UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

FORM 10-K



 

 
(Mark One)     
x   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2014

OR

 
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number: 001-32384



 

Macquarie Infrastructure Company LLC

(Exact Name of Registrant as Specified in Its Charter)



 

 
Delaware   43-2052503
(Jurisdiction of Incorporation
or Organization)
  (IRS Employer
Identification No.)

125 West 55th Street
New York, New York 10019

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (212) 231-1000



 

Securities registered pursuant to Section 12(b) of the Act:

 
Title of Each Class:   Name of Exchange on Which Registered:
Limited Liability Company Interests of
Macquarie Infrastructure Company LLC (“LLC interests”)
  New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None



 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

     
Large Accelerated Filer x   Accelerated Filer o   Non-Accelerated Filer o   Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x

The aggregate market value of the outstanding shares of stock held by non-affiliates of Macquarie Infrastructure Company LLC at June 30, 2014 was $3,289,655,130 based on the closing price on the New York Stock Exchange on that date. This calculation does not reflect a determination that persons are affiliates for any other purposes.

There were 71,231,631 shares of stock without par value outstanding at February 18, 2015.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to Macquarie Infrastructure Company LLC’s Annual Meeting of Shareholders for fiscal year ended December 31, 2014, to be held May 20, 2015 is incorporated by reference in Part III to the extent described therein.

 

 


 
 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC
 
TABLE OF CONTENTS

 
  Page
PART I
 

Item 1.

Business

    3  

Item 1A.

Risk Factors

    21  

Item 1B.

Unresolved Staff Comments

    43  

Item 2.

Properties

    43  

Item 3.

Legal Proceedings

    44  

Item 4.

Mine Safety Disclosures

    44  
PART II
 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

    45  

Item 6.

Selected Financial Data

    47  

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

    50  

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

    91  

Item 8.

Financial Statements and Supplementary Data

    93  

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

    149  

Item 9A.

Controls and Procedures

    149  

Item 9B.

Other Information

    151  
PART III
 

Item 10.

Directors, Executive Officers and Corporate Governance

    151  

Item 11.

Executive Compensation

    151  

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

    152  

Item 13.

Certain Relationships and Related Transactions and Director Independence

    152  

Item 14.

Principal Accountant Fees and Services

    152  
PART IV
 

Item 15.

Exhibits and Financial Statement Schedules

    153  

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FORWARD-LOOKING STATEMENTS

We have included or incorporated by reference into this report, and from time to time may make in our public filings, press releases or other public statements, certain statements that may constitute forward-looking statements. These include without limitation those under “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A. In addition, our management may make forward-looking statements to analysts, investors, representatives of the media and others. These forward-looking statements are not historical facts and represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. We may, in some cases, use words such as “project”, “believe”, “anticipate”, “plan”, “expect”, “estimate”, “intend”, “should”, “would”, “could”, “potentially”, “may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results to differ materially from those contained in any forward-looking statements made by us. Any such forward-looking statements are qualified by reference to the following cautionary statements.

Forward-looking statements in this report are subject to a number of risks and uncertainties, some of which are beyond our control, including, among other things:

changes in general economic, business or demographic conditions or trends in the United States or changes in the political environment, level of travel or construction or transportation costs, including changes in interest rates and price levels;
the ability to service, comply with the terms of and refinance at maturity the substantial indebtedness;
disruptions or other extraordinary or force majeure events and the ability to insure against losses resulting from such events or disruptions;
the regulatory environment, including U.S. energy policy, and the ability to estimate compliance costs, comply with any changes thereto, rates implemented by regulators, and the relationships and rights under and contracts with governmental agencies and authorities;
sudden or extreme volatility in commodity prices;
changes in U.S. domestic demand for chemical, petroleum and vegetable and animal oil products, the relative availability of tank storage capacity and the extent to which such products are imported or exported;
changes in patterns of commercial or general aviation (GA) air travel, including variations in customer demand;
technological innovations leading to a change in energy, production, distribution and consumption patterns;
fluctuations in fuel costs, or the costs of supplies upon which the gas processing and distribution business is dependent, and the ability to recover increases in these costs from customers;
the ability to make alternate arrangements to account for any disruptions or shutdowns that may affect suppliers’ facilities or the operation of the barges upon which the gas processing and distribution business is dependent;
the ability to make, finance and integrate acquisitions and the quality of financial information and systems of acquired entities;
the ability to implement operating and internal growth strategies;
the competitive environment for attractive acquisition opportunities;
environmental risks, including the impact of climate change and weather conditions;

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the impact of weather events including potentially hurricanes, tornadoes and/or seasonal extremes;
changes in electricity or other energy costs, including natural gas pricing;
unplanned outage and/or failures of technical and mechanical systems;
payment of performance fees to the Manager, if any, that could reduce distributable cash if paid in cash or could dilute existing shareholders if satisfied with the issuance of shares;
changes in the current treatment of qualified dividend income and long-term capital gains under current U.S. federal income tax law and the qualification of income and gains for such treatment;
work interruptions or other labor stoppages;
the inability of principal off-takers in the contracted power businesses to take and/or pay for the energy supplied;
the Manager’s affiliation with the Macquarie Group or equity market sentiment, which may affect the market price of LLC interests, or shares;
the limited ability to remove the Manager for underperformance and the Manager’s right to resign;
unanticipated or unusual behavior of municipalities and states brought about by financial distress;
the extent to which federal spending cuts, including potentially those resulting from sequestration, reduce the U.S. military presence on Hawaii or flight activity at airports on which Atlantic Aviation operates; and
any event or occurrence that may limit the ability to pay or increase a dividend.

Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. A description of risks that could cause our actual results to differ appears under the caption “Risk Factors” in Part I, Item 1A and elsewhere in this report. It is not possible to predict or identify all risk factors and you should not consider that description to be a complete discussion of all potential risks or uncertainties that could cause our actual results to differ.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this report may not occur. These forward-looking statements are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should, however, consult further disclosures we may make in future filings with the Securities and Exchange Commission, or the SEC.

Macquarie Infrastructure Company LLC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and its obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of Macquarie Infrastructure Company LLC.

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PART I

ITEM 1. BUSINESS

Macquarie Infrastructure Company LLC, a Delaware limited liability company, was formed on April 13, 2004. Except as otherwise specified, “Macquarie Infrastructure Company”, “MIC”, “we”, “us”, and “our” refer to the Company and its subsidiaries together from June 25, 2007 and, prior to that date, to the Trust, the Company and its subsidiaries. Macquarie Infrastructure Management (USA) Inc., which we refer to as our Manager, is part of the Macquarie Group, comprised of Macquarie Group Limited and its subsidiaries and affiliates worldwide.

Strategy

Our corporate strategy is to own a diversified portfolio of infrastructure businesses and grow shareholder dividends. We intend to achieve this by:

driving performance improvement in our existing businesses by:
providing the optimal service while maintaining the highest safety, environmental and governance standards;
increasing the top-line through effective optimization of price, volume and margin;
effectively managing expenses within the businesses and realizing synergies between businesses; and
optimizing capital structure and tax planning; and
where prudent, deploying incremental capital to:
grow our existing businesses; and
acquire additional businesses.

General

We own, operate and invest in a diversified group of infrastructure businesses that provide basic services to businesses and individuals primarily in the U.S. The businesses we own and operate include:

International-Matex Tank Terminals or “IMTT”:  a bulk liquid terminals business which provides bulk liquid storage, handling and other services at ten marine terminals in the United States and two in Canada and is one of the larger participants in this industry in the U.S., based on storage capacity. On July 16, 2014, we completed the acquisition of the remaining 50% interest that we did not previously own;
Atlantic Aviation:  a network of aviation fixed-base operations (FBOs) that provide fuel, terminal, aircraft hangaring and other services primarily to owners and operators of GA aircraft at 69 airports in the U.S. The network is the one of the largest in the U.S. air transportation industry;
Contracted Power and Energy (“CP&E”) Segment:  controlling interests in five contracted solar power generation facilities and two contracted wind power generation facilities in the U.S. On August 21, 2014, the Company completed the sale of its controlling interest in the district energy business; and
Hawaii Gas:  a gas energy company processing and distributing gas and providing related services in Hawaii.

We have elected to treat MIC as a corporation for federal tax purposes. As a result, all investor tax reporting regarding dividends and/or return of capital will be provided on Form 1099.

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Industry

Infrastructure businesses, in general, are defined by a combination of the following characteristics:

ownership of long-lived, high-value physical assets that are difficult to replicate or substitute around;
opportunity to deploy growth capital within those businesses;
broadly consistent, relatively inelastic demand for their services;
scalability, such that relatively small amounts of growth can generate significant increases in earnings before interest, taxes, depreciation and amortization, or EBITDA;
the provision of basic, often essential services;
generally predictable maintenance capital expenditure requirements; and
preferred competitive positions, largely due to high barriers to entry, including:
high initial development and construction costs;
difficulty in obtaining suitable land on which to operate;
long-term often exclusive concessions or leases and customer contracts; and
lack of immediate cost-effective alternatives to customers in the foreseeable future.

Different infrastructure businesses exhibit these above characteristics to different degrees at different times. For instance, GDP correlated businesses, like Atlantic Aviation, may exhibit more volatility during periods of economic downturn than businesses with more contracted revenue streams. While not every business that MIC owns will meet all of the general criteria described above, MIC seeks to own a diversified portfolio of businesses that possesses a balance of the characteristics described above.

In addition to the benefits associated with these characteristics, the revenues generated by most of our infrastructure businesses generally can be expected to keep pace with historically normal rates of inflation. The price escalators built into many customer contracts, and the inflation and cost pass-through adjustments typically a part of pricing terms or provided for by the regulatory process to regulated businesses serve to insulate infrastructure businesses to a significant degree from the negative effects of inflation and commodity price risk. We sometimes employ hedging contracts in connection with our businesses’ floating rate debt and limited commodity price exposure.

Our existing businesses can be categorized as follows:

those with revenues derived from contracts, such as:
at IMTT and the unregulated business at Hawaii Gas (3 – 5 years); and
in our CP&E segment (20 – 25 years);
those with regulated revenue such as the utility operations of Hawaii Gas; and
those with long-dated concessions, such as Atlantic Aviation, where revenue is derived on a per-use basis.

Our Manager

MIC is managed externally by Macquarie Infrastructure Management (USA) Inc. (“MIMUSA” or “Manager”). MIMUSA is a member of the Macquarie Group, a diversified international provider of financial, advisory and investment services. The Macquarie Group is headquartered in Sydney, Australia and is a global leader in management of infrastructure investment vehicles on behalf of third-party investors and advising on the acquisition, disposition and financing of infrastructure assets.

We have entered into a management services agreement with MIMUSA. MIMUSA is responsible for our day-to-day operations and affairs and oversees the management teams of our operating businesses. MIC does not have any employees at MIC Corporate, or the “Holding Company”, rather MIMUSA has assigned, or seconded, to the Company two of its employees to serve as chief executive officer and chief financial officer

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of the Company and seconds or makes other personnel available as required. The services performed for the Company by the Manager are provided at our Manager’s expense, and include the compensation of our seconded personnel.

We pay MIMUSA a monthly base management fee based primarily on our market capitalization. Our Manager can also earn a performance fee if the quarterly total return to shareholders (capital appreciation plus dividends) exceeds the quarterly total return of a U.S. utilities index. For MIMUSA to earn the performance fee, MIC’s quarterly total returns must be positive and in excess of any prior underperformance. If payable, the performance fee is equal to 20% of the difference between the benchmark return and the return for our shareholders. The Manager’s election to invest its fees in shares can only change during an 18-trading day window following the Company’s earnings release. Any change would apply to fees paid thereafter. Accordingly, shareholders would have notice of the Manager’s intent to receive fees in cash rather than reinvest before the change was effective.

Our Businesses

Use of Non-GAAP measures

As a result of our acquisition in July of 2014 of the 50% of IMTT that we did not previously own, we generally intend to discuss the performance of our businesses on a consolidated basis in this and subsequent periods. However, where appropriate, we will continue to rely on proportionately combined metrics. Given the nature of the businesses we own and our varied ownership levels in these businesses, management believes that GAAP measures such as net income and cash from operating activities do not fully reflect all of the items that our management considers in assessing the amount of cash generated by our ownership interest in our businesses.

We note that proportionately combined metrics used by us may be calculated in a different manner by other companies, which may limit their usefulness as a comparative measure. Therefore, our proportionately combined metrics should be used as a supplement to, and not in lieu of, our financial results reported under GAAP.

Our proportionately combined financial measures are those attributable to MIC’s ownership interest in each of our operating businesses and MIC Corporate. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Summary of Our Proportionately Combined Results” in Part II, Item 7, for our proportionately combined share of gross profit, EBITDA excluding non-cash items and Free Cash Flow for the years ended December 31, 2014 and 2013. The gross profit, EBITDA excluding non-cash items and Free Cash Flow are derived from the “Results of Operations” of our businesses described below.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in Part II, Item 7, for further information for each of our businesses and Corporate and Other segment to see a reconciliation of EBITDA excluding non-cash to net income (loss), its closest comparable GAAP measure, and to see reconciliation of Free Cash Flow to cash provided by (used in) operating activities, its closest comparable GAAP measure.

IMTT

Business Overview

We owned 50% of IMTT through July 15, 2014. On July 16, 2014, we completed the acquisition of the remaining 50% interest that we did not previously own. IMTT stores or handles petroleum products, various chemicals, renewable fuels and vegetable and animal oils (referred to as “liquid commodities”). IMTT is one of the larger independent providers of bulk liquid terminal services in the U.S., based on capacity. IMTT also owns OMI Environmental Solutions, or OMI (formerly Oil Mop), an environmental emergency response, industrial services, waste transportation and disposal business.

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IMTT — (continued)

The table below summarizes the breakdown of revenue generated by IMTT for the year ended December 31, 2014:

     
Petroleum   Chemical   Renewable/Vegetable & Animal Oil   Other
57%     21 %      6 %      16 %(1) 

(1) Includes 11% of revenues from spill response activity.

Summary financial information for 100% of IMTT is as follows ($ in millions):

     
  As of, and for the
Year Ended, December 31,
     2014   2013   2012
Revenue(1)   $ 567.5     $ 513.9     $ 474.4  
EBITDA excluding non-cash items(2)(3)     285.2       268.5       231.7  
Total assets(4)     4,057.9       1,378.9       1,323.9  

(1) Includes $255.9 million in our consolidated revenues, subsequent to July 16, 2014, the date of the IMTT Acquisition.
(2) See “Business — Our Businesses” in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in Part II, Item 7, for further information and a reconciliation of net income (loss) to EBITDA excluding non-cash items.
(3) Includes $127.8 million in our consolidated EBITDA excluding non-cash items, subsequent to July 16, 2014, the date of the IMTT Acquisition.
(4) Increase in total assets at December 31, 2014 represents the fair value of assets acquired in conjunction with the IMTT Acquisition. See Note 4, “Acquisitions and Disposition”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K.

Industry Overview

Bulk liquid terminals provide an important link in the supply chain for a broad range of liquids such as crude oil (not a material product for IMTT), refined petroleum products and commodity and specialty chemicals. In addition to renting storage tanks, dock access and intra-modal transportation access, bulk liquid terminals generate revenues by offering ancillary services including product transfer (throughput), heating and blending. Pricing for storage and other services typically reflects local supply and demand as well as the specific attributes of each terminal including access to deepwater berths and connections to land-based infrastructure such as roads, pipelines and rail.

Both domestic and international factors influence demand for bulk liquid terminals in the United States. Demand for storage rises and falls according to local and regional consumption. In addition to these domestic forces, import and export activity also accounts for a material portion of the business. Shippers require storage for the staging, aggregation and/or distribution of products before and after shipment. The extent of import/export activity depends on macroeconomic trends such as currency fluctuations as well as industry-specific conditions, such as supply and demand balances in different geographic regions. Current demand for storage is also driven by fluctuations in the current and perceived future price and demand for the product being stored and the resulting temporal price arbitrage.

Sudden, sizeable and largely unforeseen fluctuations in commodity prices, similar to those experienced in the second half of 2014, can cause the bulk liquid terminals industry to enter a temporary state of flux while participants absorb and analyze the impact of the changes. The 2014 price fluctuations and the reoccurrence of a contango for some commodities gave rise to an increase in demand for storage of those commodities. Conversely, the suddenness of the change in the market caused some participants to avoid making long-term storage commitments. Over time we expect these conditions to stabilize.

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IMTT — (continued)

Potential entrants into the bulk liquid terminals business face several barriers. Strict environmental regulations, limited availability of waterfront land with the necessary access to land-based infrastructure, local community resistance to new fuel/chemical sites, and high initial investment costs limit the construction of new bulk liquid terminal facilities. These deterrents are most formidable around waterways near major urban centers. As a consequence, new tanks are generally built where existing docks, pipelines and other infrastructure can support them, resulting in higher returns on invested capital. However, restrictions on land use, difficulties in securing environmental permits, and the potential for operational bottlenecks due to infrastructure constraints may limit the ability of existing terminals to expand the storage capacity of their facilities.

Strategy

IMTT’s strategy has five primary components:

1. to continuously drive improvements in safety;
2. to drive growth in revenue and cash flows by attracting and retaining customers who place a premium on flexibility, speed and efficiency in bulk liquid terminals;
3. to deploy growth capital to develop existing locations, especially those on the Lower Mississippi River, by constructing new tanks, docks, rail offloading capacity, pipelines or other logistics infrastructure when such construction is supported by customer demand and the returns are attractive;
4. to improve business processes and systems with particular focus on cost and risk reduction, control of maintenance capital expenditure and revenue optimization; and
5. to optimize IMTT’s corporate and tax structure through selective acquisitions, divestitures, and partnerships.

Locations

The following table summarizes IMTT’s facilities. This information is as of December 31, 2014 and does not include tanks used in packaging, recovery tanks, and/or other storage capacity not typically available for rent.

     
Facility   Land   Aggregate Capacity
of Storage Tanks
in Service
(Millions of Barrels)
  Percent of
Ownership
Facilities in the United States:
                          
Louisiana Terminals     Owned       20.5       100.0 % 
Bayonne Terminal     Owned       15.9       100.0 % 
Other Terminals     Owned       3.8       100.0 % 
Facilities in Canada:
                          
Quebec City, Quebec     Leased       2.0       66.7 % 
Placentia Bay, Newfoundland     Leased       3.0       20.1 % 
Total           45.2        

All facilities have marine access, road access and, except for Richmond, Virginia and Placentia Bay, Newfoundland, all sites have rail access.

Louisiana Terminals (47% of gross profit)

On the Lower Mississippi River, IMTT currently operates four terminals (St. Rose, Gretna, Avondale and Geismar). With combined storage capacity of 20.5 million barrels, the four sites give IMTT substantial market share in the storage of black oil, bulk liquid chemicals and vegetable oils on the Lower Mississippi River.

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IMTT — (continued)

The Louisiana facilities also give IMTT a substantial presence in a key domestic transport hub. The Lower Mississippi River serves as a major transshipment point between the central United States and the rest of the world for agricultural products (such as vegetable oils) and commodity chemicals (such as methanol). The region also has substantial traffic related to the petroleum industry. Gulf Coast refiners and traders send products to other regions of the U.S. and overseas and use IMTT’s Louisiana facilities to perform some of these functions. These facilities enjoy relatively unencumbered marine and road access when compared to other, more congested waterways such as the Houston Ship Canal.

Bayonne Terminals (40% of gross profit)

Located on the Kill Van Kull between New Jersey and Staten Island, the 15.9 million barrel capacity terminal occupies an advantageous position in New York Harbor, or NYH. As the largest independent bulk liquid terminal in NYH, IMTT-Bayonne has substantial market share for third-party storage of refined petroleum products and chemicals.

NYH serves as the main petroleum trading hub in the northeast United States and a physical delivery point for the gasoline and heating oil futures contracts traded on New York Mercantile Exchange (NYMEX). In addition to waterborne shipments, products reach NYH through petroleum product pipelines from the U.S. Gulf region and elsewhere. NYH also serves as the starting point for refined product pipelines linked to inland markets and as a key port for refined petroleum product exports and imports. IMTT-Bayonne has connections to the Colonial, Buckeye and Harbor refined petroleum product pipelines as well as rail and road connections and substantial blending capabilities. As a result, IMTT-Bayonne provides its customers with logistical flexibility.

IMTT-Bayonne has the capability to quickly load and unload the largest bulk liquid transport ships entering NYH. The U.S. Army Corp of Engineers has dredged the Kill Van Kull channel passing the IMTT-Bayonne docks to 50 feet (to date, IMTT has dredged two of its docks to 45.5 feet with a plan to dredge to 47 feet in 2015). Most competitors in NYH have facilities located on the southern portion of the Arthur Kill (water depth of approximately 35 feet) and force large ships to transfer a portion of their cargoes to barges (a process known as lightering) before docking. This technique increases the cost of loading and unloading.

