Full year results for the twelve months ended 31 December 2019

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION, RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN, OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL OR TO U.S. PERSONS. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION.

OPERATIONAL UPDATE

• The Company reaffirms that the operational performance of its investment portfolio continues as expected and there has been no material change since the Market Update issued on 26 March 2020
• The Company announces its full-year results for the year-ending 31 December 2019
• The reliability and predictability of the portfolio’s operational performance in 2019 has supported the Company’s aim of achieving consistent and growing returns via the declaration of a 2.6% increase in full-year dividend distribution to 7.18 pence per share^[i]
• The Company’s liquidity position remains strong with a £400 million revolving debt facility (maturing in July 2021) of which only c.£13.4 million is currently utilised. The Company currently also has c.£90 million of cash available with additional cash reserves held within the underlying investments
• The Company’s Investment Adviser, Amber Infrastructure Group (‘Amber’) and its asset management team are fully resourced and continue to actively manage portfolio performance. The team continues to provide clients with the support they need, whilst ensuring the health and safety of staff during this time of uncertainty – the full extent of which and its associated impact on the Company cannot yet be ascertained

PERFORMANCE FOR THE PERIOD TO 31 DECEMBER 2019

• During 2019, the Company continued to deliver long-term benefits for all its stakeholders by responsibly managing its portfolio of 130 public and social infrastructure projects and businesses
• Our portfolio of investments provides essential infrastructure to over 13 million people, households and businesses daily across the countries in which we invest
• The quality and strength of the Company’s investments generated strong operational cash flows supporting a 10.3% increase in Net Asset Value (‘NAV’) to £2.4 billion and increase in NAV per share to 150.6 pence
• £281.3 million of new cash investments were made during 2019, reflecting the Investment Adviser’s continued origination of value-enhancing opportunities in line with the Company’s investment strategy
• The Company successfully raised £190.1 million of new capital during the year to partially repay the cash drawn on its corporate debt facility
• As part of a portfolio-wide review of key performance indicators, the Company has revised its medium-term annualised internal rate of return target to 7% per annum^[ii] to reflect the growing maturity of the infrastructure asset class in which we invest, and the effects of a lower-for-longer interest rate environment. This includes the associated compression in returns on investments as a result of a current base interest rate below 1% p.a., compared to 5% p.a. at the time of the Company’s IPO
• The Company’s Investment Adviser is a signatory of the UN Principles of Responsible Investment (‘UN PRI’), and the Company continued to increase its alignment to the UN Sustainable Development Goals (‘UN SDGs’) to help manage ESG risk and specifically drive environmental progress across its assets.

FINANCIAL HIGHLIGHTS^[iii]

• NAV per share growth to 150.6 pence (31 December 2018: 148.1 pence)
• Full-year dividend increase of 2.6% to 7.18 pence per share (31 December 2018: 7.00 pence per share)
• IFRS profit before tax of £137.8 million (31 December 2018: £138.1 million)
• Strong inflation-linkage was maintained with a projected increase in return of 0.82% p.a. for a 1.00% p.a. increase in inflation (31 December 2018: 0.82% p.a.)^[iv]
• Target 2020 and 2021 full-year dividends of 7.36 and 7.55 pence per share, respectively. Whilst we currently have good forward-visibility of cash flows generated by the Company’s investments given their predictability, we continue to monitor the current Covid-19 related uncertainty
• Low correlation to the FTSE All Share Index of 0.25 and 0.19 over 12 months and 5 years, respectively.^[v]
• 2019 cash dividend cover of 1.3x^[vi]

PORTFOLIO UPDATE

Value-focused portfolio management

• During 2019, the Company continued to diligently manage greenfield projects where 9.2% of the portfolio is currently under construction. This includes Tideway, UK, where construction is now 50% complete
• Taking advantage of its pre-emption rights, the Company invested a further £2 million in two Building Schools for Future (‘BSF’) projects in Luton and Wolverhampton, UK, respectively. This followed the refinancing of Ealing and Blackburn (1 and 2) BSF projects which generated improved shared financial returns for both the Company and the local authorities
• Following the £12.4 million recapitalisation of the Midlands batch of the Priority Schools Building Programme, UK, the construction works were completed by year end with limited disruption to school pupils
• The Company completed an innovative refinancing and restructuring of three of its offshore transmission assets (‘OFTO’) by repaying the original bank debt with a combination of new lower-cost long-term finance and a £71.5 million senior debt investment made by the Company. This has enhanced the earnings quality of these assets

