Related Party Transactions

12 Months Ended

Dec. 31, 2019

Management Services

At December 31, 2019 and 2018, the Manager held 13,253,791 shares and 12,477,438 shares, respectively, of the Company’s common stock. Pursuant to the terms of the Third Amended and Restated Management Agreement (Management Services Agreement), the Manager may sell these shares at any time. Under the Management Services Agreement, the Manager, at its option, may reinvest base management fees and performance fees, if any, in shares of the Company. From May 2018 through September 2018, the Manager bought 5,987,100 shares in the open market. The Manager’s holdings at December 31, 2019 represented 15.30% of the Company's outstanding common stock.

Since January 1, 2017, the Company paid the Manager cash dividends on shares held for the following periods:

Declared

Period

Covered

per Share

Record

Date

Payable

Date

Cash Paid to

Manager

(in millions)

February 14, 2020

Fourth quarter 2019

1.00

March 6, 2020

March 11, 2020

⁽¹⁾

October 29, 2019

Third quarter 2019

1.00

November 11, 2019

November 14, 2019

July 30, 2019

Second quarter 2019

1.00

August 12, 2019

August 15, 2019

April 29, 2019

First quarter 2019

1.00

May 13, 2019

May 16, 2019

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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(1)	The amount of dividend payable to the Manager for the fourth quarter of 2019 will be determined on March 6, 2020, the record date.

Under the Management Services Agreement, subject to the oversight and supervision of the Company’s Board, the Manager is responsible for and oversees the management of the Company’s operating businesses. In addition, the Manager has the right to appoint the Chairman of the Board, subject to minimum equity ownership, and to assign, or second, to the Company, two of its employees to serve as chief executive officer and chief financial officer of the Company and seconds or makes other personnel available as required.

In accordance with the Management Services Agreement, the Manager is entitled to a monthly base management fee based primarily on the Company’s market capitalization, and potentially a quarterly performance fee based on total stockholder returns relative to a U.S. utilities index. Currently, the Manager has elected to reinvest the future base management fees and performance fees, if any, in additional shares. In 2019, 2018 and 2017, the Company incurred base management fees of $32 million, $45 million and $71 million, respectively. The Company did not incur any performance fees in 2019, 2018 and 2017.

Effective November 1, 2018, the Manager waived two portions of the base management fee to which it was entitled under the terms of the Management Services Agreement. In effect, the waivers cap the base management fee at 1% of the Company’s equity market capitalization less any cash balances at the holding company. The waiver applies only to the calculation of the base management fees and not to the remainder of the Management Services Agreement. The Manager reserves the right to revoke the waivers and revert to the prior terms of the Management Services Agreement, subject to providing the Company with not less than a one year notice. A revocation of the waiver would not trigger a recapture of previously waived fees. As part of the Disposition Agreement entered into between the Company and its Manager, discussed below, the Manager has agreed not to revoke the waiver during the term of the Disposition Agreement.

To facilitate the Company’s pursuit of strategic alternatives, the Company announced that it has entered into a Disposition Agreement (Disposition Agreement) with the Manager on October 30, 2019 (see Exhibit 10.3 of this Form 10-K). Outside of this agreement, the Company has limited ability to terminate the Management Services Agreement. With this agreement, the Company’s Management Services Agreement with the Manager will terminate as to any businesses, or substantial portions thereof, that are sold and, in connection therewith, the Company will make payments to the Manager calculated in accordance with the Disposition Agreement. The Disposition Agreement will terminate on the earlier to occur of (i) the termination of the Management Services Agreement and (ii) the sixth anniversary, subject to extension under certain circumstances if a transaction is pending.

