TIDMINPP
RNS Number : 9397F
International Public Partnerships
20 November 2020
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
PORTFOLIO UPDATE
FOR THE PERIOD 1 JULY 2020 TO 19 NOVEMBER 2020
20 November 2020
International Public Partnerships Limited ('INPP', the
'Company'), the FTSE 250 listed investment company which invests in
global public infrastructure projects and businesses, has today
issued the following portfolio update for the period 1 July 2020 to
19 November 2020.
OPERATIONAL HIGHLIGHTS
-- The Company reaffirms that its investment portfolio has
continued to perform well, with no material changes to its
operational or financial performance since it announced its Interim
Results on 10 September 2020
-- During the period, the Company made further investments of
c.GBP9.2 million across the education and digital infrastructure
sectors
-- The Company's portfolio of 130 investments in public and
social infrastructure projects and businesses continue to deliver
essential services to all its stakeholders, maintaining high levels
of asset availability
-- The Company continues to maintain confidence in the
portfolio's resilience and notes that Covid-19 has resulted in a
limited impact on the portfolio and the Company to date
-- Nevertheless, the Company continues to monitor certain
specific risk areas, particularly relating to Tideway and the
Diabolo Rail Link ('Diabolo'), as highlighted at the time of its
Interim Results
-- The Company has delivered a Total Shareholder Return(1) since
IPO in November 2006 to 19 November 2020 of 231.7% or 8.9% on an
annualised basis
-- A first half-year 2020 dividend of 3.68 pence per share was
declared on 10 September 2020 and was paid on 13 November 2020
PORTFOLIO UPDATE
Overall, the Company's portfolio of assets continues to perform
well, both for shareholders and wider stakeholders. We continue to
closely monitor the performance of all of our investments
specifically in relation to the implications of Covid-19.
-- The portfolio currently has 8.9%(2) of assets still in
physical construction. The weighted average investment life of the
portfolio is currently 34 years(3) with a weighted average
(non-recourse) debt tenor of 31 years(3) .
-- As at 30 June 2020, the portfolio comprised economic
interests in 130 projects and businesses with a composition as
detailed below. This has largely remained unchanged to 19 November
2020(2) :
Sector Breakdown Investment Fair Value %
----------------------- --------------------------
Energy Transmission 22%
----------------------- --------------------------
Transport 19%
----------------------- --------------------------
Education 19%
----------------------- --------------------------
Gas Distribution 17%
----------------------- --------------------------
Waste Water 9%
----------------------- --------------------------
Health 4%
----------------------- --------------------------
Courts 3%
----------------------- --------------------------
Military Housing 3%
----------------------- --------------------------
Other 4%
Portfolio review
During the period, the Company has continued to work with the
management team at Cadent, an essential UK gas distribution
business serving 50% of UK gas customers (16.6% of Investments at
Fair Value(2) ). Together with its co-investors, the Company has
been engaging with the industry regulator, Ofgem, as it seeks a
fair regulatory settlement in respect of Cadent's allowable returns
and incentives over the next five years. Cadent, the Company and
other market participants will continue to work for a better
outcome for both Cadent's customers and investors in the final
determination that Ofgem is expected to be publish in December
2020.
In addition, as previously indicated, there continues to be
specific areas of uncertainty as a consequence of Covid-19 relating
principally to Tideway, being the Company's largest asset under
construction, and Diabolo, where the revenues are linked to
passenger numbers.
-- Tideway (8.9% of Investment at Fair Value(2) ) - Tideway is
building the 25km 'super sewer' under the River Thames to create a
healthier environment for London. Further to the update provided on
10 September 2020, construction activities have continued across
the Tideway construction sites with processes and procedures in
place to protect the health of workers and the wider community.
Progress continues to be made with 19km of tunnel now constructed
and the last of the 21 bridges over the River Thames has now been
passed. At the end of September 2020, construction works were 60%
complete compared to 57% as at 30 June 2020. As previously
reflected in the Company's Interim Results, Tideway published a
progress update in August 2020 reflecting the impact of Covid-19,
which included an estimated GBP233 million negative effect on cost,
increasing the total project cost from GBP3.9 billion to GBP4.1
billion, and a nine-month impact on schedule, taking completion to
the first half of 2025. There are a number of contractual and
regulatory safeguards available to Tideway to help minimise the
possible financial impacts of these measures. These include
provisions to share additional costs between contractors, Tideway
investors (including the Company) and end-customers, up to a
threshold, beyond which they are borne by the UK Government.
Tideway remains in discussions with Ofwat on a package of measures
that would mitigate the financial impact of Covid-19 on the
Company. Progress is being made in these discussions and an
agreement is expected to be reached in the coming months.
-- Diabolo (8.2% of Investment at Fair Value(2) ) - Diabolo
integrates Brussels airport with Belgium's national rail network.
