INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
PORTFOLIO UPDATE FOR THE PERIOD 1 JANUARY 2017 TO 26 MAY 2017
30 May 2017
International Public Partnerships Limited ('INPP', 'the Company'), the listed investment company which invests in global public infrastructure projects, today issues the following portfolio update for the period 1 January 2017 to 26 May 2017.
OPERATIONAL HIGHLIGHTS
· The Company's portfolio of 127 investments in regulated and public infrastructure projects is performing fully in line with expectations.
· An additional £298.1 million of investments were made during the period, including a £274 million investment into the National Grid's gas distribution network, since re-branded "Cadent".
· Successful completion of a significantly oversubscribed £330 million capital raising during the period, the proceeds of which will be used in repayment of the Company's cash drawn portion of its existing debt facility.
· The portfolio currently has 10% of assets in physical construction, providing opportunities for capital growth as those assets progress to full operation.
· The Company maintains an attractive pipeline of investment opportunities across the UK, Northern Europe, Australia and North America, and will continue to deploy capital to meet its existing investment commitments to the landmark Thames Tideway Tunnel project.
FINANCIAL HIGHLIGHTS
· 9.2% increase in Net Asset Value ('NAV') per share to 142.2 pence for the twelve months to 31 December 2016 (Dec 2015: 130.2p) and an estimated NAV at 31 March 2017 of not less than 140.5 pence per share 1.
· The portfolio maintains a leading level of inflation-linkage such that a 1.00% increase in inflation leads to a 0.89% increase in return2.
· A second half year 2016 dividend of 3.325 pence per share was declared on 30 March 2017 and is expected to be paid on 7 June 2017.
· A minimum target dividend for the 2017 and 2018 financial years has been set at 6.82 and 7.00 pence per share, respectively; in line with an average increase of c.2.5%3 or greater each year.
· The Company has delivered a Total Shareholder Return (comprising share price growth and aggregate dividends) since IPO in November 2006 to 24 May 2017 of 166.90% or 9.76% on an annualised basis4.
Rupert Dorey, Chairman of International Public Partnerships Limited, said: "The successful completion of INPP's largest single investment to date underpins our differentiated approach to primary origination and active asset management, whilst growing the Company's footprint in the large-scale regulated asset sector. The significantly oversubscribed capital raise further endorses the Company's investment strategy and demonstrates the growing appetite from new and existing shareholders for INPP's predictable, long-term and substantially inflation-linked return profile. We continue to be confident in the growth prospects of the Company, with a healthy pipeline of diverse regulated and government-backed infrastructure investments in all of our key markets."
PORTFOLIO PERFORMANCE
The Company's portfolio of assets continues to perform well with revenues and cash receipts in line with management forecasts and levels of satisfaction remaining high amongst public sector clients.
The portfolio currently has 10% of assets still in physical construction. The weighted average investment life of the portfolio is currently 35 years with a weighted average (non-recourse) debt tenor of 34 years.
As at 31 March 2017, and taking into account the Group's investment in the Wolverhampton BSF project which occurred in April 2017, the portfolio comprised economic interests in 127 projects with a composition as detailed below:
Geographic breakdown |
Investment Fair Value % |
Sector breakdown |
Investment Fair Value % |
United Kingdom |
76% |
Energy Transmission |
22% |
Belgium |
9% |
Education |
21% |
Australia |
6% |
Transport |
16% |
United States |
3% |
Gas Distribution |
15% |
Germany |
3% |
Waste Water |
9% |
Canada |
2% |
Health |
5% |
Ireland |
1% |
Courts |
4% |
Italy |
<1% |
Military Housing |
3% |
|
|
Other |
5% |
Investment life |
Investment Fair Value % |
Investment stake % |
Investment Fair Value % |
<20 years |
43% |
100% |
50% |
20-30 years |
30% |
<50% |
42% |
>30 years |
27% |
50% - 100% |
8% |
Note: This breakdown is based on the fair valuation of the Group's investments calculated utilising a discounted cash flow methodology as stated in the valuation section later in this Update and includes the Group's investment in the Wolverhampton BSF project which occurred in April 2017.
Capital raising and debt facility, gearing and cash position
The Company successfully raised £330 million of capital (before costs) through a Placing, Open Offer and Offer for Subscription ('the Issue'). The Offer attracted significant interest from new and existing shareholders, exceeding by three times the original targeted capital raising of £250 million.
