TIDMINPP
RNS Number : 5320W
International Public Partnership Ld
10 November 2014
International Public Partnerships Limited
Interim Management Statement
For the period 1 July 2014 to 7 November 2014
10 November 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 July 2014 to 7 November 2014.
Highlights
-- The Company has had an active investment period and the
prospects for the future are also promising;
-- The Company's portfolio of 112 public infrastructure
investments continues to perform fully in line with
expectations;
-- In the period covered by this IMS, the Company announced its
2014 Interim Result for the period to 30 June 2013, reporting an
increase in Net Asset Value ("NAV") per share to 124.8 pence (31
December 2013: 123.0 pence per share);
-- Since that time the portfolio has continued to perform well
and assets in construction have progressed as planned. Overall, the
Company expects further NAV accretion since 30 June 2014;
-- NAV accretion is anticipated as a consequence of each of the following:
o The organic growth in value of the portfolio (including
through the effect of recent acquisitions);
o Continued upward pressure on valuations evidenced by the
continued trend in secondary market transactions for assets such as
those owned by the Company. This evidence comes both from the
Company's own experience in selling some minor assets in the period
as well as other market based evidence; and
o Macro economic factors including movements in government bond
yields in the period.
-- A first half year 2014 dividend of 3.15 pence per share was
declared on 28 August and was paid on 24 October. A full year 2014
dividend(1) of 6.30 pence per share is currently targeted (up 2.5%
from full year 2013);
-- Very good progress being made on pipeline opportunities.
Since 30 June 2014 announcements include:
o Financial close reached on GBP171 million investment in Lincs
offshore transmission project
o Reached commercial close on Priority Schools Building
Programme 'Aggregator' funding with up to GBP78 million to be
invested across 5 schools 'batches'
o Disposal of two non-strategic, minority stakes from its
portfolio for GBP3.5 million, at values in excess of carrying
value
-- In addition, an attractive pipeline of new opportunities that
the Company anticipates will come to fruition in 2015 and later is
being worked on in countries including the UK, Ireland, Belgium,
Holland, Canada, Australia and New Zealand;
-- Inflation linkage in the portfolio strengthened with recent
investments such that a 1% increase in inflation leads to a 0.84%
increase in return (previously 0.81%);
-- On 5 November 2014 the Company announced it was seeking to
raise GBP70 million by way of a tap issue;
-- The tap issue proceeds will be used to reduce the Company's
current debt facility which will remain available for re-drawing to
finance any future investments;
-- The Company has delivered a Total Shareholder Return
(comprising share price growth and aggregate dividends) since IPO
in November 2006 to 7 November 2014 of 103.3%(2) .
Portfolio performance
The Company's portfolio of 112 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.
There has been a significant level of activity within the
portfolio during the period including:
-- Angel Trains successful bid to provide 150 new, high quality
Desiro City passenger carriages to Stagecoach South West Trains
Limited ("SSWT") with a value of approximately GBP240 million. The
acquisition will be financed from Angel's internal resources. The
Company expects that the provision of the new trains will be
accretive to its projected returns from its existing investment in
Angel;
-- The Company's portfolio of four offshore transmission
projects across the UK has a cumulative 12.4 year operating history
and during this time period, performance on each of the assets has
exceeded original base case forecasts;
-- On 1 Aug 2014 the Federal German Ministry of Education and
Research in Berlin ("BMBF") Project reached construction
completion. Completion was achieved on time and the project has now
formally been handed over to the commissioning authority;
-- Stage 2 construction works at the Royal Children's Hospital
in Melbourne Australia were completed in early September, three
months ahead of schedule;
-- Construction completion was reached on the Gold Coast Rapid
Transit project in Queensland Australia. The scheme's one millionth
passenger was carried on 17 September 2014.
As a result of the completion of projects during the period the
portfolio currently has less than 1% of assets still in physical
construction although activities relating to commissioning,
snagging and the transition to full operations are ongoing. Other
things being equal, the Company would expect to benefit from an
uplift in valuation as the operational performance of completed
projects is demonstrated over the course of the next 12 to 18
months.
