International PPL - Portfolio Update
24/11/2022 07:00
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RNS Number : 4060H International Public Partnerships 24 November 2022
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
PORTFOLIO UPDATE
FOR THE PERIOD 1 JULY 2022 TO 22 NOVEMBER 2022
24 November 2022
International Public Partnerships Limited ('INPP', the 'Company'), the FTSE
250 listed investment company which invests in public or social infrastructure
assets and related businesses internationally, has today issued a portfolio
update for the period 1 July to 22 November 2022.
KEY HIGHLIGHTS
· The Company's portfolio of over 140 projects and businesses has
continued to perform well during the period.
· The portfolio continues to deliver essential services to its
stakeholders, maintaining high levels of asset availability.
· In line with previous forecasts, a first half-year 2022 dividend
of 3.87 pence per share was declared on 8 September 2022(1) representing a
c.2.5% year-on-year increase.
· The Company's dividend continues to be supported by a robust H1
2022 cash dividend cover of 1.2x.
· The Company has delivered a Total Shareholder Return(2) since IPO
in November 2006 to 22 November 2022 of 228.5% or 7.7% on an annualised basis.
· During the period, the Company invested c.£42 million in a
follow-on accretive investment into Tideway.
· The Company has investment commitments and a near-term investment
pipeline totalling over £200 million in the transport, offshore transmission,
and social infrastructure sectors, and has a strong overall pipeline of future
investment opportunities which match the Company's investment criteria.
FINANCIAL HIGHLIGHTS(3)
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. This semi-annual valuation is published within the
Company's interim and annual accounts, the last of which was published with
the Company's half-year results ending 30 June 2022 on 8 September 2022. This
reported that:
· The net asset value ('NAV') per share was 157.3 pence as at 30
June 2022.
· The cash flows generated by the Company's investment portfolio
continue to be underpinned by strong inflation-linkage (a 1.0% increase in
assumed inflation rates across all assets is projected to result in a 0.7%
increase in portfolio returns(4)).
· The Company previously announced full-year dividend targets of
7.74 and 7.93 pence per share for 2022 and 2023, respectively. This is in line
with the current targeted annual increase of c.2.5%(5).
· As at 22 November 2022, the Company's £250 million revolving
credit facility was undrawn, with c.£17 million committed via letters of
credit for near-term pipeline investments.
INVESTMENT ACTIVITY
Since 1 July 2022, the Company invested a total of c.£42 million and
completed a divestment from its commitment to the National Digital
Infrastructure Fund ('NDIF'). Please see more information below.
· In September 2022, the Company increased its holding in Tideway,
London's new "super sewer", to approximately 18% following the investment of
approximately £42 million of additional capital. The project is a key
investment for the Company given its attractive financial proposition,
positive future impact on the environment and strong engagement with local
communities, which closely reflects the Company's own values as a responsible
investor.
· In September 2022, the Company noted the sale of NextGenAccess
('NGA') which owns and operates a network of ultrafast wholesale fibre
broadband infrastructure across England and Wales. INPP was invested in NGA
via its commitment to NDIF, part of the UK Government's Digital Infrastructure
Investment Fund which has successfully accelerated investment into fibre-optic
based broadband networks and related businesses to build the next generation
of digital networks in the UK.
· In November 2022, Ofgem published a notice under Section 8A of
the Electricity Act 1989 relating to the East Anglia One OFTO. This is a key
step towards reaching financial close on the investment that the Company
expects to make in the project. The Company expects to invest c.£105 million
into the project upon financial close, anticipated to be in December 2022. The
project will be the Company's tenth OFTO investment, and under a
well-established regulatory licensing regime, connects the 714MW offshore wind
farm located c.50km off the coast of Suffolk. The East Anglia One OFTO has the
capacity to transmit enough renewable electricity to power the equivalent of
over 600k homes.
CURRENT MARKET ENVIRONMENT - VALUATIONS AND LEVERAGE
· The Company notes the increase in interest rates and government
bond yields over recent months, and sets out below the elements of the
Company's investments that could primarily be impacted as a result:
o the discount rates applied to the forecast cash flows in order to
determine the portfolio's valuations;
o the amount of interest earned from cash held; and/or
o the cost of any new or replacement debt that needs to be procured.
· The Company notes that discount rates have not historically moved
in lockstep with government bond yields and that demand for infrastructure
assets remains very strong. The Company also notes that increased cash flows
resulting from higher inflation expectations, foreign exchange gains derived
from the weakening of sterling, and greater interest earned from cash balances
may play a mitigating role in any potential future discount rate valuation
movements. The Company will formally review the discount rates used to value
its investment portfolio as part of the 31 December year-end reporting.
· There is no material refinancing risk within the Company's PPP or
OFTO investments as these investments typically benefit from fixed-rate senior
debt entered into at Financial Close which amortises to nil over the relevant
concession or licence period. These collectively represent approximately 60%
of the portfolio's investment fair value.
· There are other investments in the portfolio which do not have a
pre-determined concession term or licence period, and hence will contain an
element of refinance exposure. This statement applies principally to Cadent,
Tideway, Angel and BeNEX.
· These companies have various tranches of debt with different
maturity dates, and there is no immediate need to refinance any material
portion of debt in the four companies referenced. The increases in the cost of
debt have a limited impact on current debt costs (as the vast majority of debt
is either fixed rate or hedged) but could impact these businesses when
existing debt is refinanced. However, (i) the regulated revenues earned by
Cadent and Tideway are frequently adjusted by the regulator to compensate for
changes in the market cost of debt, and (ii) businesses such as Angel and
BeNEX that operate in industries with high barriers to entry would typically
expect to be able to pass on a majority of changes in their cost base to
counterparties.
OUTLOOK
· The Company's portfolio has proven its resilience thanks to the
high quality of underlying cash flows which are underpinned by regulated or
contracted government-backed cash flows. This generates consistent and
predictable returns benefiting from strong levels of inflation indexation.
· Competition and demand for the types of investments the Company
invests in remains high and the Company has a strong pipeline of attractive
investment commitments and future opportunities covering the social
accommodation, health, offshore transmission and transport sectors located in
the Company's target geographies.
· Governments continue to acknowledge the key role infrastructure
spending will play in driving economic recovery, creation of jobs and
addressing challenges such as climate change.
· As previously announced, the Company is now categorised as an
Article 8 financial product and the Company and its Investment Adviser will
continue to monitor the emerging requirements of the EU SFDR and EU Taxonomy
Regulation.
Notes to Editors:
While it is no longer a requirement under the Disclosure Guidance 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. The H1 2022 dividend was paid on 18 November 2022.
2. Source: Bloomberg. Share price appreciation plus dividends assumed to
be reinvested.
3. For the six months to 30 June 2022 unless stated otherwise.
4. Calculated by running a 'plus 1.0%' inflation sensitivity for each
investment and solving each investment's discount rate to return the original
valuation. The inflation-linked return is the increase in the portfolio
weighted average discount rate.
5. Future profit projection and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in future.
ENDS.
For further information:
Erica Sibree/Amy
Edwards
+44 (0) 7557 676 499 / (0) 7827 238 355
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):
INPP is a listed infrastructure investment company that invests responsibly 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 and North America. INPP seeks to provide its
shareholders with both growing dividends and the potential for capital
appreciation.
Amber Infrastructure Group ('Amber') is the Investment Adviser to INPP and
consists of approximately 170 staff who are responsible for the management of,
advice on and origination of infrastructure investments.
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