International Public Partnerships Limited (INPP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the International Public Partnerships Full Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review your questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. And if you have that your kind attention. I'm sure the company will be most grateful. I'd now like to hand over to the team from International Public Partnerships, Erica. Good afternoon.

Thanks so much for that kind introduction, and welcome, everyone, to the International Public Partnerships Results Presentation for the 12 months, ending 31 December 2023. I'm Erica Sibree. I head up Capital Solutions and Investor Relations here at the Amber Infrastructure and being the Investment Adviser to International Public Partnerships or INPP as we sometimes shorten it to. While we're pleased that so many of you are able to join us today. As a reminder, the presentation is intended for U.K. retail audience. And I'd draw your attention to the most -- the legal information that's presented on the screen. The slides will be available later, in case you want to get into the detail there. Joining me today to present the details of the results is Chris Morgan, the Investment Director at Amber, who has responsibility for the portfolio. We're also joined by Amber's Head of ESG Dan Watson. At the conclusion of our speaker's remarks, we'll be happy to take Q&A as you've heard, and we'll be taking it from the screen as you're registering your questions. So do refer to the functionality that the platform adviser has just given. As you'll hear from the team today, the company has performed well against a challenging macroeconomic backdrop and to take you through the details of that, I'll hand you over to Chris. Thanks so much, Chris.

Thanks, Erica, and good afternoon, everyone. Just before we dive into the results for the period, I just wanted to spend a moment talking about the approach and ultimate investment proposition. Now fundamentally, what we're seeking to generate is consistent and predictable returns for shareholders, whilst delivering environmental and/or social benefits for individuals or communities that are served by our assets. And we achieved those aims by investing in what we believe are low-risk, essential public infrastructure assets, and they're generating for the most part, availability-based or regulated revenues. So the revenue stream is very predictable. The revenues are paid to us by government or government-backed entities, so the revenue streams are secure. The vast majority of the assets benefit from explicit inflation linkage provisions within the underlying contracts. And something that people ask me about a lot these days is around the exposure to rising debt costs. I'm pleased to say that there's a high degree of protection against the impact of rising base rates on equity returns. We then further reduce risk by making sure the portfolio is well diversified. So we currently have more than 140 different investments within the portfolio. They're geographically diversified. So we've got assets in New Zealand, Australia, Continental Europe, U.K., North America, but they're also diversified in terms of subsectors. So we've got education facilities, court buildings. We've got the Thames Tideway Tunnel super sewer we've got rolling stock leasing assets. And finally, we're diversified in terms of the counter-parties that we've got on those assets. But I think the key thread that threads all those assets together is that they're all facilitating the delivery of Central Public Services. We've got an inhouse asset management team within Amber, the investment adviser. That's a team of around 50 people, and we've got presence in all the geographies in which INPP has invested. And that team has got a wide variety of skills and experiences. They know their assets very well, and they've got very strong relationships with the stakeholders. And I think the fact that we've got that team within the investment adviser and given the size of the team, it's really testament to the importance that the company places on actively and closely managing its infrastructure assets. Our commitment to being a responsible investor more generally is demonstrated through our alignment with the various different sustainability frameworks and regulations. But we're not standing still in this area. We've made a lot of progress, and we continue to make more progress. You'll hear from Dan later in his presentation about how we've further refined our ESG, KPIs and disclosures. And how we're working with our portfolio companies to improve ESG performance. And ultimately, all of these characteristics, the predictability of the revenue stream, security, inflation linkage, the robust capital structures, diversification and active approach to asset management has come together to provide and give rise to a portfolio that is really resilient. And that resilience has proved out over time. So the fund has now been around for 18-odd years. It IPO-ed back in 2006. So it's faced a number of macroeconomic and geopolitical challenges along the way. And yet, it's continued to perform very well. So if you look at the dividend track record, we have paid dividends that have grown every year since the IPO, that's 16 years of consecutive dividend growth, and that's a key differentiator for the company and something we're really proud of. Just moving us along to the next slide. Here we go, touch a little bit on the highlights for the year. So, in terms of the net asset valuation, you can see that on the top left of the slide. That's moved down slightly around 4% from 159.1p to 152.6p. And that's really driven by increases in underlying government bond yields, which has prompted updates or increases to the discount rates that we use to value our assets. And I'll talk about that in more detail later on. I think one important point to note is that the closing NAV per