Competition

The competitive environment in which IMTT operates varies by terminal location. The principal competition for each of IMTT’s facilities comes from other bulk liquid terminals facilities located in the same regional market. Secondary competition for IMTT’s facilities comes from bulk liquid terminal facilities located in the same broad geographic region as IMTT’s terminals. For example, bulk liquid terminal facilities located on the Houston Ship Channel provide indirect competition for IMTT’s Louisiana facilities.

Independent terminal operators generally compete on the basis of the location and versatility of facilities, service and price. The services typically provided by the terminal include, among other things, the safe storage of the product at specified temperature, moisture and other conditions, as well as receipt at and delivery from the terminal, all of which must be in compliance with applicable environmental regulations. A favorably located terminal will have access to various cost-effective transportation modes, both to and from the terminal. Transportation modes typically include waterways, railroads, roadways and pipelines. A terminal operator’s ability to obtain attractive pricing is often dependent on the quality, versatility and reputation of the facilities owned by the operator.

We face significant competition from a variety of international, national and regional energy companies, including large, diversified midstream partnerships, global terminal operators and large multi-national energy companies. We believe that we are favorably positioned to compete in the industry due to the strategic location of our terminals in the Gulf Coast and NYH, our reputation, the prices we charge for our services and the connectivity, quality and versatility of our services.

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IMTT — (continued)

We believe that significant barriers to entry exist in the storage business. These barriers include significant costs and execution risk, a lengthy permitting and development cycle, financing challenges, shortage of personnel with the requisite expertise and the finite number of sites suitable for development.

Customers

IMTT provides bulk liquid terminal services primarily to vertically integrated petroleum product producers and refiners, chemical manufacturers, food processors and traders of bulk liquid petroleum, chemical and agricultural products. IMTT does not depend on a single customer, the loss of which would have a material adverse effect on IMTT.

Customer Contracts/Agreements

IMTT’s customers are primarily major oil companies, major chemical companies or traders of these commodities. Approximately 50% of IMTT’s 2014 revenue was generated by its top ten customers of which eight were companies rated as investment grade and two were not rated. Customers typically sign medium- term contracts which, among other things, provide for a fixed periodic payment (usually monthly) for access to and use of IMTT’s facilities. This payment may be expressed in terms of cents per barrel of storage capacity, a dollar amount per unit of infrastructure, or a dollar amount per month. These amounts are payable whether they use the facilities or not.

IMTT is responsible for ensuring appropriate care of products stored at its facilities and maintains adequate insurance with respect to its exposure. IMTT does not have material exposure to commodity price fluctuations because IMTT typically does not purchase or market the products that it handles. IMTT’s customers are required to retain title to products stored and have responsibility for securing insurance or self-insuring against loss.

OMI’s customers typically pay a pre-agreed rate for services provided, as and when those services are rendered. The demand for OMI’s services is dependent on a number of difficult-to-forecast events, such as oil spills. Customers of OMI are sometimes customers of IMTT terminals and IMTT is itself a customer of OMI. All transactions between IMTT and OMI are eliminated upon consolidation.

Regulation

The rates that IMTT charges for its services are not subject to regulation. However, a number of regulatory bodies oversee IMTT’s operations. IMTT must comply with numerous federal, state and local environmental, occupational health and safety, security, tax and planning statutes and regulations. These regulations require IMTT to obtain and maintain permits to operate its facilities and impose standards that govern the way IMTT operates its business. If IMTT does not comply with the relevant regulations, it could lose its operating permits and/or incur fines and increased liability. As a result, IMTT has developed environmental and health and safety compliance functions overseen by terminal managers at the terminal level, as well as by IMTT’s Director of Environmental, Health and Safety, Chief Operating Officer and Chief Executive Officer. While changes in environmental, health and safety regulations pose a risk to IMTT’s operations, such changes are generally phased in over time to manage the impact on the industry.

The Bayonne terminal has significant environmental remediation requirements that were partially assumed at the time of purchase from the various former owners. One former owner retained environmental remediation responsibilities for a purchased site as well as responsibility for sharing other remediation costs. Remediation efforts entail removal of the free product, groundwater control and treatment, soil treatment, repair/replacement of sewer systems, and the implementation of containment and monitoring systems. These remediation activities are expected to continue for an additional ten to twenty years. See “Legal Proceedings” in Part I, Item 3, for further discussions.

The Lemont terminal has entered into a consent order with the State of Illinois to remediate contamination at the site that pre-dated IMTT’s ownership. This remediation effort, including the implementation of extraction and monitoring wells and soil treatment, is estimated to continue for an additional ten to twenty years.

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IMTT — (continued)

Management

In connection with the IMTT Acquisition on July 16, 2014, each of the then CEO, chairman and head of government relations of IMTT, all of whom were members of the founding family, retired. The CEO of MIC has assumed the role of interim CEO and chairman of IMTT. Two individuals formerly working with MIC have been named CFO and head of financial planning and analysis, respectively, at IMTT. The former CFO of IMTT assumed the role of chief banking officer of IMTT. The day-to-day operations of IMTT’s terminals are overseen by individual terminal managers who are responsible for most aspects of the operations at their respective sites.

Employees

As of December 31, 2014, IMTT (excluding the Newfoundland terminal) had a total of 1,073 employees, of which 231 employees are unionized. We believe employee relations at IMTT are good.

Atlantic Aviation

Business Overview

Atlantic Aviation operates FBOs at 69 airports in the United States. Atlantic Aviation’s FBOs provide fueling and fuel-related services, aircraft parking and hangar services to owners/operators of jet aircraft, primarily to the GA sector of the air transportation industry, but also to commercial, military, freight and government aviation customers.

Summary financial information for Atlantic Aviation is as follows ($ in millions):

     
  As of, and for the
Year Ended, December 31,
     2014   2013   2012
Revenue   $ 779.3     $ 725.5     $ 719.9  
EBITDA excluding non-cash items(1)     167.9       144.8       130.8  
Total assets     1,537.4       1,369.5       1,311.4  

(1) See “Business — Our Businesses” in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in Part II, Item 7, for further information and a reconciliation of net income (loss) to EBITDA excluding non-cash items.

Industry Overview

FBOs primarily service the GA segment of the air transportation industry. GA includes corporate and leisure flying and does not include commercial air carriers or military operations. Local airport authorities, the owners of the airport properties, grant FBO operators the right to provide fueling and other services pursuant to long-term ground leases. Fueling services provide the majority of an FBO’s revenue and gross profit.

FBOs generally operate in environments with high barriers to entry. Airports often have limited physical space for additional FBOs. Airport authorities generally do not have an incentive to add additional FBOs unless there is a significant demand for additional services. Government approvals and design and construction of a new FBO can also take significant time and require significant capital expenditures. Furthermore, airports typically impose minimum standards with respect to the experience, capital investment and breadth of services provided by the FBO.

Demand for FBO services is driven by the level of GA flight activity. Atlantic Aviation measures GA activity level by the number of take-offs and landings in a given period. GA business jet take-offs and landings increased by 3.6% in 2014 compared with 2013 according to flight data reported by the Federal Aviation Administration, or “FAA.” GA business jet take-off and landings at locations operated by Atlantic Aviation, which represent approximately 24% of total business jet take-offs and landings, increased by 3.9% for the same period. The business also believes GA flight activity will continue to expand along with increased economic activity in the U.S.

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Atlantic Aviation — (continued)

Strategy

Atlantic Aviation is pursuing a strategy that has five principal components. These are:

1. to make Atlantic Aviation the preferred FBO provider at all of the airports at which it operates by providing the best service and safety in the industry;
2. to aggressively manage the business so as to optimize its operating expenses;
3. to grow the business by leveraging the size of the Atlantic Aviation network and its information technology capabilities to identify marketing and cross-selling opportunities;
4. to effectively deploy capital in equipment and leasehold improvements; and
5. to optimize the portfolio of FBOs through acquisitions, divestitures and lease extensions.

Operations

The business has high-quality facilities and focuses on attracting customers who desire a high level of personalized service. Fueling and fuel-related services generated 64% of its gross profit in 2014. Other services, including de-icing, aircraft parking, hangar rental and catering, provided the balance. Fuel is stored in fuel tank farms and each FBO operates refueling vehicles owned or leased by the FBO to move fuel from the tank farms to the aircraft being serviced. The FBO either owns or has access to the fuel storage tanks to support its fueling activities. At some of Atlantic Aviation’s locations, services are also provided to commercial airlines and the military. Services provided to the airlines may include refueling from the airline’s own fuel supplies, de-icing and/or ground and ramp handling services.

Atlantic Aviation buys fuel at a wholesale price and sells fuel to customers either at a contracted price, or at a price negotiated at the point of purchase. While wholesale fuel costs can be volatile, Atlantic Aviation generally passes fuel cost changes through to customers and attempts to maintain and, when possible, increase its dollar-based margin per gallon. Atlantic Aviation also fuels aircraft with fuel owned by third parties and charges customers a fee for this service. The business has minimal exposure to commodity price risk as it generally carries a limited inventory of jet fuel on its books.

Atlantic Aviation is focused on managing costs effectively and continuously evaluates opportunities to reduce expenses. Such opportunities may include business reengineering, more efficient purchasing, partnering with service providers and/or capturing synergies in acquisitions.

Locations

Atlantic Aviation’s FBOs operate pursuant to long-term leases from airport authorities or local government agencies. The business and its predecessors have a strong history of successfully renewing leases and have held some leases for almost 50 years.

Atlantic Aviation’s EBITDA-weighted average remaining lease length (including extension options) was 19.4 years at December 31, 2013 and 18.8 years at December 31, 2014. The leases at seven of Atlantic Aviation’s FBOs, collectively accounting for 11.2% of Atlantic Aviation’s gross profit, will expire within the next five years. Amortizable intangibles with a definite life pertaining to Atlantic Aviation’s leasehold interest in FBOs may be amortized over a period of time longer than the remaining term of the underlying leasehold interest. To the extent that a lease with an unamortized intangible was not renewed at expiration or an FBO was disposed of prior to full amortization of the intangible occurring, this could potentially trigger a non-cash impairment loss. No individual FBO generates more than 10% of the gross profit of the business at December 31, 2014. Atlantic Aviation does not depend on a single customer, the loss of which would have a material adverse effect on the business.

The airport authorities have certain termination rights in each of Atlantic Aviation’s leases. Standard terms allow for termination if Atlantic Aviation defaults on the terms and conditions of the lease, abandons the property or becomes insolvent or bankrupt. Most of the leases allow for termination if liens are filed against the property. Fewer than ten leases may be terminated for convenience or other similar reasons. In these cases, generally, there are compensation agreements based on amortization schedules or obligations of the authority to make best efforts to relocate the FBO.

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Atlantic Aviation — (continued)

Atlantic Aviation periodically evaluates its portfolio of FBOs and may conclude that some of its sites do not have sufficient scale or do not serve a market with sufficiently strong growth prospects to warrant continued operations at these locations in which case it may elect to sell the site or not renew the lease upon maturity. From 2007 to 2014, Atlantic Aviation exited 12 locations.

In April of 2014, Atlantic Aviation completed the acquisitions of six FBOs (five in Florida and one in Colorado) and one new hangar at one of the six airports on which these FBOs operate. In January of 2015, the business completed the acquisition of another FBO in Florida.

Marketing

Atlantic Aviation has a number of marketing programs, each utilizing an internally-developed point-of-sale system that tracks GA flight movements. One program supports flight tracking and provides customer relationship management data that facilitates up-selling of fuel and optimization of revenue per customer.

Atlantic Aviation also maintains a loyalty program for pilots known as “Atlantic Awards” that provides an incentive to purchase fuel from Atlantic Aviation. These awards are recorded as a reduction in revenue in Atlantic Aviation’s consolidated financial statements.

Competition

Atlantic Aviation directly competes with other FBO operators at approximately half of its locations. The FBOs compete on the basis of location of the facility relative to runways and street access, service, safety, value-added features, reliability and price. Each FBO also faces competitive pressure from the fact that aircraft may take on sufficient fuel at one location and not need to refuel at a specific destination. FBO operators also face indirect competition from facilities located at nearby airports.

Atlantic Aviation’s main competitors are Signature Flight Support, Landmark Aviation and Million Air. Other than Signature, these competitors are privately owned. To our knowledge, other than the competitors listed, no other competitor operated more than 20 FBOs in the United States at December 31, 2014.

Regulation

The aviation industry is overseen by a number of regulatory bodies, but its primary regulator is the FAA. The business is also regulated by the local airport authorities through lease contracts with those authorities. The business must comply with federal, state and local environmental statutes and regulations associated in part with the operation of underground fuel storage tanks. These requirements include, among other things, tank and pipe testing for tightness, soil sampling for evidence of leaking and remediation of detected leaks and spills.

Atlantic Aviation’s FBOs are subject to regular inspection by federal and local environmental agencies and local fire and airline quality control departments. The business does not expect that compliance and related remediation work, if any, will have a material negative impact on earnings or the competitive position of Atlantic Aviation. The business has not received notice requiring it to cease operations at any location or of any abatement proceeding by any government agency as a result of failure to comply with applicable environmental laws and regulations.

Employees and Management

As of December 31, 2014, the business employed 1,830 people. Approximately 188 employees are subject to collective bargaining agreements. We believe relations with both unionized and non-union employees at Atlantic Aviation are good.

The day-to-day operations of Atlantic Aviation are managed by individual site managers who are responsible for most aspects of the operations at their site. Local managers within a geographic region are supervised by one of four regional managers covering the United States. Atlantic Aviation’s operations are overseen by senior personnel with significant experience in the aviation industry.

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Contracted Power and Energy

Business Overview

The businesses in our CP&E segment sell energy generated by their facilities to creditworthy off-takers, typically pursuant to multi-year contracts. These contracts include either long-term power purchase agreements (“PPAs”) or tolling arrangements whereby a counterparty has contracted with the facility to deliver a specified suite of energy and related services. Throughout its existence, MIC has invested in a range of CP&E facilities including in a district energy business that was one of the Company’s seed assets at its IPO in 2004. Subsequently, MIC has invested in electricity generating facilities utilizing wind turbine and solar photovoltaic technologies. MIC expects to continue to seek attractive opportunities in energy and electricity generation, including renewable and conventional technologies. MIC will seek to invest in operating facilities and those that are near construction completion.

At December 31, 2014, CP&E consisted of controlling interests in five solar power generating facilities and two wind power generating facilities. The solar power facilities have an aggregate generating capacity of 57 megawatts, or MW, with two facilities located in Arizona, two facilities located in California and one facility located in Texas. The wind power facilities have an aggregate generating capacity of 203 MW and are located in New Mexico and Idaho.

The seven solar and wind projects sell electricity under PPAs with initial terms of 20 – 25 years. The PPAs have fixed rates for each unit of electricity sold and certain of the PPAs have fixed or CPI-linked escalators. Six of the facilities are owned through tax-equity partnership structures in which we have controlling interests. From these we receive cash distributions disproportionate to our investment during the first several years of the projects’ operations and taxable income or taxable loss disproportionate to our interest thereafter. Our interest in the seventh project is an approximately 75% ordinary economic interest.

The renewable energy facilities utilize arrays of photovoltaic solar panels and wind turbine generators (often on sites spanning thousands of acres) to convert energy from sunlight and wind into electricity. The electricity is aggregated and fed directly into the respective regional power grid. These technologies generally produce predictable amounts of electricity, subject to seasonal and annual variability in insolation and wind. The business also generates Renewable Energy Certificates (“RECs”) based on the amount of electricity provided to off-takers. These RECs are either bundled with the electricity under the terms of the PPAs or sold separately to third-parties.

In 2014, we acquired controlling interests in two wind power generation facilities and divested our controlling interest in the district energy business, consistent with our strategy of optimizing the CP&E portfolio. In January of 2015, we announced that we had entered into an agreement to acquire a 512 MW gas-fired simple cycle power generation facility in Bayonne, NJ known as the Bayonne Energy Center (“BEC”). The transaction is expected to close in the first half of 2015, subject to receipt of required regulatory approvals and satisfaction of other closing conditions customary in a transaction of this size and type.

The BEC facility comprises eight natural gas turbine power generating sets (installed in 2012) based on Rolls Royce engine technology. The BEC facility is located immediately adjacent to IMTT. Power produced by BEC is transmitted via a dedicated cable beneath New York Harbor to a substation in Brooklyn, NY from which it is distributed throughout the New York City power market. The majority of the facility’s output is contracted with a creditworthy power wholesaler that has entered into tolling agreements with BEC for 62.5% of the facility’s capacity. In addition to the tolling agreement revenue and capacity payments from the grid operator, BEC generates energy margin when the facility is dispatched.

CP&E is likely to include a range of conventional and renewable energy generation and distribution technologies and may have fully or partially contracted off-take agreements. Contracts are generally with a specific off-taker, a power remarketer or a financial counterparty that provides a hedge against volatility in revenue. Excess generating capacity can be sold in the spot market. Operations and maintenance (“O&M”) as well as management and administrative services are often provided by contracted third-parties.

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Contracted Power and Energy — (continued)

The financial results discussed in this Form 10-K reflect 100% of the full-year performance of the businesses in the CP&E segment, not the contribution based on our economic interest, unless specified. Summary financial information for the CP&E segment, including the results of the district energy business through the date it was divested, is as follows ($ in millions):

     
  As of, and for the
Year Ended, December 31,
     2014   2013   2012
Revenue   $ 51.1     $ 57.8     $ 53.7  
EBITDA excluding non-cash items(1)     22.7       24.1       16.5  
Total assets     618.2       505.3       365.2  

(1) See “Business — Our Businesses” in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in Part II, Item 7, for further information and a reconciliation of net income (loss) to EBITDA excluding non-cash items.

Industry Overview

Without the power industry, no other industrial sectors could exist, making the industry one of the largest in the world in terms of the number and value of projects and facilities. In developed economies, aging infrastructure, new technologies, increased legislation regarding emissions and the use of renewable energy are driving capital spending.

The Energy Information Administration is forecasting a decline in the growth rate of demand for electricity in the U.S. At the same time, agencies including the Environmental Protection Agency are developing increasingly stringent emission and other standards for the power generating community. As aging and inefficient generating capacity is retired or replaced, opportunities for development of our CP&E segment are expected to increase.

Increased transaction activity in the electricity generating sector of the industry has been driven by a combination of existing generators optimizing their portfolios together with significant renewable power projects being developed as a result of the adoption of Renewable Portfolio Standards (“RPS”) in a number of states. RPS are regulatory mandates that aim to create demand for electricity derived from renewable sources by obligating utilities and other load-serving entities to provide at least a specific portion of their electricity sales from qualifying renewable technologies by a specified date.

Demand for both existing and greenfield assets has grown as CP&E projects offer an attractive risk-adjusted return, particularly in a low interest rate environment, which has resulted in increased competition. For example, developers have in some cases formed publicly-listed, yield-oriented entities (“YieldCos”) which have access to low-cost capital to construct projects from their own development pipeline and development pipelines for which they have rights of first offer, and to purchase projects from third-parties. Similar to our Company, the YieldCos tend to have a high distribution payout ratio to provide ongoing distributions to their shareholders.

Strategy

The strategy behind our CP&E businesses includes the following components:

1. to deliver cost-competitive electricity generation in a safe and reliable manner;
2. to optimize our portfolio of projects through acquisitions, divestitures and PPA and tolling extensions;
3. to leverage the growing scale of our portfolio to manage costs and increase efficiencies across the business; and
4. to deploy additional capital at attractive risk-adjusted returns by acquiring electricity generating projects across a range of technologies and geographies.

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Contracted Power and Energy — (continued)

Operations

O&M of the CP&E facilities is performed by qualified contracted personnel and by well-respected third-party service providers under long-term contracts for a fixed annual cost. Accordingly, a significant portion of the operating costs of these facilities are highly predictable. The business regularly evaluates which O&M services are best provided by contractors, employees or third-parties.

Customers

The primary customers of the contracted power generation business are creditworthy local electric utilities and a U.S. military base. Customers have entered into PPAs with initial terms ranging from 20 to 25 years.

Seasonality

Each CP&E facility has unique seasonality based on local market factors including weather and energy demand. The solar projects generate a disproportionate amount of their revenue in the summer months when insolation is highest, while wind energy revenues vary by season depending on the geographical location of the specific project. Other CP&E projects may also exhibit seasonality based on the respective market’s varying electricity demand.

Competition

The contracted portion of CP&E’s business is not subject to substantial direct competitive pressure due to the long-term nature of the PPAs and tolling agreements. Certain of our facilities may have incremental generating capacity which is available for sale in the spot power market. These facilities are typically located in capacity constrained geographies where there is an established demand for this additional generation. After the expiration of the PPAs or tolling agreements, our facilities could be subject to greater competition.

Employees and Management

As of December 31, 2014, we own controlling interests in each of the seven operating solar and wind power generation facilities. For the projects which are owned through a tax equity partnership structure, we serve as the managing member of each of the partnerships.

The contracted power generation business has three contractors that provide certain management oversight, while O&M services are provided by contracted personnel and third-parties. Additional resources are provided by the Manager and external third parties as required. As the business grows, we anticipate that we may add further staff as we centralize functions to take advantage of scale efficiencies. Consistent with this approach, contract management and accounting for the five solar projects was insourced in December of 2014.

