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, 2018

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 CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

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

125 West 55^th 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:
Common stock, par value $0.001 per share		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 every Interactive Data File required to be submitted 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 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer x		Accelerated Filer o
Non-accelerated Filer o		Smaller Reporting Company o		Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 Corporation at June 30, 2018 was $3,177,277,457 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 85,860,351 shares of common stock, with $0.001 par value, outstanding at February 15, 2019.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to Macquarie Infrastructure Corporation’s Annual Meeting of Stockholders for fiscal year ended December 31, 2018, to be held May 15, 2019 is incorporated by reference in Part III to the extent described therein.

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MACQUARIE INFRASTRUCTURE CORPORATION
 
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		Page
PART I
Item 1. Business			3
Item 1A. Risk Factors			18
Item 1B. Unresolved Staff Comments			48
Item 2. Properties			48
Item 3. Legal Proceedings			49
Item 4. Mine Safety Disclosures			50
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer   Purchases of Equity Securities			51
Item 6. Selected Financial Data			54
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of   Operations			57
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			95
Item 8. Financial Statements and Supplementary Data			97
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial   Disclosure			154
Item 9A. Controls and Procedures			154
Item 9B. Other Information			157
PART III
Item 10. Directors, Executive Officers and Corporate Governance			157
Item 11. Executive Compensation			157
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related   Stockholder Matters			157
Item 13. Certain Relationships and Related Transactions and Director Independence			157
Item 14. Principal Accountant Fees and Services			157
PART IV
Item 15. Exhibits and Financial Statement Schedules			158
Item 16. Form 10-K Summary			158

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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 “Business” in Part I, Item 1, “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:

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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 (SEC).

Macquarie Infrastructure Corporation 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 Corporation.

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PART I

ITEM 1. BUSINESS

MIC is a Delaware corporation formed on May 21, 2015. MIC’s predecessor, Macquarie Infrastructure Company LLC, was formed on April 13, 2004. Except as otherwise specified, all references in this Form 10-K to “MIC”, “we”, “us”, and “our” refer to Macquarie Infrastructure Corporation and its subsidiaries.

MIC Level Strategy

We own, operate and intend to expand our portfolio of infrastructure and infrastructure-like businesses with the objective of increasing the amount of Free Cash Flow generated by these businesses over time. Currently, we are focused on three priorities in pursuit of this strategy:

We expect these efforts will, collectively, produce growth in the amount of cash generated by our businesses consistent with maintaining the highest level of environmental, health and safety and governance standards.

General

We currently own and operate a portfolio of businesses that provide services to other businesses, government agencies and individuals primarily in the U.S. The businesses we own and operate are organized into four segments:

Effective October 1, 2018, the Bayonne Energy Center (BEC) and substantially all of our portfolio of solar and wind power generation businesses were classified as discontinued operations and our Contracted Power segment was eliminated. The remaining renewable power development businesses have been reported as components of Corporate and Other. All prior comparable periods have been restated to reflect this change. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments” for further discussions.

We buy, develop and invest in the growth of our businesses based on a general assumption that we will own them indefinitely. It is neither our intent nor our expectation that we will divest of a business at a particular point in our ownership or as a result of having achieved certain targets, financial or otherwise. This view of ownership as a long-term relationship does not preclude sales of all or portions of businesses when we believe that we have either maximized the amount of value in the asset relative to our capability, or the asset is more highly valued by another owner. We may, depending on our ability to access additional debt or equity capital on what we consider attractive terms, sell businesses or assets to generate capital for reinvestment in new or existing businesses at what we believe could be improved returns. With respect to new

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developments, sales of these assets may occur more opportunistically. In general, we have redeployed the proceeds from asset sales in the development of our remaining businesses either through investment in growth projects or acquisitions of small, “bolt-on” operations consistent with our view of MIC as a long-term owner.

Managing the deployment of growth capital effectively has been and is expected to continue to be an important part of our strategy and the creation of stockholder value. Our sources of growth capital include the retained capital generated by our businesses but not distributed as a cash dividend to our stockholders, capital generated through the issuance of additional debt and/or equity securities, or the proceeds from the sale of entire or portions of certain businesses. Over time, we expect to deploy growth capital of $300.0 million to $350.0 million per year in projects and bolt-on acquisitions across all of our businesses. Importantly, although we find value in diversification and the generally uncorrelated nature of the businesses in our current portfolio, we are not obligated to invest in the growth of any one business or segment or the addition of any new segment. We currently expect that, given the relative size of the business, the attractiveness of available opportunities and the tax benefits associated with investing in high-value, physical-asset backed opportunities, a disproportionate share of the growth capital we deploy over the near term will be deployed into projects at IMTT.

Equally important, we seek to drive stockholder value by focusing on business performance improvement. These efforts include upgrading systems and technology, implementing data analytics tools, developing cross business efficiencies and deploying enterprise-wide procurement strategies among others. In 2017, we formed MIC Global Services (MGS), a new entity into which we have consolidated support functions across all of our businesses. We believe that MGS will generate significant savings relative to the cost of maintaining these functions separately in each of our operating companies. A majority of the costs associated with the operation of MGS are allocated to our operating companies. Any unallocated MGS costs are reported as a component of our Corporate and Other segment.

Businesses

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

The different businesses that comprise our Company exhibit these above characteristics to different degrees at different times. For example, a more macro-economically correlated business like Atlantic Aviation may exhibit more volatility during periods of economic downturn than businesses with substantially contracted revenue streams. While not every business we own will meet all of the general criteria described above, we seek to own a diversified portfolio of businesses that possesses a balance of these characteristics.

In addition to the benefits associated with these characteristics, net margins generated by most of our businesses tend to keep pace with historically normal rates of inflation. The price escalators built into many

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customer contracts, and the inflation and cost pass-through adjustments that are typically included in pricing, serve to insulate our businesses to a significant degree from the negative effects of inflation and commodity price fluctuations.

Our Manager

We are a party to a Management Services Agreement with Macquarie Infrastructure Management (USA) Inc. (Manager). Our Manager 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 the management of infrastructure investment vehicles on behalf of third-party investors and an advisor on the acquisition, disposition and financing of infrastructure assets.

Effective November 1, 2018, our Manager waived two portions of the base management fee to which it is entitled under the terms of the Third Amended and Restated Management Services Agreement (Management Service Agreement). Our Manager reserves the right to revoke the waivers and revert to the prior terms of the agreement, subject to providing the Company with not less than a one year notice. We pay our Manager a monthly base management fee of 1% of our equity market capitalization less any cash balances at the holding company. For this, in accordance with the Management Services Agreement, the Manager provides normal ongoing corporate center functions such as facilities, technology, employee benefits and access to services including human resources, legal, finance, tax and accounting among others. Our Manager is responsible for and oversees the management of our operating businesses, subject to the oversight and supervision of our board of directors. Our Manager compensates and has assigned, or seconded, to us employees to serve as our chief executive officer and chief financial officer on a full-time basis. It also compensates and seconds, or makes available, other personnel as required. MIC has no employees at the holding company level.

Our Manager may also earn a performance fee if the quarterly total return (capital appreciation plus dividends) for our stockholders is positive and exceeds the quarterly total return of a U.S. utilities index benchmark both in the quarter and cumulatively. If payable, the performance fee is equal to 20% of the difference between the benchmark return and the total return for our stockholders during the quarter. Per the terms of the Management Services Agreement, our Manager currently reinvests any base management or performance fees in new primary shares of the Company. The Manager may elect to receive either base management or performance fees, if any, in cash but may only change its election during a 20 trading day window following our earnings release. Any change would apply to fees to which it was entitled thereafter.

Our Businesses

Use of Non-GAAP measures

In addition to our results under U.S. GAAP, we use certain non-GAAP measures to assess the performance and prospects of our businesses. In particular, we use EBITDA excluding non-cash items, Free Cash Flow and certain proportionately combined financial metrics. Proportionately combined financial metrics reflect our proportionate interest in our solar and wind facilities, substantially all of which are in discontinued operations.

We measure EBITDA excluding non-cash items as it reflects our businesses’ ability to effectively manage the volume of products sold or services provided, the operating margin earned on those transactions and the management of operating expenses independent of the capitalization and tax attributes of those businesses.

In analyzing the financial performance of our businesses, we focus primarily on cash generation and Free Cash Flow in particular. We believe investors use Free Cash Flow as a measure of our ability to sustain and potentially increase our quarterly cash dividend and to fund a portion of our growth.

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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, Free Cash Flow and Proportionately Combined Metrics” for further information, including our definition and calculation of EBITDA excluding non-cash items, Free Cash Flow and our proportionately combined metrics and for reconciliations of non-GAAP measures to the most comparable GAAP measures.

IMTT

Industry Overview

Bulk liquid terminals provide important infrastructure in the supply chain for a broad range of liquid commodities (see below). Bulk liquid terminals provide vital logistics services to oil producers and marketers, refiners, chemical manufacturers, food processors and commodity traders. Customers typically pay terminal operators such as IMTT on an ‘availability’ or ‘take or pay’ basis to provide tank capacity, loading and unloading access, and pipeline and trans-loading capacity, and also pay additional fees for ancillary services such as heating, blending and packaging.

A number of factors influence demand for bulk liquid terminals in the U.S. Demand for storage rises and falls according to local and regional consumption. In addition, import and export activity accounts for a material portion of the business. Shippers require storage for the staging, aggregation and/or distribution of products before and after transport. The extent of import/export activity depends on macroeconomic factors, such as currency fluctuations, as well as industry-specific conditions, such as supply and demand imbalances in different geographic regions. 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.

Potential entrants into the bulk liquid terminals business face several barriers. Strict environmental regulations, availability of suitable land with connectivity to pipeline and transport logistics, including marine, road and rail infrastructure, local community resistance and initial investment costs may limit the construction of new bulk liquid terminals. These barriers are typically higher around waterways near major urban centers. As a consequence, new tanks are generally built where existing docks, pipelines and other infrastructure can support them. However, restrictions on land use, difficulties in securing environmental permits, and the potential for operational bottlenecks due to constraints on related infrastructure may limit the ability of existing terminals to expand the storage capacity of their facilities.

Business Overview

IMTT is one of the largest providers of independent, or third-party, bulk liquid terminal services in the U.S., based on capacity. IMTT handles products consumed by a diverse range of users in both domestic and foreign markets. IMTT stores or handles primarily refined petroleum products, various commodity and specialty chemicals, renewable fuels and vegetable and tropical oils (collectively liquid commodities). Crude oil constitutes an immaterial portion of IMTT’s overall storage and handling operations. The business operates 19 terminals including 17 in the U.S. and two in Canada (one partially owned) with principal operations in the New York Harbor market and on the Lower Mississippi River.

Since our initial investment in IMTT in May 2006, we have deployed capital in the growth and development of additional storage capacity, facilities and related infrastructure (pipes, pumps, docks, etc.) and acquisitions of facilities in Illinois and a portfolio of terminals primarily in the U.S. Southeast. Consistent with IMTT’s strategy below, we expect to be able to continue to deploy capital in the growth and expansion of storage capacity and capabilities and to generate attractive risk-adjusted returns.

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IMTT — (continued)

The table below summarizes the revenue generated by product type by IMTT for the year ended December 31, 2018:

Refined Products		Chemical				Renewable/Vegetable & Tropical Oil				Crude Oil				Other
54%			29	%			7	%			2	%			8	%(1)

Following is summary financial information for IMTT ($ in millions):

		As of, and for the Year Ended, December 31,
		2018				2017				2016
Revenue		$	510.8			$	549.4			$	532.5
Net income(1)			65.3				363.0				83.1
EBITDA excluding non-cash items(2)			286.6				326.2				321.9
Total assets			4,020.5				4,109.4				3,978.4

Locations

As of December 31, 2018, IMTT comprised the following facilities and storage capacity, not including tanks used in packaging, recovery tanks, and/or other storage capacity not typically leased.

Facility		Land				Aggregate Capacity of Storage Tanks in Service (Millions of Barrels)				Percent of Ownership
Facilities in the United States:
Lower Mississippi River Terminals (4)			Owned				20.6				100.0	%
Bayonne Terminal			Owned				15.8				100.0	%
Other Terminals (12)			Owned				6.9				100.0	%
Facilities in Canada:
Quebec City, Quebec			Leased				2.0				100.0	%
Placentia Bay, Newfoundland			Leased				3.0				20.1	%
Total							48.3

IMTT facilities generally operate 24 hours a day providing customers with prompt access to a wide range of logistical services. In each of its two key markets, IMTT’s scale ensures availability of sophisticated product handling capabilities. IMTT continuously improves speed and flexibility of operations at its facilities by investing in upgrades of its docks, pipelines and pumping infrastructure and facility management systems.

Lower Mississippi River Terminals (48% of gross profit)

On the Lower Mississippi River, IMTT currently operates four terminals (St. Rose, Gretna, Avondale and Geismar). With combined storage capacity of 20.6 million barrels, the four sites give IMTT substantial market share in the storage and handling of refined petroleum products, bulk liquid chemicals, vegetable and tropical oils on the strategically important Lower Mississippi River. These terminals serve a predominantly import/export market.

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IMTT — (continued)

The Lower Mississippi River facilities also give IMTT a substantial presence in a key domestic transport hub. The Lower Mississippi River serves as a major transshipment point for agricultural products (such as vegetable and tropical oils) and commodity chemicals (such as methanol) between the central U.S. and the rest of the world. The region also has substantial traffic related to the petroleum industry. Lower Mississippi River refiners and traders send products to other regions of the U.S. and overseas and use IMTT’s Lower Mississippi River facilities to provide aggregation and transshipment services. The Lower Mississippi River facilities also serve as an aggregation point for feedstocks prior to being utilized by refinery and chemical plant processing units located nearby. These facilities enjoy relatively unencumbered marine and road access when compared to other, more congested waterways such as the Houston Ship Channel.

Bayonne Terminal (37% of gross profit)

Located on the Kill Van Kull between New Jersey and Staten Island, New York, the 15.8 million barrel capacity IMTT-Bayonne Terminal occupies an attractive position in New York Harbor where it has substantial market share. New York Harbor serves as the main petroleum distribution hub in the northeast U.S. and a physical settlement site for certain futures contracts traded on the New York Mercantile Exchange (NYMEX). In addition to waterborne shipments, products reach New York Harbor through petroleum product pipelines including the Colonial Pipeline which originates in Houston, Texas. Pipelines also move imports and exports of refined petroleum product to and from New York Harbor and various inland markets. With connections to the Colonial, Buckeye and Harbor refined petroleum product pipelines, as well as rail and road connectivity and blending capabilities, the IMTT-Bayonne Terminal provides its customers with considerable logistical and commercial flexibility.

IMTT-Bayonne has the capability to quickly load and unload the largest bulk liquid transport ships entering New York Harbor which is an important competitive advantage. The U.S. Army Corp of Engineers has dredged the Kill Van Kull channel passing the IMTT-Bayonne docks to 50 feet. IMTT has dredged two of its docks to 47 feet, allowing large vessels to dock, load and unload products. Most of IMTT’s competitors in New York Harbor have facilities located on the southern portion of the Arthur Kill (water depth of approximately 37 feet), and large ships must transfer a portion of their cargoes to barges before docking (a process known as lightering). Lightering increases the cost and time associated with loading and unloading.

Competition

The competitive environment in which IMTT operates varies by terminal location and product. The principal competition for each of IMTT’s facilities comes from other bulk liquid terminals located in the same regional market. Secondary competition for IMTT’s facilities comes from bulk liquid terminals located in the same broad geographic region as IMTT’s terminals. For example, IMTT’s Lower Mississippi River facilities indirectly compete with bulk liquid terminals located on the Houston Ship Channel.

Independent terminal operators generally compete on the basis of the location, connectivity 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 and delivery from the terminal, all of which must be in compliance with applicable environmental regulations. A terminal with a favorable location will have access to a variety of 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 prices is often dependent on the quality, versatility and reputation of its facilities.

IMTT faces significant competition from a variety of international, national and regional energy companies, including large, diversified midstream entities, global terminal operators and large multi-national energy companies. We believe that IMTT is favorably positioned to compete in the industry due to the strategic location of terminals on the Gulf Coast and in New York Harbor and certain secondary markets, its reputation, the prices charged for its services and the connectivity, quality and versatility of those services. In particular, we believe that IMTT’s proximity to petroleum refineries and chemical plants in both of its key markets and to the very substantial end use market in the Northeast are sources of competitive advantage and provide diversity in our revenue.

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IMTT — (continued)

As noted above, we believe that significant barriers to entry exist in the terminalling business. These barriers include significant capital requirements and execution risk, a lengthy permitting and development cycle, financing challenges, a finite number of sites suitable for development, operating expertise and customer relationships.

Customers

IMTT provides bulk liquid terminalling services primarily to oil refiners and marketers, chemical manufacturers, food processors and commodity traders. These customers, in turn, serve a range of end users in both domestic and foreign markets. Within its terminals, IMTT has the ability to repurpose tanks and related infrastructure for various bulk liquid products both to respond to and to anticipate changes in customer demand. IMTT does not depend on a single customer, the loss of which would have a material adverse effect on IMTT.

