Portfolio Update

RNS Number : 1232Z

International Public Partnership Ld

24 May 2016

 

International Public Partnerships Limited

Portfolio Update

For the period 1 January 2016 to 20 May 2016

24 May 2016

International Public Partnerships Limited ('INPP', 'the Company'), a listed infrastructure investment company which invests in global public infrastructure projects, today issues the following update for the period 1 January 2016 to 20 May 2016.

Highlights

·        The Company's portfolio of 122 public infrastructure investments are performing fully in line with expectations;

·        The Company reported an increase in Net Asset Value ('NAV') per share to 130.2 pence at its 2015 Full Year Results for the period to 31 December 2015;

·        Inflation linkage in the portfolio remains strong such that a 1.00% increase in inflation leads to a 0.76% increase in return¹;

·        A second half year 2015 dividend of 3.225 pence per share was declared on 24 March 2016 and is expected to be paid on 27 May 2016 with a full year 2015 dividend¹ of 6.45 pence per share (up 2.5% from full year 2014);

·        A minimum target dividend for the 2016 financial year of 6.65 pence per share has been set and in 2017 the minimum target dividend will be 6.82 pence per share, an average increase of c.2.5%² or greater in each year;

·        Considerable progress is being made on pipeline opportunities with c.£53 million of investments made or committed during the period, including in the Westermost Rough offshore transmission project, the fifth batch of the Priority Schools Building Programme, drawdowns as part of its investment in the Thames Tideway Tunnel, as well as a commitment to invest in Gold Coast Light Rail;

·        The Company has an attractive pipeline of new opportunities across the UK, Northern Europe, Australia and North America, and will continue to deploy its commitment in the Thames Tideway Tunnel;

·        The Company has delivered a Total Shareholder Return (comprising share price growth and aggregate dividends) since IPO in November 2006 to 20 May 2016 of 129.29% or 9.09% on an annualised basis³.

Rupert Dorey, Chairman of International Public Partnerships Limited, commented: "The first quarter of 2016 has been another encouraging period in which the Company has made four significant investments in the electricity transmission, education and transport infrastructure sectors, respectively. The Company and its Investment Adviser also reached a milestone in the completion of the Priority Schools Building Programme, helping to fund improvements in a total of 46 UK schools.

Having delivered a consistent 2.5% increase in the second half year dividend for 2015, we look forward to targeting similar successes in the next period."

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 9.3% of assets still in physical construction although activities relating to commissioning, snagging and the transition to full operations are ongoing.  The weighted average concession life of the portfolio is currently 28 years with a weighted average (non-recourse) debt tenor of 26 years.

As at 20 May 2016, the portfolio comprised economic interests in 122 projects with a geographical split as detailed below:

Geographic Split	20 May 2016 %	Sector breakdown	20 May 2016 %
United Kingdom	70.3%	Energy Transmission	29.5%
Belgium	11.7%	Education	21.9%
Australia	7.0%	Transport	20.2%
Germany	3.9%	Health	7.0%
Canada	2.9%	Waste Water	6.0%
United States	2.6%	Courts	5.7%
Ireland	1.4%	Police Authority	3.4%
Italy	0.2%	Military Housing	2.6%
		Custodial	0.8%
		Government Offices/Other	2.9%

Investment Life	20 May 2016 %	Project Stake	20 May 2016 %
<20 years	52.4%	100%	67.4%
20-30 years	22.7%	50% - 100%	4.5%
30> years	24.9%	<50%	28.1%

Note: This breakdown is based on the fair value market valuation of the Group's investments calculated utilising discounted cash flow methodology, consistent with European Private Equity and Venture Capital Association (EVCA) guidelines.

Gearing and cash position

The Company has approximately £141 million of uncommitted credit available under its £300 million revolving credit facility (after taking into account its future investment obligations into new projects including its investment commitments to the Thames Tideway Tunnel project). The Company has all but fully deployed the capital it raised in November 2015, with c.£2 million available for investment.

Acquisitions

During the period to 20 May 2016, c. £49 million of investment was made into three projects, with confirmation of committed investment into a fourth.

Westermost Rough offshore transmission project

Transmission Capital Partners, the consortium comprising INPP, Amber Infrastructure and Transmission Investment reached financial close on its sixth offshore transmission project.

The Company made a £26.8 million investment for 100% of the equity and subordinated debt of the transmission cable connection to the Westermost Rough Offshore Wind Farm.

Priority Schools Building Programme 'Aggregator'

During the period the Amber Consortium of which INPP is part, invested £5.1 million into the fifth and final batch of schools being delivered through the Priority Schools Building Programme ('PSBP').

Additional investment in Gold Coast Light Rail project

The Company committed to make a further approximately A$7 million (c.£3.8 million) investment into a 7.3km extension to the Gold Coast Light Rail project in Queensland, Australia. The commitment is supported by a letter of credit provided by the Company.