Hawaii Gas

Business Overview

Hawaii Gas, founded in 1904, is Hawaii’s only government-franchised gas utility, processing and distributing gas throughout the state. The market includes Hawaii’s approximately 1.4 million residents and approximately 8.3 million visitors in 2014. Hawaii Gas services customers throughout Oahu, Hawaii, Maui, Kauai, Molokai and Lanai (“the main islands”).

Hawaii Gas’s primary products consist of:

Synthetic Natural Gas (“SNG”): The business converts a light hydrocarbon feedstock (currently naphtha) into SNG. The product is chemically similar in most respects to natural gas and has a similar heating value on a per cubic foot basis. Hawaii Gas has the only SNG processing capability in Hawaii at its plant located on the island of Oahu. SNG is delivered by underground piping systems to utility customers on Oahu. The business generates hydrogen gas as part of the reforming process that creates SNG, the majority of which currently is extracted and sold to one of the local refineries.

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Hawaii Gas — (continued)

Liquefied Petroleum Gas (“LPG”): LPG is a generic name for a mixture of hydrocarbon gases, typically propane and butane. LPG liquefies at a relatively low pressure under normal temperature conditions. As a result, LPG can be stored or transported more easily than natural gas or SNG. Once on shore, LPG is typically transported in cylinders or tanks. Domestic and commercial applications of LPG are similar to those of natural gas and SNG.

Liquefied Natural Gas (“LNG”): In March of 2014, the business received regulatory approval to utilize LNG as a backup fuel for the SNG utility distribution system and currently utilizes conventional intermodal cryogenic containers to transport LNG from the U.S. mainland. The first shipment of LNG was regasified in April of 2014 and LNG operations have been ongoing since that time.

Renewable Natural Gas (“RNG”): The business continues its initiatives to develop RNG and is now evaluating a range of feedstock sources including municipal waste water treatment plants, landfills and biomass.

The utility business includes the processing, distribution and sale of SNG and LNG on the island of Oahu and the distribution and sale of LPG on all of the main islands. The non-utility business sells and distributes LPG to customers on all the main islands. LPG is delivered by truck to individual tanks located on customer sites or is distributed in cylinders filled at central locations.

The gas distributed by Hawaii Gas has a wide range of commercial and residential applications including water heating, drying, cooking, emergency power generation and decorative lighting, such as tiki torches. LPG is also used as a fuel for specialty vehicles such as forklifts. Users include residential customers and a wide variety of commercial, hospitality, military, public sector and wholesale customers.

Hawaii Gas’s products, SNG, LNG and LPG, are relatively clean-burning fuels that produce lower levels of carbon emissions than other hydrocarbon fuels such as coal or oil. This is particularly important in Hawaii where heightened public awareness of the environmental impact of using hydrocarbon fuels makes lower emission fuels attractive to customers.

Hawaii Gas continues to move forward with initiatives to utilize cleaner-burning fuels, including RNG and LNG. RNG projects under development include the recovery of gas from municipal waste water treatment plants and landfills as well as the processing of locally grown biomass. The source gas for these projects is often controlled, directly or indirectly, by state or municipal government, thereby requiring extended procurement processes.

Hawaii Gas is the only company with regulatory approval to land and utilize LNG in Hawaii, currently as a back-up fuel for its SNG system on Oahu. In October of 2014, Hawaii Gas filed an application with the Hawaii Public Utilities Commission, or HPUC, seeking approval to invest $12.8 million in its utility business for a smaller-scale containerized LNG import project to provide natural gas as a replacement for up to 30% of SNG gas demand. Regular deliveries of containerized LNG would commence approximately six-months after receiving HPUC approval.

Hawaii Gas also continues to work with stakeholders throughout the state to pursue a larger-scale bulk import, storage and distribution program to supply multiple end markets including power generation and ground and marine transportation. In November of 2014, Hawaii Gas launched its Invitation to Bid (“ITB”) to more than 55 companies with relevant experience in larger-scale bulk LNG with preliminary bids due in February of 2015. Following a review of the responses, binding bids are expected in the second quarter of 2015, at which time Hawaii Gas will share the findings with the State of Hawaii and key off-takers and identify preferred bidders.

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Hawaii Gas — (continued)

The ITB is consistent with a Memorandum of Understanding (“MOU”) signed in December of 2013 by Hawaii Gas and the state’s largest electric utility, the Hawaiian Electric companies (“HECO”), with input from the state. The MOU established key priorities for a larger-scale bulk LNG program as well as a framework for utility collaboration and regulatory oversight. Under the MOU, Hawaii Gas is responsible for developing the on and near-shore infrastructure to support larger-scale LNG delivery in Hawaii in the most cost efficient and least impactful manner.

Summary financial information of Hawaii Gas is as follows ($ in millions):

     
  As of, and for the
Year Ended, December 31,
     2014   2013   2012
Revenue   $ 264.6     $ 257.7     $ 260.5  
EBITDA excluding non-cash items(1)     57.0       55.0       56.3  
Total assets     394.4       395.5       387.0  

(1) See “Business — Our Businesses” in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in Part II, Item 7, for further information and a reconciliation of net income (loss) to EBITDA excluding non-cash items.

Hawaii Energy Market Overview

With no locally occurring hydrocarbons, Hawaii has historically relied on imported oil as its primary feedstock, predominantly for electricity generation and as a transportation fuel. Beginning in 2008, with the Hawaii Clean Energy Initiative, the state implemented a renewable portfolio standard that required increasing levels of electricity generation be derived from renewable resources with the goal of cleaner and lower cost electricity in Hawaii. State regulators have subsequently questioned HECO’s strategic planning in response to Hawaii’s changing energy landscape, including the pace at which HECO expects to retire older, less-efficient fossil fuel generation and incorporate greater amounts of distributed and renewable generation. Absent such changes, regulators noted, Hawaii electricity customers will continue to endure the highest electricity prices in the country, approximately three times the national average in 2014. These high electricity prices have contributed to alternative energy sources, including gas and rooftop solar, growing their share of the energy market in Hawaii as customers convert from HECO’s electricity to cleaner and less expensive alternatives.

Hawaii Gas sees a key role for LNG in supporting the State’s clean energy goals by lowering emissions, increasing energy security and decreasing costs for all energy users in Hawaii. LNG end markets include: sale to Hawaii Gas customers as a substitute for SNG; as a transportation fuel, either as LNG or as compressed natural gas; and as a transition fuel for power generation. Hawaii Gas believes that natural gas is a better fuel for power generation in Hawaii compared to fuel oil (currently the primary power generation fuel used in Hawaii) as it is cleaner-burning and less expensive. Further, natural gas-fired power generation better compliments Hawaii’s growing renewable power generation sources given its efficiency and operating flexibility. To date, Hawaii Gas has made very limited progress in discussions with HECO on larger-scale LNG, but will continue to engage HECO (irrespective of future ownership), along with other stakeholders in an effort to advance key energy initiatives.

In April of 2014, the HPUC rejected HECO’s integrated resource plan and announced four major decisions and orders that collectively provided key policy, resource planning and operational directives to HECO. These orders required HECO to develop and implement major improvement action plans to aggressively pursue energy cost reductions, proactively respond to emerging renewable energy integration challenges and embrace customer demand response programs. In August of 2014, HECO responded with a revised plan, as required, and the HPUC has opened a docket to initiate a review.

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Hawaii Gas — (continued)

In December of 2014, Hawaiian Electric Industries, HECO’s parent company, announced an agreement to merge with NextEra Energy (“NextEra”), a Florida-based energy company with holdings that include the largest electric utility in Florida. In January of 2015, Hawaiian Electric Industries and NextEra filed a merger application with the HPUC. NextEra has indicated that it supports HECO’s broader strategic goals but does not expect to comment publicly on specific programs or policies until after the transaction closes. This position creates a risk of further delays in advancing key energy initiatives in Hawaii.

Strategy

Hawaii Gas’s strategy has four primary components:

1. to lower the cost of energy in Hawaii in a safe and environmentally sustainable manner;
2. to diversify its sources of supply to ensure energy security for Hawaii and to mitigate the impact of potential cost increases to its customers;
3. to increase and diversify its customer base; and
4. to maintain positive relationships with regulators, government agencies, customers, communities it serves and other stakeholders.

Customers

Hawaii Gas does not depend on any single customer, the loss of which would have a material adverse effect on the business.

Utility Regulation

Hawaii Gas’s utility business is regulated by the HPUC. The HPUC exercises broad regulatory oversight and investigative authority over all public utility companies in Hawaii.

Rate Regulation.  The HPUC establishes the rates that Hawaii Gas can charge its utility customers via cost of service regulation. Although the HPUC sets the base rate for the SNG and LPG sold by Hawaii Gas’s utility business, the business is permitted to pass through changes in its raw materials cost by means of a monthly fuel adjustment charge, or FAC.

The business’ utility rates are established by the HPUC in periodic rate cases typically initiated by Hawaii Gas. The business initiates a rate case by submitting a request to the HPUC for an increase in rates based, for example, upon materially higher costs related to providing the service. Following initiation of the rate increase request and submissions by other intervening parties of their positions on the rate request, and potentially an evidentiary hearing, the HPUC issues a decision establishing the revenue requirements and the resulting rates that Hawaii Gas will be allowed to charge. The business’s last rate case had a test year of 2009 and was approved in 2010. The business is currently reviewing the timing of its next rate case.

Other Regulations.  In addition to regulating utility rates, the HPUC acts on requests for the acquisition, sale, disposition or other exchange of utility properties, including mergers and consolidations; acts on requests for financings; and approves material supply contracts. When we acquired Hawaii Gas, we agreed to 14 regulatory conditions with the HPUC that address a variety of matters including: a requirement that the ratio of consolidated debt to total capital for Hawaii Gas and HGC Holdings LLC, or HGC, does not exceed 65%; and a requirement to maintain $20.0 million in readily-available cash resources at Hawaii Gas, HGC or MIC. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in Part II, Item 7, for further discussions on these requirements and that conditions have been consistently met.

Competition

Depending upon the end-use, the business competes with electricity, diesel, solar, geo-thermal, wind, other gas providers and alternative energy sources. Electricity in Hawaii is generated by four electric utilities and various independent power producers. In addition, residential and some commercial customers in Hawaii have increased the rate at which they are installing distributed solar photovoltaic generating capacity.

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Hawaii Gas — (continued)

Utility Business.  Hawaii Gas holds the only government franchise for utility gas services in Hawaii. This enables it to utilize public easements for its pipeline distribution systems. This franchise also provides protection from competition within the same gas-energy sector since the business has developed and owns extensive below-ground distribution infrastructure. The costs associated with developing distribution infrastructure are significant. However, in some instances, the business’ utility customers also have the ability to use alternative sources of energy, such as diesel.

Non-Utility Business.  Hawaii Gas sells LPG in an unregulated market on the main islands of Hawaii. There are two other wholesale companies and several small retail distributors that share the LPG market (some of whom are supplied by Hawaii Gas). Hawaii Gas believes it has a competitive advantage because of its established customer base, storage facilities, distribution network and reputation for reliable service.

Fuel Supply, SNG Plant and Distribution System

Fuel Supply

Hawaii Gas obtains the majority of its LPG supply from off-island producers with the remainder being supplied by Hawaii Independent Energy (“HIE”), formerly Tesoro, which is a subsidiary of Par Petroleum Corporation, and the Chevron oil refinery located on Oahu.

Hawaii Gas obtains all of its naphtha supply, the feedstock for SNG, from HIE. On October 14, 2014, Hawaii Gas and HIE signed an amendment to the Petroleum Feedstock Agreement extending the existing terms through June 30, 2016.

SNG Plant and Distribution System (Utility Business)

Hawaii Gas processes and distributes SNG from its plant located west of the Honolulu business district. The life of the plant continues to be extended through routine maintenance and additional capital investments. A 22-mile transmission pipeline links the SNG plant to a distribution system at Pier 38 in south Oahu. From Pier 38, a pipeline distribution system consisting of approximately 900 miles of distribution and service pipelines transports gas to customers. For the islands other than Oahu, LPG is distributed to the islands by direct deliveries from off-island suppliers by ship and by barge from Oahu. It is then distributed via pipelines to utility customers. Approximately 90% of the business’ pipeline system is on Oahu.

Distribution System (Non-Utility Business)

The non-utility business provides gas to customers on the main islands not connected to the business’ utility pipeline system. The majority of Hawaii Gas’s non-utility customers are on islands other than Oahu. LPG is transported to these islands by direct deliveries from off-island suppliers by ship and by barge from Oahu. The business also owns the infrastructure with which it distributes LPG to its customers, including harbor pipelines, trucks, several holding facilities and storage base-yards on Kauai, Maui and Hawaii.

Environmental Matters

Environmental Permits: Gas processing and distribution requires environmental operating permits. The most significant are air and wastewater permits that are required for the SNG plant. Hawaii Gas is in compliance in all material respects with all applicable provisions of these permits.

Employees and Management

As of December 31, 2014, Hawaii Gas had 315 employees, of which 209 were subject to the terms of a collective bargaining agreement that expires on April 30, 2015. The business believes it has a good relationship with the unionized employees and there have been no major disruptions in operations due to labor matters for over 30 years. Management of the business is headquartered in Honolulu, Hawaii.

Consolidated

Our Employees

As of December 31, 2014, we employed approximately 3,200 people across our consolidated businesses of which approximately 20% were subject to collective bargaining agreements. The holding company itself does not have any employees.

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AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for information on the operations of the public reference room. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including Macquarie Infrastructure Company LLC) file electronically with the SEC. The SEC’s website is www.sec.gov.

Our website is www.macquarie.com/mic. You can access our Investor Center through this website. We make available free of charge, on or through our Investor Center, our proxy statements, annual reports to shareholders, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, as amended, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available through our Investor Center statements of beneficial ownership of the shares filed by our Manager, our directors and officers, any holders of 10% or more of our shares outstanding and others under Section 16 of the Exchange Act.

You can also find information on the Governance page on our website where we post documents including:

Third Amended and Restated Operating Agreement of Macquarie Infrastructure Company LLC;
Second Amended and Restated Management Services Agreement;
Corporate Governance Guidelines;
Code of Ethics and Conduct;
Charters for our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee;
Policy for Shareholder Nomination of Candidates to Become Directors of Macquarie Infrastructure Company LLC; and
Information for Shareholder Communication with our Board of Directors, our Audit Committee and our Lead Independent Director.

Our Code of Ethics and Conduct applies to all of our directors, officers and employees as well as all directors, officers and employees of our Manager involved in the management of the Company and its businesses. We will post any amendments to the Code of Ethics and Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange (“NYSE”), on our website. The information on our website is not incorporated by reference into this report.

You can request a copy of these documents at no cost, excluding exhibits, by contacting Investor Relations at 125 West 55th Street, New York, NY 10019 (212-231-1825).

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ITEM 1A. RISK FACTORS

An investment in our shares involves a number of risks. The occurrence of any of these risks could have a significant or material adverse effect on our results of operations or financial condition and could cause a corresponding decline in the market price of our shares.

Risks Related to Our Business Operations

Fluctuations in economic, equity and credit market conditions may have a material adverse effect on our results of operations, our liquidity or our ability to obtain credit on acceptable terms.

Should the economic, equity and credit market conditions become disrupted, our ability to raise equity or obtain capital, to repay or refinance credit facilities at maturity, pay significant capital expenditures or fund growth may be costly and/or impaired. Our access to debt financing in particular will depend on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to our industry, our credit history and credit capacity, as well as the historical performance of our businesses and lender perceptions of their and our financial prospects. In the event that we are unable to obtain debt financing, particularly as significant credit facilities mature, our internal sources of liquidity may not be sufficient.

Economic conditions may also increase our counterparty risk, particularly in those businesses whose revenues are determined under multi-year contracts, such as IMTT, and businesses within our CP&E segment. Should conditions deteriorate, we would expect to see increases in counterparty defaults and/or bankruptcies, which could result in an increase in bad debt expense and may cause our operating results to decline.

The volatility in the financial markets makes projections regarding future obligations under pension plans difficult. Two of our businesses, Hawaii Gas and IMTT, have defined benefit retirement plans. Future funding obligations under those plans depend in large part on the future performance of plan assets and the mix of investment assets. Our defined benefit plans hold a significant amount of equity securities as well as fixed income securities. If the market values of these securities decline or if interest rates decline, our pension expense and cash funding requirements would increase and, as a result, could materially adversely affect the results and liquidity of these businesses and the Company.

Our holding company structure may limit our ability to make regular dividends in the future to our shareholders because we will rely on the cash flows and distributions from our businesses.

The Company is a holding company with no operations. Therefore, it is dependent upon the ability of our businesses to make distributions to the Company to enable it to meet its expenses, and to make dividends to shareholders in the future. The ability of our operating subsidiaries and the businesses in which we will hold investments to make distributions to the Company is subject to limitations based on their operating performance, the terms of their debt agreements, the applicable laws of their respective jurisdictions, and compliance of co-investors with applicable contracts and agreements. In addition, the ability of each business to reduce its outstanding debt will be similarly limited by its operating performance, as discussed below and in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The documents governing our debt impose significant operating and financial restrictions, which may prevent us from pursuing certain business opportunities and taking certain actions.

The senior secured revolving credit facility imposes, and future debt agreements may impose, operational and financial restrictions on us. These restrictions limit or prohibit, among other things, our ability to:

incur additional indebtedness;
pay dividends, redeem subordinated debt or make other restricted payments;
make certain investments or acquisitions;
grant or permit certain liens on our assets;
enter into certain transactions with affiliates;

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merge, consolidate or transfer substantially all of our assets; and
transfer or sell assets, including capital stock of our subsidiaries.

These covenants could adversely affect our ability to finance our future operations or capital needs, withstand a future downturn in our business or the economy in general, engage in business activities, including future opportunities that may be in our interest, and plan for or react to market conditions or otherwise execute our business strategies. A breach of any of these covenants could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders or holders of such indebtedness could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing that indebtedness. Acceleration of our other indebtedness could result in a default under the terms of the senior secured revolving credit facility or our convertible senior notes. There is no guarantee that we would be able to satisfy our obligations if any of our indebtedness is accelerated.

Our strategy includes an expectation that we will find, acquire and integrate additional infrastructure businesses.

Although our businesses tend to benefit from stable fundamental drivers of growth over time, we will attempt to augment that growth by finding, acquiring and integrating additional infrastructure businesses. We may not find or be able to acquire such businesses on economically sensible terms. In addition, we may acquire businesses with financial reporting and control systems that are less sophisticated than ours. If we do make an acquisition, we may not be successful in integrating it into our portfolio and/or achieving the expected level of performance. Failure to do any of these could result in generating less cash than expected or generating growing amounts of cash at a slower than anticipated rate, either of which could result in a reduction in our share price. In January of 2015, we signed an agreement to acquire BEC, subject to receipt of regulatory approvals and satisfaction of customary closing conditions. As with all acquisitions, BEC acquisition may not be completed on a timely basis or at all. If completed, failure to successfully integrate BEC into our portfolio or achieve anticipated operating results could adversely impact our business.

Decreasing the proportion of infrastructure businesses in our portfolio that are not regulated or of predominantly contracted nature increases the potential volatility in our financial results.

With the exception of our airport services business, our businesses generally possess some or all of the typical characteristics of infrastructure — high barriers to entry, generally inelastic demand, long-term contracts/concessions, stable yields, regulated operations, and inflation linked revenue. Our airport services business generates revenue and distributable cash in a way that is broadly reflective of the economic health of the country. To the extent we invest in or acquire businesses with revenue and cash generating capacity that is similarly GDP sensitive or businesses that do not possess the typical characteristics of infrastructure businesses, our financial results could become more volatile and our share price could decline as a result of an increase in the real or perceived increase in risk.

If borrowing costs increase or if debt terms become more restrictive, the cost of refinancing and servicing our debt will increase, reducing our profitability and ability to freely deploy Free Cash Flow.

The majority of indebtedness at our primary businesses matures within three to six years. Refinancing this debt may result in substantially higher interest rates or margins or substantially more restrictive covenants. Any of these could limit operational flexibility or reduce dividends and/or distributions from our operating businesses to us, which would have an adverse impact on our ability to freely deploy Free Cash Flow. We cannot provide assurance that we or the other owners of any of our businesses will be able to make capital contributions to repay some or all of the debt if required.

The debt facilities at our businesses contain terms that become more restrictive over time, with stricter covenants and increased amortization schedules. Those terms will limit our ability to freely deploy Free Cash Flow.

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Our holding company level debt could adversely affect our financial condition and results of operations, limit our operational and financing flexibility and negatively impact our business.

