Infrastructure Entity Disclosures
BenchmarksStatementsExplanationFurther information
1Corporate structure and management: The infrastructure entity’s corporate governance policies and practices conform with the principles and recommendations in GN 9A, Corporate Governance - ASX Corporate Governance Council - Revised corporate governance principles and recommendationsThe benchmark is metSydney Airport publishes a corporate governance statement in the Sydney Airport Annual Report which sets out detailed disclosures in respect of compliance with the ASX Corporate Governance Principles and RecommendationsFor additional disclosure on this benchmark see the:Corporate Governance Statement on page 136 of the Sydney Airport - Annual Report 2014. For additional information on the corporate structure, board and management of Sydney Airport refer to the:- Corporate Structure diagram;- Board details; and- Senior Management details
2Remuneration of management:Incentive-based remuneration paid to management for the infrastructure entity is derived from the performance of the infrastructure entity and not the performance of other entities within its consolidated group, except where the infrastructure entity is the parent of the consolidated groupThe benchmark is metSydney Airport has implemented an equity-based long-term incentive (LTI) plan for the CEO and other Executives.Full details of the terms of the LTI plan, and the proposed initial grant to the CEO, have been provided to security holders in theNotice of Meeting for the 2015 AGMFor additional disclosure on this benchmark see the: Remuneration of Management disclosures in Note 22 of the 31 December 2014 Sydney Airport Limited ("SAL") accounts and the2015 Notices of Meeting.
3Classes of units and shares:All units or shares are fully paid and have the same rightsThe benchmark is metN/AFor additional disclosure on this benchmark, see SAL Constitution.
4Substantial related party transactions:The infrastructure entity complies with ASX Listing Rule 10.1 for substantial related party transactionsThe benchmark is metN/AThis benchmark is met for substantial related party transactions between Sydney Airport and entities outside the Sydney Airport economic group. In respect of transactions between the stapled entities and their wholly-owned subsidiaries which comprise Sydney Airport, ASIC has provided Sydney Airport with customary relief for such transactions to proceed without the need to seek unitholder approval. For additional disclosure on this benchmark see the: Related Party Disclosures in Note 22 of the 31 December 2014 SAL accounts.
5Cash flow forecast: The infrastructure entity has, for the current financial year, prepared and had approved by its directors:
1. a 12-month cash flow forecast for the infrastructure entity and has engaged an independent suitably qualified person or firm to provide, in accordance with the auditing standards:
− negative assurance on the reasonableness of the assumptions used in the forecast; and
− positive assurance that the forecast is properly prepared on the basis of the assumptions and on a basis consistent with the accounting policies adopted by the entity; and2. an internal unaudited cash flow forecast for the remaining life, or the right to operate (if less), for each new significant infrastructure asset acquired by the infrastructure entity.
The benchmark is not metManagement has prepared a cash flow forecast for the next 12 months and over the remaining life of the airport lease. Sydney Airport has not engaged an external party to provide assurances on the current 12 month cash flow forecast in a manner consistent with the benchmark. However, the Sydney Airport cash flow models and forecasts are reviewed intermittently by independent external parties in relation to the reasonableness of assumptions, accounting policies and model operations.N/A
6Base-case financial model: Before any new material transaction, and at least once every three years, an assurance practitioner performs an agreed-upon procedures check on the infrastructure entity’s base-case financial model that:
1. checks the mathematical accuracy of the model, including that:− the calculations and functions in the model are in all material respects arithmetically correct; and− the model allows changes in assumptions, for defined sensitivities, to correctly flow through to the results; and
2. includes no findings that would, in the infrastructure entity’s opinion, be materially relevant to the infrastructure entity’s investment decision
The benchmark is metAs of 31 December 2014, Sydney Airport has no new material transactions. Within the next three years or prior to any new material transaction, Sydney Airport expects that it will appoint an assurance practitioner to perform an agreed-upon procedures check on the base-case financial model. These practitioners may be internally or externally engaged.N/A
7Performance and forecast: For any operating asset developed by the infrastructure entity, or completed immediately before the infrastructure entity’s ownership, the actual outcome for the first two years of operation equals or exceeds any original publicly disclosed forecasts used to justify the acquisition or development of the assetThe benchmark is not applicableSydney Airport has not developed or acquired operating assets within the last two years.N/A
8Distributions: If the infrastructure entity is a unit trust, it will not pay distributions from scheme borrowingsThe benchmark is metN/AThe constitution of Sydney Airport Trust (SAT1) provides that distributions to members must be made from the income of the trust.For further information refer to clause 11 of the SAT1 constitution which is accessible here.