share of 152.6p is stated after the payment of dividends in the year. So we paid just shy of 8p in dividends. So if you were to add that back to the closing NAV, you can see there's a positive total return for the year. Our assets have continued to perform very well, operationally and financially. Distributions from those assets were in line with the targets that we set ourselves at the start of the year. And that's enabled us to meet our growing dividend target on a fully cash covered basis. Inflation linkage remains a core part of the offering. You can see from the middle point of the slide on the left, inflation linkage of 0.7%. And what that really means is that if inflation was around 100 basis points above our inflation assumptions, then we would expect to generate 70 basis points of additional return. So it's a good level of protection in the event that we have high levels of inflation. We invested GBP 108 million in the period. That was really the closing out or completion of the acquisition of some operational PPPs in New Zealand that we flagged to investors previously. Alongside that number, I think you also need to consider the realizations that we undertook. So we realized assets that generated proceeds in excess of GBP 200 million, and I'll talk about that a little bit later in the presentation. The ongoing charges has moved up a little bit compared to the previous year. That's really just a function of timing differences against the reduction in the NAV and that should level out over time. On the right-hand side, we've got some of the positive environmental and social contributions made by the assets. And we've set those out because effectively the use of the UN sustainable development goals is a key tool in which we assess and demonstrate the positive environmental and social contributions that are made by our portfolio. Just moving on to the next slide. So, the portfolio continues to perform very well. I mentioned that a couple of times. And that, I guess, is a sort of frustration against where we see the share price. And of course, we understand that there are reasons why the share price is not where we'd like it to be, and those reasons are largely outside of the control of the company. And it's obviously not something that's unique to INPP. It's across the wider listed investment trust sector. But as part of our half-year results, which we published back in September last year, we committed to taking a number of actions to make sure the fund is as well positioned as possible in the current market environment. And this slide provides you with a little bit of a reminder. So each of those 4 boxes sets out the commitment that we made back in September and the darker blue bit at the bottom of this box is a very brief summary of the good progress we've made during the year against those commitments. But don't worry about squinting and trying to read that. We'll cover that off in more detail later in the presentation. I think the key point for me is that despite the actions that we've taken and are continuing to take, we still believe that the share price continues to materially undervalue the company, and we'll maintain a focus on actively managing the portfolio. We'll retain a prudent approach to the use of debt and a disciplined and transparent approach to allocating capital more generally. So just getting into the financials. When we value our assets, we do so using a discounted cash flow valuation methodology. So we forecast out all of the cash flows are individual projects and we determine a risk-adjusted discount rate that we apply for each set of cash flows. And the ultimate -- what we do as part of our process is we determine the fair valuations of those assets and they ultimately go through an audit that's currently undertaken by PwC. Now when we determine the discount rates that we use to value the assets, we take into account various different data points that we have available to us. So that would include activities in which we're involved in. So we have a large origination team within Amber, the investment adviser. There's a lot of ongoing activities there and whether we are successful in acquiring an asset or we're unsuccessful. The process itself provides us with a great deal of feedback as to how other market participants are valuing these assets. There's also been a number of transactions within our portfolio of companies, of which we've had oversight of the price. We also have a very extensive -- extensive relationships with various advisers as well. We need to consider all of the data points coming out of that alongside the backdrop of changing the macroeconomic environment, where specifically, we've seen increases in government bond yields. So I suppose where we saw lower transactions in 2023, whilst we might have specific data points that are helpful for some assets, we also need to balance that against the increases in government bond yields. And we've allowed a significant portion of the increase in the government bond yield to flow through and cause the discount rates to rise because we try to -- on the side of being conservative. Just to give you a little bit of flavor in terms of where we're seeing the changes in the discount rates, that's more on our U.K. assets because government bond yields in the U.K. have increased more than what we've seen on our overseas assets. And I think you'll see that the assets at the lower end of our risk range have increased by more than those at the upper end of the range. For me though, I think the key takeaway on this slide is probably the weighted average discount rate and that's 8.4%. And the reason why I say that's important is because that is the guide as to the returns that can be generated from this portfolio, if you were to buy in at the net asset value. Of course, if you've got the opportunity as you do now to buy in at a price less than the net asset value, then you're able to generate greater