Macquarie Infrastructure Holdings, LLC

Jay Davis - Head of IR James Hooke – CEO

T.J. Shultz - RBC Capital Management Markets Jeremy Tonet - JPMorgan Brendan Maiorana - Wells Fargo Nick Chin - ALEMBIC Cap Global

Thank you, Shannon. Welcome once again to Macquarie Infrastructure Company's earnings conference call.

This one covering the fourth quarter and full year 2014. Our call today is being webcast.

It is open to the media. In addition to discussing our quarterly financial performance on this call, we've published a press release summarizing the results and filed a financial report on Form 10-K with the Securities and Exchange Commission.

These materials were released last evening. They may be downloaded from our website at www.Maquarie.com/mic.

Before turning the proceedings over to Macquarie Infrastructure Company'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 Company 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're not currently aware could also cause our actual results to differ.

The forward-looking statements 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 once again introduce Macquarie Infrastructure Company's Chief Executive Officer, James Hooke.

Thank you, Jay. Kong Hei Fat Choi, which is my feeble attempt to say, Happy New Year, in Chinese to everyone dialing in this morning.

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.

As reflected in our results press release and related materials published last evening, our business has performed well during the fourth quarter. The performance was a continuation of the good performance we had reported through to the end of the third quarter plus a boost from faster than anticipated progress on the integration of IMTT.

Consistent with our focus on cash generation, we reported an increase in free cash flow per share for the fourth quarter of 54.2% and an underlying free cash flow per share for the year of 18.6%; notwithstanding a significant increase in the number of shares outstanding. In dollar terms, that translated into $1.28 per share for the quarter and $4.85 per share for the full year.

The increase in free cash flow in both the quarter and the full-year periods was driven primarily by the maintenance CapEx reduction and cost control at IMTT, along with the improved operating results at each business. I would note that these results – that these increases were achieved taking into consideration the substantial increase in the number of shares outstanding in 2014 versus 2013 as a result of the IMTT acquisition and the settlement of base and the majority of performance fees incurred during the year in additional shares.

With the growth in free cash flow and consistent with our stated intent of maintaining a payout ratio of between 80% and 85% of free cash flow per share as a dividend, the MIC Board authorized the payment of a cash dividend of $1.02 per share for the fourth quarter or $4.08 per share on an annualized basis. On a trailing 12-month basis that means that MIC distributed approximately 81% of its underlying free cash flow per share as a cash dividend for 2014.

The dividend for the fourth quarter, which will be payable on March 5, 2015 to shareholders of record on March 2 of 2015. Because a number of you have asked, the dividends MIC paid in the tax year 2014 have all been characterized as a return of capital.

I'd ask you to please consult with your tax advisor regarding the treatment of the MIC dividend and your particular circumstances. We have no view at this point time as to whether any dividend paid in 2015 will be characterized as a dividend or as a return of capital.

Speaking of dividends in 2015, we now believe that we will be able to grow our cash dividend by at least 14% per year over the next 2 years. I mentioned a 12% per year increase during our third-quarter call; but given what's been achieved at IMTT, the trading performance of our business and our growth pipeline, we are comfortable bumping that up to 14%.

Any increase is of course subject to approval of the Board of Directors, the continued stable performance of our businesses and the broader economy here in the US. I'll have a bit more to say about the guidance for 2015 in the context of growth capital deployment in a few minutes.

While the past is never a perfect predictor of the future, I want to place that 14% growth guidance into some historical context for you. We're comfortable with guiding to these growth levels because we've been achieving them for some time now.

Since 2007, the first full year in which MIC owned IMTT and Hawaii Gas, MIC has grown underlying proportionately combined free cash flow per share by 13.1% per year. Since we resolved the IMTT shareholder disagreement in 2012, we've grown proportionately combined free cash flow per share by 16.2%.

In 2014, we grew underlying proportionately combined free cash flow per share by 18.6%. According to Bloomberg, since MIC's IPO in December 20, 2004, more than ten years ago, MIC has delivered total shareholder returns of a little over 17% per year with dividends reinvested.

We have a lower leverage than we have had historically and better liquidity than ever. I'm a bit surprised by the questions we fielded around our 2015 free cash flow per share guidance.

Especially given the fact that it was in response to shareholder suggestions that we did away with free cash flow per share guidance and instead focus on dividend growth. But just to be clear, if the dividend is expected to grow by 14%, our free cash flow per share should also grow by 14%.

We are not changing our payout ratio target or levering up. The 2 figures, free cash flow per share and the dividend per share, should move in tandem by the 14% we referenced.

Bayonne Energy Center. Regarding the Bayonne Energy Center or BEC, we're pleased to be building out our contracted parent energy segment with the acquisition of this business.

A number of you have asked about how we got involved in the opportunity. I'm happy to fill in some of the details for you.

The business is situated on the Bayonne waterfront surrounded by what was the Hess-Bayonne Terminal now owned by Buckeye on one side and IMTT on the other. Indeed, BEC was originally developed as a joint venture between Hess and ArcLight.

The earliest public conversations about the project date from around 2007, I think. The developers needed an easement from IMTT.

Through the process of IMTT negotiating that easement, we have been aware of the project since those early days. During the construction and after the completion of the project, ArcLight sought to lease additional land from IMTT on which to add more generating capacity to the existing 512 megawatts.

Once we had acquired all of IMTT, we approached ArcLight about buying the plant rather than just leasing them more land. Because in this day and age, no one likes to sell an asset without conducting an auction, ArcLight initiated a sale process managed by Morgan Stanley regarding BEC in the fall of 2014.

We were active in that process. We were the winning bidder.

Part of the reason we were the winning bidder was the fact that we had the benefit of being able to expand BEC in a way that no one else could, namely on a portion of the land owned by IMTT. Stepping back from BEC for just a moment, what you can now see is our approach to deployment of capital in a new vertical.