9Updating the unit price: If the infrastructure entity is unlisted and a unit trust, after finalising a new valuation for an infrastructure asset, the infrastructure entity reviews, and updates if appropriate, the unit price before issuing new units or redeeming unitsThe benchmark is not applicableSydney Airport is a listed entity comprising a company and a trust stapled together, trading on the ASX as SYD.N/A
 Disclosure PrinciplesDisclosure
1Key relationships: Disclose:
(a) the important relationships for the entity and any other related party arrangements relevant to an investor’s investment decision, including any controlling arrangements, special voting rights or director appointment rights; and
(b) for any significant infrastructure asset under development:
(i) key relationships in the development, including with any concessionaire, developer, builder, sponsor, promoter, asset manager, independent expert, financier, joint venture party, issuer or manager; and
(ii) key participants that bear material development-related risks, including for timing and cost of delivery of the development, procurement and cost of financing for the development, and guaranteeing the performance of other entities.
- No important ownership relationships for the entity exist. Sydney Airport is listed on the ASX.
- No investor or third party has control, special voting rights or director appointment rights for Sydney Airport.
- No significant infrastructure assets are under development.For detailed information related to this disclosure principle see the Corporate Structure and our Financial Services Guide.
2Management and performance fees: Disclose:
(a) all fees and related costs associated with the management of the entity’s assets paid or payable directly or indirectly out of the money invested in the entity, providing clear justification for the fees; and
(b) if performance fees are payable, how these fees will be paid.
Sydney Airport comprises SAL and SAT1. The shares in SAL and the units in SAT1 are stapled and quoted on the ASX. The responsible entity of SAT1 is the Trust Company (Sydney Airport) Limited, part of the Perpetual group, which receives an annual management fee for performing this responsible entity role. This management fee is currently $450,000 reducing to$250,000 plus CPI from the third year of appointment. The Trust Company (Sydney Airport Limited) was appointed as responsible entity on 22 November 2013. For more information, see our Financial Services Guide. No performance fees are payable by SAL or SAT1.
3Related party transactions:Disclose: In relation to any related party arrangements relevant to the investment decision, details of:
(a) the value of the financial benefit and the consideration payable;
(b) the nature of the relationship;
(c) whether the arrangement is on arm’s length terms, the remuneration is reasonable, some other Ch 2E exception applies or ASIC has granted relief;
(d) whether member approval for the transaction has been sought and, if so, when;
(e) the risks associated with the related party arrangement;
(f) the policies and procedures that the infrastructure entity has in place for entering into related party transactions, including how compliance with these policies and procedures is monitored;
(g) for management agreements with related parties:
(i) the term of agreement;
(ii) if a fee is payable by the infrastructure entity on termination of the agreement, the method of termination that will incur a fee and details on how that fee is calculated;
(iii) any exclusivity arrangements in the management agreement;
(iv) whether a copy of the agreement is available to investors and, if so, how an investor can obtain a copy of the agreement; and
(v) any other arrangements that have the potential or actual effect of entrenching the existing management; and(h) for transactions with related parties involving a significant infrastructure asset:
(i) what steps the infrastructure entity took to evaluate the transaction; and
(ii) if not otherwise disclosed, a summary of any independent expert opinion obtained for the transaction and whether, and if so how, an investor can obtain a copy of the opinion.
- Sydney Airport does not have any current (and has not recently had) material related party transactions with entities outside the Sydney Airport economic group.
- Sydney Airport has no management agreement with related parties.
- Sydney Airport has no transactions with related parties involving a significant infrastructure asset.
- In respect of transactions between the stapled entities and their wholly-owned subsidiaries which comprise Sydney Airport, ASIC has provided Sydney Airport with customary relief for such transactions to proceed without the need to seek unitholder approval, reflecting the fact that such transactions are within the same economic group and the securityholders of the two stapled entities are the same.

For more detailed information in relation to related party arrangements refer to the Related Party Disclosures in Note 22 of the 31 December 2014 SAL accounts.
4Financial ratios:
Disclose:
(a) if target financial ratios have been publicly disclosed, the respective financial ratios actually achieved for the entity and how those target and actual ratios are calculated; and
(b) an explanation of what the financial ratios mean in practical terms and how investors can use the ratios to determine the entity’s level of debt related risk.
