3i Infrastructure (LSE:3IN) — Full Year Results

0:00 Good afternoon, and welcome to the 3I INFRASTRUCTURE PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to James Doors, CFO. Good afternoon, sir.

0:32 Good afternoon, everybody, and thank you very much for joining this full year results presentation. We appreciate your interest in in the company very much. I will scroll through the first couple of slides, which are hard to read, and they're the standard disclaimers. I'll start the presentation just in case we've got people who are not familiar with the company on the line with a quick introduction to the company. So 3I INFRASTRUCTURE PLC, a large public company investing in private infrastructure businesses just outside the FTSE one hundred, market capital of around £3,500,000,000 depending on what the share price is at any one point. The aim is to have a diversified portfolio of private businesses within the company.

1:24 These are businesses that you can't buy yourselves obviously because they're private, but you can invest through the listed investment trust structure. We are control investors, so we seek control positions taking majority stakes, often 100% stakes. And we have this is the we've just entered the twentieth year of the company, We've got a long proven repeatable strategy for driving value through managing the companies that we own very actively. Our investment objectives are to deliver a total return of eight to 10% per annum over the medium term and we've got that track record. We've met or exceeded that target every year for more than ten years. And within that return target we're also seeking to provide a progressive annual dividend per share, so the income out to shareholders, and we yield around about 3.5% on NAV, so 3.5 to 4% on share price at the moment.

2:26 Moving forward, area of infrastructure that we invest in, we call it core plus. Just to explain what that is, this is a simple risk return spectrum chart. At the lower end of the risk return spectrum, you've got what we think of as core infrastructure or public private partnerships as well. So concessions where you're contracting with government or on the core end regulated monopolies, regulated utilities, for example. And those typically return nowadays eight to 10% gross. And you've got some of the renewable portfolio of renewable energy generation assets, sort of solar farms and wind farms as well down at that end of the market.

3:13 Clearly, we're getting eight to 10% gross returns off our investments, we're not going to be able to deliver eight to 10% net of all fees to shareholders. So that is not part of the market that we invest in. So we're slightly further up the risk return spectrum in core plus. And these are real businesses rather than just concessions or portfolios of assets. These are companies with management teams, with employees, with engineering expertise, but importantly, they're infrastructure businesses and they have asset bases and they're seeking high quality assets and they're doing something essential. So they're providing an essential service to either the industry they're in or to the public.

3:58 And we're looking for businesses that are supported by long term growth, we call them mega trends. So trends that will persist beyond any one economic cycle. So the two main mega trends in the portfolio at the moment are the energy transition, so moving away from oil and gas towards renewable energy and all that means in terms of strengthening the grid and that sort of thing, ways of generating electricity. And also digitalization, so communications infrastructure and digital assets. Those two I do see as linked, you would have seen I think a lot in newspapers, people talking about increasing energy demands to fuel the growth in digital assets.

4:48 But beyond that, we've also got the need to renew essential infrastructure. So that's one of the themes and demographic change. So ageing populations, the burdens on the health care and other sort of assets within society that that brings. And typically, when we're looking to buy new businesses, we're trying to find businesses that aren't already owned by infrastructure funds. So there may be it's corporate carve outs, it's things owned by family offices or by private equity funds, and where we are then going to be the first infrastructure owner. And we will then reposition companies in many ways to make them more infrastructure like and then can sell them on in due course to another infrastructure investor, ideally a larger business by that stage and selling on to a larger infrastructure investor.

5:40 So that's the key elements of what we're looking for. And once we've bought something, as I said, we look to enhance the infrastructure characteristics and we have a clear plan of doing that when we buy something. So we're thinking about that even as we're looking to make an investment into a business. And then, infrastructure investors love CapEx, and often that's a good reason for, businesses to move into our ownership because maybe they've been starved of capital in the past. For example, if they've been owned by a larger corporate whose strategy lies in a different direction, so they haven't had the capital available to invest in their asset bases. We like investing in asset bases. We can then drive growth in earnings, grow the business, and grow the earnings and then, move to sell it in due course. And and that's the third leg of of this strategy is is preparing businesses for exit, finding a clear growth pathway that somebody else can back.

