EFTA00585131.pdf

Valuation Discussion Stansted Airport 7 April, 2011 EFTA00585131 Valuation Considerations ■ Market for airports of all types almost disappeared with the credit crunch as buyers retreated - High returns were achievable only with "excess" leverage - Significant cyclicality of leisure traffic became evident - Listed infrastructure fund business model collapsed, e.g. Babcock & Brown ■ Activity in the sector has returned (Liverpool, Gatwick) but prices are likely to be below previous highs - Uncertainty about timing and scale of recovery - High oil price and consumer issues continue to overhang low-cost carrier ("LCC') market - Debt available but lower quanta and worse terms - Assumed exit multiples for infrastructure funds lower ■ Gatwick offers the best comparison 2 SEABURY EFTA00585132 Stansted Airport Limited: Statutory Financial Information 2008 2009 2010 Mean Revenue £258.8 £243.0 £229.6 £243.8 EBITDA 117.4 102.4 86.2 102.0 Margin 45% 42% 3804 EBIT 84.3 63.8 45.9 Margin 33% 26% 20% PBT 53.0 42.8 20.6 Net profit 40.0 40.7 13.8 Margin 15% 17% 6% RAB £1,231.1 £1,291.0 £1,327.3 £1,283.1 Nole: Numbers &Paled to exclude txtrptional items .Sourte: .StausterlFimmein 3 SEABURY EFTA00585133  Regulated Asset Base ("RAB") • The "Regulated Asset Base is a common tool for regulating returns in the UK's utility and infrastructure sectors where an owner has a monopoly or quasi-monopoly position. Starting RAB • The RAB represents the accumulated cost of the assets used by the business, net of depreciation. It is used as the base amount against which charges can be made to ensure an agreed rate of return on investment for the owner. • For UK regulated airports, the RAB is determined and reviewed every five years by the Competition Commission and the Capex Civil Aviation Authority. Maximum charges are then set by the regulators. I • The RAB is a proxy for the enterprise value of regulated assets - Charges are set to provide a return on capital equal to an assumed weighted average cost of capital - Includes all airport operational assets: runways, terminals, shops, car parks, cargo, maintenance etc. Depreciation 1 • Stansted's RAB stood at £1,327 million as of December 2011 Stansted's RAB Evolution (1997 - 2010) 1,400 1,300 Inflation / I 1,200 Adjustments 1,100 1,000 900 800 700 600 500 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 SWIM': Shunted Finantiair 4 SEABURY EFTA00585134  Trading Comparables Analysis ■ Most airport companies are either privately-held or government owned. The universe of publicly-traded comparable companies is limited. ■ The two major quoted companies, Aeroports de Paris and Fraport, are slow growth airports because they have few Low Cost Carriers ■ The Comparable companies analysis concludes that the universe of peers are valued at 11.7x EV / 2010A EBITDA Trading Comparables - Airport Comparable Company Analysis (in EURO millions &yapfirptribee 'kw Trading Comparables Market Enterprise EV / Sales EV / EBITDA EV / EBIT Company Name Capitalisation Value CY2010A CY201IE CY2012E CY2010A CY201IE CY2012E CY2010A CY201IE CY2012E Aeroports de Paris C 6,394 E 8,761 3.2x 3.1x 2.9x 9.5x 9.0x 8.4x 16.1x 15.3x 14.2x Fraport AG C 5,002 C 7,619 33x 33x 3.0x 10.7x 9.4x 83x 171x 15.1x 13.4x Shanghai International Airport Co., Ltd. C 2,859 C 2,991 6.6x 6.6x 6.0x 13th 122x 10.8x 21.1x 18.9x 15.9x Beijing Capital International Airport Co. Ltd. C 1,757 C 3,703 6/x 5.6x 5.1x 11.7x 10.2x 8.9x 24.1x 18.9x 15.9x Auckland International Airport Ltd. C 1,661 C 2,245 10.7x 10.0x 9.4x 13.9x 13.1x 123x 17/x 16.0x 14.8x Mean 6.0x 5.7x 5.3x 11.7x I0.8x 9.7x 19.3x 16.8x I4.8x Median 6.Zx 5.6x 5.1x 11.7x 10.2x 8.9x 17.7x 16.0x 14.8x Sown: Capital12, news net, broker reports. 5 SEABURY EFTA00585135  Precedent Transactions Analysis • Financial details on many precedent transactions are not publicly disclosed — the only listed company which has been the subject of a transaction is BAA • Valuation multiples from Precedent Transactions Analysis greatly vary, depending mainly on the growth profile of the target airport • Most targets have either been regional airports with very high growth from LCCs or capital city airports with a high LCC component; most are unregulated whereas listed companies are usually regulated 35x 30x X Leeds Bradford/Bridgepoint X Budapest/BAA X LonclonCity/AIG&GIP 25x Bratislava/Vienna Airport EV / EBITDA X Consortium (abandoned) X George Best Belfast/ARIA AMRO X Bristol/Ontario Teachers' Pension 20x Budapest/I-lochtief Consortium Bristol/Ferrovial-Macquarie X X Belfast City/Fermvial Birmingham/Ontario Teachers BAA/Ferroviai Cgnsorritniaion Consortium I 5x X Rome/Macquarie X TBI/Abertis X Naples/P2i X Brussels/Macquarie Consortium 10x X Copenhagen/Nlacq unicX Rome/Leonardo X Gatwick/GIP 5x 2001 2002 2004 2005 2006 2008 2009 2010 2012 Soberly Capital IQ, nen not, broker reports. 