We began several years ago with relatively small steps acquiring contracted solar generation assets in the renewable sub-sector. I said at the time that if we were making a mistake, we wanted to make it in a small way.

Fortunately, our efforts in contracted parent energy have played out pretty much as we'd envisaged to this point, but we did learn some things along the way. We also made it clear all along that we weren't adverse to making an investment in gas fired generation alongside our investment in renewables, only that it was difficult to find something like the renewable deals in terms of the long-dated power purchase agreements.

With BEC, we believe we have found not only something that has the stability associated with a significant measure of contracted revenue, but also provides us with the opportunity to deploy a meaningful amount of additional capital in the growth of the business over time. In this case, we have the opportunity to develop an additional 100 megawatts of generating capacity.

We can do so on a cost-effective basis in part because: one, we already own the land on which it would be built; and two, the related infrastructure including the capacity of the cable to New York City is sufficient to handle the increase without modification. When we've completed the acquisition, we will begin to look at our options to build-out a facility and provide you with additional commentary on timing of that build-out.

Our current focus, in addition to securing the requisite regulatory approvals, is getting the capitalization of the business sorted. As many of you would know at this point, we have the option of: one, leaving the existing debt package in place; two, refining the business using our existing lower cost debt facilities at either or both of the IMTT Holding Company and IMTT; 3, refinancing the business with new debt; four, equitizing a portion of the debt by the regular way, capital raising or an ATM program; or 5, some combination of the 4 above.

The overlay to this decision will be the input we received from S&P regarding our credit rating, which we intend to maintain at investment-grade. We continue to believe that the investment-grade rating is helpful from a cost of capital perspective and from the good housekeeping seal of approval that it provides and that certain investors find reassuring.

Because this is an ongoing process governed by the closing timeline, we can't provide you with more in any – in the way of guidance as to the free cash flow or the precise level of accretion associated with this project. However, we believe the accretion is sufficient to warrant increasing our guidance for dividend growth to 14% per year for the next couple of years, as I said.

But that's as close as we are going to go for the moment. We will provide you with additional information as we get clarity around the regulatory approval process and our dialogue with S&P.

We believe this to be an attractive acquisition that provides us with meaningful scale in our contracted parent energy segment. Together our existing CP&E investments and BEC will become the third largest segment, larger than Hawaii Gas.

Remember too that this is not the only electricity generation asset in Bayonne. As I mentioned last quarter, inside the fence at IMTT is another facility, a co-generation facility whose ground lease expires in 2018.

In connection with the BEC press release, we published supplemental materials about the BEC transaction that have been posted on our website. These can be found under the Investor Center tab and the sub-heading Reports & Presentations.

The materials include a map of the IMTT Bayonne facility. I think it provides an interesting perspective on these opportunities.

I encourage you to take a look at it. We will continue to pursue opportunities in the CP&E segment where we can prudently deploy capital in projects that provide us with a suitable risk-adjusted return.

Moving to tax. One thing we do know about the expected performance of BEC is that it should provide MIC with additional tax shield, at least for the next couple of years.

In general, we believe that the accelerated depreciation of the BEC plant over 15 years should result in the business generating a tax loss that will help us extend the point at which we could have a material federal income tax liability and consolidation further into the future. In our call covering the third quarter of 2014, I said that I thought we would be – it would be sometime in 2017 before MIC faced a federal tax liability of any note.

This is a function of the rate at which we use our accumulated net operating loss carry-forwards. At the end of 2014, our loss carry-forwards increased to more than $250 million.

We now believe that including the benefits associated with BEC, the earliest point at which we could have a federal income tax liability of any consequence will now be beyond 2017. That's 3 years from now.

We will continue to explore avenues for extending that point potentially using investments in tax equity and additional tax effective investments. None of these efforts preclude our pursuing an alternative structure that may have tax advantages associated with that.

On each of the last couple of calls, we've described what we saw as the challenges and potential opportunities in converting some or all of MIC into an MLP or REIT. We have yet to determine if or when a conversion would make sense or precisely how far we would go about making that happen.

We continue to have a productive conversation with our shareholders and with advisors on this subject and to monitor the legislative backdrop for these structures. What we have determined, however, is that it makes sense to pursue a conversion from a LLC to a Corporation first and to do so sooner rather than later.

Last evening, in addition to filing our results from the quarter and our 10-K, we also filed a registration statement on Form S-4. The S-4 filing is the first step leading to a shareholder vote on the conversion to a Corporation.

In effect, the S-4 registers the shares of Macquarie Infrastructure Corporation that will, subject to shareholder consent, be used to replace the LLC interests currently on issue. The S-4 contains the proxy statement that explains the conversion and that will be used for the special shareholder meeting to vote on the conversion.

The S-4 also provides some information on 3 additional matters to the conversion worth mentioning now. One, the first is a mechanism that preserves the right of MIC's manager to name the Chairman of the Board of Directors, something the manager has the right to do under our current arrangement and issuance of 100 shares of separate class stock with that right.

Two, the second is the fact that we will seek authorization to issue a new class of stock, preferred stock, as a means of improving flexibility with respect to managing our capital structure. I would point out that we've been careful to characterize the availability of preferred stock as nothing more than a capital management tool.

The term allowed associated within this instrument seems to be a declawed preferred, meaning that the Company intends to only issue preferred shares as a method of financing acquisitions or growth projects and not as a defensive or anti-takeover device. To be clear, we're not aware of any threatening takeover attempt; rather having the ability to issue preferred stock is simply good business for a grown-up Company.

