Macquarie Infrastructure Holdings, LLC

Thank you and good morning everyone. Welcome once again to Macquarie Infrastructure Company’s earnings conference call this one covering the first quarter of 2012.

Our call today is being webcast and is open to the media. In addition to discussing our quarterly financial performance on this call, we have published a press release summarizing our results and filed a financial report on Form 10-Q with the Securities and Exchange Commission.

These materials were released last evening and they may be downloaded from our website, www.macquarie.com/mic.

To help illustrate some of the key points in our results we have again produced supplemental materials that will be referenced during the call. Materials are also available on our website.

A link to the materials is located under the Events portion of the Home page. If you have not already done so, I encourage you to download these at this time.

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 are not currently aware could also cause our actual results to differ.

The forward-looking events discussed in this presentation may not occur. These forward-looking statements are made as of the date of this presentation and 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 introduce Macquarie Infrastructure Company’s Chief Executive Officer, James Hooke.

Thank you, Jay. Good morning and thank you all for participating in our earnings conference call this morning.

I'll focus on 3 areas in my prepared remarks this morning. These are: firstly, an update on our ongoing efforts to secure the payment of dividends to which we are entitled from IMTT; secondly, guidance from our Board on dividend policy and our intent to increase our quarterly cash payments to our shareholders to at least $0.50 per share per quarter; and thirdly, an update on the continued good performance of our businesses through the first quarter of 2012, in particular the strong year-on-year comparisons.

As always we will answer any questions you might have about MIC following my prepared remarks.

I will begin by providing some additional color on the performance of our businesses during the quarter. For those of you with limited time and multiple calls this morning, I will begin with a 2 minute summary of our operating results for the quarter.

Each of our 4 businesses delivered financial performance during the first quarter that was consistent with or better than our expectations. We enjoyed outperformance at The Gas Company on growth and volume of gas sold and further margin improvement in the unregulated portion of the business.

At IMTT, the improved performance was a function of mid-single digit increases in average storage rates and a modest increase in utilization rates.

The milder winter caused customers of District Energy to use building cooling earlier in the season than they would normally and this resulted in significant outperformance at District Energy albeit of a seasonally low base.

And Atlantic Aviation reported growth in performance in spite of significant year-on-year decline in de-icing revenue due to the same mild winter that impacted District Energy. The performance of our businesses contributed to an increase in proportionally combined free cash flow per share of 9% compared with the first quarter in 2011.

We reported $0.88 per share in proportionally combined free cash flow for the quarter compared with $0.81 per share in 2011.

At the corporate level legal costs associated with the IMTT arbitration resulted in a significant increase in year-on-year SG&A expenses. Excluding the effect of these corporate expenses incurred in connection with the IMTT arbitration, mixed proportionally combined free cash flow per share would have increased by 17.3% to $0.95 per share in the first quarter of the 2012.

Maintenance capital expenditures were in line with our expectations. Cash interest was lower on reduced debt balances compared with 2011 and cash taxes were within expectations for the quarter.

The continued generation of substantial free cash flow allowed the MIC Board to again authorize the payment of a shareholder dividend. The $0.20 per share cash payment for the quarter will be made on May 17 to shareholders of record on May 14.

Overall I'd characterize the first quarter as providing a solid start to 2012.

I will turn now to the first item on our agenda, an update on the arbitration with our co-investor at IMTT. Now to recap on March 30 the arbitration panel awarded MIC and our co-investor in IMTT $110.6 million each resolving the matters that we had bought before the panel on April 18 of 2011.

In addition to awarding the dividend we were due, the panel as expected dismissed all the counterclaims made by our co-investor. And as we had requested, the panel also provided clarification on the methodology used to calculate dividends in the future and, again as we had requested, directed the parties to comply with certain corporate governance recommendations.

On April 1, 2012 immediately after the award was issued we filed a complaint in Delaware State Court to confirm the award. When the award is confirmed, it takes on the features of a court enforceable judgment and we would then take the customary steps to enforce such a judgment.

Our co-investor has not yet responded to our April 1 complaint for confirmation but has until May 24 to do so. Despite comments from our co-investor’s representatives that they want to put the arbitration behind us and move forward, the steps necessary to affect the payment of the award have not yet been taken by them.

Now, while we were pleased in the outcome of the arbitration, our co-investor would clearly have preferred a different outcome. They are working through their issues and I am hopeful that they will soon be able to do as they say and put this behind them and move forward.

That would clearly be in the best interest of IMTT. If they are unable to do this by May 24, MIC will obviously seek a summary judgment for the court concerning the award and then seek enforcement of that judgment.

And while I hope it doesn't come to this, and I don't think it should come to this, a number of shareholders have asked about the technical path forward if IMTT does not pay the award, so I wanted to clarify this.

While any additional delay in this matter would be disappointing, our confidence in our ability to obtain the cash proceeds to which we are entitled has not diminished. In fact, as noted in our press release, our Board has approved and we are providing you with very clear and specific commentary on our approach to utilizing these proceeds to increase our quarterly dividend.