6:41 And ideally, we've we've grown the business and and we're moving it on to somebody with with even deeper pockets than we have. So that's the three prongs to our strategy. And this is the track record. So this we've included this in our latest full year results. So up to March 2026. So over the last decade, 13% per annum, sort of compounding nicely over that period. So always good, good to have charts that are going up and to the right and 6.6% per annum within that dividend growth. So growing income over to shareholders.

7:24 While we're still on this slide, we give one year's forward visibility of the dividend and we've met the target that we set a year ago in terms of the dividend and we've set a new target. That target is up 6.3% on on the prior year dividend. 14.3p per share is the dividend target for full year 2027. So just quick highlights of the year. So as I said for more than ten years, we've met or exceeded our return target 8.5% this year. We've met the target. There were some ups and downs within there, which I will go through shortly. And I can see the question base starting to build up, which will cover some of that.

8:12 The net asset value per share at $4.00 5.2p. The last share price I checked, we're in the £3 60s. So we're trading at roughly 10% discount to net asset value at the moment. In terms of liquidity, we were materially drawn into the credit facility at the 3I INFRASTRUCTURE PLC level. And we've done that because we'd invested in a number of businesses and this credit facility is held to bridge the timing difference between buying and selling businesses. And we had previously said that we thought the next sale of a business would fully repay that credit facility. And indeed, this is what we're showing here. We with with the deals that we've signed in the in the last six months, when all those complete, we will have 200,000,000, of of net cash. So that's the pro form a position. So fully repaying their credit facility at the top tier level, and, some cash available. And we would expect to invest continuing to invest through the portfolio companies that we own.

9:23 And we have room to add one or more portfolio companies we think to the portfolio, and continue to diversify it. The dividend I mentioned already, we met the dividend target 13.45. So half of that was already paid as an interim dividend, and we'll pay the second half in July, following the AGM provided shareholders approve it. So that will meet 13.45p per share. That's fully covered by income net of costs from the company and the higher target as I mentioned 14.3p for next year.

10:01 So this is what we set out to do over the last financial year and we told shareholders this as we went through the year. It was an extremely busy year, one of the busiest that I can remember in the more than ten years I've been here. We set out to sell a business. We look to sell the right business at the right time. So we don't want to be driven by some liquidity needs or anything, but selling businesses is a key part of our proposition. And we had identified that we thought TCR actually was our largest business in the portfolio was the right business to sell and this was the right time to sell it. And that took really the year to do that.

10:49 So we set out to do that. We also set out to invest more through our existing portfolio companies and we've done that. And also to refresh our pipeline of potential new investments and potentially to make one or more investments out of that pipeline and again we've done that. So on the right hand side what we've delivered so we did sign the deal to sell TCR, I'll go through that in more detail in a minute. And that was at the start of March. We made four bolt on investments again, we'll come to this in a bit more detail, for SVAC, Joules and Future Biogas, so existing businesses within our portfolio companies we've added to them. And we made a new investment that we're very excited about, in the Left Al MIND Data Center campus in Norway. And I will tell you why we're so excited about that in a minute.

11:45 First, and again, I can see the questions building up here on DNS net. So this was a drag on returns during the year. We announced a major change in sentiment on this business in our q three update, and I did one of these, presentations through this platform at the time. So I dealt with that quite a lot, then. DNSnet was a German fibre to the home business. So, a business that already owned a fibre to the cabinet network. And, we backed the management team to to roll out it was a sort of early stage network at the time, but to roll out a network of fibre to the home. In Germany, it was a regionally, sort of concentrated network around Berlin.

12:37 Everybody in the sector and a lot of infrastructure investors went into German fibre on the back of the German government, sort of seeking to get universal coverage as we've seen here in The UK, over a pretty short time period. So we thought there was a good tailwind there. It turned out to be a lot harder than we than we expected. And so we made pretty prompt changes a few years ago. We recruited a new management team who had done this before, they'd rolled out fibre to the home networks before. We recalibrated the business plan so it was less ambitious and more deliverable. And we also focused at the time on rather than rolling out new fibre on densifying the network that had already been rolled out.

