International PPL - Market Update, Realisation and Capital Markets Day
26/07/2023 07:00
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RNS Number : 1759H International Public Partnerships 26 July 2023
MARKET UPDATE, REALISATION AND CAPITAL MARKETS DAY
26 July 2023
International Public Partnerships Limited ('INPP', or the 'Company'), the
listed infrastructure investment company, which invests in public and social
infrastructure assets and related businesses internationally is pleased to
provide a market update and to announce a date for a Capital Markets Day.
Market Update and Macroeconomic Protections
During the first six months of 2023, the Company's assets continued to perform
strongly and in line with expectations. The level of actual cash receipts
remained in line with the Company's projections, enabling the net operating
cash flows to more than cover the Company dividend. The portfolio's resilience
in challenging macroeconomic conditions is largely attributable to:
High levels of protection to increasing base rates
· As at 31 December 2022, 90% of INPP's portfolio by fair value
benefits from mitigations in relation to changes in base rates. This is
either due to the asset-level debt having been hedged for the full term at the
original close of each investment (representing 61% of the portfolio by fair
value) or because the assets benefit from mechanisms as part the regulatory
regimes in which they operate, where the regulator includes a revenue
allowance for the cost of debt (29% of the portfolio by fair value).
· For the remaining 10% of INPP's portfolio by fair value, increased
debt costs are typically able to be recovered from the end user. For example
in the Company's UK and German train leasing company investments (which
together constitute 8% of the portfolio by fair value), increased costs are
expected to be passed through to the client at the relevant re-leasing point.
High levels of inflation correlation
· The investment portfolio generates strongly inflation-linked cash
flows such that a 1.0% increase in assumed inflation rates across all assets
is currently projected to result in a 0.7% increase in portfolio returns.
Predictability of operational cashflows
· Since its IPO in 2006, the Company has delivered average annual
dividend growth of c.2.5% and has increased the dividend for 15 consecutive
years. The Company has reaffirmed its future dividend targets of 7.93 and 8.13
pence per share for 2023 and 2024 respectively, representing additional
c.2.5% i (#_edn1) annual increases.
· The projected cash receipts from the Company's existing portfolio of
over 140 investments are such that even if no further investments are made,
INPP would be able to continue to meet its existing progressive dividend
policy for at least the next 20 years.
The Board remains confident that the high quality and long tenor of the
Company's cash flows continues to demonstrate its differentiated investment
thesis. Notwithstanding this, the Investment Adviser and the Company's Board
fully recognise that its shares remain at a discount to the Company's last
published net asset value ('NAV').
The Company will publish its interim results on 7 September 2023. This
publication will include a revised NAV as at 30 June 2023.
As with previous periods, this revised NAV will reflect changes to the
macroeconomic environment that have occurred since 31 December 2022. These
changes will include adjustments to the discount rates used to value the
forecast cashflows (expected to have a negative impact on NAV) as well as
changes to the forecast cashflows themselves to reflect the latest inflation
rate and deposit rate expectations (expected to have a positive impact on
NAV). Overall, the Board believes the combined effect will be to have a
modestly negative impact on the 31 December 2022 NAV.
The Board and its Investment Adviser continue to believe the discount to NAV
at which the Company's shares are trading materially undervalues the Company.
The principal current actions taken by the Board in consultation with the
Investment Adviser to address this issue include:
· A strong focus on efficient balance sheet management and, in
particular, minimising to the extent possible use of the Company's revolving
credit facility ('RCF');
· Realisation of value from specific existing investments where it is
prudent to do so and utilising the proceeds to reduce corporate
indebtedness. The sale of Airband, referred to below, is a first step; and
· In addition to the reduction of the RCF through additional
realisations (further announcements are expected to follow in Q4 2023),
further tools, such as share buy-backs and a review of dividend policy remain
available for consideration by the Board if the circumstances so justify.
These actions are consistent with the Company's established approach.
Moreover, the Board and the Investment Adviser are firmly committed to the
creation and delivery of long-term shareholder value. The continued strength
and long duration of the Company's future anticipated cash receipts provide
the Board and the Investment Adviser with confidence to continue to meet the
Company's investment objectives.
Balance Sheet and Realisation
The Company maintains a strong liquidity position. INPP's £350 million RCF is
currently c.£125 million utilised (including c.£17 million committed by way
of letters of credit) and is available until June 2025, following the
refinancing earlier in 2023. Current fund level leverage therefore
constitutes c.4% of the Company's 31 December 2022 NAV.
It is also the Company's intention to repay c.£20 million of the RCF before
the end of July utilising a combination of free cashflow and the proceeds from
the sale of its remaining investment ii (#_edn2) in one of its digital
infrastructure assets, Airband, in respect of which a sale was recently agreed
and which is expected to reach completion shortly.
Airband is a fibre to the premise and fixed wireless access network operator
which, since INPP's investment in 2018, has rolled out up to 1GB speed
broadband to over 290,000 homes, businesses and industries in rural and
hard-to-reach areas in the UK.
Notification of Date of Interim Results and October Capital Markets Day
The Board is also pleased to announce that in addition to its interim results
presentation expected to be held on Thursday 7 September 2023, it intends to
host a Capital Markets Day for investors on the morning of Wednesday 4 October
2023 in central London.
The Capital Markets Day will include a panel with representatives from
portfolio companies together with members of the Investment Adviser's team.
Institutional investors and sell-side analysts who wish to register in advance
of either event can do so via investorrelations@amberinfrastructure.com.
Further details including timings and access to both events will be released
via RNS at a later date.
ENDS.
For further information:
Erica Sibree +44 (0) 7557 676 499
Amber Fund Management Limited
Hugh Jonathan +44 (0)20 7260 1263
Numis Securities
Ed Berry/Mitch Barltrop +44 (0) 7703 330 199 / (0) 7807 296 032
FTI Consulting
About International Public Partnerships:
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 over 140 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, New Zealand 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 approximately 180 staff who are responsible for the management of,
advice on and origination of infrastructure investments.
i (#_ednref1) Future profit projections and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in the future.
ii (#_ednref2) Held through the National Digital Infrastructure Fund which
INPP is invested in alongside the UK Government.
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