On The Right Track: Continuous Improvement In P3 Delivery - BMO Capital Markets Infrastructure & Utilities Conference - 407 ETR
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On The Right Track: Continuous Improvement In P3 Delivery BMO Capital Markets Infrastructure & Utilities Conference January 29, 2009
DISCLAIMER/DISCLOSURE
This presentation has been prepared by 407 ETR.
The financial information presented is taken from quarterly and year-end
statistics that have been disclosed publicly over 2006, 2007 and 2008.
All financial amounts are shown in Canadian dollars unless otherwise
indicated.
Additional information relating to 407 ETR and or 407 International,
including the 2007 Annual Information Form dated January 31, 2008, can
be accessed on SEDAR.
The statements about expected future events and financial and operating
results are forward-looking. Forward-looking statements may include words
such as anticipate, believe, could, expect, goal, intend, may, outlook, plan,
strive, target and will. These statements reflect internal projections,
expectations, future growth, performance and business prospects and
opportunities, and, as they are subject to a number of risks and
uncertainties, you are cautioned not to put undue reliance upon such
statements as they may differ from actual results and developments.
2
AGENDA
Current Global Economic Challenges
Implications for 407 ETR
2009 Toll Rate Changes
Recent and Planned Infrastructure Improvements
Key Financial Measures
Key Operational Measures
Continued Customer Service Improvements
Continued Efficiency Improvements
3
GLOBAL ECONOMIC CHALLENGES
4
GAS PRICES
Regular Gas
Price (CAD c/L)
5
Miles Travelled
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2,500
2,600
2,700
2,800
2,900
3,000
3,100
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0
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1
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Date
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05
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Monthly US Traffic 2000 to 2008
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07
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7
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08
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8
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DECLINE IN DRIVING
INTERNATIONAL TOLL ROADS
Impact of economy and gas prices being felt on toll roads
around the world
Foothill/Eastern Tollroads (Cal.) down 7% in Q4
Chicago Skyway down 9.2% in Q4
M6 Toll (UK) down 11.5% in Q4
Indiana Toll Road down 16.4% in Q4
Public Border Operators Association (11 border crossings in the Great
Lakes/St. Lawrence area) down 12.4% in Q4
Including Ambassador Bridge down 22.9% in November and 19.3 %
in December 08
While 407 ETR has been affected by the economy and poor
weather, the economic impact has not been as dramatic as
other concessions
407 ETR Q4 traffic down 1.5%
7
407 ETR TRAFFIC
Average Workday Trips
Weekday Trips by Month
425,000
400,000
Number of Transactions
375,000
350,000
325,000
300,000
275,000
250,000
225,000
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Month Se
2003 2004 2005 2006 2007 2008
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IMPLICATIONS FOR 407 ETR
Demand for 407 ETR is still relatively strong, especially:
In peak hours
Among customers with transponders
In specific sections (“zones”) of the highway
However, in mid- to late-2008, we started to experience:
Less off-peak travel
Less travel by video users
Shorter trips – particularly by video users
Differing demand in different sections
Truck traffic down on all routes
As a result of Plate Denial, some customers are no longer using
our highway
Contract provides flexibility to manage traffic volumes
2009 toll rates use different tools to address these issues
9
ZONE TOLLING CHANGES
2008 – Three zones with
two price levels
2009 – Two zones with
two price levels
10PEAK VERSUS OFF-PEAK PRICING
Highest Peak Rate to increase by 3.1%
from 19.25 to 19.85
Off-Peak Rate will be held at 2008
levels (i.e. 18.00 cents/km)
11TRIP TOLL CHARGE
Introduction of a new Trip Toll Charge
Charged for every trip on the highway
Based on vehicle size:
25 cents for light vehicles
50 cents for heavy vehicles
75 cents for heavy multiple vehicles
Trip Toll Charge will:
Offset decreases in average trip length
Reduce congestion caused by short trips
Increase revenue opportunities
12TARGETED FEE REDUCTIONS
Video Toll Charge
reduced from $3.60 Monthly
to $3.25. Transponder
Lease Fee
reduced from Video Account Fee
$2.55 to $2.50. reduced from $2.55
to $2.50.
