TIDMINPP
RNS Number : 6919H
International Public Partnership Ld
19 November 2018
PORTFOLIO UPDATE FOR THE PERIOD 1 JULY 2018 TO 16 NOVEMBER
2018
19 November 2018
International Public Partnerships Limited ('INPP', the
'Company'), the listed investment company which invests in global
public infrastructure projects and businesses, today issues the
following portfolio update for the period 1 July 2018 to 16
November 2018.
OPERATIONAL HIGHLIGHTS
-- The Company's portfolio of 130 investments in public and
social infrastructure assets and related businesses are operating
and performing in line with expectations.
-- The solid and consistent level of operational performance in
the portfolio continues to drive strong and sustainable ongoing
financial performance for shareholders with continued dividend
growth.
-- Successful completion of a GBP116 million capital raising
during the period. A portion of the proceeds were used to repay the
Company's cash drawn portion of the existing debt facility. The
remainder will be deployed into the Company's strong pipeline of
opportunities where the Company has existing committed near term
future investment obligations.
-- The Company made an additional c.GBP51.8 million of
investments during the period, including a c.GBP46 million
investment in the Company's seventh offshore transmission
investment (OFTO), Dudgeon and further investment into UK digital
infrastructure.
-- The Company successfully completed the refinancing of the
senior debt in Durham Building Schools for Future. The refinancing
delivered a significant financial benefit to Durham County Council
and demonstrates Amber's, the Investment Adviser, active asset
management approach across the portfolio where it seeks to add and
deliver value for money to all stakeholders.
-- The Company has previously announced its commitment to
acquire a further investment into the Cadent gas distribution
business to a level that enabled the permanent right to appoint a
board director. It now expects it will make a further investment of
c.GBP150-155 million (subject to price adjustment per the terms of
the option agreements) into Cadent gas distribution network by the
end of June 2019, following National Grid's announcement that it
has elected to exercise the options that it held with the Quadgas
consortium, of which INPP is a member.
FINANCIAL HIGHLIGHTS
-- 0.9% increase in Net Asset Value ('NAV') per share to 146.3
pence for the six months to 30 June 2018 (31 Dec 2017: 145.0p).
-- The portfolio maintains a high level of inflation-linkage
such that a 1.00% increase in inflation leads to a 0.81% increase
in return(1) .
-- A first half-year 2018 dividend of 3.50 pence per share was
declared on 6 September 2018 and was paid on 8 November 2018.
-- A minimum target dividend for the 2018 and 2019 financial
years has been set at 7.00 and 7.18 pence per share, respectively;
in line with an average increase of c.2.5%(2) 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 16 November 2018 of 172.5% or 8.7% on an
annualised basis(3) .
PORTFOLIO PERFORMANCE
The Company's portfolio of assets continues to perform well with
revenues and cash receipts at least in line with management
forecasts and levels of satisfaction remaining high amongst public
sector clients.
The portfolio currently has 11.4%(4) of assets still in physical
construction. The weighted average investment life of the portfolio
is currently 36 years(5) with a weighted average (non-recourse)
debt tenor of 33 years(5) . As at 30 September 2018, the portfolio
comprised economic interests in 130 projects and businesses with a
composition as detailed below(4) :
Geographic breakdown Investment Fair Sector Investment
Value % breakdown Fair Value
%
------------------------ ------------------ ---------------------- --------------
United Kingdom 71.4% Transport 20.6%
------------------------ ------------------ ---------------------- --------------
Belgium 10.0% Education 19.6%
------------------------ ------------------ ---------------------- --------------
Australia 9.9% Energy Transmission 19.5%
------------------------ ------------------ ---------------------- --------------
United States 3.0% Gas Distribution 14.1%
------------------------ ------------------ ---------------------- --------------
Germany 2.8% Waste Water 10.8%
---------------------- --------------
Canada 1.9% Health 4.2%
---------------------- --------------
Ireland 1.0% Courts 3.4%
---------------------- --------------
Italy <0.1% Military Housing 3.0%
---------------------- --------------
Other 4.8%
Investment life Investment Fair Investment stake Investment
Value % % Fair Value
%
---------------------- --------------
<20 years 46.5% 100% 46.9%
---------------------- --------------
20 - 30 years 25.6% <50% 7.4%
---------------------- --------------
>30 years 27.9% 50% - 100% 45.7%
---------------------- --------------
Debt facility, gearing and cash position
Following the successful renewal of the corporate debt facility
in July 2018 for a further three years on improved terms, the
Company has now repaid the GBP72.8 million cash drawn on the
corporate debt facility during the period using the proceeds from
the capital raise in October 2018. At 16 November 2018, the Company
has a cash balance of c.GBP42 million available and the GBP400
million revolving credit facility is currently undrawn to support
the c.GBP200 million of nearer term investment commitments.