returns. And I'll come back to that point later. I perhaps went on the next slide, albeit, of course, if there are any questions, then I'm very happy to take questions at the end. But this slide is just retained for reference, and it allows you to see the various components that underpin the change in the net asset value over the time -- over the period. So it shows the impact of the change in discount rates, the dividends that were paid out in the period, as well as macroeconomic factors. Now the next 4 slides, this is where we start to talk about some of the actions that we've taken to address the current market environment. And the first one is around increasing the dividends. So you'll see from the chart at the top of this slide, we've increased our dividend every year since the IPO. So sorry to repeat myself, but that is 16 years of consecutive dividend growth and something we're very pleased with. Obviously, what we've seen over the last couple of years is a much higher level of inflation. And because of the inflation linkage that we have in the portfolio, our fund has been generating greater revenues. So what we've decided to do is increase our 2023 and 2024 dividend targets to 5% and 3%, respectively. That's the growth rate in the dividend. And because we're currently seeing inflation starting to moderate from 2025 onwards, we've assumed a reversion to our long-term annual dividend growth rate of 2.5%. But hopefully, this forward dividend guidance gives you good visibility as to what we intend to pay over the next few years. When we're determining our new dividends, we need to take into account a few competing needs. We obviously want investors to be able to benefit from the inflation linkage within the portfolio through the cash they receive. But also, we wanted to make sure that we were setting the dividend at a level from which we can continue to sustainably grow over time in a fully cash covered manner. So as a result of the revision to the 2023 target dividend, which is up 5% relative to 2022. The forward dividend yield at the end of the year stood at 6.1%, which you can see from the bottom right of the slide. I think if you actually run that number today, it's just ahead of 6.5%. The other point, just before I move on from this slide is around the longevity and predictability of the portfolio. So the bottom -- the second slide at the bottom of that -- that slide here sets out the projected investment receipts from the portfolio as it is currently. And those projected investment receipts from the existing portfolio are sufficient to service our growing dividend for the next 20 years. So as I said, a real demonstration as to the longevity and predictability of the fund and its cash flows. Just moving on to the next slide, realizing value from the existing portfolio. This is something that we wanted to do to allow us to generate proceeds to repay our corporate debt facility. We wanted to demonstrate the robustness of our valuations. And we ultimately wanted to recycle capital to make sure that capital is working in the most advantageous way possible for shareholders. I won't talk much about the asset on the left-hand side, Airband because we discussed that at our previous results because that transaction actually completed in July 2023. But I think the key point from that one is that, our investment in Airband was very successful. We generated very good returns significantly ahead of the weighted average returns from the portfolio and the realization proceeds of GBP 12 million were in line with our half year valuation. Perhaps more importantly, the transaction on the right-hand side, that relates to some of our OFTO assets, OFTO offshore transmission owners. Now an offshore transmission owner owns the electricity transmission assets that connect an offshore wind farm with the onshore grid. So it effectively allows the owner of an offshore wind farm to transmit that renewable electricity through to the onshore grid for us to consume. Now these assets, they are granted an initial revenue period by Ofgem, the energy regulator, during which they received a set availability-based revenue stream that is linked to RPI. So when we invest in these assets, we are not taking exposure to the amount of electricity that is produced by the wind farm or the price of electricity. Now at the year-end, we had a portfolio of 10 OFTOs. We actually have 11 now, but I'll come on to that in a moment. But importantly, we had the senior debt positions on 4 of those OFTOs, and what we did as part of this transaction that we completed in December 2023 was that we realized those senior debt positions. And we also added a small amount of debt or additional debt to one of our OFTOs, which was otherwise very prudently levered. And this transaction did a few things for us. It generated a significant amount of capital, so GBP 200 million, which we can use in more advantageous ways and I'll comment on that in a moment. It demonstrated the robustness of the valuations because those senior debt positions were realized at a modest premium to the 30th of June carrying values. And it improved the composition and key metrics of the fund. So it enhanced the overall returns of the portfolio and extended the weighted average portfolio life. So just moving on. One of the other comments that we made was to reduce the use of the corporate debt facility. So in terms of the debt that we have at the fund level, we have a GBP 350 million corporate debt facility. And the reason we have that -- or used -- and we've used it historically, is to help us efficiently finance acquisitions because historically, it's been very cheap to use. And -- what we've done is we found an attractive investment opportunity. We've drawn down on our corporate debt facility. And then we've gone out and raised new capital to pay that corporate debt facility down. So it's efficient and flexible way of financing acquisitions. But obviously, this