3i Infrastructure plc (3IN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to 3i Infrastructure's 2020 Results Presentation. First of all, let me wish all of you good health in these troubled times and to thank you for logging in to this call. You should be able to see the slides, and they will also be available on the 3i Infrastructure website. Notwithstanding the different medium of our results presentation, we will be following the tried-and-tested agenda. After my brief introduction, I will hand over to Phil White, the Managing Partner of Infrastructure at 3i, who will talk about the business in general; and then to James Dawes, who will focus on financial matters. Finally, we will have a Q&A session. This slide summarizes the results for the year. First, we exceeded our target of an 8% to 10% total return over the medium term. The total return on opening net asset value was 11.4%. Our closing NAV was 254.5p per share. Valuing the portfolio in the context of COVID-19 was not straightforward. The manager, the Board and indeed the auditors spent a great deal of time and thought on this. I believe we have produced a valuation, which reflects the uncertainties in a balanced way. Both Phil and James will talk more about this later. We made one new platform investment during the year, Ionisos, further diversifying the portfolio. New investments totaled GBP 186 million. There were 2 major realizations during the year: First, Wireless Infrastructure Group; and secondly, the U.K. projects portfolio. Total gross proceeds were GBP 581 million. Phil will speak further about these transactions. The realizations, combined with the equity raise in the autumn of 2019, meant that at the 31st of March, we had a healthy cash position of GBP 418 million, with a further GBP 300 million undrawn from our revolving credit facility. We are, of course, keeping our liquidity position under regular review. But in present market conditions, our current view is to keep this high level of liquidity. James will expand on this later. I am pleased to announce that with a final dividend of 4.6p per share, the full year dividend is 9.2p per share, right on our previously indicated target. One of the major advantages of infrastructure over many other business sectors is a relatively predictable nature of cash flows. Clearly, COVID-19 will affect all businesses, and we are not immune from that. Nevertheless, there is a significant degree of visibility in the cash flows from our investee companies. So we feel able to set a dividend target of 9.8p per share for the next year, an increase of 6.5%. Over the last 5 years, the share price has significantly outperformed the FTSE 250 benchmark, delivering a 5-year total shareholder return of 12.5% per annum from the company. That compares with the FTSE 250 of 0.3%. Like just about every other company, our share price has been volatile recently. But so far, we have weathered the storm of COVID-19 reasonably well, and our share price has continued to outperform the FTSE 250. Before I pass over to Phil, I would like to make a couple of points on sustainability, which we take extremely seriously. First, we see sustainability as a real opportunity for us to influence companies positively. We can identify and invest in companies, which, along with other long-term social and economic themes, support a more sustainable future. And we have already begun to do just that. For example, Infinis, Joulz, Attero and Valorem are all helping the transition to a low carbon economy. In this year's annual report, we have expanded significantly the section on sustainability and explained the journey we are on, to enhance our approach to sustainability. Second, we appointed Samantha Hoe-Richardson as a Non-Executive Director earlier this year. Samantha brings deep expertise and experience on sustainability and the environment that will be invaluable to the company. Where in the past, it was enough to be good at responsible investment, we all know that today, there is a pressing need to go a lot further than that. Now over to Phil.