For the year ended December 31, 2018, approximately 50% of IMTT’s revenue was generated by its top ten customers, of which eight were rated investment grade and two were not rated. Customers typically sign contracts which, among other things, provide for a fixed periodic payment (usually monthly) for access to and use of IMTT’s facilities. These payments may be expressed in terms of cents per barrel of capacity, a dollar amount per unit of infrastructure, or a dollar amount per month. These amounts are payable whether the customer uses the facilities and services or not and does not include additional charges for throughput or ancillary services. In 2018, approximately 80% of IMTT’s revenues were generated from these ‘availability’ style payments.

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

Regulation

The rates that IMTT charges for its services are not subject to regulation. However, a number of regulatory agencies, including the United States Environmental Protection Agency, New Jersey Department of Environmental Protection, Louisiana Department of Environmental Quality, Department of Transportation, Department of Homeland Security and the United States Coast Guard, regulate 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. While changes in environmental, health and safety regulations pose a risk of higher operating costs, such changes are generally phased in over time to manage the impact on both the industry and the business.

Few of IMTT’s facilities require significant environmental remediation. Those that do have such efforts overseen by various state and federal agencies. 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, or more. See “Legal Proceedings” in Part I, Item 3, for further discussions.

Employees

As of December 31, 2018, IMTT (excluding the Newfoundland terminal) had a total of 917 employees, of which 274 employees were unionized. We believe relations with both union and non-union employees at IMTT are generally good.

The day-to-day operations of IMTT are managed by individual terminal managers who are responsible for most aspects of the operations. IMTT’s operations are overseen by senior personnel with significant experience in the bulk liquid terminals industry. Management of the business is headquartered in New Orleans, Louisiana.

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Atlantic Aviation

Industry Overview

Fixed based operations (FBOs) primarily service the GA segment of the air transportation industry. Local airport authorities own the airport properties and grant FBO operators a long-term ground lease that includes the right to provide fueling and other services. Fueling services provide the majority of an FBO’s revenue and gross margin.

FBOs often operate in environments with high barriers to entry. Airports tend to have limited physical space for additional FBOs and airport authorities generally do not have an incentive to add FBOs unless there is a significant demand for services that cannot be met by the existing FBO at the airport. Development of a new FBO requires securing airport approvals, completing the design and construction and may involve substantial time and capital. Furthermore, airports typically impose minimum standards with respect to the experience, capital investment and breadth of services provided by the FBO.

The ownership of FBOs in the U.S. is highly fragmented with the majority of facilities individually owned and operated rather than part of networks. Consolidation has been and is expected to continue to be an important feature of the industry as larger networks are able to achieve economies of scale in fuel and insurance purchasing, marketing and back office operations compared with individual owners/operators.

Demand for FBO services is driven by the level of GA flight activity which is defined as the number of take-offs and landings in a given period. We believe GA flight activity will continue to expand at rates broadly consistent with overall economic activity in the U.S.

Business Overview

At December 31, 2018, Atlantic Aviation operated FBOs at 70 airports in the U.S. Atlantic Aviation’s FBOs provide fuel, terminal, aircraft hangaring and other services primarily to owners/operators of GA aircraft, but also to commercial, military, freight and government aviation customers.

Atlantic Aviation has been a part of the MIC portfolio since our IPO. In December 2004, the business owned and operated a total of 16 FBOs. Through a roll-up of FBOs, we have increased the size of the network to a total of 70 facilities. Consistent with our strategy of seeking to optimize the portfolio, we have exited markets we believe have limited growth potential in favor of entering those with better prospects. Since our IPO, we have deployed capital in Atlantic Aviation in the acquisition of FBOs and projects including the construction of terminals and aircraft hangars, fuel tank farms, aircraft parking (ramps) and a range of smaller projects.

Following is summary financial information for Atlantic Aviation ($ in millions):

		As of, and for the Year Ended, December 31,
		2018				2017				2016
Revenue		$	962.5			$	846.4			$	740.2
Net income(1)			96.4				124.4				59.5
EBITDA excluding non-cash items(2)			264.7				247.2				225.1
Total assets			1,675.7				1,710.5				1,564.7

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Atlantic Aviation — (continued)

Operations

Atlantic Aviation operates high-quality facilities and focuses on attracting customers who desire personalized service. Fuel sales generated 60% of gross margin in 2018. Other services, including de-icing, aircraft parking and hangar rental, aircraft cleaning and catering provided the balance. Fuel is stored in tank farms owned either by Atlantic Aviation or by the airport and Atlantic Aviation operates owned or leased refueling vehicles to move fuel from the tank farms to the aircraft being serviced. At some of Atlantic Aviation’s locations, services are also provided to commercial airlines, freight operators, and military and government users. 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 vary, Atlantic Aviation generally passes changes in fuel costs through to customers and seeks to maintain and, when possible, increase its dollar-based margin per gallon. In general, the business has minimal exposure to commodity price fluctuations as it carries a limited inventory of jet fuel.

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 the airport authorities who own or manage the airport. Atlantic Aviation works with these airport authorities to optimize lease lengths through capital improvements or other enhancements to the airport.

Atlantic Aviation’s EBITDA-weighted average remaining lease length (including leases extendable at Atlantic Aviation’s sole discretion) was 19.9 years and 20.3 years at December 31, 2018 and 2017, respectively. The leases at nine of Atlantic Aviation’s FBOs, collectively accounting for approximately 15.0% of Atlantic Aviation’s gross margin, are expected to be renegotiated and extended within the next five years. No individual FBO generated more than 10% of Atlantic Aviation’s gross margin at December 31, 2018.

The airport authorities have certain termination rights in each of Atlantic Aviation’s leases of the FBO. 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. Leases related to fewer than twenty out of the 70 FBOs 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 airport authority to make best efforts to relocate the FBO.

Atlantic Aviation periodically evaluates its portfolio of FBOs and occasionally concludes 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 these cases, it may elect to sell the site or not renew the lease upon maturity.

Marketing

Atlantic Aviation has a number of marketing programs, each utilizing an internally-developed point-of-sale system that tracks GA flight movements. This 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.

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Atlantic Aviation — (continued)

Competition

Atlantic Aviation competes with other FBO operators at more than half of its locations, and its facilities may also face indirect competition from FBOs located at nearby airports. 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.

Atlantic Aviation’s main competitors are Signature Flight Support, Jet Aviation, Million Air, Sheltair Aviation and TAC Air. To our knowledge, other than certain of the competitors listed, no competitor operated more than 20 FBOs in the U.S. at December 31, 2018.

Customers

Atlantic Aviation does not depend on a single customer, the loss of which would have a material adverse effect on the business.

Regulation

The aviation industry is overseen by a number of regulatory agencies, including the Department of Homeland Security, Department of Transportation and Environmental Protection Agency, but its primary regulator is the Federal Aviation Administration (FAA). In addition, local airport authorities also regulate FBOs. The business must comply with federal, state and local environmental statutes and regulations associated in part with the operation of fuel storage tank systems and mobile fueling vehicles. These requirements include 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 as well as local fire departments and other agencies. 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

As of December 31, 2018, the business employed 1,924 people, of which 203 employees were subject to collective bargaining agreements. We believe relations with both union and non-union employees at Atlantic Aviation are generally 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. Atlantic Aviation’s operations are overseen by senior personnel with significant experience in the aviation industry.

MIC Hawaii

Industry Overview

According to the Energy Information Administration, energy consumption in Hawaii is split approximately equally between the transportation market and the industrial/commercial/residential markets. Gas holds approximately 2% share of the Hawaii energy market and serves primarily the residential and commercial markets with applications including water heating, drying, cooking, emergency power generation and other select uses.

Beginning in 2008 with the Hawaii Clean Energy Initiative, the State of Hawaii embarked on a program to be a leader in the development and deployment of clean energy solutions. MIC Hawaii has invested in multiple clean energy projects including the recent commissioning of a renewable natural gas facility that captures and purifies wastewater biogas for injection into the Hawaii Gas utility pipeline on Oahu. MIC Hawaii expects to pursue additional growth opportunities in line with Hawaii’s clean energy goals.

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MIC Hawaii — (continued)

Business Overview

MIC Hawaii comprises Hawaii Gas and several smaller businesses collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii. From 2006 to 2015, our MIC Hawaii segment consisted solely of Hawaii Gas, a combination of Hawaii’s only government-franchised gas utility and an unregulated liquefied petroleum gas (LPG) distribution business. Founded in 1904, Hawaii Gas serves the State’s approximately 1.4 million residents and 10.0 million visitors across Oahu, Hawaii, Maui, Kauai, Molokai and Lanai (the main islands).

Hawaii Gas’ utility business includes the processing, distribution and sale of synthetic natural gas (SNG) and renewable natural gas (RNG) and the distribution and sale of re-gasified liquefied natural gas (LNG) on the island of Oahu, as well as the distribution and sale of LPG via pipeline on all of the main islands. Hawaii Gas’ unregulated business distributes LPG by truck to individual tanks located on customer sites or distributes LPG in cylinders filled at central locations to customers on all the main islands. Customers include a wide variety of residential, commercial, hospitality, military, public sector and wholesale users.

Hawaii Gas’ primary products consist of:

Synthetic Natural Gas (SNG):  The business converts a light hydrocarbon feedstock (naphtha) into SNG which has a similar heating value to natural gas. Hawaii Gas operates the only SNG processing capability in Hawaii at its plant located on the island of Oahu. SNG is delivered by underground pipelines to utility customers throughout Oahu.

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 and can be efficiently transported in a range of quantities. LPG is typically stored in cylinders or tanks and Hawaii Gas maintains the largest network of LPG storage throughout Hawaii. Domestic and commercial applications of LPG are similar to those of natural gas and SNG.

Liquefied Natural Gas (LNG):  LNG is transported to Hawaii in conventional intermodal cryogenic containers from the U.S. mainland. Hawaii Gas utilizes LNG to offset up to 30% of the naphtha used to produce SNG that supplies customers of the regulated utility on Oahu.

Renewable Natural Gas (RNG):  In December 2018, Hawaii Gas commissioned a renewable natural gas facility capable of collecting and purifying biogas from the Honouliuli Wastewater Treatment Plant and injecting it into the utility pipeline distribution system on Oahu. The business continues to evaluate a range of additional renewable feedstock sources including other waste water treatment plants, landfills and locally produced biomass.

Following is summary financial information for MIC Hawaii ($ in millions):

		As of, and for the Year Ended, December 31,
		2018				2017				2016
Revenue		$	291.8			$	277.9			$	233.9
Net (loss) income(1)			(13.1	)			25.4				35.7
EBITDA excluding non-cash items(1)(2)			37.3				60.6				62.8
Total assets			501.1				532.1				501.7

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MIC Hawaii — (continued)

Customers

The businesses of MIC Hawaii provide services to commercial, residential and governmental customers. MIC Hawaii does not depend on any single customer, the loss of which would have a material adverse effect on the business.

Utility Regulation

Hawaii Gas’ utility business is regulated by the Hawaii Public Utilities Commission (HPUC). The HPUC exercises broad regulatory oversight and investigative authority over all public utilities 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 gas sold by Hawaii Gas’ utility business, Hawaii Gas is permitted to pass through changes in its fuel costs by means of a monthly fuel adjustment charge.

Hawaii Gas’ 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 upon, for example, increased costs related to providing services. 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.

On December 21, 2018, the HPUC issued its Final Decision and Order in the rate case filed by Hawaii Gas in August 2017, authorizing an increase in regulated revenue of $8.9 million or 8.4%. This is consistent with the HPUC’s Interim Decision and Order issued in June 2018 that approved new rates effective July 1, 2018.

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.

Competition

Depending upon the end-use, Hawaii Gas competes with electric generators as well as other gas providers. 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 solar photovoltaic generating capacity.

Hawaii Gas’ Utility Business.  Hawaii Gas holds the only government franchise for utility gas services in Hawaii. This enables Hawaii Gas to utilize public easements for its pipeline distribution systems. This franchise also provides for the exclusive use of extensive below-ground distribution infrastructure that Hawaii Gas owns and maintains. Hawaii Gas competes on the basis of price, reliability and the energy preferences of its customers.

Hawaii Gas’ Non-Utility Business.  Hawaii Gas sells LPG in an unregulated market on the main islands of Hawaii. There are several other wholesale and smaller retail distributors that compete in the LPG market. 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 sources naphtha feedstock for its SNG plant from Par Hawaii Refining, LLC (Par) pursuant to a contract that expires in December 2020. The majority of Hawaii Gas’ LPG is purchased from an off-island supplier. Hawaii Gas sources LNG from a U.S. mainland supplier pursuant to a contract that expires in July 2021. RNG is purchased from the City and County of Honolulu under a fixed rate contract that expires in December 2024.

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MIC Hawaii — (continued)

SNG Plant and Distribution System (Utility Business)

Hawaii Gas processes and distributes SNG from a plant located on the west side of Oahu. 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. On islands other than Oahu, LPG is distributed by direct deliveries from an off-island shipper and by barge from Oahu to holding facilities or base-yards on those islands. It is then distributed via pipelines to utility customers. Approximately 90% of the Hawaii Gas pipeline system is on Oahu.

Distribution System (Non-Utility Business)

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

Environmental Permits

The businesses of MIC Hawaii require environmental operating permits, the most significant of which are air and wastewater permits required for the Hawaii Gas SNG plant.

Employees

As of December 31, 2018, MIC Hawaii had 330 employees, of which 215 are subject to the terms of collective bargaining agreements. We believe relationships with both union and non-union employees are generally good.

Corporate and Other

Corporate and Other comprises MIC Corporate, our shared services center and other smaller businesses.

The financial results for MIC Corporate also reflect the costs associated with operating as a public company. These include primarily the fees paid in connection with the evaluation of various investment and acquisition/disposition opportunities, fees paid to the New York Stock Exchange, fees paid to our external auditors and advisors and the cost of Director’s and Officer’s insurance. Other corporate center costs including the salaries, benefits and incentives paid to individuals seconded to MIC, together with the cost of our facilities, technology and services provided to the holding company by the Manager, are covered in the Fees to Manager — related party line item.

In 2017, we formed and staffed MGS, a shared services center that provides common administrative functions including payroll processing, health and benefit plan administration, information technology, procurement, tax, legal and certain finance and accounting functions to the businesses in our portfolio. Substantially all of the costs associated with the operation of MGS are allocated to each of our operating companies. Any unallocated MGS costs are reported as a component of our Corporate and Other segment.

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Corporate and Other — (continued)

Other businesses within Corporate and Other include those that do not meet the criteria for being a reportable segment on a standalone basis. These include a business relationship with a third party renewables developer, the Company’s joint venture with a developer of solar power facilities and other smaller businesses. Prior to October 2018, these businesses were reported as part of the Contracted Power segment. Following the sale of BEC and the commencement of a sale process involving substantially all of our portfolio of solar and wind power generation businesses, the Contracted Power segment has been eliminated.

Employees

As of December 31, 2018, Corporate and Other had 142 employees at MGS. MIC Corporate has no employees as our Manager seconds those individuals who serve as our chief executive officer and chief financial officer on a full-time basis and makes other personnel available as required.

Consolidated

Our Employees

As of December 31, 2018, our consolidated businesses employed approximately 3,300 people, of which approximately 20% were subject to collective bargaining agreements.

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AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including Macquarie Infrastructure Corporation) 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 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 the statements of beneficial ownership of 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 About MIC page on our website where we post documents including:

Our Code of Business 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 Business 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 55^th 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, cash flows 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 economic, equity and credit market conditions, collectively or individually, become disrupted, our ability to raise equity or obtain capital, to repay or refinance credit facilities at maturity, pay significant capital expenditures, pay, maintain or grow dividends 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. 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 our Company.

Continued economic expansion and reductions in unemployment rates and the tightening of labor markets could increase the cost of operating any or all of our businesses or make it more difficult to recruit and retain those with appropriate skillsets. In a tight labor market it may take longer to identify and hire additional employees and such delays could, in turn, increase fees paid to recruiting firms or the amount of overtime paid to existing employees. A tightening labor market may also drive the cost of retaining employees with appropriate skillsets higher to the extent we face increased competition from employers willing or able to pay higher wages.

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

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

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,

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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 operations require significant growth capital expenditures and a failure to make such capital expenditures could have a material adverse effect on our business, financial condition, operating results and prospects.