13SUMMARY OF TOLL RATE CHANGES
ü Continues the use of Zone Tolling
ü Increases difference between Peak & Off-Peak pricing
ü Uses new levers available under the contract, including
the new Trip Toll Charge
ü Targeted reductions to fees to influence usage
We are fine-tuning our tolling structure,
using the flexibility available in the
contract to maximize value.
14CONSTRUCTION AND INFRASTRUCTURE
407 ETR has invested over $1.1
billion since 1999!
152 + 2 Lanes
1 + 1 Lanes
2 + 2 Lanes
2 + 2 Lanes
3 + 3 Lanes
New Lanes Added By 407 ETR
Ø 420 new lane kilometres
Ø 74 new rampsIMPACT OF NEW LANES
17PLANNED CONSTRUCTION
$70 million of planned highway
construction spending in 2009
1. E1 New Lanes:
Addition of one new lane in each direction
between Markham and York Durham Line
2. C7 Structures (404 to Markham):
Widening bridges in preparation for new
lanes in 2010
3. 401 Structures:
Widening of both the EB and WB bridge
structures at the 401/407 interchange
A very complicated project in 2009 and 2010
to allow new lanes in 2011
18KEY FINANCIAL MEASURES
Revenues (in $000's) Operating Expenses (in $000's)
600,000 120,000
500,000 100,000
400,000 80,000
300,000 60,000
200,000 40,000
100,000 20,000
0 0
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
EBITDA (in $000's) Revenue/Trip and Expenses/Trip
500,000 7.00
6.00
400,000 5.00
4.00
300,000 3.00
2.00
200,000 1.00
0.00
100,000 2004 2005 2006 2007 2008
(Q1-Q3 average)
OpEx/Trip
0
Rev/Trip
2004 2005 2006 2007 2008
19DEBT MATURITY PROFILE
900
Junior Bonds
800
Senior Bonds
Subordinated Bonds
700
Senior Amortizing Payments
600 Real Return Bonds
500
400 *
-
300 *
200 *
100
-
-
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040
* Refinanced with bond offerings in January 2009
(2012 add $300 senior, 2014 add $200 senior)
20KEY OPERATIONAL MEASURES
Transponders In Circulation (000s) Unbillable Percentage
1,000 9
900 8
800
7
700
6
600
5
500
4
400
3
300
2
200
100 1
0 0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2000 2001 2002 2003 2004 2005 2006 2007 2008
Transponder Penetration Percentage
85
80
2008 figures up to Q3
75
70
65
60
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
21KEY OPERATIONAL MEASURES
Number of Escalated Complaints Number of Personal and Business Calls (000s)
3,500 1,600
3,000 1,400
1,200
2,500
1,000
2,000
800
1,500
600
1,000
400
500
200
0 0
2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008
Bills Mailed (000s)
25,000
20,000
15,000
10,000
5,000
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
22CUSTOMER SERVICE EXCELLENCE
Winner of a 2008 Canadian Council for
Public-Private Partnerships National Award
for Excellence in Service Delivery
$180 million of new lanes in 2006/2007
$40 million ETR Rewards loyalty program
$110 million of customer service improvements
ISO 9001:2000 Certified
Notified of certification on January 13, 2009
Committed to continuous improvement and
achieving the utmost Quality in the products
and services we offer to meet the needs and
expectations of our customers
23CONTINUED SEARCH FOR EFFICIENCIES
RIN project
Using MTO Registered Identification Number (RIN) to improve
customer service, reduce number of bills going to customers
(i.e. loose accounts), consolidate loose accounts, etc.
eBilling
Number of registrations continued to grow in 2008
Over 80,000 customers receive electronic bills, reducing
postage and paper costs and improving ability to communicate
through email
Online Services
PAC/PAD enrolments, online payments, online address
changes and online transponder leases remain strong
24“407 ETR’S MOST WANTED”
“Customer Drops Plate While Cops Wait”
Acura uses 407 with plate
lowered several times.
One day, the exact same
vehicle is spotted with the plate
raised, allowing 407 ETR to
identify the driver.
OPP set up a “sting” at the
commuter’s usual entrance and
usual morning drive time.
Vehicle is spotted by OPP with
plate lowered and is pulled over by
the OPP on the highway.
Cable between back seat and plate
is discovered.
Driver cut cheque for all outstanding
tolls. Crime doesn’t pay!
25QUESTIONS?
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