The arbitration panel resolved the matter of dividends payable through the end of 2011 and provided clear articulation of the methodology to be used in determining future dividends.

In addition to the $110.6 million award which covered the period up to the end of 2011, we will therefore also expect to receive a dividend for the first quarter of 2012. The free cash flow generated by IMTT in the first quarter, per the terms of the shareholders’ agreement and consistent with the arbitration award, was approximately $22.6 million for each shareholder.

In recent discussion on this matter, our co-investor offered to pay the arbitration award of $110.6 million if MIC would accept a lesser dividend for the first quarter of approximately $8.5 million for each shareholder. We could not do this.

We hear our shareholders loudly and clearly on the issue of future dividends from IMTT. Having gone through the arbitration and achieved the award we did, MIC is not going to again enter into a negotiation on this matter.

The time to negotiate and settle differences on the courthouse steps is on the way into court or in this case, arbitration, not on the way out.

Look, I understand MIC shareholders’ unambiguous views on this and we will act accordingly. You should be confident that we’ll be vigorous in our pursuit of this payment as well as the amounts due under the arbitration award in itself.

Clearly, an arbitration experience like the one we’ve been through strains relationships between all parties.

As I said on previous calls, arbitration is not a mechanism that brings parties close together. Nonetheless, MIC is working hard to put the disagreement behind us and strengthen those strained relationships.

Once we have received the dividends due, I am optimistic that we can work together as owners of IMTT to see it continue to grow. IMTT is a good business.

When dividends and governance are working, we would be happy to invest more MIC capital in prudent expansion opportunities. When we resolve all our differences with our co-investor with respect to dividends -- and we have got hope we can do that and we will do that soon -- we would expect IMTT to become even more productive and even more valuable.

Let me turn now to the next logical subject, that of dividends and an update on our thinking regarding dividends for MIC. In authorizing a dividend for the first quarter of 20% per share, the MIC Board was of course unable to consider either the cash awarded to MIC in the arbitration or the dividend from IMTT due for the first quarter.

Nevertheless, the Board felt that it was important that investors have a sense of their thinking and direction on this topic. Given our confidence in our ability to secure the payments to which we are entitled, the MIC Board is comfortable expressing its intent to raise the MIC dividend from $0.20 per share per quarter, or $0.80 per year, to at least $0.50 per share per quarter, or $2.00 per year when the award proceeds are being received.

As we noted in the past, MIC is fundamentally a total return story with a foundation in a substantial, sustainable dividend. Our intent is to return to paying out substantially all of the free cash or the cash generated by our businesses in the form of a quarterly cash dividend as well as was the case part of the financial crisis in 2008-2009.

The dividends we expect to receive from IMTT will make it possible for us to simulate that substantial pay up even though we are unlikely to have access to all the free cash flow generated by our businesses for at least another year or more until we’ve refinanced Atlantic Aviation. Now some of you will immediately look to the proposed $2.00 per share in dividend and ask, "Does that mean your target payout ratio is only 70% of your free cash flow after payment of management fees?"

And the answer to that is no. The payout ratio was not an input to our thinking or calculation; rather it was an output of what we think is a prudent approach to dividends for now.

Let me put this into some context for you. Had MIC paid its management fees in cash in 2011, it would have generated $2.87 per share in proportionally combined free cash flow, of which Atlantic Aviation would have generated $1.37.

A $2 per share dividend before the IMTT arbitration award would have represented 70% of the $2.87 per share in free cash flow being generated, but 133% of the free cash excluding Atlantic Aviation.

In summary, MIC wants to move back to a position of paying out substantially all of the free cash flow as dividend. There were previously 2 impediments to doing this, namely the disputed IMTT and the debt levels of Atlantic Aviation.

We are very close to having resolved the constraint at IMTT and in fact having a large amount of money, $110.6 million, coming to us from IMTT. However, we need to see Atlantic through the delever.

However, we don’t propose to use the dividends from IMTT to delever Atlantic faster because the current debt at Atlantic includes such favorable terms. We think it is better for us to use the cash flows generated by Atlantic to reduce its debt rather than seek to refine Atlantic Aviation now.

In the interim, we will use the payment from IMTT to underwrite higher dividends for MIC shareholders than would otherwise be the case until we can prudently and more cheaply refinance Atlantic then we could today. In short, think of payment from IMTT as bridging the MIC dividend through to the point of which we have access to all the cash flows from all of our businesses.

I will now continue with commentary on our individual operating companies and look first at our investment in IMTT. At IMTT, we had gains for top line growth driven by an improvement in rates and utilizations.

Terminal revenue grew by 5.3% versus 2011 driven by 5.6% growth in average storage rates and an increase in utilization from 93.8% to 95.9%. As a reminder, both of these are offset by roughly 30% of terminal revenue that escalates in line with inflation.

That proportion includes throughput, packaging, labor recovery and railroad operations among other items.