Finally, the S-4 also notes that the Board has selected Delaware as the exclusive forum for hearing any derivative and similar claim that may be brought against the Company or its directors and officers. In addition to the efficiency associated with a single venue, Delaware courts have significant experience and expertise in adjudicating corporate matters.

Again, we're not aware of any legal claim against us on these issues at this time. There are number of steps associated with this conversion effort.

First is the filing of the S-4 registration that was published last night. The S-4 will then likely go through a review process by the SEC.

After the SEC clears the S-4, the Board will acquire a record date, schedule the meeting, distribute the proxy statement and begin soliciting shareholder votes. If shareholders approve the conversion, we will file papers with the Delaware Secretary of State to complete the change to a Corporation.

With that as an overview of some of the big matters in front of MIC, let's turn around and look at the performance of our businesses in the fourth quarter. IMTT.

Early last fall, we received a few nervous calls from shareholders as energy prices and energy-related stocks began to tumble. The general tone of the questions at the time was, is IMTT taking it in the shorts like some of the MLPs?

But a few months of low energy prices and additional trading at IMTT behind us, the answer is quite clearly no. IMTT's shorts remain intact and have maybe grown a little.

The decline in oil and distillate prices has pushed the markets into a contango, something we haven't seen for several years. As has been our experience in previous periods of contango, this has driven additional demand for storage.

In and of itself, a contango in pricing and related demand has a positive but only limited impact on IMTT, in part because: one, IMTT doesn't store much crude, less than 2% of our tankage is in crude but other petroleum products are also in contango; two, IMTT is for all practical purposes operating at very near full utilization; and third, IMTT's facilities function more as a break ball point than as facilities belonging to storage. However, as I've said in the past, the contango does make the trading community more likely to have a positive outlook and to be willing to enter into storage contracts at better rates.

In the recent case, however, because of the speed and the extent of the decline in oil prices, there's more uncertainty in the market and that has manifest itself in contract renewals that are shorter in duration than have been the case historically. As the traders make more money on this contango, we hope to push those to longer durations.

So overall, I would say that we have seen a definite increase in demand as a result of lower oil prices; however, it's still a little short in duration. The follow-on question is perhaps the more interesting one.

That is, what does the low energy price environment mean for capital deployment in petroleum and pet-chem projects in the long-term? What does that mean for IMTT's growth prospects?

Here again, we think the impact is limited. Over the near-term, we think that projects in petroleum refining and pet-chem processing currently underway will, for the most part, be completed.

Again, we've all read the articles about the projects that are being canceled or deferred. To be frank, you'd be crazy not to take a bit of a wait-and-see attitude with respect to potential large scale deployments in the current environment, provided they're not already underway.

But to put this into perspective, at IMTT, we are looking to deploy roughly $100 million per year in growth projects. The business will stumble over $40 million to $50 million in projects each year that are brought forward by existing customers or projects that clearly enhance the value proposition of the business and are thus a no-brainer.

So realistically, we are looking for another $40 million to $60 million per year in growth projects to get to our $100 million target. The big numbers, that have been battered around regarding capital deployment on the lower Mississippi in petroleum and pet-chem, have been in the range of $100 billion.

That is a B as in Big Boy. Let's assume for a moment that 40% of those projects are canceled or delayed.

I have no better intelligence on this than you, I am just asking you to assume that for a moment. That means we are looking for a role for IMTT with a value equal to less than 0.1% of the development that goes forward.

That's if we deploy everything in projects on the lower Mississippi and completely ignore the New York harbor market or any other market. It seems highly unlikely that we won't be able to do that – that we wouldn't be able to do that.

As a result, we are not losing any sleep over our ability to deploy capital at IMTT. But for the skeptics among you, even if we weren't able to deploy $100 million per year at IMTT, we are quite confident in our ability to deploy an offsetting amount in our other businesses, particularly with the opportunities like the ones I mentioned in relation to BEC a few moments ago.

Let's focus on actual performance at IMTT for a moment. So, what did happen at IMTT in the fourth quarter?

How did we end up for the year? It was a case of continued growth and doing what we said we would do but doing it sooner than we had anticipated.

Although costs increased in the fourth quarter, the rate of increase was substantially lower than in prior quarters, 3.3% versus 13.1% through the first 9-months of the year. Moreover, all of the increase in the fourth quarter was tied to severance and transaction-related expenses.

Maintenance capital expenditures were down from what had been a run rate of $55 million to $60 million to just $44 million. More than anything else, the improvement in cost controls and maintenance CapEx was the result of staffing to put in place controls and processes that are in place at our other businesses.

But that doesn't mean there isn't more to do. If you'll recall my comments from this time last year, IMTT was out of step with its peers particularly in terms of maintenance CapEx spending.

We had looked at a number of IMTT's competitors at that point and concluded that IMTT was spending 3 to 4 times as much as the peer group on its maintenance CapEx as a percentage of EBITDA. Looking at the same set of peers today, notwithstanding the improvement in IMTT's performance, IMTT is still spending at almost twice the rate of the rest of this group.

For instance, for the full year 2014, Kinder Morgan spent 7.9% of EBITDA on maintenance CapEx; Plains All American spent 10.3%; Buckeye spent 11.3%; Oiltanking spent 5.1% through the third quarter; Magellan midstream spent 7%. The average of this group is 8.3% and was 7.7% in 2013.

While IMTT reduced its maintenance CapEx in 2014 to 15.5% of EBITDA, this is still well above the 8.3% average of the benchmark cited above. So, do I think there is reason for some of the benchmark companies to push maintenance CapEx down to artificially or unsustainably low levels?

Yes. Do I think there is scope for further improvement in the performance of IMTT?

Absolutely. But to be fair, the whole team at IMTT has risen to the challenge and has done a good job of finding opportunities for maintenance CapEx reduction and process improvement.