13:25 And when we announced our interim results, we were in the process of raising additional debt because it was primarily a debt funded rollout. And we were quite advanced in doing that. We were close to raising an additional €100,000,000 of debt to continue the rollout. At the back end of 2025, the largest alternative network in Germany, Deutsche Glasfaser, it was announced it had gone into restructuring talks with its lenders. That completely changed the debt market for specifically for this sector in Germany. And that meant that we couldn't raise any more debt. And we this took a little while to play out, but when we announced our Q3 update, I think it was right at the start of February, we said that we'd taken the view that given that change in sentiment, we were not going to be able to roll out the network that we expected and that the equity value of the platform that we had, we saw going to be written down to zero. And that remains the case. And I was saying at the time, it would be overly optimistic to think that that was going to be anything other than zero.

14:39 I stand by that at the moment. We are still working with the company and working with lenders. But we've decided we're not going to be putting any more equity into this business, because we don't have sufficient confidence in getting a return on any further equity. So we're still working with the company and with lenders, but I do expect this to be fully written off in due course, and that the business will be transferred, the ownership of the business will be transferred to lenders. We don't see these issues, in terms of the debt market, on any of our other portfolio companies. This was a very different investment proposition to anything else we have in the portfolio. Fortunately, was one of the smaller investments in the portfolio. In terms of lessons learned, we've reflected on that and we talked a bit about it in our in our analyst presentation when we made these full year numbers public.

15:34 I think one of the key things is when you're doing a largely debt funded rollout of some of an asset base, are and it's going to take many years, you are going to be exposed to changes in the debt market over time. And so one way of putting it is the hurdle for making a new investment of that sort should be higher. So I think that's one of the key takeaways from that. And the other thing was that everybody found it harder to do this network rollout in Germany than we'd expected. So we thought we'd deal with that upfront. But across the business, we did have this is across the portfolio, some standout performers, I'll talk a bit about them in a minute, particularly the exceptional return on selling TCR.

16:22 We had double digit returns from many of the portfolio companies And one other business that's been having difficulties in The UK, SRL, again, I'll talk through that in a minute. We've taken some value out of that business. Again, fortunately, that was one of the smaller businesses in the portfolio. These are weighted by size order, that so that the weight of strong performance is at the larger ends. Here's the portfolio at the at the financial year end. The pie chart, you can see TCR was the largest business in the portfolio at the time, 4,300,000,000. We've sold it for a bit under £1,000,000,000. Again, I'll come to that detail in a minute. But you can see the spread, you can see the energy transition assets in the lighter blue, you can see digitalisation in the sort of more pinky colour, and sort of the renewing, essentially infrastructure is more in the green. And in a darker blue is Eonisos, which is exposed to the the health care market.

17:27 I'll I'll come back to what the the portfolio shape looks looks like. So if you're buying into this new now, you're buying into the the future portfolio rather than this one. The new investment that we've made, that we're very excited about is in a we didn't have exposure to a data centre business before, because we never found the right one. And we think we have found the right one now. And the origination aspect of this is worth talking about in a little bit now. This business is on the West Coast Of Norway. It I wouldn't say it's completely unique, but it's a very unusual business in that it's a campus within a mountain. So within it's a disused mine being repurposed as a data centre complex.

18:17 And it's vast. It's six levels, only one of which is being used. It has seven fibre networks connected to it, one of which is the TampNet network running along the West Coast Of Norway. So we actually already knew about this business as a customer of TampNet. We had met the management team a couple of years ago, when it was an earlier stage business. And but thought it was very interesting. And we were in in contact with the owners of the business, which was a fund managed by Columbia thread needle, who had made that they'd raised some money, investing in private infrastructure. And they that the fund had not performed as they'd expected.

19:07 And their investors were not happy. They were not going to be able to raise more funding to continue this strategy. So they were looking for a solution and multiple stakeholders were involved. Obviously, had the previous investors in this fund, you had the team at Columbia Threadneedle, and actually a lot of the team left because of the performance issues in the fund. And but there were still some people there managing the remaining assets. And you had the owner, the Columbia Threadneedler, who were looking to stop investing in private infrastructure. So they were looking initially for somebody to take over the management of their fund. We actually ended up making a different proposal, which was that we would set up a new fund vehicle that the investors would have a choice as to whether to continue investing in the assets, or whether they would like to sell now.

20:04 And if they sold now, the 3I INFRASTRUCTURE would provide liquidity and take on, ownership of of essentially their stakes in the fund. By this stage, almost all of the value of the fund was in this one asset, the Left L 9 data center. And so it's a very unusual transaction. And we started talking to Columbia Threadneedle about a year ago and started the valuation that was being put on the business was was from about a year ago. And that's the price at which investors were being, you know, offered to roll or exit. Most investors are exiting, about €40,000,000 of money is rolling into our new vehicle.