is a floating rate facility. And therefore, whilst it was very cheap for a very long time, it has now become much more expensive to use that facility. And therefore, as it was announced to be a priority to pay down that corporate debt facility. The bar chart on the bottom left of the slide sets out the drawings under that facility. So you can see that as at June, we had cash flows of GBP 107 million on the facility. And through the use of surplus cash flow that we generated over the year, as well as some of the realization proceeds from transactions I've just talked about, we paid down the cash drawings over the course of the year, to the point where we are today, where we have no cash drawings on our corporate debt facility. That very small light blue bar, GBP 14 million. That is a couple of letters of credit that we have issued under the facility that are issued in respect of 2 investment commitments that we have to a couple of Australian projects, and I'll come on to those in a moment. But that GBP 14 million, the cost of having those letters of credit is in the region of 1%, so obviously significantly cheaper than any cash drawings. The right-hand side of this slide gives a brief update as to the asset level debt that we have in place. And the key point there is that we have a significant level of protection against the impact of rising base rates on equity returns. So if you look at the pie chart going from sort of 12:00, all the way around to 11:00, you've got their assets that have debt that is fully hedged for the full term, the full concession life of the assets. There's no interest rate risk or refinancing risk. And then the 31%, the light blue part of the pie chart, that represents a couple of assets that are operating under regulatory frameworks that provide greater revenue allowances in the event that the market cost of debt increases. Again, a mechanism that materially mitigates the impact of rising base rates on equity returns. So in summary, I think the mitigations that we have at the asset level have ultimately enabled our assets to continue to perform very strongly despite the increases in base rates. And obviously, where we have floating rate debt exposure. We've obviously now fully repaid that, which will, of course, save the company those higher financing costs and ultimately improve the returns for the company and reduce risk because that corporate debt facility would otherwise need to be refinanced every few years. Just moving on. We also set out a commitment to consider various other initiatives to enhance total returns. And I've talked through how we allocated the majority of the GBP 212 million of realization proceeds. But I just want to talk you through how we allocated the remaining proceeds and also introduce our new returns target. So we published a lot of information in relation to the current portfolio. We published our weighted average discount rate. We published the macroeconomic assumptions, our net asset value sensitivities. We provide forward-looking dividend guidance. And through all of those disclosures, we hope investors have a good idea as to the projected returns from the existing portfolio. And obviously, we'll carry on providing all of that information. But I think what is really important is that we provide investors with updated guidance as to the rate of return that we'll be seeking for any new investments. And the target rate for any new investments, and it's written on the slide, but it's in a relatively small print so I'll go through it. It's effectively saying that any new investments, the assessment of the target of the returns available there will be guided by several qualitative factors. So we'll take into account the company's weighted average discount rate. We'll take into account whether the shares are trading at a premium or discount to the net asset value. So inferring what the public markets are expecting in terms of returns from the assets. And obviously, we're also taking to account any relevant economic or strategic considerations. And I suppose what this really means in practice is that the total returns for any new investment ultimately need to be favorable relative to the economics of alternative allocation options, for example, buying back our own shares. And we haven't published this new target return prior to the acquisition of the Moray East OFTO. But I think that acquisition does demonstrate the application of the target. So I'll just briefly talk you through that. Now Moray East, it's another offshore transmission asset. We have flagged that to investors for a couple of years. And what we said when we published our half year report last year, was that we would only acquire that asset if we had capital available and if the returns were attractive relative to alternative options. Obviously, we did have capital available because we then undertook the realization processes, which I've talked through. And the returns available from Moray East were considered attractive and were attractive relative to alternative capital allocation options. And therefore, the acquisition of that OFTO was considered in the best interest of shareholders. And that acquisition completed in February, so just post the year-end. The amount that we invested was GBP 77 million. It was a little bit smaller than what we've guided to previously, and that's really just because of changes in interest rates leading up to the day of financial close. It doesn't affect our returns. It just means that we only need to invest a small amount of capital. It's a really attractive asset. I've mentioned the general attractiveness of OFTOs already. This OFTO is also quite a large OFTO. So it has the capacity of transmitting sufficient renewable electricity to power equivalent of 1 million homes. Which when you add that to the rest of INPP's OFTO portfolio, INPP is OFTO's have the combined capacity to transmit sufficient renewable electricity to pound equivalent