3i Infrastructure’s results for the year ended 31 March 2015 demonstrate the positive impact on the business from their sale of Eversholt Rail. The total return on net assets for the period was 24.6%. The dividend is upped from 6.7p to 7p and a 17p special dividend is planned for July. They plan to pay a 7.25p dividend in 2016. £114m was invested in the portfolio including the acquisition of the two oiltanking terminals we reported on earlier this year.
The Board cautions that sustained growth in demand for long duration assets in a low interest rate environment, combined with the availability of debt finance for infrastructure investment on attractive terms, continues to drive the price of some infrastructure assets materially higher and therefore projected returns lower. This has been the case particularly for large Core infrastructure assets. While this has had a positive impact on the value of the Company’s portfolio, it has also made it more challenging for the Company to secure new investments at returns consistent with its existing targets. As competition for large Core infrastructure assets has increased, they have sought more attractive risk-adjusted returns in other areas of the infrastructure market, such as mid market Core infrastructure and primary PPP and low-risk energy projects. This includes investing in the Oiltanking companies as well as in five new Primary PPP projects during the course of the year.
The Board has decided to amend the total return target from a 10% annual target to a sustainable target of 8% to 10%, to be achieved over the medium term. Other changes include a new revolving credit facility, increasing the facility from £200m to £300m, with lower pricing and an extended term and proposing a change to the Company’s single-asset concentration limit, increasing it from 20% to 25% of Gross Assets, to provide additional flexibility for new investment, this is subject to shareholder approval.
3IN : 3i Infrastructure planning return of capital