I continue to be very pleased with the level of engagement on the part of the team at IMTT and believe that together we can drive further significant growth in the value of IMTT. I have been very pleased with the receptivity of IMTT management to new ideas, but also to their preparedness to tell me when a new idea is impractical or stupid.

The transition to new ownership could not have gone more smoothly from my perspective. The credit for this rests 100% with the people at IMTT.

Having analyzed the situ at IMTT, we are comfortable that $45 million per year in maintenance CapEx is a good new run rate for the business until we can make the next step function improvement. But the quarter and full-year results weren't entirely about cost-cutting.

You can't cut your way to greatness after all. There has to be topline growth as well.

Revenue at IMTT increased by 11.4% in the quarter and 10.4% for the full year. The increases were the result of several factors including: an increase in spill response activity at OMI; an increase in firm commitments driven by the factors I mentioned a few minutes ago; and an increase in storage utilization.

Utilization rose to 93.2% in the fourth quarter from 92.4% in the fourth quarter. Utilization was up sequentially as well from 92.5% in the third quarter of 2014.

The combination of revenue growth and the reduction in expense rate growth rate drove an increase in EBITDA of 19.4% in the quarter and 6.2% for the full year. The flow through to free cash flow was enhanced by the reduction in maintenance CapEx and lower taxes in the quarter.

Together these contributed to growth in free cash flow of more than 131% in the quarter and 21% for the full year. 2015 has started much as 2014 left off.

Demand is strong due to the contango. Our utilization rates are close to historically normal levels.

Notwithstanding the recent frigid weather in the Northeast, heating activity is lower in the first quarter last year when we experienced the extreme polar vortex and associated spike in natural gas prices. To summarize, IMTT results in the fourth-quarter and full-year reflected delivery of sooner than anticipated improvement in maintenance capital expenditures in particular and good progress with respect to expense management generally.

We been talking about these opportunities for some time. It's certainly nice to see them materialize.

Better than that, it's nice to see them materialize now that we own 100% of the business, not just 50%. Turning now to Atlantic Aviation.

We've also been talking about the fact that Atlantic Aviation is in the midst of a cyclical recovery for some time. I'm pleased that the recovery continued in the fourth quarter of 2014 and that the business delivered some of the best full-year growth in EBITDA in the last several years.

The improved performance was bolstered by the continued upward trend in general aviation flight movements in the US as reported by the FAA. For the year-end – sorry, for the year, the FAA reported an increase in GA flight movements of 3.6% compared with 2013.

As I always do, I'll remind you that the activity figures reported by the FAA are directionally – in our directional indicator, not a perfect correlation with the performance of Atlantic Aviation; given that Atlantic operates at 69 locations versus the FAA data of several hundred airports. The increase in flight activity together with the Kansas City FBO acquired in December 2013 and the Galaxy acquisition completed in April 2014 contributed to growth in gross profit at Atlantic of 14.9% and 12.2% in the quarter and full-year periods.

On a same-store basis, that is excluding Kansas City and Galaxy locations, gross profit for the year – for the full-year period increased by 5.9% which is nicely above the 3.6% increase in flight activity that I just mentioned. The acquisition of Galaxy was an important transaction for Atlantic.

With that one event, Atlantic went from having no presence in the largest general aviation market in the country to being the second-largest service provider there. We added to Atlantic's Florida presence late in the year with the acquisition of Showalter FBO at Orlando Executive Airport; a transaction that is now closed and look forward to continued strong performance of that facility under the Atlantic banner.

The Galaxy acquisition is performing in line with our expectations. As I've said before, the Galaxy acquisition has increased the seasonality in this business, but has provided Atlantic with access to a larger portfolio of traffic, in the busiest general aviation corridor in the country, the corridor between the greater New York Metropolitan area and south-central Florida.

As a result of the acquisitions themselves together with transaction-related costs, overall costs were higher in Atlantic in 2014 compared to 2013. Perhaps not surprisingly, you can't add more than 10% to the size of the portfolio and have costs remain constant.

Excluding the acquisitions however, costs were higher in 2014 by a little more than 3%. A portion of this was normal salary and benefits increases and a portion was weather-related.

Snow and cold drove utility and overtime costs higher in the first-quarter last year. The improvement in operations in 2014 translated into nearly 24% growth in EBITDA in the fourth quarter compared with the fourth quarter in 2013.

EBITDA for the full-year rose by just about 16%. The conversion of EBITDA to free cash flow at Atlantic was good, with free cash flow up over 40% for the quarter and 17.5% on the full-year.

A proportion of the increase in both periods was attributable to a reduction in maintenance CapEx. Maintenance CapEx was higher in 2013 as a result of upgrades to information technology systems made in that year.

Interest expense was higher as a result of Atlantic's debt having been unhedged and very low cost during the first 5-months of 2013 and by virtue of the fact that debt balances were higher in 2014 with the previously mentioned acquisitions. To sum up the Atlantic story, the performance of the business continues to reflect what we've been saying for some time is a cyclical recovery in general aviation.

Given the fact that general aviation flight activity in the US remains well below its historical peak in 2007 and the fact that we continue to improve both the scale and value proposition of the business, we are confident that Atlantic Aviation continues to have a lot of runway in front of it, so to speak. Contracted Parent Energy.

The performance of our portfolio of contracted parent energy businesses in the fourth quarter reflects the considerable changes to that segment that occurred during 2014. We acquired 2 wind power generating facilities, a 20-megawatt facility in New Mexico and a controlling interest in an 183-megawatt facility in Idaho.

We've divested our controlling interest in District Energy in Chicago. Thus the results need a bit of interpretation.

On the face of it, CP&E seems to have come undone when in fact, District Energy performed well for the portion of the year we owned it. We more than doubled the size of our renewables portfolio during the year.