Thank you, Richard, and good morning, everyone. As Richard said, our portfolio is proving to be very resilient through this pandemic. In fact, all of our companies are maintaining continuity of service to their customers. And that resilience is clear when you look at our performance for the year as a whole. Once again, we have delivered a return well ahead of our target of 8% to 10% per annum over the medium term. And over the last 5 years, our average return has been almost 16% per year. Of course, this year's result would have been even better without COVID-19 and the fall in oil and power prices, both of which dampened year-end valuations. I'll talk about some of those effects in a minute. Then James will give you more detail on our approach to valuation in his remarks. As you all know, we aim to provide shareholders with sustainable long-term returns from a balanced portfolio of infrastructure investments that deliver both income and capital growth. We do that by actively managing the portfolio. That means selling assets when they no longer fit or where we can achieve exceptional value for shareholders through a sale; and through our origination platform, replacing the assets we've sold by buying businesses like Ionisos, Joulz and Tampnet that benefit from favorable social or economic trends and fit our key investment criteria. What do I mean by investment criteria? First, we're looking for asset-intensive businesses, delivering essential services and that have a strong market position and defensible competitive advantage; secondly, we target mid-market economic infrastructure businesses, where our engaged asset management approach will add value; and thirdly, businesses that have an acceptable element of market and/or volume risk. This is clearly a time of extraordinary economic and social challenges. And despite that, I'm really pleased that the portfolio is demonstrating the essential nature of the defensive businesses we bought. It's especially in times like this that you can see the benefits of careful asset selection over many years to achieve the well-balanced and well-diversified set of businesses we have. So how has COVID-19 affected our businesses? The immediate effects are very limited, except for TCR and to some extent, Attero. Together, they account for about 33p of the NAV. I'll talk about those specifically in a minute. All of the other companies are operating close to normal, adhering to government instructions on social distancing and, where necessary, making modifications to their operating procedures. A good example is ESVAGT, taking measures to keep crews separate during shift changeovers. These sorts of procedures have relatively minor cost implications. The main impact on valuations has been to reduce near-term growth. For example, although Valorem's renewables assets have continued to operate, some construction projects have slowed down through shortages of supplies such as solar panels. We also recognize that the duration of the lockdown, the pace of recovery and the future path of variables such as inflation and power prices are very uncertain and nearly impossible to predict. So we have decided to reflect that uncertainty in higher discount rates. James will give more insight into those changes a little later. Attero processes household, industrial and commercial wastes produced in the Netherlands and imported from other countries, mostly the U.K. The economic slowdown caused by COVID-19 has reduced the overall volume of waste being produced in those countries. But the reduction in industrial and commercial waste is being partly offset by more household waste. Attero also maintains a waste buffer, which means that its waste-to-energy plants continue to operate as normal. But there is less waste going to its landfills. We anticipate less waste in the market overall for the rest of this year and into next. Attero has mostly medium-term waste supply contracts, but there will be some impact on Attero's profitability. The effects of the pandemic are most obvious in TCR, our airport ground services equipment business. Most of TCR's revenues are from fixed lease rental contracts. But variable revenues from aircraft movements and equipment maintenance about 25% of the total, have reduced materially, as you would expect. But TCR's customers are directly exposed to the drop in air traffic, and TCR is working very closely with them to help navigate through these very tough conditions. The TCR management team has been very proactive, and they are well supported by us and our co-shareholder, [ DWS ]. Pre-COVID-19, TCR had a very successful year with some important contract wins in the U.S.A., the Middle East and Australasia, and they also continued to deliver strong growth in Europe. In the past, negative events for the air travel industry have created additional growth opportunities for TCR, for example, through the sale and leaseback of equipment from airlines and ground handling companies and pooling of equipment at airports. And TCR is ready to support customers in that way now. This pandemic is clearly a setback for TCR, and there is a lot of uncertainty around the recovery of air travel. But we remain confident in its business model, and we're optimistic that it will come through in good shape. Now what about investments and realizations? It has been a quieter year for new investment. But don't forget, we only completed the acquisitions of Tampnet and Joulz either side of the last year-end. So we've been quite busy getting