We financed a portion of our acquisition of the remaining interest in IMTT with the issuance of convertible senior notes. We also entered into a new senior secured revolving credit facility in connection with the IMTT acquisition. This holding company level debt increases our interest payments and could have significant effects on our business, including the following:

we may be required to use a significant portion of our cash flow to pay interest on our indebtedness which will reduce the funds available for dividends to shareholders, additional acquisitions, pursuit of business opportunities or other business purposes;
our ability to obtain additional financing may be impaired;
it may be more difficult for us to satisfy our financial obligations under our contractual and commercial commitments;
our increased level of indebtedness could place us at a competitive disadvantage compared to our competitors that may have proportionately less debt;
exposing us to risk of increased interest rates because any borrowings under the senior secured revolving credit facility are at variable rates of interest;
our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited; and
our indebtedness may make us more vulnerable to economic downturns and adverse developments in our businesses.

We expect to obtain the funds to pay our expenses and to repay our indebtedness primarily from our operating businesses. Our ability to meet our expenses and make these payments therefore depends on the future performance of our businesses, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our businesses may not generate sufficient cash flow from operations in the future, which could result in our inability to repay indebtedness or to fund other liquidity needs. As a holding company with no operations, we are dependent on the ability of our businesses to make distributions to us to pay our expenses and repay our indebtedness. In addition, the senior secured revolving credit facility is guaranteed by Macquarie Infrastructure Company Inc., or MIC Inc., our direct, wholly owned subsidiary. MIC Inc. is a holding company whose only material asset is the capital stock of our other subsidiaries. If we do not have enough funds, we may be required to refinance all or part of our then existing debt, sell assets or borrow more funds, which we may not be able to accomplish on terms acceptable to us, or at all. In addition, the terms of existing or future debt agreements may restrict us from pursuing any of these alternatives.

We and any of our existing or future subsidiaries may incur substantially more indebtedness in the future. This could further exacerbate the risks to our business as described herein.

We and any of our existing and future subsidiaries may incur substantial additional indebtedness in the future. Although the terms of our senior secured revolving credit facility contain limitations on our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions. In addition, IMTT currently has $1.3 billion senior unsecured revolving credit facility in place. If we incur any additional indebtedness that ranks equally with the indebtedness under our senior secured revolving credit facility, the holders of that additional debt will be entitled to share ratably with the lenders or holders of the indebtedness under the senior secured revolving credit facility in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our Company. If new debt is added to our or any of our subsidiaries’ current debt levels, the related risks that we now face could be exacerbated.

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We are dependent on certain key personnel, and the loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our consolidating businesses, financial condition and results of operations.

We operate our consolidating businesses on a stand-alone basis, relying on existing management teams for day-to-day operations. Consequently, our operational success, as well as the success of our internal growth strategy, will be dependent on the continued efforts of the management teams of our consolidating businesses, who have extensive experience in the day-to-day operations of these businesses. Furthermore, we will likely be dependent on the operating management teams of businesses that we may acquire in the future. The loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our business, financial condition and results of operations.

We own, and may acquire in the future, investments in which we share voting control and, consequently, our ability to exercise significant influence over the business may be limited.

While it is our preference to own our businesses outright or to be able to exercise significant influence over our investments, including with respect to the timing and amount of distributions to us from those businesses, we may in some cases find the potential economic benefits of owning less than a controlling interest to be compelling. In such cases we will attempt to co-invest with like-minded individuals/organizations. However, there can be no certainty that our interests with such co-investor(s) will always be aligned or that we will always be in a position to determine the amount and timing of distributions from such investments.

Disputes with a prior co-investor has resulted in our being involved in an arbitration proceeding. While we prevailed in this arbitration, it was costly and diverted the attention of our management and there was a delay associated with receipt of the benefits to which we were entitled.

Our ability to influence a joint venture business is typically governed by (and may be limited to) our rights under a shareholders’ agreement. We may not directly manage the day to day operations of a joint venture, and we may not be provided with notice of material events with respect such joint venture businesses (including, without limitation, potential liabilities for environmental health and safety (“EHS”) matters) in as timely a manner and with the same level of detail as we would if we were in such a day-to-day management role.

If we do not manage the day-to-day operations of a joint venture, we may not have complete visibility into operational and financial systems, controls or processes, including among others, as they relate to EHS measures. We may not be able to evaluate whether such financial, operational, or EHS systems or controls are sufficiently robust or executed appropriately.

Our businesses are subject to environmental risks that may impact our future profitability.

Our businesses (including businesses in which we invest) are subject to numerous statutes, rules and regulations relating to environmental protection. Atlantic Aviation is subject to environmental protection requirements relating to the storage, transport, pumping and transfer of fuel. Hawaii Gas is subject to risks and hazards associated with the refining, handling, storage and transportation of combustible products. These risks could result in substantial losses due to personal injury, loss of life, damage or destruction of property and equipment and environmental damage. Any losses we face could be greater than insurance levels maintained by our businesses, which could have an adverse effect on their and our financial results. In addition, disruptions to physical assets could reduce our ability to serve customers and adversely affect sales and cash flows.

IMTT’s operations in particular are subject to complex, stringent and expensive environmental regulation and future compliance costs are difficult to estimate with certainty. IMTT also faces risks relating to the handling and transportation of significant amounts of hazardous materials. Failure to comply with regulations or other claims may give rise to interruptions in operations and civil or criminal penalties and liabilities that could adversely affect the profitability of this business and the distributions it makes to us, as could significant unexpected compliance costs. Further, these rules and regulations are subject to change and compliance with any changes could result in a restriction of the activities of our businesses, significant capital expenditures and/or increased ongoing operating costs.

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A number of the properties owned by IMTT have been subject to environmental contamination in the past and require remediation for which IMTT is liable. These remediation obligations exist principally at IMTT’s Bayonne and Lemont facilities and could cost more than anticipated or could be incurred earlier than anticipated, or both. In addition, IMTT may discover additional environmental contamination at its Bayonne, Lemont or other facilities that may require remediation at significant cost to IMTT. Further, the past contamination of the properties owned by IMTT, including by former owners or operators of such properties, could result in remediation obligations, personal injury, property damage, environmental damage or similar claims by third parties.

We may also be required to address other prior or future environmental contamination, including soil and groundwater contamination that results from the spillage of fuel, hazardous materials or other pollutants. Under various federal, state, local and foreign environmental statutes, rules and regulations, a current or previous owner or operator of real property may be liable for noncompliance with applicable environmental and health and safety requirements and for the costs of investigation, monitoring, removal or remediation of hazardous materials. These laws often impose liability, whether or not the owner or operator knew of, or was responsible for, the presence of hazardous materials. Persons who arrange for the disposal or treatment of hazardous materials may also be liable for the costs of removal or remediation of those materials at the disposal or treatment facility, whether or not that facility is or ever was owned or operated by that person and whether or not the original disposal or treatment activity accorded with all regulatory requirements. The presence of hazardous materials on a property could result in personal injury, loss of life, damage or destruction of property and equipment, environmental damage and/or claims by third parties that could have a material adverse effect on our financial condition or operating results.

Our income may be affected adversely if additional compliance costs are required as a result of new safety, health or environmental regulation.

Our businesses are subject to federal, state and local safety, health and environmental laws and regulations. These laws and regulations affect all aspects of their operations and are frequently modified. There is a risk that any one of our businesses may not be able to comply with some aspect of these laws and regulations, resulting in fines or penalties. Additionally, if new laws and regulations are adopted or if interpretations of existing laws and regulations change, we could be required to increase capital spending and incur increased operating expenses in order to comply. Because the regulatory environment frequently changes, we cannot predict when or how we may be affected by such changes. Environmental emissions and other compliance testing technologies continue to improve, which may result in more stringent, targeted environmental regulations and compliance obligations in the future, for example at IMTT, the costs of which could be material and adversely affect our cash flows and results of operations.

Our businesses are dependent on our relationships, on a contractual and regulatory level, with government entities that may have significant leverage over us. Government entities may be influenced by political considerations to take actions adverse to us.

Our businesses generally are, and will continue to be, subject to substantial regulation by governmental agencies. In addition, our businesses rely on obtaining and maintaining government permits, licenses, concessions, leases or contracts. Government entities, due to the wide-ranging scope of their authority, have significant leverage over us in their contractual and regulatory relationships with us that they may exercise in a manner that causes us delays in the operation of our businesses or pursuit of our strategy, or increased administrative expense. Furthermore, government permits, licenses, concessions, leases and contracts are generally very complex, which may result in periods of non-compliance, or disputes over interpretation or enforceability. If we fail to comply with these regulations or contractual obligations, we could be subject to monetary penalties or we may lose our rights to operate the affected business, or both. Where our ability to operate an infrastructure business is subject to a concession or lease from the government, the concession or lease may restrict our ability to operate the business in a way that maximizes cash flows and profitability. Further, our ability to grow our current and future businesses will often require consent of numerous government regulators. Increased regulation restricting the ownership or management of U.S. assets, particularly infrastructure assets, by non-U.S. persons, given the non-U.S. ultimate ownership of our Manager, may limit our ability to pursue acquisitions. Any such regulation may also limit our Manager’s ability to

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continue to manage our operations, which could cause disruption to our businesses and a decline in our performance. In addition, any required government consents may be costly to seek and we may not be able to obtain them. Failure to obtain any required consents could limit our ability to achieve our growth strategy.

Our contracts with government entities may also contain clauses more favorable to the government counterparty than a typical commercial contract. For instance, a lease, concession or general service contract may enable the government to terminate the agreement without requiring them to pay adequate compensation. In addition, government counterparties also may have the discretion to change or increase regulation of our operations, or implement laws or regulations affecting our operations, separate from any contractual rights they may have. Governments have considerable discretion in implementing regulations that could impact these businesses. Governments may be influenced by political considerations to take actions that may hinder the efficient and profitable operation of our businesses.

Many of our contracts, especially those with government entities or quasi-government entities are long-term contracts. These long-term contracts may be difficult to replace if terminated. In addition, buy-out or other early termination provisions could adversely affect our results of operations if exercised before the end of the contract.

Governmental agencies may determine the prices we charge and may be able to restrict our ability to operate our businesses to maximize profitability.

Where our businesses are sole or predominant service providers in their respective service areas and provide services that are essential to the community, they are likely to be subject to rate regulation by governmental agencies that will determine the prices they may charge. We may also face fees or other charges imposed by government agencies that increase our costs and over which we have no control. We may be subject to increases in fees or unfavorable price determinations that may be final with no right of appeal or that, despite a right of appeal, could result in our profits being negatively affected. In addition, we may have very little negotiating leverage in establishing contracts with government entities, which may decrease the prices that we otherwise might be able to charge or the terms upon which we provide products or services. Businesses we acquire in the future may also be subject to rate regulation or similar negotiating limitations.

Unfavorable publicity or public perception of the industries in which we operate could adversely impact our operating results and our reputation.

Accidents and incidents involving the aviation industry, particularly those involving the airports and heliport at which we operate, whether or not directly related to the Company’s services, and the media coverage thereof, can adversely impact the Company’s reputation and the demand for our services. Similarly, negative publicity or public perception of the energy-related industries in which we operate, including through media coverage of environmental contamination and climate change concerns, could reduce demand for our services and harm our reputation. Any reduction in demand for the services our businesses provide or damage to our reputation could have a material adverse effect on our results of operations and business prospects.

A significant and sustained increase in the price of oil could have a negative impact on the revenue of a number of our businesses.

A significant and sustained increase in the price of oil could have a negative impact on the profitability of a number of our businesses. Higher prices for jet fuel could result in less use of aircraft by GA customers, which would have a negative impact on the profitability of Atlantic Aviation. Higher fuel prices could increase the cost of power to our businesses generally which they may not be able to fully pass on to customers.

A sustained period of low energy prices may foreshadow a downturn in economic activity, and capital investment in particular, that could have a negative impact on the performance and prospects of one or more of our businesses.

A period of low energy prices, or what has been characterized as an “oil” or “energy” glut, may not drive an increase in economic activity and capital investment. If instead there results in a lack of growth in economic activity and capital investment, and a slowing of the economy, demand for products and services provided by our airport services and/or bulk liquid terminal businesses may flatten or decline. A decline in the performance of these businesses could result in a decline in the value of our shares.

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Energy efficiency and technology advances, as well as conservation efforts and changes in the sources and types of energy produced in the U.S. may result in reduced demand for our products and services.

The trends toward increased conservation, as well as technological advances including installation of improved insulation, the development of more efficient heating and cooling devices and advances in energy generation technology, may reduce demand for certain of our products and services. During periods of high energy commodity costs, the prices of certain of our products and services generally increase, which may lead to customer conversation. In addition, federal and/or state regulation may require mandatory conservation measures, which would also reduce demand.

The discovery and development of new and unconventional energy sources in the U.S. may drive changes in related energy product logistics chains. The location and exploitation of these new energy sources could result in the dislocation of certain portions of some of our businesses. Either or both of these changes in energy supply chain logistics or trends toward increased conservation could reduce demand for our products and services and could adversely affect our results of operations.

Each of our businesses experience a measure of seasonality and such seasonality may cause fluctuations in our results of operations.

Although infrastructure business tend to produce stable financial results owing to a preponderance of contracted/concession based revenues and the provision of generally essential services, each of our businesses operates in an environment which can generate seasonal variations in results. Our bulk liquid terminals business may generate incrementally more cash during cold weather months as a result of increased heating, throughput of certain products such as heating oil or the reduction in maintenance expenses. Our aviation services business may generate relatively more cash during cold weather months as a result of increased GA traffic into bases in Florida and intermountain West. Our solar power generation facilities may generate incrementally more cash during summer months when the number of daylight hours increases. Our gas production and distribution business may generate incrementally more cash during the peak tourism periods in Hawaii between mid-December and the end of March and from mid-June through mid-September. To the extent that our businesses collectively appear to generate more cash in the first quarter of the year, such performance, if annualized, could result in an overly optimistic estimate of the value of our shares.

Security breaches or interruptions in our information systems could materially adversely affect our business.

We rely on information technology networks and systems to process, transmit and store electronic information used to operate our businesses. We also share certain information technology networks with our Manager. The information technology infrastructure we use, as well as the information technology systems used by our Manager, could be vulnerable to security breach, damage or interruption from computer viruses, cyber attacks, cyber terrorism, natural disasters or telecommunications failures. If our technology systems were to fail or be breached and we were unable to recover in a timely manner, we may be unable to fulfill critical business functions and confidential data could be compromised, which could have a material adverse effect on our results of operations, financial condition and cash flows.

Climate change, climate change regulations and greenhouse effects may adversely impact our operations and markets.

Climate change is receiving increased attention from the scientific and political communities. There is an ongoing debate as to the extent to which our climate is changing, the possible causes of this change and its potential impacts. Some attribute global warming to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. The outcome of federal and state actions to address global climate change could result in significant new regulations, additional changes to fund energy efficiency activities or other regulatory actions. These actions could increase the costs of operating our businesses, reduce the demand for our products and services and impact the prices we charge our customers, any or all of which could adversely affect our results of operations. In addition, climate change could make severe weather events more frequent, which would increase the likelihood of capital expenditures to replace damaged infrastructure at our businesses.

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We may face a greater exposure to terrorism than other companies because of the nature of our businesses.

We believe that our infrastructure businesses face a greater risk of terrorist attack than other businesses, particularly our operations within the immediate vicinity of metropolitan and suburban areas. Because our businesses provide basic services relied on by many people, our facilities may be at greater risk for terrorism attacks than other businesses, which could affect its operations significantly. Any terrorist attacks that occur at or near our business locations would likely to cause significant harm to our employees and assets. In recent years, insurers have significantly reduced the amount of insurance coverage available for liability to persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events. A terrorist attack that makes use of our property, or property under our control, may result in liability far in excess of available insurance coverage. In addition, any terrorist attack, regardless of location, could cause a disruption to our business and a decline in earnings. Furthermore, it is likely to result in an increase in insurance premiums and a reduction in coverage, which could cause our profitability to suffer.

Risks Related to IMTT

IMTT’s business is dependent on the demand for bulk liquid terminals capacity in the locations where it operates.

Demand for IMTT’s bulk liquid terminals is largely a function of U.S. domestic demand for chemical, petroleum and vegetable and animal oil products and, less significantly, the extent to which such products are imported into and/or exported out of the United States. U.S. domestic demand for chemical, petroleum and vegetable and animal oil products is influenced by a number of factors, including economic conditions, growth in the U.S. economy, the pricing of chemical, petroleum and vegetable and animal oil products and their substitutes. Import and export volumes of these products to and from the United States are influenced by demand and supply imbalances in the United States and overseas, the cost of producing chemical, petroleum and vegetable and animal oil products domestically versus overseas and the cost of transporting the products between the United States and overseas destinations. Specifically, increased production of natural gas or crude from mainland North America or the volatility of global crude prices may increase or decrease the demand for bulk liquid terminals. This situation continues to develop and the effects are not yet predictable.

In addition, changes in government regulations that affect imports and exports of bulk chemical, petroleum, renewable fuels and vegetable and animal oil products, including the imposition of surcharges or taxes on imported or exported products, could adversely affect import and export volumes to and from the United States. A reduction in demand for bulk liquid terminals, particularly in NYH or the Lower Mississippi River, as a consequence of lower U.S. domestic demand for, or imports/exports of, chemical, petroleum or vegetable and animal oil products, could lead to a decline in storage rates and tankage volumes rented out by IMTT and adversely affect IMTT’s revenue and profitability and the distributions it makes to us.

IMTT’s business could be adversely affected by a substantial increase in bulk liquid terminals capacity in the locations where it operates or in other alternative or substitute locations.

An increase in available bulk liquid terminal capacity in excess of growth in demand for such storage in the key locations in which IMTT operates, such as NYH and the Lower Mississippi River, or in Houston or other parts of the Gulf Coast could result in overcapacity and a decline in storage rates and tankage volumes rented out by IMTT and could adversely affect IMTT’s revenue and profitability and the distributions it makes to us.

If IMTT does not deploy capital for growth or make such deployment on economically acceptable terms, any future growth of the business may be limited.

A portion of IMTT’s historical growth has been dependent on the deployment of growth capital. We believe that there remains considerable opportunity for IMTT to deploy growth capital at levels similar to those experienced between 2006 and 2012. If IMTT cannot find projects with economically acceptable terms, future growth of this business may be limited.

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Failure to realize anticipated operational improvements following the IMTT acquisition could negatively impact our business; assumption of managerial control over IMTT will be time consuming; IMTT’s business relationships may be adversely impacted by the change in ownership.

We may be unable to timely and effectively integrate the entire IMTT business into our ongoing operations. Integration and assumption of managerial control could be expensive and is time consuming for our management. We also may not be able to achieve anticipated financial performance of the IMTT business within our expected time frames or at all. In addition, parties with which IMTT does business, including customers, suppliers and regulatory authorities, may experience uncertainty associated with our acquisition of IMTT. As a result, IMTT’s business relationships may be adversely impacted if these parties attempt to negotiate changes in existing business arrangements, which could have an adverse effect on our financial condition and results of operations.

A continued or sustained decrease in the global price of crude oil and its derivative products may negatively impact IMTT’s operations.

A decrease in oil prices over a long period of time may cause IMTT’s customers to have a lower level of demand for the services IMTT provides. Uncertainty in the oil markets may also result in IMTT’s customers entering into shorter term contracts for product storage than they have previously. This would increase the frequency of customer contract renewals and negotiations and may result in more volatility in earnings. IMTT customers that are negatively impacted by reduced oil prices may seek to renegotiate contract pricing or storage capacity in order to reduce operating costs. Low oil prices may also result in a lower level of growth capital expenditures by IMTT as its customers may not require additional storage or logistics assets to be constructed, which may limit IMTT’s future growth.

Some of IMTT’s current agreements may be terminated at the end of the current renewal term upon requisite notice or renewed on different terms. If one or more of the current agreements is terminated and IMTT is unable to secure comparable alternative arrangements, its financial condition and results of operations may be adversely affected.

Upon expiration, agreements can generally be terminated by either party upon the giving of the requisite notice. If any of IMTT’s agreements are terminated and IMTT is unable to secure comparable alternative arrangements, IMTT may not be able to generate sufficient additional revenue from third parties to replace any shortfall. Additionally, IMTT may incur substantial costs if modifications to its terminals are required by a new or renegotiated agreement.

IMTT could incur significant costs and liabilities in responding to contamination that occurs at its facilities.

There is inherent risk of incurring significant environmental costs and liabilities in IMTT’s operations due to its handling of petroleum hydrocarbons, hazardous substances and wastes, because of air emissions, water discharges and waste practices related to its operations, and as a result of historical operations and waste disposal practices of prior owners of IMTT’s facilities. IMTT’s pipeline and terminal facilities have been used for transportation, storage and distribution of crude oil, refined petroleum products and chemicals for many years. Although IMTT has utilized operating and disposal practices that were standard in the industry at the time, refined petroleum products or crude oil, hydrocarbons, hazardous substances and wastes from time to time have been spilled or released on or under the terminal properties.

