TIDMINPP
RNS Number : 1559H
International Public Partnership Ld
15 May 2014
International Public Partnerships Limited
Interim Management Statement
For the period 1 January to 14 May 2014
15 May 2014
International Public Partnerships Limited ("INPP", "the
Company"), a listed infrastructure investment company which invests
in global public infrastructure projects including those developed
under public private partnership ("PPP"), private finance
initiative ("PFI"), regulated asset and similar procurement
methods, today issues the following Interim Management Statement
("IMS") for the period 1 January to 14 May 2014.
Highlights
-- The portfolio of 115 public infrastructure investments
continues to perform in line with expectations.
-- Three additional investments have been made in the course of
2014 so far. These include a 100% ownership interest in the BMBF
project which is in the course of constructing a new headquarters
for the German Federal Education Ministry and a further investment
into the Kent and Wolverhampton Building Schools for the Future
projects.
-- The Company also made a disposal in the period to which this
IMS relates of a minority interest in some other Building Schools
for the Future projects where the Company had determined that no
realistic possibility existed of increasing the Company's stake to
a majority position. These disposals were made at a price well in
excess of the Company's carrying value.
-- The Company continues to target approximately GBP200m of
further investment in the course of 2014. In the year to date, the
Company's Investment Adviser has reviewed 34 opportunities on
behalf of the Company.
-- In the period covered by this IMS, the Company announced its
2013 Annual Result for period to 31 December 2013 reporting an
increase in Net Asset Value ("NAV") per share to 123.0 pence (31
December 2012: 121.0 pence per share).
-- Since that time the portfolio has continued to perform well
and assets in construction continue to progress as planned. At the
macro economic level, AUD has strengthened and CAD and EUR have
weakened against GBP since 31 December 2013. In the government bond
market there has been a net decrease in the weighted average
government bond yields observed since 31 December 2013. These
movements would be expected to lead to an increase in NAV compared
to 31 December 2013 NAV, other things being equal.
-- A second half year 2013 dividend of 3.075 pence per share was
declared on 27 March 2014 and is expected to be paid on 13 June
2014.
-- The Company has announced dividend guidance for both 2014 and
2015 - minimum dividend targets for the 2014 and 2015 financial
years(1) of 6.30 and 6.45 pence per share (respectively) are being
targeted.
-- Total investment in the period to which this IMS relates
amounted to GBP17.0 million and total divestment to GBP18.8
million.
-- The Company has delivered a Total Shareholder Return
(comprising share price growth and aggregate dividends) since IPO
in November 2006 to 14 May 2014 of 86.5%(2) .
Portfolio performance
The Company's portfolio of 115 assets continues to perform well
with revenues and cash receipts in line with forecasts and levels
of satisfaction remaining high amongst public sector clients.
Good progress continued to be made on the circa 8% of assets in
the portfolio that are currently under construction which all
remain on schedule. The proportion of assets in construction
increased due to the investment in the German Education Ministry
project.
Valuation benefits from successful completion of the
construction phases of these projects are expected to be realised
throughout the next year as sustained operational performance is
demonstrated. All construction currently within the portfolio is
due to be completed by December 2014.
As at 14 May 2014, the portfolio(a) could be summarised as
detailed below:
Geographic Split 14 May 2014 Sector breakdown 14 May 2014
% %
------------------ ------------ ------------------------- ------------
United Kingdom 62 Education 28
------------------ ------------ ------------------------- ------------
Belgium 15 Transport 23
------------------ ------------ ------------------------- ------------
Australia 11 Energy 19
------------------ ------------ ------------------------- ------------
Canada 5 Health 11
------------------ ------------ ------------------------- ------------
Germany 5 Courts 9
------------------ ------------ ------------------------- ------------
Ireland 2 Police Authority 5
------------------ ------------ ------------------------- ------------
France <1 Custodial 1
------------------ ------------ ------------------------- ------------
Italy <1 Government Offices/Other 4
------------------ ------------ ------------------------- ------------
Concession Length 31 Dec 2013 Project Stake 31 Dec 2013
% %
------------------- ------------ -------------- ------------
10-20 years 30 100% 74
------------------- ------------ -------------- ------------
20-30 years 50 50% - 100% 6
------------------- ------------ -------------- ------------
30> years 20 <50% 20
------------------- ------------ -------------- ------------
a. This breakdown is based on the fair value market valuation of
the Group's investments calculated utilising discounted cash flow
methodology, adjusted for European Private Equity and Venture
Capital Association (EVCA) guidelines.
