INPP, Amber eye fifth OFTO transaction

The London-listed fund and its adviser are nearing a close on the £170m Lincs transmission deal, for which they were selected preferred bidders as part of a consortium in May 2012.

UK electricity and gas market regulator Ofgem has published a notice related to the Lincs Offshore Transmission (OFTO) asset, in a strong indication that prospective investors in the projects will be given the green light to go ahead.

These include International Public Partnerships (INPP), the London Stock Exchange-listed fund, and Amber Infrastructure, INPP’s investment adviser. Both companies now expect the deal to close this November.

The investment would be made via Transmission Capital Partners – a joint venture between Amber, INPP and Transmission Investment, a UK-based firm specialised in the development, acquisition, financing and management of electricity transmission assets. Transmission Capital Partners was selected as preferred bidder for the Lincs OFTO by Ofgem in May 2012.

The consortium expects to invest approximately £170 million (€216 million; $278 million) in the project, which connects the 270-megawatt (MW) Lincolnshire wind farm to the National Grid via 100 kilometres of subsea cables, substations and other infrastructure.

Its members claim they will have no exposure to electricity production or price risk and will be remunerated via a pre-agreed, availability-based revenue stream over 20 years fully linked to UK inflation.

The deal, which would be INPP’s fifth OFTO transaction, comes after its investment in a £700 million schools PFI deal last July and further consolidation of its Building Schools for the Future (BSF) portfolio through several disposals and acquisitions.

Giles Frost, a director of INPP and chief executive officer of Amber Infrastructure, told Infrastructure Investor in March that he expected INPP to put £200 million to work in 2014. He pointed out then that this lump sum would be the result of the unpredictable gestation periods of pipeline deals –such as the Lincs OFTO – rather than any pressure to invest.

Last August, INPP reported a 1.8 percent net asset value (NAV) growth for the six months to end June and a profit before tax of £35.9 million. The company targets a dividend of 6.30 pence per share for the 2014 financial year and 6.45 pence per share for 2015, an increase of around 2.5 percent in each period.