# International Public Partnerships portfolio continues to perform well

- Link: https://www.directorstalkinterviews.com/international-public-partnerships-portfolio-continues-to-perform-well/4121179624
- Published: 2024-12-02T07:17:04+00:00
- Author: Amilia Stone

**International Public Partnerships Limited** (LON:INPP), the listed infrastructure
investment company has issued a portfolio update for the period 1 July 2024 to 29
November 2024.

> **Mike Gerrard, Chair of International Public Partnerships, commented:** _“INPP’s_
> _portfolio has continued to_ _perform_ _well during the period__, generating_ 
> _consistent financial returns_ _whilst facilitating the delivery of_ _essential
> public services__. We continue to make progress with our initiatives to optimise
> the portfolio, address the discount to Net Asset Value (‘NAV’) at which the Company’s
> shares currently trade, and deliver value to shareholders. This includes the Company
> making additional divestments during the period which has increased the amount
> realised over the past 18 months to over £260 million, equivalent to c.10% of 
> the portfolio by value^(1). The Company has also continued to buyback shares under
> the previously announced share buyback programme of up to £60 million. We_ _remain
> confident in the Company’s ability to navigate macroeconomic uncertainties, underpinned
> by the performance of its investment portfolio__.”_

**FINANCIAL PERFORMANCE^(1)**

·       As at 30 June 2024, the Company’s NAV per share was 149.5 pence, as published
in the Interim Results on 5 September 2024.

·       The Company reaffirms its 2024 dividend target of 8.37 pence per share which
represents 3.0% growth compared to the 2023 dividend and continues its track record
of growing the dividend every year since the IPO in 2006. The interim dividend of
4.18 pence per share for the six months to 30 June 2024 is expected to be paid on
19 December 2024^(2). Beyond 2024, the Board expects to revert to its long-term 
annual dividend growth rate of c.2.5%^(2).

·       The Company will increase the frequency of its dividend payments, from semi-
annually to quarterly, from 2025^(3). This will provide investors with a more regular
income stream and demonstrates the Company’s commitment to ensuring predictable 
and consistent returns for shareholders.

·       The Corporate Debt Facility (‘CDF’) was fully repaid in January 2024 and
remains undrawn^(4).  During the period, the Company reduced the size (and associated
commitment fees) of the CDF from £350 million to £250 million which demonstrates
a disciplined approach to cost management whilst maintaining the flexibility for
future investment opportunities as may arise.

·      The Company’s NAV per share is subject to changes in the external macroeconomic
environment, including inflation rates, government bond yields and foreign exchange
rates. Taken together, and other things being equal, since 30 June 2024, changes
in these factors are currently expected to have a modest negative impact on the 
Company’s last published NAV per share. The components driving this include:

·      Inflation rates in the geographies where the Company operates are slightly
below the forecasts made as of 30 June 2024. This minor deviation is expected to
have an insignificant impact on the NAV per share;

·      Yields on the government bonds issued by the countries in which the Company
is invested are broadly in line with the levels seen at 30 June 2024 with the exception
of the yields on UK government bonds which have increased slightly. In isolation,
this would imply a modest negative impact on the valuation of UK investments, but
it is worth noting that the discount rates that will be adopted as part of the 31
December 2024 valuation will be determined by taking into account other factors 
such as the positive performance of the investments and market-based evidence of
pricing for infrastructure assets and businesses; and

·      The Company has observed a strengthening of Sterling against all the currencies
it is exposed to. Other things being equal, this would have a minor negative impact
on the Company’s NAV per share.

**CAPITAL ALLOCATION**

The Board and the Investment Adviser remain focused on optimising the portfolio,
recycling capital and implementing other measures to enhance shareholder returns.
This includes having bought back over £38 million worth of shares under its existing
share buyback programme of up to £60 million, which is currently expected to run
until the end of Q1 2025. The Board acknowledges the importance of the share buyback
programme and would expect to expand the programme should the Company’s shares continue
to trade at a significant discount to their NAV.

