3i Infrastructure PLC · LSE:3IN
3i Infrastructure — H1 FY2016 Earnings Presentation
50 slides from 3i Infrastructure's earnings presentation, Nov 6, 2015
Slide 1: Results for the six months to 30 September 2015
Results for the six months to 30 September 2015 6 November 2015
Slide 2: Peter Sedgwick, Chairman
3i Infrastructure plc @ Peter Sedgwick Chairman
Slide 3: Good progress in the first half against our financial objectives
Good progress in the first half against our financial objectives Objective HY2016 6.5% Target of 8% to 10% per annum, to be achieved Total return Total return target over the medium term On track 3.625pps Target dividend of 7.25pps for full year 2016 Interim dividend Progressive Distributions
Slide 4: Introducing the incoming Chairman
Introducing the incoming Chairman Announcing the appointment of Richard Laing to succeed Peter Sedgwick as Chairman from 1 January 2016 In-depth understanding of investing in infrastructure and substantial experience of investment trusts – Formerly FD and CEO of CDC Group plc (2000-2012) – NED o
Slide 5: Today's agenda
Today’s agenda Introduction Peter Sedgwick Business review Ben Loomes Financial review Stephen Halliwell Closing remarks Phil White Q&A All 5
Slide 6: Ben Loomes
Ben Loomes Managing Partner, Infrastructure 3i Investments plc 6
Slide 7: Good first half performance
Good first half performance 6.5% Total return on opening NAV Good progression in net asset value 153.8p NAV per share Healthy level of new investment £187m Portfolio income in line with expectations £27m £335m Total liquidity Efficient balance sheet £51m Cash balances Interim dividend in line with t
Slide 8: Clear strategic priorities
Clear strategic priorities Delivering an attractive mix of income yield and capital Maintain a growth for our shareholders balanced portfolio Investing in developed markets, with a focus on the UK and Europe Manage the Drive value from the Company’s portfolio through our portfolio engaged asse
Slide 9: Balanced portfolio delivering an attractive mix of income yield and capital growth
Balanced portfolio delivering an attractive mix of income yield and capital growth Portfolio and target markets Manage for value and realisation Economic infrastructure PPP and low-risk energy India Fund businesses projects 5 investments: 6 primary PPP projects: 6 investments in: - Elenia - 3 road /
Slide 10: Engaged asset management
Engaged asset management Board representation and governance to engage with portfolio company management to define strategic direction and business plan Invest in the underlying asset base to support profitable growth over the long term and assess acquisitions if suitable opportunities arise A
Slide 11: Eversholt Rail case study
Eversholt Rail case study Completed carve-out from HSBC in 2010, setting up independent functions Set up strong Board and implemented management incentives Repositioned business as an asset management business, capable of renewing its asset base Investment in the fleet Optimised capital st
Slide 12: Key portfolio developments in the first half
Key portfolio developments in the first half Elenia − Second draft of guidelines for next two regulatory periods published − Increase in 10-year Finnish government bond yield − New long-dated bond issued on attractive terms − Positive developments reflected in valuation AWG − Focused on implemen
Slide 13: Key portfolio developments in the first half (cont.)