An important part of our strategy is the prudent deployment of capital to grow our existing businesses and develop and acquire additional businesses. Our ability to deploy capital depends on a number of variables including (i) commodity prices; (ii) customer demand; (iii) competitive and economic conditions; (iv) availability of suitable land on which to operate; (v) ability to obtain required regulatory approvals; and (vi) availability of capital. Our sources of growth capital include capital retained by our businesses, debt or equity issuances, and proceeds from the sales of businesses or assets. We may not generate sufficient cash or be able to arrange additional financing to fund our future growth needs on terms acceptable to us or at all. Our ability to arrange financing, if needed, will depend on, among other factors, our credit ratings, leverage, financial and operating performance, general economic, financial, and regulatory conditions and prevailing capital market conditions. Many of these factors are beyond our control. If we incur significant additional indebtedness, or if we do not continue to generate sufficient cash from our operations, our credit ratings could be adversely affected, which would likely increase our future borrowing costs and could affect our ability to access additional capital. If we fail to deploy growth capital as planned, we may be unable to, among other things, expand our businesses to meet competitive challenges; take advantage of strategic acquisition and development opportunities; upgrade our facilities and systems; and create stockholder value. Any or all of these could have a material adverse effect on our businesses, financial condition, operating results and prospects. In addition, under current law, certain capital expenditures are eligible for accelerated depreciation for U.S. federal income tax purposes. If we fail to take advantage of this accelerated depreciation when prudent to do so, our tax position could be materially adversely impacted.

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

Although our businesses tend to benefit from fundamental drivers of growth which are stable over time, we will attempt to augment that growth by finding, acquiring or developing, and integrating additional businesses. We anticipate that a significant portion of our future projected growth will be derived from inorganic sources which are contingent on our ability to successfully find and execute opportunities to deploy incremental capital. We may not find or acquire such opportunities 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 returns. If we invest capital in a development project, we may not be successful in the execution of the full project or in integrating it into our portfolio and/or achieving the expected level of performance. Failure to do any of these could result in higher indebtedness or expenses and/or in generating less cash flows than expected or generating growing amounts of cash flows at a slower than anticipated rate, either of which could result in a reduction in our share price.

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

With the exception of our airport services business, our businesses generally possess one or more of the following characteristics: generally stable demand; long-term contracts; regulated operations; and inflation linked revenue. Our airport services business generates revenue and cash flows in a way that is broadly reflective of the economic health of the country. To the extent we invest in or acquire or develop businesses with revenue and cash generating capacity that is similarly GDP sensitive or businesses that do not possess these characteristics, our financial results could become more volatile and our share price could decline as a result of an increase in the real or perceived 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 capital or pay dividends to stockholders.

The majority of our indebtedness matures within four to seven years. Refinancing this debt may result in substantially higher interest rates or credit margins or substantially more restrictive covenants. Each 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 capital and continue to pay, maintain or grow dividends to our stockholders. We cannot provide assurance that we or the other owners of any of our businesses will be willing or able to make capital contributions to repay some or all of the debt if required.

The interest rates under our credit facilities may be impacted by the phase-out of LIBOR.

LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rates on loans globally. We generally use LIBOR as a reference rate to calculate interest rates under our credit facilities. In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index, the Secured Overnight Financing Rate (SOFR), calculated using short-term repurchase agreements backed by Treasury securities. SOFR is observed and backward looking, unlike LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR). SOFR also may be more volatile than LIBOR. Whether or not SOFR, or another alternative reference rate, attains market traction as a LIBOR replacement tool remains in question. If LIBOR ceases to exist, we may need to renegotiate our credit agreements to replace LIBOR with an agreed upon replacement index, and certain of the interest rates under our credit agreements may change. The new rates may not be as favorable to us as those in effect prior to any LIBOR phase-out. We may also find it desirable to engage in more frequent interest rate hedging transactions.

Our holding company level debt could adversely affect our results of operations, cash flows and financial condition, limit our operational and financing flexibility and negatively impact our business. As a holding company, we are dependent on the ability of our businesses to make distributions to us to pay our expenses, pay dividends and repay indebtedness.

At December 31, 2018, we had outstanding $752.4 million of convertible senior notes and had available a $600.0 million senior secured revolving credit facility, which was undrawn. These holding company level debt instruments increase our interest payments and could have significant adverse effects on our business, including:

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We expect to obtain the funds to pay our operating expenses, pay dividends 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, pay, maintain or grow dividends 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, pay dividends and repay our indebtedness. In addition, the senior secured revolving credit facility is guaranteed by MIC Ohana Corporation, our direct, wholly owned subsidiary. MIC Ohana Corporation 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. 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.

Development and investment in our businesses involve various construction, operational and regulatory risks that could materially adversely affect our financial results.

The development, construction, operation and maintenance of our businesses involve various operational risks, which can include mechanical and structural failure, accidents, labor issues or the failure of technology to perform as anticipated. Events outside our control, such as economic developments, changes in fuel prices or the price of other feedstocks, governmental policy changes, demand for energy and the like, could materially reduce the revenues generated or increase the expenses of constructing, operating or maintaining our businesses. Degradation of the performance of our facilities may reduce our revenues. Unanticipated capital expenditures associated with maintaining, upgrading or repairing our facilities may reduce profitability. We may also choose or be required to decommission a project or other asset. The decommissioning process could be protracted and result in the incurrence of significant financial and/or regulatory obligations or other uncertainties.

Our businesses may also face construction risks typical for infrastructure businesses, including, without limitation:

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Such developments could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of construction activities once undertaken. Construction costs may exceed estimates for various reasons, including inaccurate engineering and planning, labor and building material costs in excess of expectations and unanticipated problems with project start-up. Such unexpected increases may result in increased debt service costs and funds being insufficient to complete construction. Our facilities under development may receive little or no cash flow through the date of completion of development and may experience operating deficits after the date of completion. In addition, market conditions may change during the course of development that make such development less attractive than at the time it was commenced. Any events of this nature could severely delay or prevent the completion of, or significantly increase the cost of, the construction. In addition, there are risks inherent in the construction work which may give rise to claims or demands against us from time to time. Delays in the completion of any project may result in lost revenues or increased expenses.

We rely on third-party suppliers and contractors when developing our projects. The failure of those third parties to perform could adversely affect our results of operations, cash flows and financial condition.

We source engines, boilers, chillers, cogeneration systems and other complex components from third-party suppliers and engage third-party contractors for the construction of power projects. We typically enter into contracts with our suppliers and contractors on a project-by-project basis and do not maintain long-term contracts with our suppliers or contractors. Therefore, we are generally exposed to price fluctuations and availability of products and components sourced from our suppliers and construction services procured from our contractors. In light of changing market dynamics and government policies, the price and availability of certain products have been subject to significant volatility in recent years. Increases in the prices of products and components, decreases in their availability, fluctuations in construction, labor and installation costs, or changes in the terms of our relationships with our suppliers and contractors may increase the cost of procuring equipment and engaging contractors and hence materially adversely affect our results of operations, cash flows and financial condition.

Furthermore, the delivery of defective products or construction services by our suppliers or contractors which are otherwise not in compliance with contract specifications, or the late supply of products or construction services, may cause construction delays or projects that fail to adhere to our quality and safety standards, which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Finally, we rely on third party contractors to help us develop new projects. If these contractors do not fulfill their contractual obligations we could incur additional expenses or lose part of the capital we invested in these new facilities.

Our inability to realize targeted cost savings or maintain agreed upon service levels at our shared services center may negatively impact our business.

We have formed and staffed a shared service center that is providing common administrative functions, including payroll processing, health and benefit plan administration, information technology, procurement, tax, legal and certain finance and accounting functions to the businesses in our portfolio. If any of these shared

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service functions do not perform effectively, or if we fail to adequately monitor their performance, we may not be able to achieve expected cost savings or we may have to incur additional costs to correct errors made by such shared service functions and our reputation could be harmed. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, effects on financial reporting, litigation or remediation costs. In addition, the concentration of processes in one shared service center means that any disruption at this facility could impact all or a substantial portion of our businesses. Any of these potential effects could have an adverse effect on our results of operations, cash flows and financial condition.

Changes to trade regulation, quotas, duties or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may increase our costs, result in fewer growth capital opportunities or projects, limit the amount of raw materials and products that we can import, decrease demand for certain of our services, or otherwise adversely impact our business.

The current U.S. administration has voiced concerns about imports from countries that it perceives as engaging in unfair trade practices, has increased tariffs on certain goods imported into the United States from those countries, including China and other countries from which we import components or raw materials, and has raised the possibility of imposing significant, additional tariff increases. The announcement of tariffs on imported products by the U.S has triggered retaliatory actions from certain foreign governments, including China, and may trigger retaliatory actions by other foreign governments, potentially resulting in a “trade war”. A “trade war” or other governmental action related to tariffs or international trade agreements or policies could increase our costs, reduce the demand or opportunity to deploy growth capital in our businesses at attractive rates of return, limit the amount of raw materials, components and other products that we can import, restrict our customers’ ability to deploy growth capital or transport products and therefore decrease demand for certain of our services, and/or adversely affect the U.S. economy or certain sectors thereof and, thus, adversely impact our businesses.

Warranties provided by our suppliers and contractors may be limited or insufficient to compensate our losses, or may not cover the nature of our losses incurred.

We expect to benefit from various warranties, including product quality and performance warranties, provided by our suppliers and contractors. These suppliers and contractors, however, may file for bankruptcy, cease operations or otherwise become unable or unwilling to fulfill their warranty obligations. Even if a supplier fulfills its warranty obligations, the warranty may not be sufficient to compensate us for all of our losses. In addition, the warranty period generally expires several years after the date that the equipment is delivered or commissioned and is subject to liability limits. Where damages are caused by defective products provided by our suppliers or construction services delivered by our contractors, our suppliers or contractors may be unable or unwilling to perform their warranty obligations as a result of their financial condition or otherwise, or if the warranty period has expired or a liability limit has been reached, there may be a reduction or loss of warranty protection for the affected projects, which could have a material adverse effect on our business’ result of operations, cash flows and financial condition.

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 consolidated businesses, results of operations, cash flows and financial condition.

We operate our consolidated 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, results of operations, cash flows and financial condition.

Prolonged work stoppages by employees who are subject to a collective bargaining agreement could adversely affect our financial position.

As of December 31, 2018, approximately 20% of our businesses’ employees were covered by collective bargaining agreements. These agreements have staggered expirations over the next several years. Although we

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believe our employee relations to be generally good, a prolonged work stoppage, strike or other slowdown at any facility with union employees could significantly disrupt our operations and could have a material adverse effect on our business, results of operations, cash flows or financial condition. In addition, we cannot ensure that upon the expiration of existing collective bargaining agreements, new agreements will be reached without union action or that any such new agreements will be on terms satisfactory to us. Any renegotiation of labor agreements could significantly increase our costs for wages, healthcare and other benefits.

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 or control our businesses 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.

Our ability to influence a joint venture business is typically governed by (and may be limited to) our rights under a stockholders’ 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 to such joint venture businesses (including, without limitation, potential liabilities for environmental, health and safety 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 environmental, health and safety measures. We may not be able to evaluate whether such financial, operational, or environmental, health and safety 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 jet fuel. Hawaii Gas is subject to risks and hazards associated with the refining, handling, storage and transportation of combustible products. The occurrence of any or all of 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, and 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 regulations, including compliance with emission limitations and/or air permits, 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.

IMTT owns a number of properties that 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

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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 result of operations, cash flows and financial condition.

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/or 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 results of operations, cash flows and financial condition.

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 a business is subject to a concession or lease from government entities, 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 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 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

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may enable the government to terminate the agreement without 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-governmental 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, cash flows and financial condition 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.

Failure to comply with government regulations could result in contract terminations or we may be unable to enter into future government contracts.

We enter into government contracts, from time to time, which are subject to various uncertainties, restrictions and regulations, which could result in withholding or delay of payments. In addition, government contracts are subject to specific regulations as well as various statutes related to employment practices, environmental protection, recordkeeping and accounting. These laws impact how we transact business with governmental clients and, in some instances, impose significant costs on business operations. If we fail to comply with any of these regulations, requirements or statutes, our existing government contracts could be terminated, and we could be temporarily suspended or even barred from government contracting or subcontracting. If one or more of our government contracts are terminated or if we are suspended or barred from government contract work, or if payment of our cost is disallowed, we could suffer a significant reduction in expected revenue and profits.

Delays in the government budget process or a government shutdown may adversely affect our operating results.

Certain of our businesses provide services to government customers, often under long-term contracts. Any delay in the federal or state government budget process or a federal or state government shutdown may result in our incurring substantial costs without reimbursement under these contracts for extended periods. In addition, our businesses rely on obtaining and maintaining government permits, licenses, concessions and leases. Governmental budget delays or government shutdowns could also negatively impact our ability to timely obtain approvals and consents needed to operate and grow our businesses. Any of these consequences could have an adverse impact on our operating results.

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 our Company’s services, and the media coverage thereof, can adversely impact our 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

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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, cash flows and financial condition 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 reduction in the 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 and they may not be able to fully pass the increase through 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 it constrains growth in economic activity and capital investment, and/or results in an economic slowdown, 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.

Fluctuations in commodity prices could adversely impact revenue, cost of services/goods sold and gross margin at our businesses.

Revenue at our Atlantic Aviation and Hawaii Gas businesses is generated primarily from the re-sale of a commodity. Accordingly, we may not be able to pass through all or any of the fluctuations to customers on a real time basis.

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 increased conservation. 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, cash flows and financial condition.

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

Although our businesses tend to produce stable financial results owing to a preponderance of contracted/concession based revenues and the provision of generally essential services, each 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 the intermountain West. 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

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mid-June through mid-September. To the extent that our businesses collectively appear to generate more cash flows 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, the loss or misappropriation of confidential information, or cyber-attacks on our facilities or those of third parties on which we rely, 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, make operational decisions and manage inventory. We also share certain information technology networks with our Manager and we use third party information technology service providers. The information technology we use, as well as the information technology systems used by our Manager and third party providers, 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, or those of the Manager or third party providers, 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, we may incur substantial repair or replacement costs, and our reputation could be damaged, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

We transmit confidential credit card information by way of secure private retail networks and rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission and storage of confidential information, such as customer credit card information. Any material failure by us to achieve or maintain compliance with the Payment Card Industry security requirements or to rectify a security issue may result in fines and the imposition of restrictions on our ability to accept credit cards as a form of payment. Any loss, disclosure or misappropriation of, or access to, customers’, employees’ or business partners’ information or other breach of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a negative impact on our reputation, could result in loss of customers, could lead to regulator enforcement actions against us, and could materially adversely affect our business, results of operations, cash flows and financial condition.

If our information technology systems, or the information technology systems of third parties on which we rely, cease to function properly or our cybersecurity is breached, we could suffer disruptions to our normal operations in a variety of ways, including among others: (i) unauthorized access to our facilities or a cyber-attack on our automated systems, or the power grids or communications networks we use, that could cause operational disruption and potential environmental hazards; (ii) a cyber-attack on third party transportation systems that could result in supply chain disruptions, prevent our IMTT customers from transporting product to us for storage, or prevent our Hawaii Gas business from transporting product to its customers; and (iii) a cyber-attack on power generation facilities or refineries that could significantly impact prices and demand in the commodities markets. Any or all of these events could materially adversely affect our operating results. Additionally, certain cyber incidents may remain undetected for an extended period. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

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

Climate change is receiving increased attention and 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 physical property at our businesses.

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Policies at the national, regional and state levels to regulate greenhouse gas emissions, as well as climate change, could adversely impact our results of operations, cash flows and financial condition.

Hazards customary to the power production industry include the potential for unusual weather conditions, which could affect fuel pricing and availability, as well as route to market or access to customers through transmission and distribution lines or to critical plant assets. To the extent that climate change contributes to the frequency or intensity of weather-related events, our operations could be affected.

Restrictions on emissions of methane or carbon dioxide that may be imposed could adversely impact the demand for, price of, and value of our products and reserves. As our operations also emit greenhouse gases directly, current and future laws or regulations limiting such emissions could increase our own costs. Future laws or regulations addressing greenhouse gas emissions could adversely impact our businesses.

Changes or new financial accounting standards may cause us to alter the reporting of our results or operations or cause us to change business practices.

Financial accounting standards are promulgated by the Financial Accounting Standards Board (FASB), and interpreted by the SEC and various regulatory bodies formed to interpret, modify and/or create new accounting policies. Changes in those policies can have a significant effect on our reported results of operations, cash flows and financial condition and may affect our reporting, in particular our reporting related to transactions completed prior to implementation of policy.

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

Our businesses may face 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 or essential services relied on by many people, our facilities may be at greater risk for terrorism attacks than other businesses, which could affect our operations significantly. Any terrorist attacks that occur at or near our business locations would be 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, such an attack would likely result in an increase in insurance premiums and a reduction in coverage and could reduce profitability.

Our recent sale of BEC, and the pending sale of substantially all of our portfolio of solar and wind facilities, subjects us to various risks and uncertainties.

In October 2018, we concluded the sale, through a subsidiary, of BEC. Our subsidiary has indemnified the buyer, subject to the terms and limitations in the purchase and sale agreement, for breaches of representations, warranties and covenants in the purchase and sale agreement, and we have guaranteed our subsidiary’s payment and certain post-closing indemnity obligations. In addition, following the sale, our portfolio of businesses is now less diversified and our exposure to the risks inherent in our remaining businesses has increased. The reduction in overall diversification could cause a rating agency to modify their view of the risk profile of the Company and such modification could lead to a reduction in the rating applied to the Company.