The 5.6% increase in average storage rates was consistent with my comments in November 2011 and February 2012. At both times, I said we expected 2012 rates increases to be on the low end of the range of price increases we've seen over the preceding 6 years.

We expect average storage rates to increase in the range of between 5.5% and 7.5% for the full year. Only a small number, about 17%, of the contracts that are expected to renew this year have actually been signed.

With the majority expected to renew in the second half of the year, it’s logical that the step-up in the first quarter rates would appear to be on the low side.

Now one of the factors influencing the timing of contracting Bayonne is the uncertainty regarding some of the refineries in the Northeast. Both the Sunoco and ConocoPhillips Trainer operations have been shut down and it remains an open question as to whether or not they will be shuttered permanently.

We've all read the articles about potential new owners ranging from other players in the petroleum industry to the announcement by Delta Air Lines that they would buy the Phillips Trainer facility and Carlyle buying the Sunoco facility in Philadelphia before ETP buys Sunoco.

What we know at the moment is that as long as these so-called "zombie refineries" are shuttered or idled, there will be less short term demand for storage of heavy oil residual product in the Northeast. We have a reasonable number of heavy oil tanks at Bayonne and contracts for some of these are scheduled to renew this year.

If on the other hand the refineries continue to operate under new ownership such as Delta, they will produce heavy oil as a byproduct of making jet fuel and other distillates.

fewer refineries in the Northeast means that less of the consumer demand for refined products in the Northeast would be met by these refineries. As a result, a greater portion of the demand will have to be met through imports of refined products whether from the Gulf Coast of the U.S., Europe or Asia.

And if the refined product is now going to be imported, it will likely be coming in by ship and if it comes in by ship, our facility in Bayonne are in the best position of any in the market to handle that influx.

I’ll note that this may result in a one-off increase in capital expenditures to convert the heavy product tanks to service the clean product. In general, this involves the replacement of fixed roofs, with floating roofs to minimize the head space in the tanks.

For the engineers amongst you, it’s the vapor that’s volatile, not the liquid. Any heating coils would also have to be removed.

These sorts of conversions have been completed before including at Bayonne. This is not new technology.

The cost of converting a 100,000 barrel tank from a fixed to a floating roof and converting the associated piping would be in the range of $750,000 to $1 million. Such a conversion is however not without benefit, as the storage rates for gasoline are higher than for residual product.

At the moment IMTT strategy is to wait-and-see rather than to push to renew contract now before we know what the storage demand profile will be as between residual product and gasoline. Time is on IMTT’s side in this situation.

we’ve seen an increase in the movement of black oil into our facilities. The increased crude oil production predominately associated with the various shale gas developments, but also from the Canadian Oil Sands is increasing the amount of heavy products such as vacuum gas oil in the market.

Known as black oil, these products are being transported to IMTT where they are aggregated for export or blended as feedstock in refining processes. There may be incremental long storage revenue from such products.

For instance, handling railcars and related services is part of the other 30% that I mentioned above, the non-storage portion of terminal revenue. There is a potential for this revenue source to continue to grow at a faster rate than it historically has grown as the development of non-traditional oil sources continues.

The storage rate and utilization percentage increase contributed to terminal gross profit growth of 8.6% in the quarter. The increase was tempered by increased prepared and maintenance expenses in the terminal operating cost line however.

It’s difficult to see in the condensed statement of operations because the increased R&M expense was offset by lowering heating costs that were primarily a result of lower cost natural gas. While we continue to watch expenses closely, we believe that the increase reflected a number of unavoidable non-recurring items such a dock repair in Louisiana.

Regarding growth capital expenditures, many of you have noticed the shift in timing and the amount of expected contributions to gross profit and EBITDA from new projects. We now foresee approved growth projects contributing more than $41 million of incremental annualized gross profit and EBITDA.

At present, we estimate these projects will be brought online between now and 2014. The expected completion of certain of these projects have shifted to some degree however.

Where we had expected to see new projects that would contribute approximately $18 million to annualized gross profit and EBITDA in 2012, we now expect that number to be $6.7 million. The roughly $11 million decrease in contribution this year will be a part of the 2013 result instead.

This is nothing more than a revision to the construction schedules for these projects and movements of expected completion dates from mid-2012 to early 2013. The total value of all the projects underway, both those with a direct impact on gross profit and those that involve support infrastructure, is approximately $218 million.

We have updated the table growth projects in our 10Q to reflect both the expected completion projects currently underway and the expected completion dates. Because the precise timing is subject to various construction schedules, we suggest using a media convention in modeling the contribution from new construction.

the contractual escalators tied to inflation that are part of nearly all storage contracts; the contribution to EBITDA from growth projects outlined in our filings; and the rates achieved on renewal contracts that expire this year.

To sum it up, IMTT delivered a solid first quarter and the fundamental drivers of continued good performance are intact. We have seen nothing through the month of April that suggest that similar performance will not be repeated in the second quarter and we are confident that we will see end growth in this business.

