Portfolio Update: 1 January 2022 to 31 May 2022
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
PORTFOLIO UPDATE
FOR THE PERIOD 1 JANUARY 2022 TO 31 MAY 2022
8 June 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 the following portfolio update for the period 1 January to 31 May 2022.
OPERATIONAL HIGHLIGHTS
· The Company has continued to deliver strong performance over the period across its portfolio of over 140 projects and businesses
· Approximately £48 million of investments and commitments were made during the period, including an additional c.£40 million investment being announced into Tideway, the company building a 25km 'super-sewer' under the River Thames
· Successfully completed a significantly oversubscribed £325 million capital raising during the period exceeding the initial target of £250 million demonstrating strong support from both existing and new shareholders. Approximately £160 million of the proceeds were used to pay down the Company's revolving credit facility with the remaining proceeds available to support the Company's investment pipeline of c.£180 million. The revolving credit facility remains available for re-drawing
· The Company has now delivered a Total Shareholder Return1 since IPO in November 2006 to 31 May 2022 of 245.8% or 8.3% on an annualised basis
· Dividend guidance was reaffirmed for 2022 of 7.74 pence per share, and new guidance was issued for 2023 of 7.93 pence per share which is consistent with the Company's historic c.2.5% average annual dividend growth2
· The Company considers sustainability and ESG integration to be an essential part of investment risk management and value creation. In conjunction with the recent capital raising, the Company has categorised itself as an Article 8 financial product following an internal assessment of the application of the EU Sustainable Finance Disclosure Regulations ('SFDR')
PORTFOLIO REVIEW
The portfolio continues to deliver essential services to its stakeholders, maintaining high levels of asset availability. The portfolio's cash flows continue to be underpinned by strong inflation-linkage such that a 1% increase in assumed inflation is projected to result in a 0.7% increase in portfolio return3. Cash generation continues to be in line with projections supporting the Company's established average historical dividend growth.
The Company has continued to source new investments during the period including further investment commitments in Gold Coast Light Rail Stage 3 and Tideway. In addition, the Company, through its Investment Adviser, has a strong future pipeline of investments across the social, transport and regulated utilities sectors of c.£180 million over the next 12 months. This includes the previously announced investments into two further offshore transmission projects ('OFTOs'), East Anglia One OFTO and Moray East OFTO, UK PPP portfolio and a further contingent commitment remains available to Diabolo Rail Link, if required. Please see the 2021 Annual Report for more information.
INVESTMENT ACTIVITY
Since 1 January 2022, the Company has made new investments and investment commitments of c.£48 million. New investment commitments included:
· On 1 June 2022, the Company announced that it has conditionally agreed to acquire a further shareholding in Tideway. The investment opportunity arose as a consequence of another existing investor having to dispose of its stake as an underlying investment fund is coming to the end of its life. If completed, the acquisition will result in INPP increasing its stake in Tideway to approximately 18% and deploying approximately £40 million of additional capital. Tideway continues to be a successful investment for INPP and will provide several significant environmental and social benefits once operational.
· In March 2022, the Company announced it had reached financial close on Stage 3 of the Gold Coast Light Rail project (the 'Project'). Under the terms of the acquisition the Company will make an investment totalling approximately A$12.5 million (c.£7.0 million at current exchange rates). The follow-on investment has arisen through the Company's existing 30% interest. The Project extends the existing Gold Coast Light Rail network (known as G:link) a further 6.7 kilometres south from Broadbeach to Burleigh Heads. It will include eight new stations, five additional light rail trams, new bus and light rail connections at Burleigh and Miami, and an upgrade of existing depot and stabling facilities. At completion of Stage 3 in 2025, Queensland's only light rail system will have a route 27 kilometres long from Helensvale to Burleigh Heads, stopping at 27 stations and serviced by 23 trams. This follows the success of Stages 1 and 2, of which the Company is invested. Over 60 million passenger trips have taken place to date and One of the many benefits of the rail system has been an overall increase in public transport use on the Gold Coast with a 43% uplift for combined tram and bus use since light rail opened in 2014.
FINANCIAL HIGHLIGHTS4
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 full-year results ending 31 December 2021 on 24 March 2022, reporting:
· The net asset value ('NAV') per share was 148.2 pence as at 31 December 2021
· 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 3
· A second half-year 2021 dividend of 3.77 pence per share was declared on 24 March 2022 and was paid on 7 June 2022. This dividend is in respect of the period 1 July 2021 to 31 December 2021 and represents a c.2.5% increase on the dividend paid in the corresponding period in the prior year
· The Scrip Dividend Alternative Circular applicable to that dividend was available to investors and the associated scrip allotment will be made on 13 June 2022
· As referred to above, the Company is currently maintaining its previously announced dividend targets of 7.74 and 7.93 pence per share in respect of 2022 and 2023, respectively. This is in line with the current targeted annual increase of c.2.5%2
· As at 31 May 2022, the Company's £250 million revolving credit facility was undrawn in cash with £16.9 million committed in respect of letters of credit
INVESTMENT ENVIRONMENT AND OUTLOOK
· There continues to be strong macro fundamentals that support the Company's portfolio and whilst we continue to manage and mitigate risk, the portfolio has continued to be resilient
· The Company is closely monitoring the current macroeconomic environment and in particular notes the sharp increase in nearer term inflation rates. The Company will, as it always does, review its macroeconomic assumptions in advance of the next formal valuation date being 30 June 2022
· The result of the capital raise that took place during the period demonstrates the attractiveness of the Company's investment case, including its strong inflation linkage in the current high inflationary environment, as well as support for the Company's future pipeline
· Governments have acknowledged the key role infrastructure spending will play in driving economic recovery, creation of jobs and addressing challenges such as climate change
· 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
· The pipeline for the types of assets the Company invests in remains strong and the Company continues to remain confident in its ability to continue to source and develop quality, high-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
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. Source: Bloomberg. Share price appreciation plus dividends assumed to be reinvested.
2. Future profit projection and dividends cannot be guaranteed. Projections are based on current estimates and may vary in future.
3. 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.
4. For the full year to 31 December 2021 unless stated otherwise.
ENDS.
For further information:
Erica Sibree/Amy Edwards +44 (0) 7557 646 499 / (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 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 a long-term yield and capital growth.
Amber Infrastructure Group ('Amber') is the Investment Adviser to INPP and consists of over 150 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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