Sydney Airport does not publicly disclose target financial ratios.
5Capital expenditure and debt maturities:
Disclose:
(a) its planned capital expenditure for the next 12 months and how this expenditure is to be funded (any material changes to this planned expenditure should be updated as part of the entity’s ongoing disclosure obligations); and
(b) a breakdown of material debt maturities for the entity, on a consolidated contractual basis showing the drawn amount, the undrawn amount, the total drawn and undrawn amount, the percentage of variable interest rate risk, the weighted average interest rate, the percentage of debt that is no limited recourse to a particular asset and whether the debt is fully amortising or requires principal and interest payments.
- Sydney Airport does not disclose planned capital expenditure over 12 months as projects often progress beyond this period and there is generally an overall project spend. Furthermore, disclosure over a 12 month period may not be accurate where project delays over a month may impact the way in which the pattern of funding of a particular project occurs.
- Planned capital expenditure for the period 2015 – 2019 is approximately A$1.2 billion; approximately $241.5 million was spent in 2014.
- The planned capital expenditure is expected to be funded with senior debt.
- An analysis of asset debt maturities in the format prescribed by ASIC Regulatory Guide 231 is set out on page 17 of the 31 December 2014 SAL accounts.

For more detailed information in relation to this disclosure principle see the interest bearing liabilities disclosures in Note 13 of the 31 December 2014 SAL accounts.
6Foreign exchange and interest rate hedging:
Disclose:
(a) any current foreign exchange and interest rate hedging policy for the entity; and
(b) whether the entity’s foreign exchange and/or variable interest rate exposure conforms with its foreign exchange and interest rate hedging policy.
- (Foreign exchange) Sydney Airport’s policy is to fully hedge foreign currency exposures related to borrowings, and to hedge foreign currency exposures relating to revenue or operating expenditure and capital expenditure over certain thresholds. At 31 December 2014 there were no unhedged foreign currency exposures.
- (Interest rates) Sydney Airport’s policy is to ensure that, in the medium term a minimum of 55% of senior debt is either issued at a fixed rate or hedged through the use of interest rate swaps on a five year, look forward basis.

Sydney Airport complies with its foreign currency and interest rate policies.For detailed information related to this disclosure principle see Note 26 of the 31 December 2014 Southern Cross Airports Corporation Limited accounts.
7Base-case financial model:
Disclose:
(a) For acquisitions of a significant infrastructure asset, the following details of an infrastructure entity’s base case financial model:
(i) the key assumptions and the source of those assumptions;
(ii) a confirmation by the directors as to whether or not they consider that the assumptions are reasonable;
(iii) any process the directors undertook to satisfy themselves that the assumptions were reasonable, including if an expert provided an opinion on the model and, if so, provide a summary of that expert opinion;
(iv) the agreed upon procedures check that the assurance practitioner has performed to review the base-case financial model and any findings which were materially relevant to the investment decision; and
(v) any conflicts of interest that may arise in either the expert opinion or the agreed-upon procedures check.
(b) Up to five key assumptions in an infrastructure entity’s base case financial model that are likely to have the most material impact:
(i) on the operating performance of the entity for at least the next 12 months; or
(ii) in the case of a development asset, in the first year of operation, demonstrating the impact on the infrastructure and investor entity, if any (and separately if all) of the assumptions were materially less favourable than anticipated.
(c) Also disclose:
(i) a reasonable estimate of the operating capacity of the entity’s significant infrastructure assets;
(ii) for any operating asset developed by the infrastructure entity or completed immediately before the infrastructure entity’s ownership, any material discrepancies between any publicly disclosed forecasts and the actual performance for the first two years of operation; and
(iii) any material discrepancies between the assumptions contained in the infrastructure entity’s base-case financial model used to raise any debt and the model used to raise any equity, respectively, within six months of each other in the current financial year.
-Sydney Airport is not completing (and has not recently completed) any acquisitions of significant infrastructure assets.
-Key assumptions in the base case financial model affecting performance for the next 12 months include operational assumptions, particularly passenger numbers and capital investment. In addition, economic assumptions such as risk free, interest and inflation rates are provided by third party sources.
- There are no significant development assets in the first year of operation.-There have been no operating assets developed or acquired by the infrastructure entity in respect of which publicly disclosed forecasts have been made.