Investments
During the period since 1 July 2018, the Company made new
investments of c.GBP51.8 million.
In November 2018, the Company invested c.GBP46 million into the
Dudgeon OFTO. The project is the Company's seventh OFTO investment
and relates to the transmission cable connection to the offshore
wind farm located 32km off the coast of Cromer in North Norfolk.
Dudgeon OFTO transmits clean power to over 410,000 UK homes by
generating electricity using 67 6MW offshore wind turbines. In
total, the Company's OFTO investments transmit approximately 1.5GW
of renewable electricity - or roughly 10 per cent of the UK's
current installed and operational wind capacity - to power the
equivalent of over 1.5 million UK homes.
As part of its GBP45 million commitment to the National Digital
Infrastructure Fund ('NDIF'), in November 2018, the Company made an
investment commitment of up to c.GBP9.9 million into Nextgenaccess
Ltd, a developer of ultrafast wholesale and custom fibre
infrastructure. The funding will help finance plans to deploy over
1,000km of new strategic high-capacity fibre routes across the UK
by the end of 2020. Additionally, in August 2018, the Company made
an investment commitment of up to GBP8.5 million in Airband
Community Internet Limited, a leading wireless and fibre internet
service provider that has benefited from government subsidies for
rural and isolated areas of England and Wales.
On 8 November 2018, National Grid announced that it has elected
to exercise the options to sell its remaining 39% shareholding of
Cadent gas distribution network to Quadgas Consortium, of which
INPP is a member. The Company previously announced the put/call
options that had been entered into, and as a result of the exercise
of those options by National Grid, the Company expects that it will
make a further investment of c.GBP150-155 million (subject to price
adjustment in accordance with the terms of the option agreements)
into Cadent gas distribution network with execution due by the end
of June 2019. On conclusion of these arrangements, the Company will
hold a 7.25% ownership interest in Cadent giving it the permanent
right to appoint a board director. This has been the Company's
long-term target level of shareholding in the Cadent business. This
further investment is forecast to be accretive to the Company's
current portfolio in terms of discount rate, yield contribution and
inflation indexation.
The Company also continues to follow the delivery of the
construction works at the fourth batch of the Priority Schools
Building Programme - Aggregator ('PSBP Midlands Limited') where the
Company provides debt to the project. As reported in the Company's
interim results on 6 September 2018 (for the period to 30 June
2018), these works predominately relate to the outstanding
construction of a sports hall at one of the eight schools in the
fourth batch. The sports hall's construction was due to be
completed in April 2019, subject to a new construction provider
being appointed to replace Carillion Construction Limited
('Carillion'), following its liquidation. A replacement
construction provider has been identified but is yet to be approved
by the project lenders (including the Company). The Company through
its Investment Adviser is maintaining an active dialogue with PSBP
Midlands and other stakeholders in the project to agree a plan to
resolve the outstanding works.
Top Ten Investments
As at 30 September 2018, with adjustments for subsequent
transactions, the Top Ten Investments of the Company in terms of
value were as set out below(4) :
Rank Asset Investment Fair Value
%
1 Cadent 14.1%
2 Thames Tideway Tunnel 10.8%
3 Diabolo Rail Link 10.0%
4 Lincs Offshore Transmission 9.2%
5 Ormonde Offshore Transmission 6.2%
6 Reliance Rail 4.2%
7 Angel Trains 3.5%
8 U.S. Military Housing 3.0%
9 BeNEX Rail 2.1%
10 Royal Children's Hospital 1.9%
VALUATION
The Company's investment portfolio valuation is determined
semi-annually by the Directors after advice from the Investment
Adviser and is reviewed by the Company's auditors, EY. This
semi-annual valuation is published within the Company's interim and
annual accounts.
It is normal practice for the Company to review market-based
evidence of pricing (e.g. market intelligence and its own
experience of the secondary market) for assets such as those owned
by the Company as part of its semi-annual valuation process. Since
30 June 2018, the Company has seen continued evidence of rising
valuations for the type of assets it owns, most notably the
takeover of JLIF, which could be expected to have a modest positive
impact on the Company's NAV. The Company will undertake a thorough
review of such market data to ensure the valuation implications of
the transactions seen during the year to date are appropriately
reflected in the Company's 31 December 2018 annual accounts.