As at 7 November 2014, the portfolio comprised economic
interests in 112 projects with a geographical split as detailed
below:
Geographic Split 7 Nov 2014 Sector breakdown 7 Nov 2014
% %
------------------ ----------- ------------------------- -----------
United Kingdom 67% Education 22%
------------------ ----------- ------------------------- -----------
Belgium 13% Transport 19%
------------------ ----------- ------------------------- -----------
Australia 9% Energy 33%
------------------ ----------- ------------------------- -----------
Canada 4% Health 10%
------------------ ----------- ------------------------- -----------
Germany 5% Courts 7%
------------------ ----------- ------------------------- -----------
Ireland 2% Police Authority 4%
------------------ ----------- ------------------------- -----------
Italy <1% Custodial 1%
------------------ ----------- ------------------------- -----------
Government Offices/Other 4%
------------------ ----------- ------------------------- -----------
Concession Length 7 Nov 2014 Project Stake 7 Nov 2014
% %
------------------- ----------- -------------- -----------
<20 years 46% 100% 79%
------------------- ----------- -------------- -----------
20-30 years 38% 50% - 100% 5%
------------------- ----------- -------------- -----------
30> years 16% <50% 16%
------------------- ----------- -------------- -----------
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.
The weighted average concession life of the portfolio is
currently 22 years with a weighted average (non recourse) debt
tenor of 21 years.
Top Ten Investments
The Top Ten Investments of the Company as at 7 November 2014
were:
Rank Asset Investment Fair
Value
------ ------------------------------ -----------------
1 Lincs Offshore Transmission 16.4%
------ ------------------------------ -----------------
2 Diabolo Rail Link 13.0%
------ ------------------------------ -----------------
3 Ormonde Offshore Transmission 12.2%
------ ------------------------------ -----------------
4 Royal Children's Hospital 4.5%
------ ------------------------------ -----------------
5 BeNEX Rail 3.5%
------ ------------------------------ -----------------
6 Hereford & Worcester Courts 3.3%
------ ------------------------------ -----------------
7 Northampton Schools 3.2%
------ ------------------------------ -----------------
8 Alberta Schools 2.7%
------ ------------------------------ -----------------
Strathclyde Police Training
9 Centre 2.4%
------ ------------------------------ -----------------
10 Tower Hamlets Schools 2.0%
------ ------------------------------ -----------------
Acquisitions and divestments
During the period to 7 November 2014 GBP171 million of
investment was made into the Lincs offshore transmission projects
with up to a further GBP78 million earmarked for investment as the
Priority Schools Building Programme 'Aggregator' scheme reaches
financial close over the next 12 months. In addition two
divestments were made from the portfolio at prices in excess of the
Directors' valuation, realising a total of GBP3.5 million.
Lincs offshore transmission project
During the period the Company achieved financial close and
completed its investment in the Lincs offshore transmission
project. This is the fifth offshore transmission project that
Transmission Capital Partners has closed under Ofgem's tenders for
the long-term licence and operation of offshore transmission assets
in the United Kingdom. It represents the Company's single largest
investment to date.
The Company invested approximately GBP171 million to acquire
100% of the equity and junior debt of the project, with the senior
debt provided by the European Investment Bank. The Company's
projected returns from its investment in the Lincs project are
expected to be consistent with the returns it is receiving from its
existing portfolio of transmission assets and will be fully linked
to inflation (RPI). This will enhance the proportion of revenues
from investments in the Company's portfolio that are inflation
linked to 84%. The investment is expected to provide immediate
yield to the Company.
The project links the 270MW Lincs windfarm to the National Grid
via 100 kilometers of subsea cables and other related
infrastructure including substations. The Company takes no exposure
to electricity production or price risk but is paid a pre-agreed,
availability-based revenue stream over 20 years.