to grips with those 2 businesses as well as the Ionisos, which completed in September. All 3 of those businesses have started well under our ownership and have met or exceeded our investment thesis so far. We refinanced Tampnet in the first half of the year and Ionisos just last week. In both cases, we extended maturities and achieved debt pricing better than we had allowed for at acquisition. The COVID-19 situation has increased emphasis on sterilization of medical equipment, which is positive for Ionisos. And just at the end of March, we completed the first bolt-on investment for Joulz, buying an electric vehicle charging business from Greenflux. This is an important step in Joulz's strategy of becoming the leading electricity infrastructure solutions business in the Netherlands. And earlier in the year, we added FHA, the hydro developer and operator to our renewables platform, Valorem. The realization of our investments in Wireless Infrastructure Group was a big part of this year's outperformance. As a reminder, we achieved a 27% IRR over our holding period of just 3.5 years. That was a great piece of origination. We initially acquired a minority stake, and that gave us the chance to buy out the majority shareholder later. We delivered strong asset management to support the growth ambitions of the management team and a timely realization. I say timely, because we sensed that market conditions in that sector would be less favorable in the future, yet we were able to secure an exit at a very attractive price. Our U.K. projects portfolio had derisked following completion of construction. And in our strategic review, we concluded that it was in the best interest of shareholders to sell those assets if we could get strong prices. We ran an efficient, targeted sales process to maximize price and deliverability in what then seemed like uncertain market conditions just ahead of the U.K. general election. We announced the sale in December, delivering another excellent return of 15% per year. That return was achieved over many years. In fact, one of those assets, Octagon, was in 3iN seed portfolio back in 2007. As a result of those 2 sales, we now have less of the portfolio invested in the U.K., just 17%. And we have reduced the portfolio's linkage to inflation. Our exposure to unhedged power prices remains around 10% of the portfolio value. The mild winter, coupled with the drop in the oil price and the fall in demand caused by the pandemic, mean lower power prices than we had previously assumed and lower price assumptions for future periods. These factors have affected our valuations of Infinis, Attero and Valorem. But those businesses, otherwise, all had a very good year, both operationally and financially. So they've delivered good returns overall. And we're excited by the solar initiative at Infinis. That's another demonstration of the value of the portfolio of land rights and electricity grid connections that we identified when we bought Infinis back in 2016. The oil price drop also affects oil tanking, Tampnet and ESVAGT's nonwind activities. Market conditions for ESVAGT's oil and gas support vessels had improved in the second half of 2019 and through the winter. And the management team had made good progress in lengthening contract coverage. We now anticipate reduced demand through the peak summer period and into next year caused by reduced new drilling activity. But our strategy of shifting ESVAGT's business towards offshore wind maintenance vessels has continued to pay off as we've seen further growth and plenty of future opportunities. Tampnet could be affected negatively by the lower oil price because fewer new fields will need connections. But in the past, the lower oil price has increased demand for bandwidth as part of a drive by producers to reduce costs, so Tampnet could also benefit. Oystercatcher on the other hand, is already benefiting from strong growth in demand from both existing and new customers. Most of our capacity is already rented out, so the positive effects will flow through over time as contracts are renewed. We are acutely aware that we are experiencing unprecedented times, and we can't be sure that we judged the effect on our businesses exactly. You wouldn't expect us to say that we have, but we can say with confidence that all our portfolio companies are sound businesses with strong market positions, supportive shareholders and prudent financing arrangements. We think that they remain well placed to help 3i Infrastructure maintain our long-term track record of strong returns and growth in the dividend. We continue to look for new investment opportunities. We have a healthy cash balance and available revolving credit facilities. We have a busy pipeline of investment ideas that has picked up momentum over the past few months. We will continue to scrutinize each one carefully for fit with our existing portfolio. We'll test them against the key criteria I outlined a few minutes ago. We aim to find those investment opportunities best able to support our goal of delivering long-term sustainable returns. And we are no doubt learning new ways of thinking about what makes a sound infrastructure investment from today's exceptional conditions. I am hugely grateful to our portfolio company management teams and their staff for their tremendous response to these unique circumstances. And I'd also like to thank my team for their dedication and hard work in what has been a very testing period. Thank you. I will now hand over to James.

