REG - 3i Infrastructure - 3i Infrastructure plc – Pre-close update

3i InfrastructureAnnouncement

31/03/2022 07:16

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RNS Number : 6790G  3i Infrastructure PLC  31 March 2022

31 March 2022

 

3i Infrastructure plc - Pre-close update

 

 

Portfolio performing strongly; on track to meet dividend target, up 6.6%
year-on-year

 

3i Infrastructure plc ('3i Infrastructure' or the 'Company') is an investment
company whose purpose is to invest responsibly in infrastructure, delivering
long-term sustainable returns to shareholders and having a positive impact on
our portfolio companies and their stakeholders. This statement relates to the
period from 1 October 2021 to 30 March 2022 (the 'Period').

 

 

Highlights

 

·    Strong level of investment in new platforms and existing portfolio
companies:

 

-  On 17 November 2021, 3i Infrastructure agreed to invest c.$512 million to
acquire 100% of Global Cloud Xchange ('GCX'). GCX is a leading global data
communications service provider and owns one of the world's largest private
subsea fibre optic networks.  Additional acquisition debt was raised in March
2022, reducing the Company's equity commitment to c.£300 million.  The
transaction is due to complete in Summer 2022

 

-  On 14 December 2021, 3i Infrastructure completed the c.£191 million
acquisition of a 92% stake in SRL Traffic Systems ('SRL'), the market leading
traffic management equipment rental company in the UK

 

-  On 16 December 2021, the Company invested a further c.£21 million into
Valorem through a capital increase to fund its growth, raising the Company's
stake in Valorem to c.33%

 

-  On 1 February 2022, 3i Infrastructure completed a further £258 million
investment in ESVAGT, the market leader in service operation vessels for the
offshore wind industry, doubling its equity stake to 100%

 

-  On 14 February 2022, the Company invested a further £33 million in
DNS:NET to fund the next step of its fibre roll-out, increasing 3i
Infrastructure's stake in DNS:NET to 64%

 

·    Successful realisation of Oystercatcher's four European terminals: On
29 October 2021, the Company completed the sale of its 45% stakes in four
European liquid storage terminals for proceeds of c.€55 million after debt
repayment.  3i Infrastructure continues to hold a 45% stake in Oiltanking
Singapore.

 

·    Sale of the European projects portfolio: On 29 March 2022, the
Company agreed to sell its European projects portfolio to 3i European
Operational Projects Fund ('3i EOPF') for c.£100 million.  This transaction
is expected to reach completion by June 2022.

 

·    Portfolio performing strongly: The portfolio overall has delivered
strong operational and financial performance over the Period, in most cases
ahead of the expectations we set in September 2021.

 

·    Income as expected in the Period: Total income and non-income cash
was in line with expectations at £86 million in the Period.  This compares
with £69 million of income and non-income cash received in the same period
last year.

 

·    On-track to meet the FY22 dividend target of 10.45 pence per share, a
year-on-year increase of 6.6%.  The dividend is expected to be fully covered.

 

·    Efficient balance sheet: In January 2022, 3i Infrastructure obtained
an additional one-year credit facility of £400 million from existing lenders.
 As a result, the Company's aggregate credit facilities total £1 billion,
giving ample liquidity to fund existing commitments and bid for new investment
opportunities.

 

Phil White, Managing Partner and Head of Infrastructure, 3i Investments plc,
Investment

Manager of the Company, commented: "We are delighted with the new investment
commitments we have made, both in new businesses and in companies we already
know well, and with the successful realisations at attractive prices of
Oystercatcher's European terminals and the European projects portfolio.  Our
engaged asset management approach has continued to drive performance from the
portfolio, ahead of our expectations."

 

Changes to management team

 

3i Group plc has today announced that Phil White is stepping down from his
role with effect from 1 July 2022. Scott Moseley and Bernardo Sottomayor will
be appointed as Co-Heads of European Infrastructure.

