INPP highlights ‘heat’ in secondary market

The listed UK fund manager is seeing big valuation uplifts, forcing a ‘disciplined’ approach to new investments.

Announcing its annual results to the end of last year, International Public Partnerships (INPP), the London Stock Exchange-listed fund manager, drew attention to the high prices being paid in the public-private partnership (PPP) secondary market.

Speaking to Infrastructure Investor, Giles Frost – a director of INPP and chief executive officer of its investment adviser Amber Infrastructure – said this “heat in the market” was demonstrated by INPP having sold certain minority interests (post period end) at a 52 percent premium to acquisition prices paid in 2011.

Frost said the state of the market called for a “disciplined” investment approach. He said that, out of 42 opportunities to invest last year, INPP had actually invested in just three for a combined investment of £36.5 million (€44.1 million; $60.7 million) – and that all three were increased stakes in existing investments. “There is a pricing advantage when you buy from co-shareholders,” said Frost.

Frost added that the firm, which has almost £81 million available to invest plus £175 million of acquisition debt to be drawn, would probably put around £200 million to work in 2014. However, he pointed out that this was due to the unpredictable gestation periods of pipeline deals – which include the Lincolnshire Offshore Transmission (OFTO) asset – rather than any pressure to invest. He also said that the firm had no immediate plans to raise more capital.

INPP will also see “more overseas opportunities over the next two years”, said Frost, who described the Australian market as “resurgent”. He also highlighted opportunities in Germany and Belgium. At the moment, 62 percent of INPP’s assets are located in the UK.

In its results, INPP announced a full-year dividend up 2.5 percent to 6.15 pence, with a minimum target of 6.30 pence for 2014 and 6.45 pence for 2015. Net asset value grew 8.6 percent during the year to £935.4 million.