Further allocation to availability-based renewables assets

• The Company was appointed preferred bidder on its eighth and ninth UK OFTO in which we hope to invest c.£100 million by the end of 2020. These two OFTOs have a combined transmission capacity of 988MW, enough to power 800,000 more homes with renewable power. The Company will take no exposure to electricity production or price risk but is paid a pre-agreed, availability-based revenue stream over 20 years, fully linked to UK inflation

Additional exposure to mature inflation-linked regulated assets

• The Company invested a further £153.2 million to reach its long-term target shareholding of 7.25% of Cadent, a UK gas distribution business connecting 11 million UK homes and businesses. This provides the Company with a permanent board seat as part of a highly qualified consortium of international investors which now owns 100% of the business
• Cadent delivers long-term cash flows with low anticipated levels of volatility and a strong degree of inflation-linkage. In addition, Cadent plays an important role in supporting the UK Government’s net zero target for 2050, undertaking research to demonstrate how the existing gas network can be used for clean fuel distribution in the future

Continued global portfolio diversification

• The Company acquired an additional 51% shareholding in BeNEX, the German rail business, with an accretive investment of £29.4 million^[vii]. The acquisition increases the Company’s ownership to 100%, following its initial acquisition in 2007. The Company has limited exposure to passenger volumes and fair prices

ASSET STEWARDSHIP^[viii]

Over the period, the Investment Adviser introduced a series of sector-specific ESG stewardship objectives, which further evolved the Company’s ESG controls for the five key asset classes in which the Company invests. This supports enhanced alignment of the portfolio to the UN SDGs, more about which can be found on pages 34-40 of the Company’s Annual Report. Owing to the Investment Adviser’s active asset management approach, the Company noted, among other things:

• 94% of investments are captured by an overarching ESG policy to help reduce risk and drive environmental and social progress;
• In demonstration of the Company’s commitment to health and safety, the Accident Frequency Rate for occupational accidents that resulted in lost time was 0.36 per 100,000 hours worked;
• Over 91,000 of additional hours of asset availability were dedicated to community use;
• Creation of over 12,000 sustained full-time equivalent jobs;
• Over 1,000 commissioned contract variations which resulted in £47.4 million of additional project work conducted on behalf of the commissioning body.

Michael Gerrard, Chairman of International Public Partnerships Limited, said: “Our portfolio of 130 infrastructure assets is proving resilient through an uncertain environment created by the Covid-19 pandemic and its global economic consequences. The strength of our underlying cash flows supports the forthcoming payment of our full-year dividend, as scheduled. The Investment Adviser continues to focus on ensuring that our clients and their end-users are well supported during this exceptionally difficult time, and I have great confidence in the Company’s continued ability to generate inflation-linked returns for our shareholders, in line with expectations.”

A copy of the results presentation can be downloaded here.

INPP is a listed infrastructure investment company that invests in global public infrastructure projects and businesses, which meets societal and environmental needs, both now, and into the future.

INPP is a responsible, long-term investor in 130 infrastructure projects and businesses. The portfolio consists of utility and transmission, transport, education, health, justice and digital infrastructure projects and businesses, in the UK, Europe, Australia and North America. INPP seeks to provide its shareholders with both a long-term yield and capital growth.

Amber Infrastructure Group ('Amber') is the Investment Adviser to INPP and consists of approximately 130 staff who are responsible for the management of, advice on and origination of infrastructure investments.

IMPORTANT INFORMATION

This announcement contains information that is inside information for the purposes of the Market Abuse Regulation (EU) No. 596/2014.

This announcement is an advertisement. It does not constitute a prospectus relating to the Company and does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract therefor.

Forward-looking statements are subject to risks and uncertainties and accordingly the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These forward-looking statements speak only as at the date of this announcement. The Company, Amber and Numis Securities expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Prospectus Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.

^{[i] The forecast date for payment of the dividend relating to the six months to 31 December 2019 is 19 June 2020.}

^{[ii] Calculated by reference to the November 2006 IPO issue price of 100p and reflecting NAV appreciation plus dividends paid.}

^{[iii] For the full year ended 31 December 2019 unless otherwise stated.}

^{[iv] Projected increase in portfolio return for a 1.00% p.a. increase in the inflation rate assumed in the current valuation analysis for each asset in the portfolio.}

^{[v] Correlation (R) from Bloomberg – 12 months and 5 years to 31 December 2019.}

^{[vi] Cash dividend payments to investors are paid from net operating cash flow before non-recurring operating costs as detailed.}

^{[vii] In addition, there is a deferred commitment of £17.8 million which is due to be settled from future returns generated by BeNEX.}

^{[viii] Metrics are estimates and exclude digital infrastructure (UK), US Military Housing, Brescia Hospital (Italy) and construction projects (except Tideway).}