 

Richard Laing, Chair of 3i Infrastructure plc, said: "Phil has contributed
enormously to 3i Infrastructure's success over many years.  During his 8
year tenure as Managing Partner, the Company's returns have consistently been
ahead of the FTSE-250 benchmark - a major achievement.  In addition, under
his leadership the management team has increased in number and depth, and is
therefore well positioned for the future.  All of us on the Board will miss
Phil's experience, wisdom and commitment and are extremely grateful for all
that he has done.  We know Scott and Bernardo well, having worked with them
over many years, and are confident that the team will continue to provide
excellent management of the Company."

 

Portfolio update

 

Overall, the portfolio has performed strongly in the Period, with performance,
in most cases, ahead of the expectations set in September 2021.

 

Neither 3i Infrastructure, nor any of its portfolio companies, has any direct
exposure to Russia or Ukraine.  In two portfolio companies, Ionisos and
Infinis, there are or have been commercial relationships with Russian-owned
companies which, when ceased, would have only minor consequences for those
portfolio companies pending replacement by third parties.  Further detail is
provided below.

 

There are actual and potential indirect effects on portfolio companies of the
Russian invasion of Ukraine and the imposition of sanctions on Russia and
Russian businesses, including increasing cost and wage inflation, availability
of resources and disruptions to normal market activities.  However, the
impact to date on portfolio companies has been limited.

 

DNS:NET, in which the Company first invested in June 2021, is performing
overall in line with our expectations. As anticipated at the time of
investment, 3i Infrastructure injected a further £33 million of capital in
the Period to support further fibre network roll-out in and around the Berlin
area.

 

Attero has enjoyed strong operational and financial performance in the Period,
supported by high waste volumes, gate fees and power prices.  The Company
closed an additional debt raise of €81 million and refinanced €19 million
of existing bank debt in the Period, on favourable terms.

 

At Oystercatcher, our terminal in Singapore has performed in line with our
expectations in the Period and ahead of prior year, supported by increasing
oil prices, although the current backwardation market structure observed for
most products and recent market volatility may maintain some short-term
pressure on pricing of contract renewals.

 

Ionisos's performance exceeded expectations in the Period driven by increasing
end customer demand across all market segments and a favourable product mix.

 

Ionisos's Estonian business has in the past sourced Cobalt-60 from a
Russian-owned company, JSC.  Whilst JSC is not currently subject to
sanctions, Ionisos will not source new Cobalt-60 from JSC for the foreseeable
future and is in the process of making alternative supplier arrangements.

 

SRL, the traffic management equipment business acquired in December 2021, is
performing in line with our investment case.  As planned at acquisition, the
Company completed a debt raise in February 2022 and the bridge loan provided
at acquisition by 3i Infrastructure has been repaid.

 

ESVAGT has started the period of our 100% ownership well, with good progress
made in the pipeline for new service operation vessels. ESVAGT's emergency
rescue and response vessel segment is also experiencing positive momentum due
to the oil price rebound and increasingly attractive supply / demand dynamics.

 

Infinis performed strongly in the Period supported by higher energy prices,
benefitting its power response business in particular.  Infinis has continued
the development of its solar power generation business and now has a consented
pipeline of 117MW with a further 93MW currently in planning.

 

Infinis's electricity offtake arrangements include contracts with Gazprom's UK
subsidiary, a large supplier in the UK non-domestic energy market. Whilst
these contracts are not currently affected by sanctions, Infinis is actively
replacing contracts where permitted and others will run off over time.  We do
not expect Infinis to be adversely affected by any extension of sanctions or
an insolvency process for Gazprom's UK subsidiary.

 

Despite lower than anticipated revenue from electricity generation due to low
wind conditions in Q4 2021, Valorem's performance has been in line with
expectations.  In February 2022, Valorem closed the 313MW Viiatti wind
project in Finland, of which 148MW is owned by Valorem, enhancing its
pan-European profile.

 

TCR outperformed our expectations in the Period. The recovery in air traffic
continued, although negatively affected by travel restrictions and regulations
imposed to combat the Omicron variant of Covid-19, and the business maintained
strong cost discipline.