In addition, the terminal properties were previously owned and operated by other parties and those parties from time to time also have spilled or released refined petroleum products or crude oil, hydrocarbons, hazardous substances or wastes. The terminal properties are subject to federal, state and local laws that impose investigatory, corrective action and remedial obligations, some of which are joint and several or strict liability obligations without regard to fault, to address and prevent environmental contamination. IMTT may incur significant costs and liabilities in responding to any soil and groundwater contamination that occurs on its properties, even if the contamination was caused by prior owners and operators of its facilities. IMTT may not be able to recover some or any of these costs from insurance or other sources of contractual indemnity. To

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the extent that the costs associated with meeting any or all of these requirements are substantial and not adequately provided for, there could be a material adverse effect on IMTT’s business, financial condition and results of operations.

IMTT may incur significant costs and liabilities in complying with stringent environmental and occupational health and safety laws and regulations.

IMTT’s operations involve the transportation and storage of petroleum and chemical products which are subject to federal, state, and local laws and regulations governing release of materials and vapors into the environment, occupational health and safety aspects of our operations, and otherwise relating to the protection of the environment. Compliance with this complex array of federal, state, and local laws and regulations is difficult and may require significant capital expenditures and operating costs to mitigate or prevent pollution. Moreover, IMTT’s business is subject to accidental spills, discharges or other releases of petroleum or chemical products or other hazardous substances or wastes into the environment and neighboring areas, in which events joint and several, strict liability may be imposed against us under certain environmental laws for costs required to remediate and restore impacted properties, for claims made by neighboring landowners and other third parties for personal injury, natural resource and property damages, and for costs required to conduct health studies. Failure to comply with applicable environmental, health, and safety laws and regulations may result in the assessment of sanctions, including fines, administrative, civil or criminal penalties, and permit revocations, the imposition of investigatory, corrective action, or remedial obligations and the issuance of injunctions limiting or prohibiting some or all of IMTT’s operations.

New laws and regulations, amendment of existing laws and regulations, increased government enforcement or other developments could require IMTT to make additional unforeseen expenditures. Many of these laws and regulations are becoming increasingly stringent, and the cost of compliance with these requirements can be expected to increase over time. IMTT is not able to predict the impact of new or changed laws or regulations or how such legal requirements are interpreted or enforced, but any such expenditures or costs for environmental and occupational health and safety compliance could have a material adverse effect on its results of operations, financial condition and profitability.

IMTT’s business involves hazardous activities and is partly located in a region with a history of significant adverse weather events and is potentially a target for terrorist attacks. We cannot assure that IMTT is, or will be in the future, adequately insured against all such risks.

The transportation, handling and storage of petroleum, chemical and vegetable and animal oil products are subject to the risk of spills, leakage, contamination, fires and explosions. Any of these events may result in loss of revenue, loss of reputation or goodwill, fines, penalties and other liabilities. In certain circumstances, such events could also require IMTT to halt or significantly alter operations at all or part of the facility at which the event occurred. IMTT carries insurance to protect against most of the accident-related risks involved in the conduct of the business; however, the limits of IMTT’s coverage mean IMTT cannot insure against all risks. In addition, because IMTT’s facilities are not insured against loss from terrorism or acts of war, such an attack that significantly damages one or more of IMTT’s major facilities would have a negative impact on IMTT’s future cash flow and profitability and the distributions it makes to us. Further, future losses sustained by insurers during hurricanes in the U.S. Gulf and Northeast regions may result in lower insurance coverage and/or increased insurance premiums for IMTT’s properties.

Information about IMTT’s historical operations of which we are not currently aware could cause either or both of IMTT’s and our performance in the future to be different than our current expectations and such differences could be material.

We own 100% of IMTT since July 16, 2014, the date of the acquisition. Prior to the acquisition, our co-investor had primary responsibility for the day-to-day operations of the business during that time. As such, we relied on the financial reporting of our co-investor, and related reviews conducted by independent auditors, with respect to the performance of the business for that period. To the extent such reporting has been in any way inaccurate or incomplete, correcting or completing the reporting could cause us to restate our financial statements for prior periods and could result in the identification of previously unknown liabilities, and may have an adverse impact on our results both historically and prospectively.

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IMTT employs systems and technology to handle and track the movements of bulk liquid products. Weaknesses in or failures to those systems and technology could result in a need to implement more robust and potentially more expensive systems.

IMTT also employs spill prevention, containment and clean up systems. However, such systems could fail and future spills or those that may have occurred in the past could result in our having liability for remediating these at an unknown cost. Any or all of these matters could have a material adverse effect on our results of operations.

IMTT’s business could be adversely affected by the insolvency of large customers.

IMTT has a number of customers that together generate a material proportion of IMTT’s revenue and gross profit. In 2014, IMTT’s ten largest customers by revenue generated approximately 50% of IMTT revenue. The insolvency of any of these large customers could result in an increase in unutilized storage capacity in the absence of such capacity being rented to other customers and adversely affect IMTT’s revenue and profitability and the distributions it makes to us.

Risks Related to Atlantic Aviation

Deterioration in the economy in general or in the aviation industry that results in less air traffic at airports that Atlantic Aviation services would have a material adverse impact on our business.

A large part of the business’ revenue is derived from fueling and other services provided to GA customers and, to a lesser extent, commercial air travelers. An economic downturn could reduce the level of air travel, adversely affecting Atlantic Aviation. GA travel is primarily a function of economic activity. Consequently, during periods of economic downturn, FBO customers are more likely to curtail air travel.

Air travel and air traffic volume can also be affected by events that have nationwide and industry-wide implications. Events such as wars, outbreaks of disease, severe weather and terrorist activities in the United States or overseas may reduce air travel. Local circumstances include downturns in the general economic conditions of the area where an airport is located or other situations in which the business’ major FBO customers relocate their home base or preferred fueling stop to alternative locations.

In addition, changes to regulations governing the tax treatment relating to GA travel, either for businesses or individuals, may cause a reduction in GA travel. Increased environmental regulation restricting or increasing the cost of aviation activities could also cause the business’ revenue to decline.

Atlantic Aviation is subject to a variety of competitive pressures, and the actions of competitors may have a material adverse effect on its revenue, market share, and fuel margins, causing a decline in the profitability of that business.

FBO operators at a particular airport compete based on a number of factors, including location of the facility relative to runways and street access, service, value added features, reliability and price. Many of Atlantic Aviation’s FBOs compete with one or more FBOs at their respective airports and with FBOs at nearby airports. Furthermore, leases related to FBO operations may be subject to competitive bidding at the end of their term. Some present and potential competitors may have or may obtain greater financial and marketing resources than Atlantic Aviation, which may negatively impact Atlantic Aviation’s ability to compete at each airport or for lease renewal. Some competitors may aggressively or irrationally price their bids for airport concessions, which may limit the business’ ability to grow or renew its portfolio. Excessive price discounting may cause fuel volume and market share decline, potential decline in hangar rentals and de-icing and may result in increased margin pressure, adversely affecting the profitability of this business.

Atlantic Aviation’s FBOs do not have the right to be the sole provider of FBO services at any airport. The authority responsible for each airport has the ability to grant other leases to other operators and new competitors could be established at those airports. The addition of new competitors may reduce or impair Atlantic Aviation’s ability to grow or improve its financial performance.

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The termination for cause or convenience of one or more of the FBO leases would damage Atlantic Aviation’s operations significantly.

Atlantic Aviation’s revenue is derived from long-term leases at 69 airports in the U.S. If Atlantic Aviation defaults on the terms and conditions of its leases, including upon insolvency, the relevant authority may terminate the lease without compensation. In this case, Atlantic Aviation would then lose the income from that location and potentially the expected returns from prior capital expenditures. Atlantic Aviation would also likely be in default under the loan agreements and be obliged to repay its lenders a portion or the entire outstanding loan amount. Any such events would have a material adverse effect on Atlantic Aviation’s results of operations.

The business may be exposed to sudden and extreme volatility in commodity prices directly or indirectly.

Aviation fuel is generally stored on site in fuel farms. In some instances these fuel farms are owned by the FBO operator and in other instances they are owned by a third party, usually the airport or a third party fuel provider. Extreme and sudden movements in underlying commodity prices may impact the value of an FBO operator’s fuel inventory as well as the margin the FBO operator earns on fuel. In addition, extreme and sudden movements in commodity prices may impact overall GA activity levels.

Failure to complete, or realize anticipated performance from acquisitions could negatively impact Atlantic Aviation; the business’ increased indebtedness after the acquisitions could reduce our operating flexibility.

Completing acquisitions are subject to a number of conditions, and we may not complete our acquisitions on a timely basis or at all, which could have an adverse effect on the business and results of operations of our Atlantic Aviation business.

FBO industry participants are often smaller, private companies with less sophisticated information systems and financial reporting and control capabilities. Acquisitions are typically privately owned and have financial reporting and control systems that are less sophisticated than ours. If we complete the acquisitions, we may be unable to integrate the assets into our existing operations on a timely basis or to achieve expected efficiencies. The integration could be expensive and could be time consuming for our management.

We may not be able to achieve anticipated levels of financial performance at the acquired assets within our expected time frames or at all. In addition, Atlantic Aviation has incurred indebtedness to fund a portion of the acquisitions. This increased level of indebtedness will increase interest expense and could reduce funds available for reinvestment or distribution to MIC.

Deterioration of business jet traffic at airports where Atlantic Aviation operates would decrease Atlantic Aviation’s ability to refinance or service its debt.

As of December 31, 2014, Atlantic Aviation had total long-term debt outstanding of $611.3 million, consisting of $606.6 million in term loan debt and $4.7 million in stand-alone debt facilities. The terms of these debt arrangements require compliance with certain operating and financial covenants. The ability of Atlantic Aviation to meet its respective debt service obligations and to refinance or repay their outstanding indebtedness will depend primarily upon cash produced by this business.

Reductions in U.S. military spending could result in a reduction in demand for services provided by Atlantic Aviation at certain airports in the U.S.

The U.S. military operates non-combat aircraft that are serviced at Atlantic Aviation FBOs around the U.S. and combat and non-combat aircraft at certain airports where fueling and fuel-related services are provided by Atlantic Aviation. Cuts in U.S. military spending, to the extent they result in a reduction in the number of flights by military aircraft, could reduce revenue at Atlantic Aviation.

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Regulators, such as The Transportation Security Administration (or TSA), have and may continue to consider new regulations which could impair the relative convenience of GA and adversely affect demand for Atlantic Aviation’s services.

The business believes that new regulations, if implemented, could affect Atlantic Aviation, its customers and the airports at which it operates. Such rules could decrease the convenience and attractiveness of GA travel relative to commercial air travel and, therefore, may adversely impact demand for Atlantic Aviation’s services.

The lack of accurate and reliable industry data can result in unfavorable strategic planning, mergers and acquisitions and macro pricing decisions.

The business uses industry and airport-specific GA traffic data published by the FAA to identify trends in the FBO industry. The business also uses this traffic data as a key input to decision-making in strategic planning, mergers and acquisitions and macro pricing matters. However, as noted by the FAA on their website, the data has several limitations and challenges. As a result, the use of the FAA traffic data may result in conclusions in strategic planning, mergers and acquisitions or macro pricing decisions that are ultimately sub-optimal.

Risks Related to CP&E

CP&E depends on counterparties performing in accordance with their agreements. If they fail to so perform, our CP&E businesses could incur substantial losses of revenue or additional expenses and business disruptions.

CP&E is exposed to the risk that counterparties under long-term agreements will not perform their obligations in accordance with such agreements. Should they fail to so perform, CP&E may be required to seek alternative purchasers of the power produced by our CP&E facilities. The failure of any of the parties to perform in accordance with these agreements could adversely affect CP&E’s results of operations, cash flows and financial condition.

The generation of electricity from our solar and wind power generation facilities is dependent on meteorological conditions. If conditions are unfavorable, CP&E’s generation facilities may underperform which could materially adversely affect CP&E’s financial condition, cash flows and result of operations.

Certain of CP&E’s power generation facilities are dependent on the available solar and wind resources. Historical solar insolation and wind speed data, combined with computer modeling, is used to project expected power generation. Actual conditions are beyond our control and may vary from our projections. If actual conditions cause material underperformance, CP&E’s result of operations, cash flows and financial condition may be materially adversely affected. This may cause a default under some or all of CP&E’s debt facilities and/or limit CP&E’s ability to pay distributions to MIC.

CP&E depends on electric interconnection and transmission facilities that we do not own or control and that are potentially subject to transmission constraints. If these facilities fail to provide adequate transmission capacity, CP&E may be restricted in its ability to deliver electricity to customers.

CP&E depends on electric interconnection and transmission facilities owned and operated by others to deliver the power it generates under specific contracts agreed with CP&E. Within certain of these contracts, there are provisions that allow for occasional curtailment of electricity generated by CP&E due to the limitations of the transmission system or electricity grid. Any constraints on, or the failure of, interconnections or transmission facilities could prevent CP&E from selling power and could adversely affect CP&E’s results of operations, cash flows and financial condition.

Some of our generating capacity and/or the associated attributes of our facilities are not contracted and the price at which we can sell electricity and related products and services may be impacted by price fluctuations in the wholesale power and energy markets.

Market prices for electric generation, capacity and ancillary services are unpredictable and may fluctuate substantially. Unlike most other commodities, power can only be stored on a very limited basis and generally

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must be produced concurrently with its use. As a result, power prices are subject to significant volatility due to supply and demand imbalances, especially in the day-ahead and spot markets. CP&E’s results of operations, cash flows and financial condition may be impacted by lower prices for wholesale power.

Maintenance, expansion and refurbishment of power generation facilities involve significant risks that could result in unplanned power outages or reduced output.

Our facilities may require periodic upgrading and improvement. Any unexpected operational or mechanical failure, including failure associated with breakdowns and forced outages, and any decreased operational or management performance, could reduce our facilities’ generating capacity or generation below expected levels, reducing our revenues. Degradation of the performance of our facilities above levels provided for in the related PPAs may also reduce our revenues. Unanticipated capital expenditures associated with maintaining, upgrading or repairing our facilities may also reduce profitability. Any of these factors could adversely affect CP&E’s results of operations, cash flows and financial condition.

Laws, governmental regulations and policies supporting renewable energy, and specifically solar and wind energy (including tax incentives), could change at any time, including as a result of new political leadership, and such changes may materially adversely affect our business and our growth strategy.

Renewable generation assets currently benefit from various federal, state and local governmental incentives. In the United States, these incentives include investment tax credits, or “ITCs,” cash grants in lieu of ITCs, loan guarantees, RPS programs, modified accelerated cost-recovery system of depreciation and bonus depreciation. In addition, many U.S. states have adopted RPS programs mandating that a specified percentage of electricity sales come from eligible sources of renewable energy. If these government incentives or RPS requirements are reduced or eliminated, it could lead to fewer future power contracts or lead to lower prices for the sale of power in future power contracts, which could have a material adverse effect on future projects.

We are exposed to the risk of fuel price volatility and interruptions in supplies.

Under certain future PPAs, we may be responsible for the purchase of fuel and face the risks of supply interruptions and fuel price volatility, as fuel deliveries may not exactly match those required for energy sales.

CP&E acquisitions or future expansions of existing businesses may expose us to development risk.

We may acquire CP&E businesses or invest additional capital in existing facilities that requires the development of new CP&E projects or facilities and exposes us to the project development risks associated with new power projects. These risks may include excessive delays or costs related to obtaining necessary permits and approvals, environmental remediation costs, technology failures, counterparty contract and construction risk, any or all of which may adversely affect the operational and financial performance of the business.

We may not be able to replace expiring PPAs or tolling agreements with contracts on similar terms. If we are unable to replace an expired contract with an acceptable new contract, we may experience lower than anticipated revenues.

We may not be able to replace an expiring PPA or tolling arrangement with a contract on equivalent terms and conditions, including at prices that permit operation of the related facility on a profitable basis. If we are unable to replace an expiring contract, the affected site may temporarily or permanently cease operations. In the case of a facility that ceases operations, the PPA may require that we remove the assets, including fixing or reimbursing the site owner for any damages caused by the assets or the removal of such assets. Alternatively, we may agree to sell the assets to the site owner, but we can offer no assurances as to the terms and conditions, including price, that we would receive in any sale, and the sale price may not be sufficient to replace the revenue previously generated by the project.

CP&E’s failure to uphold its obligations as managing member at the relevant facilities could materially adversely affect CP&E’s financial condition, cash flows and results of operations.

As managing member, CP&E is obligated to perform certain actions, including providing certain reporting items to its co-investor and the filing of correct and timely tax returns. As managing member, CP&E

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is also obligated to refrain from performing certain actions, including selling its interest to certain entities that would result in adverse economic outcomes to CP&E and its co-investor due to tax regulations. If CP&E were to cause an adverse tax outcome for its co-investor, CP&E could be liable. CP&E’s failure to perform its obligations or to take any actions contrary to its obligations under any or all operating LLC agreements could adversely affect CP&E’s results of operations, cash flows and financial condition.

Risks Related to Hawaii Gas

Hawaii Gas is exposed to the effects of changing commodity prices that have a history of price volatility. To the extent that these costs cannot be passed on to customers, both in the short-term or the long-term, the business’ gross profit and cash flows will be adversely affected.

The profitability of Hawaii Gas is based on the margin of sales prices over costs. Since LPG and feedstock for the SNG plant are commodities, changes in global supply of and demand for these products can have a significant impact on costs. In addition, increased reliance on off-island sources of LPG, whether as a result of disruptions to or shortages in local sources or otherwise, could also have a significant impact on costs. Hawaii Gas has no control over these costs, and, to the extent that these costs cannot be passed on to customers, the business’ financial condition and the results of operations would be adversely affected. Higher prices could result in reduced customer demand or customer conversion to alternative energy sources, or both, that would reduce the volume of gas sold and adversely affect the profitability of Hawaii Gas.

Changes in commodity market prices may have a negative effect on our liquidity.

Depending on the terms of our contracts with suppliers as well as our use of financial instruments to reduce volatility in the cost of LPG, changes in the market price of LPG can create payment obligations for us and expose us to an increased liquidity risk.

Hawaii Gas is subject to risks associated with volatility in the Hawaii economy.

Tourism and government activities (including the military) are two of the largest components of Hawaii’s economy. Hawaii’s economy is heavily influenced by economic conditions in the U.S. and Asia and their impact on tourism, as well as by government spending. A large portion of Hawaii Gas’s sales are generated by businesses that rely on tourism. If the local economy deteriorates, the volume of gas sold could be negatively affected by business closures and/or lower usage and adversely impact the business’ financial performance. Additionally, a lack of growth in the Hawaiian economy could reduce the level of new residential construction, and adversely impact growth in volume from new residential customers. A reduction in government activity, particularly military activity, or a shift by either away from the use of gas, could also have a negative impact on Hawaii Gas’s results.

Disruptions or shutdowns at either of the oil refineries on Oahu from which Hawaii Gas obtains both LPG and the primary feedstock for its SNG plant may have an adverse effect on the operations of the business.

Hawaii Gas processes SNG and distributes SNG and LPG. SNG feedstock or LPG supply disruptions could increase Hawaii Gas’s costs as a result of an inability to source feedstock at rates comparable to those being paid currently. The extended unavailability of one or both of the refineries or disruption to crude oil supplies or feedstock to Hawaii could also result in an increased reliance on off-island sources. An inability to purchase LPG from off-island sources would adversely affect operations. The business is also limited in its ability to store LPG, and any disruption in supply may cause a depletion of LPG stocks. All supply disruptions of SNG or LPG, if occurring for an extended period, could adversely impact the business’s contribution margin and cash flows.

Hawaii Gas relies on its SNG plant, including its transmission pipeline, for a significant portion of its sales. Disruptions at that facility could adversely affect the business’ ability to serve customers.

Disruptions at the SNG plant resulting from mechanical or operational problems or power failures could affect the ability of Hawaii Gas to produce SNG. Most of the utility sales on Oahu are of SNG and all SNG is produced at the Oahu plant. Disruptions to the primary and redundant production systems would have a significant adverse effect on Hawaii Gas’s revenues and cash flows.

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The operations of Hawaii Gas are subject to a variety of competitive pressures and the actions of competitors, particularly those involved in other energy sources, could have a materially adverse effect on operating results.

Other fuel sources such as electricity, diesel, solar energy, geo-thermal, wind, other gas providers and alternative energy sources may be substituted for certain gas end-use applications, particularly if the price of gas increases relative to other fuel sources, whether due to higher costs or otherwise. Customers could, for a number of reasons, including increased gas prices, lower costs of alternative energy or convenience, meet their energy needs through alternative sources. This could have an adverse effect on the business’ revenues and cash flows.

The proposed merger of Hawaii Electric Industries and NextEra Energy could create delays in the review of Hawaii Gas’s pending and future regulatory filings or result in a less favorable competitive landscape.

The proposed merger, announced in December of 2014, contemplates the largest energy transaction in state history and its review will require a significant portion of Hawaii’s regulatory resources. To the extent this delays the timely review of current or future Hawaii Gas regulatory filings, this may have an adverse impact on the business’ revenues and cash flows. Further, to the extent that the merged companies are permitted to further vertically integrate into fuel supply, this could also result in an adverse impact on the business’ revenues and cash flows.

Hawaii Gas’s utility business is subject to regulation by the HPUC and actions by the HPUC or changes to the regulatory environment may constrain the operation or profitability of the business.