The proceeds of the Issue were used to fully repay the Company's cash drawn portion of its existing debt facility amounting to £255.5 million, leaving £69.6 million
The Company has utilised £86.5 million of the credit available under its revolving credit facility, (taking into account its future investment obligations including its investment commitments to the Thames Tideway Tunnel project).
Investments
During the period since 1 January 2017, £298.1 million was invested across the following three investments.
Cadent
The Company is part of a consortium which includes other leading UK and international institutional investors which acquired a 61% interest in the National Grid gas distribution network (now known as Cadent). The Company invested £274 million into the project for a 4.4% stake with the remaining risk capital funded by consortium partners.
The investment comprises four networks, each covering a geographic monopoly in the East and North West of England, North London, and the West Midlands, respectively. The networks distribute gas to approximately 50% of the country's connected households through 130,000 km of gas pipeline. Cadent is made up of well-established, predictable, and strong cash yielding businesses whose characteristics are consistent with and complementary to the other regulated and non-regulated assets in the Company's portfolio.
Additional to the 61% interest acquired by the consortium, a further 14% interest in the networks has also been negotiated with National Grid and is subject to put and call options between National Grid and the consortium. The consortium also has pre-emption arrangements over the residual 25% investment that National Grid would continue to hold after exercise of these options.
Thames Tideway Tunnel
Since 31 December 2016 the Company has invested a further £22.6 million into the Tideway project leaving £55.7 million to be invested during the remainder of 2017 (currently supported by a letter of credit).
Wolverhampton Building Schools for the Future
The Company acquired an additional interest in the Wolverhampton Building Schools for the Future ("BSF") project (the "Project"), committing a further £1.5 million to acquire Carillion Private Finance's 8% indirect investment in each of phase I and phase II of the Wolverhampton BSF scheme. The Company's existing 82% investment in the Project grew to 90%.
Top Ten Investments
As at 31 March 2017, and taking into account the Group's investment in the Wolverhampton BSF project which occurred in April 2017, the Top Ten Investments of the Company in terms of value were as set out below:
Rank |
Asset |
Investment Fair Value % |
1 |
Cadent (gas distribution network) |
15.0% |
2 |
Lincs Offshore Transmission |
9.9% |
3 |
Diabolo Rail Link |
9.5% |
4 |
Tideway Tunnel |
8.8% |
5 |
Ormonde Offshore Transmission |
7.2% |
6 |
Angel Trains |
3.9% |
7 |
U.S. Military Housing |
3.3% |
8 |
Royal Children's Hospital |
2.4% |
9 |
Benex Rail |
2.1% |
10 |
Northampton Schools |
1.7% |
VALUATION
The Company's investment portfolio valuation is revised semi-annually by the Investment Advisor, and presented for approval by the Directors and reviewed by the Company's auditors, EY. In addition, the Company provides quarterly NAV guidance predominantly based on movements over the period in the government bond yields of countries where the Company holds investments and changes to relevant foreign exchange rates.
This quarterly guidance does not include any changes (positive or negative) in NAV arising from matters specific to individual investments (e.g. changes in asset specific risks, timing implications of delayed or accelerated cash flows, changes to cash flow projections and assumptions, indexation adjustments due to changes in inflation etc.), although any material investment-specific issues occurring in the period can be expected to be reported on separately in this quarterly update. The Directors' valuations published with the Company's full and interim results are reviewed by the Company's auditors and are updated to reflect both investment-specific and macroeconomic factors.
The Company published an estimated NAV at 31 March 2017 of not less than 140.5 pence per share in conjunction with the release of its Prospectus dated 12 April 2017. Since that date government bond yields in the majority of jurisdictions in which the Company invests have increased. On a net basis and other things being equal, the net increase in government bond yields could be expected to have a negative effect on the Company's NAV.
Over the same period, the Sterling forward curve strengthened against the Australian Dollar, the Canadian Dollar and the U.S. Dollar but weakened against the Euro. The net change in the foreign exchange rates of Sterling could be expected, other things being equal, to have a negative effect on the Company's NAV.
In the course of its normal practice the Company also reviews market based evidence (market intelligence and its own experience of the secondary market for assets such as those owned by the Company) in its assessment of NAV. Since 31 December 2016 the Company has seen continued strong evidence of rising valuations for assets of the type it owns. The extent of the positive impact which this is likely to have on NAV is being considered and will be reported on more fully at the time of the Company's interim results.
DISTRIBUTIONS
On 30 March 2017, the 2016 second half year distribution of 3.325 pence per share was declared for shareholders on the register as at 21 April 2017. This distribution was for the period 1 July 2016 to 31 December 2016 and was a c.2.5% increase on the distribution paid in the previous corresponding period.