The results for the fourth-quarter are essentially those of our wind and solar assets but exclude any meaningful contribution to from the Idaho project since that transaction didn't close until late December. In addition, the quarterly results are burdened with transaction costs of about $1 million.

I'd like to add a bit of color around the Idaho project. We did have a couple of people ask us in August, why did you take a minority interest in a project that you have to account for on the equity method just at the port when you're simplifying your reporting?

We clearly had a reasonable hunch, a technical term, that we could potentially increase our stake in that project and keep our reporting simple rather than just put money out the door for the sake of doing so. In the case of Idaho Wind, it seemed to us that of the other 2 owners of the project, GE would likely – would highly likely be a seller at some point and that Atlantic Power would not likely be a buyer.

We would not have entered into an arrangement involving a 10% stake had we not concluded that we could probably increase our position. At the end of – at year-end, the CP&E segment comprised controlling interest in 7 facilities with a combined generating capacity of approximately 260 megawatts.

We expect to add BEC to these figures in the first half of the year, bringing the total generating capacity of the segment to close to 800 megawatts. Not bad, given that we owned nothing in this sub-sector prior to the end of 2012.

We continue to evaluate opportunities to deploy additional capital in this segment in the regular common equity way. We have a unique advantage in bidding for BEC but we are not going to stretch to do any deal just for the sake of deploying capital.

That's a recipe for disaster. If we find that, as was the case from the second half of 2014, there are just too many drunks at the party, we will walk away and look at other opportunities in other segments.

For example, I may just take another phone call from the banker about a blowing up or distressed MLP. The point is, we have the ability to be flexible and take advantage of opportunities when and whether they arise, not necessarily for the sake of putting money to work in a particular sub-sector.

Hawaii Gas. Gas sales at Hawaii Gas increased by approximately 1% in 2014 compared with 2013.

The increased demand came primarily from commercial customers, many switching to gas from electricity due to higher electricity prices, partially offset by a reduction in residential consumption. The results reflect the overall health of the Hawaiian economy and the ability of the Hawaii Gas team to market gas as a sensible alternative to expensive electricity.

Revenue for the fourth-quarter was down year-on-year reflecting the lower feedstock and propane costs, both of which move in relation to oil prices. Because of the lag in the billing cycle, the fourth quarter didn't reflect much in terms of an ability to capture incremental margin in a falling pricing environment.

We expect to see some of that in the first quarter. Gross profit at Hawaii Gas was flat in the quarter and up modestly on the year.

Hawaii Gas recorded an asset for certain regulated transportation costs primarily from 2010 through 2013. These costs are not recoverable through the fuel adjustment clause and a charge was taken in the fourth quarter of 2014 to write-off the related asset.

Excluding this non-cash item, expenses were relatively flat for the year and up for the quarter due primarily to marketing programs. A stable capital structure kept interest rates – interest expense flat.

There was little volatility and maintenance CapEx at Hawaii Gas. There was also a voluntary and somewhat larger than normal pension contribution noted in the third quarter.

The net of these was an increase in free cash flow generated by Hawaii Gas of 25.5% in the fourth quarter and 12% for the full-year compared with prior comparable periods. I'd characterized Hawaii Gas as in a steady state at this point.

The question that follows is, what will drive growth of this business in the future? The answer is, there are 4 key initiatives in front of us to continue to grow Hawaii Gas.

First, we must continue to find ways to improve cost structures. Realistically, this is a job that is never done.

Second, we must make a determination on the timing of the filing of a general rate case. We had talked about the possibility of filing in early 2015 for implementation in 2016.

However, the proposed acquisition of Hawaiian Electric by NextEra and the attention of the HPUC to that filing may cause us to delay a filing by Hawaii Gas for a period of time. We are still considering this decision.

Third, we must conclude our current open docket item in front of the HPUC with regard to bringing additional LNG into Hawaii. Recall that we are seeking to increase the amount of containerized LNG coming into Oahu to levels sufficient to offset up to 30% of Hawaii Gas' naphtha usage.

The consumer advocate and others have filed their information requests with the HPUC on the matter. Hawaii Gas is obliged to respond.

We expect to have a resolution in the second quarter of the year. In the meantime, Hawaii Gas is proceeding with its related RFP process and expects to have responses regarding the cost of equipment and availability of supplies of LNG early in the second quarter.

Forth, we have to do whatever we can prudently to advance the dialogue around bulk LNG as a future of the Hawaii Energy complex. Hawaii Gas continues to work closely with the state, the Hawaii regulators and like-minded stakeholders to hasten this process.

We continue to believe that the combination of these initiatives provides Hawaii Gas with substantial room to grow over the next few years. Looking ahead, before we open the call to your questions, I'd like to provide you with a bit of additional information concerning growth projects in 2015.

We've been saying for some time that the business in our portfolio can be assumed to generate underlying organic growth in the free cash flow in a mid- to high single-digit range depending upon the business. The balance up to our expected growth in free cash flow is sufficient to support approximately 14% year-on-year growth in free cash flow and dividends will come from the effective deployment of growth capital.

In the past, we've laid this out looking at each of the businesses individually. Last quarter, we began to provide much more concise, easier to digest information on growth projects.

We'll continue that this quarter, much more like the disclosure made by a number of the MLPs. In the discussion of growth projects and liquidity in capital resources section of our 10-K, you will kind of find a couple of useful pieces of information.

First, we have a pipeline of approved projects worth more than $177 million including approximately $100 million related to IMTT. Of these, we expect to be able to complete about $150 million worth in 2015.

Completion of these is factored into our projections for 2015, but remember the growth CapEx projections usually have a gap between when money is spent and when the return is generated and that not every single dollar of growth capital is revenue-generating. Investment in related infrastructure, projects that enhance the operations of a business but may not be tied to a particular revenue stream, like a new dock, fall into this bucket.

