Macquarie Infrastructure : Reports Third Quarter 2020 Financial and Operational Results, Announces Agreement to Sell IMTT

• On November 8, MIC entered into an agreement to sell IMTT for approximately $2.685 billion; all net proceeds after taxes and expenses expected to be distributed to shareholders and used to reduce holding company debt
• Sustained recovery in general aviation flight activity and effective cost management drive sequential growth in quarterly cash from operations and free cash flow at Atlantic Aviation
• Easing of quarantine requirements in Hawaii post quarter-end expected to generate increased gas sales in the fourth quarter
• Majority of holding company level revolving credit facility outstanding balance repaid
• Guidance for full year 2020 re-initiated

today announced its operational and financial results for the third quarter 2020 and its entry into an agreement to sell its International-Matex Tank Terminals (IMTT) business to an affiliate of Riverstone Holdings LLC.

On November 8, 2020, MIC entered into an agreement to sell its bulk liquid storage and handling business, IMTT, to an entity affiliated with Riverstone Holdings LLC for approximately $2.685 billion in cash and assumed debt. The transaction is expected to close in late 2020 or early 2021, subject to receipt of approvals and satisfaction of the conditions precedent set forth in the sales agreement.

MIC intends to use all net proceeds, after payment of capital gains taxes and additional transaction related expenses and fees, to pay a special dividend of approximately $10.75 per share and to repay or offset holding company level debt of approximately $400 million. Both the record date for the dividend and final amount remain subject to approval by the MIC board of directors, which is expected following the closing of the sale based on business and economic conditions at the time. Pro-forma for the completion of the sale and the payment of the special dividend, the Company expects its leverage ratio to be approximately 4.3x net debt to EBITDA.

On closing of the sale, MIC anticipates paying capital gains taxes of approximately $158 million, additional transaction expenses of approximately $25 million and a payment to the Company's external Manager of approximately $28 million pursuant to the Disposition Agreement entered into between the Company and the Manager on October 30, 2019.

'We are pleased with the result of our efforts to sell IMTT against the challenging backdrop created by the COVID-19 pandemic,' said Christopher Frost, MIC's chief executive officer. 'We have achieved a favorable outcome for MIC shareholders consistent with our strategy of unlocking value via sales of our operating businesses.'

'We remain committed to our pursuit of strategic alternatives for our ongoing businesses and to maintaining our balance sheet strength and financial flexibility throughout the process,' Frost added.

Lazard and Evercore acted as financial advisors to MIC, and White & Case provided legal support.

IMTT has been classified as a discontinued operation for financial reporting purposes as of September 30, 2020. All prior periods referenced in this press release and in the Company's filing with the SEC on Form 10-Q have been restated to reflect this classification. MIC's continuing operations comprise Atlantic Aviation, MIC Hawaii, and the Company's Corporate and Other segment.

MIC's results for the third quarter reflect strong sequential growth in cash generation by Atlantic Aviation based on stable domestic general aviation flight activity at levels consistent with the end of the second quarter together with effective expense management. The Company also reported performance by its MIC Hawaii businesses consistent with the second quarter of 2020 reflective of COVID-related restrictions on tourism in the state.

Commenting on the Company's results for the quarter, Frost said: 'The continued stable performance of Atlantic Aviation and MIC Hawaii underpinned our decision to repay most of the funds previously drawn on our revolving credit facility. We are confident in the outlook for our ongoing operations and their ability to remain profitable as the economy recovers from the effects of the pandemic.'

Third Quarter 2020 Financial Results of Continuing Operations

MIC generated a net loss from continuing operations of $(158) million for the quarter, compared with net income of $2 million in the third quarter of 2019. The net loss reflects reduced revenue from each of Atlantic Aviation and MIC Hawaii driven by the COVID-related decline in business activity versus the prior comparable period. In addition, given the probability that IMTT will be sold in a taxable transaction, the Company recorded a deferred tax liability on the difference between the book and tax basis in its investment in IMTT. The net loss was partially offset by reduced operating expenses and lower interest expense.

