3i Infrastructure PLC · LSE:3IN
3i Infrastructure — FY2014 Earnings Presentation
43 slides from 3i Infrastructure's earnings presentation, May 9, 2014
Slide 1: Annual results 2014
Annual results 2014 Presentation of the results for the year to 31 March 2014 9 May 2014
Slide 2: Chairman's introduction
Chairman’s introduction Peter Sedgwick Chairman 2
Slide 3: Today's agenda
Today’s agenda Introduction Peter Sedgwick Financial review Stephen Halliwell Business review Ben Loomes Q&A All 3
Slide 4: Robust performance driven by European portfolio
Robust performance driven by European portfolio Steady net asset value progression £71m total return for the year (6.6% of opening net asset value) driven by a strong performance from the European portfolio and the stabilisation of the 6.6% 3i India Infrastructure Fund in the second half of the year
Slide 5: Changes to the Investment Advisory Agreement benefit shareholders
Changes to the Investment Advisory Agreement benefit shareholders Reduction in the advisory fee rate for investments in future primary PPP and individual renewable energy projects to 1.0% (reduced from existing rate of 1.5% with a step down to 1.25%) Introduction of a high water mark requirement
Slide 6: Financial review
Financial review Stephen Halliwell CFO, Infrastructure 3i Investments plc 6
Slide 7: Key Performance Indicators
Key Performance Indicators Return underpinned by the strong performance of the European portfolio, which achieved a gross portfolio return of 13.5% Annual distribution objective achieved for the seventh successive year Objective Outcome for the year to 31 March 2014 Total Return To provide sharehold
Slide 8: Reconciliation of movements in NAV
Reconciliation of movements in NAV Strong income and steady capital returns from the European portfolio, partly offset by weakness in India Fund portfolio and foreign exchange losses (£m) 1 2 1 Net of prior year final dividend. 2 Foreign exchange movements are addressed in slide 10. 8
Slide 9: Weighted average discount rate
Weighted average discount rate Portfolio weighted average discount rate (%) Changes in the weighted average discount rate driven by: Addition of XLT to the portfolio Reduction in discount rate for Elenia to reflect benefit of successful re-financing and other market factors Marginal reduction
Slide 10: Foreign exchange losses stabilised in the second half of the year
Foreign exchange losses stabilised in the second half of the year Portfolio currency exposure (%) 7% Sterling Euro 36% Rupee 57% Impact of foreign exchange movements on portfolio value (£m) Year to Six months Mar 2014 to Sep 2013 £/rupee (17.1) (18.3) £/€ (net of hedging) (2.1) (0.9) Net foreign exc
Slide 11: Overall costs broadly stable year on year
Overall costs broadly stable year on year (£m) £21.9m £20.6m £21.9m 0.4 0.4 2.9 3.1 2.9 1.3 2.1 0.7 2.4 2.3 2.3 14.0 14.3 15.3 March 2014 March 2013 March 2012 Advisory and performance fees Opex Deal costs Finance costs Other1 1 Comprises principally local taxes. 11
Slide 12: Balance sheet remains strong
Balance sheet remains strong (£m) As at 31 March 2014 As at 31 March 2013 (IFRS basis) (restated) Investments at fair value 996.6 928.9 Other net assets/(liabilities) 26.5 (1.4) Cash and cash equivalents 90.7 175.8 Net assets 1,113.8 1,103.3 NAV per share (p) 126.4 125.2 NAV per share post dividend
Slide 13: Business review
Business review Ben Loomes Managing Partner and Co-head of Infrastructure 3i Investments plc 13
Slide 14: Differentiated and attractive investment proposition for shareholders
Differentiated and attractive investment proposition for shareholders Existing European portfolio provides a strong basis for future returns and differentiated access for shareholders to the infrastructure asset class compared to other UK listed vehicles Our target European markets provide attra
Slide 15: Clear target markets and portfolio objectives
Clear target markets and portfolio objectives Focus on the core infrastructure market, while building over time further exposure to primary projects with attractive risk-adjusted returns Target markets Primary PPP / low-risk Core infrastructure India infrastructure energy projects Dynamic businesses
