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4 q2015 earnings_ppt_final

- InfraREIT reported strong 2015 full year results, with cash available for distribution growing 21% over 2014 and adjusted EBITDA growing 11%. - Lease revenue increased 13% in both Q4 2015 and full year 2015, driving earnings growth. - InfraREIT has $280.5 million in available liquidity through revolving credit facilities and cash on hand to fund future growth opportunities. - The company's financing strategy focuses on acquiring regulated transmission and distribution opportunities within its existing footprint to maintain a strong financial profile and grow dividends over the long term.

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InfraREIT, Inc. 2015 Full Year Results & Supplemental Information
Safe Harbor Forward Looking Statements These presentations contain “forward-looking statements” about the business, financial performance, contracts, leases and prospects of InfraREIT, Inc. (the “Company”). Words such as “could,” “will,” “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “guidance,” “outlook,” “target,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential” or “continue” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. This presentation also contains forward-looking statements that have previously been publicly disclosed by the Company. These previously disclosed forward-looking statements should not be deemed reaffirmed or updated by their inclusion in this presentation. The Company’s actual results, performance or achievements could differ materially from those expressed or implied by any forward-looking statements made in connection with this presentation. The Company’s capabilities or performance, stockholder value as well as any other statements that are not historical facts in this presentation are forward-looking statements that involve certain risks and uncertainties, many of which are difficult to predict and beyond the Company’s control. Factors that could cause actual results to differ materially from the results contemplated by such forward-looking statements include, without limitation, decisions by regulators or changes in governmental policies or regulations with respect to the Company’s permitted capital structure, acquisitions and dispositions of assets, recovery of investments and authorized rate of return; the Company’s current reliance on its tenant for all of its revenues and, as a result, the Company’s dependency on its tenant’s solvency and financial and operating performance; risks that the capital expenditures the Company expects will not materialize for a variety of reasons; risks related to future lease negotiations or non-renewal of leases with the Company’s tenant; insufficient cash available to meet distribution requirements; the Company’s ability to make strategic acquisitions that add to its rate base, including through acquisition of ROFO Projects from Hunt Consolidated, Inc. and its subsidiaries; the price and availability of debt and equity financing; the Company’s level of indebtedness or debt service obligations; cyber breaches, weather conditions or other natural phenomena; the effects of existing and future tax and other laws and governmental regulations; the Company’s failure to qualify or maintain its status as a real estate investment trust (REIT); or changes in the tax laws applicable to REITs; the termination of the Company’s management agreement or the loss of the services of the Company’s manager or other qualified personnel; and adverse economic developments in the electric power industry or in business conditions generally, particularly in Texas. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in the Company’s filings with the U.S. Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. Forward-looking statements speak only as of the date made and reaffirmed, and the Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Non-GAAP Legend This presentation contains certain financial measures that are not recognized under generally accepted accounting principles (GAAP). These non-GAAP measures are presented because InfraREIT’s management believes they help investors understand InfraREIT’s business, performance and ability to earn and distribute cash to its stockholders by providing perspectives not immediately apparent from net income. These measures are also measures frequently used by securities analysts, investors and other interested parties in the evaluation of utilities, yieldcos and REITs. The presentation of Non-GAAP earnings per share (Non-GAAP EPS); cash available for distribution (CAD); net income (loss) before interest expense, net, income tax expense, depreciation and amortization (EBITDA); Adjusted EBITDA; funds from operations (FFO); and adjusted FFO (AFFO) in this presentation are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, InfraREIT’s method of calculating these measures may be different from methods used by other companies, and, accordingly, may not be comparable to similar measures as calculated by other companies that do not use the same methodology as InfraREIT. Reconciliations of these measures to their most directly comparable GAAP measures are included in the Schedules 1-4 to this presentation. 2
Q4 2015 Performance Summary $ millions 3 Strong Q4 2015 performance, in line with expectations Cash Available for Distribution $16.3 $19.0 Q4 2014 Q4 2015 +17% Lease Revenue $45.0 $50.9 Q4 2014 Q4 2015 +13% Adjusted EBITDA $33.0 $36.6 Q4 2014 Q4 2015 +11%
Full Year 2015 Performance Summary $ millions 4 Strong 2015 performance, in line with expectations Cash Available for Distribution $59.9 $72.6 2014 2015 Lease Revenue $134.4 $151.2 2014 2015 +13% Adjusted EBITDA $124.2 $138.4 2014 2015 +11% +21%
Full Year 2015 Performance – CAD / Share 5 IPO CAD / Share Forecast Interest Expense Savings Other 2015 CAD / Share $0.12 $0.01 $1.20 (1) (1) Forecasted 2015 interest expense, net in the IPO Prospectus ($35.9 million) less reported 2015 interest expense, net ($28.6 million) divided by 60.6 million shares outstanding at December 31, 2015 $1.07
Adjusted EBITDA Full Year 2015 vs. Full Year 2014 6 2015 adjusted EBITDA exceeded 2014 adjusted EBITDA by 11%, driven by growth in lease revenue $ thousands 2015 2014 Increase/(Decrease) $ % Lease revenue $ 151,203 $ 134,415 G&A expense (64,606) (18,625) Other income (expense), net 3,048 (17,236) EBITDA 89,645 98,554 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment — — Base rent adjustment 6,538 6,688 Reorganization expenses 333 1,729 Other (income) expense, net (3,048) 17,236 Adjusted EBITDA $ 138,365 $ 124,207 $ 14,158 11%
Cash Available For Distribution Full Year 2015 vs. Full Year 2014 7 2015 CAD grew by 21% over 2014, reflecting growth in lease revenue $ thousands, except share amounts 2015 2014 Increase/(Decrease) $ % Net income $ 19,931 $ 29,780 Depreciation 40,211 35,080 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment — — Base rent adjustment 6,538 6,688 Amortization of deferred financing costs 3,241 4,383 Reorganization expenses 333 1,729 Non-cash equity compensation 678 120 Other (income) expense, net (3,048) 17,236 Capital expenditures to maintain net assets (40,211) (35,080) Cash Available For Distribution (CAD) $ 72,570 $ 59,936 $ 12,634 21% Shares outstanding (as of 12/31/2015) 60,594 CAD Per Share $ 1.20
CAD / Share Comparison to Non-GAAP EPS Full Year 2015 8 Non-GAAP EPS is presented as a metric to enable comparisons with other utilities. CAD / share and Non-GAAP EPS will show some variances, but are expected to approximate each other over time $ thousands, except share amounts CAD per share Non-GAAP EPS Net income $ 19,931 $ 19,931 Depreciation 40,211 — Non-cash reorganization structuring fee 44,897 44,897 Percentage rent adjustment — — (1) Base rent adjustment 6,538 6,538 Amortization of deferred financing costs 3,241 — Reorganization expenses 333 333 Non-cash equity compensation 678 — Other income, net (3,048) — Capital expenditures to maintain net assets (40,211) — Total $ 72,570 $ 71,699 Shares outstanding 60,594 (2) 59,215 (3) Per Share Amount $ 1.20 $ 1.21 (1) Adjustment will exist in quarterly reporting (2) Outstanding shares as of December 31, 2015 (3) Weighted average common shares outstanding for the year ended December 31, 2015