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



Period	Base Management Fee Amount ($ in millions)		Performance Fee Amount ($ in millions)		Shares Issued
2019 Activities:
Fourth quarter 2019	$	9	$	—	208,881	⁽¹⁾
Third quarter 2019	8			—	201,827
Second quarter 2019	7			—	192,103
First quarter 2019	8			—	184,448
2018 Activities:
Fourth quarter 2018	$	9	$	—	220,208
Third quarter 2018	12			—	269,286
Second quarter 2018	11			—	277,053
First quarter 2018	13			—	265,002
2017 Activities:
Fourth quarter 2017	$	17	$	—	248,162
Third quarter 2017	18			—	240,674
Second quarter 2017	18			—	233,394
First quarter 2017	18			—	232,398

_____________


(1)	The Manager elected to reinvest all of the monthly base management fees for the fourth quarter of 2019 in new primary shares. The Company issued 208,881 shares for the quarter ended December 31, 2019, including 70,954 shares that were issued in January 2020 for the December 2019 monthly base management fee.

The Manager is not entitled to any other compensation and all costs incurred by the Manager, including compensation of seconded staff, are paid by the Manager out of its base management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries, income taxes, audit and legal fees, acquisitions and dispositions and its compliance with applicable laws and regulations. The Manager charged the Company approximately $1 million in each of the years ended December 31, 2019, 2018 and 2017 for reimbursement of out-of-pocket expenses. The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in Due to Manager-related party in the consolidated balance sheets. In 2019, the Company also incurred $294,000 in legal fees incurred by the Manager related to the Shareholder Litigation. For additional information, see Note 17, "Legal Proceedings and Contingencies", for further discussions.

Macquarie Group - Other Services

The Company uses the resources of the Macquarie Group with respect to a range of advisory, procurement, insurance, hedging, lending and other services. Engagements involving members of the Macquarie Group are reviewed and approved by the Audit Committee of the Company’s Board. Macquarie Group affiliates are engaged on an arm’s length basis and frequently as a member of syndicate of providers whose other members establish the terms of the interaction.

Advisory Services

The Macquarie Group, and wholly-owned subsidiaries within the Macquarie Group, including Macquarie Bank Limited (MBL) and Macquarie Capital (USA) Inc. (MCUSA) have provided various advisory and other services and incurred expenses in connection with the Company’s equity raising activities, acquisitions and debt structuring for the Company and its businesses. Underwriting fees are recorded in stockholders’ equity as a direct cost of equity offerings. Advisory fees and out-of-pocket expenses relating to acquisitions are expensed as incurred. Debt arranging fees are deferred and amortized over the term of the credit facility.

Long-Term Debt

In January 2018, the Company completed the refinancing and upsizing of its senior secured revolving credit facility to $600 million from $410 million and extended the maturity through January 3, 2022. As part of the refinancing and upsizing, MIHI LLC’s $50 million commitment was replaced by a $40 million commitment from Macquarie Capital Funding LLC. As part of the closing, the Company paid Macquarie Capital Funding LLC $80,000 in closing fees.

Prior to the refinancing in January 2018, the Company incurred $285,000 in interest expense in 2017 related to MIHI LLC’s portion of the MIC senior secured revolving credit facility. Subsequent to the refinancing in January 2018, the Company incurred $155,000 and $454,000 in interest expense related to Macquarie Capital Funding LLC’s portion of the MIC senior secured revolving credit facility in 2019 and 2018, respectively.

Other Transactions

In May 2018, the Company sold its equity interest in projects involving two properties to Macquarie Infrastructure and Real Assets, Inc. (MIRA Inc.), an affiliate of the Manager, for their cost of $27 million. The Company retained the right to 20% of any gain on a subsequent sale by MIRA Inc. to a third-party of a more than 50% interest in either or both of the projects.

From time to time, indirect subsidiaries within Macquarie Group may enter into contracts with IMTT to lease capacity. The revenue from these contracts were approximately $2 million and $1 million in 2019 and 2017, respectively, and were insignificant in 2018.

Other Related Party Transactions

In 2019, the Company incurred $125,000 for advisory services from a former Board member.