other jurisdictions
Speaker 3: as well.
Speaker 1: Jason, we'll talk about some of the successes you've had
Speaker 1: with the impressive results that came out a couple of
Speaker 1: weeks ago, but I think it would be quite good
Speaker 1: to kind of set the scene. I mean, what has
Speaker 1: been achieved has been in a climate or a world
Speaker 1: that is quite volatile. What are some of the challenges
Speaker 1: that you've faced and had to sort of get through
Speaker 1: in order to, you know, have the results you have.
Speaker 3: It's definitely been I think we say whippy in certain areas.
Speaker 3: The definitely volatile interest rates has been incredibly challenging for
Speaker 3: all sorts of investments, and because infrastructure is quite capital
Speaker 3: intensive and uses a lot of debt if you can
Speaker 3: set it up correctly, the quick changes and interest rates
Speaker 3: really through COVID and after has been incredibly challenging for
Speaker 3: the businesses, and by large, teams have navigated that incredibly well.
Speaker 3: But it's always hard to really lean in with confidence
Speaker 3: to grow businesses you think have every right to grow
Speaker 3: when they're facing challenging cost increases. So you know, for example,
Speaker 3: if you're building a solar farm in the US, almost
Speaker 3: a third of the cost is interest, right, so if
Speaker 3: that's doubled overnight, You've got a lot of work that
Speaker 3: needs to happen on the power price effectively in order
Speaker 3: for the maths to still work. So that has no
Speaker 3: doubt been challenging. And now really the big debate is
Speaker 3: what is the new two percent rod? What is the
Speaker 3: new long term interest rate? Is it two or three?
Speaker 3: Is at four? And we have no better view on
Speaker 3: that than anyone, So it sort of plan for the
Speaker 3: worst and hope for the best, I think is the
Speaker 3: most sensible way to approach that in your investment pieces.
Speaker 1: But a constant juggle and obviously you're doing your modeling
Speaker 1: as you always have.
Speaker 3: And try and be conservative in terms of hedging will
Speaker 3: conserve I think then a lot of people although a
Speaker 3: lot of people there are a number of people who
Speaker 3: could say you could take more edging, but yeah, try
Speaker 3: and head you downside as much as you can where
Speaker 3: the cost justifies it. So that's always a bit of
Speaker 3: an equation. And then really the other part is are
Speaker 3: you in markets where either your business has pricing power
Speaker 3: or the industry as a whole that you're in has power.
Speaker 3: To say, in that electricity example I gave before, you
Speaker 3: can go back to whoever's buying your power and say well,
Speaker 3: do you want the project? Yes, well, then really the
Speaker 3: price has to change, and that's always very uncertain until
Speaker 3: you're right in those moments. You can do all the
Speaker 3: work that you like on that and get convinced that
Speaker 3: that ability is there, but until I actually achieve it,
Speaker 3: it's all very much uncertain. And I think the benefit
Speaker 3: of getting through times like this that we have is
Speaker 3: that has proven now, particularly in the US renewables market,
Speaker 3: the power price is quite rational. Everybody seems to have
Speaker 3: more or less the same cost to capital, which means
Speaker 3: that when something like interest rate happens that affects everyone,
Speaker 3: the power price is able to be adjusted. And I
Speaker 3: think we've been happily. You know, data seen has been
Speaker 3: a little bit of a different story. I would say,
Speaker 3: what's really happened there is you've had the same sort
Speaker 3: of dynamic in terms of interest rates, but there's just
Speaker 3: been this huge explosion of demand which has helped balance
Speaker 3: everything in that in that industry.
Speaker 1: Just looking briefly at the numbers for the full year result,
Speaker 1: I think earnings is probably what we'll focus on. And
Speaker 1: ebitt Dath is that lovely acronym which basically means that
Speaker 1: before all the expenses come in. That was up sixty
Speaker 1: three percent. I think it was eight hundred and sixty
Speaker 1: four million. That said, one New Zealand had a fairly
Speaker 1: big impact on that. So if you extrapolate that out,
Speaker 1: what'll be looking at Yeah.