20:51 And 3I INFRASTRUCTURE is putting in about 300,000,000 into this investment. And the reason I'm going into this in such detail is it's not just the investment that's very unusual and has very attractive characteristics, which I'll talk to in a minute. It was the way we got into doing it, which meant that we we think we got in at a very good entry price, which is critical for delivering a very good return, for new investments. And then the characteristics that are so exciting about about this business, because it's in a naturally cold environment within a mine, and it's in an environment where obviously the walls of the of the data centers are already there. These are caverns that have been excavated in the past. It's very cheap. It's very cheap to keep cool. It takes cold water from the fjord, circulates it to drive the cooling, which means it has a very it's very efficient.

21:48 So one of the metrics for data centres is it's called power usage effectiveness. 1.1 is about as good as it gets, it means almost all of the power goes to compute rather than running the underlying infrastructure. Providing the power, providing the cooling, and providing the fibre connectivity, which is what our business does. It has 80 megawatts of power capacity available from the grid. It's in one of the cheapest electricity areas in Europe, in the middle of Norway. It's 100% renewable power, mostly hydroelectric. And all of that 80 megawatts of capacity is now fully contracted. That wasn't the case when we first started talking to the business, but it is now.

22:36 And those contracts are availability based, they're inflation linked,

22:41 and on average they're more than ten years term to run. We grew this business to being the largest lease lessor of ground handling equipment in airports in the world. We grew it into a global platform and on realisation we've achieved a price that's 50% higher than the valuation at the start of the year, so before the process kicked off. 20% IRR over the life of the investment, which is around ten years, So, that's an amazing sort of compounding every year return. So, we've done more than three times our money, so 3.6 times is a very good result. So, we were very pleased with that and that's driven a key part of the return this year and offset the write down in value at DNSnet.

23:38 And this isn't a one off. So over the last three years, we've sold three businesses. Otero was a waste treatment business in The Netherlands. Valerem is a renewable energy developer based in France, but it became more wider European and TCR. And over those three years and those three companies, we delivered 3.5 times our money and 21% IRR across the three investments. And if look back at three years ago, those three investments between them were just under a quarter of the portfolio, and we've sold them for a 76% uplift overall over those three years in value. And I think this is a key part of our strategy. We buy investments with long term hold investment cases, but because we do rotate the portfolio over time, we are proving out constantly proving out the net asset values that we hold businesses at. We're selling them ahead of those net asset values.

24:43 And as I say, if over three years we can turn a quarter of the portfolio into cash, add a significant uplift, I think that demonstrates the robustness of our valuation process and indeed of our value creation process across the portfolio.

25:01 Moving on a little bit about liquidity. I mentioned this earlier. So, we ended the year, at the end of March, at £531,000,000 drawn into our credit facility. As I said, we use this as a bridge between investments and realisations, And so, it's not long term debt at Topco level, because the underlying portfolio companies are geared in themselves. And the TCR proceeds fully repay that. The investment in the Left Al Mine Data Centre Complex, that uses £262,000,000 so that's the €300,000,000 and that gives us the pro form a net cash of £200,000,000 when all of those complete in the next couple of months, I would expect.

25:47 We are quite active in managing our credit facilities. So, we have a £900,000,000 credit facility that on top of that has a £300,000,000 what we call the accordion feature. We activated that accordion, so we got extra commitments from our lenders to bring us to £1,200,000,000 of available facilities. Obviously, when you'll receive nearly a billion pounds of cash in from an investment, that is a useful thing to have, and it means that you can look to commit some of those proceeds in advance of receiving the cash, which is of course what we did. We left our mind. In fact, we signed that investment a week after we signed the realisation of TCR, but well ahead, a few months ahead of getting the cash. And that is a feature of private market investing.

26:35 I mean, it can take a year to sell a business, even between signing and completion, it can be a number of months while you get various approvals through. So, it's very helpful to have that flexibility from available credit facilities. There's a slide showing the sort of second leg of our strategy, investing through CapEx. We invested over £400,000,000 in gross CapEx through the portfolio. Most of that was cash generated by portfolio companies themselves and their own debt facilities. I'll come to those in a minute. And that helped drive across the portfolio 11 growth in earnings. That's the annual growth over the last three years, so 11% per annum.

