PORT OF SEATTLE PRESENTATION TO THE WESTERN STATES INSTITUTIONAL INVESTORS CONFERENCE MAY 15, 2018 Elizabeth Morrison, Port of Seattle Director of Corporate Finance 0
OVERVIEW Regional Economy Port Financial Overview Sea Tac Airport Capital Funding The 2017 and 2018 information provided herein is preliminary, subject to change, and is provided for illustrative purposes. The information is limited in scope, is dated as of indicated dates, does not contain all material information concerning the Port, and is not an offer to sell Port bonds. The information includes forward looking statements (which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different than expressed or expected) that should be viewed with particular caution 1 All photos: Don Wilson
Port of Seattle independent port authority in agrowing economy BUSINESSES Port operates and manages Sea Tac International Airport Port has a 50% interest in the Northwest Seaport Alliance (NWSA), a joint venture with the Port of Tacoma Other businesses include various Maritime and Economic Development Division (EDD) activities Airport NWSA 2017 OPERATING REVENUE (1) $55 $76 STATUTORY TAXING AUTHORITY Port governance: run by five Commissioners elected County wide Port is authorized to levy property taxes within King County Actual 2018 property tax levy: $72.0 million; maximum allowable 2018 levy: $101.6 million Primarily used for non Airport purposes; not permitted for revenue bond debt service but can be used for operating expense Maritime, EDD, Corporate $501 (1) Unaudited, $ million 2
Robust regional economy is the basis for Airport growth and sustainability King County unemployment remains low, at 3.7% in 2018 46% of King County s population has a bachelor s degree or higher (2016), compared to 28% nation wide Puget Sound is home to a wide range of employers that contribute to the vibrant growth in the region $100,000 PER CAPITA INCOME $80,000 $60,000 $40,000 $20,000 $0 2012 2013 2014 2015 2016 King County United States 3 Source: U.S. Department of Commerce
Financial results Airport expenses are expected to continue to increase, driven by passenger growth, added services, and inflation Non Airport expenses are increasing to accommodate rising operating costs for new facilities and the Port s community initiatives (partially paid from the tax levy) Revenue received from the NWSA expected to decline due to increase in operating expenses, primarily depreciation (1) PORT WIDE FINANCIAL PERFORMANCE ($ million) 2016 2017 2018 Actual Unaudited Budget Total Airport Revenue $ 465.2 $ 500.9 $ 545.9 Airport Operating Expenses (261.0) (299.1) (334.9) Airport NOI Before Depreciation $ 204.2 $ 201.8 $ 211.0 Total Non Airport Revenue $ 133.0 $ 131.1 $ 124.6 Non Airport Expenses (64.0) (73.9) (88.0) Non Airport NOI Before Depreciation $ 69.0 $ 57.2 $ 36.6 Total Port NOI Before Depreciation $ 273.2 $ 259.0 $ 247.6 Key Non Operating Items Tax Levy $ 72.0 $ 72.0 $ 72.0 GO Bond Debt Service Payments (35.0) (36.5) (43.4) Passenger Facility Charges 85.6 88.4 91.8 (1) NWSA depreciation in 2017 = $2.2 million and in 2018 = $7.4 million, per joint venture accounting 4
Sea Tac Airport is the ninth busiest airport in the United States 69.4% of passengers began or ended their flight in Seattle in 2016 (1) Number of enplaned passengers grew 4.8% in Q1 2018 (2018 projected to grow 5.0%) Southwest, United, and American have a significant presence, accounting for 68% of the Other category in 2017 25,000 20,000 15,000 10,000 5,000 36% 12% 52% 52% TOTAL ENPLANED PASSENGERS (thousand) 9% Annual Growth 33% 16% 30% 19% 30% 20% 28% 22% 51% 50% 50% Other Delta(2) Alaska(2) (1) Most recent data available 0 2013 2014 2015 2016 2017 5 (2) Includes regional affiliate airlines
Sea Tac Airport has developed into an international gateway, adding to the resiliency generated by the local economy and natural O&D market 3,000 INTERNATIONAL ENPLANED PASSENGERS (thousand) New international hub created by Delta Foreign flag carriers are adding service to Seattle new service in 2018: Air France, Aer Lingus, Thomas Cook Sea Tac now has 45 international services, with 22 airlines serving 27 international destinations 2,500 2,000 1,500 1,000 500 47% 24% 11% Annual Growth 44% 29% 43% 44% 48% 31% 35% 32% Other Delta(1) Alaska (1) 29% 28% 25% 21% 20% 0 2013 2014 2015 2016 2017 6 (1) Includes regional affiliate airlines