Speaker 3: So that's the parent at surplus and so that was
Speaker 3: that would have been reflecting the revaluation of one through
Speaker 3: the transaction that we executed last year. Think we spoke
Speaker 3: about that last time. The well, well, the way we
Speaker 3: look at it is if you want to understand how
Speaker 3: the operations of the underlying businesses are performing, we use
Speaker 3: this metric called proportionate EBITDAV. So we would take so
Speaker 3: if we own fifty percent of CDCAT it's actually a
Speaker 3: little bit less, but say fifty percent, you would take
Speaker 3: fifty percent of their earnings through, thirty seven percent of
Speaker 3: Long Road take thirty seven percent through. So take that
Speaker 3: through across the portfolio and then compare that to the
Speaker 3: same period last year and say how have the underlying
Speaker 3: operations gone. So at that level we grow grew at
Speaker 3: about it was eleven percent, I think I want to
Speaker 3: say last year, so above we hit a number that
Speaker 3: was above our guidance, which was nice, and then we
Speaker 3: were growing at that kind of double digit rate that
Speaker 3: we like to see given that we're investing a lot
Speaker 3: in our businesses to generate that going forward.
Speaker 1: Down that that growth and that double digit growth is there.
Speaker 1: It has been with imperature for a long timement. If
Speaker 1: you look back ten years in even thirty, there's always
Speaker 1: been double digits and the last ten twenty two percent,
Speaker 1: which is pretty phenomenal. That said, the market wasn't that
Speaker 1: and those were the results? Were they just expecting it
Speaker 1: to be even better? I mean, how do you win?
Speaker 3: Yeah, I think there were a few things going on
Speaker 3: on the day, So I think the print for the
Speaker 3: year everybody was happy with because nobody expected us to
Speaker 3: be above guidence. Everybody at as below it, so that
Speaker 3: was fine. They were more thinking about the outlook. So
Speaker 3: then we provided one which we've always done, even through COVID,
Speaker 3: one year forward view of that proportionate eve deaf metric
Speaker 3: that I talked about before, and that was still up
Speaker 3: double digits. But two of them they were disappointed, and
Speaker 3: I think I would say one was one inzet which
Speaker 3: we had as actually flat. So although at an aggregate
Speaker 3: level we were showing this double digit growth. We had
Speaker 3: one in zet As flat, which is really, as we
Speaker 3: explained on the call, as a result of what Sparker
Speaker 3: also seeing this market, which is the enterprises, which in
Speaker 3: New Zealand means a lot of government as well definitely
Speaker 3: holding back and pulling back in terms of spending on
Speaker 3: all their needs, including the ones that we provide as well.
Speaker 3: So I think the market was prepared for that. There
Speaker 3: was also a little bit of confusion between some normalizations
Speaker 3: we'd shown in June when we did the rays and
Speaker 3: what we were showing on the day, which we were
Speaker 3: able to clean up during the day, I think, which
Speaker 3: tied it up to normalizations. But that was a little
Speaker 3: bit messy on the call, so apologies if you had
Speaker 3: to listen through that slightly painful conversation. So I think
Speaker 3: people have got their head around that, and our message
Speaker 3: on one really is we're soft because the market is
Speaker 3: soft on that side of things. Nothing particularly wrong with
Speaker 3: our investment, and we're still actually really positive about the
Speaker 3: leavers we have within that business to continue to achieve
Speaker 3: good growth over time. Particularly remember one end Z is
Speaker 3: still really becoming a standalone telco having been owned by
Speaker 3: Vodafone for all those years, so we've got plenty of
Speaker 3: simplification we can do, which Spark's already done the good
Speaker 3: work on, but we still have to do it to
Speaker 3: generate above market growth we think in earnings once that
Speaker 3: program completes over the next two or three years. So
Speaker 3: we're still quite positive about that and people will be
Speaker 3: waiting to see us execute. But we've executed well on
Speaker 3: that before, so I don't think people should expect us
Speaker 3: not to over the next two or three years. And
Speaker 3: then there was another little bit of confusion on the
Speaker 3: day because we had presented Long Roads operating earnings on
Speaker 3: a slightly different way than the way the team the
Speaker 3: Long Road team had shown it in March, which even
Speaker 3: though it was actually labeorly labeled correctly in March, people
Speaker 3: had taken to mean something else. So once we tied
Speaker 3: it up that message, I think people have reset their
Speaker 3: expectations on what Long Roads earnings should be. But the
Speaker 3: overall message there which I gave on the day was well,
Speaker 3: it's the same projects at the same really attractive marginal
Speaker 3: economics that we've already been talking about. This is really
Speaker 3: just how you present the earnings as to win their turn.
