Download Port of Seattle Credit Overview Western States Institutional Investors

Port of Seattle
Credit Overview
Western States Institutional Investors Conference
March 4-5, 2014
Overview
•
Revenue bonds secured by pledge of
consolidated Port revenue
•
Port of Seattle 2013 financial results
•
SeaTac Airport has strong fundamentals
•
SeaTac is growing as an international
gateway
•
Aeronautical revenues are derived from cost recovery formulas in the SLOA III lease
•
Other Airport revenues are largely driven by passenger traffic
•
Five-year Capital Budget includes several major Airport projects
•
Capital funding forecast is based on a rigorous process driven by financial policies
•
Port has strong coverage on multiple liens
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Revenue bonds secured by pledge of consolidated Port revenue
OPERATING REVENUE 2013: $545 MILLION
Real Estate and
Other
6%
The Port of Seattle operates SeaTac Airport
The Port also manages :
Seaport
18%
• Seaport: containers, grain, and cruise
• Real Estate: marinas and industrial and
commercial properties
Aeronautical
46%
The Port has statutory authority to levy a
property tax assessed within King County
Other Airport
30%
• $73 million in 2014
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Port of Seattle Financial Results: 2012 and 2013
FINANCIAL PERFORMANCE ($ MILLION)
2012
2013 UNAUDITED
Aeronautical
Other Airport
Total Airport Revenue
Airport Operating Expenses
Airport NOI Before Depreciation
$ 233
153
$ 386
(217)
$ 169
$ 253
161
$ 414
(226)
$ 188
Seaport
Real Estate and Other
Total Non-Airport Revenue
Non-Airport Expenses
Non-Airport NOI Before Depreciation
$ 104
32
136
(82)
$ 54
$ 100
31
131
(81)
$ 50
TOTAL Port NOI Before Depreciation
$ 223
$ 238
$
$
KEY NON-OPERATING RESOURCES
Tax Levy
G.O. Bond Debt Service
Passenger Facility Charges
Customer Facility Charges
73
(40)
62
21
4
73
(39)
65
20
• Aeronautical revenue includes
a one-time $14 million noncash accounting adjustment
• Other Airport revenues
increased due to
improvements in concessions,
parking, and rental car
revenues
• Non-Airport Revenue declined
due to low grain volumes,
container lease rate
reductions, and lower event
revenues
SeaTac Airport has strong fundamentals
SEATAC ENPLANEMENTS
20,000
15,000
10,000
5,000
0
2003
2004
2005
2006
2007
2008
Domestic
2009
2010
2011
2012
2013
International
•
2013 enplanements up 4.7% (3% is YOY growth; the remainder is attributable
to a change in reporting)
•
Predominantly origin and destination (O&D) traffic, ranging from 72% to 76%
since 2003
•
Largely serves medium- and long-haul markets
•
Only large hub airport in Washington
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SeaTac is growing as an international gateway
SeaTac has experienced strong growth in
international service and enplanements
•
International enplanements up 9.8%
in 2013
•
Delta has targeted Seattle as an
international gateway; it carried
24% of international passengers in
2013, more than Horizon at 23%
•
Non-stop service to more than 20
international destinations
•
New international service
announced for 2014 includes
London, Seoul, and Hong Kong
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Aeronautical revenues are derived from cost recovery formulas
in the SLOA III lease
Aeronautical cost recovery is based on operating cost and capital cost
• Capital cost includes debt service and amortized payments for cash-funded assets
All aeronautical costs are allocated to a cost center
• Primary cost centers are the Air Movement Area and Terminal Building
• New cost centers, e.g., International Arrival Facility, tie costs to users
Cost recovery model establishes a floor for aeronautical charges, and excess revenue sharing
better aligns Airport and airline interests
Cost recovery is established to maintain 1.25x overall Airport coverage, based
on formula below
[Aeronautical Net Income + Other Airport Net Income] /
[Airport debt service – (PFCs + CFCs)] = 1.25
• If less than 1.25, increase aeronautical charges
• If greater than 1.25, the amount above 1.25 is
shared equally between signatory airlines and
the Port
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Other Airport revenues are largely driven by passenger traffic
DIVERSE 2013 NON-AIRLINE REVENUES:
$161 MILLION
• Other Airport revenues grew by 5.1% in
2013
• Concession revenue grew the most, by
8.7% in 2013
Other
12%
• Concession sales per enplanement
$11.23 in 2013 (compared to $9.98 for
other large hubs*)
Concessions
26%
• International passenger growth had
positive impact
• New duty-free shops
• International passenger lounge used
by multiple carriers
* ACI_NA Concessions Benchmarking Survey
Rental Car
25%
Public Parking
32%
Ground
Transportation
5%
8
Five-year Capital Budget includes several major Airport projects
2014-2018 CAPITAL BUDGET: $1,898 MILLION
2014-2018 major Airport spending
• NorthStar project, which includes
improvements to the North Satellite
Terminal in cooperation with Alaska
Airlines: $285 million
Corporate, 2%
Real Estate, 3%
Seaport, 14%
• International Arrival Facility will add
a new, larger facility for processing
international arrivals: $304 million
• Checked Bag Optimization will add
capacity and improve efficiency of
baggage handling and screening:
$239 million
Aviation, 81%
• Center runway reconstruction
means all three runways new within
past five years: $103 million
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Capital funding forecast is based on a rigorous process driven
by financial policies
Targets are based on prudent management,
rather than legal requirements
Annual budget includes five-year
operating and capital plan forecast
•
Funding plan based on forecast and
financial targets
• Meet internal revenue bond debt
service coverage targets of 1.25x
for airport and 1.50x for seaport
• Maintain nine months of O&M in
Port’s operating funds
• Operating funds account for
most of the unrestricted cash
and investments
• Invested in a conservative
short-term portfolio
Airport
Operating
Income and
Funds, 10.4%
Non-Airport
Operating
Income and
Funds, 13.0%
Future Bond
Proceeds,
55.5%
Tax Levy, 3.1%
Grants, 9.0%
Passenger
Facility Charge,
7.3%
Existing
Revenue Bond
Proceeds, 1.7%
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Primarily Non-Airport
•
2014-2018 CAPITAL FUNDING: $1,898 MILLION
Port has strong coverage on multiple liens
FLOW OF FUNDS
Pledged Revenue
•
PFCs and CFCs are not pledged to revenue
bonds, but may be used to pay revenue
bond debt service and do impact revenue
bond coverage
•
Tax levy (net of G.O. debt service) is
considered an offset to operating expenses
for coverage calculation
•
Subordinate lien has been used for LOCbacked variable rate debt
O&M
CFCs
First Lien P&I
First Lien Reserves
PFCs
Intermediate Lien P&I
Intermediate Lien
Reserves
Subordinate Lien P&I
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2014 Finance Initiatives
•
Potential new money issue to fund Airport capital spending
• Timing and amount being evaluated
• First new money issue since 2010
•
Continual monitoring of opportunities to refund for savings
•
Continual monitoring of variable
rate debt
• $309 million VRDBs provide
hedge to investment pool
• Backed by direct-pay LOCs
• CP program with $250 million
authorization, $43 million
outstanding
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Contact Information
Elizabeth Morrison
Director, Corporate Finance
206-787-3115
[email protected]
Port’s website:
www.portseattle.org
“About the Port” tab contains
financial information, operating
statistics, and publications.
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All images: Don Wilson