Risks Related to IMTT

IMTT’s business is dependent on the demand for bulk liquid terminal services in the markets it serves.

Demand for IMTT’s bulk liquid terminal services is largely a function of demand for chemical, petroleum and vegetable and tropical oil products and the extent to which such products are imported into and/or exported out of the U.S. Demand for chemical, petroleum and vegetable and tropical oil products is influenced by a number of factors, including economic conditions, growth in the economy, the absolute and relative pricing of chemical, petroleum and vegetable and tropical oil products and their substitutes. Import and export volumes of these products to and from the U.S. are influenced by demand and supply imbalances

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in the U.S. and overseas, the cost of producing chemical, petroleum and vegetable and tropical oil products domestically versus overseas and the cost of transporting the products between the U.S. and overseas destinations.

Global demand for heavy oils has declined in recent years, and the demand for light transportation fuels, tropical oils and vegetable oils has increased. In addition, recent backwardation (meaning the futures prices for commodities are below the current, or spot, prices) has reduced the demand for storage by commodities traders. These trends have had, and are expected to continue to have, an adverse impact on the demand for a segment of IMTT’s services. If IMTT is unable to successfully repurpose some of its capacity to accommodate the products for which demand is high, increase supply chain efficiencies and upgrade certain other capabilities to enhance service, the demand for IMTT’s services may materially decrease and IMTT’s results of operations, cash flows and financial condition may be materially adversely affected.

In addition, changes in government regulations that affect imports and exports of bulk chemical, petroleum, renewable fuels and vegetable and tropical 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 U.S. A reduction in demand for bulk liquid terminals, particularly in New York Harbor or the Lower Mississippi River, as a consequence of lower demand for, or imports/exports of, chemical, petroleum or vegetable and tropical oil products, could lead to a decline in storage rates and tankage volumes leased 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 change in bulk liquid terminal or refining capacity or demand 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 New York Harbor 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 leased out by IMTT. This could adversely affect IMTT’s revenue and profitability and the distributions it makes to us.

Demand for products at IMTT’s terminal locations may also drive pricing and utilization. Demand may be influenced by a range of factors including changes in petroleum product supply for demand patterns, forward-price structure, financial market conditions, regulations or other factors.

The interplay and proximity of terminal capacity, refining and end user demand is critical for the commercial viability of a terminal. Shifts in any of these factors may cause a decline in demand for our terminals or make other terminals more attractive, which 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. IMTT faces significant uncertainties and competition in the pursuit of growth opportunities. For example, decisions regarding new growth projects rely on numerous estimates, including among other factors, predictions of future demand for IMTT’s services, future supply shifts, crude oil production estimates, commodity price environments, economic conditions and potential changes in the financial condition of IMTT’s customers. IMTT’s predictions of such factors could cause it to forego certain investments or to lose opportunities to competitors who make investments based on more aggressive predictions. If IMTT cannot find projects with economically acceptable terms, future growth of this business may be limited.

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 result in reduced demand for the services IMTT provides. Uncertainty in the oil markets may also result in IMTT’s customers entering into shorter term contracts for storage than they have previously. This would increase the frequency of customer contract renewals and negotiations and may result in more volatility in earnings.

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Lower oil prices may negatively impact certain IMTT customers and cause them to 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 deployment by IMTT as its customers may not require additional storage or logistics assets and this may limit IMTT’s future growth. IMTT’s customer base includes large, multinational oil companies. If oil prices remain low or decline further, one or more of these companies could cease operations or be consolidated. This could result in a loss of customers and/or a consolidation among customers and may reduce IMTT’s revenue or concentrate counterparties to the point where the loss of any one could be material to the performance or prospects of the business.

IMTT’s agreements may be terminated or expire at the end of the current 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 results of operations, cash flows and financial condition may be adversely affected.

Upon expiration, agreements can generally be terminated by either party, though some agreements require the giving of requisite notice. Changing market conditions, including changes in petroleum product supply or demand patterns, forward-price structure, financial market conditions, regulations, accounting rules or other factors could cause IMTT’s customers to be unwilling to renew their storage agreements when those agreements terminate, or make them willing to renew only at lower rates or for shorter periods. If any of IMTT’s agreements are terminated or expire 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.

Recent trends in the demand for certain products stored at IMTT’s facilities, as well as recent pricing trends in the commodities futures markets, have had, and are expected to continue to have, an adverse impact on the demand for IMTT’s services. See risk factor “IMTT’s business is dependent on the demand for bulk liquid terminal services in the markets it serves” above. If IMTT is unable to successfully repurpose some of its capacity and upgrade certain of its other capabilities to address these trends, the level of contract renewals by IMTT customers may materially decrease, which may have a material adverse effect on IMTT’s results of operations, cash flows and financial condition.

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

There is risk of incurring significant environmental costs and liabilities in IMTT’s operations due to its handling of petroleum chemicals, 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 terminals have been used for transportation, storage and distribution of crude oil, refined petroleum products and chemicals for several decades. Although IMTT has utilized operating and disposal practices that were standard in the industry at the time, refined petroleum products or crude oil, chemicals, hazardous substances and wastes from time to time have been spilled or released on or under the terminal properties.

In addition, the terminal properties that were previously owned and operated by other parties and those parties from time to time also may have spilled or released refined petroleum products or crude oil, chemicals, 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 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, results of operations, cash flows and financial condition.

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

IMTT’s operations involve the transportation and storage of petroleum, chemical and vegetable and tropical oil 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 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 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 affected 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 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, cash flows and financial condition.

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 tropical 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. Losses from terrorism or acts of war, which results in significant damage to one or more of IMTT’s major facilities, may 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 and storms in the U.S. Gulf and Northeast regions may result in lower insurance coverage and/or increased insurance premiums for IMTT’s properties.

Many of IMTT’s facilities have been in service for several decades. Costs of maintaining those facilities could adversely affect IMTT’s results of operations.

IMTT’s terminals are generally long-lived assets. Some of those assets have been in service for several decades. The age and condition of these terminals could result in increased maintenance or remediation expenditures and an increased risk of product releases and associated costs and liabilities. Any significant increase in these expenditures, costs or liabilities could materially adversely affect IMTT’s results of operations, cash flows and financial condition.

IMTT’s business is subject to federal, state and local laws and regulations that govern the product quality specifications of the products that it stores or handles. Changes in these regulations could impose costs on IMTT that would adversely affect its results of operations, cash flows and financial condition.

Petroleum and other products that IMTT stores and handles are consumed in various end markets. Various federal, state and local agencies have the authority to prescribe specific product quality specifications for commodities sold into the public market. Changes in product quality specifications or blending

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requirements could reduce IMTT’s revenue, require IMTT to incur additional costs or require capital expenditures. If IMTT is unable to recover these costs through increased revenue, its cash flows could be adversely affected.

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

As of December 31, 2018, IMTT’s ten largest customers by revenue generated approximately 50% of its revenue. The loss of one or more of these customers for any reason, including, but not limited to, insolvency, industry consolidation or deconsolidation or changes in market conditions, could result in a reduction in storage capacity utilization in the event such capacity is not leased to other customers and may 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, freight and military flights. An economic downturn could reduce the level of air travel, adversely affecting Atlantic Aviation as GA travel is primarily a function of economic activity. Consequently, during periods of financial market dislocation, FBO customers may be 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 U.S. 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.

A decline in financial markets activity could have a negative impact on Atlantic Aviation’s results of operations.

Atlantic Aviation may experience negative impacts to its results of operations due to a deterioration in the level of domestic and international financial markets activity. A deterioration in either equity or credit markets and its impact on the volume or value of debt or equity issuances and/or merger and acquisition activity may cause GA activity to decline and consequently impact our results of operations, cash flows and financial condition.

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 leases, 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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Airport leases may not be renewed on economically favorable terms.

Atlantic Aviation generates revenue pursuant to leases granted by airport authorities. Airport authorities may choose at the expiration of the current lease to not renew the lease at all or to only renew the lease on terms which are economically unfavorable to Atlantic Aviation. In addition, airport authorities may require Atlantic Aviation to participate in a bidding process to renew a lease, which could require unanticipated capital spending and could divert management’s attention during the pendency of the process. The loss or modification of any of Atlantic Aviation’s airport leases could adversely impact its results of operations, cash flows and financial condition.

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 granted by airport authorities on 70 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. Such an event could have a material adverse effect on Atlantic Aviation’s results of operations, cash flows and financial condition.

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 adequately maintain the facilities comprising our FBOs or the integrity of our fuel supplies may have a material adverse impact on the revenue or market share of one or more of the FBOs in the network resulting in a decline in profitability of the business.

FBO operators compete in part on the basis of the overall quality and attractiveness as well as the safety of their operations. Inadequate maintenance of any of the hangars, terminals, ramps or other assets comprising Atlantic Aviation’s FBOs could result in customers’ electing not to utilize Atlantic Aviation where another provider operates or to elect not to use a particular airport where an alternative in the same market exists. The resulting decline in customer visits or negative impact on reputation could adversely impact revenue from fuel sales, hangar/office rental, ramp and/or ramp services fees and could impact more than one facility.

Aircraft owners and operators rely on FBOs to control the quality of the fuel they sell. Failure to maintain the integrity of supplies as a result of inadequate or inappropriate maintenance of fuel farms (storage facilities), fuel trucks, or related equipment could result in the introduction of contaminants and could lead to damage or failure of aircraft and could adversely impact the reputation, revenue and/or profitability of the business.

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

Completing acquisitions, expansions or developments are subject to a number of conditions, and we may not complete such transactions on a timely basis or at all, which could have an adverse effect on the business and results of operations, cash flows and financial condition.

FBO industry participants are often smaller, private companies with less sophisticated information systems and financial reporting and control capabilities. 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 FBO within our expected time frames or at all. Atlantic Aviation may incur additional indebtedness to fund future

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acquisitions, expansions or developments. This increased level of indebtedness will increase interest expense and could reduce funds available for reinvestment or distribution to us.

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

As of December 31, 2018, Atlantic Aviation had $1,025.0 million of its term loan debt outstanding and a senior secured revolving credit facility that was not drawn. 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 flows generated 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 aircraft that are serviced at Atlantic Aviation FBOs. 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 and gross margin at Atlantic Aviation.

Atlantic Aviation is subject to extensive governmental regulations that could require significant expenditures. Regulators, such as the Transportation Security Administration (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.

FBOs are subject to extensive regulatory requirements that could result in significant costs. For example, the FAA, from time to time, issues directives and other regulations relating to the management, maintenance and operation of facilities. Compliance with those requirements may cause Atlantic Aviation to incur significant expenditures. The proposal and enactment of additional laws and regulations, as well as any charges that Atlantic Aviation has not complied with any such laws and regulations, could significantly increase the cost of Atlantic Aviation’s operations and reduce overall revenue. In addition, new regulations, if implemented, 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 MIC Hawaii

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 hedged or passed on to customers, both in the short-term or the long-term, the business’ gross margin 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 LNG, as well as feedstock for the SNG plant are commodities, changes in global supply of and demand for these products can have a significant impact on costs. Hawaii Gas has no control over these costs, and, to the extent that these costs cannot be hedged or passed on to customers, the business’ results of operations, cash flows and financial condition could be adversely affected.

The operations of Hawaii Gas are subject to a variety of competitive pressures and the actions of competitors could have a materially adverse effect on operating results.

Other energy resources, including diesel, solar, geo-thermal and wind, may be substituted for gas in certain end-use applications, particularly if the price of gas increases relative to competing resources, whether

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due to higher costs or otherwise. Customers could, for a number of reasons, including increased gas prices, lower costs of alternative generation resources or convenience, meet their energy needs through other energy sources. This could have an adverse effect on the business’ results of operations, cash flows and financial condition.

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 issues 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. Hawaii Gas has redundant production systems in place, however, disruptions to both the primary and redundant production systems could have a significant adverse effect on Hawaii Gas’ results of operations, cash flows and financial condition.

Hawaii Gas obtains its primary feedstock for its SNG plant from a refinery located on Oahu and sources its LPG supply from an off-island distributor. Supply disruptions may have an adverse effect on the operations of the business.

The extended unavailability of the refinery that supplies SNG feedstock, or the inability to purchase LPG from off-island sources, could adversely affect operations. The business has a limited 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 materially adversely impact the business’ results of operations, cash flows and financial condition.

The MIC Hawaii businesses are subject to risks associated with volatility in the Hawaii economy.

Hawaii’s economy, and demand for our business’ products, is heavily influenced by economic conditions in the U.S. and Asia and their impact on tourism, as well as by government spending. If the local economy deteriorates, the volume of gas sold at Hawaii Gas could be negatively affected by business closures or lower usage which could adversely impact the business’ financial performance. Additionally, a lack of growth in the Hawaiian economy could adversely impact gas volumes from new customers and reduce the level of new commercial construction. A reduction in government activity, particularly military activity could also have a negative impact on the MIC Hawaii businesses.

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 the extent and success of our use of financial instruments to reduce our exposure related to volatility in the cost of LPG, changes in the market price of Hawaii Gas’ fuel supplies could create payment obligations that expose the business to increased liquidity risk.

Hawaii Gas’ 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 our business.

As part of our 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 Holdings LLC’s (HGC) 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 business.

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Hawaii has implemented a renewable portfolio standard (RPS) for utility electric generation, currently at 15% through 2020, with periodic increases resulting in a 100% goal by 2045. In recent Hawaii legislative sessions, lawmakers have proposed bills that have included an RPS for utility gas. The enaction of 2018 legislation requiring the State to be carbon neutral by 2045 or a potential RPS for utility gas usage or supply could result in supply disruptions, increased energy costs to ratepayers or a negative impact on Hawaii Gas’ future financial performance.

Hawaii’s geographic location includes an abundance of renewable electric energy resources which, combined with state and federal tax incentives and regulatory tariffs, has resulted in significant growth of rooftop solar and a growing number of utility scale electric generation projects that support the State’s electric utilities in meeting Hawaii’s RPS. The production of renewable natural gas in Hawaii is limited by comparatively fewer local feedstocks, limited tax incentives and the economic importation of renewable natural gas is unproven. As part of its existing regulatory reporting requirements, Hawaii Gas provides the HPUC the annual percentage of feedstock and quantity of gas produced from non-petroleum feedstock. The Hawaii legislature or municipal governments could impose a gas RPS, enact other restrictive legislation or impose changes to building codes, which may result in increased energy costs to the business and its customers, and disruptions in supply or restrict future business.

Hawaii Gas seeks to grow its renewable feedstocks to increase the percentage of RNG distributed to its customers. This initiative exposes Hawaii Gas to new technology, supply, counterparty and regulatory risks that could impact the performance of the business.

Hawaii Gas continues to pursue a range of renewable resources for conversion into pipeline quality gas in scalable quantities. These initiatives include the current contract for recovery of biogas from the Honouliuli waste water treatment plant as well as ongoing commercial negotiations to source biogas from additional waste water treatment plants, landfills and biomass producers. Blending of RNG with existing fuels and integrating RNG into the Hawaii Gas’ pipeline network may present technical challenges resulting in project delays, cost overruns or pipeline disruptions. Use of RNG also has the risk of supply fluctuations due to the organic digestion processes inherent in its production. These technical and supply risks may impact the performance of the business.

Hawaii Gas’ LNG initiatives include regulatory, environmental, contractual and market-based risks.

Hawaii Gas has invested in the evaluation and planning for LNG import, storage and distribution program to supply various end markets including the marine and transportation sectors. In August 2015, Hawaii’s Governor announced that his administration is opposed to LNG for electricity generation, the largest potential LNG market. The LNG project is subject to ongoing implementation risks 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; site difficulties; environmental conditions; delays of critical equipment and materials; and commercial arrangements to transport and distribute LNG. If the project is delayed or cancelled, the actual cost of planning and implementation may increase beyond the amounts currently estimated in our capital and operating budgets.

Because of its geographic location, Hawaii, and in turn the MIC Hawaii businesses, are subject to earthquakes, volcanos and certain weather risks that could materially disrupt operations.

Hawaii is subject to earthquakes, volcanic activity and certain weather risks, such as hurricanes, floods, heavy and sustained rains and tidal waves that could materially disrupt operations. Because MIC Hawaii’s business properties, such as the SNG plant, SNG transmission line and several storage facilities, are close to the ocean, weather-related disruptions to operations are possible. In addition, earthquakes and volcanic activity 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, adversely impacting the business’ results of operations, cash flows and financial condition.

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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 and has contributed to its economy. To the extent that federal spending cuts, including voluntary or mandatory cuts in U.S. military spending results in a reduced military presence in Hawaii, such reductions could reduce the demand for gas and new construction in Hawaii.

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

The changing nature of the Hawaiian energy complex has had an impact on our 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. Unemployment rates in Hawaii are traditionally lower than those in the U.S. Mainland. Moreover, relocation to Hawaii is costly and often requires employees to make cultural and family adjustments not normally required for a change of employment. Despite the asset intensity of the Company’s businesses in Hawaii, the inability to source and retain staff with appropriate skill sets could adversely impact their performance. In addition, dependence on skilled labor trades could result in constraints on growth and profitability as a result of competition for a limited labor pool.