Speaker 1: Up, and the share prices recovered pretty much, you think,
Speaker 1: I think so.
Speaker 3: We had run quite a bit leading into the result. Actually,
Speaker 3: just on that last day, which is an unusual actually,
Speaker 3: people like to just in case you're going to run
Speaker 3: ount something bombastic, buy a few more shares, so it
Speaker 3: would be normal for it to trade back. You can
Speaker 3: never really win on that, and I think we are
Speaker 3: pretty much back to kind of the normalized share price
Speaker 3: from what the team are telling me this morning.
Speaker 1: Looking at the portfolio, it's always good to see what
Speaker 1: the waitings are, how it might have changed from year
Speaker 1: to year. What appeared to me that digital infrastructure really
Speaker 1: is the one leading the charge renewables right up there too,
Speaker 1: but as the waiting changing somewhat with the airport's the healthcare.
Speaker 3: Digital, yeah, I think we was trying to give ourselves
Speaker 3: the option to up or downweight sectors over time. So
Speaker 3: you definitely think of healthcare as one of the newer
Speaker 3: ideas that could increase assuming our thesis plays out as
Speaker 3: we hoped or just well, even if we didn't expect
Speaker 3: it to go well in the particular way it chooses to.
Speaker 3: So that's one for the future. The airport is the airport.
Speaker 3: It's very hard for us to buy another airport.
Speaker 1: I'm going to say you've got airports, but actually we
Speaker 1: have won airport and it's Wellington add Wellington. The city
Speaker 1: council are wanting to sell these shares. Does that mean
Speaker 1: you are going to buy?
Speaker 3: And that's all they voted that last week. Well, I
Speaker 3: don't know exactly what they're going to do. I think
Speaker 3: infratil shiholders, she would expect us to take a look
Speaker 3: if that was actually what they want to do. People
Speaker 3: like that investment.
Speaker 1: Is that something you'd like?
Speaker 3: I don't know until I see it really. Actually, I
Speaker 3: think there's a price for everything, right, There's a price
Speaker 3: at which I would sell the airport too, so I know.
Speaker 3: So it's all it's all dependent on what people want
Speaker 3: for things, I think. But I think as it from
Speaker 3: a portfolio strategy perspective, it's not off base at all.
Speaker 1: Yeah, And the runway extension is always the other thing
Speaker 1: that people investors always.
Speaker 3: Want to know about think about. Yeah. I think in
Speaker 3: Matt Clark, our CEO there, spoke about it at our
Speaker 3: vest day March. I think what he was saying there
Speaker 3: really is that there are a number of other technological
Speaker 3: ways of achieving a similar outcome. He was talking about
Speaker 3: a new plane stopping distances, some technology the team have
Speaker 3: put in on the runway itself. It's got grooves and
Speaker 3: a few other things that they're thinking about. We don't
Speaker 3: need a runway extension. If we don't need one, we
Speaker 3: just want to able to fly slightly further afield directly
Speaker 3: rather than having the lovely walk.
Speaker 1: In Auckland because it was Surfey's. I think are worried
Speaker 1: and Wellington that you might change many things, I mean
Speaker 1: fear but at stake.