Debt Obligations and Available Liquidity 9 Long-Term Debt (rate / maturity) ($ millions) Outstanding As of December 31, 2015 TDC - Senior Secured Notes (8.50% / December 30, 2020) $ 18.8 SDTS - Senior Secured Notes (5.04% / June 20, 2018) (1) 60.0 SDTS - Senior Secured Notes, Series A (3.86% / December 3, 2025) (2) 400.0 SDTS - Senior Secured Notes (7.25% / December 30, 2029) 44.5 SDTS - Senior Secured Notes (6.47% / September 30, 2030) 101.6 Total $ 624.9 Liquidity Facilities ($ millions) Amount Outstanding As of December 31, 2015 Available InfraREIT Partners Revolver $ 75.0 $ — $ 75.0 SDTS Revolver 250.0 54.0 196.0 Total $ 325.0 $ 54.0 $ 271.0 Cash (as of December 31, 2015) 9.5 Total Available Liquidity $ 280.5 (1) Sharyland Projects (SP) debt used to fund construction of the CREZ Transmission assets was assumed by SDTS during December 2015 (2) $100.0 million of SDTS Senior Secured Notes, Series B were issued on January 14, 2016 at an interest rate of 3.86% per annum with a maturity of January 14, 2026
Financing Strategy 10 Focus on Regulated T&D Opportunities Maintain Strong Financial Profile Grow Dividends ► Sign multi-year leases that reflect regulated rate structure ► Minimize regulatory lag with prudent rate case / TCOS filings ► 80% - 90% long-term CAD payout ratio ► Construct Footprint Projects ► Acquire ROFO Projects ► Opportunistically acquire T&D assets ► Maintain significant liquidity to support capex plan and financial flexibility ► Maintain 55% debt to capitalization at our regulated subsidiary, SDTS ► Target consolidated credit metrics of 60% debt to capitalization and 12% AFFO to debt
Q4 2015 Highlights  Solid performance continued in Q4 2015  Year-over-year growth remains on target for key metrics  Rate base grew by approximately 16%  Total 2015 capital expenditures of $230 million, above the $210 million to $220 million range cited during the Q3 earnings call  Progress on ROFO and Hunt Developer projects  Golden Spread Electric Cooperative Interconnection project (Golden Spread Project) has been offered to InfraREIT and negotiations are in progress  Cross Valley Transmission Line project (Cross Valley Project) has been offered to InfraREIT and negotiations are in progress  The review of Lubbock Power & Light’s request to join ERCOT continues to progress through PUCT and ERCOT review processes  Southline received its Final Environmental Impact Statement (EIS) in November 2015 11
 Initiating 2016 guidance metrics, based on footprint capital expenditures  CAD per share range $1.15 - $1.25  Non-GAAP EPS range $1.15 - $1.25  Dividends per share $1.00 • Quarterly dividend per share of $0.25 declared on March 2nd  Updating the estimate for footprint capital expenditure for 2016 – 2018 to a range of $640 million - $740 million  Updating projected three-year compound annual growth rate (CAGR) range of dividends per share of 8% - 10% from 2015 through 2018  Targeted payout ratio of 80% - 90%  Acquisition of both the Golden Spread Project and Cross Valley Project could increase the CAGR by 1% - 2% Forward Outlook 12
Q1 2016 Dividend Increased 11% 13 2016 CAD Per Share Range 2016 Annualized Dividend Per Share Payout Ratio $1.00 $1.00 87% 83% The 2016 annualized dividend is 11% higher than the annualized 2015 post-IPO dividend, representing an 83% payout ratio at the midpoint of the 2016 CAD per share range $1.15 $1.20 $1.25 $1.00 80%
2016E - 2018E Footprint Capital Expenditures (1) $ millions 14 (1) Footprint Projects are transmission or distribution projects primarily situated within our distribution service territory, or that physically hang from our existing transmission assets The forecast range of $640 million - $740 million for 2016 – 2018 has been updated to reflect the estimated impact of ongoing oil price declines 2016 2017 2018 Base Distribution $70 - $75 $85 - $95 $70 - $90 Base Transmission $130 - $135 $70 - $80 $75 - $95 Base Footprint Capex $200 - $210 $155 - $175 $145 - $185 Synchronous Condensers $10 - $15 $45 - $50 $20 - $25 Second Circuit $10 - $15 $50 - $55 $5 - $10 Total Footprint Capex $220 - $240 $250 - $280 $170 - $220
 While the long-term fundamentals for the Texas economy remain strong, the ongoing oil price decline is impacting activity and investment levels in West Texas  ERCOT reached a record peak demand of 69,877 MWs in August 2015  While at a slower pace, growth continues in the Permian / Midland Basin as it is one of the areas where upstream and midstream companies continue to invest capital  “We expect the majority of our total 2016 spending will be allocated to our domestic oil and gas business, primarily in the Permian Basin, with roughly 21% to be spent in Permian Resources and about 17% going toward Permian EOR.” – Oxy CFO, Feb. 4, 2016  “…capital expenditures of about $2 billion for 2016. That's down from our preliminary forecast in early January from $2.4 to $2.6 billion and from actual spending in 2015 of 2.2.” – Pioneer CEO, Feb. 10, 2016  “Based on current strip prices, our plan is to continue to drill and complete at a steady clip...Adding in facilities and infrastructure capital, along with a few vertical wells, we expect to spend $380 million to $430 million this year. And we project to generate production growth of around 40%, with oil growth more like 60%.” – Parsley Energy, CEO, Feb. 26, 2016  “We expect to spend approximately $120 million to $140 million of growth capital in Texas, the majority of which will be spent in the Permian Basin.” – EnLink Midstream CFO, Feb. 17, 2016  The multi-year extension of PTCs and bonus depreciation will provide ongoing support for renewables development in the Panhandle Texas Economic Overview 15
Texas Economic Overview (continued) 16 Permian oil production has continued to grow despite the declining oil price environment Source: Energy Information Administration projected to March 1, 2016
Pipeline of Development Projects 17 NV CA OK TX AZ NM MEXICO Additional U.S. – Mexico DC Ties Additional South Texas Transmission / Generation Interconnections South Plains Reinforcement ROFO Project (1) Estimated Project Cost Expected Completion Status Golden Spread $80 - $100mm 2016 Under construction Cross Valley $160 - $185mm 2016 Under construction Southline ~ $800mm — Final EIS Published Verde $60 - $80mm — In development Southline Transmission Project Verde Transmission Project Cross Valley Transmission Line Golden Spread Electric Coop (GSEC) Interconnection Lubbock Power & Light Interconnection Under Construction Other ROFO Additional Development Opportunities (1) ROFO projects are identified projects that are being developed by Hunt Consolidated, Inc. and its affiliates with respect to which InfraREIT has a right of first offer.
ROFO Project Update As of March 3, 2016 18 ROFO Project State Estimated Costs (1) Status Golden Spread TX $80 - $100 mm (incl. financing) • CNN (Certificate of Convenience & Necessity) received • Major components continue to arrive and construction is proceeding as planned • Expected completion in late Q1 or early Q2 2016 • HIFR Conflicts Committee received an offer for the purchase of the Golden Spread Project. Negotiations are in progress. Cross Valley TX $160 - $185 mm (incl. financing) • CCN received • Major components continue to arrive and construction is proceeding as planned • Expected completion in late Q2 or early Q3 2016 • HIFR Conflicts Committee received an offer for the purchase of the Cross Valley Project. Negotiations are in progress. Southline AZ NM ~ $800 mm (excl. financing) • Final EIS (Environmental Impact Statement) in November 2015 • Achieved Phase 3 status in WECC (Western Electricity Coordinating Council) ratings process in March 2015 • FERC (Federal Energy Regulatory Commission) granted a PDO (Petition for Declaratory Order) in September 2015 • Open solicitation process anticipated to begin during the first half of 2016 Verde NM $60 - $80 mm (excl. financing) • Easement agreements reached with three Native American Pueblos (1) Cost estimates are preliminary estimates, and include estimated financing costs for the Golden Spread Project and Cross Valley Project. For Southline, Verde and other development projects other than the Golden Spread Project and Cross Valley Project, Hunt may opt to partner with other parties in the development of projects depending on their scope, location and cost.