Thanks, Phil. Good morning, everyone. As Richard said, our 11% return is once again ahead of our medium-term target. Our net asset value of almost GBP 2.3 billion is a new record for the company. Our portfolio delivered good income growth, as we expected. And that growth should continue over the next few years. That supports our progressive dividend policy, and we have strong liquidity. Now is clearly the right time to have access to over GBP 700 million of cash and credit facilities. We can support our portfolio companies should they need it, and we are well funded to make new investments as we recover from this pandemic. This chart shows our liquidity position. We ended the year with cash of GBP 418 million. That followed the sale of both WIG and the U.K. projects at the end of 2019, as Phil mentioned earlier. The RCF is undrawn, so that adds a further GBP 300 million of liquidity, which could be up to GBP 500 million if we add the accordion feature. And we will receive deferred proceeds from the WIG sale of another GBP 198 million, half in December this year and the other half at the same time next year. So this is the right time to be so well funded. And as Richard said, we are monitoring our cash balance carefully. This year's dividend and costs are fully covered, and we have a substantial surplus of reserves. Total income and non-income cash was GBP 139 million, slightly ahead of our expectations. This chart shows the growth in income over the last 3 years. That income reached GBP 121 million, driven by a portfolio that is growing organically and through new investment. As you know, we realized a number of investments over that period, too. And we have a good record of replacing the income that we sold. The nonincome cash distributions are cash from portfolio companies paying back some of the shareholder loans we invested. These included exceptional distributions from refinancing activity last year. We expect the portfolio to distribute nonincome cash even when there is no refinancing activity. But these distributions are lumpy and will depend on portfolio company activity. This year, we received GBP 18 million. Our net asset value increased by GBP 402 million to nearly GBP 2.3 billion. This chart shows the progression in NAV for the year. Working from the left-hand side, you can see our opening NAV was GBP 1.9 billion or 230.4p per share. That's after paying the final dividend for last year. In October, we raised equity at a premium to NAV. That new equity increased NAV by GBP 219 million, and we are very grateful for the support we got from our shareholders. Capital return delivered GBP 152 million, and there was a small FX gain of GBP 3 million after hedging. The hedging program continued to insulate the company from foreign exchange volatility. Overall, the portfolio returned over 13% on the opening value plus new investments. The income I just mentioned added GBP 121 million. Costs were GBP 52 million, which includes performance fee. We distributed GBP 41 million as an interim dividend. And our new shareholders, who came in at the equity raise, got the benefit of that dividend, too. That gave us a closing NAV of GBP 2.3 billion or 254.5p per share. The final dividend of 4.6p per share will be paid to shareholders on the 13th of July. This chart shows the portfolio return I just mentioned split by asset. The portfolio performed very well for most of the year. Phil has described the impact on our businesses from the COVID-19 pandemic and the knock-on impact on oil and power prices and waste volumes. As you can see, the realization of WIG and the U.K. projects has driven our outperformance this year. And our renewable energy generating assets have performed well this year. You can see that in the returns for Valorem, Infinis and Attero. I'd like to give you more color on how we've valued our assets this year. Our valuation policy and the process we follow hasn't changed. We established a balanced base case for our cash flow projections, where the likelihood of outperformance and underperformance are broadly the same. Across the portfolio, we have risk assumed in our projections that the stay-at-home and social distancing policies will remain in place from April through to the end of July. We have then assumed a gradual recovery in activity over the rest of 2020, starting slowly over the summer months. We've also taken account of company-specific impacts, such as updated power price curves and the impact on customers of the lower oil price and fewer air traffic movements. As Phil said, our companies are still operating close to normal other than TCR. We have then applied discount rates to these projections that reflect company-specific risks and uncertainties to achieving these balanced base cases. This has led to an increase in the weighted average discount rate across the portfolio. I'll talk more about that in a second. We are pleased with how resilient our portfolio companies are. These are real economic infrastructure businesses. And despite the truly extraordinary market environment, the valuations are holding up well overall. As I just said, in addition to changes in cash flow projections, the weighted average discount rate today has increased to 11.3%. This chart shows the change in our discount rates over the last 6 years. Almost all of our current portfolio is acquired over these years. And our large core infrastructure assets, held at the lower end of our discount rate range, were also realized over this period. This change in portfolio mix accounts for the rising trend in the chart, but most of the increase this year reflects COVID-19. If we deliver a portfolio return of 11.3% and we deduct a couple of percent for costs, we can sustain a net return to shareholders in the middle of the target range of 8% to 10%. Delivering a long-term sustainable return in line with our target doesn't rely on our selling assets. And we believe the portfolio we have now has the potential for us to find opportunities to continue to outperform. Our final dividend of 4.6p per share meets our target for the year. Our dividend is important to many of our shareholders. It is core to our strategy and objectives. We're in a strong liquidity position, and the dividend is fully covered this year. So we're doing as expected: paying a final dividend this year in line with our target. Our shareholders also look to us for visibility on future income. It remains appropriate to set a dividend target for the next year. Our new target is 9.8p per share, up 6.5%. This chart shows our dividend growth over time. The dividend and target has now grown by around 6.5% for 2 years. Looking further ahead, we expect continued strong growth in income from the portfolio over the next few years. We have a progressive dividend policy and would like to continue increasing the dividend to reflect this growth in income. We also have substantial dividend reserves of GBP 876 million should we need them. So we have strong liquidity available to support our portfolio of companies and to make new investments. We have a resilient portfolio that is demonstrating its solid infrastructure characteristics. And we have continued to outperform our target return. That concludes our presentation. I'll now hand back to the moderator for Q&A. Thank you.

