3i Infrastructure PLC · LSE:3IN
3i Infrastructure — H1 2009 Earnings Presentation
42 slides from 3i Infrastructure's earnings presentation, Nov 3, 2008
Slide 1: Half-yearly results to 30 September 2008
Half-yearly results to 30 September 2008 3 November 2008
Slide 2: Introduction
Introduction Peter Sedgwick Chairman, 3i Infrastructure Limited 2
Slide 3: Agenda
Agenda Highlights Peter Sedgwick Chairman, 3i Infrastructure plc Business review Michael Queen Managing Partner, Infrastructure, 3i Investments plc Financial review Stephen Halliwell CFO, Infrastructure, 3i Investments plc 3
Slide 4: Highlights
Highlights • Results in line with return objectives, with total return of 6.1% on average shareholders’ funds • Interim dividend of 2.1 pence per share, 5% increase from interim 2007 • £115 million raised in placing and open offer completed in July – Ample liquidity to invest – At 30 September: £329
Slide 5: Investment review
Investment review Michael Queen Managing Partner, Infrastructure, 3i Investments plc 5
Slide 6: Performance against objectives
Performance against objectives Objective Status • Proceeds fully invested within • 68% invested; 84% invested and Ahead two years committed since inception at 30 Sept • Cash balance at 30 Sept of £329m • 12% pa total return on • 6.1% total return to 30 September In line average shareholders’ funds •
Slide 7: Market
Market Infrastructure market opportunity • Spending on infrastructure likely to remain significant, driven by remains good… – Developing markets: favourable demographic trends – Developed markets: ageing infrastructure • Resource-constrained governments unlikely to be able to finance infrastructure
Slide 8: Investment strategy
Investment strategy Investing cautiously • We have slowed the pace of investment, but are still seeing a good flow of opportunities, as infrastructure investment opportunity remains good • Focus on highest quality opportunities only • Vendors’ pricing expectations are slow to adjust to changed marke
Slide 9: Investment activity in the period
Investment activity in the period Investment activity Investment strategy: • Cautious approach • £102.9 million invested in the period, of • Dislocation in debt markets which offers opportunity to invest in debt instruments at below • £86.7 million in a portfolio of junior debt par, generating equit
Slide 10: New investment - junior debt portfolio
New investment - junior debt portfolio • Pricing at values below par delivers equity-like returns and strong levels of cash yield • Opportunistic purchases during the period when available pricing has met return objectives of this portfolio • Average purchase price: 84% of par value • Average yield
Slide 11: Portfolio performance
Portfolio performance AWG I2 • Special dividend to shareholders from sale of • £12.4 million further investment from the Company, Morrison Utilities Services invested in existing projects and stake in North Durham University Hospital • Draft Business Plan for 2010-2015 regulatory period submitted to
Slide 12: Valuation
Valuation Income Valuation Valuation Value (£m) in Driver of valuation change (31/3/2008) (30/9/2008) movement* period Anglian Water 159.6 152.1 (7.5) 16.5 Strong income due to sale of Morrison Utilities Services I2 125.1 150.5 13.0 - Further investment, cash retained in the fund, operational and st
Slide 13: Portfolio breakdown by value – 30 September 2008
Portfolio breakdown by value – 30 September 2008 By sector By maturity By geography (1) Social Early-stage 12% infrastructure 30% Asia 9% Continental Europe Utilities 20% 53% Mature 58% Operational growth UK Transportation 30% 71% 17% (1) Continental Europe includes investment in Oiltanking, with op
Slide 14: Financial review
Financial review Stephen Halliwell CFO, Infrastructure, 3i Investments plc 14
Slide 15: Total return
Total return Sept 2008 Sept 2007 Sept 2008 Sept 2007 6 months to 30 September 2008 Investment Investment Consolidated Consolidated basis (£m) basis (£m) basis (£m) basis (£m) Realised profit on disposal of investments 4.1 - 4.1 - Unrealised profits on revaluation of investments 19.5 11.3 14.8 18.8 E
Slide 16: Capital return
Capital return £m 30 • Unrealised value growth from 25 portfolio 20 • Return in the period also 15 underpinned by realised profits on disposal of Alma 10 Mater 5 0 2007 2008 Realised capital profits Unrealised value movements Exchange 16
Slide 17: Portfolio income – strong cash yield
Portfolio income – strong cash yield £m 35 • Return in the period 30 underpinned by strong income generated from the 25 portfolio 20 • 89% of portfolio income 15 received in cash 10 • Cash received from portfolio covers interim dividend and 5 costs 0 Income Dividend and costs Accrued income Dividend
Slide 18: Total return
Total return Sept 2008 Sept 2007 Sept 2008 Sept 2007 6 months to 30 September 2008 Investment Investment Consolidated Consolidated basis (£m) basis (£m) basis (£m) basis (£m) Realised profit on disposal of investments 4.1 - 4.1 - Unrealised profits on revaluation of investments 19.5 11.3 14.8 18.8 E
Slide 19: Balance sheet
Balance sheet Sept 2008 Sept 2007 Sept 2008 Sept 2007 As at 30 September 2008 Investment Investment Consolidated Consolidated basis basis basis basis £m £m £m £m Investment portfolio 576.4 426.4 846.0 671.1 Other net assets / (liabilities) 5.1 3.6 3.0 8.3 Cash and cash equivalents 328.7 296.7 333.3