2016 Activities and Objectives 19  Continue to enable growth in our core business through financing $220 million to $240 million in estimated 2016 footprint capital expenditures  Support the Conflicts Committee in evaluating the Golden Spread and Cross Valley ROFO Project opportunities  Deal analysis and transaction support  If the acquisitions are completed: deal execution and financing  Participate in the Sharyland rate case (to be filed by 4/30/2016)  Monitor and support Southline, Verde, the potential Lubbock Power & Light integration into ERCOT, and other ROFO and Hunt transmission development projects  Opportunistically pursue additional acquisitions
Questions 20
Reg G Reconciliation 21
Schedule 1: Reconciliation of Non-GAAP EPS Q4 2015 vs. Q4 2014 22 Non-GAAP EPS InfraREIT defines non-GAAP net income as net income (loss) adjusted in a manner the Company believes is appropriate to show its core operational performance, including: (a) adding back the non-cash reorganization structuring fee, (b) adding back the reorganization expense related to the Company’s IPO and related reorganization transactions, (c) adding back the expense related to the contingent consideration issued as deemed capital credits, (d) an adjustment for the difference between the amount of percentage rent payments that the Company expects to receive with respect to the applicable period and the amount of percentage rent the Company recognizes under GAAP during the period and (e) an adjustment for the difference between the amount of base rent payments that the Company receives with respect to the applicable period and the amount of straight-line base rent recognized under GAAP. The Company defines Non-GAAP EPS as non-GAAP net income divided by the weighted average shares outstanding calculated in the manner described in the footnotes below. The following table sets forth a reconciliation of net income attributable to InfraREIT, Inc. per diluted share to Non-GAAP EPS per share for the three months ended December 31, 2015 and 2014: $ thousands, except share amounts Q4 2015 Amount Per Share (3) Q4 2014 Amount Per Share (4) Net income attributable to InfraREIT, Inc. $ 19,806 $ 0.45 $ 2,924 $ 0.08 Net income attributable to noncontrolling interest 7,725 0.45 836 0.08 Net income 27,531 0.45 3,760 0.08 Non-cash reorganization structuring fee — — — — Reorganization expenses — — 921 0.02 Contingent consideration — — 17,247 0.38 Percentage rent adjustment (1) (9,768) (0.16) (8,899) (0.19) Base rent adjustment (2) 1,069 0.02 1,767 0.04 Non-GAAP net income $ 18,832 $ 0.31 $ 14,796 $ 0.32
Schedule 1: Reconciliation of Non-GAAP EPS Full Year 2015 vs. Full Year 2014 23 Non-GAAP EPS The following table sets forth a reconciliation of net income attributable to InfraREIT, Inc. per diluted share to Non-GAAP EPS per share for the years ended December 31, 2015 and 2014: $ thousands, except share amounts 2015 Amount Per Share (5) 2014 Amount Per Share (6) Net income attributable to InfraREIT, Inc. $ 13,267 $ 0.31 $ 22,898 $ 0.65 Net income attributable to noncontrolling interest 6,664 0.41 6,882 0.65 Net income 19,931 0.34 29,780 0.65 Non-cash reorganization structuring fee 44,897 0.76 — — Reorganization expenses 333 — 1,729 0.04 Contingent consideration — — 18,357 0.40 Percentage rent adjustment (1) — — — — Base rent adjustment (2) 6,538 0.11 6,688 0.15 Non-GAAP net income $ 71,699 $ 1.21 $ 56,554 $ 1.24
Schedule 1: Reconciliation of Non-GAAP EPS (1) Represents the difference between the amount of percentage rent payments and the amount recognized during the applicable period, if any. Although the Company receives percentage rent payments related to each quarter, it does not recognize lease revenue related to these percentage rent payments until its tenant’s annual gross revenues exceed minimum specified breakpoints in the leases. (2) This adjustment relates to the difference between the timing of cash based rent payments made under the Company’s leases and when the Company recognizes base rent revenue under GAAP. The Company recognizes base rent on a straight-line basis over the applicable term of the lease commencing when the related assets are placed in service, which is frequently different than the period in which the cash rent becomes due. (3) The weighted average common shares outstanding of 43.6 million was used to calculate net income attributable to InfraREIT, Inc. common stockholders per diluted share. The weighted average redeemable partnership units outstanding of 17.0 million was used to calculate the net income attributable to noncontrolling interest per share. The combination of the weighted average common shares and redeemable partnership units outstanding of 60.6 million was used for the remainder of the per share calculations. (4) The weighted average shares outstanding of 35.1 million was used to calculate net income attributable to InfraREIT, Inc. shareholders per diluted share. The weighted average redeemable partnership units outstanding of 10.6 million was used to calculate the net income attributable to noncontrolling interest per share. The combination of the weighted average shares and redeemable partnership units outstanding of 45.7 million was used for the remainder of the per share calculations. (5) The weighted average common shares outstanding of 43.0 million was used to calculate net income attributable to InfraREIT, Inc. common stockholders per diluted share. The weighted average redeemable partnership units outstanding of 16.2 million was used to calculate the net income attributable to noncontrolling interest per share. The combination of the weighted average common shares and redeemable partnership units outstanding of 59.2 million was used for the remainder of the per share calculations. (6) The weighted average shares outstanding of 35.1 million was used to calculate net income attributable to InfraREIT, Inc. shareholders per diluted share. The weighted average redeemable partnership units outstanding of 10.5 million was used to calculate the net income attributable to noncontrolling interest per share. The combination of the weighted average shares and redeemable partnership units outstanding of 45.6 million was used for the remainder of the per share calculations. 24
Schedule 2: Explanation and Reconciliation of CAD Q4 2015 vs. Q4 2014 25 CAD The Company defines CAD in a manner that it believes is appropriate to show its core operational performance, which includes a deduction of the portion of capital expenditures needed to maintain its net assets which equals depreciation expense within the applicable period. The portion of the capital expenditures in excess of depreciation, which the Company refers to as growth capital expenditures, will increase its net assets. Also included in CAD are various other adjustments from net income, as outlined below and described in more detail on Schedules 1, 3 and 4. The following sets forth a reconciliation of net income to CAD for the three months ended December 31, 2015 and 2014: $ thousands, except share amounts Three Months Ended December 31, 2015 2014 Net income $ 27,531 $ 3,760 Depreciation 10,773 9,255 Non-cash reorganization structuring fee — — Percentage rent adjustment (1) (9,768) (8,899) Base rent adjustment (2) 1,069 1,767 Amortization of deferred financing costs 805 1,190 Reorganization expenses — 921 Non-cash equity compensation 185 — Other (income) expense, net (3) (868) 17,569 Capital expenditures to maintain net assets (10,773) (9,255) CAD $ 18,954 $ 16,308 Shares Outstanding (mm of shares) 60.6 (4) 45.7 (5) CAD Per Share $ 0.31 $ 0.36
Schedule 2: Explanation and Reconciliation of CAD Full Year 2015 vs. Full Year 2014 26 CAD The following sets forth a reconciliation of net income to CAD for the years ended December 31, 2015 and 2014: $ thousands, except share amounts Years Ended December 31, 2015 2014 Net income $ 19,931 $ 29,780 Depreciation 40,211 35,080 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment (1) — — Base rent adjustment (2) 6,538 6,688 Amortization of deferred financing costs 3,241 4,383 Reorganization expenses 333 1,729 Non-cash equity compensation 678 120 Other (income) expense, net (3) (3,048) 17,236 Capital expenditures to maintain net assets (40,211) (35,080) CAD $ 72,570 $ 59,936 Shares Outstanding (mm of shares) 60.6 (6) 45.7 (7) CAD Per Share $ 1.20 $ 1.31
Schedule 2: Explanation and Reconciliation of CAD 27 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation on Non-GAAP EPS (2) See footnote (1) on Schedule 1 on Explanation and Reconciliation on Non-GAAP EPS (3) Includes allowance for funds used during construction (AFUDC) on equity of $0.9 million and $(0.3) million for the three months ended December 31, 2015 and 2014, respectively, and $3.0 million and $1.1 million for the years ended December 31, 2015 and 2014, respectively. (4) Consists of 43.6 million outstanding common shares of InfraREIT and 17.0 million outstanding OP Units held by the limited partners of the Operating Partnership as of December 31, 2015. (5) Consists of 35.1 million outstanding shares of InfraREIT and 10.6 million outstanding OP Units held by the limited partners of the Operating Partnership as of December 31, 2014. (6) Consists of 43.6 million outstanding common shares of InfraREIT and 17.0 million outstanding OP Units held by the limited partners of the Operating Partnership as of December 31, 2015. (7) Consists of 35.1 million outstanding shares of InfraREIT and 10.6 million outstanding OP Units held by the limited partners of the Operating Partnership as of December 31, 2014.
Schedule 3: Explanation and Reconciliation of EBITDA and Adjusted EBITDA Q4 2015 vs. Q4 2014 28 EBITDA and Adjusted EBITDA InfraREIT defines EBITDA as net income (loss) before interest expense, net; income tax expense; depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted in a manner the Company believes is appropriate to show its core operational performance, including: (a) adding back the non-cash reorganization structuring fee, (b) an adjustment for the difference between the amount of percentage rent payments that the Company expects to receive with respect to the applicable period and the amount of percentage rent the Company recognizes under GAAP during the period, (c) an adjustment for the difference between the amount of base rent payments that the Company receives with respect to the applicable period and the amount of straight-line base rent recognized under GAAP, (d) adding back the reorganization expense related to the Company’s IPO and related reorganization transactions and (e) adjusting for other income (expense), net. The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the three months ended December 31, 2015 and 2014: $ thousands Three Months Ended December 31, 2015 2014 Net income $ 27,531 $ 3,760 Interest expense, net 7,470 8,377 Income tax expense 374 297 Depreciation 10,773 9,255 EBITDA 46,148 21,689 Non-cash reorganization structuring fee — — Percentage rent adjustment (1) (9,768) (8,899) Base rent adjustment (2) 1,069 1,767 Reorganization expenses — 921 Other (income) expense, net (3) (868) 17,569 Adjusted EBITDA $ 36,581 $ 33,047 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (2) See footnote (2) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (3) See footnote (3) on Schedule 2 on Explanation and Reconciliation of CAD
Schedule 3: Explanation and Reconciliation of EBITDA and Adjusted EBITDA Full Year 2015 vs. Full Year 2014 29 EBITDA and Adjusted EBITDA The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the years ended December 31, 2015 and 2014: $ thousands Years Ended December 31, 2015 2014 Net income $ 19,931 $ 29,780 Interest expense, net 28,554 32,741 Income tax expense 949 953 Depreciation 40,211 35,080 EBITDA 89,645 98,554 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment (1) — — Base rent adjustment (2) 6,538 6,688 Reorganization expenses 333 1,729 Other (income) expense, net (3) (3,048) 17,236 Adjusted EBITDA $ 138,365 $ 124,207 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (2) See footnote (2) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (3) See footnote (3) on Schedule 2 on Explanation and Reconciliation of CAD
Schedule 4: Explanation of FFO and AFFO 30 FFO and AFFO The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (computed in accordance with GAAP), excluding gains and losses from sales of property (net) and impairments of depreciated real estate, plus real estate depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Applying the NAREIT definition to the Company’s consolidated financial statements, which is the basis for the FFO and the reconciliations below, results in FFO representing net (loss) income before depreciation, impairment of assets and gain (loss) on sale of assets. FFO does not represent cash generated from operations as defined by GAAP and it is not indicative of cash available to fund all cash needs, including distributions. AFFO is defined as FFO adjusted in a manner the Company believes is appropriate to show its core operational performance, including: (a) adding back the non-cash reorganization structuring fee, (b) an adjustment for the difference between the amount of percentage rent payments that the Company expects to receive with respect to the applicable period and the amount of percentage rent the Company recognizes under GAAP during the period, (c) an adjustment for the difference between the amount of base rent payments that the Company receives with respect to the applicable period and the amount of straight-line base rent recognized under GAAP, (d) adding back the reorganization expense related to the Company’s IPO and related reorganization transactions and (e) adjusting for other income (expense), net.
