INPP in £700m schools PF2 deal

The London-listed fund, as part of a consortium led by Amber Infrastructure, has been selected preferred bidder to finance the renovation of 46 UK schools.

The UK government has chosen Amber Infrastructure as preferred bidder to raise £700 million (€883 million; $1.2 billion) to rebuild or renovate some of the country’s most neglected schools.

The mandate is part of the government’s Priority School Building Programme, which aims to revamp 261 schools needing urgent repair across the UK. As part of the scheme, 46 schools in five batches will be delivered via private funding using the Private Finance 2 (PF2) structure.

Amber Infrastructure will act in consortium with International Public Partnerships Limited (INPP), the London-listed fund it manages. INPP expects to provide approximately 10 percent of the funding as each batch reaches financial close over the next 12 months.

Acknowledging the retreat of banks at the longer-tenor end of the market since the financial crisis, the government has proposed using an “aggregator model” to raise the liquidity. The structure will in effect have the capacity to warehouse loans and aggregate total financing requirements across all the batches.

Amber was part of the three consortia shortlisted in December 2013 to look after the aggregator, which also included Allianz and Uberior on the one hand and Barclays Infrastructure Fund, 3i and Blackrock on the other.

A source close to the firm told Infrastructure Investor that the winning consortium, in addition to INPP and Amber on the equity side, comprised Aviva and the European Investment Bank (as senior lenders) as well as Lloyds (as structuring bank).

The Education Funding Agency has already launched three of the batches, comprising the Hertfordshire batch, the Luton batch and the Reading batch, last May. The other groupings, to be released to the market over the next 12 months, include the North East and the North West batch, the Yorkshire batch and the Midlands batch.

Under PF2, the public sector and the main contractor will respectively provide around 2 per cent and 8 per cent of the equity needed to fund the projects, while the aggregator will make up the remaining 90 per cent of the required financing.