Financial Close on National Grid Gas Acquisition

RNS Number : 1851B

International Public Partnership Ld

31 March 2017

 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION, RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN, OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL OR TO U.S. PERSONS. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION.

31 March 2017

financial cloSe on THE ACQUISITION OF A 61% INTEREST IN national grid GAS distRibution network

International Public Partnerships Limited, the listed infrastructure investment company (the 'Company', 'INPP'), is pleased to announce that it has, as part of the Quad Gas Group consortium, reached financial close on the acquisition of a 61% interest in National Grid's gas distribution networks ('GDNs', the 'networks' or the "investment").  The Consortium has also established the right to acquire an additional 14% equity interest in the GDNs from National Grid in due course.

The Company has invested £274 million for a 4.4% interest in the four regulated networks, with the remaining risk capital funded by consortium partners who include other leading UK and international institutional investors (together, the "Consortium").

The four networks each cover a geographic monopoly in, respectively, the East and North West of England, North London, and the West Midlands.  The networks distribute gas to approximately 50% of the country's connected households through 130,000km of gas pipeline.  The GDNs are 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.

Key attributes of the investment for the Company include:

·      Highly predictable long term low volatility cash flows;

·      A stable regulatory environment;

·      Very long life assets;

·      Strong levels of inflation linkage; and

·      Projected returns that are expected to be accretive to the Company's portfolio.

The investment illustrates the continued ability of the Company to source attractively valued core infrastructure assets and, in particular, through its investment adviser, Amber Infrastructure, to have material influence on the structuring, analysis and execution of large infrastructure transactions. 

Rupert Dorey, Chairman of International Public Partnerships, said: "The acquisition of essential UK infrastructure assets such as these gas networks further underlines our ability to find high quality, low volatility infrastructure transactions in the current market at prices that continue to add value for shareholders. This transaction will also enhance the portfolio's inflation protection and cash generation." 

The GDNs operate under a stable regulatory framework which allows a permitted return to be made by investors on the regulated asset base of the GDNs.  This regime is overseen by Ofgem and benefit from RPI-linked revenues. Future cash flow generation is therefore predictable with regulatory mechanisms in place to reduce risk with respect to unpredictable costs. The effect of the acquisition of the interest in the GDNs also is to extend the Company's weighted average investment life to 34 years from 31 years (at 31 December 2016).  It will also have the effect of improving the inflation linkage within the portfolio, which will rise to 0.89% for every 1% increase in inflation rates assumed in the portfolio valuation (previously 0.78% at 31 December 2016).

National Grid will continue to own a 39% interest in the networks and the existing management team will remain in place providing operational and management continuity.

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.  Furthermore, the Consortium has pre-emption arrangements over the residual 25% investment that National Grid would continue to hold after exercise of these options.

The Company's investment in the GDNs strengthens its focus on investments in regulated assets which deliver long-term, sustainable, inflation-linked revenues. This began in 2011 in the offshore transmission (OFTO) sector and continued with the Company's investment into the Tideway project in 2015. The Company sees these assets as fully complementary to the other assets in its portfolio in terms of length and predictability of cash flow and inflation protection.

The Company will fund its acquisition through its corporate debt facility.  This facility is now either drawn or committed to identified opportunities to a level of c£360 million out of a total available capacity of £400 million. 

Following the Company's Annual Results on 30 March 2017, the Board has indicated that it expects to raise additional capital in early Q2 2017 in the order of £250 million. Further details, including a prospectus, are expected to be to be announced in the near future.

ENDS.

For further information:  

Erica Sibree Amber Fund Management Limited	[phone]
Nick Westlake/Hugh Jonathan Numis Securities	[phone]/1263
Ed Berry/Mitch Barltrop FTI Consulting	[phone]/1039

Important Information

This announcement contains information that is inside information for the purposes of the Market Abuse Regulation (EU) No. 596/2014.

This announcement is an advertisement. It does not constitute a prospectus relating to the Company and does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract therefor.

Forward-looking statements are subject to risks and uncertainties and accordingly the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These forward-looking statements speak only as at the date of this announcement. The Company, Amber and Numis Securities expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Prospectus Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.

Notes to Editors:

About Quad Gas Group

The consortium is made up of Allianz Capital Partners, Amber Infrastructure, CIC Capital Corporation (CIC), Dalmore Capital, Hermes Investment Management, Macquarie Infrastructure and Real Assets (MIRA), and Qatar Investment Authority.

Following acquisition, the business will have the following ownership structure:

·      National Grid	39.0%
·      Quad Gas Group
o  MIRA o  CIC Capital o  ACP o  Hermes o  QIA o  Amber/INPP o  Dalmore Capital	14.5% 10.5% 10.2% 8.5% 8.5% 4.4% 4.4%
Total	100.0%

The Consortium consists of long term investors in the UK's critical infrastructure with a track record of delivering reliable services and operational outperformance in regulated industries - they have proven operational excellence, as well as financial scale.

Individually they have invested in a multitude of global projects in the regulated asset environment, including numerous gas assets such as Open Grid Europe, Gassled and NET4GAS, Czech Gas Networks, Thyssengas, Wales & West Utilities, and have a successful track record of investing in the UK's largest critical infrastructure investments, including Tideway Tunnel, Heathrow, Thames Water and Porterbrook.

About the Gas Distribution Networks:

National Grid has agreed a sale of a 61% shareholding in its gas distribution network which consists of four of the eight UK regional GDN companies which deliver gas from the high pressure transmission network (also owned by National Grid) across the East of England, North London, the North West and the West Midlands. The four GDNs, the subject of this transaction, distribute gas to approximately half of the country's connected households serving 11 million customers across a network of 131,000km of gas pipeline. These GDNs are regulated by Ofgem, the UK's gas and electricity regulator.

About International Public Partnerships:

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 Advisor to INPP and has around 90 dedicated staff who manage, advise on and originate projects for INPP.

Visit the INPP website at www.internationalpublicpartnerships.com for more information.

About Amber Infrastructure Group:

Amber is a leading international infrastructure specialist, providing asset management and investment advisory services in respect of over £7 billion of assets in the UK, Europe, Australia and North America. Amber's core business focuses on sourcing, developing, advising on, investing in and managing infrastructure assets within the utilities, PPP, transport, renewable energy and regeneration sectors.

Amber provides investment advisory services to International Public Partnerships
Limited as well as private investment funds, specialising in urban regeneration. Amber is headquartered in London with offices in Munich, Sydney, Melbourne and San Francisco and employs over 90 people, making it one of the largest international infrastructure specialists.

 

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