In addition to these ornery course type of growth projects, we expect to be able to deploy an additional roughly $100 million in relatively small, what we characterize, as bolt-on acquisitions by our existing businesses. The best examples of these historically have been the individual FBOs that we have added to the Atlantic network or small wind and solar projects that we have invested in as part of CP&E.

On top of these 2 categories but without a specific dollar target value are those types of acquisitions that could accurately characterized as transformative. Examples would include an acquisition like BEC, and the impact that is expected to have on our CP&E segment this year or certainly the IMTT acquisition last year.

The timing and value of this type of event is necessarily unknowable. Therefore, not factored into our outlook.

But the point is simply that you can and should think of MIC as a vehicle that is well-placed to take advantage of capital deployment opportunities, large or small, in an effort to drive growth and value. I hope we have shown you, we will only pursue such opportunities when there is a real opportunity to create shareholder value.

Expect that our quarterly commentary will continue to focus on our consolidated results, rather than the asset level detail we've provided in past years. We will continue to speak to proportionately combined results, but hopefully only in the past tense with respect to prior-year results.

Thank you to those of you who continue to encourage us to shorten our release and our commentary. If only I could get Jay to write a shorter script, we'd be in business.

One other note of disclosure. We intend to again conduct our annual general meeting this year virtually, as we have for the past several years.

We have found the online format to be efficient and cost-effective and certainly a trend among companies who don't use their annual meetings as a forum for marketing. We will make one change this year that is at the request of one of our shareholders.

That is we will have a live phone line for shareholders who might wish to pose a question orally rather than requiring them to type a question into the website. The AGM will likely be scheduled for late May this year.

If you have any concerns about the virtual AGM format, please let me know. I'd characterize MIC's performance in the fourth-quarter and full-year of 2014 as both good and in certain instances, ahead of our expectations.

We've set aggressive but what we believe are achievable growth targets for the coming years. We have focused the management teams at each of our businesses on meeting or exceeding these.

I'm confident they are up to the task. When we look back on the year, we expect to have delivered an approximately 14% year-on-year increase in our quarterly dividend based on the continued stable performance of our businesses and the effective deployment of our available resources.

With that, I'll thank you once again for participation in our call and ask that our operator open the phone lines for your questions.

Great. Thanks.

Thanks for all the color. First just a quick one, as you look at BEC capitalization options.

Just – does the fact that you filed the S-4 that's being reviewed by the SEC for a conversion from a LLC to a C-Corp preclude you at all from issuing new equity during this SEC review process?

TJ, thanks for your question. I think as it relates to BEC, we've got lots of options.

We have the option of an ATM program. As I said in my comments, we have an option of raising equity.

We have the option of paying down the debt with the existing facilities at the MIC revolver or IMTT. Step 1 in that process is to have a good dialogue with S&P.

I think S&P, after the deal was announced, put us on watch. But I would also say that watch was developing watch, it wasn't negative watch.

So people can read into that what they want. I don't think there's anything in relation to any S-4 filing or anything else we've done that precludes us doing what we need to do or want to do at BEC.

But the lawyers get very nervous when I mentioned the word S-4 because I think if you want to look at the S-4, yes, my advice is to read the statement, otherwise, I get kicked under the table by the lawyers.

Okay, fair enough. Then as we look at BEC, just how quickly do expect to start pursuing some of the growth options that come about by the proximity to IMTT?

Can you quantify how much new capital you think the opportunity presents?

At this point in time, we haven't quantified anything on that. I think those who follow the power sector will have a rough figure of what 100 megawatts of additional capacity would cost, recognizing that it's 100 megawatts bolting-on to an existing facility.

We already have the land available to do it. In terms of timing, to some extent that's a how long is a piece of question, where first step is to get FERC approval for the transaction.

We would then need to deal with the New York ISO and FERC and suppliers around adding additional capacity. At this point in time given that many stakeholders, I don't know.

But I would say it is not a 2015 capital deployment. It's a spend 2015 beating our head against all the bureaucratic processes and look to make some progress in the next couple of years.

Okay, thanks. Then you did highlight that you do expect you can grow through larger acquisitions over time.

I'm seeing that with BEC. But you look at – more recently at some of the disruptions that commodity prices have caused.

Just any specifics that you could highlight that would mark types of assets that make sense possibly outside the current wheelhouse? Or is the thought here just similar to growing within your current segments?

Yes, it's a good question, TJ, so thanks. I think in terms of growth, we're really focused on the existing 4 segments that we are in at the moment.

It's not to say we wouldn't look to a fifth at some point in time. As you said, the discontinuity that's going on, our personal view is that there will continue to be a massive amount of what I would call carnage in the MLP sector.

I think our personal view is the party has only just begun there. I think there are a number of players in that space that have no equity value but perceive they have equity value.

The question for us is, do we spend any time talking with them or do we just go straight to talking to their lenders. I think what we're more looking at in that space and what more excites me is good businesses with bad balance sheets than just businesses that should never have been IPOs or MLPs, to start with.

But if you said when we acquired IMTT in July of last year, all of our growth capital focus was organic growth CapEx. Bolt-on acquisitions didn't feel like they made sense to us because we saw the prices that others were paying and that was stratospheric.

I think we are now looking at other opportunities in the midstream space. Asset prices for those things have clearly compressed us.

A lot of those businesses no longer have access to equity capital given where their share prices are and don't have access to debt capital given that they don't have access to equity capital and given that they – given that I think lenders have wised up to some of those businesses. So I think, IMTT levered at 3.5 times, where out of day with $600 million on undrawn liquidity is in a great position to take advantages of some of those opportunities.

We're not going to rush into it because – our personal view is that the carnage has only just begun.

Okay, thanks. That's helpful.