Slide 16: Portfolio evolution over time
Portfolio evolution over time Over time, the portfolio will rebalance in favour of less volatile core infrastructure and primary PPP project investments in developed markets The portfolio composition will evolve over time: At least 75% of portfolio value Core infrastructure invested in core infras
Slide 17: Investment advisory team providing specialist investment skills
Investment advisory team providing specialist investment skills and comprehensive coverage of target markets Ben Loomes Phil White Neil King Managing Partner Managing Partner Senior Partner Stéphane Grandguillaume Andy Matthews Nigel Middleton Partner Partner Partner Team broadened and strengthened
Slide 18: Increase in new investment activity in the year
Increase in new investment activity in the year Core infrastructure PPP Cross London Trains £62m Mersey Gateway Bridge £13m Company established to procure and Design, build and operation of a 1km lease the rolling stock for use on the tolled bridge across the Mersey river Thameslink passenger rail f
Slide 19: Our portfolio offers differentiated access to the infrastructure asset class
Our portfolio offers differentiated access to the infrastructure asset class, delivering income yield and capital growth Invested and committed capital (£m) % of total 17 £1,012m £90m Core portfolio 814 81% Investments Portfolio1 Net cash balances Elenia 236 AWG 234 Eversholt Rail Group 160 Oysterca
Slide 20: Portfolio management: progress and opportunities
Portfolio management: progress and opportunities Value creation through refinancing activity in the portfolio: ─ Elenia – refinancing of acquisition debt through whole business securitisation ─ Eversholt – £600m refinancing of residual acquisition debt Positive regulatory developments: ─ Elenia
Slide 21: Portfolio management: key focus areas in the year ahead
Portfolio management: key focus areas in the year ahead Regulatory risks ─ AWG – regulatory review for AMP6 underway; Final Determination expected in December 2014 ─ Oystercatcher – new health & safety regulations driving further capex in Amsterdam Market and macroeconomic risks ─ India Fund – p
Slide 22: Strong long-term performance
Strong long-term performance Portfolio asset return throughout holding period (£m) 15% Annualised asset IRR from inception to 31 March 2014 22
Slide 23: Good market opportunity and growing pipeline
Good market opportunity and growing pipeline Increased competition for infrastructure investments, supported by increased debt availability We have taken advantage of refinancing opportunities in the portfolio to create value Seeing attractive investment opportunities in the core infrastructur
Slide 24: 3i Infrastructure plc
3i Infrastructure plc 60
Slide 25: Q&A
Q&A
Slide 26: Elenia
Elenia Operational highlights for the year Both electricity distribution and district heating businesses performing well despite impact of storms in the winter of 2013 Original acquisition debt refinanced in December 2013 through a WBS (the first for a non- UK utility), with positive implication
Slide 27: AWG
AWG Operational highlights for the year Operational performance and income levels in line with expectations Ranked second for the SIM qualitative assessment for first three quarters of FY14 Regulatory review underway, with Final Determination expected in December Wholesale WACC of 3.7% propo
Slide 28: Eversholt
Eversholt Operational highlights for the year Business continues to perform well Eversholt working with franchise holders and prospective bidders in accordance with new refranchising timetable New contract to provide advisory and asset management services agreed with XLT Recruitment of a new
Slide 29: Oystercatcher
Oystercatcher Operational highlights for the year Terminals performed in line with expectations Market conditions for trading customers remain difficult, resulting in lower throughput Capacity remains fully let and contract renewals have been agreed on good terms Valuation impacted by deprec
Slide 30: XLT