of 3.7 million homes. Which is making a meaningful contribution to the U.K.'s transition to net zero. Sorry, I've just moved on to the next slide. I didn't mean to. The other point I wanted to finish off on this slide was around share buybacks. Share buybacks was something we said we would consider, but we only wanted to consider that once we paid down our corporate debt facility because we didn't believe in drawing down on our corporate debt facility in order to fund the buyback. Following the realization processes and the generation of those GBP 200 million of proceeds, we -- and I suppose, sadly with the shares still trading at a discount to the net asset value, we considered investing in our own shares, buying back our own shares was an attractive investment opportunity. And therefore, the Board agreed to allocate up to GBP 30 million to the buyback program, which will run for the course of 2024. And of course, over the duration of this year has further funds may come available, the Board will obviously consider adding to that program. So now I will move on to the next slide. And the next 3 slides actually are really just designed to provide a brief update on the assets across the portfolio. So I'll start with the regulated investments. These make up 48% of the portfolio. In this bucket, we've got Cadent, Tideway and those what were 10 and what is now 11 OFTOs. The Cadent is a U.K. gas distribution business. It owns and operates 4 regional gas distribution networks in the U.K. It's not an energy supplier though. It's -- it doesn't matter whether the price of gas increases or decreases or the volume of gas through its pipes moves around. It's actually just paid regulated revenues for providing a safe and reliable distribution network. And as revenues are set by Ofgem, the energy regulator and that's set for every price control period. So the price control period that we're currently going through for which revenues are set will end in March 2026, and the regulator is now consulting on what revenues will be available for the subsequent 5 years, so the period running to March 2031. We're obviously engaging in that process through Cadent we'll, of course, keep investors appraised of any material developments, albeit I'd flag that Ofgem doesn't expect to finalize its revenue determinations before several months prior to the staff the new period. So they won't be finalized until late 2025. I'm looking beyond that, gas distribution networks, obviously, have a very critical role to play over the coming decades in facilitating the transition to net zero. And that's through the delivery of reliable and affordable energy. And of course, those networks are also in making sure they're part of the longer-term solution by building awareness of the opportunities offered by cleaner fuels such as hydrogen and biomethane. Just moving on to Tideway. This is the 25-kilometer super sewer being built under the River Thames. You may have seen the BBC News article yesterday, if you haven't, it's worth looking up. But we had some fantastic news on the project, where the final piece of the construction puzzle was put into place. That was a 1,200 tonne concrete lid that capped off the shaft in the east of London at Abbey Mills. And that marks the end of the major construction works of the project that takes us a step closer to the start of commissioning. Beyond that, the project remains on course to be fully operational in 2025. At which point the new infrastructure will capture 95% of polluting overspills that are currently going into the River Thames, and it will transport that combined rain water and raw sewage of the treatment at the sewage treatment works in Becton in East London. That will, of course, dramatically improve the water quality of the Thames and deliver significant environmental benefits once that asset is fully operational. I'm sure you've seen the continued media coverage around Thames Water's financial position. But I think it's really important to stress that Thames Water is a separate company to Tideway. And whilst Thames Water does have a less obligation to collect revenues on behalf of Tideway and transfer those revenues across Tideway. Tideway does benefit from regulatory and statutory protections that are designed to mitigate the risk of any disruption in the receipt of revenues. So the financial position of Thames Water is not expected to have any material impact on Tideway or investment in the Tideway business. Just finally, back to OFTOs. I mentioned earlier that we had 10 of these at the end of the year. They represented 17% of the portfolio. But important to note that they are all separate investments. They're geographically diversified because they're interfacing, we're connecting with different offshore wind farms around the coast of the U.K. They have different transmission assets, and they have their own individual financing solutions, with no refinancing risk. I think -- probably the talking point from a regulation perspective around OFTOs is that Ofgem, the regulator, continues to consult on the regulatory developments that would be needed to underpin an extension of that initial revenue period. It made some announcements in January of this year. Effectively, the key point that was made was that it expects the incumbent OFTO to be best positioned to continue to operate the transmission assets going forward. And that its preferred approach is to engage in bilateral negotiations with the incumbent OFTO in assessment of any extension period revenues. So the announcements continue to be in line with our expectations. Of course, we'll again, keep investors appraised of any material developments. But fundamentally, the -- there is a line of interest in terms of continuing to ensure the continued use of these assets given government's ambitious offshore wind targets. Moving on to our PPP portfolio. So these represent 42% of the portfolio. They continue to perform