27:26 We've got some extra metrics here. In terms of what we look for in infrastructure businesses, they tend to have high EBITDA margins, which gives them a lot of resilience and enables them generate the cash to invest in CapEx. And 86% cash conversion, so 86% of their earnings turns into cash. So, 43% EBITDA margin, that's the average across the portfolio. Moving on now, so this is the portfolio that we're very excited about. So if you buy into the company now, this is what you're buying into. So TCR sold, left our mine added to the portfolio. We think this is a well balanced portfolio. The new investment has significant upside.

28:14 We have strong liquidity. A small relative to the size of the company, a small cash balance. We have a lot of flexibility around timing of what we do next, about investing further through portfolio, about investing in new businesses to further diversify the portfolio. I would say of all the advanced sort of investment cases we had in our pipeline, we signed them all, so we're now going through a process of refreshing them. So, the nearer term, I would say maybe there might be some bolt on activities, but in terms of new platform businesses, I wouldn't expect that to be imminent, but it would be good to add another business in the next financial year to the portfolio.

28:58 And we're saying that this year, the new financial year, we've made a very strong start. So, we're very pleased about the position that we're in at the moment. Because of the time we've taken, I'm probably not going to go through all the asset slides in detail. They're available on our website. You can add I know there were some questions that were asked in Q and A, so we'll get to those in a second. But we will take if there are further questions, we will take them and after the last presentation I did answer a few extra things and those went up onto sort of Q and A summary after the meeting. So perhaps given the time that we've taken with the interruptions, can move to Q and A now.

29:53 That's great, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Catherine, if I could just hand back to you just to read out the questions give responses where appropriate to do so and I'll pick up from you at the end. Okay, I'm going to do it myself actually just because we've had to swap laptops as part of trying to fix the connectivity issues. So all of the Q and A is in front of my screen now. The first bit on DNS, absolutely right, lessons learned. I think I covered this a little bit in my remarks. Hopefully that came through.

30:41 There are always lessons learned when things go wrong and we've been giving that some thought. I think I made the point about long sort of rollout investments that require raising additional debt along the way. You are going to be exposed to changes in the credit cycle as you go. So I think that's you need much more buffer in the return that you're seeking to take account of that additional risk. So, we will learn from that and have learned that lesson. The next question. So industry consolidation, I'm assuming this well, there are two sides to it.

31:29 Maybe this relates to DNSnet. I'm not sure. In terms of German fibre, no, we don't want to be part of consolidating the industry. I think that's maybe somebody else can do that. I think we're sufficiently burnt by that one. In terms of the listed infrastructure market, which is probably what the questioner is getting at, I think we're seeing that really there's a lot of the companies, billion or less, have either gone into wind down or been taken private already. So rather than consolidation, it's been those companies ceasing to exist in time and that's going on at the moment. And indeed it was interesting that BBGI as one of the larger companies participated was taken private.

32:20 I think we'll remain as my personal view is that the company's over one or two billion, will be what remains in due course. I think the hurdle for consolidating the market and we did see some managers trying to consolidate even a couple of the funds that the same manager was managing and those didn't go through. So, I think there's quite a high bar rightly from shareholders on consolidation. So, I think we'll keep on doing what we're doing. We're by far the largest in the sector and we want to keep growing the business from here. The next question: In investing, is there a typical timeframe because we buy, we manage these businesses and then we sell?

33:14 Typical timeframe, mean, TCR was held for ten years. Typical is probably five to seven years, so longer than our private equity colleagues would typically hold an investment for. But I think, yeah, maybe that's the typical but that's in no way a sort of a limit or even actually a driver for when we take businesses to market. We will take a business to market when we think it's the right time for that company, right time in the market and indeed the right time for that business itself. There's some questions on the UK government and what they're doing on renewables. We have two renewable sort of energy generation businesses in the portfolio.

34:05 One, INFRASTRUCTURE generates electricity and the other one, Future Biogas, generates gas from anaerobic digestion.

34:16 And we need more energy in The UK, so the market will incentivise people to generate energy. Generating electricity from offshore wind is efficient. Generating electricity from solar panels is efficient. Generating electricity from landfill gas is an extremely sensible idea because you've got methane from landfills. It's generated by rotting waste and the methane is a very potent greenhouse gas. So, you have to do something with it. You either flare it and just burn it off, or you generate electricity from it. The subsidies for that have always been due to end in 2027.