XLT Operational highlights for the year Siemens making good progress manufacturing the trains All material actions in the post- acquisition 100-day plan completed New senior management team installed Current Thameslink franchise expires in September 2014; announcement of new franchise Equity
Slide 31: PPP portfolio
PPP portfolio Operational highlights for the year Two new primary PPP investments in the period, in Mersey Gateway Bridge and Dutch National Military Museum All assets performed well operationally, delivering good levels of income Significant value uplifts for two of the investments: – Octagon
Slide 32: 3i India Infrastructure Fund
3i India Infrastructure Fund Operational highlights for the year Transportation Road investments affected by – funding constraints – slow-down in project execution – increase in raw material costs K-Port still affected by long-term impact of iron ore export ban, but performance has improved as a
Slide 33: Appendix
3i Infrastructure plc & Appendix
Slide 34: Change to basis of preparation / IFRS10
Change to basis of preparation / IFRS10 3i Infrastructure plc meets the definition of an investment entity and is required to fair value its subsidiaries through profit or loss unless they provide investment-related services or activities Fair value accounting of subsidiaries excludes minority i
Slide 35: IFRS 10 – total return adjustments
IFRS 10 – total return adjustments Year to 31 March 2014 Underlying Adjustments for portfolio asset transactions in aggregate returns unconsolidated Financial Summary total return (£m) and costs subsidiaries Statements Capital return 5.3 4.51 9.8 Movement in the fair value of derivatives 4.9 ─ 4.9 I
Slide 36: IFRS 10 – balance sheet adjustments
IFRS 10 – balance sheet adjustments As at 31 March 2014 Underlying Adjustments for aggregate portfolio transactions in amounts and other unconsolidated Financial Summary balance sheet (£m) balances subsidiaries1 Statements Portfolio assets 996.0 0.6 996.62 Cash balances 92.3 (1.6) 90.7 Other financi
Slide 37: Portfolio summary
Portfolio summary 31 March 2014 (£m) 1. Capitalised income 2. Net investment 37 3. Income statement adjustments explained in Slide 35
Slide 38: Portfolio diversification
Portfolio diversification 31 March 2014 By geography By sector By maturity 9% 7% 12% 7% 36% 50% 57% 38% 84% UK and Ireland Utilities Early stage Cont. Europe and Singapore Transportation Operational growth PPP Mature India 38
Slide 39: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income Year to Year to (£m) 31 Mar 2014 31 Mar 2013 (restated) Realised gains/(losses) over fair value on disposal of investments 2.0 2.5 Net gains on investments at fair value through profit or loss 7.8 43.1 9.8 45.6 Portfolio income 72.6 62.2 Transaction fee
Slide 40: Foreign exchange impact
Foreign exchange impact Year to 31 March 2014 Impact of foreign exchange movements on £/rupee £/€ Net portfolio value (£m) impact Translation of assets (£/rupee) (17.1) (17.1) Translation of assets (£/€) (7.0) (7.0) Reported foreign exchange losses on investments (17.1) (7.0) (24.1) Movement in the
Slide 41: Sensitivities to total return
Sensitivities to total return Inflation linkage Assets with revenues: Directly linked to UK inflation Directly linked to 27% Sensitivity +1% -1% 35% (for European assets only) point point Finnish inflation Partly linked to Change in inflation over underlying £17.9m £(19.1)m 18% assumption for next 2
Slide 42: Total shareholder return March 2007 – March 2014
Total shareholder return 31 March 2007 – 31 March 2014 84.9% 72.7% 70.8% 39.3% 32.5% -46.0% 3i Infrastructure FTSE 100 FTSE 250 FTSE 350 FTSE 350 FTSE 350 Gas, General Banks Water and Financials Multiutilities Source: Bloomberg 42 Calculated as share price performance with net dividends reinvested i
Slide 43: Governance and fees
Governance and fees Board of Independent Chairman, four independent non-executive directors and one Directors 3i Group appointed non-executive director Committed to observe requirements of the UK Corporate Governance Code Responsibilities - acts as Investment Committee / approves investment op