Speaker 3: Yeah, yeah, exactly. It's very important, no doubt. I mean
Speaker 3: it's interesting, isn't it. Adam per TONI along that what
Speaker 3: they're doing there with that big sea wall. I wonder
Speaker 3: if they'll learn anything from that. That'll be interesting. But
Speaker 3: have a lot of heck full of stone.
Speaker 1: Yeah, that's interesting. Double digit growth, that's something, as we
Speaker 1: discussed before, that you've been able to achieve. How long
Speaker 1: can it keep going eleven to fifteen percent? I think
Speaker 1: is what you're saying to shareholders. How confident are you
Speaker 1: that that will keep coming? And can you better that?
Speaker 3: I think we have bettered that, haven't we in the
Speaker 3: last few years I think, I mean, you never know,
Speaker 3: of course on these things, but we feel like the
Speaker 3: portfolio is set up and the right way to give
Speaker 3: us the best chance of achieving that. And mostly that's
Speaker 3: through having your high single digit return underwritten by Wellington
Speaker 3: Airport and something like one which in most cycles will
Speaker 3: generate that return and that's a good chunk of for two.
Speaker 3: But then also having these platforms like CDC and Long
Speaker 3: Road who have this ability to build a new data
Speaker 3: center or a new solar farm for fifteen plus percent
Speaker 3: type returns if you model it. But that asset out
Speaker 3: to its end of life. Of course, if you sell
Speaker 3: it earlier, you bring a lot of that return forward
Speaker 3: so you can earn even more. So to me, that
Speaker 3: balance is that's always the critical one. And it feels
Speaker 3: like we're in a good spot now and really the
Speaker 3: task is to make sure those proportions stand the right
Speaker 3: balance to produce the right outcome.
Speaker 1: So that you've got cash cows if you like, with
Speaker 1: one New Zealand the airport's those sorts, yeah, and then
Speaker 1: you've got the other development prospects and also obviously that's
Speaker 1: where a lot more capital we'll have to go up
Speaker 1: as well.
Speaker 3: That's right, that's right. So it's that balance of how
Speaker 3: much you've got invested in those high single digital cash
Speaker 3: car whatever you want to call them as sets, and
Speaker 3: then how much can you how much do you need
Speaker 3: to put in fifteen plus to keep the kind of
Speaker 3: returns in the right range. The other important component if
Speaker 3: you look back over our history of the returns is
Speaker 3: some of those ones for the future maturing. So in
Speaker 3: the past that's been SA Long Road and now you
Speaker 3: have sort of gur and maybe as the one to
Speaker 3: call out there. Yeah, So what happens often is when
Speaker 3: those investments come of age, and sometimes that's made evident
Speaker 3: by transaction. So in the case of Long Road, it
Speaker 3: was when our partner's Munich reinvested and the value of
Speaker 3: that asset became clear. That's when you get these kind
Speaker 3: of big jumps and value as well. I think it
Speaker 3: went up. The people's valuation of that business doubled or
Speaker 3: tripled overnight through that through that value realization phase. You've
Speaker 3: got those as well coming through.
Speaker 1: Just on Long Road, we probably should explain that that
Speaker 1: is the renewables business in the US, Yeah, and gurin
Speaker 1: is the renewables business. In Singapore and in Philippines I
Speaker 1: think is the other Yeah.
Speaker 3: In Thailand and Korea and Japan, but mostly in Singapore.
Speaker 1: The thinking of that lovely wael chest you've got to
Speaker 1: eight hundred and twenty million, I think it was, and
Speaker 1: the guidance there's obviously an opted opportunity there. Where are
Speaker 1: you looking in the world. I imagine it's probably not here,
Speaker 1: it's or Australia, it's elsewhere.
Speaker 3: Yeah, should we look everywhere? And there are some interesting
Speaker 3: assets here, but it's really just that balance of the portfolio. Really,
Speaker 3: your stable cashier and as will tend to be here
Speaker 3: where you can see and touch them, and we can
Speaker 3: denye on the exactly you do want those ones performing,
Speaker 3: but the ones where are we looking at in the future.