Schedule 4: Reconciliation of FFO and AFFO Q4 2015 vs. Q4 2014 31 FFO and AFFO The following table sets forth a reconciliation of net income to FFO and AFFO for the three months ended December 31, 2015 and 2014: $ thousands Three Months Ended December 31, 2015 2014 Net income $ 27,531 $ 3,760 Depreciation 10,773 9,255 FFO 38,304 13,015 Non-cash reorganization structuring fee — — Percentage rent adjustment (1) (9,768) (8,899) Base rent adjustment (2) 1,069 1,767 Reorganization expenses — 921 Other (income) expense, net (3) (868) 17,569 AFFO $ 28,737 $ 24,373 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (2) See footnote (2) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (3) See footnote (3) on Schedule 2 on Explanation and Reconciliation of CAD
Schedule 4: Reconciliation of FFO and AFFO Full Year 2015 vs. Full Year 2014 32 FFO and AFFO The following table sets forth a reconciliation of net income to FFO and AFFO for the years ended December 31, 2015 and 2014: $ thousands Years Ended December 31, 2015 2014 Net income $ 19,931 $ 29,780 Depreciation 40,211 35,080 FFO 60,142 64,860 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment (1) — — Base rent adjustment (2) 6,538 6,688 Reorganization expenses 333 1,729 Other (income) expense, net (3) (3,048) 17,236 AFFO $ 108,862 $ 90,513 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (2) See footnote (2) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (3) See footnote (3) on Schedule 2 on Explanation and Reconciliation of CAD
Appendix 33
Attractive Asset Profile Transmission ► ~75% of our rate base is transmission ► ~665 miles of transmission lines ► Transmission Operations Center ► Railroad DC Tie with Mexico (300 MW) Distribution ► ~25% of our rate base is distribution ► ~12,300 miles of distribution lines ► ~53,000 electric delivery points As of December 31, 2015 34
Disciplined, Multifaceted Pursuit of Growth 35 Footprint Projects (Funded by InfraREIT) Hunt Development team members are experienced T&D planners ROFO Projects Growth Strategy Growth Drivers • Population and economic growth across Texas • Energy-driven economic expansion • Generator interconnections to Panhandle Transmission assets • Specific Hunt T&D projects under construction or in development • Cross Valley transmission line and Golden Spread interconnection have approved CCNs and are under construction • Value enhancing M&A Transactions that build on: • Hunt’s industry relationships and reputation • Expertise with REIT structure • Future T&D projects developed and constructed by Hunt • Primarily focused on Texas and the Southwest Other Hunt Development Projects Acquire other T&D assets from third parties
SDTS (2) Structure Mechanics 36  SDTS owns our T&D assets and leases them to Sharyland  Sharyland collects rate- regulated revenue from other utilities and retail electric providers  Sharyland makes regular lease payments to SDTS  InfraREIT pays dividends to stockholders 1 2 3 4 Shareholders InfraREIT (1) Hunt Family Sharyland Utilities Customers T&D Services Cash Lease Rent 1 2 3 4  Ownership (3)  Hunt Manager  Hunt Developer 100% Interest (1) Represents InfraREIT, Inc., InfraREIT Partners, LP (Operating Partnership) and Transmission and Distribution Company, L.L.C. (TDC) (2) Represents Sharyland Distribution & Transmission Services, L.L.C. (SDTS) (3) Represents Hunt Transmission Services, L.L.C. (limited partner of the Operating Partnership and shareholder of InfraREIT) Conducted business as a REIT since 2010 Hunt Consolidated, Inc.
Board Structure Management Related Party Transactions Management Agreement  9 total members, 6 independent  CEO, CFO and General Counsel are officers of InfraREIT and Hunt Manager  Require majority approval by the independent board members (i.e. ROFO Project acquisitions)  Responsible for the day-to-day business and legal activities of InfraREIT  Annual base fee equal to $14.0 million for April 1, 2016 through March 31, 2017 representing 1.50% of total book equity as of year end 2015  Capped at $30 million per year  Incentive fee equal to 20% of quarterly dividends per share in excess of the threshold distribution amount payable quarterly  2016 dividend per share: $0.25  Threshold dividend: $0.27 Governance and Management 37
Lease Mechanics 38 Lease Objectives InfraREIT ► Rent payments intended to provide InfraREIT with approximately 97% of the projected regulated return on rate base attributable to InfraREIT’s assets Sharyland ► Sharyland recovers operating and maintenance (O&M) costs and a portion of the return on InfraREIT’s rate base Lease Terms ► InfraREIT is obligated to fund capex for Footprint Projects ► New assets are added to leases through supplements ► Lease renewals apply the same methodology but are updated for new rate case information ► Approximately 80% – 90% of rent is a fixed amount – paid monthly ► Approximately 10% – 20% of rent is variable based on a percentage of Sharyland’s gross revenue less adjustments – paid quarterly
Q4 2015 Results 39
Non-GAAP EPS Q4 2015 vs. Q4 2014 40 Non-GAAP EPS per diluted share was lower in Q4 2015 than Q4 2014 by 3%, due to increased lease revenues offset by higher weighted average common shares outstanding during Q4 2015 compared to Q4 2014 $ thousands, except share amounts Q4 2015 Amount Per Share Q4 2014 Amount Per Share Net income attributable to InfraREIT, Inc. $ 19,806 $ 0.45 $ 2,924 $ 0.08 Net income attributable to noncontrolling interest 7,725 0.45 836 0.08 Net income 27,531 0.45 3,760 0.08 Non-cash reorganization structuring fee — — — — Reorganization expenses — — 921 0.02 Contingent consideration — — 17,247 0.38 Percentage rent adjustment (9,768) (0.16) (8,899) (0.19) Base rent adjustment 1,069 0.02 1,767 0.04 Non-GAAP net income $ 18,832 $ 0.31 $ 14,796 $ 0.32
Cash Available For Distribution Q4 2015 vs. Q4 2014 41 CAD grew by 17% over Q4 2014, reflecting growth in lease revenue $ thousands, except share amounts Q4 2015 Q4 2014 Increase/(Decrease) $ % Net income $ 27,531 $ 3,760 Depreciation 10,773 9,255 Non-cash reorganization structuring fee — — Percentage rent adjustment (9,768) (8,899) Base rent adjustment 1,069 1,767 Amortization of deferred financing costs 805 1,190 Reorganization expenses — 921 Non-cash equity compensation 185 — Other (income) expense, net (868) 17,569 Capital expenditures to maintain net assets (10,773) (9,255) Cash Available For Distribution (CAD) $ 18,954 $ 16,308 $ 2,646 17% Shares outstanding (as of 12/31/2015) 60,594 CAD Per Share $ 0.31
Adjusted EBITDA Q4 2015 vs. Q4 2014 42 Q4 2015 adjusted EBITDA exceeded Q4 2014 adjusted EBITDA by 11%, driven by growth in lease revenue $ thousands Q4 2015 Q4 2014 Increase/(Decrease) $ % Lease revenue $ 50,921 $ 45,044 G&A expense (5,641) (5,786) Other income (expense), net 868 (17,569) EBITDA 46,148 21,689 Non-cash reorganization structuring fee — — Percentage rent adjustment (9,768) (8,899) Base rent adjustment 1,069 1,767 Reorganization expenses — 921 Other (income) expense, net (868) 17,569 Adjusted EBITDA $ 36,581 $ 33,047 $ 3,534 11%

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4 q2015 earnings_ppt_final

  • 1.
    InfraREIT, Inc. 2015 FullYear Results & Supplemental Information
  • 2.