At 14 May 2014, 21% (31 December 2013: 22%) of the Company's
investments were into infrastructure project companies that had no
external finance (ie the Company owns the project without any
external borrowing) and 79% (31 December 2013: 78%) of the
Company's portfolio was invested into the equity and subordinated
debt of infrastructure project companies financed in part by
external non recourse project finance debt.
Top Ten Investments
The Top Ten Investments of the Company as at 14 May 2014
were:
Investment %
-------------------------------------- ---
Diabolo Project 15
-------------------------------------- ---
Ormonde offshore energy transmission
project 14
-------------------------------------- ---
Building Schools for the Future
portfolio(3) 7
-------------------------------------- ---
Royal Children's Hospital 5
-------------------------------------- ---
BeNEX 4
-------------------------------------- ---
Hereford & Worcester Magistrates
Courts 4
-------------------------------------- ---
Northampton Schools 4
-------------------------------------- ---
Alberta Schools 3
-------------------------------------- ---
Strathclyde Police Training Centre 3
-------------------------------------- ---
Tower Hamlets Schools 2
-------------------------------------- ---
Acquisitions, divestments gearing and cash position
During the period to 14 May 2014 GBP17.0 million of investment
was made into three projects.
In January, the Company acquired a 97% equity interest and 100%
of the subordinated debt for GBP9.7 million in the Federal German
Ministry of Education and Research headquarters in Berlin ("BMBF").
The Ministry provides funding for research projects and
institutions and sets general educational policy, including
providing student loans, in Germany. The investment is expected to
complete construction in July 2014.
The Company has also entered into a number of UK schools PFI
transactions with respect to Building Schools for the Future
("BSF") portfolio. Two investments were made in existing BSF
projects:
-- The acquisition of 60% of Kier Project Investments' 80%
interest in the Kent BSF (UK PFI schools) project for GBP6.8
million. When all aspects of the transaction are completed later in
2014 the Company will own 58% of the project
-- A follow-on investment of GBP0.5 million in the Wolverhampton
BSF (UK PFI schools) project where the Company had the opportunity
to invest on a minority basis. The project involves the design,
construction, financing and operation of two high schools in the
second phase of the Wolverhampton BSF programme delivered using a
PFI structure
In addition, minority interests in the Hull, Leeds, Newcastle,
Rochdale, Sandwell and Leicester BSF projects were disposed for
GBP18.8 million. The divestments were made as the Company had
determined that it had no realistic scope to increase its holdings
in these particular projects to majority controlling holdings and
therefore considered that, based on the price offered; a sale would
be in the best interests for the Company.
The proceeds of sale are substantially in excess of the price
paid for the same stakes on acquisition, offering a significant
premium to the Company and illustrates the strength of the
secondary market for these assets.
Taking into account these acquisitions and divestments, the
Company had approximately GBP80.2 million of cash available for
investment as at 14 May 2014 (excluding the anticipated amount of
the second half 2013 cash dividend, due to be paid in June 2014).
In addition, the Company has GBP175 million corporate debt facility
and as at 14 May 2014, the facility was undrawn.
Valuation
The Company reports its NAV every six months when it publishes
its full and interim results each year. In addition, the Company
provides quarterly NAV guidance predominantly based on movements in
the government bond yields of countries where INPP holds
investments and changes to relevant foreign exchange rates. This
quarterly guidance does not reflect any changes (positive or
negative) in NAV arising from matters specific to individual
investments (eg 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). Such matters are reflected in the half
year directors' valuations published with the Company's full and
interim results.
Since 31 December 2013 (NAV: 123.0 pence per share), government
bond yield movements have been mixed, though on a weighted average
portfolio basis we have seen a slight net decrease. The net
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, foreign exchange ("FX") movements have
seen GBP weaken against AUD and strengthen against CAD and EUR
which the Company has exposure. The net FX movements, other things
being equal, are expected to have a positive effect on the
Company's NAV.
Based on these two macroeconomic updates alone (other things
being equal) the NAV could be expected to have increased since 31
December 2013.
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 2013, there
has been further evidence - both through the Company's own
experience of assets it has disposed together with sales by third
parities - that there continues to be strong market demand for
assets such as those the Company invests in and that there
continues to be further upward pressure on values. These pressures
have reinforced the Company's determination to be disciplined in
its approach to additional investment. The Company is aware of a
number of large transactions currently in the market and it will be
interesting to see where pricing comes out on these.