The Company reported Adjusted EBITDA excluding non-cash items of $60 million in the third quarter, down from $69 million in the prior comparable period. The decrease reflects primarily the reduced contributions from each of Atlantic Aviation and MIC Hawaii.

MIC generated cash from operating activities of $44 million in the third quarter, down from $101 million in the prior comparable period. The decrease primarily reflects the absence of a federal income tax liability in the prior comparable quarter related to the gain on sale of the Company's renewable power generation businesses that was paid in December of 2019. The decrease also reflects the reduced EBITDA excluding non-cash items generated by each of Atlantic Aviation and MIC Hawaii, partially offset by favorable movements in accounts receivable.

The Company reported Adjusted Free Cash Flow of $38 million for the third quarter, down from $50 million in the prior comparable period. The decrease reflects the reduced Adjusted EBITDA excluding non-cash items and a current income tax liability versus an income tax benefit in the prior comparable period. These were partially offset by lower interest expense and lower maintenance capital expenditures.

Third Quarter 2020 Financial Results of Discontinued Operations

MIC's discontinued operations comprise IMTT and its subsidiaries in the current period. In the prior periods reported, discontinued operations include IMTT, MIC's portfolio of wind and solar power generation businesses, and a solar power development company.

MIC generated a net loss from discontinued operations of $(735) million for the quarter versus net income of $59 million in the prior comparable period. The net loss reflects primarily an impairment of the IMTT disposal group of $750 million including a $725 million write-down of the value of the goodwill of IMTT and the absence of the gain on sale of the wind and solar power generation businesses and the solar power development company which were concluded in the third quarter of 2019.

Third Quarter 2020 Segment Results

Continuing Operations

'Domestic general aviation flight activity in the third quarter was stable and modestly improved relative to the end of the second quarter, although down approximately 14% industry wide and down 19% at the airports on which Atlantic Aviation operates, versus the prior comparable period. The stability in flight activity throughout the quarter and continued effective cost control resulted in substantially better cash generation by Atlantic Aviation versus the second quarter,' said Frost.

• Atlantic Aviation recorded net income of $13 million and $14 million and cash from operations of $47 million and $49 million for the quarters ended September 30, 2020 and 2019, respectively.
• Atlantic Aviation generated EBITDA excluding non-cash items of $54 million in the third quarter of 2020, down from $64 million in the prior comparable period but up from the $17 million generated in the second quarter of 2020. The sequential improvement reflected the higher average level of flight activity, stable tenant rental income, and effective cost control as well as the absence of a $7 million provision for remediation of certain environmental matters booked in the second quarter.
• The disproportionate decline in flight activity at airports on which Atlantic Aviation operates relative to the results for the broader industry reflects Atlantic's presence in regions of the country with a higher proportion of business and international travel. Flight activity in these regions has not recovered at the same rate as primarily leisure-oriented regions.
• Free Cash Flow generated by Atlantic Aviation totaled $39 million for the quarter, down from $42 million in the prior comparable period primarily as result of the decline in EBITDA excluding non-cash items, partially offset by lower cash interest expense, taxes and maintenance capital expenditures.

'The performance of MIC Hawaii during the third quarter was consistent with the second quarter with the amount of gas sold declining by approximately 37% versus the third quarter in 2019,' said Frost. 'The number of visitors to Hawaii dropped by 94% in the third quarter versus the same period in 2019, although the easing of quarantine requirements on October 15, 2020 is expected to result in an increase in the number of visitors and to contribute to modest growth in gas sales by our Hawaii Gas business in the fourth quarter.'