    Safe Harbor Forward LookingStatements These presentations contain “forward-looking statements” about the business, financial performance, contracts, leases and prospects of InfraREIT, Inc. (the “Company”). Words such as “could,” “will,” “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “guidance,” “outlook,” “target,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential” or “continue” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. This presentation also contains forward-looking statements that have previously been publicly disclosed by the Company. These previously disclosed forward-looking statements should not be deemed reaffirmed or updated by their inclusion in this presentation. The Company’s actual results, performance or achievements could differ materially from those expressed or implied by any forward-looking statements made in connection with this presentation. The Company’s capabilities or performance, stockholder value as well as any other statements that are not historical facts in this presentation are forward-looking statements that involve certain risks and uncertainties, many of which are difficult to predict and beyond the Company’s control. Factors that could cause actual results to differ materially from the results contemplated by such forward-looking statements include, without limitation, decisions by regulators or changes in governmental policies or regulations with respect to the Company’s permitted capital structure, acquisitions and dispositions of assets, recovery of investments and authorized rate of return; the Company’s current reliance on its tenant for all of its revenues and, as a result, the Company’s dependency on its tenant’s solvency and financial and operating performance; risks that the capital expenditures the Company expects will not materialize for a variety of reasons; risks related to future lease negotiations or non-renewal of leases with the Company’s tenant; insufficient cash available to meet distribution requirements; the Company’s ability to make strategic acquisitions that add to its rate base, including through acquisition of ROFO Projects from Hunt Consolidated, Inc. and its subsidiaries; the price and availability of debt and equity financing; the Company’s level of indebtedness or debt service obligations; cyber breaches, weather conditions or other natural phenomena; the effects of existing and future tax and other laws and governmental regulations; the Company’s failure to qualify or maintain its status as a real estate investment trust (REIT); or changes in the tax laws applicable to REITs; the termination of the Company’s management agreement or the loss of the services of the Company’s manager or other qualified personnel; and adverse economic developments in the electric power industry or in business conditions generally, particularly in Texas. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in the Company’s filings with the U.S. Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. Forward-looking statements speak only as of the date made and reaffirmed, and the Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Non-GAAP Legend This presentation contains certain financial measures that are not recognized under generally accepted accounting principles (GAAP). These non-GAAP measures are presented because InfraREIT’s management believes they help investors understand InfraREIT’s business, performance and ability to earn and distribute cash to its stockholders by providing perspectives not immediately apparent from net income. These measures are also measures frequently used by securities analysts, investors and other interested parties in the evaluation of utilities, yieldcos and REITs. The presentation of Non-GAAP earnings per share (Non-GAAP EPS); cash available for distribution (CAD); net income (loss) before interest expense, net, income tax expense, depreciation and amortization (EBITDA); Adjusted EBITDA; funds from operations (FFO); and adjusted FFO (AFFO) in this presentation are not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, InfraREIT’s method of calculating these measures may be different from methods used by other companies, and, accordingly, may not be comparable to similar measures as calculated by other companies that do not use the same methodology as InfraREIT. Reconciliations of these measures to their most directly comparable GAAP measures are included in the Schedules 1-4 to this presentation. 2
  • 3.
    Q4 2015 PerformanceSummary $ millions 3 Strong Q4 2015 performance, in line with expectations Cash Available for Distribution $16.3 $19.0 Q4 2014 Q4 2015 +17% Lease Revenue $45.0 $50.9 Q4 2014 Q4 2015 +13% Adjusted EBITDA $33.0 $36.6 Q4 2014 Q4 2015 +11%
  • 4.
    Full Year 2015Performance Summary $ millions 4 Strong 2015 performance, in line with expectations Cash Available for Distribution $59.9 $72.6 2014 2015 Lease Revenue $134.4 $151.2 2014 2015 +13% Adjusted EBITDA $124.2 $138.4 2014 2015 +11% +21%
  • 5.
    Full Year 2015Performance – CAD / Share 5 IPO CAD / Share Forecast Interest Expense Savings Other 2015 CAD / Share $0.12 $0.01 $1.20 (1) (1) Forecasted 2015 interest expense, net in the IPO Prospectus ($35.9 million) less reported 2015 interest expense, net ($28.6 million) divided by 60.6 million shares outstanding at December 31, 2015 $1.07
  • 6.
    Adjusted EBITDA Full Year2015 vs. Full Year 2014 6 2015 adjusted EBITDA exceeded 2014 adjusted EBITDA by 11%, driven by growth in lease revenue $ thousands 2015 2014 Increase/(Decrease) $ % Lease revenue $ 151,203 $ 134,415 G&A expense (64,606) (18,625) Other income (expense), net 3,048 (17,236) EBITDA 89,645 98,554 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment — — Base rent adjustment 6,538 6,688 Reorganization expenses 333 1,729 Other (income) expense, net (3,048) 17,236 Adjusted EBITDA $ 138,365 $ 124,207 $ 14,158 11%
  • 7.
    Cash Available ForDistribution Full Year 2015 vs. Full Year 2014 7 2015 CAD grew by 21% over 2014, reflecting growth in lease revenue $ thousands, except share amounts 2015 2014 Increase/(Decrease) $ % Net income $ 19,931 $ 29,780 Depreciation 40,211 35,080 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment — — Base rent adjustment 6,538 6,688 Amortization of deferred financing costs 3,241 4,383 Reorganization expenses 333 1,729 Non-cash equity compensation 678 120 Other (income) expense, net (3,048) 17,236 Capital expenditures to maintain net assets (40,211) (35,080) Cash Available For Distribution (CAD) $ 72,570 $ 59,936 $ 12,634 21% Shares outstanding (as of 12/31/2015) 60,594 CAD Per Share $ 1.20
  • 8.
    CAD / ShareComparison to Non-GAAP EPS Full Year 2015 8 Non-GAAP EPS is presented as a metric to enable comparisons with other utilities. CAD / share and Non-GAAP EPS will show some variances, but are expected to approximate each other over time $ thousands, except share amounts CAD per share Non-GAAP EPS Net income $ 19,931 $ 19,931 Depreciation 40,211 — Non-cash reorganization structuring fee 44,897 44,897 Percentage rent adjustment — — (1) Base rent adjustment 6,538 6,538 Amortization of deferred financing costs 3,241 — Reorganization expenses 333 333 Non-cash equity compensation 678 — Other income, net (3,048) — Capital expenditures to maintain net assets (40,211) — Total $ 72,570 $ 71,699 Shares outstanding 60,594 (2) 59,215 (3) Per Share Amount $ 1.20 $ 1.21 (1) Adjustment will exist in quarterly reporting (2) Outstanding shares as of December 31, 2015 (3) Weighted average common shares outstanding for the year ended December 31, 2015
  • 9.
    Debt Obligations andAvailable Liquidity 9 Long-Term Debt (rate / maturity) ($ millions) Outstanding As of December 31, 2015 TDC - Senior Secured Notes (8.50% / December 30, 2020) $ 18.8 SDTS - Senior Secured Notes (5.04% / June 20, 2018) (1) 60.0 SDTS - Senior Secured Notes, Series A (3.86% / December 3, 2025) (2) 400.0 SDTS - Senior Secured Notes (7.25% / December 30, 2029) 44.5 SDTS - Senior Secured Notes (6.47% / September 30, 2030) 101.6 Total $ 624.9 Liquidity Facilities ($ millions) Amount Outstanding As of December 31, 2015 Available InfraREIT Partners Revolver $ 75.0 $ — $ 75.0 SDTS Revolver 250.0 54.0 196.0 Total $ 325.0 $ 54.0 $ 271.0 Cash (as of December 31, 2015) 9.5 Total Available Liquidity $ 280.5 (1) Sharyland Projects (SP) debt used to fund construction of the CREZ Transmission assets was assumed by SDTS during December 2015 (2) $100.0 million of SDTS Senior Secured Notes, Series B were issued on January 14, 2016 at an interest rate of 3.86% per annum with a maturity of January 14, 2026
  • 10.
    Financing Strategy 10 Focus on Regulated T&D Opportunities MaintainStrong Financial Profile Grow Dividends ► Sign multi-year leases that reflect regulated rate structure ► Minimize regulatory lag with prudent rate case / TCOS filings ► 80% - 90% long-term CAD payout ratio ► Construct Footprint Projects ► Acquire ROFO Projects ► Opportunistically acquire T&D assets ► Maintain significant liquidity to support capex plan and financial flexibility ► Maintain 55% debt to capitalization at our regulated subsidiary, SDTS ► Target consolidated credit metrics of 60% debt to capitalization and 12% AFFO to debt
  • 11.