[Operator Instructions] First question we have is from Alex Wheeler from RBC.

Three questions from me, please, all asset-specific. Firstly, clearly, the portfolio is holding up well in the face of COVID-19. I'm just thinking about the positive drivers that potentially come from the pandemic, namely for Ionisos. And you note the demand had increased in the short term, but do you think that a stronger global focus on health care going forward could potentially add an additional leg of growth to this business over the medium term? Secondly for TCR. In the press release, you note that you're considering taking on further equipment currently owned by customers as an additional leasing contract. I just wondered if you could give further detail on how that transaction would actually work and what the benefit is of undertaking such a transaction for TCR. And then finally, could you provide an update on the carve-out with Joulz from Stedin, please?

Thanks, Alex. First of all, the Ionisos, yes, I think there's 2 effects at the moment. There's certainly increased demand for sterilization of medical testing kits and protective equipment and so forth. There's been a counter effect, which is that the sterilization of prosthetics for elective surgery has reduced because in many countries that's not happening or has significantly been reduced. But as the CEO of Ionisos said, that's a bit like a pizza. If you don't eat it today, you don't eat it tomorrow. So, it's not like a pizza. It's not as if, if you don't eat it today, you don't eat it tomorrow. If you don't have your need transplant today, you still need it tomorrow. So a short-term increase at the moment in testing and -- sorry, in sterilization of testing and certain types of medical device, but an offsetting effect. But we do think that, that will mean in the long run, increased demand overall and the short-term reduced sterilization of prosthetics is just a deferral of demand and will mean that when it comes back, it will probably come back more strongly. So yes, I agree with your assessment of the Ionisos prospect. TCR has grown in a number of ways, but particularly by undertaking sale and leasebacks of ground handling equipment from airlines, airports and ground handling company. So that's not a new type of transaction for TCR. It's a common transaction, and we've done a number of those since we bought the business a few years ago. And there are always potential transactions being discussed. But right at the moment, particularly as those categories of customer are more cash-constrained than ever, it becomes more attractive for customers who were previously happy to hold some equipment on balance sheet to sell that equipment to TCR and lease it back. And TCR is in a position to do that, as I said in my presentation. So it has to be the right transaction. It has to be with the right customer and on the right terms, but that's absolutely a key part of TCR's business model and its growth prospects. Joulz, James, would you like to answer the Joulz carve-out question?

Yes. The carve-out is planned and expected to happen over the rest of this year, so to be completed by the end of this calendar year. It's progressing according to plan. And so we do expect it to complete this year.

Alex, do you have any follow-up questions?

No, that's great. I mean -- well, actually, maybe one slightly. The -- I guess, on the carve-out side, what is left to be done? I know that you note in the report that you've made significant progress. I just wondered what the granular -- more granular basis, what the next steps are?

Well, they're still implementing their ERP -- new ERP system. That's part of it. Most of the IT has separated from Stedin, and data and so on has moved over to Joulz-specific data holding sites. But they still work on the ERP. We are -- we've strengthened the management team. We've brought in additional senior hires and a new Head of Metering, so that was very good progress. So it's really just -- it's on track. It takes a while to implement the new systems and processes but that's where we expect them to be.

Our next question comes from Christopher Brown from JPMorgan.

Just a couple of questions from me. I guess first one, I just wondered if you could give a little color around power prices and how you model for those and the effect they've had. And then second, I wonder whether you could talk about the H2 balance between sort of cash flow changes in your models and discount rate changes and the relative size of each. And then finally, maybe a question for the Chairman. But just wondering if you could sort of talk about the sort of -- obviously, this very large cash balance at the moment. Clearly, there's an advantage of having that on the balance sheet in the shorter term. But I just wondered if you could talk about the longer-term approach there given the dilution that will have on returns, if it's possible.

Thanks, Chris. For power prices, well, we mentioned -- I mentioned the assets that are affected by power prices. We've had a consistent methodology for making assumptions about future power prices, which is a formula comprising a mixture of the forward price forecasts produced by industry experts and the spot -- those of the spot, current or recent spot price. And so that means that, generally, since the forward assumptions are -- the forward predictions by experts are upward sloping, the spot price generally is a dampener on those forecasts. So we've applied exactly the same methodology this time. We do have a recent, as at the end of March, set a forecast from one of the industry experts. And we've used that together with the current spot price in the various countries where we're operating. Both Attero and Infinis do hedge to some extent their power price or sell forward their power price exposure, but that's a relatively short-term market. Infinis, I'm pleased to say did anticipate the risk of falling power prices some while ago, and so has sold forward most of its output for the next couple of years. So the impact on movement has been moderated by that. But overall, both the spot price and the forward projections are significantly lower. So it has been a significant negative still for Infinis and to a lesser extent for Attero and a very small extent for Valorem because Valorem still has a very long life left in the feed-in tariff and fixed price regimes in France. Cash flow changes versus discount rates, James, do you want to answer that question?