6 SEABURY EFTA00585136 Selected Transactions - BAA/Ferrovial Sale of Gatwick Airport Sale of Belfast City Airport Transaction Overview Transaction OVenic‘‘ • BAA sold Gatwick in October 2009 for £1.5bn to Global Infrastructure ■ In September 2008 Ferrovial sold Belfast City Airport to a subsidiary of Partners ABN AMRO Global Infrastructure Fund for a consideration of £133m, valuing the asset at 22.4x EV/LTM EBITDA • Unusually for a regulated asset, Gatwick was valued at a discount (5%) to its RAB, equating to a 2008 EV/EBITDA of 9.5x • Belfast City Airport was serving more than two million passengers a year at the time of the transaction, thanks to the rapid growth from LCCs RAB EBITDA Discount EBITDA Val • The Belfast sale was part of Ferrovial's strategy to focus on its BAA (2008) (2008) to RAB Mu]. ' airport business Gatwick £I,578m 59m 9.5x £l.5bn Sale of Budapest Airport Development to-date Transaction Overview • Shareholders who have later bought stakes in the airport include: Abu ■ In June 2007 BAA sold its non-core Budapest Airport to a consortium Dhabi Investment Authority, National Pension Service of Korea, led by German Hochtief AirPort for £1.3bn, valuing the asset at 20.3x California state fund Calpers and Future Fund of Australia, leaving GIP EV/LTM EBITDA with 42% ■ The sale came 18 months after BAA acquired the airport in a ■ In June 2010 the airport's owners announced a £lbn investment and government privitisation, valuing the asset at the same price development programme over the next two years ■ Budapest airport has attracted high offers due to its potential for high ■ In 2011 Gatwick launched two £300m bonds and a new £620m debt future traffic growth supported by the growth of LCCs, the largely facility to refinance its acquisition debt raised in 2009 unexploited property and retail opportunities, and its big reserves of both runway and terminal capacity ■ In March the five new owners have announced a payment of £330m special dividend to themselves, 15 months after the acquisition ■ Post the transaction Hochtief initiated a €261m five-year investment programme for the expansion and development of the airport 7 SEABURY EFTA00585137 Valuation Summary ■ Using EBITDA multiple and discount to RAB (£ in millions) methods, our preliminary valuation range of Stansted Stansted Financial Metrics Parameters Resulting Valuation is between £750m and £1.2bn RAB Metric Discount ■ For the full valuation of Stansted we would prepare a FY 2008A 1,231 10% 20% £1,108 £985 detailed financial model with a long term (10+ years) FY 2010A 1,327 10% 20% £1,195 £1,062 traffic forecast and detailed cost structure FY08-10 Avg. 1,283 10% 20% £1,155 £1,027 This is a valuation methodology commonly used in Min £1,108 £985 Max £1,195 £1,062 private treaty deals - It is to be done once both sides are engaged in the EBITDA Metric EV / EBIT transaction and more detailed financials are FY 2008A 117 8.5x 9.5x £998 £1,115 obtained from BAA FY2010A 86 8.5x 9.5x £733 £819 FY08-10 Avg. 102 8.5x 9.5x £867 £969 - The preparation of a long term traffic forecast Min £733 £819 would further demonstrate the buyer's credibility to Max £998 £1,115 Ferrovial/BAA 8 SEABURY EFTA00585138 Purchase Price Ratio Analysis • The table below summarises the various valuation multiples at different price levels l0 in millions) Entc .rise Value [8511.0 L900.0 050.0 fl,MH).0 f1,050.0 1;1,1110.0 01,150.0 RAB Discount Metric FY 2008A 1,231.1 (31%) (27%) (23%) (19%) (15%) (11%) (7%) FY 2010A 1,327.3 (36%) (32%) (28%) (25%) (21%) (17%) (13%) FY08-10 Avg. 1,283.1 (34%) (30%) (26%) (22%) (18%) (14%) (10%j Enterprise Value / EBITDA Metric FY 2008A 117.4 7.2x 7.7x 8.1x 8.5x 8.9x 9.4x 9.8x FY 2010A 86.2 9.9x 10.4x 11.0x 11.6x 12.2x 12.8x 13.3x FY08-10 Avg. 102.0 8.3x 8.8x 9.3x 9.8x 10.3x 10.8x 11.334 9 SEABURY EFTA00585139