very well. So if we look at availability in the period, it was up at 99.8%. So very good operational financial performance from these assets. Perhaps just 3 key points to pull out. The first is the acquisition of our first investments in New Zealand, that completed during the year. That obviously grew the number of availability-based PPPs that we have in the portfolio. It increased the geographic diversification of the fund. And with the opening of an Amber office in New Zealand should help to generate a future pipeline of opportunities in the country, which is really positive. Moving on to Diabolo. This is the one notable PPP that does have an exposure on material exposure to passenger numbers. It's a rail transportation asset. It effectively links Brussels Airport with the rest of the Belgian Rail Network, so you can travel to the airport by train. That linked to passenger numbers though is not unmitigated. So in the event the passenger numbers and returns dropped below a certain threshold, we are able to change the passenger fare. And what we saw during and after COVID-19 and to some point up to this year, we saw a reduction in the number of people using the asset and therefore, we were able to exercise that right to adjust the passenger fare, and that's something that was implemented in February of this year. We're now seeing very good passenger numbers. So during calendar year 2023, we saw around 5.5 million people use the asset. And that's around 95% of the number of people who use the asset in 2019, i.e., the full year immediately proceeding COVID-19. So that asset is now performing very well from a financial perspective. I can't move on from PPPs without talking a little bit about hand-backs, and that's because a lot of earlier PPPs in the market, not necessarily [indiscernible], but a lot of earlier PPPs in the market are now approaching the end of their concession date and therefore, they're going through the contractual process of handing the assets back to the public sector. The first of INPP's PPPs to go through the hand-back process will be a U.K. court project. That's going to happen in 2025. It's a very small asset. It represents less than 0.2% of the fund's valuation and activities for that transfer are well underway. In terms of the future timing of hand-backs, they spend the next 25 years with the majority of them occurring in the mid- to late 2030s. Just, I suppose, how are we comfortable or why are we comfortable around this envisaged process. And that's really down to a number of factors. Firstly, our in-house asset management team proactively and routinely monitors asset condition, maintenance and life cycle works. And that's to make sure that the assets are obviously performing right now, as they should be. But it's also to make sure that the assets will meet the criteria set out in the hand-back provisions, when they get to at that point in time. We've also been engaging with the Infrastructure and Projects Authority, in helping to shape the guiding principles for the industry. And also the final point there is that we have -- if you look at the potential for remedial costs to rise to ensure the assets meet that hand-back criteria, that risk has been materially passed on to third-party contractors on the vast majority of our assets. And I think all of those factors combined should help ensure an efficient future transfer of our PPP assets back to the public sector. Moving on to our operating businesses, and these make up only 10% of the portfolio and comprise Angel Trains, BeNEX Rail and 2 digital businesses. So Angel is the U.K.'s largest rolling stock leasing business. It owns over 4,000 vehicles, which it leases to various different train operating companies around the country. But the lease rates within those agreements are not linked to usage. So it doesn't matter if the number of people using the train reduces whether that's for whatever reason, whether that's because of strikes or another reason, it doesn't impact Angel's current contracted revenues. But I think more generally, it's very positive that we're seeing strong passenger usage of the railways with passenger numbers in Q4 of last year, up at 90% of pre-pandemic levels. Rail is already one of the most environmentally friendly mode of transport. But the Rail industry Sustainable Rail Blueprint was published late last year, and that sets out the framework for making the U.K.'s railways even more sustainable. And that should really help to drive momentum across the industry and ultimately creates more attractive investment opportunities to grow the Angel business over time. Just on BeNEX, which is our German rail business. We've talked about the positive impact of the subsidized ‘Deutschlandticket before that's driven a sharp increase in passenger numbers. And that's whilst that is helpful. And perhaps supportive for the future business of BeNEX, it has no direct impact on the current revenues that are generated by BeNEX. But I think more importantly, we are continuing to grow that platform business. So we started operating a new concession in Germany in late last year, generating further availability-based revenue streams. And the overall service volume of BeNEX now to 48 million train kilometers per annum. And I think there's a good pipeline of opportunities to grow that business further. Finally, just on very quickly on digital infrastructure. It's a very small part of the portfolio, 1%. We announced our intention previously to commit, to invest a further GBP 13 million into toob and that's part of a wider capital raise of up to GBP 300 million that toob is undertaking, which will help it to pass 3,000 -- 600,000 premises. We'll get it to a point where it's EBITDA positive and significantly derisk the business plan. And we're looking to make that GBP 13 million investment during the course of 2024 and 2025. So at that point, I'm just going to hand over to Dan to cover this slide actually.