Hawaii Gas’ 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 our 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 for the only two Jones Act qualified barges available in Hawaii 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 business could be adversely affected. If the barges require refurbishment or repair at a greater frequency than forecast, cash outflows for capital costs could adversely impact Hawaii Gas’ results of operations, cash flows and financial condition.

Generation underperformance at individual projects within MIC Hawaii could lead to financial penalties or contract terminations under existing off-take agreements.

Certain distributed generation projects have minimum production clauses included in their respective PPAs. These minimum production levels are specified in each respective contract. Failure to meet these minimum production levels, could result in liquidated damages, other financial penalties, or contract termination which could negatively impact the business’ results of operations, cash flows and financial condition.

Certain MIC Hawaii projects depend 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, MIC Hawaii projects may be restricted in their ability to deliver electricity to customers.

MIC Hawaii’s generation facilities depend on the electricity grid interconnection and transmission facilities owned and operated by others to deliver the power they generate. Certain off-taker contracts include limited provisions that allow for occasional curtailment of electricity generated by MIC Hawaii due to the limitations of the transmission system or electricity grid. Any constraints on, or the failure of, interconnections or transmission facilities could prevent MIC Hawaii from selling power and could adversely affect MIC Hawaii’s results of operations, cash flows and financial condition.

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MIC Hawaii depends on counterparties, including O&M providers and power purchasers, performing in accordance with their agreements. If they fail to so perform, our MIC Hawaii businesses could incur losses of revenue or additional expenses and business disruptions.

Counterparties to long-term agreements within MIC Hawaii may not perform their obligations in accordance with such agreements. Should they fail to perform, due to financial difficulty or otherwise, MIC Hawaii may be required to seek alternative O&M providers. The failure of any of the parties to perform in accordance with these agreements could adversely affect MIC Hawaii’s results of operations, cash flows and financial condition.

MIC Hawaii’s failure to uphold its obligations as managing member at the relevant facilities could adversely affect MIC Hawaii’s result of operations, cash flows and financial condition.

As managing member, MIC Hawaii 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, MIC Hawaii is also obligated to refrain from performing certain actions, including selling its interest to certain entities that would result in adverse economic outcomes to MIC Hawaii and its co-investor due to tax regulations. If MIC Hawaii were to cause an adverse tax outcome for its co-investor, MIC Hawaii could be liable. MIC Hawaii’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 MIC Hawaii’s results of operations, cash flows and financial condition.

Risks Related to Having an External Manager

We are subject to the terms and conditions of the Management Services Agreement between us and our Manager; our Manager may revoke its fee waiver.

We cannot unilaterally amend the Management Services Agreement between us and our Manager. Changes in the compensation of our Manager, certain rights held by our Manager or other components of the Management Services Agreement require the approval of our Manager and limit our ability to make changes without the consent of the Manager that could be beneficial to stockholders generally.

Effective November 1, 2018, our Manager waived two portions of the base management fee to which it was entitled under the terms of the Management Services Agreement. Our Manager reserves the right to revoke the waiver and revert to the prior terms of the Management Services Agreement, subject to providing us with at least one year’s notice. If our Manager chooses to revoke the waiver in the future, the base management fee payable to our Manager will increase, which will result in additional dilution of existing stockholders (to the extent our Manager reinvests the additional fee amounts in our common stock) or reduce our cash (to the extent our Manager does not so reinvest the additional fee amounts).

Our Manager owns a significant portion of our outstanding stock. A sale of all or a portion of the common stock owned by our Manager could be interpreted by the equity markets as a lack of confidence in our prospects.

Our Manager, in its sole discretion, determines whether to reinvest base management and performance fees, if any, in shares of our common stock and whether to hold or sell those securities. From May 2018 through September 2018, the Manager bought 5,987,100 shares in the open market. Reinvestment of base management and performance fees, if any, in additional common stock would increase our Manager’s ownership stake in our Company. At December 31, 2018, our Manager owned 14.54% of our outstanding shares. Our Manager has sold, and is expected to continue to sell from time to time, our common shares that it acquires upon reinvestment of fees. If our Manager decides to reduce its position in our Company, such sales may be interpreted by some market participants as a lack of confidence in our Company and put downward pressure on the market price of our common stock. Sales of shares of common stock by our Manager would increase the available supply and could decrease the price if demand is insufficient to absorb such sales.

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Certain provisions of our Management Services Agreement, certificate of incorporation and bylaws make it difficult for third parties to acquire control of our Company and could deprive investors of the opportunity to obtain a takeover premium for their shares of common stock.

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 our common stock ceases to be listed on a recognized U.S. exchange as a result of the acquisition of our common stock by third parties in an amount that results in our common stock ceasing to meet the distribution and trading criteria on such exchange or market, our 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 our Manager’s exercise of its right to resign as our Manager subsequent to a delisting of our common stock could delay or prevent a change in control that may favor our stockholders. 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 stockholders or our affiliates without the prior written approval of our Manager. These provisions could deprive stockholders of opportunities to realize a premium on the common stock owned by them.

Our certificate of incorporation and bylaws contain 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 our Company. These provisions include:

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

Our Manager is paid a base management fee based on our market capitalization and potentially performance fees based on the total return generated on behalf of equity holders relative to a U.S. utilities index benchmark. 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 common stock. In the event our Manager chooses not to reinvest the fees to which it is entitled in additional shares of common stock, the amount paid will reduce the cash that may otherwise be distributed as a dividend to all stockholders or used in our Company’s operations. In the event our Manager chooses to reinvest the fees to which it is entitled in additional common stock, effectively returning the cash to us, such reinvestment and the issuance of new shares of common stock will dilute existing stockholders by the increase in the percentage of common stock owned by our Manager. Either option may adversely impact the market for our shares.

In addition, our Manager has typically elected to invest its fees in shares of common stock, and, unless otherwise agreed with us, can only change this election during a 20-trading day window following our earnings release. Any change would apply to fees incurred thereafter. Accordingly, stockholders would generally have notice of our Manager’s intent to receive fees in cash rather than reinvest before the change was effective.

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The price of our stock and our ability to pay dividends could be adversely affected by our obligation to pay performance fees to our Manager, which in turn is dependent on the performance of our stock relative to a benchmark index which is unpredictable and beyond our control.

Under our Management Services Agreement, we are obligated to pay performance fees to our Manager if we outperform a benchmark index that reflects broader utility industry components. The amount of the performance fees can be substantial, and could adversely affect the price of our common stock and our ability to pay dividends. For example, if our absolute performance (as described in the Management Services Agreement) increases slightly and the benchmark index substantially decreases, we could be obligated to pay a significant performance fee. As a result, we may be obligated to pay our Manager a performance fee, which could be substantial, even when there has not been a substantial increase in the performance of our common stock. The benchmark index comprises numerous utility stocks, the performance of which may or may not correlate to our actual performance. Moreover, the benchmark index is unpredictable and variable. The Manager is entitled to select whether a performance fee will be settled in cash, shares of our common stock or a combination thereof, which could result in a material cash expense or dilution of our shares.

Our Manager is not required to offer all acquisition opportunities to us and may offer such opportunities to other entities. Our management may waive investment opportunities presented by our Manager.

Pursuant to our Management Services Agreement, we have first priority ahead of all current and future funds, investment vehicles, separate accounts and other entities managed by our Manager or by members of the Macquarie Group within the Macquarie Infrastructure and Real Assets division only with respect to four specific types of acquisition opportunities within the United States. The four specific type of acquisition opportunities where we have first priority include airport FBOs, airport parking, district energy and “user pays”, contracted and regulated assets that represent an investment of greater than AUD $40.0 million. Other than these four specific types of opportunities, our Manager does not have an obligation to offer to us any particular acquisition opportunities, even if they meet our investment objectives, and the Manager and its affiliates can offer any or all other acquisition opportunities on a priority basis or otherwise to current and future funds, investment vehicles and accounts sponsored by the Manager or its affiliates. Our businesses may compete with these entities for investment opportunities, and there can be no assurance that we will prevail with respect to such investments.

In addition, our management may determine not to pursue investment opportunities presented to us by our Manager, including those presented on a priority basis. If our management waives any such opportunity, our Manager and its affiliates may offer such opportunity to any other entity, including any entities sponsored or advised by members of the Macquarie Infrastructure and Real Assets division of the Macquarie Group. As such, every acquisition opportunity presented to us by our Manager may not be pursued by us, and may ultimately be presented to entities with whom we compete for investments.

Our Manager can resign with 90 days’ notice, or our CEO or CFO could be removed by our 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 common stock.

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 manager or not. In addition, our Manager could re-assign or remove the CEO and/or the CFO from their positions and responsibilities at our Company without our board of directors’ approval and with little or no notice. If our Manager resigns or our CEO and/or 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 common stock 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.

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Furthermore, if our Manager resigns, we and our 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 our Company and the market price of our common stock to decline.

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

We are 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 us 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 our market capitalization and thus increases as we grow. 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 our Company internally. Per the terms of the Management Services Agreement with our Manager, the current default election for satisfying any base management or performance fees to which our Manager may be entitled is the issuance of additional shares of common stock. To the extent the fees continue to be satisfied by reinvestment in our common stock, all stockholders will be 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 the market price of our common stock.

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 instruments with members of the Macquarie Group serving as lender or counterparty, and financial advisory or equity and debt 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 review and approve in advance 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 us and cause a decline in the price of our common stock 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 common stock.

Under the terms of the Management Services Agreement, our Manager must significantly underperform in order for the Management Services Agreement to be terminated. Our board of directors cannot remove our Manager unless:

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Our board of directors cannot remove our Manager unless the market performance of our common stock also significantly underperforms the benchmark index. If we were unable to remove our Manager in circumstances where the absolute market performance of our common stock does not meet expectations, the market price of our common stock could be negatively affected.

Risks Related to Ownership of Our Stock

The guidance we may provide for our anticipated dividends, EBITDA excluding non-cash items, Free Cash Flow and other metrics is based on estimates. Circumstances may arise that lead to conflicts between using funds to pay anticipated dividends or to invest in our business, and our dividends could be reduced.

We periodically disclose our expected annual cash dividend growth rate and other financial metrics. This reflects our judgment at the time, but as with any estimate, it may be affected by known and unknown risks and uncertainties and inaccurate assumptions, many of which are beyond our control. See “Forward-Looking Statements.” If the payment of dividends at the anticipated level would leave us with insufficient cash to take timely advantage of growth opportunities (including through acquisitions), to meet any large unanticipated liquidity requirements, to fund our operations, or otherwise to address properly our business prospects, our board of directors, which determines our business strategy and our dividend policy, might have to choose between addressing those matters or reducing our anticipated dividends, and the board could determine to reduce our dividends. If dividends are reduced below anticipated levels, our stock price could be significantly adversely affected.

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

The performances of our businesses or our holding company structure may limit our ability to make regular dividends in the future to our stockholders because we are reliant upon the cash flows and distributions from our businesses.

Our Company is a holding company with no operations. Therefore, we are dependent upon the ability of our businesses to make distributions to our Company to enable it to meet its expenses, and to pay, maintain or grow dividends to stockholders in the future. The ability of our operating subsidiaries and the businesses we

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own to make distributions to our Company is subject to limitations based on their operating performance, the terms of their debt agreements and the applicable laws of their respective jurisdictions. In addition, the ability of each business to reduce its outstanding debt will be similarly limited by its operating performance, as discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

We could be adversely impacted by actions of activist stockholders, and such activism could impact the value of our securities.

We value constructive input from our stockholders and the investment community. However, there is no assurance that the actions taken by our board of directors and management in seeking to maintain constructive engagement with our stockholders will be successful. Certain of our shareholders may express views with respect to the operation of our business, our business strategy, corporate governance considerations or other matters that are contrary to ours. Responding to these, or to actions that may be taken by activist stockholders can be costly and time-consuming, disruptive to our operations and divert the attention of management and our employees. The perceived uncertainties as to our future direction due to activist actions could affect the market price of our securities, result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel, board members and business partners.

We are currently subject to purported securities class action and shareholder derivative lawsuits and could become subject to other similar actions in the future, the unfavorable outcome of which could have a materially adverse impact our business or results of operations.

In April 2018, two lawsuits seeking to establish class actions were filed against us and certain current and former officers of ours and one of our subsidiaries. These lawsuits allege violations of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder and knowing material misstatements and omissions in our public disclosures concerning our business and the sustainability of our dividend to stockholders. In addition, three shareholder derivative complaints were filed asserting derivative claims on behalf of the Company against certain current and former officers and directors, arising out of the same subject matter at issue in the securities class action lawsuits. While we intend to vigorously defend against these lawsuits, there is no assurance that we will be successful in the defense or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of the actions. In addition, we are obligated to indemnify and incur legal expenses on behalf of current and former officers under certain circumstances. These lawsuits, and any similar proceedings or claims that may be brought against us in the future, may divert management resources and cause us to incur substantial costs, and any unfavorable outcome could result in payment of damages and could damage our reputation, any or all of which could have a material adverse impact our business and results of operations.

The price of our stock may be vulnerable to actions of market participants whose strategies may not involve buying and holding our securities in pursuit of an attractive total return.

Our common stock has been the subject of short selling efforts by certain market participants. Short sales are transactions in which a market participant borrows, then sells a security that it does not own. The market participant is obligated to replace the security borrowed by purchasing the security at or before the time the security is recalled. If the price at the time of recall is lower than the price at which the security was originally sold by the market participant, then the market participant will realize a gain on the transaction. Thus, it is in the market participant’s interest for the price of the security to decline during the period up to the time of recall.

Previous short selling efforts have had an impact on, and may in the future impact, the value of our stock in an extreme and volatile manner to our detriment and the detriment of our stockholders. In addition, market participants have published, and may in the future publish, negative, inaccurate or misleading information regarding our company and our management team. We believe that the publication of such information has led, and may in the future lead to, significant downward pressure on the price of our stock to our detriment and the further detriment of our stockholders. These and other efforts by certain market participants to unduly influence the price of our common stock for financial gain may cause value of our stockholders’ investments to decline, may make it more difficult for us to raise equity capital when needed without significantly diluting existing stockholders, and may reduce demand from new investors to purchase our shares.

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We identified a material weakness in our internal control over financial reporting which, if not remediated could result in loss of investor confidence and adversely impact our stock price.

Effective internal controls are necessary for us to provide reliable and accurate financial statements. As further described in Part II, Item 9A “Controls and Procedures,” management has concluded that, because of a material weakness at Atlantic Aviation relating to non-credit card fuel revenues, our internal control over financial reporting was not effective as of December 31, 2018. We are implementing remedial measures and we expect that the remediation of this material weakness will be completed prior to the end of fiscal year 2019. However, we cannot be certain that these measures will be successful or that we will be able to prevent future significant deficiencies or material weaknesses. If we are unable to remediate the material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our stock and our access to capital. In addition, implementing any appropriate changes to internal controls will result in additional expenses.

We may issue preferred stock with rights, preferences and privileges that may be superior to the common stock, and these could have negative consequences for holders of our common stock.

We may issue shares of preferred stock in one or more financing transactions. We may also use the authorized preferred stock for funding transactions, including, among other things, acquisitions, strategic partnerships, joint ventures, restructurings, business combinations and investments, although we have no immediate plans to do so. We cannot provide assurances that any such transaction will be consummated on favorable terms or at all, that they will enhance stockholder value, or that it will not adversely affect our business or the trading price of our common stock. Any shares of preferred stock could be issued with rights, preferences and privileges that may be superior to those of our common stock. In addition, preferred stock could be issued for capital raising, financing and acquisition needs or opportunities that have the effect of making an acquisition of our Company more difficult or costly, as could also be the case if the board of directors were to issue additional common stock.

Our reported Earnings per Share (EPS), as defined under GAAP, does not reflect the cash generated by our businesses and may result in unfavorable comparisons with other businesses.

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. We pay our Manager base management fees and may pay performance fees both of which may be reinvested in additional shares thereby rendering them a non-cash expense. Whether the fees are settled in cash or reinvested in additional shares, they have the effect of reducing EPS. As a result, our financial performance may appear to be substantially worse compared with other businesses. 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 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 even where they generate positive cash flow and this cash flow may not be reflected in the valuation of our stock.

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, 2018, goodwill and other intangible assets, net, represented 38.0% of our total assets. Goodwill and other

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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 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 intangible 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 our Company among some potential investors and may reduce the market for our common stock.

Risks Related to Taxation

We have significant federal NOL carryforwards that may be fully utilized in 2019 or subsequent years. After they are utilized, we could be subject to payment of substantial federal income taxes, which would reduce our distributable Free Cash Flow.

We may, without the acquisition of businesses with NOLs, incurring performance fees, investing in growth capital expenditures that qualify for 100% bonus depreciation, or implementing 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 stockholders” (as defined in the Code) increases by more than fifty percentage points over such stockholders’ 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.

