3i Infrastructure PLC · LSE:3IN
3i Infrastructure — H1 2010 Earnings Presentation
44 slides from 3i Infrastructure's earnings presentation, Nov 5, 2009
Slide 1: Results for the six months to 30 September 2009
Results for the six months to 30 September 2009 5 November 2009
Slide 2: Chairman's highlights
Chairman’s highlights Peter Sedgwick Chairman, 3i Infrastructure plc 2
Slide 3: Agenda
Agenda Chairman’s highlights Peter Sedgwick Chairman, 3i Infrastructure plc Financial review Stuart Howard Interim CFO, Infrastructure, 3i Investments plc Portfolio review and strategy update Cressida Hogg Managing Partner, Infrastructure, 3i Investments plc 3
Slide 4: Chairman's highlights: continued growth in returns to shareholders
Chairman’s highlights Continued growth in returns to shareholders • Portfolio assets continue to perform well operationally, with EBITDA up 11.8% in the six months over the prior 120 119.0 121.1 corresponding period 116.3 115 • Interim dividend of 2.2p per share, or 110.6 Pence per share 110 2.0% on
Slide 5: Financial review
Financial review Stuart Howard Interim CFO, Infrastructure, 3i Investments plc 5
Slide 6: Reconciliation of movements in NAV
Reconciliation of movements in NAV (£m) 940 Realised 13.7 920 profits 0.9 (7.5) 900 (7.8) 890.1 888.6 Income (17.8) 880 17.0 860 840 820 800 Opening NAV at Investment Unrealised Net foreign Costs Proposed Closing NAV at 31 March 2009 income gains exchange distribution to 30 September movement shareh
Slide 7: Income and realised profits
Income and realised profits (£m) • Portfolio income up year-on-year 90 – Interest on loans up in absolute 80.2 80 terms – Dividend income down 70 25.9 60 • Interest on cash deposits impacted 50 10.3 by lower interest rates 40 36.4 15.6 4.1 30 • Income and realised profits of 17.9 10.3 £17.9 million
Slide 8: Value growth
Value growth (£m) 30 • Value gains at 30 September 25 2009 driven by the the junior debt portfolio (2.6) 20 • Value growth impacted negatively by foreign exchange movements 15 24.3 10 (7.5) 13.7 5 0 HY to Sep 2008 HY to Sep 2009 Foreign exchange movement - net of hedging Value growth 8
Slide 9: Fees and operating expenses
Fees and operating expenses (£m) 9 8 7.8 • Costs in line with prior 7.6 corresponding period 0.8 1.0 7 6 1.3 1.6 5 0.9 0.9 4 3 4.6 4.3 2 1 0 2008 2009 Advisory Opex Deal costs Other 9
Slide 10: Balance sheet - on an investment basis
Balance sheet - on an investment basis (£m) As at As at 30 September 31 March 2009 2009 Investment portfolio 573.5 536.7 Other net assets / (liabilities) 14.7 10.7 Cash and cash equivalents 330.0 386.8 Borrowings - - Other current liabilities (11.8) (18.1) Net assets 906.4 916.1 Diluted NAV per shar
Slide 11: Portfolio review and strategy update
Portfolio review and strategy update Cressida Hogg Managing Partner, Infrastructure, 3i Investments plc 11
Slide 12: Our portfolio
Our portfolio AWG Asset Value at Cash 30 Sep 2009 Anglian Water Group £185.5m Cash Junior debt portfolio £116.4m Portfolio Oystercatcher £110.8m assets Junior debt portfolio 3i India Infrastructure Fund £80.3m T2C I2 vendor loan notes £28.2m Novera Alpha Oystercatcher Octagon £26.5m Octagon I2I2Loan
Slide 13: Portfolio diversification
Portfolio diversification By sector By maturity By geography 12% 8% 7% 23% 62% 26% 60% 17% 85% Social Infrastructure Early-stage UK Operational growth Continental Europe Transportation Mature Asia Utilities (as at 30 September 2009, breakdown by value) 13
Slide 14: Portfolio performance
Portfolio performance • Robust EBITDA growth for underlying equity assets: +11.8% for the six months on average on a like-for-like basis on previous reporting period (1), including – Oystercatcher companies (+12.1% on average) – AWG (+7.5%) • Portfolio income of £15.5 million for the six months (div
Slide 15: Valuation summary
Valuation summary Valuation Further Value Foreign Valuation Income Valuation driver (£m) (Mar 09) invt in movement exchange (Sep 09) in the period translation period AWG 162.9 23.4 (0.8) - 185.5 4.5 • Regulatory review Junior debt 91.9 5.2 19.8 (0.5) 116.4 3.6 • Mark-to-market portfolio Oystercatche
Slide 16: Anglian Water Group
Anglian Water Group Valuation drivers • Ofwat Draft Determination for the sector as a whole is challenging • Valuation at 30 September 2009 takes into account Draft Determination as well as expectations of outcome of Final Determination, adjusted for some company-specific items (£m) Cost 173.7 • EBI
Slide 17: Oystercatcher
Oystercatcher Valuation drivers • Income received in the period • Favourable market conditions • Construction of Phase 10 in Singapore completed in June, taking capacity up 10% to 1.4 million cubic metres (£m) Cost 84.5 • For the period ending 30 June 2009, Valuation 110.8 EBITDA improved by 12.1% c
Slide 18: 3i India Infrastructure Fund
3i India Infrastructure Fund Valuation drivers • Fund’s valuation impacted negatively by the dilution of holding in Adani Power following IPO. Adani Power now valued on a MTM basis • All assets performing well operationally and financially (£m) Cost 58.3 • Foreign exchange losses also weighed on the
Slide 19: Junior debt portfolio
Junior debt portfolio Valuation drivers • Increase in mark-to-market valuation of underlying investments • Yield on portfolio running at average of 6.3% on time-weighted cost and 6.3% on 30 September valuation (£m) • Yield to maturity was 16.8% on valuation at Cost 119.9 30 September Valuation 116.4
Slide 20: Weighted average discount rate
Weighted average discount rate 20% 18.0% • Majority of the portfolio valued on a DCF basis • Weighted average discount rate Weighted Average Discount Rate (%) 15% declined compared to March 13.1% 2009: 12.4% 12.0% 13.8% range – Adani Power now valued 12.8% on a MTM basis – Slight reduction for Soma
Slide 21: Preconditions for new investment
Preconditions for new investment Precondition Status Trend • Debt financing available for attractive opportunities, albeit at less attractive terms than pre-crisis Availability of financing • Significant funds raised for the infrastructure asset class; investors still equity-rich Visibility on earni
Slide 22: Market conditions
Market conditions Market performance since 1 April 2009 140 • Equity markets up strongly since the end of March, but… 130 – Uncertainty on sustainability of economic recovery 120 – Return of inflation / outlook for interest rates? 110 – Significant exchange rate volatility 100 • …are causing a persi
Slide 23: Strategy
Strategy Strong track record Premium market access Rigorous investment Best-in-class portfolio and origination + approach + management Best placed to take advantage of the market opportunity as conditions for investment improve 23
Slide 24: Our investment proposition
Our investment proposition • Strong track record - preserving net asset value in challenging conditions • Robust portfolio, generating yield and offering opportunities for capital growth – Diversified by sector, maturity and geography, with exposure to emerging markets – Delivering resilient operati
Slide 25: Q&A
Q&A “While the pipeline for the second half is encouraging, conditions for infrastructure investment remain challenging. Completion risk remains high, due to uncertainty in the macro outlook and ongoing volatility in asset pricing. Nonetheless, with financial resources to invest, a strong track reco
Slide 26: Additional financial information
Additional financial information 26
Slide 27: Total return
Total return (£m) Investment basis Investment basis Consolidated basis 30 September 2009 30 September 2008 30 September 2009 Realised profits 0.9 4.1 1.5 Unrealised profits 18.1 19.5 13.9 Foreign exchange gains / (losses) (13.4) 2.2 (0.4) Capital return 5.6 25.8 15.0 Portfolio income and interest 15
Slide 28: Balance sheet
Balance sheet (£m) As at As at As at Consolidated – 30 September 31 March 30 September As at 2009 2009 2008 30 September 2009 Investment portfolio 573.5 536.7 576.4 847.0 Other net assets / (liabilities) 14.7 10.7 10.3 15.7 Cash and cash equivalents 330.0 386.8 328.7 336.4 Borrowings - - - (197.7) O
Slide 29: Macroeconomic drivers of performance
Macroeconomic drivers of performance Inflation Foreign exchange Asset exposure to inflation by value • Euro position 85% hedged • Rupee / dollar position currently 21% unhedged 43% 9% • Hedging policy monitored by the Board and Investment Adviser on an ongoing basis 27% Revenues directly linked to R
Slide 30: Refinancing requirement
