TIDMINPP
RNS Number : 9690T
International Public Partnerships
20 November 2019
PORTFOLIO UPDATE FOR THE PERIOD 1 JULY 2019 TO 19 NOVEMBER
2019
20 November 2019
International Public Partnerships Limited ('INPP', the
'Company'), the listed investment company which invests in global
public infrastructure projects and businesses, has today issued the
following portfolio update for the period 1 July 2019 to 19
November 2019.
OPERATIONAL HIGHLIGHTS
-- The Company's portfolio of 130 investments in public and
social infrastructure assets and related businesses continues to
operate and perform 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
-- The Company's investments continue to deliver sustained value
by supporting their public sector partners and the wider
communities that they serve including, as an example, the Company's
investments in operational rail businesses which provide
sustainable transport solutions to c.230 million passengers
annually
-- The Company made an additional c.GBP70 million senior debt
investment alongside new bank debt to support the successful
refinancing and restructuring of three projects within its offshore
transmission ('OFTO') portfolio
-- Successful completion of a significantly oversubscribed
GBP116.5 million capital raising with strong demand from existing
and new shareholders. The proceeds of which were used to pay down
the cash drawn portion of the Company's corporate debt facility
that exists to finance the Company's investments
-- The Company was appointed as preferred bidder for the
Company's eighth UK OFTO, Rampion OFTO, in August 2019 as part of
the Transmission Capital Partners consortium
FINANCIAL HIGHLIGHTS
-- The Company announced its interim results for the six months
to 30 June 2019 on 6 September 2019 reporting a 2.2 pence increase
in Net Asset Value ('NAV') per share to 150.3 pence (31 Dec 2018:
148.1 pence per share)
-- The portfolio maintains a high level of inflation-linkage
such that a 1.00% increase in inflation leads to a 0.86% increase
in return(1)
-- A first half-year 2019 dividend of 3.59 pence per share was
declared on 6 September 2019 and was paid on 7 November 2019
-- A target dividend for the 2019 and 2020 financial years has
been set at 7.18 and 7.36 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 19 November 2019 of 197.8% 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 in line with management forecasts and
levels of satisfaction remaining high amongst public sector
clients.
The portfolio currently has 10.4%(4) of assets still in physical
construction. The weighted average investment life of the portfolio
is currently 34 years(5) with a weighted average (non-recourse)
debt tenor of 32 years(5) . As at 30 September 2019, the portfolio
comprised economic interests in 130 projects and businesses with a
composition as detailed below(4) :
Geographic breakdown Investment Fair Value %
------------------------ --------------------------
United Kingdom 73.0%
------------------------ --------------------------
Belgium 8.7%
------------------------ --------------------------
Australia 8.6%
------------------------ --------------------------
Germany 4.1%
------------------------ --------------------------
United States 2.9%
------------------------ --------------------------
Canada 1.7%
------------------------ --------------------------
Ireland 0.9%
------------------------ --------------------------
Italy <0.1%
Sector breakdown Investment Fair Value %
------------------------ --------------------------
Energy Transmission 22.3%
------------------------ --------------------------
Transport 19.9%
------------------------ --------------------------
Education 17.6%
------------------------ --------------------------
Gas Distribution 16.8%
------------------------ --------------------------
Waste Water 9.4%
------------------------ --------------------------
Health 3.6%
------------------------ --------------------------
Courts 2.9%
------------------------ --------------------------
Military Housing 2.9%
------------------------ --------------------------
Other 4.6%
Investment life Investment Fair Value
%
------------------- ------------------------
<20 years 51.2%
------------------- ------------------------
20 - 30 years 19.7%
------------------- ------------------------
>30 years 29.1%
------------------- ------------------------
Investment stake Investment Fair Value
Investment stake %
%
-------------------- ------------------------
100% 50.6%
-------------------- ------------------------
<50% 5.9%
-------------------- ------------------------
50% - 100% 43.5%
-------------------- ------------------------
Debt facility, gearing and cash position
The Company has a GBP400 million corporate debt facility
(available until July 2021) and as at 19 November 2019, c.GBP103
million of the facility was drawn with GBP0.6 million committed via
letters of credit, leaving GBP297 million undrawn to support the
c.GBP35-45 million nearer term investment commitments.
Investments
During the period since 1 July 2019, the Company made new
investments of c.GBP81.7 million, including previously existing
commitments.
In September 2019, the Company successfully completed an
innovative refinancing and restructuring of three projects within
its OFTO portfolio. This involved a repayment of original bank debt
secured against the original projects within its portfolio (Barrow,
Gunfleet Sands and Robin Rigg OFTOs) by taking advantage of current
favourable conditions in the debt market for new, lower-cost
long-term bank debt alongside an additional c.GBP70 million senior
debt investment made by the Company.