35:01 That's always been in our investment case. We do think it is worth the government incentivising ongoing electricity generation from landfill gas. We'll see how they do that. They are looking at providing, well, contracts for difference where the government effectively guarantees or sets a price level. If the wholesale price is lower than that, you get a top up. If it's higher than that, the government takes the benefit. So that seems to be where it's going. We'll consult with the government along with the rest of the industry on making sure the proposals are sensible. I think when it comes down to it, other parties who talk about what they do for renewables, we need the energy and wise heads realise that and, you know, they're faced with the need for the energy, they will continue to make sure the energy is produced.

36:03 But largely, we try not to rely on subsidies to an excessive extent. And indeed, note that we don't assume any further subsidies for landfill gas in our valuations. Right, the next one. So, have I told institutional investors a few details which are not public? I don't think I said that. I think I talked about our analyst presentation. Those are considered to be a public forum and indeed it's on our website, the broadcast of that. So that's the stock market analysts. That counts as public disclosure and it is available to you on website.

36:53 So, I'm not going to say anything different to any shareholder that I would do through this forum. I absolutely understand my obligations as the CFO of this business. Just going through. A long term shareholder has asked a question saying that they've been invested in this since 2015, which is great. I joined at the start of 2016, so a similar time period. But it's a question of how have we managed to produce a relatively smooth return over time? Well, it's not by fudging the valuations, because we prove those out by selling the businesses. And I think in terms of businesses held since 2015, there are only two that were in the portfolio then that are still in the portfolio now.

37:46 SVAC, which we bought in 2015, and one part of the Oystercatcher portfolio, which remains that was an original portfolio from 2008. But everything else that we held then has been sold, it's been monetised, we've proved the value and indeed many of the things that we've bought since 2015 we've also sold and proved the value. So I think the reason we produce steady returns, we have a diversified portfolio exposed to different underlying risks. So we are less exposed to the interest rate cycle than maybe some of the, well, fixed income funds or slightly more fixed income like infrastructure funds investing more at the core end. We take a long term valuation approach. We haven't changed our inflation assumptions. So, we value things based on a 2% inflation over the long term. That's CPI, 2.5% RPI rather.

38:42 That's been the case since the start of the vehicle. And all of our other macro assumptions are based around those long term assumptions. So, we're not moving things around in that way, but we're investing in businesses that are doing essential things that continue to perform across the economic cycle. So, that's really what's behind the steady progress of our portfolio over time. And as I said, we're incentivised to outperform that. So, we work extremely hard to find ways to deliver better performance than our base cases in our portfolio.

39:19 Another question on the discount rate. So, the weighted average discount rate, it's slide in deck and the slide deck is on our website if you want to look at the full deck. The weighted average discount rate across the portfolio is 11.1%. So, if we deliver our business cases, we should get a gross return off the portfolio of 11.1%, which will translate to a net return to shareholders of something at the high end of our eight to 10% return target. So, the portfolio is built, is designed and structured to deliver our return target. A few more questions about the mine.

40:07 What did it do before?

40:09 Was a material called Olivine, and I'm not an expert in that, but that's what was mined out of that mountain. I mean, a mine, a deep mine with very large sort of caverns within it is a naturally cool place. Mean, if you walk in there, it's obviously colder than the outside and it's on the West Coast Of Norway, sort of halfway up, so it's a naturally cooler environment. And as I said before, it's using natural cooling from the fjord and the intake of the water from the fjord comes in at eight degrees centigrade and that's pretty constant across the year.

40:53 The cooling system, I mean, modern chips now, GPUs made by Nvidia, they're vast and the cooling actually goes through the chips and so the excess heat is taken away by the cooling system and it leaves back the water goes back into the fjord, warm at about 20 degrees at a different level in the water, in the depths in the fjord. Which is why, and this gets to what the question is asking, why it doesn't turn into a vast sauna. It's a vast mine and it's kept cool by the cooling system. Are there any legacy issues? Not in the mine. I mean, we're a sort of landlord in the mine.