That's all I've got.

Good morning. Congratulations on the strong quarter.

Hey, Jeremy. Thank you very much, Jeremy.

Turning to the corporate conversion process, would you be in a position to provide any color on what type of index inclusion MIC might see? How that could work out in your eyes?

Yes. It's a good question.

I will throw it to Jay Davis from Investor Relations because he's got a better sense of it than me.

There's a couple of options here, Jeremy. I think that we've looked at what might be open to us.

It's obviously subject to consideration by the index managers, the Russell Organization as an example or S&P. Russell will look at the end of May at the make-up of the listed companies in the US and decide what the cutoff is for inclusion in their list typically the top 4,000 largest organizations.

S&P is a little more ad hoc as to when they include or remove anybody from their indices. But there is potentially opportunity for passive demand for our shares in the range of $3 million to $3.5 million, maybe $4 million shares depending on how many of those indices actually pick MIC up.

We'd look at something like the S&P MidCap 400 or the Russell 3,000 as likely to do so but there is certainly no guarantee.

That's very helpful. Thank you.

I was just wondering, after we've had – the second half of IMTT under the belt for some time, if you might be able to provide any updated thoughts from potential cross business synergies that you guys could enjoy now that you have full control of IMTT?

Yes, we're not yet going to quantify that. But I would say the – Rick Courtney from IMTT and some of the – an IMTT Head of Engineering went out to Hawaii Gas this quarter to assist with what we are looking at doing in the LNG terminal opportunity and investment in Hawaii.

We are continuing or really kicking off the process now of jet fuel opportunities between Hawaii and – I'm sorry between IMTT and Atlantic Aviation. I would put those into the revenue bucket opportunities we are looking at.

Obviously, once we own BEC, the fuel oil storage for the BEC plan to run on fuel oil when gas prices spike or gas isn't available. That business will all shift to IMTT and IMTT will increase the capability of BEC to run on fuel oil if and when that transaction closes.

So on the revenue side, they are the sort of opportunities we are exploring. We're also kicking off or driving forward for opportunities on the back-office integration of all of our businesses more broadly where that make sense.

So we haven't quantified it. But we are seeing a greater level of interaction between the different businesses driving opportunities to each other.

That's helpful, thank you. Then coming at the M&A questions at maybe just a little different angle here.

It seems like there is broader distress in the energy markets and even beyond the MLP market. I'm just curious if you see larger energy companies that are looking to live within cash flow and might be more willing to divest midstream assets to bridge that funding gap?

If you're seeing any more opportunities on that part of the energy arena.

We're definitely – the answer to that is we're definitely seeing opportunities there. Folks who would previously not have looked to divest assets because essentially their cost of capital was zero or they believed their cost of capital was zero because their access to capital was infinite, have had a sudden dose of reality.

I think there, we're treading our way carefully. One of the reasons for that is especially in some of the oil and gas fields locally, this opportunity for people to divest to you pipeline systems that have off-take agreements.

But your off-take agreement is with someone that may or may not stand in place to honor that off-take agreement depending on where the commodity price comes out. So there are certainly those opportunities.

Many of those opportunities that I would describe as being first to market and are available now are probably with the more distressed because there the ones who have rushed – who have had a dose of reality sooner. But we have to think very carefully through the counter-party risk there.

That makes sense. Thanks.

Just one last one if I could. Sorry if I missed it, but the S-4, are you able to share any thoughts on timeline for how that process generally unfolds?

I can't really say anything more other than the comments that I have given, which is the process that's involved after we filed the S-4, which was last night, is the SEC take a look at it and decide whether and how they will review it. Then the next step in the process is once the SEC has completed that process how long it takes the SEC to do that is in their hands not ours.

The only thing I would say is the reason we are moving forward on this as we can, as Jay mentioned that the Russell index is readjusted by the end of May and we are hoping though not guaranteeing but we're certainly hoping that with the timing we've done in this, we should be through the process in time to be included in the Russell index if everything went as the way these things normally go. That sort of timing would be doable.

But as to the specifics of timing, I can't give you any more color than that.

That's helpful. That's it for me.

Thank you very much.

Thanks, Jeremy.

Thanks. Good morning.

Hi, Brendan.

Hey, guys. So first, on BEC, is there – so you guys provided the EBITDA outlook.

Is there much by way of maintenance CapEx that we should expect from that facility? Or is it fairly new so maintenance CapEx was pretty minimal at this point.

Yes. Maintenance CapEx will be minimal I think for the first few years of life.

It was only put into service in 2012.

Okay, great. James, you mentioned the co-gen plant at IMTT.

I think you said the ground lease is up in 2018. So, you – am I right?

Do you own the ground? Are you receiving payments from the owner of the plant for the ground?

Yes. So that ground has been leased, I think the timeline will be roughly a 30-year lease that comes up for fruition in 2018.

I don't think it was originally struck as a 30-year lease but I think that will be the rough timing with extensions. So we are receiving very small, well-below market lease payments from that facility today.

When that ground lease expires and we get the ground back, there is clearly a much higher and better use of that ground that is – currently it's ground used today.

Is the plants useful life likely to end at the time of the expiration of lease in 2018? Or would the plant – would the improvements there fall to you guys and then you have that co-gen facility along with BEC?

That's a very interesting question. Different people have different views on that.

There's probably only 2 views that matter: the tenants and the landlords. There's a differing view on that.

I think the key part that is the unarguable part is from the lease expiration. We will get that land back.

We could put new power generating equipment on that land. And run a much more profitable business than we currently run today.

So I think the answer is, it doesn't really matter whether the equipment has any value to us. The opportunity from that land is massively greater than the land-use today.

Okay. All right, great.

Thanks. Then just on the M&A outlook that is there, maybe I'm just being a little bit dense in terms of hearing your comments.