Yes. So I think when you say H2, I'm assuming you mean for the March valuations. Clearly, March valuations on the same basis before discounted cash flow is the primary valuation methodology. We have come up with the best balanced base case we can do, as I said in my speech. So knowing what we know currently, we've projected the impact on each company. And I talked about the knockdown general assumption we've applied across the portfolio. So the first impact we've tried to put through is on the cash flows. Having done that, we've looked at the risk to those cash flows and put it through in the discount rate. So for most companies, most of the impact has come through cash flows, but it does vary by company. So for some companies, there would be more of an impact on the discount rate where we think the uncertainty is greater. So that's the way we've come out with it. Where possible, we have tried to reflect a balanced forecast in the cash flow. Does that answer that question, Chris?

Yes. I think I was just trying to get a feel for the sort of relative size of the 2 impacts. I think you've suggested there that it's mostly those cash flow things that's a bigger driver of the 2 rather than the discount rate change.

Yes, I think that's fair, but it does vary across the portfolio.

Yes. Yes. And that's obviously sort of pretty much all the second half impact, isn't it, clearly?

Yes. It's this gradual recovery over the second half of the year, really starting from August. That's the big -- but to some of the companies, the impact lasted longer than that.

Sorry, when I say second half, I mean second half of your financial year in terms of you applying...

Yes. You're right. Yes, you're right. Yes. I mean the assets, as I said, up until the last couple of weeks, the portfolio overall was performing very well indeed. But for most of the assets, the impact on cash flows has been to defer growth or reduce growth because of the effects of the lockdown and the potential impact on the economies. Not that we're necessarily seeing it. I mean, in Joulz, for example, we have in our base case assumed that there is a reduction in growth over the rest of this year. But at the moment, we aren't seeing it. So we will have gotten many things wrong, but we hope that we've got them equally wrong on the upside and the downside. I don't want to deprive Richard of the opportunity to answer the question on cash, but I'm also happy to add to your answer, Richard, if you'd like me. I'll hand it to you first.

Okay. Thank you, and thanks for the question, Chris. Well, clearly, we have got high levels of liquidity at the moment. And I have to say that I think this is the right time to have that. We've got the firepower to take advantage of suitable investment opportunities that can arise. And the sort of free possible types of deal we might do, either adding platform investments to existing businesses or, secondly, alongside rather like we did with Greenflux with Joulz and, of course, then there's the completely new investments. It's difficult at the moment to say exactly when and what and how we might deploy that cash with the uncertainties around COVID-19. But we are confident that some opportunities will arise in due course. I would say that we will, of course, keep this level of cash under review, and we'll constantly monitor the situation. Phil, did you want to add to that, did you say?

Thank you, Richard. It's very comprehensive. The only thing to say is that we certainly have not lost sight of the effect of holding material amounts of cash for an extended period of time and the impact on return. And we're very acutely aware of that and sensitive to that, which is why, as Richard said, it is closely under review. We have to weigh up the prospects in the pipeline versus handing -- potentially handing it back to shareholders. And we will certainly continue to do that. So yes, it's -- okay, it's a current topic, absolutely.

Thank you. Our next question comes from Iain Scouller from Stifel.

I've got a couple of questions. Just coming back to the cash. I was wondering if you could just talk a bit about pipeline sort of areas you're looking at, at the moment? And any observations on market activity and pricing given the events over the last couple of months? And then secondly, I think you had nonincome cash of about GBP 18 million over the year. I was wondering if you could just give us a bit of color on that.

