International Public Partnerships (INPP), the £2.5bn infrastructure investment company, has sold stakes in nine UK private-public partnership (PPP) projects to InfraRed Capital Partners which will manage the assets on behalf of Dutch pension scheme ABP.
Total proceeds from the disposal, involving 15 London comprehensives, special educational schools and further education colleges built as part of a government programme, are expected to be over £58m, a premium to their valuation at the end of last year.
At 31 December, INPP had 13%, or around £351m, of its assets in the education sector. The portfolio is 72% invested in the UK.
INPP, which disappointed shareholders with the write-down of a £24m investment in broadband provider toob this week, said it had now realised more than £440m of assets over the past three years, with every disposal completed at or above carrying value.
Over the same period it had reinvested around £480m, generating annual investment returns of more than 11% that was above its 9.1% cost of capital, and therefore positive for shareholders.
Chair Sarah Whitney said: “The disposal of the PPP projects at a premium provides further validation of INPP’s high-quality assets and the inherent value embedded in the existing portfolio. The proceeds, coupled with internal cash flows, are being reinvested in highly attractive assets and therefore accretive to overall returns.”
Shares in INPP were flat at 139p but have seen the gap, or discount, between their price and the net asset value (NAV) of its 130 or so investments in transport, energy transmission, waste water, gas distribution and education, narrow to 8% compared to a one-year average of 14%.
InfraRed, manager of HICL Infrastructure (HICL) and The Renewables Infrastructure Group (TRIG), has bought the portfolio of schools in Ealing, Islington, Southwark and Lewisham for a separately managed account (SMA). This is run by pension services provider APG on behalf of APG, the main pension scheme in the Netherlands for teachers and civil servants, which wanted to increase its allocation to social infrastructure.
InfraRed said it would “seek to enhance operational performance and preserve asset quality across the life of each concession through to handback.”
Our view
Matthew Read, senior analyst at QuotedData, said: “The sale of nine assets, all at a premium to their carrying value, once again highlights the robustness of INPP’s NAV. Recycling mature PPP assets into investments offering prospective returns of more than 11%, comfortably ahead of INPP’s 9.1% weighted average discount rate, should also enhance returns, while retaining scope for further share buybacks. With the shares still trading at a high single digit discount to NAV, transactions such as this provide tangible evidence that private markets are placing greater value on these sorts of assets than public markets are prepared to.”