    Q4 2015 Highlights Solid performance continued in Q4 2015  Year-over-year growth remains on target for key metrics  Rate base grew by approximately 16%  Total 2015 capital expenditures of $230 million, above the $210 million to $220 million range cited during the Q3 earnings call  Progress on ROFO and Hunt Developer projects  Golden Spread Electric Cooperative Interconnection project (Golden Spread Project) has been offered to InfraREIT and negotiations are in progress  Cross Valley Transmission Line project (Cross Valley Project) has been offered to InfraREIT and negotiations are in progress  The review of Lubbock Power & Light’s request to join ERCOT continues to progress through PUCT and ERCOT review processes  Southline received its Final Environmental Impact Statement (EIS) in November 2015 11
  • 12.
     Initiating 2016guidance metrics, based on footprint capital expenditures  CAD per share range $1.15 - $1.25  Non-GAAP EPS range $1.15 - $1.25  Dividends per share $1.00 • Quarterly dividend per share of $0.25 declared on March 2nd  Updating the estimate for footprint capital expenditure for 2016 – 2018 to a range of $640 million - $740 million  Updating projected three-year compound annual growth rate (CAGR) range of dividends per share of 8% - 10% from 2015 through 2018  Targeted payout ratio of 80% - 90%  Acquisition of both the Golden Spread Project and Cross Valley Project could increase the CAGR by 1% - 2% Forward Outlook 12
  • 13.
    Q1 2016 DividendIncreased 11% 13 2016 CAD Per Share Range 2016 Annualized Dividend Per Share Payout Ratio $1.00 $1.00 87% 83% The 2016 annualized dividend is 11% higher than the annualized 2015 post-IPO dividend, representing an 83% payout ratio at the midpoint of the 2016 CAD per share range $1.15 $1.20 $1.25 $1.00 80%
  • 14.
    2016E - 2018EFootprint Capital Expenditures (1) $ millions 14 (1) Footprint Projects are transmission or distribution projects primarily situated within our distribution service territory, or that physically hang from our existing transmission assets The forecast range of $640 million - $740 million for 2016 – 2018 has been updated to reflect the estimated impact of ongoing oil price declines 2016 2017 2018 Base Distribution $70 - $75 $85 - $95 $70 - $90 Base Transmission $130 - $135 $70 - $80 $75 - $95 Base Footprint Capex $200 - $210 $155 - $175 $145 - $185 Synchronous Condensers $10 - $15 $45 - $50 $20 - $25 Second Circuit $10 - $15 $50 - $55 $5 - $10 Total Footprint Capex $220 - $240 $250 - $280 $170 - $220
  • 15.
     While thelong-term fundamentals for the Texas economy remain strong, the ongoing oil price decline is impacting activity and investment levels in West Texas  ERCOT reached a record peak demand of 69,877 MWs in August 2015  While at a slower pace, growth continues in the Permian / Midland Basin as it is one of the areas where upstream and midstream companies continue to invest capital  “We expect the majority of our total 2016 spending will be allocated to our domestic oil and gas business, primarily in the Permian Basin, with roughly 21% to be spent in Permian Resources and about 17% going toward Permian EOR.” – Oxy CFO, Feb. 4, 2016  “…capital expenditures of about $2 billion for 2016. That's down from our preliminary forecast in early January from $2.4 to $2.6 billion and from actual spending in 2015 of 2.2.” – Pioneer CEO, Feb. 10, 2016  “Based on current strip prices, our plan is to continue to drill and complete at a steady clip...Adding in facilities and infrastructure capital, along with a few vertical wells, we expect to spend $380 million to $430 million this year. And we project to generate production growth of around 40%, with oil growth more like 60%.” – Parsley Energy, CEO, Feb. 26, 2016  “We expect to spend approximately $120 million to $140 million of growth capital in Texas, the majority of which will be spent in the Permian Basin.” – EnLink Midstream CFO, Feb. 17, 2016  The multi-year extension of PTCs and bonus depreciation will provide ongoing support for renewables development in the Panhandle Texas Economic Overview 15
  • 16.
    Texas Economic Overview(continued) 16 Permian oil production has continued to grow despite the declining oil price environment Source: Energy Information Administration projected to March 1, 2016
  • 17.
    Pipeline of DevelopmentProjects 17 NV CA OK TX AZ NM MEXICO Additional U.S. – Mexico DC Ties Additional South Texas Transmission / Generation Interconnections South Plains Reinforcement ROFO Project (1) Estimated Project Cost Expected Completion Status Golden Spread $80 - $100mm 2016 Under construction Cross Valley $160 - $185mm 2016 Under construction Southline ~ $800mm — Final EIS Published Verde $60 - $80mm — In development Southline Transmission Project Verde Transmission Project Cross Valley Transmission Line Golden Spread Electric Coop (GSEC) Interconnection Lubbock Power & Light Interconnection Under Construction Other ROFO Additional Development Opportunities (1) ROFO projects are identified projects that are being developed by Hunt Consolidated, Inc. and its affiliates with respect to which InfraREIT has a right of first offer.
  • 18.
    ROFO Project Update Asof March 3, 2016 18 ROFO Project State Estimated Costs (1) Status Golden Spread TX $80 - $100 mm (incl. financing) • CNN (Certificate of Convenience & Necessity) received • Major components continue to arrive and construction is proceeding as planned • Expected completion in late Q1 or early Q2 2016 • HIFR Conflicts Committee received an offer for the purchase of the Golden Spread Project. Negotiations are in progress. Cross Valley TX $160 - $185 mm (incl. financing) • CCN received • Major components continue to arrive and construction is proceeding as planned • Expected completion in late Q2 or early Q3 2016 • HIFR Conflicts Committee received an offer for the purchase of the Cross Valley Project. Negotiations are in progress. Southline AZ NM ~ $800 mm (excl. financing) • Final EIS (Environmental Impact Statement) in November 2015 • Achieved Phase 3 status in WECC (Western Electricity Coordinating Council) ratings process in March 2015 • FERC (Federal Energy Regulatory Commission) granted a PDO (Petition for Declaratory Order) in September 2015 • Open solicitation process anticipated to begin during the first half of 2016 Verde NM $60 - $80 mm (excl. financing) • Easement agreements reached with three Native American Pueblos (1) Cost estimates are preliminary estimates, and include estimated financing costs for the Golden Spread Project and Cross Valley Project. For Southline, Verde and other development projects other than the Golden Spread Project and Cross Valley Project, Hunt may opt to partner with other parties in the development of projects depending on their scope, location and cost.
  • 19.
    2016 Activities andObjectives 19  Continue to enable growth in our core business through financing $220 million to $240 million in estimated 2016 footprint capital expenditures  Support the Conflicts Committee in evaluating the Golden Spread and Cross Valley ROFO Project opportunities  Deal analysis and transaction support  If the acquisitions are completed: deal execution and financing  Participate in the Sharyland rate case (to be filed by 4/30/2016)  Monitor and support Southline, Verde, the potential Lubbock Power & Light integration into ERCOT, and other ROFO and Hunt transmission development projects  Opportunistically pursue additional acquisitions
  • 20.
  • 21.
  • 22.
    Schedule 1: Reconciliation ofNon-GAAP EPS Q4 2015 vs. Q4 2014 22 Non-GAAP EPS InfraREIT defines non-GAAP net income as net income (loss) adjusted in a manner the Company believes is appropriate to show its core operational performance, including: (a) adding back the non-cash reorganization structuring fee, (b) adding back the reorganization expense related to the Company’s IPO and related reorganization transactions, (c) adding back the expense related to the contingent consideration issued as deemed capital credits, (d) an adjustment for the difference between the amount of percentage rent payments that the Company expects to receive with respect to the applicable period and the amount of percentage rent the Company recognizes under GAAP during the period and (e) an adjustment for the difference between the amount of base rent payments that the Company receives with respect to the applicable period and the amount of straight-line base rent recognized under GAAP. The Company defines Non-GAAP EPS as non-GAAP net income divided by the weighted average shares outstanding calculated in the manner described in the footnotes below. The following table sets forth a reconciliation of net income attributable to InfraREIT, Inc. per diluted share to Non-GAAP EPS per share for the three months ended December 31, 2015 and 2014: $ thousands, except share amounts Q4 2015 Amount Per Share (3) Q4 2014 Amount Per Share (4) Net income attributable to InfraREIT, Inc. $ 19,806 $ 0.45 $ 2,924 $ 0.08 Net income attributable to noncontrolling interest 7,725 0.45 836 0.08 Net income 27,531 0.45 3,760 0.08 Non-cash reorganization structuring fee — — — — Reorganization expenses — — 921 0.02 Contingent consideration — — 17,247 0.38 Percentage rent adjustment (1) (9,768) (0.16) (8,899) (0.19) Base rent adjustment (2) 1,069 0.02 1,767 0.04 Non-GAAP net income $ 18,832 $ 0.31 $ 14,796 $ 0.32
  • 23.