So it sounded like you are looking at pipelines as possible options. Are storage facilities that are either owned by MLPs or other energy companies, are they, things that are coming up now more as options for acquisition or are bulk liquid storage facilities still performing well and they're more likely to be held on to by companies that may or may not have some pressure on other parts of their business?

Yes, I think the answer is by and large, terminals are doing well. I think if you look across the reporting period, from what I've seen from other companies who wanted terminals, they've done well.

That's not uniformly true. Not all terminals were created equal.

So some terminals are doing better than others. I think the terminal opportunities would be to buy from companies that got themselves distressed or the terminal opportunities would be to buy from companies that got themselves distressed not just as terminal operators because they own some other stuff as well as terminals.

So we definitely like the terminal space and would look to add there. We'd like to see people who own terminals.

It may well be the better asset that they own but they're prepared to divest it because they won't get anything else for any of the other assets. So all of the above, I would say we were looking at.

Pipelines, we always have an interest in. But the prices have been too high more recently.

So we will take a look across that midstream spectrum.

Okay. All right, great.

Thanks for the time.

Thank you.

Hi, guys. This is Rick Faulkner [ph] for Ian.

Hi.

I just wanted to ask about maintenance CapEx at IMTT. It looks like it went from $83 million in 2013 to $44 million in 2014.

Yes.

I was hoping you could just explain that decline year-over-year? If possible, get a sense of what it would be going forward?

Sure. So the first thing I'd say is that the 2013 number whilst disappointing was slightly artificially high because roughly $20 million to $25 million of that related to Hurricane Sandy uninsured repairs.

So I think the run rate was sort of closer to $60 million rather than the headline $80 million. So we decreased it from $60 million to $44 million.

I think we said that for all intents and purposes, $45 million should be the new normal until we provide further advice that we can still reduce it. I think versus benchmarks, we should be able to get it down further than the $45 million; however, there is more work to be done on that.

I think the thing I would say in relation to the reduction is when we did the transaction I think our view was first step was reduce it to $50 million and second step was reduced to $45 million. We had thought it would take us until maybe 2016 to get to $45 million or maybe longer.

We just ended up getting there faster than we had expected. But we think that $45 million is sustainable and maybe lowerable going forward.

The real thing about IMTT that pleased me during the fourth quarter was, it actually had its best safety record of any period since we had acquired a stake in the business in 2006. There was no lost time incident in the fourth quarter at IMTT.

The focus on safety and environmental health and safety that we ramped up post our acquisition bringing DuPont in has really been well-received and the management team there have done a great job of implementing it. I'm pleased that the safety initiative is actually being led by the CFO, James May, who we put in there.

One of the reasons I say that is, if you get the safety processes and procedures right, it is a sign that you are starting to rollout processes and procedures everywhere else. So the fact that safety is improving, tells me that operating costs will prove and that maintenance CapEx processes and procedures will improve because it's part of the same mindset of rolling out standard procedures.

So the safety result in the fourth quarter, in my mind, is in no small way linked to the maintenance CapEx reduction because it's all about putting standard process and systems in place.

Great, thanks.

Thanks.

Hi, guys. Thanks so much for taking my question this morning.

Hi.

And congratulations on a good quarter.

Thanks.

Great. So I was hoping you could give us an update quickly just on the integration of Showalter and if it's still expected to close in Q1.

Then also if you could just give us an idea of any other possible acquisition targets in the aviation space? If there's any other geographic markets you are looking to expand into at this point?

Sure. Thanks for the question, Nick.

Showalter, the transaction actually closed in late January. So that's now in and operating.

One of the things I would say about Showalter as to why it appealed to us was, Orlando has an enormous amount of convention traffic. The reason we like that as a market is, it gives us an access point into a customer who visited for the convention that we can then cross-sell our network to for the rest of the year.

So as well as being a nice bolt-on opportunity, the network effect of being in convention locations. We are in Vegas.

It's a very important destination for us, not just because we make money at Vegas but it's a key touch point to develop customer relationships for the rest of the year. Orlando is probably as good as Vegas from that perspective.

So that integration is going well. We are always looking with the Atlantic portfolio at whether there is locations to bolt-on or to divest.

The key – the one keyhole in our footprint I would say is IAD or Dulles in Washington DC. The 2 incumbents there are Landmark and Signature.

We understand that Landmark's lease has expired; it's the most profitable and biggest site in the Landmark portfolio. The airport will be running an RFP.

So we are very keen to run hard at that RFP to get into IAD. I certainly think it would be better for the airport in Dulles to have Atlantic the sort of premiere FBO network at the nation's capital.

I think we would probably do a better job than either of the incumbents at big events in DC. So we will take a good crack at that.

That's probably the biggest hole in our footprint. Places like Seattle, we have no presence.

We'd like to have a presence, but we will be judicious in our approach to those business opportunities.

That's great. Thanks so much guys.

Thank you. End of Q&A

Thank you very much. It's the time of year when a number of conferences and non-deal road shows are on the calendar.

We look forward to seeing a number of you at these events. As always, if you have comments or really tough questions call Jay.

If you something easy or nice to say, please call me. Before closing, I would like to note that during – since the start of the year, we have lost a very important member of the MIC family.

Ann Tang, who was the Executive Assistant to the CEO at Hawaii Gas passed away very suddenly at her home. We miss her.

We remember her fondly. Our thoughts and prayers go out to the team at Hawaii and to her family.

Thanks to our great team here at MIC including our finance and legal personnel, our external advisors and the management teams at each of our businesses. Thank you to our lenders, who are very important suppliers to us.

Everyone did a tremendous job of pulling all the materials for this report together. I thank you for that.

We look forward to discussing our first-quarter 2015 results with you in early May.