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Lloyd Morrison and his colleagues are to receive a $14 million bonus for their work in building Infratil's Australian electricity businesses.
Infratil Energy Australia's operating profit of A$9.6 million ($10.8 million), up from a A$2.2 million loss last year, was one of the highlights of Infratil's full-year result yesterday.
The group's net profit was up by more than 300 per cent to $34.7 million, mainly thanks to previously disclosed gains on the sale of shares in Port of Tauranga and the purchase and sale of Trustpower shares. Infratil now owns 51 per cent of Trustpower.
"Consolidation of Trustpower for the first time and a number of one-off transactions make it difficult to compare consolidated figures ... with the previous year," the company said.
This year Infratil Energy Australia acquired 100 per cent of energy retailer Victoria Electricity, a transaction that triggered the obligation to pay its management company Morrison & Co the $14 million.
Lloyd Morrison, Infratil managing director and Morrison and Co chairman, said the payment was required under a fee structure approved by shareholders five years ago when the company began investing in the Australian energy industry.
Those first investments were part of a venture capital portfolio for which Morrison & Co received very little payment for their management. But under the agreed fee structure, Morrison & Co was to receive 20 per cent of returns in excess of 17.5 per cent per annum on particular investments, including Victoria Electricity.
"The incentive for us to do it was to make it very successful and if it was very successful, get a share of the action."
With net investment in the business of $113 million to date, Infratil Energy Australia is now valued at $206 million. "The main thing there is evidence of phenomenal use of capital. So Infratil shareholders have done very well and under contract they agreed that if that happened they'd give a little bit back to us."
Morrison said he not yet decided exactly how, but the money would be divided up between Morrison and Co's 25 to 30 staff.
The company had "exceedingly good people", and it was "very competitive" trying to keep them.
"It's important that we remunerate them on an international scale because they're international quality players." Aside from Infratil Energy Australia's performance, Morrison said the acquisition of 51 per cent of Trustpower was especially notable in the group's result.
The consolidation of the company over the last three months of the year saw group revenue jump to $700.8 million from $301 million a year ago.
Morrison said Trustpower's annualised contribution to group turnover would lift it to about $1.25 billion.
Across the rest of the group, European Airports contributed a loss at the ebitda level of $2 million after a $1.4 million gain last year, and Wellington Airport contributed $49.6 million, up from $47 million.
Morrison said he didn't expect European Airports to break even for another three or four years. "But every year if they are growing in the direction we expect them to grow they'll be adding value."
Many of the group's investments were still in a growth phase.
"All of these businesses as they mature will be very good cash generators so inevitably our bottom line will move towards expressing some very good numbers.
"But we've got another two or three years before some of that cash really starts to come through strongly."
Infratil also said it was planning a one for one share split to be immediately followed by a free one for 10 pro rata issue of five-year warrants, which would have an exercise price of $4.25.
Morrison said the split and warrant issue was intended to increase the liquidity of the company's stock.
Infratil shares closed up 30c at $6.45 yesterday.