The HPUC regulates all franchised or certificated public service companies operating in Hawaii; prescribes rates, tariffs, charges and fees; determines the allowable rate of earnings in establishing rates; issues guidelines concerning the general management of franchised or certificated utility businesses; and acts on requests for the acquisition, sale, disposition or other exchange of utility properties, including mergers and consolidations.

Any adverse decision by the HPUC concerning the level or method of determining utility rates, the items and amounts that may be included in the rate base, the returns on equity or rate base found to be reasonable, the potential consequences of exceeding or not meeting such returns, or any prolonged delay in rendering a decision in a rate or other proceeding, could have an adverse effect on the business.

As part of MIC’s acquisition, the business agreed to 14 regulatory conditions with the HPUC that address a variety of matters including: a requirement that Hawaii Gas and HGC’s ratio of consolidated debt to total capital does not exceed 65%; and a requirement to maintain $20.0 million in readily-available cash resources at Hawaii Gas, HGC or MIC. The business is currently in compliance with these conditions, however, future non-compliance with these or other HPUC regulatory conditions, could adversely impact the profitability of Hawaii Gas.

Hawaii Gas’s operations on the islands of Hawaii, Maui and Kauai rely on LPG that is transported to those islands by Jones Act qualified barges from Oahu and from non-Jones Act vessels from off-island ports. Disruptions to service by those vessels could adversely affect the financial performance of the business.

The Jones Act requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships and that they meet certain other requirements. The business has time charter agreements allowing the use of two barges that currently have a cargo capacity of approximately 420,000 gallons and 500,000 gallons of LPG, respectively. The barges used by the business are the only two Jones Act qualified barges available in the Hawaiian Islands capable of carrying large volumes of LPG. If the barges are unable to transport LPG from Oahu and the business is not able to secure off-island sources of LPG or obtain an exemption to the Jones Act that would permit importation of a sufficient quantity of LPG from the mainland U.S., the profitability of the business could be adversely impacted. If the barges require refurbishment or repair at a greater frequency than forecast, cash outflows for capital costs could adversely impact Hawaii Gas’s results and cash flows.

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The RNG and LNG initiatives expose Hawaii Gas to new supply, counterparty, facility, technology and regulatory risks.

Hawaii Gas continues to evaluate a range of RNG sources for conversion into pipeline quality gas in scale quantities. These initiatives include ongoing commercial negotiations to source bio gas from waste water treatment plants, landfills and biomass. The source gas for these projects is often controlled, directly or indirectly, by state or municipal government, thereby requiring extended procurement processes which may delay the business’s plans for implementation. Beginning March 31, 2012, Hawaii Gas must report annually to the HPUC the percentage of feedstock and quantity of gas produced from non-petroleum feedstock. In the event Hawaii Gas’s RNG initiatives face procurement delays, regulators could impose a renewable portfolio standard on the business, resulting in significantly increased energy costs to the business and its customers.

Hawaii Gas has invested over $4.0 million to evaluate and plan for LNG transport from the mainland and utilization by the business, as well as to commence training and development of systems required for regulatory approval. This project is subject to ongoing implementation risk including but not limited to: the timely issuance of necessary permits, licenses and approvals by governmental agencies and third parties; unanticipated changes in market demand or supply; competition with similar projects; site difficulties; environmental conditions; delays of critical equipment and materials; and commercial arrangements to transport and distribute LNG. If the project is delayed beyond the estimated implementation period, the actual cost of planning and implementation may increase beyond the amounts currently estimated in our capital and operating budgets. A delay in implementation would also cause a delay in the receipt of projected revenues, which may cause our financial results to be negatively impacted.

Reductions in U.S. military spending could result in a reduction in demand for gas in Hawaii.

The U.S. military has a significant presence in Hawaii. To the extent that federal spending cuts, including voluntary or mandatory cuts in U.S. military spending, result in a reduced military presence in Hawaii, such reductions could reduce the demand for gas in Hawaii.

Because of its geographic location, Hawaii, and in turn Hawaii Gas, is subject to earthquakes and certain weather risks that could materially disrupt operations.

Hawaii is subject to earthquakes and certain weather risks, such as hurricanes, floods, heavy and sustained rains and tidal waves. Because the business’ SNG plant, SNG transmission line and several storage facilities are close to the ocean, weather-related disruptions to operations are possible. In addition, earthquakes may cause disruptions. These events could damage the business’ assets or could result in wide-spread damage to its customers, thereby reducing the volumes of gas sold and, to the extent such damages are not covered by insurance, the business’ revenues and cash flows.

Because of its geographic location and the unique economy of Hawaii, Hawaii Gas is subject to challenges in hiring and maintaining staff with specialized skill sets.

The changing nature of the Hawaii energy complex has had an impact on the Company’s staffing requirements. Volatility in feedstock prices, together with the impact of the State of Hawaii’s goals to reduce dependency on imported petroleum, requires staff with specialized knowledge of the energy sector. Because the resident labor pool in Hawaii is both small, and oriented mainly to Hawaii’s basic industries, it is difficult to find individuals with these specialized skill sets. Moreover, relocation to Hawaii is costly and often requires employees to make cultural and family adjustments not normally required for a change of employment. The inability to source and retain staff with appropriate skill sets could adversely impact the performance of the business.

Risks Related to Having an External Manager

We are subject to the terms and conditions of the Management Services Agreement between the Company and our Manager.

We cannot unilaterally amend the Management Services Agreement between ourselves and our Manager. Changes in the compensation of our Manager, certain rights held by the Manager or other components of the Agreement require the approval of our Manager and may limit our ability to make changes that could be beneficial to shareholders generally.

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Our Manager owns a significant portion of MIC’s shares outstanding. A sale of all or a portion of the shares owned by our Manager could be interpreted by the equity markets as a lack of confidence in the prospects of the Company.

Our Manager, in its sole discretion, determines whether to reinvest base and performance fees in shares and whether to hold or sell those securities. Reinvestment of base and performance fees in additional shares would increase our Manager’s ownership stake in the Company. As of February 18, 2015, our Manager owned 6.75% of our outstanding shares. If our Manager decides, for reasons other than the performance and prospects of the Company, to reduce its position in the Company, such sales may be interpreted by some market participants as a lack of confidence in the Company and put downward pressure on the market price of our shares. Sales of shares by our Manager could increase the available supply and decrease the price if such sales are not made in an orderly fashion.

Certain provisions of the management services agreement and the operating agreement of the Company make it difficult for third parties to acquire control of the Company and could deprive investors of the opportunity to obtain a takeover premium for their shares.

In addition to the limited circumstances in which our Manager can be terminated under the terms of the management services agreement, the management services agreement provides that in circumstances where the stock ceases to be listed on a recognized U.S. exchange as a result of the acquisition of stock by third parties in an amount that results in the stock ceasing to meet the distribution and trading criteria on such exchange or market, the Manager has the option to either propose an alternate fee structure and remain our Manager or resign, terminate the management services agreement upon 30 days’ written notice and be paid a substantial termination fee. The termination fee payable on the Manager’s exercise of its right to resign as our Manager subsequent to a delisting of our shares could delay or prevent a change in control that may favor our shareholders. Furthermore, in the event of such a delisting, any proceeds from the sale, lease or exchange of a significant amount of assets must be reinvested in new assets of our Company, subject to debt repayment obligations. We would also be prohibited from incurring any new indebtedness or engaging in any transactions with shareholders of the Company or its affiliates without the prior written approval of the Manager. These provisions could deprive shareholders of opportunities to realize a premium on the shares owned by them.

The operating agreement of the Company, which we refer to as the LLC agreement, contains a number of provisions that could have the effect of making it more difficult for a third-party to acquire, or discouraging a third-party from acquiring, control of the Company. These provisions include:

restrictions on the Company’s ability to enter into certain transactions with our major shareholders, with the exception of our Manager, modeled on the limitation contained in Section 203 of the Delaware General Corporation Law;
allowing only the Company’s Board of Directors to fill vacancies, including newly created directorships and requiring that directors may be removed only for cause and by a shareholder vote of 66 2/3%;
requiring that only the Company’s chairman or Board of Directors may call a special meeting of our shareholders;
prohibiting shareholders from taking any action by written consent;
establishing advance notice requirements for nominations of candidates for election to the Company’s Board of Directors or for proposing matters that can be acted upon by our shareholders at a shareholders’ meeting;
having a substantial number of additional shares authorized but unissued; and
providing the Company’s Board of Directors with broad authority to amend the LLC agreement.

Our Manager’s decision to reinvest its monthly base management fees and quarterly performance fees, as applicable, in shares or retain the cash will affect shareholders differently.

Our Manager earned $46.6 million and $121.5 million in base management and performance fees, respectively, during 2014. These fees are based on the Company’s market capitalization and performance and

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may be higher or lower than these levels in the future. Our Manager, in its sole discretion, may elect to retain base management fees and performance fees, if applicable, paid in cash or to reinvest such payments in additional shares. In the event the Manager chooses not to reinvest the fees to which it is entitled in additional shares, the amount paid will reduce the cash that may otherwise be distributed as a dividend to all shareholders or used in the Company’s operations. In the event the Manager chooses to reinvest the fees to which it is entitled in additional shares, effectively returning the cash to us, such reinvestment will dilute existing shareholders by the increase in the percentage of shares owned by the Manager. Either option may adversely impact the market for our shares.

In addition, the Manager has typically elected to invest its fees in shares, and, unless otherwise agreed with MIC, can only change this election during an 18-trading day window following the Company’s earnings release. Any change would apply to fees paid thereafter. Accordingly, shareholders would generally have notice of the Manager’s intent to receive fees in cash rather than reinvest before the change was effective.

Our Manager can resign with 90 days notice, or our CEO or CFO could be removed by the Manager, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations, which could adversely affect our financial results and negatively impact the market price of our shares.

Our Manager has the right, under the management services agreement, to resign at any time with 90 days notice, whether we have found a replacement or not. The resignation of our Manager will trigger mandatory repayment obligations under debt facilities at certain of our operating companies. In addition, the Manager could re-assign or remove the CEO and/or the CFO from their positions and responsibilities at the Company without the Board’s approval and with little or no notice. If our Manager resigns or our CEO/CFO are removed, we may not be able to find a new external manager or hire internal management with similar expertise within 90 days to provide the same or equivalent services on acceptable terms, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial results could be adversely affected, perhaps materially, and the market price of our shares may decline substantially. In addition, the coordination of our internal management, acquisition activities and supervision of our businesses are likely to suffer if we were unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Manager and its affiliates.

Furthermore, if our Manager resigns, the Company and its subsidiaries will be required to cease use of the Macquarie brand entirely, and change their names to remove any reference to “Macquarie”. This may cause the value of the Company and the market price of our shares to decline.

Our externally managed model may not be viewed favorably by investors.

Our Company is externally managed by a member of the Macquarie Group. Our Manager receives a fee for its services that provides for a number of corporate center functions including the compensation of our management team and those who provide services to the Company on a shared basis, health and welfare benefits, the provision of facilities, technology and insurance (other than Directors and Officers). The fee is based on the market capitalization of the Company and thus increases as the Company grows. The size of the fee may bear no direct correlation with the actual cost of providing the agreed upon services and may be higher than the cost of managing the Company internally. Per the terms of the Management Services Agreement with our Manager, the default manner for satisfying any base or performance fees to which the Manager may be entitled is the issuance of additional shares. To the extent the fee continues to be satisfied with the delivery of additional shares, all shareholders are diluted and our hurdle for growing distributable cash on a per share basis will be higher.

Our Manager’s affiliation with Macquarie Group Limited and the Macquarie Group may result in conflicts of interest or a decline in our stock price.

Our Manager is an affiliate of Macquarie Group Limited and a member of the Macquarie Group. From time to time, we have entered into, and in the future we may enter into, transactions and relationships involving Macquarie Group Limited, its affiliates, or other members of the Macquarie Group. Such transactions have included and may include, among other things, the entry into debt facilities and derivative

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instruments with members of the Macquarie Group serving as lender or counterparty, and financial advisory or equity underwriting services provided to us by the Macquarie Group.

Although our audit committee, all of the members of which are independent directors, is required to approve of any related party transactions, including those involving members of the Macquarie Group or its affiliates, the relationship of our Manager to the Macquarie Group may result in conflicts of interest.

In addition, as a result of our Manager’s being a member of the Macquarie Group, negative market perceptions of Macquarie Group Limited generally or of Macquarie’s infrastructure management model, or Macquarie Group statements or actions with respect to other managed vehicles, may affect market perceptions of our Company and cause a decline in the price of our shares unrelated to our financial performance and prospects.

In the event of the underperformance of our Manager, we may be unable to remove our Manager, which could limit our ability to improve our performance and could adversely affect the market price of our shares.

Under the terms of the management services agreement, our Manager must significantly underperform in order for the management services agreement to be terminated. The Company’s Board of Directors cannot remove our Manager unless:

our shares underperform a weighted average of two benchmark indices by more than 30% in relative terms and more than 2.5% in absolute terms in 16 out of 20 consecutive quarters prior to and including the most recent full quarter, and the holders of a minimum of 66.67% of the outstanding shares (excluding any shares owned by our Manager or any affiliate of the Manager) vote to remove our Manager;
our Manager materially breaches the terms of the management services agreement and such breach continues unremedied for 60 days after notice;
our Manager acts with gross negligence, willful misconduct, bad faith or reckless disregard of its duties in carrying out its obligations under the management services agreement, or engages in fraudulent or dishonest acts; or
our Manager experiences certain bankruptcy events.

Because our Manager’s performance is measured by the market performance of our shares relative to a benchmark index, even if the absolute market performance of our shares does not meet expectations, the Company’s Board of Directors cannot remove our Manager unless the market performance of our shares also significantly underperforms the benchmark index. If we were unable to remove our Manager in circumstances where the absolute market performance of our shares does not meet expectations, the market price of our shares could be negatively affected.

Risks Related to Ownership of Our Stock

Our reported Earnings per Share (“EPS”), as defined under GAAP, do not reflect the cash generated by our businesses and may result in unfavorable comparisons with other businesses for which EPS is a useful component in valuation.

Our businesses own and invest in high-value, long-lived assets that generate large amounts of depreciation and amortization. Depreciation and amortization are non-cash expenses that serve to reduce reported EPS. As a result, our financial performance may appear to be substantially worse compared with businesses whose earnings do not reflect the effects of depreciation and amortization (or other non-cash items). To the extent that our results appear to be worse, we may have relatively greater difficulty attracting investors in our stock.

Our inability, under GAAP, to consolidate the financial results of certain of our investments may make it relatively more difficult to analyze the cash generating capacity of our combined businesses.

We may make investments in certain businesses which we will be required to account for using the equity method rather than consolidate with the results of our other businesses. The equity method requires us

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to include the portion of the net income, as determined in accordance with GAAP, equal to our equity interest in the business in our consolidated statement of operations. The physical asset backed nature of the businesses in which we invest (and the higher levels of non-cash expenses including depreciation and amortization) may mean that the performance of these investments have relatively little impact on our consolidated statement of operations and may not be reflected in the valuation of our shares.

We report dividends, whether treated as dividends or returns of capital for federal income tax purposes, on Form 1099, but could report on Schedule K-1 in the future.

Our Company is structured as a Limited Liability Company that has made an election to be treated as a regular corporation for tax purposes. We report distributions to shareholders on Form 1099, either in Box 1 as a dividend or in Box 3 as a return of capital, depending on the level of earnings and profits generated in the reporting period. We may not always be or be treated as a corporation in which case distributions may be reported on another tax form including possibly Schedule K-1. Certain investors may not wish to or may be precluded from investing in an entity that reports on Schedule K-1 thus limiting the market for our shares.

Our total assets include a substantial amount of goodwill and other intangible assets. The write-off of a significant portion of intangible assets would negatively affect our reported earnings.

Our total assets reflect a substantial amount of goodwill and other intangible assets. At December 31, 2014, goodwill and other intangible assets, net, represented approximately 44.6% of total assets. Goodwill and other intangible assets were primarily recognized as a result of the acquisitions of our businesses. Other intangible assets consist primarily of airport operating rights, customer relationships and trade names. On at least an annual basis, we assess whether there has been any impairment in the value of goodwill and assess for impairment of other intangible assets when there are triggering events or circumstances. If the carrying value of the tested asset exceeds its estimated fair value, impairment is deemed to have occurred. In this event, the amount is written down to fair value. Under current accounting rules, this would result in a charge to reported earnings. We have recognized significant impairments in the past, and any future determination requiring the write-off of a significant portion of goodwill or other intangible assets would negatively affect our reported earnings and total capitalization, and could be material.

Our total assets include a substantial amount of intangible assets and fixed assets. The depreciation and amortization of these assets may negatively impact our reported earnings.

The high level of intangible and physical assets written up to fair value upon acquisition of our businesses generates substantial amounts of depreciation and amortization. These non-cash items serve to lower net income as reported in our consolidated statement of operations as well as our taxable income. The generation of net losses or relatively small net income may contribute to a net operating loss (“NOL”) carryforward that can be used to offset current taxable income in future periods. However, the continued reporting of little or negative net income may adversely affect the attractiveness of the Company among some potential investors and may reduce the market for our shares.

The market price and marketability of our shares may from time to time be significantly affected by numerous factors beyond our control, which may adversely affect our ability to raise capital through future equity financings.

The market price of our shares may fluctuate significantly. Many factors that are beyond our control may significantly affect the market price and marketability of our shares and may adversely affect our ability to raise capital through equity financings. These factors include, but are not limited to, the following:

significant volatility in the market price and trading volume of securities of Macquarie Group Limited and/or vehicles managed by the Macquarie Group or branded under the Macquarie name or logo;
significant volatility in the market price and trading volume of securities of registered investment companies, business development companies or companies in our sectors, which may not be related to the operating performance of these companies;
changes in our earnings or variations in operating results;

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any shortfall in EBITDA excluding non-cash items or Free Cash Flow from levels expected by securities analysts;
changes in regulatory policies or tax law;
operating performance of companies comparable to us; and
loss of funding sources.

Risks Related to Taxation

We have significant NOL Carryforwards that may be fully utilized over the next several years thereby subjecting us to payment of substantial federal income taxes and reducing our distributable Free Cash Flow.

We may, without the acquisition of businesses with NOLs, payment of performance fees or implementation of other strategies that provide us with additional tax shield, fully utilize our existing NOLs before we anticipate or have previously indicated. At that point we may be subject to federal income taxes in consolidation and any liability could be material. Any liability will reduce distributable Free Cash Flow and could prevent the growth or reduce the rate of growth of our dividends.

The current treatment of qualified dividend income and long-term capital gains under current U.S. federal income tax law may be adversely affected, changed or repealed in the future.

Under current law, qualified dividend income and long-term capital gains are taxed to non-corporate investors at a maximum U.S. federal income tax rate of 20%. In addition, certain holders that are individuals, estates or trusts are subject to 3.8% surtax on all or a portion of their “net investment income,” which may include all or a portion of their dividend income and net gains from the disposition of our shares. This tax treatment may be adversely affected, changed or repealed by future changes in tax laws at any time, which may affect market perceptions of our Company and the market price of our shares could be negatively affected.

Our ability to use our NOL carryforwards to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation (or other entity taxable as a corporation, such as the Company) that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs and certain other tax attributes to offset future taxable income. Generally speaking, an “ownership change” occurs if the aggregate percentage ownership of the stock of the corporation held by one or more “five-percent shareholders” (as defined in the Code) increases by more than fifty percentage points over such shareholders’ lowest percentage ownership during the testing period, which is generally the three year-period ending on the transaction date. If we undergo an ownership change, our ability to utilize NOLs and certain other tax attributes could be limited.

We have significant income tax NOLs, which may not be realized before they expire.

We have $250.7 million in federal NOL carryforwards at December 31, 2014. While we have concluded that all of the NOLs will more likely than not be realized, there can be no assurance that we will utilize the NOLs generated to date or any NOLs we might generate in the future. In addition, we have incurred state NOLs and have provided a valuation allowance against a portion of those. As with our federal NOLs, there is also no assurance that we will utilize those state losses or future losses that may be generated. Further, the State of Illinois has suspended the use of NOL carryforwards through 2014, similar to the State of California’s suspension of an NOL deduction through 2011 for large corporations. There can be no assurance that other states will not suspend the use of NOL carryforwards or that California and Illinois will not extend the suspension of the use of NOL carryforwards.

The treatment of depreciation and other tax deductions under current U.S. federal income tax law may be adversely affected, changed or repealed in the future.

Under current law, certain capital expenditures are eligible for accelerated depreciation, including 50% bonus depreciation for assets placed in service prior to December 31, 2014, for U.S. federal income tax

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purposes. In addition, certain other expenses are eligible to be deducted for U.S. federal income tax purposes. This tax treatment may be adversely affected, changed or repealed by future changes in tax laws at any time, which may affect market perceptions of our Company and the market price of our shares could be negatively affected.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

In general, the assets of our businesses, including real property, are pledged to secure the financing arrangements of each business on a stand-alone basis. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in Part II, Item 7, for a further discussion of these financing arrangements.