Key portfolio developments in the first half (cont.) Oystercatcher − Acquisition of two terminals providing diversification benefits to existing Oystercatcher terminals − Additional debt raised in Oystercatcher on favourable terms − Some softening in demand for storage for certain products; strong
Slide 14: Market segmentation and our investment focus
Market segmentation and our investment focus Examples Oystercatcher Eversholt Rail (at the point of NMM Elenia WODS ESVAGT Return investment) Economic infrastructure Large Core economic infrastructure Primary PPP and low-risk energy projects Investment activity focus Operational PPP projects Risk Ma
Slide 15: Attractive and differentiated investment proposition
Attractive and differentiated investment proposition Economic infrastructure businesses Projects Businesses generally: Primary PPP Low-risk energy own asset base in perpetuity Greenfield projects in the Low-risk energy projects in often provide essential services education, transport, wind, sola
Slide 16: Healthy level of new investment
Healthy level of new investment OTT & OTG (Netherlands and Belgium) Mid-market economic infrastructure June 2015 Two additional Oiltanking terminals added £53m investment to the Oystercatcher portfolio 45% interest in each terminal WODS OFTO (UK) Low-risk energy project August 2015 Operational trans
Slide 17: ESVAGT investment case
ESVAGT investment case Strong infrastructure characteristics Asset intensive businesses Leading market position with high barriers to entry Revenues underpinned by medium term contracts Adding value through the life of the investment Ensure strong level of service to maintain good contract r
Slide 18: Examples of economic infrastructure sectors
Examples of economic infrastructure sectors Key characteristics own asset base in perpetuity often provide essential services have a strong market position generate stable cash flows Core sectors Adjacent sectors Reviewing a broad range of investment opportunities across adjacent sectors 18
Slide 19: Market access through the Investment Adviser
Market access through the Investment Adviser Broad origination platform, providing access to opportunities across the infrastructure market c.25 dedicated investment professionals covering Europe using 3i’s network of local offices in London, Amsterdam, Frankfurt, Madrid, Paris and Stockholm Acc
Slide 20: Good first half performance
Good first half performance European portfolio continues to perform well, underpinning a total return of 6.5% On track to achieve target dividend of 7.25pps for FY16 Healthy level of new investment of £187 million Balance sheet and liquidity managed efficiently, with good level of liquidity of £335m
Slide 21: Stephen Halliwell
Stephen Halliwell CFO, Infrastructure 3i Investments plc 21
Slide 22: Good NAV progression
Good NAV progression Return underpinned by valuation gain for Elenia and robust performance of the European portfolio, more than offsetting weak performance of India Fund (£m) Closing NAV of 153.8p/share, reducing to 150.2p/share after payment of interim dividend 1 Net of prior year final dividend.
Slide 23: Weighted average discount rate unchanged
Weighted average discount rate unchanged Portfolio weighted average discount rate (%) Only £0.7m impact to total return. This is due to the discount rate change for NMM 23
Slide 24: Costs reflect higher activity levels and refinancing costs
Costs reflect higher activity levels and refinancing costs Costs (£m) Deal fees 1.8 − Credit in period of £0.1m as fees accrued from last financial year were capitalised following successful completion of transactions 7.6 Performance fee 3.1 Operational costs 1.4 Finance costs 1.4 1.3 − On-going
Slide 25: Dividend and dividend coverage
Dividend and dividend coverage Announced interim dividend of 3.625 pence per share, or £28.8m in total (£m) Interim dividend coverage shortfall covered by realised capital profits Material growth in amounts available for future distributions 25
Slide 26: An efficient balance sheet
An efficient balance sheet Active management of Company’s balance sheet following the receipt of proceeds from Eversholt Rail sale New RCF Increased from £200m to £300m Special dividend £150m returned to shareholders New investment £187m invested in the period Total liquidity of £335m availabl
Slide 27: Phil White
Phil White Managing Partner, Infrastructure 3i Investments plc
Slide 28: Strong and proven long-term track record
Strong and proven long-term track record Company’s performance since Total shareholder return (%) IPO in 2007 160% 152% 3iN FTSE 250 11.4% annualised total shareholder return 120% 93% 80% 10.8% annual return based on NAV growth and dividends paid 40% 7% Dividend per share has grown 0% each yea
Slide 29: An attractive and differentiated investment proposition
An attractive and differentiated investment proposition Access to attractive infrastructure asset class Differentiated investment proposition Strong and proven long-term track record Sustainable return target and dividend policy 29
Slide 30: 3i Infrastructure plc
3i Infrastructure plc 6D
Slide 31: Appendix
3i Infrastructure plc @ Appendix
Slide 32: New investment: ESVAGT
New investment: ESVAGT 50% interest acquired for £111m in June, in a joint investment with AMP Capital Headquartered in Denmark, provides emergency rescue and response vessels and related services to the offshore energy industry Leading positions in Denmark and Norway; growing presence in the UK