    Schedule 1: Reconciliation ofNon-GAAP EPS Full Year 2015 vs. Full Year 2014 23 Non-GAAP EPS The following table sets forth a reconciliation of net income attributable to InfraREIT, Inc. per diluted share to Non-GAAP EPS per share for the years ended December 31, 2015 and 2014: $ thousands, except share amounts 2015 Amount Per Share (5) 2014 Amount Per Share (6) Net income attributable to InfraREIT, Inc. $ 13,267 $ 0.31 $ 22,898 $ 0.65 Net income attributable to noncontrolling interest 6,664 0.41 6,882 0.65 Net income 19,931 0.34 29,780 0.65 Non-cash reorganization structuring fee 44,897 0.76 — — Reorganization expenses 333 — 1,729 0.04 Contingent consideration — — 18,357 0.40 Percentage rent adjustment (1) — — — — Base rent adjustment (2) 6,538 0.11 6,688 0.15 Non-GAAP net income $ 71,699 $ 1.21 $ 56,554 $ 1.24
  • 24.
    Schedule 1: Reconciliation ofNon-GAAP EPS (1) Represents the difference between the amount of percentage rent payments and the amount recognized during the applicable period, if any. Although the Company receives percentage rent payments related to each quarter, it does not recognize lease revenue related to these percentage rent payments until its tenant’s annual gross revenues exceed minimum specified breakpoints in the leases. (2) This adjustment relates to the difference between the timing of cash based rent payments made under the Company’s leases and when the Company recognizes base rent revenue under GAAP. The Company recognizes base rent on a straight-line basis over the applicable term of the lease commencing when the related assets are placed in service, which is frequently different than the period in which the cash rent becomes due. (3) The weighted average common shares outstanding of 43.6 million was used to calculate net income attributable to InfraREIT, Inc. common stockholders per diluted share. The weighted average redeemable partnership units outstanding of 17.0 million was used to calculate the net income attributable to noncontrolling interest per share. The combination of the weighted average common shares and redeemable partnership units outstanding of 60.6 million was used for the remainder of the per share calculations. (4) The weighted average shares outstanding of 35.1 million was used to calculate net income attributable to InfraREIT, Inc. shareholders per diluted share. The weighted average redeemable partnership units outstanding of 10.6 million was used to calculate the net income attributable to noncontrolling interest per share. The combination of the weighted average shares and redeemable partnership units outstanding of 45.7 million was used for the remainder of the per share calculations. (5) The weighted average common shares outstanding of 43.0 million was used to calculate net income attributable to InfraREIT, Inc. common stockholders per diluted share. The weighted average redeemable partnership units outstanding of 16.2 million was used to calculate the net income attributable to noncontrolling interest per share. The combination of the weighted average common shares and redeemable partnership units outstanding of 59.2 million was used for the remainder of the per share calculations. (6) The weighted average shares outstanding of 35.1 million was used to calculate net income attributable to InfraREIT, Inc. shareholders per diluted share. The weighted average redeemable partnership units outstanding of 10.5 million was used to calculate the net income attributable to noncontrolling interest per share. The combination of the weighted average shares and redeemable partnership units outstanding of 45.6 million was used for the remainder of the per share calculations. 24
  • 25.
    Schedule 2: Explanation andReconciliation of CAD Q4 2015 vs. Q4 2014 25 CAD The Company defines CAD in a manner that it believes is appropriate to show its core operational performance, which includes a deduction of the portion of capital expenditures needed to maintain its net assets which equals depreciation expense within the applicable period. The portion of the capital expenditures in excess of depreciation, which the Company refers to as growth capital expenditures, will increase its net assets. Also included in CAD are various other adjustments from net income, as outlined below and described in more detail on Schedules 1, 3 and 4. The following sets forth a reconciliation of net income to CAD for the three months ended December 31, 2015 and 2014: $ thousands, except share amounts Three Months Ended December 31, 2015 2014 Net income $ 27,531 $ 3,760 Depreciation 10,773 9,255 Non-cash reorganization structuring fee — — Percentage rent adjustment (1) (9,768) (8,899) Base rent adjustment (2) 1,069 1,767 Amortization of deferred financing costs 805 1,190 Reorganization expenses — 921 Non-cash equity compensation 185 — Other (income) expense, net (3) (868) 17,569 Capital expenditures to maintain net assets (10,773) (9,255) CAD $ 18,954 $ 16,308 Shares Outstanding (mm of shares) 60.6 (4) 45.7 (5) CAD Per Share $ 0.31 $ 0.36
  • 26.
    Schedule 2: Explanation andReconciliation of CAD Full Year 2015 vs. Full Year 2014 26 CAD The following sets forth a reconciliation of net income to CAD for the years ended December 31, 2015 and 2014: $ thousands, except share amounts Years Ended December 31, 2015 2014 Net income $ 19,931 $ 29,780 Depreciation 40,211 35,080 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment (1) — — Base rent adjustment (2) 6,538 6,688 Amortization of deferred financing costs 3,241 4,383 Reorganization expenses 333 1,729 Non-cash equity compensation 678 120 Other (income) expense, net (3) (3,048) 17,236 Capital expenditures to maintain net assets (40,211) (35,080) CAD $ 72,570 $ 59,936 Shares Outstanding (mm of shares) 60.6 (6) 45.7 (7) CAD Per Share $ 1.20 $ 1.31
  • 27.
    Schedule 2: Explanation andReconciliation of CAD 27 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation on Non-GAAP EPS (2) See footnote (1) on Schedule 1 on Explanation and Reconciliation on Non-GAAP EPS (3) Includes allowance for funds used during construction (AFUDC) on equity of $0.9 million and $(0.3) million for the three months ended December 31, 2015 and 2014, respectively, and $3.0 million and $1.1 million for the years ended December 31, 2015 and 2014, respectively. (4) Consists of 43.6 million outstanding common shares of InfraREIT and 17.0 million outstanding OP Units held by the limited partners of the Operating Partnership as of December 31, 2015. (5) Consists of 35.1 million outstanding shares of InfraREIT and 10.6 million outstanding OP Units held by the limited partners of the Operating Partnership as of December 31, 2014. (6) Consists of 43.6 million outstanding common shares of InfraREIT and 17.0 million outstanding OP Units held by the limited partners of the Operating Partnership as of December 31, 2015. (7) Consists of 35.1 million outstanding shares of InfraREIT and 10.6 million outstanding OP Units held by the limited partners of the Operating Partnership as of December 31, 2014.
  • 28.
    Schedule 3: Explanation andReconciliation of EBITDA and Adjusted EBITDA Q4 2015 vs. Q4 2014 28 EBITDA and Adjusted EBITDA InfraREIT defines EBITDA as net income (loss) before interest expense, net; income tax expense; depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted in a manner the Company believes is appropriate to show its core operational performance, including: (a) adding back the non-cash reorganization structuring fee, (b) an adjustment for the difference between the amount of percentage rent payments that the Company expects to receive with respect to the applicable period and the amount of percentage rent the Company recognizes under GAAP during the period, (c) an adjustment for the difference between the amount of base rent payments that the Company receives with respect to the applicable period and the amount of straight-line base rent recognized under GAAP, (d) adding back the reorganization expense related to the Company’s IPO and related reorganization transactions and (e) adjusting for other income (expense), net. The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the three months ended December 31, 2015 and 2014: $ thousands Three Months Ended December 31, 2015 2014 Net income $ 27,531 $ 3,760 Interest expense, net 7,470 8,377 Income tax expense 374 297 Depreciation 10,773 9,255 EBITDA 46,148 21,689 Non-cash reorganization structuring fee — — Percentage rent adjustment (1) (9,768) (8,899) Base rent adjustment (2) 1,069 1,767 Reorganization expenses — 921 Other (income) expense, net (3) (868) 17,569 Adjusted EBITDA $ 36,581 $ 33,047 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (2) See footnote (2) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (3) See footnote (3) on Schedule 2 on Explanation and Reconciliation of CAD
  • 29.
    Schedule 3: Explanation andReconciliation of EBITDA and Adjusted EBITDA Full Year 2015 vs. Full Year 2014 29 EBITDA and Adjusted EBITDA The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the years ended December 31, 2015 and 2014: $ thousands Years Ended December 31, 2015 2014 Net income $ 19,931 $ 29,780 Interest expense, net 28,554 32,741 Income tax expense 949 953 Depreciation 40,211 35,080 EBITDA 89,645 98,554 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment (1) — — Base rent adjustment (2) 6,538 6,688 Reorganization expenses 333 1,729 Other (income) expense, net (3) (3,048) 17,236 Adjusted EBITDA $ 138,365 $ 124,207 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (2) See footnote (2) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (3) See footnote (3) on Schedule 2 on Explanation and Reconciliation of CAD
  • 30.