Great. Thanks, Chris. Well, good afternoon, everyone. It's a pleasure to speak with you today. And I'd just like to start this section by reiterating that sustainability remains a priority for the company, and I'm pleased to announce the progress made over the period. We've just released the third edition of the company's sustainability report. And this year, we've taken it a step further by incorporating EU Taxonomy Alignment Disclosures and included material Scope 3 emissions of the company's investments. These disclosures are in addition to the TCFD and SFDR disclosures that the company commenced reporting on last year with full data comparisons available in the sustainability report. These enhanced disclosures not only showcase the company's commitment to transparency, but also demonstrates its alignment with global sustainability standards. Over the past 2 years, the company has gained enhanced insights into its investment sustainability performance, forming a baseline to monitor the impact of its approach to asset management. This additional data has helped the company to update its ESG KPIs, which are discussed in detail within the Sustainability Report. Drawing from sector best practice, these KPIs are targeted to reduce ESG risks and maximize impact where possible. Notably, the company has introduced new pathway to net zero KPIs, at a portfolio level, drawing on guidance provided by the Institutional Investors Group on Climate Change, to track the company's investments alignment with credible net zero pathways. But the company's efforts extend beyond just reporting. Throughout the year, we've actively collaborated with investments to explore the potential for improving sustainability performance. This includes engaging with facility management companies within the company supply chain to drive feasibility studies and implement initiatives aimed at reducing energy consumption and carbon emissions. For more information on the company's approach to responsible investment, we'd encourage you to take a look at the Sustainability Report published today. We're always keen to receive feedback from shareholders on what's useful. I would be more than happy to provide detailed one-to-one sessions on our approach, so please don't hesitate to get in touch. With that, I'd like to hand back to Chris to round out today's presentation.

Thanks a lot, Dan. Just 2 more slides from me. The first really just sets out our investment commitments and future opportunities. So, if we start with the table at the top there, hopefully, you recognize some of those names. I've mentioned them already, but we have existing commitments to invest in the Flinders University and Gold Coast Light Rail, Stage 3 projects. Both of those are in Australia. And then I just mentioned our intention to invest further into one of our existing digital infrastructure businesses. Those amounts, I think they total GBP 30 million. They are scheduled to be invested on a profile basis, during the remainder 2024 and 2025, and we have now started to fund those. We'll, of course, use existing cash reserves first so that we can minimize the use of our corporate debt facility. Looking forward, I think there'll be a lot of investment opportunities driven by various themes, the need to upgrade aging infrastructure, drive economic growth in short client resilience and achieve decarbonization targets. And we continue to review various opportunities across our core geographies and sectors and a brief summary of those is set out at the bottom of that slide. I think the key point is though that we're not actually required to make any further investments in order to deliver current projected returns. And I've obviously talked through our focus of reducing the use of our corporate debt facility, which effectively means that any new opportunities would ultimately need to be funded by recycling capital from other existing assets. Even then, we're setting ourselves a very high bar for new investments, as we need to make sure that any new investment offers favorable returns relative to alternative allocation options. Finally then, just in terms of summary and outlook. Our assets continue to perform very well. and have demonstrated their resilience against the volatile macroeconomic backdrop. And I think that's really attributable to the defensive characteristics that I set out at the start of the presentation, including the predictability security, the revenue streams, the inflation linkage and the robust nature of the capital structures. We've continued to meet published dividend guidance with dividends paid during the period, having again been well covered by net operating cash flows and the high-level inflation linkage has facilitated the increase in the 2023 and 2024 dividend targets, continuing the trend of growing that dividend every year. The yield is really important, which is about 6.5%. I actually think it's possibly even more important to look at the total returns that are available though. And if you look at the share price, 29th of February 2024, in the most recent month end, the portfolio was projected to deliver net returns of 9.3%, which was 470 basis points above that, for a 30-year U.K. gilt. So the point I'm making there is that the current environment is offering a very attractive entry point into the fund. We've obviously taken action to ensure the funds as well positioned as possible, including paying off the corporate debt facility. And we'll continue to maintain a focus on actively managing the portfolio, retaining a prudent approach to the use of debt and a disciplined and transparent approach to capital allocation more generally. We remain very confident in the future performance of the assets for the reasons I've mentioned. And when coupled with the scale of attractive investment opportunities going forward, we believe that INPP is very well positioned and remains a very attractive investment proposition. So thanks for listening. That was all I was going to say. So I think I'm handing back over to you, Mark, to take Q&A.