Speaker 3: So we announced a transaction last year with Hong Kong
Speaker 3: Telecom where they wanted a partner to invest in their
Speaker 3: international business, which we haven't closed yet. So that's really
Speaker 3: where that a good chunk of that available capital is
Speaker 3: earmarked for. And so their international business. What I mean
Speaker 3: by that, it's access to their exclusive access actually to
Speaker 3: their international network of subse cables, which is extensive built
Speaker 3: by that business and predecessor businesses over twenty years and
Speaker 3: it carries nearly twenty percent of the world's Internet traffic.
Speaker 3: To give you this and a sense of the reach
Speaker 3: of that network, very attractive asset, and then they have
Speaker 3: a business that effectively markets that capacity to enterprise customers,
Speaker 3: wholesale customers, and then even smaller customers. Now can access
Speaker 3: that network through a software platform they call Console Connect,
Speaker 3: which means you can sort of go online and using
Speaker 3: a credit card, provision capacity for ten minutes, one hour,
Speaker 3: three days, three months to any point on their network
Speaker 3: in the world, which is pretty much anywhere at whatever
Speaker 3: kind of speed you might choose within the parameters that
Speaker 3: the network allows. And it's really that part of the
Speaker 3: business that we think is really the future of how
Speaker 3: people will buy connectivity, because you don't need in the
Speaker 3: old world used to lease aligne for three years at
Speaker 3: a fixed cost whether you are using it all or not.
Speaker 3: This software and there are sort of two or three
Speaker 3: others in the world that can do this, but not many.
Speaker 3: This software allows you to say, well, actually, I'm broadcasting
Speaker 3: from the Olympics for the next three months, and I
Speaker 3: need provision capacity down to Africa, say for my customers there,
Speaker 3: I can buy capacity on that line. That's incredibly high
Speaker 3: quality because we own the network, but I only have
Speaker 3: to pay for it for that period pare of time.
Speaker 1: Yeah, gosh, exciting.
Speaker 3: Yeah.
Speaker 1: So what about Saudi Arabia and Middle East, all those
Speaker 1: sorts of places, I mean, they seem to be going
Speaker 1: off in terms of infrastructure and renewables.
Speaker 3: Yeah, we haven't really looked too much there. Actually a
Speaker 3: lot of what in our world, what we see from
Speaker 3: that part of the world is really well funded investors
Speaker 3: actually who are reaching out into Asia Pacific and particularly
Speaker 3: to invest to take the money they've earned from all
Speaker 3: of those good things and invest in Asia Pacific. But
Speaker 3: we haven't actually spent a lot of time there yet. Anyway,
Speaker 3: I think we're really excited about Asia Pacific actually, And
Speaker 3: a lot of infrastructure investors. If you looked at you
Speaker 3: know KKR who are listed or the other unlisted infrastructure
Speaker 3: funds that are being closed around the world, a lot
Speaker 3: of them have an Asia Pacific focus. And that's really
Speaker 3: you know, population growth. You have quite strong GDP growth
Speaker 3: in an emerging middle class and growing middle class, which
Speaker 3: is important in terms of their ongoing growth. You have
Speaker 3: electrification and because they don't really have the inflation problem
Speaker 3: that most of the West has, which is going to
Speaker 3: lead to higher interest rates, so you have a nicer
Speaker 3: interest rate outlook. I think in that market that makes
Speaker 3: it quite interesting for infrastructure investors anyway, in.
Speaker 1: A bit of a hedge. Yeah, so India would be
Speaker 1: among a lot I imagine, given its population and class.
Speaker 3: It's a very interesting market from a fundamental perspective, and
Speaker 3: we've done a bunch of work on it. We've tried
Speaker 3: a few things and haven't landed something that we would like,
Speaker 3: but I think it is interesting yet.