Atlantic Aviation is up to a reasonably good start to the year as well. The business continues to outperform its broader market and generated a 1.4% increase in reported gross profit in the first quarter compared with the same period in 2011.

As always with Atlantic we need to peel back a couple of layers to get at the underlying performance improvement.

For the first quarter, same-store gross profit, that is adjusted for the acquisitions and dispositions made during the past year, was up 2.1%. The increase was driven by a combination of a 1.4% increase in the volume of fuel sold and a 3.3% increase in the average margin on those sales.

Offsetting this in the total gross profit was of course the milder winter weather and the decrease in de-icing revenue. Removing de-icing from both periods and looking at them on a comparable basis in terms of the underlying performance, the same-store total gross profit growth would have increased by 3.9%.

While the business performance continues to improve, we are mindful that the rate of improvement slowed marginally this quarter, consistent with a slowdown in general aviation activity. Having said that preliminary results for April suggest it was marginally stronger year-on-year than in the first quarter.

As noted in the FAA data, the absolute number of general aviation flight movement is up on a trailing-12 month basis, but down marginally in the first quarter on the prior comparable period.

We look at this as having more to do with weather this quarter than anything else. And as I've always said -- and I remind you again the FAA data is indicative but not perfectly correlated to Atlantic's performance -- with continued strengthening in the broader economy here in the US, we are hopeful the cyclical recovery and general aviation will gather a bit more steam in the next 3 quarters than it showed in the first quarter.

Along with the growing top line SG&A expenses at Atlantic were lower than last year. The decrease reflects both the dispositions that took place over the past year and a noticeably lower cost of insurance.

The lower insurance cost is a function of Atlantic’s excellent safety record and the buying power of the Macquarie insurance facility. We believe we have a better training and safety regime than any other FBO operator.

We invest enormous amounts in safety because it’s the right thing to do. It's good to see that this investment is recognized by hardnosed insurance companies in the form of lower premiums.

The cost outcome at Atlantic is even more pleasing to me when one considered the impact of high jet fuel commodity prices had on our credit card service fees. Credit card fees are a significant part of Atlantic’s SG&A.

When Jet-A prices rise, we pay to more credit card processes. This cost line increased noticeably year-on-year.

However the Atlantic management team did a good job in identifying other cost saving opportunities to offset this.

The teams at Atlantic and District Energy remain the stars within our portfolio when it comes to cost control. Many investors have asked if we expect to continue to rationalize the Atlantic portfolios we did during the past year.

The answer is that we will continue to be opportunistic in this regard. If we can sell individual sites where it makes sense to do so, we will.

If we can buy individual sites where it makes sense to do so, we will. There are areas in the country in which we would like to increase our presence, but we will continue to be disciplined with respect to the buying and selling of FBOs.

In short, we will be economically rational. In a similar vein, we noted in our 10-Q that we've seen a couple of instances of late of what we would characterize as uneconomic bids for leaseholds at a number of airports.

Atlantic's leases are a valuable asset and one that we work hard to preserve and enhance. We intend to be competitive in those situations where we are seeking to retain or acquire a new lease, but we are not going to bid to a loss-making position and hope we can make it up in volume at some point in the future.

As I've said before, we prefer to engage proactively with the airport authorities on which we operate in an effort to renew or extend our leases. If others wish to bid to loss-making levels as they have recently we will be prepared to stand aside for the time being and then be prepared to pick up the pieces when the "winners" untimely stumble.

Atlantic is expected to pay down another $9.2 million of its debt facility in the next week bringing the total debt principle payments to $15.7 million for the year. Had that $9.2 million payment been made at the end of the quarter, the leverage level of the business would have been reduced to 5.75x debt to EBITDA.

That's a turn of EBITDA in headroom that make the leverage covenant of 6.75x at March 31.

Similarly Atlantic is expected to make a distribution to MIC of $9.2 million on May 10 bringing the total amount distributed this year to $15.7 million. That's consistent with our expectation that the business will distribute approximately $25 million to MIC based on current and projected performance through the third quarter of this year.

Now beginning with the fourth quarter of this year, Atlantic Aviation will again be using all of its free cash flow to reduce its debt regardless of the leverage level. Free cash flow will increase at that point by the reduction in interest expense associated with the roll off of interest rate swaps.

All else being equal, the reduction in interest expense will increase free cash flow by approximately $30 million per year. I would note however that we are likely to put some form of interest rate hedge in place when the swaps expire.

It could be a swap or more likely a cap, but hopefully won’t be particularly costly, probably around a million dollars given where the markets are today.

We view this as wise insurance against some unpredictable but large movements in LIBOR rates in the next 2 years. The all-win rate of Atlantic's debt facility will drop to LIBOR plus 1.725% in the fourth quarter.

That's cheap debt and unless there is a compelling reason to do so, we are likely to leave the package in place and see Atlantic deliver at an accelerated rate.

