International Public Partnerships Limited (LON:INPP), the listed infrastructure investment company, has announced that Transmission Capital Partners, the consortium comprising INPP, Amber Infrastructure Group and Transmission Investment, has completed its acquisition of the Moray East offshore transmission assets (OFTO) which connects the onshore electricity grid to the Moray East wind farm located in the Moray Firth off the coast of Scotland.
The Moray East OFTO will be the Company’s eleventh OFTO investment and has the capacity to transmit enough renewable electricity to power the equivalent of c.1.0 million homes, increasing the total equivalent across the Company’s OFTO portfolio to c.3.7 million homes.
At financial close, the OFTO will be granted a 23-year revenue period during which it will have no exposure to electricity production or price but will be paid an availability-based revenue stream linked to UK inflation (as measured by the Retail Price Index).
The Company will make a c.£78 million investment for 100% of the equity and subordinated debt in Moray East OFTO. Project level senior debt will be provided by a group of banks, the tenor of which will match the maturity of the 23-year revenue period such that there is no refinancing risk.
Other key investment highlights include:
· An operational and immediately yielding asset with no construction or refinancing risk;
· INPP will benefit from an availability-based revenue stream with protected downside whereby maximum potential deductions will be capped at 10% of base revenue in any year;
· The returns generated from the Company’s investment are highly correlated to UK RPI and are not subject to any revenue or penalty exposure to windfarm performance; and
· Revenues are contracted by a subsidiary of National Grid, the National Grid Electricity System Operator (NGESO; rated Baa1 Moody’s) in their statutory ring-fenced role as electricity systems operator.
The investment has been financed with the proceeds of the c.£200m OFTO investment realisation, announced in December 2023[1]. Following the repayment of the Company’s Corporate Debt Facility (‘CDF’) [2] and funding of the recently announced £30 million share buyback programme, c.£16 million cash remains available for further allocation.
Mike Gerrard, Chair of International Public Partnerships said: “We are proud to report the acquisition of our eleventh OFTO. The Board has carefully considered the merits of the Moray East investment and, as previously announced, believes that the acquisition is favourable relative to alternative capital allocation options. In addition, the acquisition builds on the Company’s contribution to a net zero carbon economy.”
A copy of the Ofgem press release can be found at https://www.ofgem.gov.uk/news-media/latest-news-press-releases.
[1] https://www.internationalpublicpartnerships.com/media/press-releases/update-on-portfolio-optimisation-and-capital-allocation/
[2] At the time of this announcement, the Company’s £350 million CDF is undrawn with c.£17 million committed via letters of credit for near-term pipeline investments, which includes the Gold Coast Light Rail 3 and Flinders University projects.