Priority Schools Building Programme 'Aggregator'
During the period the UK Education Funding Agency ("EFA")
announced that the Amber Consortium, of which INPP is part, had
reached commercial close to fund five batches of schools being
delivered through the Priority Schools Building Programme
("PSBP").
The PSBP is a centrally managed government programme set up to
address the needs of the schools most in need of urgent repair.
Through the programme, 261 schools in total will be rebuilt or have
their condition improved through funding provided by the EFA.
As part of the programme, 46 schools in five batches with a
value of circa GBP700 million are being delivered via private
finance funding using the PF2 structure- the government's new
approach to private finance. These will be majority financed by the
Amber Consortium. The Company expects to provide up to GBP78
million to fund the five batches as they reach financial close over
the next 12 months alongside debt provided by Aviva and the
European Investment Bank.
Divestment of non-strategic, minority assets
During the period the Company divested non-strategic, minority
stakes in two of its assets - Amiens Hospital PPP in France, and
its interest in the Sheffield Building Schools for the Future
("BSF") project. The disposals realised GBP0.3 million and GBP3.2
million respectively with both sales were completed at prices in
excess of director valuations. In the case of the Sheffield BSF
asset, over 50% more than the value the asset was purchased for in
2011. The ability to transact at these levels provides a continuing
indication of the demand for assets in the secondary market.
Gearing and cash position
Taking into account these acquisitions and divestments, the
Company had approximately GBP11.5 million of unrestricted cash at 7
November 2014. In addition, the Company has a GBP175 million
corporate debt facility and as at 7 November 2014 this was c.
GBP110 million drawn.
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 IMS. The half year 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 macro economic factors.
Since 30 June 2014 (NAV: 124.8 pence per share), all government
bond rates in 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, GBP has strengthened against the three
currencies to which the Company has exposure. The strengthened
foreign exchange position of GBP could be expected, other things
being equal, to have a negative effect on the Company's NAV.
Based on these two macroeconomic updates alone the NAV could be
expected to have increased since 30 June 2014 as the increase due
to the reduction in government bond yields more than offsets the
decrease due to GBP strengthening.
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 30 June 2014 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 final results.
Distributions
On 28 August 2014, the 2014 first half year distribution of 3.15
pence per share was declared for shareholders on the register as at
19 October 2014. This distribution was for the period 1 January
2013 to 30 June 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 was made on 24 October 2014.
The Board of Directors have previously announced minimum targets
for the 2014 and 2015 distributions of 6.30 pence per share and
6.45 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.(3)
Investment environment and outlook
The Company's portfolio continues to perform well and the
Company has maintained good relations with its public sector
stakeholders. A number of attractive new infrastructure investment
opportunities are available for the Company in the UK and in
overseas jurisdictions in which it and the Investment Advisor is
represented and where it is knowledgeable.
In total, these opportunities have a combined anticipated
investment value of between GBP150 million and GBP200 million.
These include preferred bidder status and other preferential
positions (for instance pre-emptive rights over investments held by
third parties). As this potential investment would exceed the
amount of cash and debt facility currently available to the
Company, the Company is in the process of undertaking the
aforementioned capital raising by way of tap issuance.
During the period the Company continued to review mature
investment opportunities brought to it by third party developers
and their advisors. No such assets were acquired by the Company in
the period as the Company's view was that the majority of these
opportunities would not have been accretive to projected returns at
the prices paid by the successful buyers. Notwithstanding this, the
Company continues to review investment opportunities from such
sources.
The continuing commitments to infrastructure procurement by the
UK Government and governments in other jurisdictions in which the
Company invests continue to give substantial confidence in the
longer term likelihood of a supply of attractive investment
opportunities. The Company is also encouraged by the continued
investor demand for well structured investment opportunities in the
infrastructure sector.
These trends, combined with the continued good performance of
the existing portfolio and the strong pipeline of opportunities for
further investment, lead the Company to have continued confidence
in its overall prospects for the remainder of 2014 and into
2015.
Notes:
1. 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.
2. Source: Bloomberg
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.
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/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 112 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 over 75 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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