Since 30 June 2024, the Company realised proceeds of over £40 million, taking the
total realised proceeds for the last 18 months to over £260 million. All of the 
divestments made have either been in line with, or modestly above, the most recently
published valuations. The divestments and investments made since 30 June 2024 are
set out below.

·      **August 2024****:** The Company announced the divestment of its stake in
the Three Shires PPP portfolio at a price of c.£14 million which was in line with
the 30 June 2024 valuation. The portfolio comprised the design, build, financing
and maintenance of four community healthcare facilities.

·      **September 2024****:** The Company announced it had raised c.£30 million
from a partial disposal of its Family Housing for Service Personnel (‘FHSP’) investment;
the sales price was in line with the Company’s 30 June 2024 valuation. The FHSP 
investments are in the form of mezzanine debt investments secured against seven 
operational public-private partnership (‘P3’) projects and comprise c.21,800 housing
units across the United States.

·      **October 2024****:** The Company made a further c.£15 million investment
into BeNEX to enable the acquisition of Abellio’s rail operations in Germany from
the Dutch State Railway. The transaction will result in BeNEX having interests in
seven train operating companies (‘TOCs’) and increasing its service volume from 
c.48 million train kilometres per year to c.65 million from 2025. The projected 
economics of this investment were considered significantly more attractive, over
the medium to long-term, relative to the economics of engaging in a share buyback
^(5).

·      **Other investments:** During the period, the Company invested c.£6 million
in respect of three long-standing commitments to the Flinders University Health 
and Medical Research Building, Gold Coast Light Rail – Stage 3, and toob. The remaining
commitments to invest in these three assets currently total c.£14 million and are
expected to be funded over the next 15 months.

**PORTFOLIO UPDATES**

·       **East Anglia One OFTO (‘EA1 OFTO’****):** The Company reported in its 2024
Interim Results that EA1 OFTO was operating at half its physical capacity having
suffered an offshore cable fault. Repair works have been completed and the EA1 OFTO
has returned to full service. Evidence gathered to date indicates that the cable
fault was beyond the reasonable control of the EA1 OFTO and therefore we continue
to believe that there will be no material financial impact on the Company owing 
to manufacturer warranties and regulatory protections.

·       **Thames Tideway:** In October 2024, it was announced that Tideway is now
starting to protect the River Thames from sewage pollution for the first time^(6).
Data shows that during heavy rainfall in London on 23 September 2024, the tunnel
prevented more than half a million cubic metres of sewage from entering the River
Thames demonstrating the critical role of the project. The project is due to be 
fully operational in 2025.

·       **Public-private partnerships (‘PPP’) handbacks:** The first INPP scheme
to go through a handback process is Hereford and Worcester Courts which expires 
in late 2025. Activities to support the handback of the assets and transfer the 
service provision are already substantially progressed.

The Company is also ensuring that it is well positioned to facilitate an efficient
and timely transfer of its other PPP assets and their associated services when those
concessions come to an end. The expiry dates for the remainder of the Company’s 
PPP concessions are spread over the next 25 years with less than 4% of the portfolio
by value being handed back before 2030.

**CORPORATE GOVERNANCE**

·      Giles Adu joined the Board in September 2024 as a non-executive director 
and has been appointed to each of the Company’s Committees. Giles brings over 30
years of experience in investment management and investment companies.

**OUTLOOK**

The demand for infrastructure investment remains strong across the geographies in
which the Company invests. Internationally, we believe that the pressure to upgrade
public infrastructure coupled with fiscal limitations means there will likely be
increased appetite for partnerships with private investors to deliver much-needed
infrastructure.

International Public Partnerships recognises that the recent policy shifts in the
UK Autumn Budget, particularly in relation to schools, healthcare facilities and
transport networks, will seek to deliver greater social equality in the UK and will
aid sustainable social infrastructure development for the benefit of local communities.
There is significant government appetite for private capital investment to support
infrastructure policy, which creates attractive opportunity for INPP and its shareholders.

Through the continued evolution of the portfolio via further investments in projects
closely aligned to the Company’s responsible investment commitment, the Company 
is well-positioned for future growth.

Share on: