3i Infrastructure PLC · LSE:3IN
3i Infrastructure — H1 2015 Earnings Presentation
43 slides from 3i Infrastructure's earnings presentation, Nov 6, 2014
Slide 1: Results for the six months to 30 September 2014
Results for the six months to 30 September 2014 6 November 2014
Slide 2: Chairman’s introduction
Chairman’s introduction Peter Sedgwick Chairman
Slide 3: Today’s agenda
Today’s agenda Introduction Peter Sedgwick Market and business review Ben Loomes Financial review Stephen Halliwell Closing remarks Phil White Q&A All 3
Slide 4: Strong performance driven by European portfolio
Strong performance driven by European portfolio Strong net asset value progression £117m total return 10.8% total return on opening NAV 136.3 NAV per share Portfolio income in line with prior period £33m portfolio income in the period Good momentum in primary PPP investment £13m commitments to three
Slide 5: Market and business review
Market and business review Ben Loomes Managing Partner and Co-head of Infrastructure 3i Investments plc
Slide 6: 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 Core infrastructure Primary PPP / low-risk India infrastructure energy projects Dynamic businesses
Slide 7: We focus on a distinct segment of the risk-return spectrum
We focus on a distinct segment of the risk-return spectrum Return Hybrid infrastructure Focus of new Core economic investment infrastructure Infrastructure debt Primary PPP and low-risk energy projects Operational PPP and low-risk energy projects Risk Note: The bars indicate the Investment Adviser’s
Slide 8: Market conditions: core infrastructure
Market conditions Core infrastructure Supply/demand imbalance pushing up prices 2,200 institutions investing in infrastructure in 2014, vs. Growing investor 900 in 20101 universe SWFs, pension funds and insurers building direct investing capabilities Average actual allocation of 4.3% in 2014 v
Slide 9: Market conditions (cont.): primary PPP
Market conditions (cont.) Primary PPP Approximately £1bn per annum of equity opportunity The market in Europe opportunity Growth as European governments increasingly adopt PPP and expand existing programmes Competitive, with c.3-5 bidders per project Competition Few players with internationa
Slide 10: Good momentum in new PPP and energy project investing
Good momentum in new PPP and energy project investing A12 (Netherlands) Motorway connecting the German border to the Hague RIVM (Netherlands) New laboratories and office accommodation for national public health authorities Ayrshire College (UK) Consolidation of further education facilities in Kilmar
Slide 11: 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 20 £1,096m £96m Core portfolio 897 82% Investments Portfolio Net cash balances Eversholt Rail 241 Anglian Water Group ("AWG") 236 El
Slide 12: Portfolio management: key value drivers
Portfolio management: key value drivers Rolling stock investments performing strongly Strong valuation uplifts for Eversholt and XLT – positive fundamentals: Eversholt successful in securing extended leases for a number of key fleets – shift in market conditions: evidence of competitive pricing an
Slide 13: Other portfolio developments
Other portfolio developments Oystercatcher Increased capex requirements in Amsterdam driven by health and safety regulations Refinancing completed since the period end a significant achievement AWG Regulatory review for AMP6 in process; Final Determination in December 2014 India Continued we
Slide 14: Strong long-term performance
Strong long-term performance Portfolio asset return throughout holding period (£m) 16% Annualised asset IRR from inception to 30 September 2014 14
Slide 15: A strong start to the financial year
A strong start to the financial year Strong return, driven by – underlying performance of the portfolio – reduction of the discount rate for rolling stock investments, reflecting business and market developments Actively driving value from our portfolio Good momentum in primary PPP investing i
Slide 16: Financial review
Financial review Stephen Halliwell CFO, Infrastructure 3i Investments plc
Slide 17: Strong performance against our KPIs
Strong performance against our KPIs Return underpinned by the strong performance of the European portfolio, which achieved a gross asset return of 15.3% in the first half On track to meeting annual dividend objective Objective for the year Six months to 30 September 2014 Total Return 10% per annum o
Slide 18: Strong growth in NAV
Strong growth in NAV Strong value growth in the Company’s rolling stock assets and good income receipts (£m) 1 1 Net of prior year final dividend 18
Slide 19: Weighted average discount rate reduced
Weighted average discount rate reduced in the period £57.1 million1, from a total gross asset return of £136.4 million, driven by discount rate movements Portfolio weighted average discount rate (%) Change in the weighted average discount rate driven by the reduction in the discount rate used to val
Slide 20: Costs
Costs £19.2m £10.0m (£m) Provision of performance 7.6 fee of £7.6 million due to strong performance 1.8 0.1 0.2 1.4 1.3 1.8 Increase in deal fees driven 1.1 by momentum in origination 7.1 6.8 activity 9.8 9.9 Sep 2014 Sep 2013 Reduction in finance costs Operational costs flagged last year, and
Slide 21: Interim dividend
Interim dividend Inflows £36.7m £29.8m Income from portfolio and £26.9m interest on cash balances accrued Non-income cash distributions from the portfolio less Operational costs £9.8m Advisory fees Net income Dividend for Operating expenses for the period the period Finance costs 21
Slide 22: Strong balance sheet with good liquidity
Strong balance sheet with good liquidity (£m) As at 30 September As at 30 September 2014 (IFRS basis) 2013 (restated) Investments at fair value 1,068.5 977.7 Other net assets 35.7 14.0 Cash and cash equivalents 97.5 86.5 Net assets 1,201.7 1,078.2 NAV per share (p) 136.3 122.3 NAV per share post div
Slide 23: Closing remarks and Q&A
Closing remarks and Q&A Phil White Managing Partner and Co-head of Infrastructure 3i Investments plc
Slide 24: 3i Infrastructure plc
3i Infrastructure plc 60
Slide 25: Appendix
3i Infrastructure plc & Appendix
Slide 26: 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 20 £1,096m £96m Core portfolio 897 82% Investments Portfolio1 Net cash balances Eversholt Rail 241 Anglian Water Group ("AWG") 236 E
Slide 27: Portfolio summary
Portfolio summary 30 September 2014 Underlying Directors’ Foreign Directors’ portfolio Asset total valuation Investment Divestment in Value exchange valuation Profit/(loss) income in return in the Portfolio assets 31 Mar 2014 in the period the period movement translation 30 Sep 2014 on disposal the
Slide 28: Unrealised value movement
Unrealised value movement Six months to 30 September 2014 Value movement Value Description component movement in the period (£m) Planned value growth 28.4 Net value movement resulting from the passage of time, consistent with the discount rate at the beginning of the period less distributions receiv
Slide 29: Portfolio diversification
Portfolio diversification 30 September 2014 By geography By sector By maturity 6% 12% 12% 5% 31% 44% 63% 44% 83% UK and Ireland Utilities Early stage Cont. Europe and Singapore Transportation Operational growth PPP Mature India 29
Slide 30: Eversholt Rail Group
Eversholt Rail Group Operational highlights for the period Strong performance and cash flow generation Business successful in securing extended leases for a number of key fleets; actively working on re-leasing proposals for new franchises Discount rate reduced, supported by market return compr
Slide 31: AWG
AWG Operational highlights for the period Operational performance and income broadly in line with expectations Ranked joint first among water and water recycling companies in Ofwat’s SIM for year ending 31 March 2014 Regulatory review in progress; Final Determination expected in December 2014
Slide 32: Elenia
Elenia Operational highlights for the period Good operational and financial performance, despite warmer than average weather conditions Reduction in WACC in line with Finnish 10-year government bond yield, with negative value implications New bond issues within WBS framework on attractive term
Slide 33: Oystercatcher
Oystercatcher Operational highlights for the period Market conditions remained difficult for trading customers due to shallower forward curve for oil prices However, capacity remains substantially let, with contract renewals on good terms Valuation lower due to impact on near- term cash flows
Slide 34: Cross London Trains
Cross London Trains Operational highlights for the period Manufacturing of the trains progressing ahead of schedule Thameslink franchise expired in September 2014 DfT appointed Govia Thameslink Railway to replace First Capital Connect; XLT worked with FCC and GTR on franchise transition Disc
Slide 35: PPP portfolio
PPP portfolio Operational highlights for the period All assets in the operational PPP portfolio performed well, delivering good levels of income £13m committed to new primary PPP investments in the period in the UK and the Netherlands Achieved preferred bidder stage for two further primary PPP
Slide 36: 3i India Infrastructure Fund
3i India Infrastructure Fund Operational highlights for the period Transportation Road assets: performance affected by funding constraints, slow project execution and increase in raw material costs Krishnapatnam Port successful in broadening cargo mix and witnessing strong growth in traffic, mai
Slide 37: IFRS 10 – total return adjustments
IFRS 10 – total return adjustments Six months to 30 September 2014 Underlying Adjustments for portfolio asset transactions in aggregate returns unconsolidated Financial Summary total return (£m) and costs subsidiaries Statements - Capital return 91.3 91.3 Movement in the fair value of derivatives 12
Slide 38: IFRS 10 – balance sheet adjustments
IFRS 10 – balance sheet adjustments As at 30 September 2014 Underlying Adjustments for aggregate portfolio transactions in amounts and other unconsolidated Financial Summary balance sheet (£m) balances subsidiaries1 Statements Portfolio assets 1,067.9 0.6 1,068.52 Cash balances 98.6 (1.1) 97.5 Finan
Slide 39: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income Six months to 30 September 2014 Six months to Six months to 30 Sep (£m) 30 Sep 2014 2013 (restated) Realised gains over fair value on disposal of investments 0.8 ─ Net gains/(losses) on investments at fair value through profit or loss 90.5 (15.2) 91.3 (
Slide 40: Foreign exchange impact
Foreign exchange impact Six months to 30 September 2014 Impact of foreign exchange movements on £/rupee £/€/SGD Net portfolio value (£m) impact Translation of assets (£/rupee) (0.3) (0.3) Translation of assets (£/€/SGD) (20.3) (20.3) Reported foreign exchange losses on investments (0.3) (20.3) (20.6
Slide 41: Sensitivities to total return
Sensitivities to total return Inflation linkage Assets with revenues: Directly linked to UK inflation Sensitivity +1% -1% 34% 32% (for European assets only) point point Directly linked to Finnish Change in inflation over underlying £16.0m £(17.2)m inflation assumption for next 2 years Partly linked
Slide 42: Total shareholder return March 2007 – September 2014
Total shareholder return 31 March 2007 – 30 September 2014 97.3% 83.3% 66.3% 42.7% 28.8% -44.6% 3i Infrastructure FTSE 100 FTSE 250 FTSE 350 FTSE 350 FTSE 350 Gas, General Banks Water and Financials Multiutilities Source: Bloomberg Calculated as share price performance with net dividends reinvested
Slide 43: Governance and fees
Governance and fees Board of Independent Chairman, four independent non-executive directors and one 3i Group Directors appointed non-executive director Committed to observe requirements of the UK Corporate Governance Code Responsibilities - acts as Investment Committee / approves investment op