Slide 20: Portfolio analysis
Portfolio analysis • Refinancing requirement • Interest rate profile • Inflation exposure • Currency exposure 20
Slide 21: Refinancing requirement
Refinancing requirement Annual refinancing and new debt as a % of existing committed debt 89% • Very limited refinancing / new debt required in the short term Refinancing requirement New debt • AWG successfully issued a €500 million bond in June 2008 • 89% of refinancing due post 2018 7% 4% 4% 5% 3%
Slide 22: Interest rate profile
Interest rate profile Hedged debt as a % of the debt balance 95% 95% • Majority of debt is fixed-rate India Fund Fixed Index linked 68% • 1% change to UK/CE portfolio 62% 63% 62% 60% 59% 59% 59% has a valuation impact of £(17) million Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Ma
Slide 23: Inflation exposure
Inflation exposure Asset exposure to inflation by value • Current inflation assumptions are prudent N/A 15% • 2.5% inflation rate assumed in Revenues Not linked to directly linked the models in the UK / CE RPI to RPI 10% 56% Closely linked to RPI 19% 23
Slide 24: Currency exposure
Currency exposure • Exposures – Transaction – Reporting • Hedging – Euro – Indian Rupee 24
Slide 25: Investment review
Investment review Michael Queen Managing Partner, Infrastructure, 3i Investments plc 25
Slide 26: Closing remarks
Closing remarks • On track towards achieving return and distribution objectives • Uncorrelated return and strong yield • The portfolio has a low risk profile, with low refinancing risk • Market prospects for infrastructure remain positive • With ample liquidity to invest, 3i Infrastructure is well p
Slide 27: Appendix
Appendix 3i Infrastructure plc | 6D 27
Slide 28: 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 29: Internationally connected
Internationally connected Europe London Frankfurt New York New Delhi Mumbai • Infrastructure Team operates from 5 offices in key markets • Access to a global network of 23 offices in 14 countries • Access to wider network of over 250 investment professionals 25 executives in London, New York, Mumbai
Slide 30: 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 31: 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 and
Slide 32: 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 33: Anglian Water Group Limited
Anglian Water Group Limited Description • Owner of Anglian Water, fourth largest water/waste water company in England and Wales, Morrison Facilities Services and a property development business Strategy • Deliver a reliable supply of clean, safe drinking water and effective wastewater services at af
Slide 34: I2
I2 Description • Makes and manages investments in PFI projects in the UK and continental Europe • 84 assets in the portfolio Strategy • Build a diversified portfolio of investments, generating stable long-term returns for investors • Maximise value through identifying synergies across the portfolio,
Slide 35: Oystercatcher
Oystercatcher Description • Provider of third-party storage facilities for oil and petroleum products in the Netherlands, Malta and Singapore Strategy • Experienced management teams, supported by Oiltanking’s central management expertise and 3i Infrastructure’s board representatives, seek maximise P
Slide 36: Octagon
Octagon Description • Concession company under a 35-year PFI contract to build, operate and maintain the Norfolk and Norwich University Hospital • Receives RPI-linked payments from the NHS Trust to cover services and building maintenance Strategy • Management team, with close shareholder involvement
Slide 37: Novera
Novera Description • Established, UK-focused renewable energy company which generates electricity from wind, hydro, waste and landfill gas Strategy • Novera operates in landfill gas and wind development • Potential to develop new operations in energy from waste Portfolio detail • Novera’s strategy i
Slide 38: Alpha Schools
Alpha Schools Description • Concession company under a 30-year PFI contract to build, operate and maintain 11 new schools on 10 sites in the Highland region of Scotland • Receives RPI-linked payment from the Highland Council to cover services and building maintenance Strategy • Timely completion of
Slide 39: T2C
T2C Description • Construction of a new-build waste to energy plant to generate heat and power from refuse-derived fuels • 15-year fixed-price ‘take or pay’ contract Strategy • Management team focused on the timely completion of construction and commencement of operations Portfolio detail • Managing
Slide 40: 3i India Infrastructure Fund
3i India Infrastructure Fund Interest • US$250 million commitment – no additional fees payable by 3i Infrastructure to 3i Group Description • US$1.2 billion fund set up by 3i Group to invest in Indian infrastructure • Cornerstone commitments of US$250 million by 3i Group and 3i Infrastructure Portfo
Slide 41: Junior debt portfolio
Junior debt portfolio Portfolio detail Strategy Date invested April – Sept 2008 • Build a portfolio of debt instruments issued by infrastructure businesses Cost £86.7m • Pricing at values below par delivers equity-like returns and Directors’ valuation £86.4m strong levels of cash yield Income in the
Slide 42: Governance
Governance • Independent Chairman, four 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 – Responsible f