Refinancing requirement Annual refinancing and new debt as a % of existing committed debt New debt raised Refinancing requirement 77% • Very limited refinancing / new debt required in the short term • Already raised £352m of the £447m debt needed by March 2010 13% • 77% of refinancing due post 2019
Slide 31: Total shareholder return
Total shareholder return Total shareholder return (31 March 2007 – 30 September 2009) 20% 10% 0% -10% -20% -30% -40% -50% 3iN* FTSE 100 FTSE 250 FTSE 350 Gen FTSE 350 Banks *3i Infrastructure TSR calculated using IPO price of 100 pence per share Fin Note: calculated as share price performance with d
Slide 32: Case studies
3i Infrastructure plc Case studies 32
Slide 33: Octagon
Octagon Valuation drivers • RPI-linked income • Lifecycle spend Developments in the period • Awarded top “excellent” rating in National Patient Safety Agency’s Patient Environment Action Team in all three categories of assessment: catering, (£m) cleanliness and privacy and dignity Cost 20.2 • Subcon
Slide 34: Alpha Schools
Alpha Schools Valuation drivers • RPIX-linked inflation • Lifecycle spend Developments in the period • All schools operating successfully • Remaining external works and sports pitches (£m) nearing completion as planned Cost 9.1 • 3i Infrastructure holds its investment in Alpha Schools through Northe
Slide 35: Novera
Novera Valuation drivers • Mark-to-market Developments in the period • During the period, Novera received planning consent for a further wind farm with a potential capacity of 12MW • On 7 October, Novera received notice from Infinis (£m) Energy Limited of its intention to make an offer for Cost 11.2
Slide 36: T2C
T2C Valuation drivers • Delays in completion of construction Developments in the period • T2C management has worked hard during the period to manage the delays and significant progress was made, both in construction and cold commissioning of the plant (£m) Cost 6.5 • First fire expected on or before
Slide 37: About 3i Infrastructure plc
About 3i Infrastructure plc 37
Slide 38: Governance and fees
Governance and fees • Independent Chairman, five independent non-executive directors and 3i Group appointed non-executive director • Committed to observe requirements of the Combined Code Board of • Responsibilities: Directors – Acts as investment committee / approves investment opportunities – Resp
Slide 39: The market
The market Significant investment opportunities across all our regions UK & Europe North America Asia Well-established role for Potentially the world’s We have identified India private investors in largest infrastructure as the most attractive infrastructure market geography in Asia • Mature assets
Slide 40: Internationally connected
Internationally connected Europe London New York New Delhi Mumbai • Infrastructure Team operates from 4 offices in key markets • Access to a global network of 15 offices in 12 countries • Access to wider network of investment professionals 21 executives in London, New York, Mumbai and New Delhi worl
Slide 41: Investment approach
Investment approach Asset intensive businesses that provide essential services Transport Utilities Social Infrastructure Airports Power generation Primary and secondary PFI Ports Power transmission Public Private Partnerships Ferries Electricity & gas distribution Government accommodation Toll roads
Slide 42: Diversification of risk/return across asset life
Diversification of risk/return across asset life Early stage/construction Operational growth Mature/steady state Greenfield projects Buy & build portfolios Corporate acquisitions New build PFI/PPP Privatisations Steady state operations • Accessing the most • Optimising the • Focus on cash yield attr
Slide 43: Delivering on the pipeline
Delivering on the pipeline Strategic approach Dynamic approach Ability to move quickly and with confidence Evaluate target sectors and geographies Take advantage of market dislocations Systematic origination process Identify “distressed seller” opportunities Continuous re-assessment of strategy Ongo
Slide 44: Senior members of the investment advisory team
Senior members of the investment advisory team Cressida Hogg Neil King Phil White Girish Baliga Samir Palod Stephen Halliwell Anil Ahuja 44