Speaker 1: Now dayson, let's look at sustainability. You guys seem to
Speaker 1: be leading the charge somewhat. You did put out a
Speaker 1: sustainability of report last year, your first one, and then
Speaker 1: obviously climate related disclosures. They are compulsory for a number
Speaker 1: of ZiT X and ASEX listed companies, and there's a
Speaker 1: lot of consternation about the different standards. We aren't there yet.
Speaker 1: It's confusing, it's onerous, but surely you know is a
Speaker 1: way to go. You've obviously thought about it prior. How
Speaker 1: has that process been.
Speaker 3: I don't necessarily disagree with all those conversation from my peers.
Speaker 3: I don't know if it's a necessarily evil, but it
Speaker 3: is it does seem like the right thing to do
Speaker 3: because and there's just a million ways you can count
Speaker 3: these things at the end of the day, and we're
Speaker 3: only going to make progress if we can coalesce around
Speaker 3: a pretty standard set of ways of counting carbon. There's
Speaker 3: still plenty of double triple counting available, but you've kind
Speaker 3: of just got to get started, I think. So, I mean,
Speaker 3: we're supportive. We've invested quite a lot actually in learning
Speaker 3: a lot about this because we have fifteen different businesses
Speaker 3: for different sectors. You're encountering these kind of double counting
Speaker 3: and border issues and lots of different ways. So it's
Speaker 3: actually taken quite a bit of time for us and
Speaker 3: our management teams to get to where we've got to.
Speaker 3: And I would agree with the current that we're not
Speaker 3: fully yet. Only the kind of good thing for us
Speaker 3: is that New Zealand has pushed ahead really of the
Speaker 3: rest of the world so in a lot of ways
Speaker 3: in terms of making these compulsory. So Australia, yeah, so
Speaker 3: Australia is not till next year, I think, and maybe
Speaker 3: the year after really win it by it so it's
Speaker 3: quite helpful for say CDC to see how we're going
Speaker 3: through it now and then take what we've learned and
Speaker 3: applied to them as they come. So I think that's
Speaker 3: quite good for us because we operate everywhere anyway, But
Speaker 3: that might not work for everyone who doesn't because.
Speaker 1: CDC aren't they net zero here in New Zealand. But
Speaker 1: that's what they're working toward in Australia. That's right, that's right,
Speaker 1: because that brings me to another question. I mean we've
Speaker 1: talked about, you know, the scale and the demand that
Speaker 1: those data centers are having to now put out, and
Speaker 1: you know it's going great for you, but I mean
Speaker 1: AI is an aspect of that.
Speaker 3: There's a lot of.
Speaker 1: Criticism with AI in terms of the environmental impact power
Speaker 1: and the like. Can you tak me through how that
Speaker 1: works in terms of balancing sustainability? I think I think
Speaker 1: some of the data centers do have some renewable powers them,
Speaker 1: I mean, how do they work?
Speaker 3: Yeah, So it's totally the issue I think on data
Speaker 3: centers in this new capacity for generative AI, because it's
Speaker 3: such a huge chunk of megawats that needs to be
Speaker 3: generated most you know, if you're dealing and most of
Speaker 3: this is provisioned by hyperscalars that brands everyone knows and
Speaker 3: they buy their power. So we're a little bit on
Speaker 3: the side of how they choose to do that, but
Speaker 3: we're not disinterested at all and how they do it
Speaker 3: and what's available over time. I think in Australia, where
Speaker 3: a lot of the capacity we're talking about is going in,
Speaker 3: there is huge resource available to them if the transmission
Speaker 3: capacity can be brought online. So for me, I don't
Speaker 3: worry about it so much in the medium tom because
Speaker 3: of the fundamental structure of that market and the availability
Speaker 3: of soul and wind. It's going to be just these
Speaker 3: pinch points really where if it runs too far ahead
Speaker 3: and then there are compromises that need to be made
Speaker 3: about where the power goes, that you need to really worry.
Speaker 3: So most of our customers will be investing in large
Speaker 3: customers would be investing and bringing on new renewable power
Speaker 3: in order to power their data centers, but getting the
Speaker 3: timing to line up, I think that'll be a real challenge.