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

We have $152.0 million in federal NOL carryforwards at December 31, 2018. 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 Louisiana has imposed limitations on the ability of NOL carryforwards to offset current year income. There can be no assurance that other states will not suspend or limit the use of NOL carryforwards.

Recent changes to U.S. tax laws may adversely affect our results of operations and financial condition and create the risk that we may need to adjust our accounting for these changes.

The Tax Cut and Jobs Act made significant changes to U.S. tax laws and includes numerous provisions that affect businesses, including ours. For instance, as a result of lower corporate tax rates, the Tax Cut and Jobs Act tends to reduce both the value of deferred tax assets and the amount of deferred tax liabilities. It also limits interest rate deductions and the amount of NOLs that can be used each year and alters the expensing of capital expenditures. The Tax Cut and Jobs Act is unclear in certain respects and will require interpretations and implementing regulations by the IRS, as well as state tax authorities, and the Tax Cut and Jobs Act could be subject to amendments and technical corrections, any of which could lessen or increase the adverse (and positive) impacts of the Tax Cut and Jobs Act. The accounting treatment of these tax law changes is complex, and some of the changes may affect both current and future periods.

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 100% bonus depreciation for qualifying assets purchased and placed in service after September 27, 2017 and prior to January 1, 2023, for U.S. federal income tax 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.

Our Company could be adversely effected by changes in tax laws and/or changes in the interpretation of existing tax laws.

We are subject to various taxing regimes, including federal, state, local and foreign taxes such as income, excise, sales/use, payroll, franchise, property, gross receipts, withholding and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations or the interpretation thereof are continuously being enacted or proposed and could result in increased expenditures for tax in the future and could have a material adverse effect on our Company’s results of operations, cash flows and financial condition.

Our property taxes could increase due to reassessment or property tax rate changes.

We are required to pay real property taxes in respect of our properties and such taxes may increase as our properties are reassessed by taxing authorities or as property tax rates change. An increase in the assessed value of our properties or our property tax rates may not be passed along to our customers and could adversely impact our results of operations, cash flows and financial condition.

Our Company and our subsidiaries are subject to examinations and challenges by taxing authorities.

Periodic examinations or audits by taxing authorities could increase our tax liabilities and result in the imposition of interest and penalties. If challenges arising from such examinations and audits are not resolved in our Company’s favor, they could have a material adverse effect on our Company’s results of operations, cash flows and financial condition.

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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 17 wholly-owned bulk liquid terminals in the U.S., one in Canada and has a minority interest in a company that owns a single bulk liquid terminal, also 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 the majority of any related ship docks. Ship docks at facilities in Quebec and Geismar, L.A. are leased. Management believes 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 as appropriate to ensure continued safe and efficient operations and the maintenance of service level standards. Management believes 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.

MIC Hawaii

Hawaii Gas owns real property and equipment including: its SNG plant on Oahu and the land on which it sits; several LPG storage yards on islands other than Oahu; 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. In addition, MIC Hawaii has controlling interests in operating solar facilities and distributed energy products.

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

The following represents the properties owned or leased by the Hawaii Gas business.

Island		Description		Use		Own/Lease
Oahu		SNG plant and land		Production of SNG		Own
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

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The following represents the properties leased by the other businesses within MIC Hawaii.

Project Name		Facility		Location		Ownership or Lease Information
Waihonu		Solar		Oahu, HI		Long-term property lease until 2036.
GWE Solar-Storage		Solar with Battery Storage		Hawaii, HI		Long-term site leases until 2037.
SW Cogen		Combined Heat and Power		Oahu, HI		Long-term site lease until 2028.

Corporate and Other

MGS leases an office building in Plano, Texas that currently expires in December 2024.

ITEM 3. LEGAL PROCEEDINGS

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

IMTT Bayonne — Remediation

The Bayonne, New Jersey terminal, portions of which have been acquired over a 30-year period, have 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 and shares in 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 and cost from $30.0 million to $65.0 million. The cost of 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.

Shareholder Litigation

On April 23, 2018, a complaint captioned City of Riviera Beach General Employees Retirement System v. Macquarie Infrastructure Corp., et al., Case 1:18-cv-03608 (VSB), was filed in the United States District Court for the Southern District of New York. A substantially identical complaint captioned Daniel Fajardo v. Macquarie Infrastructure Corporation, et al., Case No. 1:18-cv-03744 (VSB) was filed in the same court on April 27, 2018. Both complaints assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder on behalf of a putative class consisting of all purchasers of MIC common stock between February 22, 2016 and February 21, 2018. The named defendants in both cases are the Company and four current or former officers of MIC and one of its subsidiaries, IMTT Holdings LLC. The complaints in both actions allege that the Company and the individual defendants knowingly made material misstatements and omitted material facts in its public disclosures concerning the Company’s and IMTT’s business and the sustainability of the Company’s dividend to stockholders. On January 30, 2019, the Court issued an opinion and order consolidating the two cases, appointing Moab Partners, L.P. (Moab) as Lead Plaintiff, approving Moab’s selection of lead counsel, and directing Moab to file a consolidated amended complaint within 30 days. The Company intends to vigorously contest the claims asserted in the consolidated cases, which the Company believes are entirely meritless.

On August 9, 2018, a shareholder derivative complaint captioned Phyllis Wright v. Liam Stewart, et al., Case No. 1:18-cv-07174 (VSB), was filed in the United States District Court for the Southern District of New York. A substantially identical complaint captioned Raymond Greenlee v. James Hooke, et al., Case No. 1:18-cv-09339 (VSB) was filed in the same court on October 12, 2018. A third and substantially similar shareholder derivative complaint captioned Kim Johnson v. Liam Stewart, et al., Case No. 1:18-cv-011062 (VSB) was filed in the same court on November 27, 2018. Each of the shareholder derivative complaints assert derivative claims on behalf of the Company against certain of its current and former officers and directors arising out of the same subject matter at issue in the City of Riviera Beach and Fajardo complaints discussed above. The causes of action asserted include violation of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, waste of corporate assets, unjust enrichment, and aiding and abetting breach of fiduciary duty. A motion to consolidate the three actions is currently pending.

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Proceedings in the Wright, Greenlee and Johnson cases are otherwise stayed pending resolution of an anticipated motion to dismiss the securities class actions described above. The Company expects that the named defendants will vigorously contest the claims asserted in the Wright, Greenlee and Johnson complaints.

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”. As of February 15, 2019, we had 85,860,351 shares issued and outstanding that we believe were held by approximately 326 holders of record.

The following represents the Company’s relative share price performance from January 1, 2014 through December 31, 2018.

Securities Authorized for Issuance Under Equity Compensation Plans

The table below sets forth information with respect to shares authorized for issuance as of December 31, 2018:

Plan Category		Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)				Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (b)				Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Under Column (a)) (c)
Equity compensation plans approved by stockholders(1)			23,646			$	—				(1)
Equity compensation plans not approved by stockholders			—				—				—
Total			23,646			$	—				(1)

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The Company’s 2016 Omnibus Employee Incentive Plan provides for the issuance of equity awards covering up to 500,000 shares of common stock to employees, consultants and service providers. Types of awards include stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards and other stock-based awards. At December 31, 2018, 500,000 shares of common stock were available to be issued under this Plan.

Dividend Policy

We intend to provide investors with the benefits of access to a portfolio of infrastructure businesses that we believe will, as a result of inflation-linked escalators and the provision of basic services to customers, generate growing amounts of cash flow over time. Consistent with this, we intend to distribute the majority of the cash generated from operations of our businesses as a quarterly cash dividend.

Our board of directors regularly reviews our dividend policy and payout ratio. 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 and economic conditions, the Company’s financial condition, results of operations, indebtedness levels, capital requirements, capital opportunities and any contractual, legal and regulatory restrictions on the payment of dividends by the Company to its stockholders 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. Moreover, the Company’s senior secured credit facility and the debt commitments at our businesses contain restrictions that may limit the Company’s ability to pay dividends. Although historically we have declared cash dividends on our shares, any or all of these or other factors could result in the modification of our dividend policy, or the reduction, modification or elimination of our dividend in the future.

Since January 1, 2017, MIC has paid or declared the following dividends:

Declared

Period Covered

$ per Share

Record Date

Payable Date

February 14, 2019

Fourth quarter 2018

$

1.00

March 4, 2019

March 7, 2019

October 30, 2018

Third quarter 2018

1.00

November 12, 2018

November 15, 2018

July 31, 2018

Second quarter 2018

1.00

August 13, 2018

August 16, 2018

May 1, 2018

First quarter 2018

1.00

May 14, 2018

May 17, 2018

February 19, 2018

Fourth quarter 2017

1.44

March 5, 2018

March 8, 2018

October 30, 2017

Third quarter 2017

1.42

November 13, 2017

November 16, 2017

August 1, 2017

Second quarter 2017

1.38

August 14, 2017

August 17, 2017

May 2, 2017

First quarter 2017

1.32

May 15, 2017

May 18, 2017

February 17, 2017

Fourth quarter 2016

1.31

March 3, 2017

March 8, 2017

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Fourth Quarter of 2018 Dividend

The MIC Board has authorized a quarterly cash dividend of $1.00 per share for the quarter ended December 31, 2018. Together with the dividends for the first three quarters for 2018, this represents a cumulative 2018 dividend of $4.00 per share.

Tax Treatment of 2018 Dividends

The Company has determined that 65.5% of the dividends paid in the year ended December 31, 2018 were characterized as a dividend for U.S. federal income tax purposes. The remaining 34.5% of dividends paid were characterized as returns of capital.

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

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data includes the results of operations, cash flows and balance sheet data for the years ended, and as of, December 31, 2018, 2017, 2016, 2015 and 2014 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, 2018 have been derived from the consolidated financial statements of the Company, as adjusted for the presentation of discontinued operations. The information below should be read in conjunction with the consolidated financial statements (and notes thereto) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7.

		Year Ended December 31,
		2018				2017				2016				2015				2014
		($ In Thousands, Except Share and Per Share Data)
STATEMENT OF OPERATIONS DATA:
Revenue
Service revenue		$	1,515,149			$	1,445,832			$	1,288,562			$	1,288,501			$	1,035,195
Product revenue			246,384				222,955				213,470				226,952				264,621
Total revenue			1,761,533				1,668,787				1,502,032				1,515,453				1,299,816
Cost and expenses
Cost of services			712,082				624,214				524,423				551,029				525,298
Cost of product sales			178,822				143,787				119,440				150,053				189,012
Selling, general and administrative			328,464				306,664				277,628				274,611				256,935
Fees to Manager – related party			44,866				71,388				68,486				354,959				168,182
Goodwill impairment			3,215				—				—				—				—
Depreciation			193,659				178,292				175,518				169,753				83,684
Amortization of intangibles			68,314				63,825				60,997				97,935				41,852
Total operating expenses			1,529,422				1,388,170				1,226,492				1,598,340				1,264,963
Operating income (loss)			232,111				280,617				275,540				(82,887	)			34,853
Interest income			788				83				86				32				89
Interest expense			(112,626	)			(86,999	)			(95,613	)			(94,666	)			(64,567	)
Equity in earnings and amortization charges of investee			—				—				—				—				26,147
Gain from acquisition/divestiture of businesses(1)			—				—				—				—				948,137
Other (expense) income, net			(6,194	)			10,566				17,765				222				(3,248	)
Net income (loss) from continuing operations before income taxes			114,079				204,267				197,778				(177,299	)			941,411
(Provision) benefit for income taxes			(49,451	)			229,503				(69,313	)			56,622				55,846
Net income (loss) from continuing operations		$	64,628			$	433,770			$	128,465			$	(120,677	)		$	997,257
Discontinued Operations(2)
Net income (loss) from discontinued operations before income taxes		$	31,748			$	17,691			$	28,348			$	(1,669	)		$	73,498
(Provision) benefit for income taxes			(2,128	)			4,651				(1,944	)			8,539				(31,472	)
Net income from discontinued operations			29,620				22,342				26,404				6,870				42,026
Net income (loss)		$	94,248			$	456,112			$	154,869			$	(113,807	)		$	1,039,283
Net income (loss) from continuing operations		$	64,628			$	433,770			$	128,465			$	(120,677	)		$	997,257
Less: net (loss) income attributable to noncontrolling interests			(3,452	)			(409	)			(3,608	)			586				1,726
Net income (loss) from continuing operations attributable to MIC		$	68,080			$	434,179			$	132,073			$	(121,263	)		$	995,531

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		Year Ended December 31,
		2018				2017				2016				2015				2014
		($ In Thousands, Except Share and Per Share Data)
Net income from discontinued operations		$	29,620			$	22,342			$	26,404			$	6,870			$	42,026
STATEMENT OF OPERATIONS DATA:
Less: net (loss) income attributable to noncontrolling interests			(38,821	)			5,319				2,096				(5,856	)			(4,471	)
Net income from discontinued operations attributable to MIC		$	68,441			$	17,023			$	24,308			$	12,726			$	46,497
Net income (loss) attributable to MIC		$	136,521			$	451,202			$	156,381			$	(108,537	)		$	1,042,028
Basic income (loss) per share from continuing operations attributable to MIC		$	0.80			$	5.22			$	1.63			$	(1.55	)		$	15.80
Basic income per share from discontinued operations attributable to MIC			0.80				0.20				0.30				0.16				0.74
Basic income (loss) per share attributable to MIC		$	1.60			$	5.42			$	1.93			$	(1.39	)		$	16.54
Weighted average number of shares outstanding: basic			85,233,989				83,204,404				80,892,654				77,997,826				62,990,312
Diluted income (loss) per share from continuing operations attributable to MIC		$	0.80			$	4.94			$	1.55			$	(1.55	)		$	15.38
Diluted income per share from discontinued operations attributable to MIC			0.80				0.19				0.30				0.16				0.72
Diluted income (loss) per share attributable to MIC		$	1.60			$	5.13			$	1.85			$	(1.39	)		$	16.10
Weighted average number of shares outstanding: diluted			85,249,865				91,073,362				82,218,627				77,997,826				64,925,565
Cash dividends declared per share		$	4.00			$	5.56			$	5.05			$	4.46			$	3.8875

		Year Ended December 31,
		2018				2017				2016				2015				2014
		($ In Thousands)
STATEMENT OF CASH FLOWS DATA:
Cash flow from continuing operations
Cash provided by operating activities		$	473,160			$	464,106			$	488,127			$	360,607			$	207,086
Cash used in investing activities			(156,344	)			(421,064	)			(287,526	)			(238,217	)			(1,216,476	)
Cash (used in) provided by financing activities			(389,376	)			70,462				(138,415	)			302,144				858,358
Net (decrease) increase in cash, cash equivalents and restricted cash from continuing operations		$	(72,560	)		$	113,504			$	62,186			$	424,534			$	(151,032	)
Cash flow from discontinued operations(2)
Cash provided by operating activities		$	46,268			$	64,928			$	71,668			$	19,827			$	8,671
Cash provided by (used in) investing activities			614,892				(135,757	)			(85,733	)			(207,647	)			152,112
Cash used in financing activities			(30,881	)			(32,359	)			(28,485	)			(264,414	)			(224,937	)
Net increase (decrease) in cash, cash equivalents and restricted cash from discontinued operations		$	630,279			$	(103,188	)		$	(42,550	)		$	(452,234	)		$	(64,154	)

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		As of December 31,
		2018				2017				2016				2015				2014
		($ In Thousands)
BALANCE SHEET DATA:
Current assets from continuing operations		$	772,651			$	270,731			$	208,934			$	178,528			$	199,717
Current assets held for sale(2)			647,652				36,914				35,734				38,041				31,761
Total current assets			1,420,303				307,645				244,668				216,569				231,478
Property, equipment, land and leasehold improvements, net			3,141,407				3,197,407				2,963,247				2,869,353				2,799,529
Intangible assets, net			788,761				851,751				822,197				863,691				949,264
Goodwill			2,043,320				2,047,040				2,002,781				1,995,583				1,990,018
Noncurrent assets held for sale(2)			—				1,550,948				1,475,868				1,342,358				581,379
Total assets		$	7,443,781			$	8,008,951			$	7,559,253			$	7,308,804			$	6,567,739
Current liabilities from continuing operations		$	520,798			$	205,300			$	195,840			$	261,077			$	193,295
Current liabilities held for sale(2)			317,178				50,665				55,169				47,713				31,037
Total current liabilities			837,976				255,965				251,009				308,790				224,332
Deferred income taxes			680,938				644,914				904,179				826,935				848,684
Long-term debt, net of current portion			2,652,748				2,991,654				2,473,477				2,226,240				2,049,804
Noncurrent liabilities held for sale(2)			—				603,037				643,291				601,029				333,563
Total liabilities		$	4,327,454			$	4,658,248			$	4,411,719			$	4,106,362			$	3,597,571
Stockholders’ equity		$	2,964,602			$	3,153,692			$	2,952,894			$	3,030,190			$	2,787,163

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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 Corporation should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere herein.