When we have completed the refinance of Atlantic's debt package, probably in late 2013 or early 2014, we would expect to have access to additional free cash flow that we will then use to support our shareholder dividend. All else being equal, the lower we can get Atlantic's leverage before we refinance, the better the terms of that refinancing.

Taking advantage of the L plus 1.725% debt package, will see the businesses leverage reduce at a faster rate.

leverage continues to decline; gross profit is up; expenses remained strongly under control; and Atlantic Aviation is performing at the levels consistent with our guidance for EBITDA, excluding non-cash items of between $130 million and $140 million for the full year.

We continue to believe that the industry is in the midst of a cyclical recovery with a bit of retrenchment occurring in the first quarter as a result of weather and reduced de-icing revenue, and that we will see continued growth in value at Atlantic.

Turning now to The Gas Company in Hawaii. Total contribution margin increased by more than 21% for the quarter and the volume of gas sold at each of the regulated and unregulated portions of the business increased as well.

Free cash flow increased nearly 60% to just over $8 million for the quarter. Once again the non-utility portion of the business showed particular strength.

A 6.7% increase in volume of gas sold compared with effective margin management contributed to a more than 42% growth in contribution margin in this portion of the business.

The utility portion of the business sold slightly more gas than in the first quarter of 2011, although contribution margin was offset by a lower average margin per term.

Tourism in Hawaii continues to improve. Year-to-date through March, tourism is up 7.8% after adjustment for the leap year according to the Hawaiian Department of Business Economic Development and Tourism.

Tourism has grown steadily for the past 2 years and shows no signs of abating. Clearly, the recovery in this portion of the Hawaiian economy has contributed to the growth in sales by The Gas Company.

We did have to wonder however, when the department reported that 40,307 visitors were honeymooning on the islands in March. You may well ask as I did, "How can you have an odd number for people honeymooning?"

That represents some 20,153.5 couples; all very modern.

We continue to work with our colleagues at The Gas Company on solutions to the issues and the opportunities raised by the possible sale or closure of the Tesoro refinery on Oahu. Tesoro announced in January that it was seeking a buyer for its refinery on Oahu and thought that immediate closing of the transaction was possible.

We understand that there's been some slippage in that target date now.

In any case, we are continuing to pursue alternative strategies involving both the replacement of the gas feedstock produced by Tesoro, and alternatives to synthetic natural gas that could be delivered to our utility customers. We continue to evaluate the importation of feedstock and alternative gases including propane and LNG.

Obtaining the equipment necessary to transport and re-gasify LNG requires substantial lead time and this quarter we placed orders for those items. We've determined that importing some LNG into Hawaii represents an attractive alternative for a part of our utility volume.

The scale of the LNG opportunity remains to be seen, but we've now taken a small sensible step down this path.

The Gas Company and its customers would be better served with TGC having flexibility and independence when it comes to sourcing feedstock or supply.

As noted earlier, utility customers would likely see a reduction in their monthly bills if we are able to meet their gas leads with LNG today rather than naphtha.

Clearly, moving to an LNG based system is likely to entail capital expenditures and, depending on the scale of the operation, these could be substantial. However, certain expenditures would be components of the regulated utility and therefore we would expect these expenditures to be recoverable in the rate setting process overtime.

We also expect these expenditures to serve not only our existing gas customer base, but to support increase in both the customer base and the volume of gas being supplied. In this scenario, it’s not difficult to envisage The Gas Company as a more significant provider to Hawaii’s energy complex.

Given the solid performance of The Gas Company during the first quarter, we expect the business to come in on the higher end of our guidance for EBITDA excluding non-cash items on the full year. That would put the business closer to the $55 million for 2012.

The proposed refinancing of The Gas Company’s primary debt facility that we announced in February is proceeding as anticipated. And we would hope to have the refinance concluded well before year end.

April looks to have been another good month for The Gas Company as well. The number of honeymooners, volume and margins are ahead of expectations and the cost of LPG was favorable.

In summary, the performance of The Gas Company in the first quarter of the year was pleasing. Absent a material downturn in the recovery in the Hawaiian economy or some external shock, we expect to enjoy continued strong performance from that business.

Now we certainly couldn’t have anticipated the performance of District Energy in the first quarter. I mean who would have thought that there would be demand for air conditioning and cooling in Chicago in February, but there was this year and it translated into a nearly 43% increase in consumption revenue for District Energy.

Daily electricity expenses increased when consumption goes up, so gross profit was only up 30%; a strange phrase, gross profit up only 30%. At the end of the day that translated to an increase in free cash flow of $1.1 million and we had a 50% increase -- we have a 50.01% interest in this business.

Capacity revenue at District Energy was up on contractual escalators and the increase in the number of customers on the system this year versus last year. SG&A expenses were down a bit with the business having a couple of open positions during the quarter.

At our full year update, we noted that District Energy had a revolving credit facility that matured in September of this year. Nothing was drawn on the facility, but it was being used to back stop $7 million in letters of credit required by the City of Chicago.

