3i Infrastructure rapidly deploys capital on back of legacy investments

3i Infrastructure is investing ahead of schedule and looks set to outperform return expectations. Separately its largest shareholder 3i Group exited a Finnish data services company with a six times return over three and a half years.

The UK-listed infrastructure fund 3i Infrastructure has invested ahead of its expectations since its initial public offering in April this year, when it raised £700 million (€974 million; $1.44 billion), a 3i managing director Michael Queen said.

Oil Tanking: 3i
acquired three

The fund is 59 percent or £412.7 million invested, according to a statement. Taking into account deals which had closed the fund is 74 percent committed, Queen said.

Because of the pace of investment the firm was “well ahead of its target” to be invested before March 2009, Queen said. The firm has also made a 4.8 percent return of £33.3 million on its invested portfolio, which has led analysts to raise the fund’s target for the year from 7 or 8 percent to 10 to 11 percent. The firm was ahead of expectations to meet its targeted 12 percent internal rate of return, according to analysts.

Queen said there had been a “flight to quality” in the debt markets so that the levels of debt available for infrastructure deals had not diminished. “The only difference is the oversubscription level for projects is less than it was. There was three to four to five times oversubscription before the debt market problems and now this has lowered.”

The robust nature of cashflows at infrastructure portfolio companies has led banks to appreciate the qualities of the asset class slightly more in the current climate, Queen said.

The firm initially acquired £234.4 million of infrastructure assets from its largest shareholder 3i Group. This initial portfolio included minority investments in Anglian Water, Infrastructure Investors, Octagon and Alpha Schools. The firm has made three other investments of £147.4 million after the initial portfolio acquisition.

The firm bought a 45 percent stake in three subsidiaries of German petroleum and chemical storage company Oiltanking for £84.5 million. In August it bought a 16.7 percent stake from 3i Group in German waste energy company Thermal Conversion Compound Industriepark for £6.5 million.

It committed $250 million to sister investment fund 3i India Infrastructure Fund in September. This fund has bought a power station development in the port of Mundra in Gujarat, drawing down £56.4 million from 3i Infrastructure.

The firm has also made £30.9 million of follow-on investments. Its diluted net asset value per share was £1.03.

Separately 3i Group sold a 42 percent stake in Finnish data provider Empower to the former captive arm of Dutch Bank ABN AMRO, AAC Capital Partners, alongside Nordic private equity firm Profita Management. Terms were undisclosed but a city source said the enterprise value of the deal was around €120 million. 3i made a more than six times return on its initial investment with a greater than 60 percent internal rate of return since early 2004.