Recent Developments

Business Divestitures

In November 2018, we completed the sale of the design-build mechanical contractor business previously reported within the MIC Hawaii segment. Prior to the sale, we wrote-down the value of our investment in the previously owned design-build mechanical contractor of approximately $30.0 million to reflect its underperformance.

In October 2018, we completed the sale of BEC and received cash of $657.4 million, net of the assumption of the outstanding debt balance of $243.5 million by the buyer and subject to post-closing working capital adjustments. We have used the proceeds from the sale of BEC and cash on hand to pay down the majority of the outstanding balances on our and our businesses’ revolving credit facilities. We may redraw the majority of these facilities in the future to fund a portion of our planned growth capital deployments. For further discussions on use of BEC proceeds, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Financing Activities from Continuing Operations”.

In October 2018, we commenced a sale process involving substantially all of our portfolio of solar and wind facilities. We believe a sale of these assets and the redeployment of the proceeds will maximize value relative to attempting to continue to expand the portfolio through acquisitions. The sale process is expected to be concluded in the second quarter of 2019.

Discontinued Operations — Presentation

Effective October 1, 2018, BEC and substantially all of our portfolio of solar and wind power generation businesses were classified as discontinued operations and our Contracted Power segment was eliminated. The remaining renewable power development businesses have been reported as components of Corporate and Other. All prior comparable periods have been restated to reflect this change. For additional information, see Note 5, “Discontinued Operations and Dispositions”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K.

Results of Operations

Consolidated

Our consolidated results reflect a decrease in the contribution from IMTT primarily as a result of the non-renewal of certain contracts for bulk liquid storage and handling services and the absence of deferred revenue recognized in 2017 in connection with the termination of a construction project. The decrease was partially offset by contributions from an acquisition of a portfolio of storage terminals completed in the third quarter of 2017.

Our consolidated results also reflect increased contributions from our Atlantic Aviation business. Atlantic Aviation benefited from contributions from acquisitions, hangar rentals and ancillary fees.

MIC Hawaii’s contribution declined primarily as a result of the underperformance of the previously owned design-build mechanical contractor, and the write-down of our investment in that business, together with cost increases at Hawaii Gas. These factors were partially offset by incremental regulated revenue generated by Hawaii Gas as a result of the settlement of the general rate case in June 2018.

Results for Corporate and Other for the year ended December 31, 2018 reflect the absence of implementation costs incurred in 2017 related to our shared services facility, and the benefit of reductions in procurement costs in 2018. The absence of the implementation expenses was partially offset by the cost of advisory and other services incurred in connection with addressing shareholder matters in 2018 and higher

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Results of Operations: Consolidated — (continued)

costs related to the evaluation of various investment and acquisition/disposition opportunities, primarily related to the sale of BEC. Corporate and Other also reflects a year over year increase in fee income from a developer of renewable power projects during the year ended December 31, 2018.

Capital deployed into acquisitions by each of IMTT and Atlantic Aviation in 2017, as well as growth investments generally, contributed to revenue and EBITDA excluding non-cash items to our overall results for the year ended December 31, 2018.

Contributions from discontinued operations increased primarily from BEC as a result of the plant expansion completed in May 2018 and improved wind resources.

		Year Ended December 31,												Change (From 2017 to 2018) Favorable/(Unfavorable)								Change (From 2016 to 2017) Favorable/(Unfavorable)
		2018				2017				2016				$				%				$				%
		($ In Thousands, Except Share and Per Share Data) (Unaudited)
Revenue
Service revenue		$	1,515,149			$	1,445,832			$	1,288,562				69,317				4.8				157,270				12.2
Product revenue			246,384				222,955				213,470				23,429				10.5				9,485				4.4
Total revenue			1,761,533				1,668,787				1,502,032				92,746				5.6				166,755				11.1
Costs and expenses
Cost of services			712,082				624,214				524,423				(87,868	)			(14.1	)			(99,791	)			(19.0	)
Cost of product sales			178,822				143,787				119,440				(35,035	)			(24.4	)			(24,347	)			(20.4	)
Selling, general and administrative			328,464				306,664				277,628				(21,800	)			(7.1	)			(29,036	)			(10.5	)
Fees to Manager – related party			44,866				71,388				68,486				26,522				37.2				(2,902	)			(4.2	)
Goodwill impairment			3,215				—				—				(3,215	)			NM				—				—
Depreciation			193,659				178,292				175,518				(15,367	)			(8.6	)			(2,774	)			(1.6	)
Amortization of intangibles			68,314				63,825				60,997				(4,489	)			(7.0	)			(2,828	)			(4.6	)
Total operating expenses			1,529,422				1,388,170				1,226,492				(141,252	)			(10.2	)			(161,678	)			(13.2	)
Operating income			232,111				280,617				275,540				(48,506	)			(17.3	)			5,077				1.8
Other income (expense)
Interest income			788				83				86				705				NM				(3	)			(3.5	)
Interest expense(1)			(112,626	)			(86,999	)			(95,613	)			(25,627	)			(29.5	)			8,614				9.0
Other (expense) income, net			(6,194	)			10,566				17,765				(16,760	)			(158.6	)			(7,199	)			(40.5	)
Net income from continuing operations before income taxes			114,079				204,267				197,778				(90,188	)			(44.2	)			6,489				3.3
(Provision) benefit for income taxes			(49,451	)			229,503				(69,313	)			(278,954	)			(121.5	)			298,816				NM
Net income from continuing operations		$	64,628			$	433,770			$	128,465				(369,142	)			(85.1	)			305,305				NM
Discontinued Operations
Net income from discontinued operations before income taxes		$	31,748			$	17,691			$	28,348				14,057				79.5				(10,657	)			(37.6	)
(Provision) benefit for income taxes			(2,128	)			4,651				(1,944	)			(6,779	)			(145.8	)			6,595				NM
Net income from discontinued operations		$	29,620			$	22,342			$	26,404				7,278				32.6				(4,062	)			(15.4	)
Net income		$	94,248			$	456,112			$	154,869				(361,864	)			(79.3	)			301,243				194.5
Net income from continuing operations		$	64,628			$	433,770			$	128,465				(369,142	)			(85.1	)			305,305				NM
Less: net loss attributable to noncontrolling interests			(3,452	)			(409	)			(3,608	)			3,043				NM				(3,199	)			(88.7	)
Net income from continuing operations attributable to MIC		$	68,080			$	434,179			$	132,073				(366,099	)			(84.3	)			302,106				NM
Net income from discontinued operations		$	29,620			$	22,342			$	26,404				7,278				32.6				(4,062	)			(15.4	)
Less: net (loss) income attributable to noncontrolling interests			(38,821	)			5,319				2,096				44,140				NM				(3,223	)			(153.8	)
Net income from discontinued operations attributable to MIC		$	68,441			$	17,023			$	24,308				51,418				NM				(7,285	)			(30.0	)
Net income attributable to MIC		$	136,521			$	451,202			$	156,381				(314,681	)			(69.7	)			294,821				188.5
Basic income per share from continuing operations attributable to MIC		$	0.80			$	5.22			$	1.63				(4.42	)			(84.7	)			3.59				NM
Basic income per share from discontinued operations attributable to MIC			0.80				0.20				0.30				0.60				NM				(0.10	)			(33.3	)
Basic income per share attributable to MIC		$	1.60			$	5.42			$	1.93				(3.82	)			(70.5	)			3.49				180.8
Weighted average number of shares outstanding: basic			85,233,989				83,204,404				80,892,654				2,029,585				2.4				2,311,750				2.9

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Results of Operations: Consolidated — (continued)

NM — Not meaningful

Year Ended December 31, 2018 Compared with Year Ended December 31, 2017

Revenue

Consolidated revenues increased for the year ended December 31, 2018 compared with the year ended December 31, 2017 primarily as a result of, (i) an increase in the wholesale cost of jet fuel sold at Atlantic Aviation; (ii) an increase in the volume and the wholesale cost of propane and synthetic natural gas sold at Hawaii Gas; and (iii) contributions from acquisitions. The increase in revenue for the year ended December 31, 2018 was partially offset by the decrease in revenue at IMTT due to the decline in utilization and lower average storage rates and the absence of deferred revenue recognized in 2017 in connection with the termination of a construction project.

Cost of Services and Product Sales

Consolidated cost of services and product sales increased for the year ended December 31, 2018 compared with the year ended December 31, 2017 primarily due to, (i) an increase in the wholesale cost of jet fuel at Atlantic Aviation; (ii) an increase in the wholesale cost of propane and synthetic natural gas and lower margins at MIC Hawaii; and (iii) incremental costs associated with various acquisitions and developments. The changes in consolidated cost of services and product sales also reflect higher unrealized losses on commodity hedges at Hawaii Gas (see “Results of Operations — MIC Hawaii” below).

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for the year ended December 31, 2018 compared with the year ended December 31, 2017 primarily due to, (i) incremental costs associated with acquired and developed businesses; (ii) higher costs related to the evaluation of various investment and acquisition/disposition opportunities, primarily related to the sale of BEC; and (ii) approximately $4.0 million of costs incurred for advisory services in connection with addressing shareholder matters. The increases in selling, general and administrative expenses were partially offset by the absence of costs incurred during 2017 in connection with the implementation of our shared services center.

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 total stockholder returns relative to a U.S. utilities index. For the years ended December 31, 2018 and 2017, we incurred base management fees of $44.9 million and $71.4 million, respectively. No performance fees were incurred in any of the above periods. The unpaid portion of base management fees and performance fees, if any, at the end of each reporting period is included in the line item Due to Manager-related party in our consolidated balance sheets.

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Results of Operations: Consolidated — (continued)

In all of the periods shown below, our Manager elected to reinvest any fees to which it was entitled in additional shares. In accordance with the Third Amended and Restated Management Services Agreement, our Manager has currently elected to reinvest future base management fees and performance fees, if any, in new primary shares.

Period		Base Management Fee Amount ($ in Thousands)				Performance Fee Amount ($ in Thousands)				Shares Issued
2018 Activities:
Fourth quarter 2018		$	8,753			$	—				220,208	(1)
Third quarter 2018			12,333				—				269,286
Second quarter 2018			10,852				—				277,053
First quarter 2018			12,928				—				265,002
2017 Activities:
Fourth quarter 2017		$	16,778			$	—				248,162
Third quarter 2017			17,954				—				240,674
Second quarter 2017			18,433				—				233,394
First quarter 2017			18,223				—				232,398
2016 Activities:
Fourth quarter 2016		$	18,916			$	—				230,773
Third quarter 2016			18,382				—				232,488
Second quarter 2016			16,392				—				232,835
First quarter 2016			14,796				—				234,179

Goodwill Impairment

During the year ended December 31, 2018, we wrote-off the goodwill balance related to the previously owned design-build mechanical contractor.

Depreciation

Depreciation expense increased for the year ended December 31, 2018 compared with the year ended December 31, 2017 primarily as a result of contributions from acquisitions and assets placed in service.

Amortization of Intangibles

Amortization of intangibles increased for the year ended December 31, 2018 compared with the year ended December 31, 2017 primarily due to write-off of intangible assets related to the previously owned design-build mechanical contractor.

Interest Expense and Gains on Derivative Instruments

Interest expense includes gains on derivative instruments of $7.6 million and $2.2 million for the years ended December 31, 2018 and 2017, respectively. Gains on derivatives recorded in interest expense are attributable to the change in fair value of interest rate hedging instruments. For the year ended December 31, 2018, interest expense also included the non-cash write-off of deferred financing costs at Atlantic Aviation related to the December 2018 refinancing of its term loan and revolving credit facility. Excluding the derivative adjustments and the write-off of deferred financing costs, cash interest expense was $98.4 million and $80.3 million for the years ended December 31, 2018 and 2017, respectively. The increase in cash interest expense reflects primarily a higher average debt balance and an increase in the weighted average interest rate. See discussions of interest expense for each of our operating businesses below.

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Results of Operations: Consolidated — (continued)

Other (Expense) Income, net

Other (expense) income, net decreased primarily due to the write-down of our investment in the previously owned design-build mechanical contractor during the quarter ended September 30, 2018, partially offset by higher fee income from a developer of renewable power during 2018.

Discontinued Operations

Income from discontinued operations increased primarily due to (i) the change in tax rates imposed on certain entities by the Tax Cuts and Jobs Act; (ii) contribution from the BEC plant expansion; and (iii) improved wind resources.

Income Taxes (including Continuing and Discontinued Operations)

We file a consolidated federal income tax return that includes the financial results of IMTT, Atlantic Aviation, MIC Hawaii, BEC through the date of sale, and our allocable share of the taxable income (loss) from the solar and wind facilities in discontinued operations. The solar and wind facilities in which we own less than 100% of the equity interest are held in limited liability companies and treated as partnerships for tax purposes. Pursuant to a tax sharing agreement, the businesses included in our consolidated federal income tax return pay MIC an amount equal to the federal income tax each would have paid on a standalone basis as if they were not part of the consolidated federal income tax return. In addition, our businesses file income tax returns and may pay taxes in the state and local jurisdictions in which they operate.

The change from income tax benefit for the year ended December 31, 2017 to income tax expense for the year ended December 31, 2018 is primarily due to the impact of the Tax Cut and Jobs Act in 2017. The Tax Cut and Jobs Act required the revaluation of the net deferred tax liability which resulted in a tax benefit of $312.3 million (primarily at IMTT and Atlantic Aviation).

For the year ended December 31, 2018, current taxable income, including income from discontinued operations, is expected to be approximately $220.0 million, which includes the gain on sale of BEC as well as the loss on the sale of the design-build mechanical contractor in the MIC Hawaii segment.

For the year ended December 31, 2018, any consolidated federal income tax liabilities our businesses generated are expected to be fully offset by net operating loss (NOL) carryforwards. Our federal NOL carryforward at December 31, 2018 was $152.0 million. The amount of any federal income tax otherwise payable in 2019 is expected to be reduced by tax benefits associated with planned capital deployment of approximately $275.0 million to $300.0 million. Gains from potential sale of assets concluded in 2019 would increase our federal income tax payable.

In addition, we expect our businesses collectively to pay state/provincial income taxes of approximately $21.0 million in 2018, including the expected taxes due on the sale of BEC. In calculating our consolidated state income tax provision, we have provided a valuation allowance for certain state income tax NOLs, the use of which is uncertain.

Valuation allowance:

At December 31, 2018 and 2017, we did not have a valuation allowance for our consolidated federal NOL carryforwards. In calculating our consolidated income tax provision, we reduced our valuation allowance by $4.4 million to $1.1 million at December 31, 2018 for certain foreign tax credits and state income tax NOL carryforwards, the utilization of which is not assured beyond a reasonable doubt.

The Tax Cuts and Jobs Act

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law and includes provisions that will have an impact on our federal taxable income. The most significant of these are 100% bonus depreciation on qualifying assets (which is scheduled to decrease ratably to 0% between 2023 and 2027) and a reduction in the federal corporate tax rate from 35% to 21%.

The Tax Cuts and Jobs Act also limits the deductibility of net interest expense to 30% of “adjusted taxable income”. We do not expect this limitation to have a material impact to our financial results through 2021.

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Results of Operations: Consolidated — (continued)

Year Ended December 31, 2017 Compared with Year Ended December 31, 2016

Revenue

Consolidated revenues increased for the year ended December 31, 2017 compared with the year ended December 31, 2016 primarily as a result of an increase in the wholesale cost and the volume of jet fuel sold at Atlantic Aviation, contributions from acquisitions and an increase in the wholesale cost and volume of gas sold at MIC Hawaii. The increase in the consolidated revenue for the year ended December 31, 2017 also includes a contribution from IMTT from the recognition of deferred revenue resulting from termination of a construction project by a customer.

Cost of Services and Product Sales

Consolidated cost of services and product sales increased for the year ended December 31, 2017 compared with the year ended December 31, 2016 primarily due to an increase in the wholesale cost of jet fuel at Atlantic Aviation, the wholesale cost of gas at MIC Hawaii and contributions from acquisitions. The changes in consolidated cost of services and product sales were also attributable to unrealized losses on commodity hedges at Hawaii Gas in 2017 compared with unrealized gains in 2016 (see “Results of Operations — MIC Hawaii” below).

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for the year ended December 31, 2017 compared with the year ended December 31, 2016 primarily due to (i) $9.3 million of costs incurred in connection with the evaluation of various investment and acquisition opportunities; (ii) $8.5 million of costs incurred in connection with the implementation of our shared services center; and (iii) incremental costs associated with acquired businesses.

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 total stockholder returns relative to a U.S. utilities index. For the years ended December 31, 2017 and 2016, we incurred base management fees of $71.4 million and $68.5 million, respectively. No performance fees were generated in any of the above periods.

Depreciation

Depreciation expense increased for the year ended December 31, 2017 compared with the year ended December 31, 2016 primarily due to contributions from acquisitions, partially offset by the write-off of tanks and docks in 2016 at IMTT.

Amortization of Intangibles

Amortization of intangibles increased for the year ended December 31, 2017 compared with the year ended December 31, 2016 primarily due to contributions from acquisitions.