The Scrip Dividend Alternative Circular applicable to that dividend was available to investors and the associated scrip allotment or dividend payment is due to be made on 7 June 2017.
The Board of Directors have previously announced minimum targets for the 2017 and 2018 distributions of 6.82 pence per share and 7.00 pence per share (respectively), providing additional guidance to investors as to the Company's future intentions. The targeted payments would represent a minimum c.2.5% increase on the preceding distributions and would continue to be in line with the growth target indicated at the time of the Company's IPO in 20062.
INVESTMENT ENVIRONMENT AND OUTLOOK
The Company remains positive about its prospects both in terms of the performance of its existing investments and the opportunity to add high quality investments to the portfolio in the short-to-medium term.
The Investment Adviser remains confident of a significant investment pipeline for the Company. In addition to its existing commitments including Tideway, the Investment Adviser has a pipeline of other potential investment opportunities that are at an earlier stage of development and, subject to further review, may be progressed as investment opportunities for the Company.
Key areas of current activity for the Company and/or its Investment Adviser (or associates) include:
· A continued focus on large-scale opportunities in the UK regulated asset sector;
· Further activities in the area of UK offshore transmission;
· U.S. P3 and similar opportunities, particularly through the relationship with Amber/Hunt;
· Other UK and European primary investment opportunities (for instance in the healthcare and digital infrastructure sectors);
· Acquisition of additional investments in projects where the Company already has an investment. Typically these will arise under pre-emption and similar rights.
Notes to Editors:
While it is no longer a requirement under the Disclosure and Transparency Rules for the Company to issue Interim Management Statements, the Board believes it is in the interest of shareholders for the Company to provide quarterly updates in addition to its half year reports.
1. Published in conjunction with the Prospectus dated 12 April 2017
2. In aggregate, the weighted average return of the portfolio would be expected to increase by 0.89% per annum in response to a 1.00% per annum inflation increase over the currently assumed inflation rates across the whole portfolio.
3. Dividend targets are targets and not profit forecasts and there can be no guarantee they will be achieved. Projections are based on the current individual asset financial models and may vary in the future.
4. Source: Bloomberg, share price appreciation plus income.
ENDS.
For further information:
Erica Sibree +44 (0)20 7939 0558
Amber Fund Management Limited
Nick Westlake/Hugh Jonathan +44 (0)20 7260 1345/1263
Numis Securities
Ed Berry/Mitch Barltrop +44 (0) 20 3727 1046/1039
FTI Consulting
About International Public Partnerships (INPP):
International Public Partnerships ('INPP') is a listed infrastructure investment company which invests in global public infrastructure projects developed under the public private partnerships ('PPP'), private finance initiative ('PFI'), regulated asset and other similar procurement methods.
Listed in 2006, INPP is a long-term investor in 127 social and transport infrastructure projects, including schools, hospitals, courts, police headquarters, transport and utility and transmission projects in the UK, Europe, Australia and North America. INPP seeks to provide its shareholders with both a long-term yield and capital growth through investment across both construction and operational phases typically of 25-40 year concessions.
Amber Infrastructure Group ('Amber') is the Investment Adviser to INPP and consists over 100 dedicated staff who manage, advise on and originate investments for INPP.
Visit the INPP website at www.internationalpublicpartnerships.com for more information.
This update does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or purchase, any investments nor shall it (or the fact of its distribution) form the basis of, or be relied on in connection with, any contract or commitment whatsoever.
The potential acquisition by the Company of any of the investments referred to in this quarterly update is subject, among other things, to those projects reaching legal completion and to the Company having conducted satisfactory due diligence in relation to such investments. Although the Company has a right of first refusal for investments disposed of by the Amber group, any acquisitions will be subject to agreement having been reached between the Company and the relevant counterparty as to the terms of the acquisitions. In addition, some of the investment opportunities are those where Amber or the Company is currently undergoing a bidding process. There is no guarantee that they will be successful in any such bidding process. There is therefore no guarantee that any of the investments will be acquired and if they are on what terms.
Forward-looking statements are not guarantees of future performance. The Company's actual investment performance, results of operations, financial condition, liquidity, distribution policy and the development of its financing strategies may differ materially from the impression created by the forward-looking statements contained in this document. Subject to their legal and regulatory obligations, International Public Partnerships and its Investment Advisor expressly disclaim any obligations to update or revise any forward-looking statement contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.