That facility has now been amended and extended. The revolving credit available has been reduced from $18.5 million to $8.4 million and the facility’s maturity has been extended to September 2014 and that’s the same as the other debt in the business.

There were no other material changes to the capital structure of the business during this quarter.

As a result, absent another material shift in the weather, we would expect District Energy to finish the year at the higher end of our guidance for EBITDA excluding non-cash items or about $22 million. That’s a look at our operating businesses, their performance and their prospects and our outlook for the remainder of the year.

To that I would add that our manager has opted to once again reinvest its management fees for the quarter in additional LLC interests. I would also note that the corporate costs were higher than normal in the first quarter driven primarily by the legal costs incurred with the arbitration.

The ordinary cost SG&A expense of the holding company should remain in the $4 million to $4.5 million range per year.

MIC got 2012 off to a good start in the first quarter. All of our businesses performed well, expenses were mostly under control and capital management initiatives are proceeding according to plan.

We reaffirm our previously provided guidance with respect to the full year performance of our businesses including the expectation that both The Gas Company and District Energy will perform to the higher end of their respective ranges.

While we were pleased with the outcome of the arbitration with our co-investor in IMTT, we are disappointed with not yet having received the payments to which we are entitled. Nonetheless the MIC Board has authorized the payment of $0.20 per share cash dividend and indicated that they will raise that to at least $0.50 per share upon receipt of the proceeds from IMTT.

The fundamental drivers of continued good performance are intact and they are being reflected in the results through the first month of the second quarter. Thank you for your support and your continued confidence in our ability to deliver on our commitment to building shareholder value.

At this time I will ask that our operator open the phone lines for you for your questions and our CFO, Todd Weintraub, and I will be happy to answer any questions that you might have.

My first question relates to the mixing opportunity at IMTT, could you talk a little bit about the margin profile of that business relative to the core storage business?

Yes. Look, the way I would characterize that is, if you think about traditional bulk liquid storage, you end up having a customer who pays us a rate for storage and in that rate there is an implicit number of 3 product movements incorporated in that rate.

Typically it can vary slightly from product category to product category, in location to location, but on average our customer gets 4 turns of inventory per year included in that storage rate. As we move to handling more of the sort of black oil that is coming out of the shale projects and the smaller amount of that coming out of Canada, you end up seeing more of the economics of the relationship we have with the customer expressed in things like rail handling fees and other handling fees and mixing fees than you do in just in the storage revenue line.

Rail handling has – it’s typically for instance priced on a per railcar movement and there is obviously some more labor intensity to that, though there is probably slightly less capital intensity to that than other parts of the business, but there may be some capital needs on some locomotive equipment. And then similarly on blending and other services it's nice incremental margin, it's priced differentially to the way that our storage is priced and it comes, for want of a better term, more volume driven; whereas in the storage business we are agnostic as to whether really someone uses the tank or not.

In relation to handling fees, throughput fees and blending fees that takes on a level of volume volatility that doesn't exist anywhere else in the business. Having said that it's incremental to the earnings we achieve on the existing core business, albeit slightly more labor intensive.

So, I think, in aggregate it is earnings accretive though it changes the nature of some of the P&L expenses.

But it should be a positive as it grows relative to the rest of the storage revenue stream. It should be a positive both from margins and cash flow, I am understanding.

Yes. It should be.

One more question on IMTT. You kind of lay out a timeline in the press release and you discussed it today where it could take up to 6 months from May 24 I believe to collect, is that right?

Look that's the -- yes that's the timeline we identified. I just want to be -- part of the reason for doing that is to present people with a very clear view because I suspect most folks haven't dealt with a scenario where someone goes through a AAA process, American Arbitration Association process.

I would not -- I'd certainly hope it doesn't take anywhere near that long because you know I am sort of hopeful and optimistic that our co-investor there will actually – we’ll see some further discussion go on and we’ll see that they realize it’s in both IMTT's interest and their interests to put this behind us. But what I wanted to lay out was the path that people could ask us the hypothetical, “well okay worse case assuming that doesn't happen, what does the time frame look like?”

I think that's wise because I am sure as you alluded to, many of your investors are very focused on this dividend and would like to see it paid.

Yes. Look, I agree with that, Andrew, and that's why I also want to be clear.

We know that our shareholders want to see it and want to see it in full, and that's why we are going to take a little longer time so to speak to ensure that it's paid in full. We've heard that message from shareholders loud and clear.

One last question, there has been some news lately on the Chicago and setting up an infrastructure trust. Would there possibly be a role for MIC or District Energy in such a fund?

That's a good question. I have spent a bit of time involved with the Chicago authorities to see if there is an opportunity for District Energy and the answer is we would hope so, but it's not clear to me yet that there is.

But we are certainly working with the city of Chicago to see whether there is an opportunity. The first opportunity that the city of Chicago outlined was trying to find someone who would retrofit buildings for them to make them more energy efficient, and in return for putting that CapEx in up front to make the building more energy efficient, the person who provided that CapEx would then be paid an annuity over time that represents the saved energy cost.