• MIC Hawaii recorded net income of $1 million in the quarter ended September 30 in both 2020 and 2019, and cash from operations of $5 million and $11 million for the quarters ended September 30, 2020 and 2019, respectively.
• MIC Hawaii generated EBITDA of $7 million for the quarter, down from $12 million in the third quarter of 2019 reflecting the reduction in amount of gas sold and realized losses on commodity hedge contracts.
• Free Cash Flow produced by MIC Hawaii declined 50% to $4 million in the third quarter from $8 million in the prior comparable period but increased from $3 million in the second quarter. The decline versus the prior comparable period reflects the reduction in EBITDA excluding non-cash items partially offset by lower taxes.

MIC's Corporate and Other segment includes primarily costs of managing the public company including fees payable to the Company's external manager, interest expense on holding company level debt facilities, and expenses related to the Company's pursuit of strategic alternatives.

• Corporate and Other recorded a net loss of $(172) million and $(13) million for the quarters ended September 30, 2020 and 2019, respectively, and cash used in operations of $(8) million in the quarter ended September 30, 2020 and from operations of $41 million in the quarter ended September 30, 2019.
• Third quarter EBITDA improved to $(4) million from $(5) million in the prior comparable period as income from a previously owned renewable power development business partially offset cost increases related to MIC's pursuit of strategic alternatives.
• Holding company level cash interest expense increased versus the prior comparable period due to the Company having $599 million drawn on its revolving credit facility for a portion of the period and lower interest income. MIC repaid $449 million of the drawn balance during the quarter. The increase in interest expense was partially offset by the repayment of a $350 million tranche of holding company convertible notes in July of 2019.

Discontinued Operations

'IMTT performed well in the third quarter as petroleum product prices remained constructive for storage,' noted Frost. 'The outlook for storage demand across petroleum, chemical and agricultural products remains favorable and overall utilization continues to be above historically normal levels causing some customers to seek renewal of contracts ahead of their scheduled maturity to ensure ongoing access to capacity.'

• Utilization averaged 95.8% and 91.9% for the quarter and nine months ended September 30, 2020, respectively, compared with 85.2% and 83.6% for the quarter and nine months ended September 30, 2019, respectively. The increase in average utilization primarily reflects the effect of a contango in prices for refined petroleum products.
• Firm commitments had a revenue weighted average remaining contract life of 1.7 years at quarter end.

Balance Sheet Strength and Flexibility

MIC's aggregate leverage ratio was 4.8x net debt/Adjusted EBITDA excluding non-cash items (trailing twelve-month basis) on September 30, 2020. Leverage across MIC's ongoing operations was 5.7x on September 30, 2020 and is expected to increase ahead of the expected closing of the sale of IMTT as the Company uses a portion of its current cash balance to fund growth projects to which it has previously committed. MIC had cash on hand of $429 million on September 30, 2020 including $150 million drawn on its revolving credit facility.

Guidance

MIC re-initiated financial guidance for 2020. For the full year, the Company expects to generate Adjusted EBITDA excluding non-cash items from continuing operations of between $200 million and $215 million. The buildup of the EBITDA guidance for 2020 on segment basis is as follows:

Segment	EBIDTA Range ($mm)
Atlantic Aviation	185 - 195
MIC Hawaii	35 - 40
Corporate and Other	(20)
Total	200 - 215

Through September 30, 2020, the Company had deployed $154 million of an anticipated $200 million to $225 million of investments in growth projects for the full year. Approximately $118 million of the capital deployed was invested in projects related to the discontinued operations of IMTT. Of the investment being made in 2020, between $50 million and $55 million is expected to be deployed into projects involving Atlantic Aviation and MIC Hawaii.

Strategic Alternatives

On October 31, 2019, MIC announced its intention to pursue strategic alternatives and unlock value for shareholders potentially through the sale of the Company or one or more of its operating businesses. Following the announcement of the agreement to sell IMTT, MIC expects to continue to pursue sales of the Company or its remaining operating businesses. Although MIC has not established a timeline for completion of any sale, the Company indicated that it would proceed at a point at which value could be expected to be maximized relative to any economic recovery.