- The board and management conduct sensitivity analyses where key assumptions are materially less favourable to provide comfort around the base case financial model and business resilience.
-Sydney Airport has substantial excess capacity, and expects to be able to accommodate the expected growth well beyond the current Master Plan horizon of 2033.
-There are no material discrepancies between the assumptions contained in the base case debt and equity models.
8Valuations:
Disclose:
(a) details on the entity’s valuation policy;
(b) whether valuations and supporting documentation are available to investors and, if so, how they are made available. If valuations and supporting documentation are not available to investors, the infrastructure entity should provide a summary of the valuations (required for significant infrastructure assets only) containing, at a minimum, the following information:
(i) whether the valuation was prepared internally or externally;
(ii) the date of valuation;
(iii) the scope of valuation and any limitations on the scope;
(iv) the purpose of the valuation;
(v) the value assessed and key assumptions used to determine value;
(vi) the key risks specific to the infrastructure assets being valued;
(vii) the valuation methodology;
(viii) the period of any forecast and terminal value assumptions;
(ix) the discount rate and the basis for calculating this rate; and
(x) the income capital expenditure and capital growth rates over the forecast period; and(c) any circumstances that may result in a conflict of interest arising in the preparation of the valuations.
- Discounted cash flow analysis is the methodology applied in the valuation framework as it is the generally accepted methodology for valuing airports and the basis upon which market participants have derived valuations for airport transactions. Discounted cash flow is the process of estimating future cash flows that are expected to be generated by an asset and discounting these cash flows to their present value by applying an appropriate discount rate. The discount rate applied to the cash flows of a particular airport comprises the risk free interest rate appropriate to the country in which the airport is located and a risk premium, reflecting the uncertainty associated with the cash flows. The valuation derived from the discounted cash flow analysis is periodically benchmarked to other sources such as independent valuations and recent market transactions to ensure that the discounted cash flow valuation is providing a reliable measure.
For detailed information related to this disclosure principle see the:
Valuation policy in Note 1.7 of the 31 December 2014 Sydney Airport Limited accounts.Valuations of the controlled investment in the Directors’ Report of the 31 December 2014 Sydney Airport Limited accounts (page 2).
Note 26 of the 31 December 2014 Southern Cross Airports Corporation Limited accounts.
9Distribution policy:
Disclose:
(a) the current distribution policy and any rights that the entity has to change the policy;
(b) on payment of distributions, the portion attributable to, for example, income, capital and debt; and
(c) the risks associated with distributions being paid from sources other than operating cash flow, including the sustainability of such distributions.
- The distribution policy of each listed unit trust is: 100% x (Distributions received from Sydney Airport +/- Net Corporate Cashflows).
- Sydney Airport has the right to vary the policy in line with Clause 11 of the SAL and SAT1 Constitutions.
- The components of all historical distributions are available at the following link: http://www.sydneyairport.com.au/investors/stock-information/distributions.aspx
- The board has indicated that 2015 distributions will be fully sourced from net operating receipts. Payment of distributions remains subject to external shocks to the aviation industry and material changes to forecast assumptions.
10Withdrawal policy:
Disclose:
(a) whether there is a right of withdrawal and, if so, the maximum period allowed for satisfying withdrawal requests under the constitution of the infrastructure entity;
(b) the withdrawal policy and any rights that the infrastructure entity has to change the policy;
(c) any significant risk factors or limitations that may impact on the ability of investors to withdraw from the infrastructure entity;
(d) how investors can exercise their withdrawal rights, including any conditions on exercise;
(e) if withdrawals from the infrastructure entity may be funded from an external liquidity facility, the material terms of this facility, including any rights the provider has to suspend or cancel the facility;
(f) how investors will be notified of any material changes to withdrawal rights and the withdrawal policy; and
(g) whether the amount of capital in the infrastructure entity has been reduced by more than 10% in the last three months.
This disclosure principle is not applicable. Sydney Airport is a listed entity with securities comprising a unit in a stapled trust and a share in a company.
11Portfolio diversification:
Disclose:
(a) details on whether it has a portfolio diversification policy and, if so, details of that policy;
(b) its actual portfolio diversification position compared to its portfolio diversification policy; and
(c) if there is a material variance between the entity’s diversification policy and its actual position, an explanation of why the variance exists and the measures being taken to rectify it.
Sydney Airport does not have a portfolio diversification policy as the Board’s current strategy is to focus solely on the ownership and operation of Sydney Airport