Distribution
On 27 March 2014, the 2012 second half year distribution of
3.075 pence per share was declared for shareholders on the register
as at 25 April 2014. This distribution was for the period 1 July
2013 to 31 December 2013 and was a 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 expected to be made on 13 June
2014.
The Board of Directors announced minimum targets for the 2014
and 2015 distributions of 6.30 pence per share and 6.45 pence per
share (respectively),(4) 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 INPP's IPO in 2006.
Outlook and Pipeline
The Company's portfolio continues to perform well and the
Directors are confident that there continues to be a number of
attractive infrastructure opportunities in the UK and in the
overseas jurisdictions in which it is active - this is particularly
(but not exclusively) the case where the Company has the ability to
be the primary investor in new infrastructure assets (such as
offshore transmission opportunities).
Overall, the Directors and the Investment Advisor continue to
have a very positive long term view of the market. Government
support for private sector investment in infrastructure continues
to feature as a high public priority. Investor demand for
infrastructure assets remains at a high level which supports the
value of the Company's existing assets and the market perception of
infrastructure being a firmly established class of investment
asset.
New investment volumes have remained low for the Company in the
period as the Company has continued to be very selective, only
progressing the acquisition of assets that it believes have a clear
benefit to the portfolio. Nevertheless the Investment Advisor has
identified around GBP200 million of likely investment for the
Company which is at preferred bidder stage which it anticipates
will be invested over the remainder of 2014.
If this investment is made as anticipated such investment will
fully utilise the Company's currently available funds including its
debt facility. In addition to these potential investments the
Company and its Investment Advisor have a significantly larger
number of transactions which are at an earlier stage of
development, under review.
Key areas of current activity within the Company and/or its
Investment Advisor (or associates) include:
-- Continued activities in the area of UK offshore transmission
where the Company has one transaction at preferred bidder stage and
another in development
-- Other UK and European primary investment opportunities (for
instance in UK healthcare and Irish schools)
-- Acquisition of additional investments in projects where the
Company already has an investment. Typically these will arise under
pre-emption and similar rights. This was a key area of focus in
2013 which is likely to continue in 2014
-- New developments in UK public policy with respect to the financing of PPP projects in the UK
-- The growing range of opportunities in Ireland
-- Further growth in social infrastructure projects in Germany,
Belgium, Australia and New Zealand which conform to the existing
risk profile within the Company's portfolio
-- Opportunities arising in the UK health and social care sphere
where an active pipeline of small to medium sized opportunities
continues to exist
-- 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
Notwithstanding the projects mentioned above, it should be noted
that the Company's performance is not, in the view of the
Directors, dependent upon making additional investments in order to
deliver its projected returns. Further investment opportunities
will be judged by their anticipated contribution to overall
portfolio returns.
(1.) Note this is a dividend target and not a profit
forecast
(2.) Source: Bloomberg
(3.) This represents the minority shareholdings only.
(4.) Provided for guidance only. This is a target and not a
profit forecast. There can be no guarantee that any distribution
will be paid.
End
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/Jack Hickey +44 (0)20 7269 7297/7196
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 123 social and
transport infrastructure projects, including schools, hospitals,
courts, police headquarters, transport and utility and transmission
projects in the U.K., Europe, Australia and Canada. INPP seeks to
provide its shareholders with both a long-term yield and capital
growth through investment across both construction and operational
phases of 25-40 year concessions.
Amber Infrastructure Group (Amber) is the Investment Advisor to
INPP and consists of over 70 dedicated staff who manage, advise on
and originate projects for INPP.
Visit the INPP website at
www.internationalpublicpartnerships.com for more information.
This interim management statement has been prepared solely to
provide additional information to shareholders as a body to meet
the relevant requirements of the UK Listing Authority's Disclosure
and Transparency Rules and the interim management statement should
not be relied on by any other party or for any other purpose. It
does not constitute an invitation to subscribe for or otherwise
acquire or dispose of securities in the Company (defined below) in
any jurisdiction. The information contained in this interim
management statement about the Issue is subject to updating and
amendment, and does not purport to be full or complete. No reliance
may be placed for any purpose on the information contained in this
interim management statement in connection with the Issue or the
purchase of securities in the Company. This interim management
statement 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. Any decision to purchase shares should be
made solely on the basis of the information contained in the final
prospectus issued by the Company.
The potential acquisition by the Company of any of the
investments referred to in this interim management statement 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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