3i Infrastructure achieved a return of 17.2% in the year ended 31 March 2022, with the NAV increasing to 303p and shareholders receiving a return of 20.9%. A 10.45p dividend for the year was 6.6% higher than the previous year and a new target of 11.15p has been set for the current financial year.
Portfolio companies have continued to demonstrate resilience throughout the Covid-19 pandemic, keeping essential infrastructure operating and supporting customers, suppliers, employees and their communities. None of the portfolio companies has direct exposure to Russia or Ukraine.
In June 2021, the fund bought a 60% stake in DNS:NET for £157m. DNS:NET is a leading independent telecommunications provider in Germany. In November 2021, the fund agreed to invest about $512m to acquire 100% of Global Cloud Xchange, a leading global data communications service provider. Additional acquisition debt was raised in March 2022, reducing the company’s equity commitment to about £300m. This transaction is expected to complete in summer 2022. In December 2021, the fund invested £191m in SRL Traffic Systems, the market leading traffic management equipment rental company in the UK.
3i Infrastructure also bought out its co-investor, AMP Capital’s stake in ESVAGT for £258m in February 2022 and invested an aggregate £71m into DNS:NET, Valorem, ESVAGT and Joulz to fund further growth.
The manager says:
“The sale of Oystercatcher’s 45% stakes in its four European terminals in Amsterdam, Terneuzen, Ghent and Malta drove part of the outperformance in the year. The majority of the net proceeds from the sale were used to prepay all of Oystercatcher’s debt.
The balance of the net proceeds to Oystercatcher, €55 million, was distributed to the Company. Oystercatcher continues to own a 45% stake in Oiltanking Singapore Limited alongside Oiltanking GmbH.
ESVAGT, in which we invested £258 million to acquire the 50% stake owned by our co-investor, AMP, had a very good year, benefitting from higher contract rates and utilisation levels returning to pre-Covid levels. It also won a milestone contract to provide the world’s first green Service Operation Vessel, powered by batteries and renewable e-methanol, to the Hornsea 2 wind farm in the UK.
Despite new travel restrictions imposed during the winter, TCR continued to demonstrate the resilience of its business model and performed ahead of our expectations for the year. The business continues to grow, increasing the number of airports in which it operates and increasing the number of clients it serves.
Infinis significantly exceeded its budget due to outperformance in its captured landfill methane business, higher UK power prices and the frequent power supply system imbalances in the UK that benefitted its power response assets. Attero also benefitted from high power prices, which, together with higher than forecast waste supply volumes and gate fees, helped it to materially outperform expectations and the prior year. In March 2022, the business closed an additional debt raise on favourable terms.
Our French-headquartered companies, Ionisos and Valorem, were strong performers in the year. To sustain the growing demand from the healthcare and pharma industries, Ionisos is looking at various expansion opportunities beyond the construction of a new site at Kleve, Germany. Valorem is progressing well with its construction activity with a total of 105MW of new wind and solar projects entering into operation during the year. It also successfully closed Viiatti, a landmark large-scale wind project in Finland.
Tampnet and Joulz performed well during the year. At Tampnet, customers continued to upgrade their bandwidth requirements. Joulz’s core businesses of Infrastructure Services and Metering performed in line with expectations and we saw continued healthy growth in the order book. This was offset by some delays in completing new projects, mainly due to Covid-19 related staffing issues. The Company invested £5 million of new equity into Joulz to support further growth.
Our newest assets, DNS:NET and SRL, are performing broadly in line with our investment cases. In February 2022 we invested a further £33 million in DNS:NET to support its fibre network roll-out.
On 29 March 2022, the Company signed an agreement to sell its European projects portfolio, comprising four Dutch and two French PPP projects across transport and social infrastructure, to 3i EOPF, representing an uplift of £8 million on the value at September. Completion is expected by June 2022 and proceeds are estimated at £103 million. This results in a 20% gross IRR and a 1.7x gross money multiple for the Company.
Finally, we were pleased with the significant progress made towards realising the remaining assets in the 3i India Infrastructure Fund (the ‘India Fund’), with the sale of the India Fund’s stake in KMC Roads and in GVK Energy at uplifts to the carrying value.
The sale of Oystercatcher’s four European terminals was completed in October 2021. This resulted in a distribution of €55m to the company after repaying all of Oystercatcher’s debt facilities. Oystercatcher retains its holding of a 45% stake in Oiltanking Singapore. In March 2022, the fund agreed to sell its European Projects portfolio to 3i European Operational Projects Fund for £103m. This transaction is expected to reach completion by June 2022.”
3IN : Another year of strong returns from 3i Infrastructure