Speaker 3: So there will be an issue that will need to
Speaker 3: be worked through and mostly driven by our customers who
Speaker 3: actually dictate the pace of rollout of their equipment, but
Speaker 3: also have all the levers that can pull to procure
Speaker 3: the renewable energy. And then I think there are still
Speaker 3: many other areas where data center sustainability needs to be examined.
Speaker 3: One would be the use of water is becoming an
Speaker 3: increasingly big focus where actually our data centers are really
Speaker 3: well placed. But then also there's this tricky issue of
Speaker 3: embodied carbon, so using concrete and steel, which no one's
Speaker 3: really on top of yet, and that but actually going
Speaker 3: back to where you started these CIDs, because you'll figure
Speaker 3: out a way to start counting them is totally how
Speaker 3: you'll end up figuring out what the trade offs are
Speaker 3: in order to bring in more sustainable versions of both
Speaker 3: of those things concrete and steel into the construction.
Speaker 1: Speaking of AI, it's something that obviously is changing rapidly
Speaker 1: and is everywhere. As you know, in terms of your
Speaker 1: company in modeling and what you foresee, you've always done
Speaker 1: pretty well in that regard. Did you see it coming
Speaker 1: in the way that it's manifested and where do you
Speaker 1: see the potential and where it goes? Yeah?
Speaker 3: No, I mean definitely not. But we had been doing
Speaker 3: work on disruptive technologies for infrastructure for quite a few years.
Speaker 3: We invested in a Finch Capital firm. This isn't for two,
Speaker 3: maybe six or seven years ago now based in San Francisco,
Speaker 3: and the idea is a very small investment. I think
Speaker 3: it was twenty five million US and we don't talk
Speaker 3: about it a lot, although it's clear and the accounts
Speaker 3: that it's there. But really the purpose of that was
Speaker 3: to keep an eye on developments like this, and it's
Speaker 3: always had a big machine learning an AI component to
Speaker 3: this sort of big bangs definitely not definitely not envisaged,
Speaker 3: but that's how we try and get it least conversant
Speaker 3: with what the issues could be with these new technologies.
Speaker 3: So you know, optimization and utilization of infrastructure would definitely
Speaker 3: be quite familiar with that theme, which I think is
Speaker 3: definitely an early application for generative AI that's relevant to us.
Speaker 3: And then you know from here that businesses themselves learn
Speaker 3: a lot as well. So you know, one en z
Speaker 3: or the healthcare businesses which are all now using forms
Speaker 3: of AI, need to be conversing in the kind of
Speaker 3: guardrails and security elements of all those things as well,
Speaker 3: which we learned from.
Speaker 1: Just looking at outlock. Then you did give some guidance.
Speaker 1: I think earnings looking at nine hundred and eighty million
Speaker 1: to one point zero three more billion actually, which will
Speaker 1: be the first time in the Big BS. You're pretty
Speaker 1: confident of getting there.
Speaker 3: Yeah. Yeah, we always stress test that guidance. We've got
Speaker 3: a really good history of heading our guidance well last
Speaker 3: year getting above it and we're still early days, so
Speaker 3: we update so thankfully, still looking good. We update those
Speaker 3: usually we get a little update at the AGM then
Speaker 3: and a half year so people can track it as
Speaker 3: we go along as that going on?
Speaker 1: Right, Okay, and Jason, what excites you about the future.
Speaker 3: I think trying to become that great New Zealand company
Speaker 3: is pretty exciting. Actually, a global version of what we've
Speaker 3: got would be really exciting I think for cheerholders, which
Speaker 3: includes me and actually a company that's known for I
Speaker 3: think being relevant, as I said, that looks after its staff,
Speaker 3: that looks up to its neighbors, that would be a
Speaker 3: very happy place.
Speaker 1: That's been a great chat, Jason, thanks for your insights
Speaker 1: and for hosting us today.
Speaker 3: Thank you for having me. Let's see you again.