Interest Expense and Gains (Losses) on Derivative Instruments

Interest expense includes gains on derivative instruments of $2.2 million and losses on derivative instruments of $2.5 million for the years ended December 31, 2017 and 2016, respectively. For the year ended December 31, 2016, interest expense also included the non-cash write-off of deferred financing costs at Atlantic Aviation related to the October 2016 refinancing of its term loan and revolving credit facility and at Hawaii Gas related to the February 2016 refinancing of its $80.0 million term loan and its $60.0 million revolving credit facility. Excluding the derivative adjustments and the write-off of deferred financing costs, interest expense decreased for the year ended December 31, 2017 compared with the year ended December 31, 2016 primarily due to a reduction in the weighted average interest rate, partially offset by a higher average debt balance. Cash interest expense was $80.3 million and $83.4 million for the years ended December 31, 2017 and 2016, respectively. See discussions of interest expense for each of our operating businesses below.

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Results of Operations: Consolidated — (continued)

As part of the refinancing of the Atlantic Aviation debt in October 2016, Atlantic Aviation paid $17.8 million in interest rate swap breakage fees associated with the termination of out-of-the-money interest rate swap contracts related to prior debt facilities. In addition, the business entered into $400.0 million of interest rate caps with a strike price of 1.0% to hedge the one month LIBOR floating rate interest exposure on the Atlantic Aviation term loan facility. The business paid $8.6 million in upfront premiums to enter into the caps.

Other Income, net

Other income, net, decreased for the year ended December 31, 2017 compared with year ended December 31, 2016 as 2016 included insurance recoveries associated with damage docks to IMTT’s facilities, partially offset by fee income from a developer of renewable power during 2017.

Income Taxes

The change from income tax expense for the year ended December 31, 2016 to income tax benefit for the year ended December 31, 2017 is primarily due to the Tax Cut and Jobs Act. The effects of the change in the corporate tax rate requires us to revalue the net deferred tax liability balances on the consolidated balance sheet. The effect of revaluing the Company’s net deferred tax liabilities to the new rate of 21% resulted in recording a tax benefit of $312.3 million, primarily at IMTT and Atlantic Aviation, in the consolidated statement of operations.

Valuation allowance:

At December 31, 2017 and 2016, we did not have a valuation allowance for our consolidated federal NOL carryforwards. In calculating our consolidated income tax provision, we increased our valuation allowance by $1.1 million to $5.5 million at December 31, 2017 for certain foreign tax credits and state income tax NOL carryforwards, the utilization of which is not assured beyond a reasonable doubt.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding non-cash items, Free Cash Flow and Proportionately Combined Metrics

In addition to our results under U.S. GAAP, we use certain non-GAAP measures to assess the performance and prospects of our businesses. In particular, we use EBITDA excluding non-cash items, Free Cash Flow and certain proportionately combined financial metrics. Proportionately combined financial metrics reflect our proportionate interest in our solar and wind facilities, substantially all of which are in discontinued operations.

We measure EBITDA excluding non-cash items as it reflects our businesses’ ability to effectively manage the volume of products sold or services provided, the operating margin earned on those transactions and the management of operating expenses independent of the capitalization and tax attributes of those businesses. We believe investors use EBITDA excluding non-cash items primarily as a measure of the operating performance of MIC’s businesses and to make comparisons with the operating performance of other businesses whose depreciation and amortization expense may vary widely from ours, particularly where acquisitions and other non-operating factors are involved. We define EBITDA excluding non-cash items as net income (loss) or earnings — the most comparable GAAP measure — before interest, taxes, depreciation and amortization and non-cash items including impairments, unrealized derivative gains and losses, adjustments for other non-cash items and pension expense reflected in the statements of operations. EBITDA excluding non-cash items also excludes base management fees and performance fees, if any, whether paid in cash or stock.

Because we have varied ownership interests in the businesses within our portfolio of solar and wind power generation facilities (in discontinued operations), but have an obligation to report their financial results on a consolidated basis, GAAP measures such as net income (loss) do not fully reflect our proportionate share of the cash generated by these businesses. We note that the proportionately combined metrics used may be calculated in a different manner by other companies and may limit their usefulness as a comparative measure. Therefore, proportionately combined metrics should be used as a supplemental measure and not in lieu of our financial results reported under GAAP.

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Results of Operations: Consolidated — (continued)

Our businesses are characteristically owners of high-value, long-lived assets capable of generating substantial Free Cash Flow. We define Free Cash Flow as cash from operating activities — the most comparable GAAP measure — which includes cash interest, tax payments 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.

We use Free Cash Flow as a measure of our ability to provide investors with an attractive risk-adjusted total return by sustaining and potentially increasing our quarterly cash dividend and funding a portion of our growth. GAAP metrics such as net income (loss) do not provide us with the same level of visibility into the performance and prospects of the business as a result of: (i) the capital intensive nature of our businesses and the generation of non-cash depreciation and amortization; (ii) shares issued to our external Manager under the Management Services Agreement; (iii) our ability to defer all or a portion of current federal income taxes; (iv) non-cash unrealized gains or losses on derivative instruments; (v) amortization of tolling liabilities; (vi) gains (losses) on disposal of assets; and (vii) pension expenses. Pension expenses primarily consist of interest cost, expected return on plan assets and amortization of actuarial and performance gains and losses. Any cash contributions to pension plans are reflected as a reduction to Free Cash Flow and are not included in pension expense. We believe that external consumers of our financial statements, including investors and research analysts, use Free Cash Flow both to assess MIC’s performance and as an indicator of its success in generating an attractive risk-adjusted total return.

In this Annual Report on Form 10-K, we have disclosed Free Cash Flow on a consolidated basis and for each of our operating segments and MIC Corporate. We believe that both EBITDA excluding non-cash items and Free Cash Flow support a more complete and accurate understanding of the financial and operating performance of our businesses than would otherwise be achieved using GAAP results alone.

Free Cash Flow does not take into consideration required payments on indebtedness and other fixed obligations or other cash items that are excluded from our definition of Free Cash Flow. We note that Free Cash Flow may be calculated differently by other companies thereby limiting its usefulness as a comparative measure. Free Cash Flow should be used as a supplemental measure and not in lieu of our financial results reported under GAAP.

Classification of Maintenance Capital Expenditures and Growth Capital Expenditures

We categorize capital expenditures as either maintenance capital expenditures or growth capital expenditures. As neither maintenance capital expenditure nor growth capital expenditure is a GAAP term, we have adopted a framework to categorize specific capital expenditures. In broad terms, maintenance capital expenditures primarily maintain our businesses at current levels of operations, capability, profitability or cash flow, while growth capital expenditures primarily provide new or enhanced levels of operations, capability, profitability or cash flows. We consider a number of factors in determining whether a specific capital expenditure will be classified as maintenance or growth.

We do not bifurcate specific capital expenditures into maintenance and growth components. Each discrete capital expenditure is considered within the above framework and the entire capital expenditure is classified as either maintenance or growth.

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Results of Operations: Consolidated — (continued)

A reconciliation of net income from continuing operations to EBITDA excluding non-cash items from continuing operations and a reconciliation from cash provided by operating activities from continuing operations to Free Cash Flow from continuing operations, on a consolidated basis, is provided below. Similar reconciliations for each of our operating businesses and Corporate and Other follow.

		Year Ended December 31,												Change (From 2017 to 2018) Favorable/(Unfavorable)								Change (From 2016 to 2017) Favorable/(Unfavorable)
		2018				2017				2016				$				%				$				%
		($ In Thousands) (Unaudited)
Net income from continuing operations		$	64,628			$	433,770			$	128,465
Interest expense, net(1)			111,838				86,916				95,527
Provision (benefit) for income taxes			49,451				(229,503	)			69,313
Goodwill impairment			3,215				—				—
Depreciation			193,659				178,292				175,518
Amortization of intangibles			68,314				63,825				60,997
Fees to Manager-related party			44,866				71,388				68,486
Pension expense(2)			8,306				8,106				8,601
Other non-cash expense (income), net(3)			25,178				5,734				(9,296	)
EBITDA excluding non-cash items – continuing operations		$	569,455			$	618,528			$	597,611				(49,073	)			(7.9	)			20,917				3.5
EBITDA excluding non-cash items – continuing operations		$	569,455			$	618,528			$	597,611
Interest expense, net(1)			(111,838	)			(86,916	)			(95,527	)
Adjustments to derivative instruments recorded in interest expense(1)			(1,574	)			(3,803	)			(8,415	)
Amortization of debt financing costs(1)			11,353				7,184				19,552
Amortization of debt discount(1)			3,627				3,266				1,007
Interest rate swap breakage fees			—				—				(17,770	)
Interest rate cap premium			—				—				(8,629	)
Provision for current income taxes			(13,950	)			(11,031	)			(7,304	)
Pension contribution(2)			—				—				(3,500	)
Changes in working capital(4)			16,087				(63,122	)			11,102
Cash provided by operating activities – continuing operations			473,160				464,106				488,127
Changes in working capital(4)			(16,087	)			63,122				(11,102	)
Maintenance capital expenditures			(49,979	)			(34,676	)			(57,191	)
Free cash flow – continuing operations			407,094				492,552				419,834				(85,458	)			(17.4	)			72,718				17.3
Free cash flow – discontinued operations			67,934				65,448				72,412				2,486				3.8				(6,964	)			(9.6	)
Total Free Cash Flow		$	475,028			$	558,000			$	492,246				(82,972	)			(14.9	)			65,754				13.4

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Results of Operations: Consolidated — (continued)

Reconciliation from Consolidated Free Cash Flow to Proportionately Combined Free Cash Flow

See “Results of Operations — Consolidated” above for a reconciliation of Free Cash Flow — Consolidated basis from continuing operations to cash provided by operating activities from continuing operations, the most comparable GAAP measure. The following table is a reconciliation from Free Cash Flow on a consolidated basis to Free Cash Flow on a proportionately combined basis (our proportionate interest in our solar and wind facilities reported in discontinued operations). See “Results of Operations” below for a reconciliation of Free Cash Flow for each of our segments to cash provided by (used in) operating activities for such segment.

		Year Ended December 31,												Change (From 2017 to 2018) Favorable/(Unfavorable)								Change (From 2016 to 2017) Favorable/(Unfavorable)
		2018				2017				2016				$				%				$				%
		($ In Thousands) (Unaudited)
100% Total Free Cash Flow (includes continuing and discontinued operations)		$	475,028			$	558,000			$	492,246				(82,972	)			(14.9	)			65,754				13.4
100% of Discontinued Operations Free Cash Flow			(67,934	)			(65,448	)			(72,412	)
Proportionately Combined Discontinued Operations Free Cash Flow			58,926				57,642				64,012
Proportionately Combined Free Cash Flow (includes continuing and discontinued operations)		$	466,020			$	550,194			$	483,846				(84,174	)			(15.3	)			66,348				13.7

Results of Operations: IMTT

The financial performance of IMTT is in large part a function of the amount of bulk liquid storage capacity under lease and the rates achieved on those leases. IMTT recorded financial results for the year ended December 31, 2018 that reflect a previously forecast decline in storage capacity utilization and lower average storage rates, partially offset by contributions from an acquisition completed in 2017.

The portion of IMTT’s storage capacity under lease (utilization) averaged 82.0% for the quarter ended December 31, 2018 compared with 82.1% in the quarter ended September 30, 2018 and 86.1% in the quarter ended June 30, 2018. For the full year 2018, utilization averaged 84.6% compared with 93.3% in 2017. The decrease in utilization during the year reflects the anticipated and previously disclosed impact of the non-renewal of certain contracts for the storage of primarily heavy and residual oil on the Lower Mississippi River. IMTT expects utilization to increase to approximately high 80s% at year ended 2019, subject to market conditions, as a result of leasing of currently uncontracted capacity related to demand growth and the re-leasing of capacity repurposed from heavy and residual oil to clean petroleum, chemical and agricultural products.

New and renewing storage rates on gasoline and distillate contracts in New York Harbor and heavy and residual fuel contracts on the Lower Mississippi River were lower in 2018 than in the prior comparable period. IMTT expects the lower storage rates to continue to impact its financial results through 2019, although this impact is expected to be partially offset by increases in storage utilization and an increase in demand for a range of products and services in advance of the implementation of the International Maritime Organization’s IMO Marpol Annex VI (IMO 2020) regulations limiting the sulphur content of bunker fuel on January 1, 2020.

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Results of Operations: IMTT — (continued)

IMTT is currently both involved in and evaluating a number of initiatives related to repurposing existing storage capacity and repositioning the overall business:

Repurposing

IMTT anticipates cleaning and modifying up to approximately 3.0 million barrels storage capacity and related infrastructure on the Lower Mississippi River, from heavy and residual oil storage to storage of products with potentially better growth prospects including clean petroleum, chemical and agricultural oils or in support of repositioning projects involving fundamental users of heavy and residual oil storage. Approximately 1.3 million of the 3.0 million barrels of storage capacity was targeted for repurposing and successfully recontracted in 2018. Approximately 600,000 of these barrels were returned to service at December 31, 2018. The remainder have been or will be returned to service in the first quarter of 2019. For the year ended December 31, 2018, the cost of repurposing the 1.3 million barrels of storage capacity totaled $10.8 million of which $6.9 million was characterized as maintenance capital expenditure. The total cost of repurposing the 1.3 million barrels is expected to be approximately $20.0 million. IMTT currently believes that up to an additional 1.0 million barrels of capacity could be repurposed in 2019, subject to identification of a corresponding level of customer demand.

Repositioning

Repositioning includes projects designed to leverage IMTT’s existing geographic footprint through increases in capacity or capability designed to meet customer demand and/or further diversify the mix of products handled. During 2018 and through February 2019, the following projects that are expected to enhance terminal connectivity via investment in truck, marine and rail infrastructure, were announced and/or executed by IMTT:

The above projects have an estimated total value of approximately $175.0 million. The majority are subject to customary pre-construction permitting. None of these repositioning projects are expected to generate any material contribution to EBITDA in 2019.

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Results of Operations: IMTT — (continued)

The successful implementation of the repurposing and repositioning initiatives is, over time, expected to, (i) improve utilization and rates, (ii) increase exposure to products with better growth prospects, (iii) generate a larger proportion of IMTT’s revenue from longer-dated contracts and (iv) reduce exposure to heavy and residual oil storage demand.

		Year Ended December 31,												Change (From 2017 to 2018) Favorable/(Unfavorable)								Change (From 2016 to 2017) Favorable/(Unfavorable)
		2018				2017				2016
		$				$				$				$				%				$				%
		($ In Thousands) (Unaudited)
Revenue			510,783				549,422				532,472				(38,639	)			(7.0	)			16,950				3.2
Cost of services			200,966				196,369				204,279				(4,597	)			(2.3	)			7,910				3.9
Selling, general and administrative expenses			32,709				36,406				32,687				3,697				10.2				(3,719	)			(11.4	)
Depreciation and amortization			131,402				126,463				134,385				(4,939	)			(3.9	)			7,922				5.9
Operating income			145,706				190,184				161,121				(44,478	)			(23.4	)			29,063				18.0
Interest expense, net(1)			(45,502	)			(38,357	)			(38,752	)			(7,145	)			(18.6	)			395				1.0
Other income, net			965				1,758				18,509				(793	)			(45.1	)			(16,751	)			(90.5	)
(Provision) benefit for income taxes			(35,885	)			209,464				(57,736	)			(245,349	)			(117.1	)			267,200				NM
Net income			65,284				363,049				83,142				(297,765	)			(82.0	)			279,907				NM
Less: net income attributable to noncontrolling interests			—				—				59				—				—				59				100.0
Net income attributable to MIC			65,284				363,049				83,083				(297,765	)			(82.0	)			279,966				NM
Reconciliation of net income to EBITDA excluding non-cash items and a reconciliation of cash provided by operating activities to Free Cash Flow:
Net income			65,284				363,049				83,142
Interest expense, net(1)			45,502				38,357				38,752
Provision (benefit) for income taxes			35,885				(209,464	)			57,736
Depreciation and amortization			131,402				126,463				134,385
Pension expense(2)			7,662				6,996				7,219
Other non-cash expense, net			867				767				657
EBITDA excluding non-cash items			286,602				326,168				321,891				(39,566	)			(12.1	)			4,277				1.3
EBITDA excluding non-cash items			286,602				326,168				321,891
Interest expense, net(1)			(45,502	)			(38,357	)			(38,752	)
Adjustments to derivative instruments recorded in interest expense(1)			(1,978	)			(3,834	)			(2,169	)
Amortization of debt financing costs(1)			1,721				1,647				1,654
Provision for current income taxes			(6,862	)			(4,417	)			(5,438	)
Changes in working capital			4,524				(32,795	)			(3,734	)
Cash provided by operating activities			238,505				248,412				273,452
Changes in working capital			(4,524	)			32,795				3,734
Maintenance capital expenditures			(33,494	)			(20,143	)			(38,620	)
Free cash flow			200,487				261,064				238,566				(60,577	)			(23.2	)			22,498				9.4