The combination of the low cost of the new bank debt, together
with the ability to release certain reserves and achieve other
efficiencies following the repayment of the existing bank debt,
allows the new senior debt investment made by the Company to be
attractively priced and generate returns accretive to the Company's
portfolio, as well as reducing financial leverage on the three
projects by c.50% (compared to the level at financial close).
The Company's OFTO portfolio connects 1.5GW of renewable energy
to the UK's grid, which is sufficient to power 1.3 million UK
homes. This investment demonstrates a further commitment from the
Company to connect the communities that the portfolio serves and
enhances the overall resilience of the Company's OFTO
investments.
On 30 August 2019, the Company, as part of the Transmission
Capital Partners consortium, was appointed as preferred bidder for
the long-term license and operation of its eighth UK offshore
transmission project. The Company expects to invest c.GBP35-45m in
the transmission cable connection to the 400 MW Rampion Offshore
Wind Farm located 13km off the Sussex coast. The Company takes no
exposure to electricity production or price risk but is paid a
pre-agreed, availability-based revenue stream over 20 years which
is fully linked to UK inflation.
Top Ten Investments
As at 30 September 2019, 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 16.8%
----- --------------------------------- ----------------------
2 Thames Tideway Tunnel 9.4%
----- --------------------------------- ----------------------
3 Diabolo Rail Link 8.7%
----- --------------------------------- ----------------------
4 Lincs Offshore Transmission 8.0%
----- --------------------------------- ----------------------
5 Ormonde Offshore Transmission 5.3%
----- --------------------------------- ----------------------
6 Reliance Rail 3.8%
----- --------------------------------- ----------------------
7 BeNEX 3.5%
----- --------------------------------- ----------------------
8 Angel Trains 3.2%
----- --------------------------------- ----------------------
9 U.S. Military Housing 2.9%
----- --------------------------------- ----------------------
10 Robin Rigg Offshore Transmission 2.6%
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.
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 2019 of 150.3 pence per
share when it released its 2019 interim results on 6 September
2019. Since that date, government bond yields have decreased in all
jurisdictions in which INPP is invested. 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 2019, Sterling has strengthened against the
Australian Dollar and the Euro, and weakened against the Canadian
Dollar and US Dollar. The net impact of these foreign exchange rate
movements could also be expected, other things being equal, to have
a small negative impact on the Company's NAV.
DISTRIBUTIONS
On 6 September 2019, the 2019 first half-year distribution of
3.59 pence per share was declared for shareholders on the register
as at 20 September 2019. This distribution was made in respect of
the period 1 January 2019 to 30 June 2019 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 7 November 2019.
The Board of Directors have previously announced targets for the
2019 and 2020 distributions of 7.18 pence per share and 7.36 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
The appetite for long-term responsible investment into public
and social infrastructure remains high. There continues to be a
positive outlook for private sector investment into public
infrastructure across the geographies that the Company invests in.
Whilst the Company acknowledges that there is an element of
uncertainty in the current political landscape, we continue to
monitor these risks such as emerging policies of the UK opposition
party to nationalise certain infrastructure in the UK. The Company
and its Investment Adviser, as previously reported, believes there
are practical mitigants in place to the implementation of these
policies. The Company continues to monitor developments as Brexit
preparations progress and as previously expressed, we do not
believe that we are unusually exposed or that there will
necessarily be a significant impact on the Company's existing
investments. However, this cannot be guaranteed, and we continue to
monitor developments closely, as the withdrawal process continues
to evolve.
The pipeline for the types of assets the Company invests in is
positive and the Company remains confident in the ability to
continue to source and develop high-quality, well-performing
opportunities, globally, that deliver long-term, predictable cash
flows with strong inflation-linkage that meet the Company's
risk-return profile.
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 0.86% 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 2019.
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 2019 calculated utilising a
discounted cash flow methodology as stated in the valuation
section.
5. This includes non-concession entities which have potentially
a perpetual life but are assumed to have finite lives.
ENDS.
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):
INPP is a listed infrastructure investment company that invests
in global public infrastructure projects and businesses, which
meets societal and environmental needs, both now, and into the
future.
INPP is a responsible, long-term investor in 130 infrastructure
projects and businesses. The portfolio consists of utility and
transmission, transport, education, health, justice and digital
infrastructure projects and businesses, in the UK, Europe,
Australia and North America. INPP seeks to provide its shareholders
with both a long-term yield and capital growth.
Amber Infrastructure Group ('Amber') is the Investment Adviser
to INPP and consists of 130 staff who are responsible for the
management of, advice on and origination of infrastructure
investments.
Visit the INPP website at
www.internationalpublicpartnerships.com for more information.
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END
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