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3i Infrastructure invests £479m in year to end March

In what seems like record time (less than six weeks) , 3i Infrastructure has today published its results for the year ended 31 March 2017. The chairman says that the company has had a strong year, completing six new investments totaling GBP479 million, executing a successful capital raise and delivering their target dividend of 7.55 pence per share for the year. They are announcing a total dividend target for the year ending 31 March 2018 of 7.85 pence per share, representing a year-on-year increase of 4%.

They generated a total return of GBP146 million in the year ending 31 March 2017, or 9.4% of opening NAV (adjusted on a time weighted average basis for the capital raise), in line with the target of 8% to 10% per annum to be achieved over the medium term. The NAV per share increased to 169 pence.

Looking at capital performance, they say that the sustained low interest rate environment and macro-economic uncertainty have continued to drive demand for long duration assets with stable cash flows. Over recent years, this has resulted in significantly increased competition for infrastructure assets, where cash yields and the relative insensitivity to economic cycles make the asset class attractive for investors. Competition for new investments in infrastructure assets comes from existing specialist financial investors and fund managers, as well as from large pension funds, sovereign wealth funds and insurance companies, a number of which have direct investment capabilities. Underlying investors continue to increase their allocations to the infrastructure sector and overall remain under-invested relative to target allocations. This increase in demand, combined with the availability of debt finance for infrastructure investment on attractive terms, has driven the price of infrastructure assets materially higher and therefore projected returns lower. This trend has been most evident in the market for large core economic infrastructure assets. Over the recent past, this compression in returns has had a materially positive impact on the value of the company’s investments, many of which were purchased in a more favourable projected returns environment.

Over the year they invested

  • GBP75 million into the independent communications infrastructure provider Wireless Infrastructure Group;
  • EUR189 million into TCR, Europe’s largest independent owner of airport ground support equipment;
  • EUR69 million into Valorem, the renewable energy development and operating company; and
  • GBP185 million to acquire Infinis plc, the leading generator of electricity from landfill gas in the UK.

They also committed to invest approximately EUR5 million to acquire a significant majority stake in Coeur du Sud B.V., a vehicle created for the Hart van Zuid greenfield PPP project in Rotterdam, Netherlands and committed to invest EUR7 million into 3Angle, a consortium comprising the Company, Fluor and Heijmans. 3Angle will design, build, manage, maintain and finance the existing and new infrastructure of the A27 and A1 roads in the Netherlands.

Elenia has continued its capital expenditure programme aimed at improving network reliability, with an emphasis on weather proofing. The rate of underground cabling has reached 38%, up from 23% at the start of 2012. The company has taken advantage of its customer services capability by agreeing to provide third-party customer services to a neighbouring network operator.

The Investment Adviser has continued to work closely with the management of Cross London Trains (“XLT”), Siemens and GTR to overcome the initial delays in the acceptance programme. The acceptance of units by GTR continued throughout the year, with 42 trains accepted and running on the Thameslink network as at the end of March 2017. The delivery programme is scheduled to complete in 2018. They also invested an additional GBP0.9 million of equity to fund its share of the cost of a variation order to fit future trains being manufactured by Siemens with wifi and seatback tables.

ESVAGT signed a binding agreement with Hess, a prominent independent energy company, to provide safety and support services at the South Arne field in the Danish sector of the North Sea for a period of 12 years, continuing a successful 17-year partnership at the field. ESVAGT’s services will be performed by a new, purpose-built vessel, scheduled for delivery in 2018. The “ESVAGT Connector” vessel will provide support to Hess until the new vessel is delivered.

Since the Company’s investment, 57MW of Valorem-owned projects have been commissioned or entered construction, which will add to the 142MW in operation at the time of investment. Valorem has continued to grow its pipeline of projects and has applied for permits and tariffs for 450MW of its wind pipeline under the French 2016 subsidy regime, following the approval of this regime by the EU Commission.

Infinis repaid its outstanding 7.0% senior notes due in 2019, utilising a debt facility put in place by the Investment Adviser at acquisition.

Part of the Oystercatcher bank facility was refinanced through long dated private placement funding in Singapore dollars. The refinancing extends Oystercatcher’s debt maturity profile and provides a natural currency hedge for distributions from the terminal located in Singapore.

3IN: 3i Infrastructure invests £479m in year to end March




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