Slide 33: New investment: ESVAGT
New investment: ESVAGT A strong infrastructure asset with potential for growth Leading market position in Denmark and Norway, with best-in-class operating model and high barriers to entry Asset intensive business, with a modern state-of-the-art fleet of purpose built vessels Revenues contracte
Slide 34: New investment: WODS OFTO
New investment: WODS OFTO Fully commissioned and operational transmission assets connecting the offshore windfarm to the onshore grid Project underpinned by a stable regulatory framework providing predictable cash flows over a 20-year revenue period Operations and maintenance subcontracted to
Slide 35: Proven track record of delivering value from the portfolio
Proven track record of delivering value from the portfolio Portfolio asset returns throughout holding period (£m) Existing portfolio Realised assets Driving an annualised total return of 11.4% from IPO to 30 September 2015 35
Slide 36: Portfolio summary
Portfolio summary 30 September 2015 (£m) Directors’ Directors’ Underlying Allocated valuation Investment Divestment Foreign valuation Profit/ portfolio foreign Asset total 31 March in the in the Value exchange 30 Sep (loss) on income in exchange return in Portfolio assets 2015 year year movement tra
Slide 37: Unrealised value movement
Unrealised value movement Six months to 30 September 2015 Value movement Value movement in the period Description component (£m) Planned value growth 18.3 Net value movement resulting from the passage of time, consistent with the discount rate and cash flow assumptions at the beginning of the period
Slide 38: Portfolio breakdown by geography and maturity
Portfolio breakdown by geography and maturity As at 30 September 2015 By geography By maturity 5% 14% 4% 43% 52% 82% UK and Ireland Early stage Cont. Europe and Singapore Operational growth India Mature 38
Slide 39: Elenia
Elenia Operational highlights for the period Good operational and financial performance, despite lower demand due to warm weather Valuation uplift recognised following: − publication of draft guidelines for the next two regulatory periods, reinforcing intent to address low allowed return Cost £1
Slide 40: AWG
AWG Operational highlights for the period Operational performance and income in line with expectations Business focused on: − implementing the cost efficiency and capital spending programmes for AMP6, which commenced on 1 April 2015 − implementing initiatives to optimise Cost £161.9m performance
Slide 41: Oystercatcher
Oystercatcher Operational highlights for the period Investment in 45% stakes in two additional terminals alongside Oiltanking − located in the Netherlands and Belgium − financed through equity from the Company and additional debt raised in Oystercatcher Improved trading conditions in the period
Slide 42: Cross London Trains
Cross London Trains Operational highlights for the period Delivery of the first train to Siemen’s test track achieved with two trains currently in the UK for testing Business focusing on the acceptance of the units for passenger service in the UK, a complex process involving all stakeholders and
Slide 43: PPP portfolio
PPP portfolio Operational highlights for the period All assets in the operational PPP portfolio performed well, delivering good levels of income WODS OFTO investment completed in August. Investment delivered immediate cash yield in the period Cost £101.6m NMM became operational in September 20
Slide 44: 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 delays in project approvals Krishnapatnam Port successful in broadening cargo mix and witnessing strong growth in traffic Power C
Slide 45: IFRS 10 – total return adjustments
IFRS 10 – total return adjustments As at 30 September 2015 Underlying Adjustments for portfolio asset transactions in Summary total return aggregate returns unconsolidated Financial (£m) and costs subsidiaries Statements Capital return 64.9 (3.0)1 61.9 Movement in the fair value of derivatives (0.4)
Slide 46: IFRS 10 – balance sheet adjustments
IFRS 10 – balance sheet adjustments As at 30 September 2015 Underlying Adjustments for aggregate portfolio transactions in amounts and other unconsolidated Financial Summary balance sheet (£m) balances subsidiaries1 Statements Portfolio assets 1,112.6 2.5 1,115.12 Cash balances 51.2 (0.8)3 50.4 Fina
Slide 47: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income Six months to Six months to (£m) 30 September 2015 30 September 2014 Realised (losses)/gains over fair value on the disposal of investments (0.1) 0.8 Net gains on investments at fair value through profit or loss 62.0 90.5 61.9 91.3 Investment income 24.
Slide 48: Foreign exchange impact
Foreign exchange impact Six months to 30 September 2015 Impact of foreign exchange movements on £/rupee £/€/SGD/DKK Net impact portfolio value (£m) Translation of unhedged assets (£/rupee) (4.4) (4.4) Translation of partially hedged assets (£/€/SGD/DKK) 2.6 2.6 Reported foreign exchange (losses) / g
Slide 49: Sensitivities to total return
Sensitivities to total return Inflation linkage Assets with revenues: Directly linked to UK inflation 12% Sensitivity +1% point -1% point 32% (for European assets only) Directly linked to Finnish inflation Change in inflation over 1 34% underlying assumption for next £21.9m £(20.6)m Partly linked to
Slide 50: Governance and fees
Governance and fees Board of Independent Chairman, five 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