And that was the first project the city announced. In many ways that's directly analogous to exactly what District Energy does.

If you think about District Energy business, it puts CapEx in up front in a building and then gets an annuity revenue stream from that building over time for providing cooling services. And the whole hypothesis is that the air conditioning expense for the building is lower over the time than it would be otherwise.

So there is an analogy with what District Energy does. Whether it's, in essence, just an interesting analogy for an actual business opportunity remains to be seen and the Chicago process, I think, is in the very early embryonic stages.

So we are adopting a sort of watch-and-see approach, but we are certainly avidly engaged with the city. Obviously with Atlantic Aviation, our FBO facility at Midway Airport is an important touch point we have with the city.

With our experience in District Energy we have another touch point with the city of Chicago. So we’re working through that.

I am intrigued as to whether there are opportunities, but I want to see them be economically rational opportunities for MIC rather just good talking points.

So question first IMTT, the dividend that you wanted to get in the first quarter that you requested, $22 million, how should we compared that to -- I think the proportional free cash flow which was, what $15 million or $16 million at your level? How is it $22 million versus $15 million?

Sure. It’s a good question.

If you think about the – remember, the way MIC reports free cash flow is that it excludes adjustments in working capital and so, on the basis that for us that nets out in time; so free cash flow from a proportionally combined basis for MIC excludes movements in working capital. Under the shareholders agreement with IMTT, the proportionally -- the free cash flow that is used to determine the dividend does not exclude movements in working capital and so that’s how you end up getting a different number.

I think the number -- that explains all of the variance. There was a substantial movement in change in working capital this year, $14.17 million for the quarter.

And that $14 million pretty much takes you from the $31 million of free cash flow that’s in our MIC proportionally combined free cash flow to the $45 million that we talk about under the IMTT scenario. That’s just one of the vagaries of the IMTT shareholders’ agreement is that it doesn’t exclude movements in working capital.

Got it, okay. So and then I wanted to just kind of get clarification to make sure I understand the targeted dividend payout, substantially all of free cash flow.

Are you defining free cash flow including -- is that as you are reporting it? Would you expect to pay out that number after deducting the manager fee even if they are going to take it in shares?

How should we sort of think about that on a long-term basis that you guys have laid out in the press release?

Sure. Look, I think the best assumption that people can use on a long-term basis is that base management fees will be paid in cash and the reason for that is, I think, that is sort of what we would envisage.

They have been paid in or reinvested in LLC units or paid off in stock, to use the short hand. At various points in time, and certainly while the IMTT arbitration was there; but in terms of sort of the way I’ve thought it through, in terms of the stuff I’ve presented to the Board, it’s predominantly been in what's the free cash flow assuming a base management fee in cash scenario.

So that’s one. The second is, obviously when we say substantially all there is a number of sort of impediments to doing that; IMTT being one that I think is almost clear, but the second is Atlantic.

And I think before the -- we want to have a substantial, but we also want to have a sustainable, dividend policy and that a chunk of the sustainability is obviously getting the capital structure at Atlantic right such that the dividend is clearly sustainable. And so I think what we’ve put in and we’ve tried to be clear with people is our sort of aspirational statement which is, we want to get to a situation where we’re substantially dividending out all of our cash.

There's more housekeeping and there's some more work to be done on getting appropriate capital structure in place, making sure it’s appropriate at all of our business, but the real area of focus there is at Atlantic. So that’s the work that still needs to be done but people have said in this sort of period of coming back, as MIC comes back, what is it we want to do.

And people have used the phrase, "when it grows up, when it gets to back where it is," what is our aspiration, our intent still to be -- to payout that substantial amount of free cash flow in dividend. And we wanted to sort of reaffirm that as a statement of intent.

I don't know how long it’s going to take us to get there. It will take us to work through the Atlantic situation but that's the philosophy that we will be using.

But let's say that when, in the fourth quarter of 2014, when -- maybe it happens before then but let's just use that. And let's say that Atlantic gets to a capital structure that is appropriate and MIC, overall, gets to a capital structure that's appropriate.

Paying out substantially all of free cash flow when your businesses have organic growth opportunities and organic growth capital in them, seems like that's an aggressive policy; when I would think that retaining some level of cash flow inside the business to support that growth would drive a long-term static capital structure over time, such that you wouldn't need to issue any equity to support growth CapEx in that business. So don't you think that you ought to retain a little bit of that cash within the business to support the organic of growth of the businesses over time?

I certainly think we should support the organic growth of the businesses over time and so that -- I sort of agree with the premise on that. As to the way we do that, the couple of points I would make is that there's a number of businesses like The Gas Company, like IMTT that have substantial revolver, or will have substantial revolver capacity, to fund growth opportunities.

And you have seen those businesses EBITDA grow, so effectively they end up -- if you don't draw those revolvers -- deleveraging as their earnings grow over time. So there's that capacity to fund growth opportunities.