41:43 Everything's contained within the mine, there's no sort of groundwater or soil remediation that you get from other sort of above ground issues and so not aware of any legacy issues. Does 3i have a non exec director on the board of each of its portfolio companies? I think this is a very good question. Yes, we control all except for one, which is the oyster catcher business, where we have a 45% stake alongside an operator. This is a sort of oil products storage. This is a legacy investment

42:27 an oil products terminal in Singapore, where we have a 45% stake as the financial investor alongside the operator of the terminal. But it's run as a joint venture, we're on the board of that terminal. But for all of the others, not only do we have multiple non exec directors on the board, we control the boards because we are the majority owner of the businesses. That's key to driving value. If we need to make changes to the management team, we will. If we are pivoting the strategy, then we have the ability to do that. Typically, within our team, in addition to a couple of people on the board, have five or six people in total from our investment team on the boards of each of our portfolio companies.

43:13 So, that's how we drive value through the portfolio.

43:19 Some questions on renewable energy. Renewable energy trusts, yes, they've had a hard time over the last couple of years. Are we exposed to their poor performances? Well, you might be if you're invested in them. We're not invested in them. We have businesses with employees and with strategies and with engineering teams and development teams and energy trading teams within those businesses. What our companies are not is just a portfolio of assets where all of the management of those assets, of the operation are outsourced. And typically that's what you have with those renewable energy trusts. So, it's quite a different beast. And I mean, are valuing them in a different way to the way we're valuing our businesses.

44:14 Within our weighted average discount rate that I mentioned of 11.1%, The range is 10.3% up to 13%. So, all of our base cases are based on double digit returns. And over the last few years, you had some renewable trusts who are valuing their assets at, well, somewhere closer to 6%, maybe between six percent and eight percent investment returns, and then as interest rates came up, they had to increase their discount rates and if they didn't, the market did it for them by widening the discount that they were trading at. So, just think that's a very different investment proposal.

45:02 We are exposed to wholesale prices, electricity prices to some extent. We hedge INFINIS hedges forward up to three years, so we're hedged in the shorter term. But we want to keep our exposure to wholesale power prices in the single digits by value in terms of the portfolio. So, we're not too much of a renewable focused business in terms of energy production. How is AI playing out across the portfolio as a whole? Well, it's a tailwind. Clearly, a tailwind for the data centre complex. We have two connectivity businesses, TampNet and Flag. These are subsea fibre networks and absolutely increasing digitalisation and rollout of AI, whether it's by customers or by consumers, is very much a tailwind for the business.

45:59 And I think I mentioned at the beginning, I do see the energy transition linked to the digitalisation theme in some respects, because all of this is going to require more and more energy and you see that playing out across the listed market as well. SRL, I think the good thing is this is getting on for the last question on the panel, and I think we're running out of time. But SRL has been a difficult business. It's not similar to DNSnet in that it's already a very profitable company. It's a market leader in the provision of temporary traffic equipment, principally temporary traffic lights in The UK. It's profitable, it's got good EBITDA margins, it's cash generative.

46:48 What we haven't been seeing though is growth and it's been difficult in The UK market. It's had some headwinds from its sort of end promoters of roadworks, so the local authorities and indeed the fibre rollout in The UK. Local authorities have had budget constraints. Fibre rollout has slowed down more recently, so there's been less roadworks there are multiple players in this market. There's been a bit more competition. So, where we've seen revenue holding up, it hasn't been growing in the way we expected. And we have had cost challenges. I mean, UK businesses every morning on the news I hear another company talking about this. It has been difficult with employers NI with minimum wage increases, with business rates. It has been tough in The UK since we bought into SRL.

47:42 So, we've moderated our cash flow assumptions in that business. We've taken a quarter of the value out of it in the last year. Our aim is to grow from here, but it's not the same sort of position or indeed the same sort of investment thesis as DNSnet. That's great, thank you for answering those questions you and can from of course the company can review all questions submitted today and we'll publish those responses on the Investor Meet company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important for the company, James, could I please just ask you for a few closing comments?

48:15 Well, firstly, thank you very much for bearing with me. We will look into our IT issues and find out what was behind that. We are very excited about the portfolio we have now. We're on track to complete all the investments as expected. So, everything's going as planned in terms of the sale of TCR and getting the cash and the investment in the Mine Data Centre complex. But we're very excited about the prospects for the business. We've got a great portfolio and it started the year well. So, thank you very much for your support and I'll speak to you again soon. That's great. Thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations?

49:00 This will only take a few moments to complete and I'm sure be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.