Whilst Diabolo does not operate train services and part of its
revenues are paid on an availability basis, the majority of its
revenues are linked to passenger use of either the rail link itself
or the wider Belgian rail network. As a result of Covid-19,
passenger numbers have been significantly lower over the course of
2020 compared to previous years, and the reinstatement of a
national lockdown in Belgium at the end of October 2020 will have
further impacted passenger numbers. Discussions are ongoing with
project lenders and the Belgian state railway in order to agree
resolutions to short-term liquidity and related debt covenant
issues consequent to the reduction in passenger numbers. We will
provide further information in due course. In the longer-term, the
project benefits from a contractual mechanism which permits an
adjustment to the passenger fee should passenger numbers and
returns fall below a certain threshold. This mechanism operated
successfully earlier in the life of the contract albeit under
different circumstances. The operational performance of the asset
remains excellent.
FINANCIAL HIGHLIGHTS
On 10 September 2020, the Company announced its results for the
six months to 30 June 2020 reporting:
-- A 0.9% decrease in Net Asset Value ('NAV') per share to 149.2
pence (31 Dec 2019: 150.6 pence)
-- The portfolio maintains a high level of inflation-linkage
such that a 1.00% increase in inflation leads to a 0.78% increase
in return(4)
-- On 10 September 2020, the 2020 first half-year distribution
of 3.68 pence per share was declared. This distribution was made in
respect of the period 1 January 2020 to 30 June 2020 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 13 November 2020
-- A target dividend for the 2020 and 2021 financial years has
been set at 7.36 and 7.55 pence per share, respectively, in line
with the current target annual increase of c.2.5%(5) . Whilst we
currently have good forward-visibility of the cash flows projected
to be generated by the Company's investments, we continue to
monitor the portfolio for the impact of Covid-19 related risks
including those noted above
The Company also notes that it has a GBP400 million corporate
debt facility (available until July 2021) and as at 19 November
2020, c.GBP29 million of the facility was drawn, leaving c.GBP371
million undrawn to support nearer term investment commitments of
c.GBP100 million.
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, the last of which was published with the Company's
Interim Results ended 30 June 2020 on 10 September 2020
-- The Company also 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 attention
is drawn to commentary provided above on the performance of
individual assets in the current environment
-- Since the Company published its 30 June 2020 NAV of 149.2
pence per share, government bond yields have decreased in all
jurisdictions in which INPP is invested. 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 2020, Sterling strengthened against all
currencies that the Company is exposed to, being the Australian
Dollar, 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 negative impact on the
Company's NAV.
INVESTMENT ACTIVITY
During the period since 1 July 2020 the Company made new
investments of c.GBP9.2 million.
-- As previously reported, in August 2020, the Company acquired
stakes in six PFI project companies that own 14 UK schools. These
schools provide education facilities to over 17,000 pupils across
Bradford and Lewisham. The Company invested a further GBP3.6
million and as a result increased its existing stake by 4% in each
of the six underlying project companies. Upon completion, the
Company will hold a 54% investment in three of the Lewisham BSF
schemes and 45% in the fourth; as well as increasing its share in
the two Bradford schemes to 15.5% and 19% in the phase 1 and 2
schemes, respectively
-- During the period, as part of the Company's GBP45 million commitment to the National Digital Infrastructure Fund ('NDIF'), the Company made further commitments across two of the NDIF's existing portfolio companies, toob and Airband. In addition, and as reported in the Interim Results, NDIF partially realised an initial investment in Community Fibre which reflected a positive return on the Company's original investment and will support the further growth of Community Fibre in delivering fibre connectivity across London
-- In October 2020, the Company acquired an additional interest
in Blackburn and Darwen BSF project. The Company invested a further
GBP1.1 million to acquire stakes in two project companies which
owns three schools. As a result, the Company now has 100%
ownership.
INVESTMENT ENVIRONMENT AND OUTLOOK
-- Our portfolio of investments provides essential
infrastructure to over 13 million people, households and businesses
daily across the countries in which we invest
-- As Covid-19 continues to affect many aspects of society and
government policy, we continue to assess and monitor its impact on
the Company's portfolio
-- Since the outbreak of the pandemic, earlier in the year,
there has been an increased focus on ensuring resilience against
future threats and the recognition that infrastructure plays a
pivotal role in delivering this globally
-- 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
particularly in supporting the post-Covid-19 recovery
-- International momentum for action on climate change continues
to grow, with China and Japan joining the UK, EU, Sweden and New
Zealand in setting net zero carbon targets. The Company continues
to monitor the opportunities that will emerge from climate
action
-- 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, across the Company's target geographies, that
deliver long-term, predictable cash flows with strong
inflation-linkage that meet the Company's risk-return profile
-- In addition, 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 new relationship between the
UK and the EU continues to evolve
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. Source: Bloomberg. Share price appreciation plus dividends assumed to be reinvested.
2. This is based on the fair valuation of the Company's
investments as at 30 June 2020 calculated utilising a discounted
cash flow methodology as stated in the valuation section.
3. This includes non-concession entities which have potentially
a perpetual life but are assumed to have finite lives.
4. In aggregate, the weighted average return of the portfolio
would be expected to increase by 0.78% 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 2020.
5. 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.
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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