IMTT

IMTT operates ten wholly-owned bulk liquid terminal facilities in the United States and has partial ownership in two companies that each own bulk liquid terminal facilities in Canada. The land on which the facilities are located is either owned or leased by IMTT with leased land comprising a small proportion of the total land in use. IMTT also owns the storage tanks, piping and transportation infrastructure such as truck and rail loading equipment located at the facilities and related ship docks, except in Quebec and Geismar, where the docks are leased. The business believes that the aforementioned equipment is generally well maintained and adequate for the present operations. For further details, see “Our Businesses — IMTT — Locations” in Part I, Item 1.

Atlantic Aviation

Atlantic Aviation does not own any real property. Its operations are carried out under various long-term leases. The business leases office space for its head office in Plano, Texas. For more information regarding Atlantic Aviation’s FBO locations, see “Our Businesses — Atlantic Aviation — Locations” in Part I, Item 1.

Atlantic Aviation owns or leases a number of vehicles, including fuel trucks and other equipment needed to provide service to customers. Routine maintenance is performed on this equipment and a portion is replaced in accordance with a pre-determined schedule. Atlantic Aviation believes that the equipment is generally well maintained and adequate for present operations. Changes in market conditions allowed Atlantic Aviation to move to purchasing or procuring capital leases for larger equipment. Atlantic Aviation believes that these assets are a core part of the business and have long useful lives making ownership desirable if conditions permit.

Contracted Power and Energy

At December 31, 2014, the contracted power generation business owned five solar and two wind power generation facilities. The business owns the solar panels and wind turbines and leases the land. For further details, see “Our Businesses — Contracted Power and Energy — Business Overview” in Part I, Item 1.

   
Project   State   Ownership or Lease Information
Tucson   Arizona   Long-term property lease until 2032.
Presidio   Texas   Two long-term property leases until 2037 and 2039.
DMAFB   Arizona   Long-term property lease until 2039.
Valley Center   California   Long-term property lease until 2038.
Ramona   California   Long-term property lease until 2037.
Brahms   New Mexico   Five long-term property leases until 2044 with two 10-year
extension options up to 2064.
IWP   Idaho   Eighteen long-term property leases until 2037 to 2050.

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Hawaii Gas

Hawaii Gas has facilities and equipment on all major Hawaiian Islands including: leased land beneath the SNG plant; several LPG holding tanks and cylinders; approximately 1,000 miles of underground piping, of which approximately 900 miles are on Oahu; and a 22-mile transmission pipeline from the SNG plant to Pier 38 in Honolulu.

A summary of selected properties, by island, follows. For more information regarding Hawaii Gas’s operations, see “Our Businesses — Hawaii Gas — Fuel Supply, SNG Plant and Distribution System” in Part I, Item 1.

     
Island   Description   Use   Own/Lease
Oahu   SNG Plant   Production of SNG   Lease
Oahu   Kamakee Street Buildings and Maintenance yard   Engineering, Maintenance Facility, Warehouse   Own
Oahu   LPG Baseyard   Storage facility for tanks and cylinders   Lease
Oahu   Topa Fort Street Tower   Executive Offices   Lease
Oahu   Various Holding Tanks   Store and supply LPG to utility customers   Lease
Maui   Office, tank storage facilities and baseyard   Island-wide operations   Lease
Kauai   Office   Island-wide operations   Own
Kauai   Tank storage facility and baseyard   Island-wide operations   Lease
Hawaii   Office, tank storage facilities and baseyard   Island-wide operations   Own

ITEM 3. LEGAL PROCEEDINGS

IMTT Bayonne — Remediation Estimate

The Bayonne, New Jersey terminal, portions of which have been acquired and aggregated over a 30-year period, contain pervasive remediation requirements that were assumed at the time of purchase from the various former owners. One former owner retained environmental remediation responsibilities for a purchased site as well as sharing other remediation costs. These remediation requirements are documented in two memoranda of agreement and an administrative consent order with the State of New Jersey. Remediation efforts entail removal of free product, soil treatment, repair/replacement of sewer systems, and the implementation of containment and monitoring systems. These remediation activities are estimated to span a period of ten to twenty or more years at a cost ranging from $30.0 million to $55.0 million. The remediation activities at the terminal are estimated based on currently available information, in undiscounted U.S. dollars and is inherently subject to relatively large fluctuation.

IMTT St. Rose — Clean Air Act

On December 16, 2010, the Louisiana Department of Environmental Quality (“LADEQ”) notified IMTT of alleged violations of emissions limits in the Clean Air Act Title V Permit at the IMTT St. Rose facility. The violations include engine emissions exceedences, which were subsequently repermitted to higher limits. IMTT had self-disclosed these exceedences to the LADEQ. IMTT settled with the LADEQ for a civil penalty of $116,000 anticipated to be paid in 2015.

Except as noted above, there are no legal proceedings pending that we believe will have a material adverse effect on us other than ordinary course litigation incidental to our businesses. We are involved in ordinary course legal, regulatory, administrative and environmental proceedings. Typically, expenses associated with these proceedings are covered by insurance.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our shares are traded on the NYSE under the symbol “MIC”. The following table sets forth, for the fiscal periods indicated, the high and low sales prices per share on the NYSE:

   
  High   Low
Fiscal 2013
                 
First Quarter   $ 54.33     $ 45.66  
Second Quarter     59.90       50.01  
Third Quarter     58.88       52.01  
Fourth Quarter     57.16       52.50  
Fiscal 2014
                 
First Quarter   $ 59.05     $ 51.52  
Second Quarter     62.42       54.55  
Third Quarter     73.47       61.03  
Fourth Quarter     72.90       62.58  
Fiscal 2015
                 
First Quarter (through February 17, 2015)   $ 77.71     $ 67.55  

As of February 17, 2015, we had 71,231,631 shares issued and outstanding that we believe were held by 181 holders of record.

The following represents the Company’s relative share price performance from December 31, 2009 through December 31, 2014.

[GRAPHIC MISSING]

Dividend Policy

MIC has been structured to provide investors with an opportunity to generate an attractive “total return” based on the capital appreciation resulting from the improved operating performance of our businesses over

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time and the payment of a cash dividend that we believe will grow over time. Our dividend payments are determined based on the cash flows available to the MIC holding company from its operating companies and paid subject to maintaining a prudent level of reserves and without creating undue volatility in the amount of such dividends where possible.

Since January 1, 2013, MIC has made or declared the following dividends:

       
Declared   Period Covered   $ per Share   Record Date   Payable Date
February 17, 2015     Fourth quarter 2014     $ 1.02       March 2, 2015       March 5, 2015  
October 27, 2014     Third quarter 2014     $ 0.98       November 10, 2014       November 13, 2014  
July 3, 2014     Second quarter 2014     $ 0.95       August 11, 2014       August 14, 2014  
April 28, 2014     First quarter 2014     $ 0.9375       May 12, 2014       May 15, 2014  
February 18, 2014     Fourth quarter 2013     $ 0.9125       March 3, 2014       March 6, 2014  
October 25, 2013     Third quarter 2013     $ 0.875       November 11, 2013       November 14, 2013  
July 29, 2013     Second quarter 2013     $ 0.875       August 12, 2013       August 15, 2013  
April 26, 2013     First quarter 2013     $ 0.6875       May 13, 2013       May 16, 2013  

Tax Treatment of 2014 Dividends

The Company has determined that none of the dividends paid in 2014 were characterized as a dividend for U.S. federal income tax purposes. All dividends were characterized as returns of capital, capital gain, or combination thereof depending on each shareholder’s tax basis.

Future dividends, if any, may be characterized as a dividend or a return of capital/capital gain depending on the earnings and profits of the Company as determined in accordance with the Internal Revenue Code. Holders of MIC LLC shares are encouraged to seek their own tax advice with regard to their investment in MIC.

Future Dividends

We currently intend to maintain a payout ratio between 80% to 85% of the Free Cash Flow generated by our businesses in the form of a quarterly cash dividend to our shareholders. We define Free Cash Flow as cash from operating activities, which reflects cash paid for interest, taxes and pension contributions, less maintenance capital expenditures, which includes principal repayments on capital lease obligations used to fund maintenance capital expenditures, and excludes changes in working capital.

The payment of a quarterly cash dividend of $1.02 per share for the quarter ended December 31, 2014 is being paid out of Free Cash Flow generated by our operating entities. In determining whether to adjust the amount of our quarterly dividend, our Board will take into account such matters as the state of the capital markets and general business conditions, the Company’s financial condition, results of operations, capital requirements, capital opportunities and any contractual, legal and regulatory restrictions on the payment of dividends by the Company to its shareholders or by its subsidiaries to the Company, and any other factors that it deems relevant, subject to maintaining a prudent level of reserves and without creating undue volatility in the amount of such dividends where possible. In particular, each of our businesses has debt commitments and restrictive covenants, which must be satisfied before any of them can make distributions to the Company. In addition, the Company’s senior secured credit facility contains restrictions on the Company’s ability to pay dividends. Although historically we have declared cash dividends on our shares, any of all of these factors could result in the modification of our dividend policy, or the reduction, modification or elimination of our dividend in the future.

We believe our current policy with respect to paying a cash dividend supports our view of the Company as a potentially attractive total return investment opportunity. From 2007 through 2014, our underlying proportionately combined Free Cash Flow per share grew at a compound annual rate of 13.1%. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Consolidated — Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow” and “Summary of Our Proportionately Combined Results” for further information on our calculation of Free Cash Flow and our proportionately combined financial measures in Part II, Item 7.

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data includes the results of operations, cash flow and balance sheet data for the years ended, and as of, December 31, 2014, 2013, 2012, 2011, and 2010 for our consolidated group, with the results of businesses acquired during those five years being included from the date of each acquisition. The selected financial data for each of the five years in the period ended December 31, 2014 have been derived from the consolidated financial statements of the Company, which financial statements have been audited by KPMG LLP. The information below should be read in conjunction with the consolidated financial statements (and notes thereon) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7.

         
  Macquarie Infrastructure Company LLC
     Year Ended
Dec 31,
2014
  Year Ended
Dec 31,
2013
  Year Ended
Dec 31,
2012
  Year Ended
Dec 31,
2011
  Year Ended
Dec 31,
2010
     ($ In Thousands, Except Share and Per Share Data)
Statement of operations data:
                                            
Revenue
                                            
Service revenue   $ 1,064,682     $ 770,360     $ 768,617     $ 731,033     $ 622,341  
Product revenue     284,400       267,096       260,893       252,766       210,607  
Financing and equipment lease income     1,836       3,563       4,536       4,992       7,843  
Total revenue     1,350,918       1,041,019       1,034,046       988,791       840,791  
Cost of revenue
                                            
Cost of services(1)     546,609       434,177       448,993       416,438       318,582  
Cost of product sales     192,881       185,843       188,099       189,768       151,782  
Gross profit     611,428       420,999       396,954       382,585       370,427  
Selling, general and administrative expenses     265,254       210,060       213,372       202,486       201,787  
Fees to manager – related party     168,182       85,367       89,227       15,475       10,051  
Depreciation(2)     98,442       39,150       31,587       33,815       29,721  
Amortization of intangibles(3)     42,695       34,651       34,601       42,107       34,898  
Loss from customer contract
termination
    1,269       5,906                    
Loss (gain) on disposal of assets(4)     1,279       226       (1,358 )      1,522       17,869  
Total operating expenses     577,121       375,360       367,429       295,405       294,326  
Operating income     34,307       45,639       29,525       87,180       76,101  
Dividend income     1,344                          
Interest income     112       204       222       112       29  
Interest expense(5)     (73,196 )      (37,044 )      (46,623 )      (59,361 )      (106,834 ) 
Loss on extinguishment of debt     (90 )      (2,472 )                   
Equity in earnings and amortization charges of investee     26,391       39,115       32,327       22,763       31,301  
Gain from acquisition/divestiture of businesses(6)     1,027,054                          
Other (expense) income, net     (1,013 )      681       1,085       912       712  
Net income from continuing operations before income taxes     1,014,909       46,123       16,536       51,606       1,309  
Benefit (provision) for income taxes     24,374       (18,043 )      (2,285 )      (22,718 )      8,697  
Net income from continuing operations   $ 1,039,283     $ 28,080     $ 14,251     $ 28,888     $ 10,006  
Net income from discontinued operations, net of taxes                             81,323  
Net income   $ 1,039,283     $ 28,080     $ 14,251     $ 28,888     $ 91,329  
Less: net (loss) income attributable to noncontrolling interests     (2,745 )      (3,174 )      930       1,545       659  
Net income attributable to MIC LLC   $ 1,042,028     $ 31,254     $ 13,321     $ 27,343     $ 90,670  

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  Macquarie Infrastructure Company LLC
     Year Ended
Dec 31,
2014
  Year Ended
Dec 31,
2013
  Year Ended
Dec 31,
2012
  Year Ended
Dec 31,
2011
  Year Ended
Dec 31,
2010
     ($ In Thousands, Except Share and Per Share Data)
Basic income per share from continuing operations attributable to MIC LLC   $ 16.54     $ 0.61     $ 0.29     $ 0.59     $ 0.21  
Basic income per share from discontinued operations attributable to MIC LLC                             1.78  
Basic income per share attributable to MIC LLC   $ 16.54     $ 0.61     $ 0.29     $ 0.59     $ 1.99  
Weighted average number of shares outstanding: basic     62,990,312       51,381,003       46,635,049       45,995,207       45,549,803  
Diluted income per share from continuing operations attributable to MIC LLC   $ 16.10     $ 0.61     $ 0.29     $ 0.59     $ 0.21  
Diluted income per share from discontinued operations attributable to MIC LLC                             1.78  
Diluted income per share attributable to MIC LLC   $ 16.10     $ 0.61     $ 0.29     $ 0.59     $ 1.99  
Weighted average number of shares outstanding: diluted(7)     64,925,565       51,396,146       46,655,289       46,021,015       45,631,610  
Cash dividends declared per share   $ 3.8875     $ 3.35     $ 2.20     $ 0.80     $  

         
  Macquarie Infrastructure Company LLC
     Year Ended
Dec 31,
2014
  Year Ended
Dec 31,
2013
  Year Ended
Dec 31,
2012
  Year Ended
Dec 31,
2011
  Year Ended
Dec 31,
2010
     ($ In Thousands)
Statement of cash flows data:
                                            
Cash flow from continuing operations
                                            
Cash provided by operating activities   $ 251,615     $ 155,117     $ 217,911     $ 91,042     $ 98,555  
Cash (used in) provided by investing
activities
    (1,068,806 )      (139,636 )      2,477       (39,682 )      (24,774 ) 
Cash provided by (used in) financing
activities
    632,422       76,516       (101,798 )      (53,137 )      (76,528 ) 
Effect of exchange rate changes on cash and cash equivalents     (590 )                         
Net (decrease) increase in cash and cash equivalents   $ (185,359 )    $ 91,997     $ 118,590     $ (1,777 )    $ (2,747 ) 
Cash flow from discontinued operations
                                            
Cash used in operating activities   $     $     $     $     $ (12,703 ) 
Cash provided by investing activities                             134,356  
Cash used in financing activities                             (124,183 ) 
Cash used in discontinued operations(8)   $     $     $     $     $ (2,530 ) 
Change in cash of discontinued operations held for sale(8)   $     $     $     $     $ 2,385  

(1) Includes depreciation expense of $4.4 million, $6.7 million, $6.7 million, $6.6 million and $6.6 million for the years ended December 31, 2014, 2013, 2012, 2011 and 2010, respectively, relating to the district energy business, a component of CP&E segment prior to the Company’s divestiture of the business on August 21, 2014.
(2) Includes non-cash impairment charges of $1.4 million recorded during the second quarter of 2011 at Atlantic Aviation.
(3) Includes non-cash impairment charges of $7.3 million for contractual arrangements recorded during the second quarter of 2011 at Atlantic Aviation.

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(4) Loss on disposal of assets includes $1.3 million, $226,000, $1.5 million and $17.9 million for FBOs disposed at Atlantic Aviation during the years ended December 31, 2014, 2013, 2011 and 2010, respectively. Gain on disposal of assets includes $1.4 million for FBOs disposed at Atlantic Aviation during the year ended December 31, 2012.
(5) Interest expense includes adjustments to derivative instruments, non-cash amortization of deferred financing fees and interest rate swap breakage fees. Interest rate swap breakage fees at Hawaii Gas were $8.7 million for the year ended December 31, 2012. Interest rate swap breakage fees at Atlantic Aviation were $595,000, $2.3 million and $5.5 million for the years ended December 31, 2012, 2011 and 2010, respectively.
(6) Gain from acquisition/divestiture of businesses represents the gain of $948.1 million from IMTT Acquisition from the remeasuring to fair value of the Company’s previous 50% ownership interest and the gain of $78.9 million from the sale of the Company’s interest in the district energy business.
(7) Diluted weighted average number of shares outstanding for 2014 assumes that the convertible senior notes issued in July of 2014 were fully converted into shares on the date they were issued.
(8) The cash used in discontinued operations is different than the change in cash of discontinued operations held for sale due to intercompany transactions that are eliminated on consolidation.

         
  Macquarie Infrastructure Company LLC
     Dec 31,
2014
  Dec 31,
2013
  Dec 31,
2012
  Dec 31,
2011
  Dec 31,
2010
     ($ In Thousands)
Balance sheet data:
                                            
Total current assets   $ 256,890     $ 406,550     $ 253,910     $ 143,313     $ 125,427  
Property, equipment, land and leasehold improvements, net(1)     3,362,585       854,169       708,031       561,022       563,451  
Intangible assets, net(2)     959,634       592,850       626,902       662,135       705,862  
Goodwill     1,996,259       514,494       514,640       516,175       514,253  
Total assets   $ 6,625,188     $ 2,500,865     $ 2,223,694     $ 2,168,633     $ 2,196,742  
Total current liabilities   $ 224,332     $ 271,452     $ 245,330     $ 148,902     $ 171,286  
Deferred income taxes     904,108       189,719       169,392       177,262       156,328  
Long-term debt, net of current portion     2,364,866       831,027       1,052,584       1,086,053       1,089,559  
Total liabilities     3,655,020       1,347,597       1,526,129       1,474,773       1,510,047  
Members' equity   $ 2,787,163     $ 1,042,228     $ 655,028     $ 703,682     $ 691,149  

(1) Includes non-cash impairment charges of $1.4 million recorded during the second quarter of 2011 at Atlantic Aviation.
(2) Includes non-cash impairment charges of $7.3 million for contractual arrangements recorded during the second quarter of 2011 at Atlantic Aviation.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of Macquarie Infrastructure Company LLC should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere herein.

We own, operate and invest in a diversified group of infrastructure businesses that provide services, such as bulk liquid terminalling and handling services, aircraft fueling, contracted power generation and utility gas services to businesses and individuals primarily in the U.S. Our businesses are International-Matex Tank Terminals, or IMTT; Atlantic Aviation; our interests in contracted power generation facilities; and Hawaii Gas.

Our businesses generally operate in sectors of infrastructure with barriers to entry including high initial development and construction costs, the existence of long-term contracts or the requirement to obtain government approvals and a lack of immediate cost-effective alternatives to the services provided. Overall they tend to generate sustainable, stable and growing cash flows over the long term.

In analyzing the financial condition and results of operations of our businesses, we focus primarily on cash generation and our ability to distribute cash to shareholders in particular. The ability of our businesses to generate cash, broadly, is tied to their ability to effectively manage the volume of products sold or services provided and the margin earned on those transactions. Offsetting these are required payments on debt facilities, taxes, pension contributions and capital expenditures necessary to maintain the productivity of the fixed assets of the businesses, among others.

At IMTT, we focus on generating revenue and on efficiently maintaining fixed assets. IMTT seeks to attract third party storage from customers who place a premium on ease of access, and operational flexibility. The substantial majority of IMTT’s revenue is generated pursuant to contracts with an average duration of approximately three years.

At Atlantic Aviation, our focus is on attracting and maintaining relationships with GA aircraft owners and pilots and encouraging them to purchase refueling and other services from our FBOs. Atlantic Aviation’s revenue is correlated with the number of GA flight movements in the U.S. and the business’ ability to service a portion of the aircraft involved in those operations.

The businesses that comprise our CP&E segment generate revenue pursuant to long-dated PPAs and tolling agreements with creditworthy off-takers, typically local and regional utilities.

At Hawaii Gas, we seek to grow by increasing the number of customers served, the volume of gas sold and the margins achieved on gas sales. Hawaii Gas actively markets its products and services in an effort to develop new customers throughout Hawaii.

Atlantic Aviation — Acquisitions

On April 30, 2014, Atlantic Aviation completed the acquisitions of the assets and liabilities of Galaxy Aviation and Boca Aviation (collectively referred to as “Galaxy Acquisitions”). The acquisitions included substantially all of the assets of six FBOs and one new hangar then under construction at one of the six airports on which the FBOs operate. On January 26, 2015, Atlantic Aviation completed the acquisition of the assets and liabilities of the Showalter Flying Service FBO at Orlando Executive Airport. The acquisitions have expanded the business network into Florida.