The Company has secured a 26.7% equity stake in the extension alongside Plenary Group, Marubeni Group, Palisade, Keolis and Aveng Group. Construction is expected to reach completion at the end of 2017, with operations commencing in early 2018 in time for the opening of the Gold Coast Commonwealth Games in April. 

Tideway project update

In the year to date the Company has invested £17.1 million into the Tideway project and has an additional c.£134 million to be committed by early 2018 (currently supported by a letter of credit) of which c.£53 million is expected to be committed during 2016.

During the period Tideway made good progress towards commencement of construction and the Company recently announced a 35-year £700 million loan with the European Investment Bank in addition to the £1 billion in funding already in place.

Top Ten Investments

The Top Ten Investments of the Company in terms of investment made as at 20 May 2016 were:

Rank	Asset	Investment Fair Value
1	Lincs Offshore Transmission	13.5%
2	Diabolo Rail Link	11.7%
3	Ormonde Offshore Transmission	10.1%
4	Thames Tideway Tunnel	5.9%
5	Angel Trains	4.8%
6	Royal Children's Hospital	3.3%
7	BeNEX Rail	3.0%
8	Northampton Schools	2.6%
9	US Military Housing	2.6%
10	Hereford & Worcester Courts	2.5%

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, Ernst & Young. 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 cashflows, changes to cashflow projections and assumptions, indexation adjustments due to changes in inflation etc.), although any material project 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 updated to reflect both project-specific and macroeconomic factors.

Since 31 December 2015 (NAV: 130.2 pence per share), government bond rates in all of the jurisdictions in which the Company invests have decreased. The decrease in these rates could, other things being equal, be expected to have a positive effect on the Company's NAV.

Over the same period, the GBP forward curve has weakened against the four currencies to which the Company has exposure, particularly the Euro. The weakened foreign exchange position of GBP could be expected, other things being equal, to have a positive effect on the Company's NAV.

Based on these two macroeconomic updates alone the NAV could be expected to have increased since 31 December 2015.

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 2015 the Company has seen continued evidence of rising valuations for assets of the type it owns in all the major countries where it invests.  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 24 March 2016, the 2015 second half year distribution of 3.225 pence per share was declared for shareholders on the register as at 15 April 2016.  This distribution was for the period 1 July 2015 to 31 December 2015 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 will be made on 27 May 2016. 

The Board of Directors have previously announced minimum targets for the 2016 and 2017 distributions of 6.65 pence per share and 6.82 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 2006.²

Investment environment and outlook

Performance of the portfolio in 2016 to date has continued to be positive and the Company remains confident in its ability and that of its Investment Adviser to continue to identify and execute new investments in core markets to strengthen the portfolio further. This includes both infrastructure assets within the primary PPP/PFI space and regulated infrastructure assets.

Key areas of current activity within the Company and/or its Investment Adviser (or associates) include:

·     Continued activities in the area of UK offshore transmission where the Company has recently closed its sixth project, Westermost Rough OFTO and is actively bidding on each new opportunity as it comes to market;

·     Enhanced access to US P3 opportunities, particularly through the relationship with Amber/Hunt;

·     Other UK and European primary investment opportunities (for instance in the regulatory, healthcare and judicial sectors);

·     Acquisition of additional investments in projects where the Company already has an investment. Typically these will arise under pre-emption and similar rights;

·     Appropriately priced proposals from third parties seeking to dispose of projects meeting the Company's investment criteria which have synergies with the Company's existing portfolio.

Where new investment opportunities do arise the Company will continue to be selective in those acquisitions which it brings into the portfolio to ensure that they bring long-term value to shareholders.

Finally, and notwithstanding the comments above and the opportunities listed below, it should be noted that the Company's projected economic performance is not dependent upon making future investment commitments in order to deliver its projected returns. These can be delivered in the Company's view from its existing assets. Further investment opportunities will, first and foremost, be judged based on whether they add value and quality to the Company's existing portfolio.

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.   In aggregate, the weighted return of the portfolio would be expected to increase by 0.76% per annum in response to a 1% per annum inflation increase across the whole portfolio over the currently assumed inflation rates.

2.   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.

3.   Source: Bloomberg, share price appreciation plus income.

End

For further information:

Erica Sibree                                                    [phone]

Amber Fund Management Limited                                

Nick Westlake/Hugh Jonathan                            [phone]/1263

Numis Securities       

Ed Berry/Mitch Barltrop                                     [phone]/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 122 social and transport infrastructure projects, including schools, hospitals, courts, police headquarters, transport and utility and transmission projects in the U.K., 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 consists around 90 dedicated staff who manage, advise on and originate projects 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.

 

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