    Schedule 4: Explanation ofFFO and AFFO 30 FFO and AFFO The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (computed in accordance with GAAP), excluding gains and losses from sales of property (net) and impairments of depreciated real estate, plus real estate depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Applying the NAREIT definition to the Company’s consolidated financial statements, which is the basis for the FFO and the reconciliations below, results in FFO representing net (loss) income before depreciation, impairment of assets and gain (loss) on sale of assets. FFO does not represent cash generated from operations as defined by GAAP and it is not indicative of cash available to fund all cash needs, including distributions. AFFO is defined as FFO adjusted in a manner the Company believes is appropriate to show its core operational performance, including: (a) adding back the non-cash reorganization structuring fee, (b) an adjustment for the difference between the amount of percentage rent payments that the Company expects to receive with respect to the applicable period and the amount of percentage rent the Company recognizes under GAAP during the period, (c) an adjustment for the difference between the amount of base rent payments that the Company receives with respect to the applicable period and the amount of straight-line base rent recognized under GAAP, (d) adding back the reorganization expense related to the Company’s IPO and related reorganization transactions and (e) adjusting for other income (expense), net.
  • 31.
    Schedule 4: Reconciliation ofFFO and AFFO Q4 2015 vs. Q4 2014 31 FFO and AFFO The following table sets forth a reconciliation of net income to FFO and AFFO for the three months ended December 31, 2015 and 2014: $ thousands Three Months Ended December 31, 2015 2014 Net income $ 27,531 $ 3,760 Depreciation 10,773 9,255 FFO 38,304 13,015 Non-cash reorganization structuring fee — — Percentage rent adjustment (1) (9,768) (8,899) Base rent adjustment (2) 1,069 1,767 Reorganization expenses — 921 Other (income) expense, net (3) (868) 17,569 AFFO $ 28,737 $ 24,373 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (2) See footnote (2) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (3) See footnote (3) on Schedule 2 on Explanation and Reconciliation of CAD
  • 32.
    Schedule 4: Reconciliation ofFFO and AFFO Full Year 2015 vs. Full Year 2014 32 FFO and AFFO The following table sets forth a reconciliation of net income to FFO and AFFO for the years ended December 31, 2015 and 2014: $ thousands Years Ended December 31, 2015 2014 Net income $ 19,931 $ 29,780 Depreciation 40,211 35,080 FFO 60,142 64,860 Non-cash reorganization structuring fee 44,897 — Percentage rent adjustment (1) — — Base rent adjustment (2) 6,538 6,688 Reorganization expenses 333 1,729 Other (income) expense, net (3) (3,048) 17,236 AFFO $ 108,862 $ 90,513 (1) See footnote (1) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (2) See footnote (2) on Schedule 1 on Explanation and Reconciliation of Non-GAAP EPS (3) See footnote (3) on Schedule 2 on Explanation and Reconciliation of CAD
  • 33.
  • 34.
    Attractive Asset Profile Transmission ►~75% of our rate base is transmission ► ~665 miles of transmission lines ► Transmission Operations Center ► Railroad DC Tie with Mexico (300 MW) Distribution ► ~25% of our rate base is distribution ► ~12,300 miles of distribution lines ► ~53,000 electric delivery points As of December 31, 2015 34
  • 35.
    Disciplined, Multifaceted Pursuitof Growth 35 Footprint Projects (Funded by InfraREIT) Hunt Development team members are experienced T&D planners ROFO Projects Growth Strategy Growth Drivers • Population and economic growth across Texas • Energy-driven economic expansion • Generator interconnections to Panhandle Transmission assets • Specific Hunt T&D projects under construction or in development • Cross Valley transmission line and Golden Spread interconnection have approved CCNs and are under construction • Value enhancing M&A Transactions that build on: • Hunt’s industry relationships and reputation • Expertise with REIT structure • Future T&D projects developed and constructed by Hunt • Primarily focused on Texas and the Southwest Other Hunt Development Projects Acquire other T&D assets from third parties
  • 36.
    SDTS (2) Structure Mechanics 36 SDTS owns our T&D assets and leases them to Sharyland  Sharyland collects rate- regulated revenue from other utilities and retail electric providers  Sharyland makes regular lease payments to SDTS  InfraREIT pays dividends to stockholders 1 2 3 4 Shareholders InfraREIT (1) Hunt Family Sharyland Utilities Customers T&D Services Cash Lease Rent 1 2 3 4  Ownership (3)  Hunt Manager  Hunt Developer 100% Interest (1) Represents InfraREIT, Inc., InfraREIT Partners, LP (Operating Partnership) and Transmission and Distribution Company, L.L.C. (TDC) (2) Represents Sharyland Distribution & Transmission Services, L.L.C. (SDTS) (3) Represents Hunt Transmission Services, L.L.C. (limited partner of the Operating Partnership and shareholder of InfraREIT) Conducted business as a REIT since 2010 Hunt Consolidated, Inc.
  • 37.
    Board Structure Management Related Party Transactions Management Agreement 9 total members, 6 independent  CEO, CFO and General Counsel are officers of InfraREIT and Hunt Manager  Require majority approval by the independent board members (i.e. ROFO Project acquisitions)  Responsible for the day-to-day business and legal activities of InfraREIT  Annual base fee equal to $14.0 million for April 1, 2016 through March 31, 2017 representing 1.50% of total book equity as of year end 2015  Capped at $30 million per year  Incentive fee equal to 20% of quarterly dividends per share in excess of the threshold distribution amount payable quarterly  2016 dividend per share: $0.25  Threshold dividend: $0.27 Governance and Management 37
  • 38.
    Lease Mechanics 38 Lease Objectives InfraREIT ►Rent payments intended to provide InfraREIT with approximately 97% of the projected regulated return on rate base attributable to InfraREIT’s assets Sharyland ► Sharyland recovers operating and maintenance (O&M) costs and a portion of the return on InfraREIT’s rate base Lease Terms ► InfraREIT is obligated to fund capex for Footprint Projects ► New assets are added to leases through supplements ► Lease renewals apply the same methodology but are updated for new rate case information ► Approximately 80% – 90% of rent is a fixed amount – paid monthly ► Approximately 10% – 20% of rent is variable based on a percentage of Sharyland’s gross revenue less adjustments – paid quarterly
  • 39.
  • 40.
    Non-GAAP EPS Q4 2015vs. Q4 2014 40 Non-GAAP EPS per diluted share was lower in Q4 2015 than Q4 2014 by 3%, due to increased lease revenues offset by higher weighted average common shares outstanding during Q4 2015 compared to Q4 2014 $ thousands, except share amounts Q4 2015 Amount Per Share Q4 2014 Amount Per Share Net income attributable to InfraREIT, Inc. $ 19,806 $ 0.45 $ 2,924 $ 0.08 Net income attributable to noncontrolling interest 7,725 0.45 836 0.08 Net income 27,531 0.45 3,760 0.08 Non-cash reorganization structuring fee — — — — Reorganization expenses — — 921 0.02 Contingent consideration — — 17,247 0.38 Percentage rent adjustment (9,768) (0.16) (8,899) (0.19) Base rent adjustment 1,069 0.02 1,767 0.04 Non-GAAP net income $ 18,832 $ 0.31 $ 14,796 $ 0.32
  • 41.
    Cash Available ForDistribution Q4 2015 vs. Q4 2014 41 CAD grew by 17% over Q4 2014, reflecting growth in lease revenue $ thousands, except share amounts Q4 2015 Q4 2014 Increase/(Decrease) $ % Net income $ 27,531 $ 3,760 Depreciation 10,773 9,255 Non-cash reorganization structuring fee — — Percentage rent adjustment (9,768) (8,899) Base rent adjustment 1,069 1,767 Amortization of deferred financing costs 805 1,190 Reorganization expenses — 921 Non-cash equity compensation 185 — Other (income) expense, net (868) 17,569 Capital expenditures to maintain net assets (10,773) (9,255) Cash Available For Distribution (CAD) $ 18,954 $ 16,308 $ 2,646 17% Shares outstanding (as of 12/31/2015) 60,594 CAD Per Share $ 0.31
  • 42.
    Adjusted EBITDA Q4 2015vs. Q4 2014 42 Q4 2015 adjusted EBITDA exceeded Q4 2014 adjusted EBITDA by 11%, driven by growth in lease revenue $ thousands Q4 2015 Q4 2014 Increase/(Decrease) $ % Lease revenue $ 50,921 $ 45,044 G&A expense (5,641) (5,786) Other income (expense), net 868 (17,569) EBITDA 46,148 21,689 Non-cash reorganization structuring fee — — Percentage rent adjustment (9,768) (8,899) Base rent adjustment 1,069 1,767 Reorganization expenses — 921 Other (income) expense, net (868) 17,569 Adjusted EBITDA $ 36,581 $ 33,047 $ 3,534 11%