 

The performance of Joulz's infrastructure services and metering businesses was
in line with expectations and we saw continued healthy growth in the order
book.  In December 2021 the Company injected €5.5 million of additional
equity into Joulz to part-fund upcoming projects including the purchase of a
further c.€2.7 million of transformers from Stedin.

 

Tampnet performed well ahead of expectations in the Period and significantly
higher than prior year.  Tampnet's core connectivity business in the North
Sea performed well as customers continued to upgrade their bandwidth
requirements.  The Gulf of Mexico region also performed well in 2021 although
it is still experiencing delays in installations, particularly in the deep
water, as Covid-19 and severe weather conditions during the winter continued
to affect customer operations.

 

On 29 March 2022, the Company signed an agreement to sell all of its holdings
in the European projects portfolio, comprising four Dutch and two French PPP
projects across transport and social infrastructure, to 3i EOPF. Completion is
expected by June 2022 and proceeds are estimated at c.£100 million.  The
proceeds from the transaction will be used to pay down the Revolving Credit
Facility ('RCF') and provide the Company with further liquidity. The projects
portfolio performed well in the Period.

 

There was completion of a further small divestment from the India Fund at an
uplift to carrying value.

 

Portfolio returns

 

The portfolio is delivering income in line with expectations.  Total income
and non-income cash was £86 million in the Period, comprising income of £85
million and non-income cash of £1 million.  This compares with £69 million
of income and non-income cash received in the same period last year.

 

As usual, an important element of the determination of the Company's results
for the

full-year to 31 March 2022 will be the valuation exercise carried out on the
investment portfolio at that date.

 

 

Balance sheet

 

At 30 March 2022, the Company's cash balance was £14 million, with drawings
of £232 million under the RCF.

 

In December 2021, 3i Infrastructure received lender approval to increase the
RCF by £200 million to £600 million.  In January 2022, the Company obtained
an additional one-year credit facility of £400 million from existing
lenders.  Aggregate credit facilities therefore total £1 billion today.

 

The outstanding balance on the vendor loan note due from the sale of WIG in
2019 was rolled forward.  The Company received £12 million of accrued
interest in December 2021, leaving £98 million of deferred proceeds due in
December 2023 and callable on 6 weeks' notice.

 

 

 

Ends

 

 

 

For information, please contact:

 

 Thomas Fodor           Shareholder enquiries  +44 20 7975 3469
 Kathryn van der Kroft  Media enquiries        +44 20 7975 3021

 

 

About 3i Infrastructure plc

3i Infrastructure plc is a Jersey-incorporated, closed-ended investment
company, an approved UK Investment Trust, listed on the London Stock Exchange
and regulated by the Jersey Financial Services Commission. The Company's
purpose is to invest responsibly in infrastructure, delivering long-term
sustainable returns to shareholders and having a positive impact on our
portfolio companies and stakeholders.

 

3i Investments plc, a wholly-owned subsidiary of 3i Group plc, is authorised
and regulated in the UK by the Financial Conduct Authority and is the
investment manager of 3i Infrastructure plc.

 

This press release is not for distribution (directly or indirectly) in or to
the United States, Canada, Australia or Japan and is not an offer of
securities for sale in or into the United States, Canada, Australia or
Japan.  Securities may not be offered or sold in the United States absent
registration under the U.S.  Securities Act of 1933, as amended (the
'Securities Act'), or an exemption from registration under the Securities
Act.  Any public offering to be made in the United States will be made by
means of a prospectus that may be obtained from the issuer or selling security
holder and will contain detailed information about 3i Group plc, 3i
Infrastructure plc, 3i India Infrastructure Fund and management, as
applicable, as well as financial statements.  No public offering in the
United States is currently contemplated.

 

This statement aims to give an indication of material events and transactions
that have taken place in the period from 1 October 2021 to 30 March 2022 and
their impact on the financial position of 3i Infrastructure plc.  These
indications reflect the Board's current view.  They are subject to a number
of risks and uncertainties and could change.  Factors which could cause or
contribute to such differences include, but are not limited to, general
economic and market conditions and specific factors affecting the financial
prospects or performance of individual investments within the portfolio of 3i
Infrastructure plc.

 

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