Equity Offering

On July 15, 2014, we completed an underwritten public offering of 11,500,000 new shares including the exercise of the underwriters’ over-allotment option. The net proceeds from the offering of $739.2 million were used to partially fund the IMTT Acquisition discussed below and for general corporate purposes.

Convertible Senior Notes Offering

On July 15, 2014, we completed the offering of $350.0 million aggregate principal amount of convertible senior notes including the exercise of the underwriters’ over-allotment option. The net proceeds from the convertible senior notes offering of $341.3 million were used to partially fund the IMTT Acquisition discussed below and for general corporate purposes.

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The notes mature on July 15, 2019 and bear interest at a rate of 2.875% payable on January 15th and July 15th of each year, beginning January 15, 2015. The notes were issued at an initial conversion rate of 11.7942 per share (equal to an initial conversion price of approximately $84.79 per share, subject to adjustment) and are convertible into shares of MIC at any time.

IMTT — Acquisition of Remaining Interest (“IMTT Acquisition”)

On July 16, 2014, we acquired the remaining 50% interest of IMTT for a purchase price of $1.029 billion, consisting of $913.6 million in cash and $115.0 million in our shares, excluding transaction costs. We funded the cash consideration for the acquisition using a portion of the proceeds from the July 15, 2014 equity and convertible senior notes offerings mentioned above, and issued 1,729,323 shares to the seller in satisfaction of the equity consideration for the acquisition.

In connection with this acquisition, each of the CEO, chairman and head of government relations of IMTT, all of whom were members of the founding family, retired. The CEO of MIC has assumed the role of interim CEO and chairman of IMTT. Two individuals formerly working with MIC have been named CFO and head of financial planning and analysis, respectively, at IMTT. The former CFO of IMTT assumed the role of chief banking officer of IMTT.

MIC Revolver

In July of 2014, we entered into a senior secured revolving credit facility with a syndicate of banks. The senior secured revolving credit facility provides for a five-year, $250.0 million senior secured first lien revolving credit facility that bears interest at LIBOR plus 1.75%. This facility is guaranteed by Macquarie Infrastructure Company Inc. (“MIC Inc.”), a direct wholly-owned subsidiary of the Company. At February 18, 2015 and at December 31, 2014, the senior secured revolving credit facility remains undrawn. Along with undrawn amounts on facilities at our businesses and other liquid resources, drawings on the revolving credit facility are available to fund growth projects and acquisitions by our existing businesses.

CP&E — Acquisitions and Disposition

2014 Wind Power Generation Facilities Acquisitions

In 2014, the Company acquired controlling interests in wind power generation facilities, consisting of Brahms Wind, LLC, Exergy Idaho Holdings, LLC and Idaho Wind Partners 1, LLC (collectively the “2014 wind power generation facilities”). These wind farms have a total of 134 turbines located in New Mexico and Idaho and have a total wind power generation capacity of 203 MW of electricity. The Company entered into LLC agreements with the noncontrolling interest co-investors whose interests in these project are reflected in ‘noncontrolling interest’ in our consolidated financial statements.

Bayonne Energy Center (or “BEC”) Acquisition

On January 28, 2015, the Company signed a Purchase and Sale Agreement for the purchase of 100% of BEC for a purchase price of $720.0 million consisting of approximately $210.0 million in cash and the assumption of approximately $510.0 million of debt, excluding transaction costs. BEC is a 512 MW natural gas-fired power generating facility located in Bayonne, New Jersey, adjacent to IMTT’s Bayonne facility. BEC has tolling agreements with a creditworthy off-taker for 62.5% of its energy generating capacity with a weighted average remaining life of approximately 13 years. Power produced by BEC is delivered into the New York City power market via a dedicated transmission cable beneath New York Harbor. The Company expects the transaction to close during the first half of 2015, subject to receipt of regulatory approvals and satisfaction of customary closing conditions.

District Energy Business Sale

On August 21, 2014, we completed the sale of the district energy business that had been a part of our CP&E segment for approximately $270.0 million. We previously held a 50.01% controlling interest in the business. Proceeds of the sale, after repayment of debt and closing costs, were divided between us and our co-investor in the business. We deployed our portion of the proceeds to fund a majority of the performance fee (payable to our Manager) generated by the Company over the third quarter of 2014.

As a result of sale of the district energy business, we deconsolidated its assets and liabilities from our consolidated financial statements effective August 21, 2014. We recorded a pre-tax gain of $78.9 million as a

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gain from acquisition/divestiture of businesses, which has been reflected in our consolidated statement of operations for the year ended December 31, 2014.

Costs and Payments Affecting Reporting Metrics

We incurred performance fees paid in cash, pension contributions and transaction-related expenses, including legal and professional costs. These affected EBITDA excluding non-cash items and Free Cash Flow, as defined in “Results of Operations — Consolidated: Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items and Free Cash Flow”, for the year ended December 31, 2014.

We incurred a performance fee of $116.6 million during the third quarter of 2014. Our Board requested, and our Manager agreed, that $65.0 million of the performance fee be settled in cash using the proceeds from the sale of the district energy business in order to minimize dilution. The remainder of the fee of $51.6 million was reinvested in additional shares of MIC.

We made contributions to the IMTT defined benefit pension plans and the Hawaii Gas defined benefit pension plan during the third quarter of 2014 of $20.0 million and $5.0 million, respectively. These contributions were voluntary and funded these plans to levels such that we do not believe any pension contributions will be required over the medium-term. The contributions were funded from cash on hand from financing activities and are fully tax deductible.

We incurred acquisition-related expenses, including legal and professional costs, during the year ended December 31, 2014. These expenses totaled $18.3 million.

Change in Presentation

The acquisition of the remaining 50% interest of IMTT we did not previously own has simplified our reporting as we now consolidate IMTT’s results with those of our other businesses. We have further simplified our reporting by condensing certain revenue and cost of revenue line items that are not required. For IMTT, we have combined terminal and environmental revenue, cost of revenue and the gross profit line items. For Hawaii Gas, we have combined utility revenue with non-utility revenue, cost of revenue including transmission, distribution and production costs, and have eliminated contribution margin. For Atlantic Aviation, we have concluded that items formerly reported as product revenue and cost of product sales are more appropriately reported as service revenue and cost of services, and have combined these items. Prior period amounts have been reclassified to conform to current period presentation.

Income Taxes

For 2014, we will file a consolidated federal income tax return that includes the financial results for IMTT subsequent to July 16, 2014, Hawaii Gas, Atlantic Aviation and our allocable share of the taxable income (loss) from our solar and wind power generation facilities which are treated as partnerships for tax purposes. Prior to July 16, 2014, IMTT filed a separate federal income tax return and subsequent to that date will file as a part of our consolidated federal income tax return (see IMTT — Income Taxes below). Pursuant to tax sharing agreements, the individual businesses included in our consolidated federal income tax return pay MIC an amount equal to the federal income taxes each would have paid on a standalone basis if they were not part of the MIC consolidated federal income tax return.

Prior to July 16, 2014, distributions we received from IMTT were characterized as dividends, returns of capital or capital gains. 20% of any distribution characterized as dividend was included in our taxable income and subject to tax at our statutory rate. Distributions characterized as returns of capital were not subject to current tax. Distributions characterized as capital gain were subject to tax at statutory rates. Subsequent to July 16, 2014, distributions we receive from IMTT generally will not be subject to tax.

As a result of having federal NOL carryforwards, together with other planned tax strategies, we do not expect to make regular federal tax payments until after 2017. For 2014, we expect to report a current year taxable loss of $34.7 million and we do not expect to pay any federal Alternative Minimum Tax. However, we expect the district energy business to pay federal income taxes of $463,000 for the period of January 1, 2014 through August 21, 2014, the date of sale.

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At December 31, 2014, our federal NOL balance was $250.7 million, all of which is available to offset future taxable income, if any, through 2034.

Cash state and local taxes paid by our individual businesses are discussed in the sections entitled “Income Taxes” within the results of operations for each of these businesses.

Absent acquisitions and/or divestitures, we expect that our effective tax rate would be higher than the U.S. federal statutory rate of 35% primarily because of state and local income taxes.

Tax Increase Prevention Act of 2014

In December of 2014, the Tax Increase Prevention Act of 2014 (the “2014 Tax Act”) was signed and became a law. The 2014 Tax Act retroactively extends several tax provisions applicable to corporations, including the extension of 50% bonus depreciation for certain assets placed in service in 2014. Other than the extension of the bonus depreciation provision, we do not expect the provisions of the 2014 Tax Act to have a material effect on our tax profile.

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Results of Operations

Consolidated

             
  Year Ended December 31,   Change
(From 2013 to 2014)
Favorable/(Unfavorable)
  Change
(From 2012 to 2013)
Favorable/(Unfavorable)
     2014   2013   2012   $   %   $   %
     ($ In Thousands) (Unaudited)
Revenue
                                                              
Service revenue   $ 1,064,682     $ 770,360     $ 768,617       294,322       38.2       1,743       0.2  
Product revenue     284,400       267,096       260,893       17,304       6.5       6,203       2.4  
Financing and equipment lease income     1,836       3,563       4,536       (1,727 )      (48.5 )      (973 )      (21.5 ) 
Total revenue     1,350,918       1,041,019       1,034,046       309,899       29.8       6,973       0.7  
Costs and expenses
                                                              
Cost of services     546,609       434,177       448,993       (112,432 )      (25.9 )      14,816       3.3  
Cost of product sales     192,881       185,843       188,099       (7,038 )      (3.8 )      2,256       1.2  
Gross profit     611,428       420,999       396,954       190,429       45.2       24,045       6.1  
Selling, general and
administrative
    265,254       210,060       213,372       (55,194 )      (26.3 )      3,312       1.6  
Fees to manager – related party     168,182       85,367       89,227       (82,815 )      (97.0 )      3,860       4.3  
Depreciation     98,442       39,150       31,587       (59,292 )      (151.4 )      (7,563 )      (23.9 ) 
Amortization of intangibles     42,695       34,651       34,601       (8,044 )      (23.2 )      (50 )      (0.1 ) 
Loss from customer contract termination     1,269       5,906             4,637       78.5       (5,906 )      NM  
Loss (gain) on disposal of assets     1,279       226       (1,358 )      (1,053 )      NM       (1,584 )      (116.6 ) 
Total operating expenses     577,121       375,360       367,429       (201,761 )      (53.8 )      (7,931 )      (2.2 ) 
Operating income     34,307       45,639       29,525       (11,332 )      (24.8 )      16,114       54.6  
Other income (expense)
                                                              
Dividend income     1,344                   1,344       NM              
Interest income     112       204       222       (92 )      (45.1 )      (18 )      (8.1 ) 
Interest expense(1)     (73,196 )      (37,044 )      (46,623 )      (36,152 )      (97.6 )      9,579       20.5  
Loss on extinguishment of debt     (90 )      (2,472 )            2,382       96.4       (2,472 )      NM  
Equity in earnings and amortization charges of investees     26,391       39,115       32,327       (12,724 )      (32.5 )      6,788       21.0  
Gain from acquisition/divestiture of businesses     1,027,054                   1,027,054       NM              
Other (expense) income, net     (1,013 )      681       1,085       (1,694 )      NM       (404 )      (37.2 ) 
Net income before income taxes     1,014,909       46,123       16,536       968,786       NM       29,587       178.9  
Benefit (provision) for
income taxes
    24,374       (18,043 )      (2,285 )      42,417       NM       (15,758 )      NM  
Net income   $ 1,039,283     $ 28,080     $ 14,251       1,011,203       NM       13,829       97.0  
Less: net (loss) income attributable to noncontrolling interests     (2,745 )      (3,174 )      930       (429 )      (13.5 )      4,104       NM  
Net income attributable to MIC LLC   $ 1,042,028     $ 31,254     $ 13,321       1,010,774       NM       17,933       134.6  

NM — Not meaningful

(1) Interest expense includes losses on derivative instruments of $21.3 million, $7.5 million and $21.6 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Key Factors Affecting Operating Results for 2014 Compared to 2013:

contributions from acquisitions during the year, primarily from the IMTT Acquisition;
improved gross profit across all of the existing businesses; partially offset by
higher performance fees;
increased costs primarily related to the acquisitions during 2014; and
increased interest expense.

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Results of Operations: Consolidated — (continued)

Year Ended December 31, 2014 Compared with Year Ended December 31, 2013

Gross Profit

Consolidated gross profit increased from 2013 to 2014 primarily reflecting the consolidation of IMTT’s results and improved results at Atlantic Aviation. This increase is offset by the decrease from the district energy business due to the sale of the business on August 21, 2014.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased in 2014 compared with 2013 primarily as a result of the consolidation of IMTT’s results, increases in legal and transaction costs primarily related to the IMTT Acquisition and the acquisition activities at both Atlantic Aviation and CP&E.

Fees to Manager

Our Manager is entitled to a monthly base management fee based primarily on our market capitalization, and potentially a quarterly performance fee, based on the performance of our stock relative to a U.S. utilities index. For the years ended December 31, 2014 and 2013, we incurred base management fees of $46.6 million and $32.0 million, respectively. For the years ended December 31, 2014 and 2013, we incurred performance fees of $121.5 million and $53.4 million, respectively. Our Manager elected to reinvest the base management and performance fees in additional shares of MIC in all those periods except a portion of the third quarter of 2014 performance fee. For the third quarter of 2014, the Board requested, and the Manager agreed, that $65.0 million of the performance fee be settled in cash using the proceeds from the sale of the district energy business in order to minimize dilution. The remainder of the fee of $51.6 million was reinvested in additional shares of MIC.

The unpaid portion of the base management fees and performance fees, if any, at the end of each reporting period is included in due to manager-related party in the consolidated balance sheets. The following table shows our Manager’s election to reinvest its base management fees and performance fees, if any, in additional shares.

     
Period   Base Management
Fee Amount
($ in thousands)
  Performance
Fee Amount
($ in thousands)
  Shares
Issued
2014 Activities:
                          
Fourth quarter 2014   $ 14,192     $       208,122 (1) 
Third quarter 2014     13,915       116,586       947,583 (2) 
Second quarter 2014     9,535       4,960       243,329  
First quarter 2014     8,994             164,546  
2013 Activities:
                          
Fourth quarter 2013   $ 8,455     $       155,943  
Third quarter 2013     8,336       6,906       278,480  
Second quarter 2013     8,053       24,440       603,936  
First quarter 2013     7,135       22,042       522,638  
2012 Activities:
                          
Fourth quarter 2012   $ 6,299     $ 43,820       980,384  
Third quarter 2012     5,844       23,509       695,068  
Second quarter 2012     4,760             113,847  
First quarter 2012     4,995             147,682  

(1) The Manager elected to reinvest the fourth quarter of 2014 base management fees in shares. The Company issued 208,122 shares, of which 69,771 shares were issued in January of 2015 for the December of 2014 base management fee.
(2) Includes $51.6 million of the third quarter of 2014 performance fee that was reinvested in shares.

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Results of Operations: Consolidated — (continued)

Depreciation

Depreciation expense increased in 2014 compared with 2013 primarily as a result of fixed assets acquired in conjunction with the IMTT Acquisition and the depreciation associated with businesses acquired during 2013 and 2014.

Amortization of Intangibles

Amortization of intangibles increased from 2013 to 2014 primarily as a result of intangible assets acquired in conjunction with the IMTT Acquisition.

Interest Expense and Loss on Derivative Instruments

Interest expense includes losses on derivative instruments of $21.3 million and $7.5 million for 2014 and 2013, respectively. Losses on derivatives recorded in interest expense are attributable to the change in fair value of interest rate hedging instruments and include the reclassification of amounts from accumulated other comprehensive loss into earnings. Excluding the derivative adjustments, interest expense for 2014 compared with 2013 increased primarily due to the consolidation of IMTT, higher interest rate and higher average balance on Atlantic Aviation’s term loan that was refinanced during the second quarter of 2013, and interest expense associated with the convertible senior notes that were issued in July of 2014 at the MIC holding company.

Equity in Earnings and Amortization Charges of Investee

The decrease in equity in earnings in 2014 compared with 2013 is primarily due to the consolidation of IMTT’s results from July 16, 2014 and thereafter compared with the equity method of accounting for IMTT’s results prior to the acquisition date.

Gain From Acquisition/Divestiture of Businesses

On August 21, 2014, we completed the sale of our 50.01% controlling interest in the district energy business, within CP&E, for approximately $270.0 million. Proceeds of the sale were used to repay the outstanding debt balance. The remaining amounts were divided between us and our co-investor in the business. Our share of the remaining proceeds was $59.6 million. As a result of this transaction, we deconsolidated the assets and liabilities of district energy business and recorded a pre-tax gain of $78.9 million.

On July 16, 2014, we completed the acquisition of the remaining 50% interest of IMTT that we did not previously own for $1.029 billion. Prior to this acquisition, our investment in IMTT was accounted for using the equity method of accounting. As of the closing date, we have consolidated IMTT’s results and the business is considered a reportable segment. The acquisition of the remaining 50% interest in IMTT requires that all assets and liabilities of IMTT be recorded at fair value including our previous 50% ownership. This resulted in a pre-tax gain of $948.1 million due to the remeasuring to fair value of our previous 50% ownership of IMTT.

Income Taxes

For 2014, we recorded an income tax benefit of $24.4 million, which includes a federal tax benefit of $22.9 million and a decrease in valuation allowances of $2.2 million. This is offset by state tax expense of $699,000.

For 2013, we recorded an income tax expense of $18.0 million, which included a federal tax expense of $13.1 million, a state tax expense of $1.9 million, and an increase in valuation allowance of $3.0 million.

The change from income tax expense in 2013 to income tax benefit in 2014 is primarily due to the income tax benefit associated with the performance fee recognized in the third quarter of 2014 and the write-off of the deferred tax liability associated with the investment in IMTT under the equity method of accounting. These benefits are partially offset by the capital gain generated on the sale of the district energy business. For tax purposes, a gain of $33.4 million was recognized on the district energy sale, resulting in a capital gain tax of $11.7 million. This amount is expected to be fully offset by our NOLs.

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Results of Operations: Consolidated — (continued)

Valuation allowance:

In calculating our consolidated federal income tax provision, we have reversed valuation allowances for certain federal income tax NOL carryforwards totaling $4.7 million which we now consider more likely than not to be realized, including an NOL carryforward that we inherited as part of the IMTT Acquisition. Our valuation allowance for federal NOL carryforwards was $2.7 million as of December 31, 2013. As of December 31, 2014, there was no valuation allowance for federal NOL carryforwards.

In calculating our consolidated state income tax provision, we have provided a valuation allowance for certain state income tax NOL carryforwards, the utilization of which is not assured beyond a reasonable doubt. We increased the valuation allowance by $1.8 million for 2014 and $3.0 million for 2013 for certain state NOL carryforwards.

Year Ended December 31, 2013 Compared with Year Ended December 31, 2012

Gross Profit

Consolidated gross profit increased from 2012 to 2013 reflecting improved results at Atlantic Aviation, an increased contribution from the contracted power generation businesses and improved results at Hawaii Gas. This increase was partially offset by a reduction in cooling consumption gross profit at the district energy business during 2013.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased in 2013 compared with 2012 primarily as a result of lower legal fees at the MIC holding company level, most significantly those incurred in connection with the arbitration and related matters involving MIC and its co-investor in IMTT incurred during 2012. These improvements were partially offset by transactional costs related to acquisitions made at Atlantic Aviation and an increase in Hawaii Gas primarily related to severance costs.

Fees to Manager

For the years ended December 31, 2013 and 2012, we incurred base management fees of $32.0 million and $21.9 million, respectively. For the years ended December 31, 2013 and 2012, we incurred performance fees of $53.4 million and $67.3 million, respectively. Our Manager elected to reinvest the base management and performance fees in additional shares of MIC in all those periods.

Depreciation

Depreciation expense increased in 2013 compared with 2012 primarily as a result of the depreciation generated by solar power generation facilities that became operational during the year.

Interest Expense and Loss on Derivative Instruments

Interest expense includes losses on derivative instruments of $7.5 million and $21.6 million for 2013 and 2012, respectively. Excluding the derivative adjustments and interest rate swap breakage fees at Atlantic Aviation and Hawaii Gas, interest expense for 2013 compared with 2012 decreased primarily due to the expiration of an unfavorable interest rate swap at Atlantic Aviation in October of 2012 and lower principal balance on the term loan debt.

Equity in Earnings and Amortization Charges of Investee

The increase in equity in earnings for the year ended December 31, 2013 reflects our share of the derivative gains for the year ended December 31, 2013 compared with our share of the derivative losses for the year ended December 31, 2012 and our share of the improved operating results from IMTT.

Income Taxes

For 2013 and 2012, we reported a current federal taxable loss of $10.7 million and $47.8 million, respectively, and did not pay a Federal Alternative Minimum Tax.

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Results of Operations: Consolidated — (continued)

Valuation allowance:

In calculating our consolidated federal income tax provision, we had provided a valuatio