Aeronautical costs are paid by the airlines REVENUES AND EXPENSES Aeronautical revenues are derived from cost recovery formulas net of revenue sharing based on an airline lease agreement Expense growth reflects more intensive use of existing facilities, planning for future facility needs, and goals of improving customer service and enhancing security, all of which contributes to increased cost per enplaned passenger (CPE) FTEs expected to increase in 2018 (up 23.5% since 2016), primarily due to the Port assuming the employee screening function AIRLINE AGREEMENT New five year airline agreement is being applied retroactively to January 1, 2018 Key elements: Similar in most respects to prior agreement Maintains the ability to set rates to achieve 1.25x debt service coverage Gradually reduces revenue sharing to 0% in 2020 and beyond 7
Strong non aeronautical businesses help maintain competitive CPE AERONAUTICAL VS NON AERONAUTICAL REVENUE 2013 AIRPORT INCOME STATEMENT ($ million except CPE) (1) Net of revenue sharing with signatory airlines 2016 2017 2018 Actual Unaudited Budget Aeronautical Revenue (1) $ 244.2 $ 264.1 $ 301.1 Non Aeronautical Revenue 221.0 236.8 244.8 Total Revenue $ 465.2 $ 500.9 $ 545.9 Operating Expenses (261.0) (299.1) (334.9) NOI Before Depreciation $ 204.2 $ 201.8 $ 211.0 CPE $ 10.10 $ 10.52 $ 11.35 61% 53% 2017 39% 47% 8 Aeronautical Non Aeronautical
Non aeronautical revenue grew at an annualized rate of 11.8% from 2013 to 2017, generating strong coverage and low CPE Non aeronautical revenue has increased 47.0% since 2013 Landside revenue experienced strong growth, up 36.5% since 2013, despite changing customer preferences Rental car revenues decreased by 5.5%, while ground transport increased 22.5% Parking revenue increased due to strong demand and price inelasticity for premium access $250 $200 $150 $100 $50 $0 NON AERONAUTICAL REVENUE ($ million) $20 $42 $22 $47 $27 $51 $100 $112 $118 $32 $41 $57 $59 $132 $136 2013 2014 2015 2016 2017(1) (1) Unaudited Other Dining, Retail, and Terminal Space Landside Dining and retail have grown 41.8% since 2013, although redevelopment of terminals may dampen near term D&R growth 9
Major Airport capital projects INTERNATIONAL ARRIVALS FACILITY Increases capacity for processing of inbound international passengers Adds international access to eight gates Completion expected in early 2020 NORTH SATELLITE Renovates and expands terminal in collaboration with Alaska Airlines, adding eight new contact gates Completion of phase 1 in 2019, phase 2 in 2021 New Alaska lounge 10
Port s 2018 2022 CIP totals $3.5 billion $1,200 $1,000 $800 $600 $400 $200 $0 FIVE YEAR PORT CIP ($ million) $954 $921 $748 $491 $403 2018 2019 2020 2021 2022 Northwest Seaport Alliance Other Port Businesses(1)(2) North Satellite and IAF(3) Other Airport Projects (1) (1) $41.2 million and $9.5 million of Corporate capital costs are allocated to Aviation and Other Port Businesses, respectively (2) Consists primarily of Maritime and Economic Development Division (3) Final costs are likely to increase $449 TOTAL FUNDING PLAN: $3.5 BILLION ($ million) $341 $481 $353 $1,918 Future Revenue Bonds(1) Net Income PFC and Grants Existing Bond Proceeds Future LTGO Bonds and Tax Levy (1) The Port expects to be in the market with fixed rate revenue bonds in June 2018, to fund approximately $560 million in projects 11
Future growth at Sea Tac Airport to accommodate 56 million annual passengers by 2027 preliminary planning estimate $4 $5 billion ARFF Relocation Westside Maint. Campus Taxiway D Extension Highspeed Exit Taxiway A/B Extension Hardstand Central North Gates Hardstand North Fuel Farm Expansion Busway and Stations Roadway Improvements Second Terminal 12
Port s debt service structure is intentionally focused on maintaining future capital funding capacity $350 SENIOR AND INTERMEDIATE LIEN REVENUE BOND DEBT SERVICE (1) ($ million) $300 $250 $200 $150 $100 $50 $0 Existing Debt Projected Debt (1) Net of capitalized interest 13
CONTACT INFORMATION Port of Seattle Elizabeth Morrison Director, Corporate Finance Pier 69 2711 Alaskan Way Seattle, Washington 98121 (206) 787 3115 morrison.e@portseattle.org www.portseattle.org www.nwseaportalliance.com 14