Thanks, Iain. So pipeline, as I said in my presentation, it has got busier not just in the last couple of months, but probably since the turn of the year. And so we have quite a lot in there, much of it relatively early stage. And as you know, we always look for things that are not necessarily part of formal processes. And it's a mixture of add-on opportunities to existing portfolio companies. And Greenflux was the first for Joulz, but we do hope there will be others. And a few of the other companies have been looking at things for a little while now and may be able to convert one of those in the coming 3 to 6 months. Some new things, and we're always looking for new opportunities that fit our criteria, that suit the portfolio. Those are more difficult. I think right now, we're not going to be meeting any management teams in person anytime soon. So that is going to, I think, delay that sort of activity, certainly for the next couple of months. But in the pipeline, there are some things where we have previously met the management teams and so are familiar with them. And I wouldn't rule out converting one of those. So -- and then of course, we want to keep some cash available so that we are able to support portfolio companies should they need it. Market activity. I mean there has been some transactions in the infrastructure sector complete. There was the KKR acquisition of the Pennon waste business, for example, which was perhaps surprising that it was able to go through following the lockdown, but it's clearly been worked on for a while. There are a number of other transactions that we know are being worked on by other people. And we're clearly in touch with investment bankers and so on. As well as focused on restructuring work, we're also busy on some transactions. But it's definitely quieter, and we're also aware of quite a few processes that were either starting up or were expected to start that had been postponed. And that's particularly true in the sort of travel space and the ones that are most directly GDP correlated. So as you'd expect, transport assets in particular, I think those are very difficult to execute at the moment. So I think it's subdued right now. That doesn't rule us out from doing certain things that I just described. And that -- well, I think that's how I sum it up. James, would you answer the nonincome cash question, please?

Yes. So comparing year-on-year, Iain, we had a refinancing gains from particularly WIG, but also Infinis last year. So large nonincome cash figures from those 2 companies last year, GBP 18 million this year. This is predominantly Infinis. It's one of the ways that Infinis distributes up to 3iN. So in many ways, it's a more normal year for nonincome cash in FY '20. But as I said in my speech, it will depend on portfolio company activity. Infinis, we've highlighted the solar opportunity in our results, which we'd expect to hit more on over the next year. So there may be -- there's always a balance between whether we hold back cash to invest in organic growth at the company. So it does depend on activity, but it's a more normal year than '18.

Our final question comes from Charlie Murphy from Panmure Gordon.

A couple of questions. One on Oystercatcher. How fast is the roll of contract -- existing contracts roll, so you can take advantage of additional demand? And separately, just going back to the cash balances, I missed -- I presume when the money was raised, there was either an acquisition intended, more purpose for the money that hasn't been deployed. Was that because the process failed or because you've sold something else?

Okay. Thanks, Charlie. So Oystercatcher contracts vary from spot contracts to very long-term contracts. Most of them are 1 to 3 years. And so there's contracts maturing all the time and not -- I don't want to say all the time. There's probably 3 to 6 contracts per year in each of the terminals. So I think if you're thinking about how quickly will we benefit from the upturn in pricing following the increase in demand, I think it will be a gradual benefit over a number of years. It is important to remember that we -- when the market is in backwardation, we don't assume it stays there. We do assume in our valuation that there's a recovery to sort of normal levels. And so to some extent, the recovery is something that we've already factored into our valuation. But it's clearly come quite quickly and quite sharply relative to what we might have expected. On the cash flow, yes, Richard?

So when we invested in Ionisos, we drew into our credit facility. Ionisos completed in September. So we were close to GBP 200 million drawn into our credit facility at the time. So when we made the decision to go to market to raise equity in October, that was principally to repay the drawings on our credit facility. Now at the time, we had envisaged that we may sell the U.K. projects, but we weren't anticipating selling our investment in Wireless Infrastructure, WIG, at the time. It was also -- if you think back to that, it was in the run-up to the U.K. general election, where there were uncertainties as to how that might have panned out. So we took the decision to raise at the time and, as I say, principally to repay drawings on the credit facility. So the reason for the cash balance now is because we did then realize the investments in WIG and the U.K. projects. And we will look to deploy these as Phil outlined earlier. But that's the reason for it. It wasn't because of process delayed or...

Thank you. That was our final question. [Operator Instructions] We currently have no further questions coming through, so I'll hand back over to the host of the call to conclude.

Just to say thanks to everyone for dialing in and for bearing with the technology. I hope it was audible and visible to all of you. Thank you for your questions, and we look forward to speaking to you again in the near future.

Thank you very much, everyone.

Yes, indeed, thank you.