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, changes to cash
flow projections and assumptions, indexation adjustments due to
changes in inflation etc.), although any material
investment-specific matters occurring in the period can be expected
to be reported on separately in this quarterly update.
The Company published its NAV at 30 June 2018 of 146.3 pence per
share when it released its 2018 interim results on 6 September
2018. Since that date, government bond yields have decreased in the
UK, Australia, Canada, Belgium and Germany, and have increased in
Ireland, Italy and the US. On a net basis and other things being
equal, the decrease in government bond yields could be expected to
have a positive impact on the Company's NAV.
Since 30 June 2018, sterling strengthened against the Australian
dollar, and weakened against the Canadian dollar, the euro and the
US dollar. The net impact of these foreign exchange rate movements
could also be expected, other things being equal, to have a small
positive impact on the Company's NAV.
Inflation rates in the UK continue to run ahead of the current
assumption used in the Company's UK investment valuations and,
other things being equal, this is expected to have a small positive
impact on the Company's NAV.
DISTRIBUTIONS
On 6 September 2018, the 2018 first half year distribution of
3.50 pence per share was declared for shareholders on the register
as at 21 September 2018. This distribution was made in respect of
the period 1 January 2018 to 30 June 2018 and represents 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 was paid on 8 November 2018.
The Board of Directors have previously announced minimum targets
for the 2018 and 2019 distributions of 7.00 pence per share and
7.18 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) .
CORPORATE GOVERNANCE
The Company consistently monitors political developments as
Brexit negotiations progress. As outlined in previous reports,
while we see obvious risks in possible market and other
dislocations arising from anything other than an orderly Brexit, we
do not anticipate that the Company is unusually exposed to such
risks or that there will necessarily be a significant impact on the
Company's existing investments.
Mr Mike Gerrard was appointed to the Board as a Non-Executive
Director on 4 September 2018. It is anticipated that Mr Gerrard
will assume the role as Chairman upon Rupert Dorey's retirement on
31 December 2018. Mr Gerrard has extremely strong infrastructure
experience having been involved in some of the largest
infrastructure projects and programmes delivered in the UK and
globally.
INVESTMENT ENVIRONMENT AND OUTLOOK
The market for the type of assets in which the Company invests
remains buoyant and governmental and regulatory environments in
which we operate continue to be supportive of long-term investment
into public infrastructure. Market sentiment has continued to
improve throughout the period and the share price has continued to
trade at a premium to NAV. Recent transactions have demonstrated
the continued strong investor demand to access infrastructure
assets and the inherent underlying value of high-quality
infrastructure portfolios. As mentioned above, we continue to
monitor the market to ensure that valuations reflect the latest
market-based evidence of pricing.
The Company has identified a pipeline of additional
opportunities that are currently under review by the Investment
Adviser, including current bids, preferred bidder opportunities and
opportunities to acquire additional investments include
pre-emption/first refusal rights, that meet the Company's
risk-return profile.
The Company remains focused on the completion of its existing
commitments, as well as a strong pipeline of longer-term potential
opportunities including regulated utilities (including offshore
transmission), health, judicial, other accommodation and transport
projects.
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 average return of the portfolio
would be expected to increase by 0.81% per annum in response to a
1.00% per annum inflation increase over the currently assumed
inflation rates across the whole portfolio. Based on analysis as at
30 June 2018.
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.
4. This is based on the fair valuation of the Company's
investments as at 30 September 2018 calculated utilising a
discounted cash flow methodology as stated in the valuation
section, adjusted to reflect the Company's investments in digital
infrastructure and Dudgeon OFTO which were made subsequent to the
30 September 2018 valuation date.
5. This includes non-concession entities which have potentially
a perpetual life but are assumed to have finite lives.
S.
For further information:
Erica Sibree/Amy Joslin +44 (0)20 7939 0558/0587
Amber Fund Management Limited
Hugh Jonathan +44 (0)20 7260 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 and businesses.
Listed in 2006, INPP is a long-term investor in 130
infrastructure projects and businesses, 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 120 dedicated staff who manage, advise on
and originate investments for INPP.
Visit the INPP website at
www.internationalpublicpartnerships.com for more information.
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END
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