The second is some of those organic growth opportunities are lumpy in time. And so what we end up doing is moving cash, or we will end up doing is moving cash from one part of the business to another to fund those organic growth opportunities.

But sort of leaving a lazy balance sheet at any of the businesses doesn't strike me as the best way of managing it. But there are other opportunities through use of revolvers, but also through use of the cash generated by other parts of the business.

And also remember when I say substantially all, if there’s good growth opportunities we don’t intend to sort of turn our backs on those good growth opportunities. So the sort of fundamental premise of seeing organic growth occur is one that we concur with.

The right funding mechanism for doing that and the interplay with the dividend policy is one where I think we have a degree of flexibility. And the analogy that I draw there is notwithstanding that we’ve been paying out $80 million in – sorry, $0.80 per share in free cash flow.

We’ve still explored some very good organic growth opportunities at TGC. We’ve announced the investment in the equipment for LNG and I’d continue to expect to be able to do that through the capacity of the business.

At Atlantic Aviation, we’ve seen good organic growth opportunities where we’ve announced a new hangar construction. We obviously built the new facility at Oklahoma City and we were able to tweak the portfolio to get us well there.

And clearly at IMTT with $218 million of growth projects underway or in the pipeline at the moment, there is an enormous number of growth projects that we’ve looked at -- and still looking at, at IMTT. So I think we want to see organic growth continue and we think that, that’s consistent with what we’re seeking to do.

Yes. I know, I agree.

I mean and I think you guys see those projects. My view would be that we’d want to see that done, but we’d want to see the capital structure maintained as well, which would mean that funding those growth projects would be sort of let’s call it a one-to-one debt-to-equity capital structure, 50% from retained cash flow, and 50% from the revolvers or putting longer term financing in that; but maybe we can chat about that offline.

The last question I had was just with respect to long-term tax outlook and given the profitability of the business, the NOL outlook, are there longer-term tax strategies that MIC can employ? And there has been a lot of non-traditional, real estate related kind of companies that have pursued a REIT structure and is that something that is an option for MIC down the road, and maybe would be an attractive option long-term?

Is that something you guys have explored to make it possible?

We are exploring and looking at a number of those angles. The REIT structure is one that has interest to me, but there are issues that we are working through and the origins of its interest to me is prior to taking on the MIC role.

I’ve sat on the Board of one of the larger U.S. cell phone wireless tower companies that was the first and it was a private one, but it was the first cell phone tower, private REIT in that space.

So ahead of AMT converting to a REIT, it did that. So I find that an intriguing structure.

Obviously in the energy space, others have looked at the MLP structure. We are working through a number of those options.

The MLP structure doesn’t appeal to me as much as the REIT structure because I think the REIT structure has more flexibility. At the moment we are in, effectively whilst we have inner wells, in effectively a similar situation anyway, where we don't pay any federal taxes; but there is a time when if we do nothing that will run out and so we are exploring a number of those options.

It’s too early for anyone to sort of take that down as an implicit "here's what we are going to do on any of that" because I haven't got an answer. All I have got at the moment is that’s in the work-in-progress bucket.

Just a quick question about the arbitration process. Did you guys end up agreeing on a targeted debt-to-EBITDA level for IMTT going forward?

Marc, it’s a good question. The shareholders’ agreement actually already had a target debt-to-EBITDA of a minimum of 3.75x debt-to-EBITDA.

And I guess our view was that the arbitration panel should confirm that and the arbitration panel did confirm that. And if you look at where Atlantic – where IMTT, sorry, is at today, the leverage ratio is 2.63x.

So from MIC’s perspective, we were pleased that the arbitration panel confirmed that what was written in the shareholders’ agreement and what the shareholders’ agreement was, and that is a minimum leverage ratio of 3.75x debt-to-EBITDA.

So for someone who is citing that contracts matter, we should consider that if we want to model your EBITDA over the next few years and then just assume that the shareholders of IMTT will maintain leverage at 3.7x trailing EBITDA?

I think that would be a good way to do it, because that's what the shareholders’ agreement says the company has to do.

Thank you once again to all of you for your participation in our update call. As always, we welcome your comments and follow-up questions.

In fact, today some of the commentary we included about the Northeast refineries was specifically done in response to a shareholder question beforehand. So I do appreciate people’s suggestions and thoughts as to what they would like to hear us talk about.

I want to thank our shareholders for their ongoing support of our business and their patience. I would like to thank the lenders to all of our businesses, they are key business partners for us and we enjoy working with them to grow and strengthen our businesses and we especially enjoy the ideas and suggestions that they provide us as to how we can do that.

I want to thank the many management and staff personnel in our businesses who continue to work hard and as passionately as they do for us to keep that businesses growing and moving forward. We look forward to providing you with an update on our results in the second quarter in early August.

And again, please feel free to contact us with any questions that you may have along away. And thank you for joining our call today.

Good bye.