[Operator Instructions] I'd just like to remind you the recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your Investor Meet company dashboard. [Operator Instructions] If I may, Erica just hand back to you. If I could just ask you to read out the questions where it's appropriate to do so, and then I'll pick up from you at the end.

Yes. Lovely. Thank you, Mark. Yes, and thanks for your engagement. It's fantastic to have so many questions. Hopefully, we can get through quite a few, but I'm conscious of the time. I'd also note that a few of the questions that have come up have -- I think, subsequently been covered in some of Chris' comments. So I might skip through some of them. There was a question earlier raised around the situation with Thames Water, that I think Chris actually addressed during the presentation to explain the relationship between Tideway and Thames Water. So I think that one's covered off. And there's a question in relation to inflation remaining elevated, although moderating and how this has impacted INPP's dividend cover, noting that it slightly decreased from the 1.3x in 2022 to 1.1x in 2023. And what our plans are for going forward. I don't know, Chris, you sort of commented generally on the sort of step down, but just expectations going forward, I guess, is what this investor is asking.

Yes, sure. No problem. And we try to be quite clear in that we set out a chart that shows the projected receipts from our existing portfolio. So that is -- that hopefully shows you the timing of cash flows that we expect to receive. And obviously, through that, you can infer that dividend coverage does move around a little bit from time to time. That's not necessarily an indicator of performance, as I mentioned earlier, just the natural flow and timing of distributions from the underlying assets. The -- I think what I can say in the near term, we've obviously published our dividend guidance covering 2024 and now 2025, and we expect those dividends to be fully covered by net operating cash flows. I think beyond that, what we've said at the moment is that we're assuming a reversion to our long-term annual dividend growth rate of 2.5%.

Terrific. Thanks, Chris. The next question relates to buybacks and the fact that there's obviously been a lot more activity there, particularly from Scottish Mortgage, and a query really whether there is any expectation that the share buyback levels might be raised, particularly given the discount that the share price is currently trading.

Yes. I mean, I think it's a good question. I think share buybacks can be an attractive use of capital. What we said previously is that we didn't want to draw down on our corporate debt facility to fund it because I think that's taking on risk, and we didn't want to do that. But absolutely, should further funds become available then we will, of course, consider the merits of enlarging the current share buyback program, absolutely.

Terrific. Next question in relation to ongoing charges, sort of a slight step-up there. And a query why that's the case if NAV is positive? I guess ..

I think -- that's fine. I'm happy to answer the question. The -- so the ongoing charges rate increased from 1.06% to 1.20%, that has ticked up a little bit just because of the timing of certain costs, which are linked to the NAV. So those costs are paid in arrears, which means that the cost that captured in the current period related to the prior period NAV, which is higher what the NAV is now. So effectively, you're having a lag in the timing of the costs and now divided by a lower NAV base, means the percentage that's disclosed is higher. I think over time -- there's a timing difference, so we'd expect that to level out over time.

Indeed. And I think there's a little bit more commentary around that and the calculation in the annual report too if anyone is interested. The next question relates to new acquisitions, particularly those made in New Zealand and how that fits strategically with our kind of outlook on where we might invest going forward.

Yes. I mean I think we're really lucky in that within the investment adviser, we have a large origination team spread across various geographies. We've got people in Australia, New Zealand, Continental Europe, U.K. and North America. So we have a lot of people reviewing an awful lot of opportunities. The New Zealand opportunity was a really interesting one. We've been looking at New Zealand for a while. I think it's a really attractive geography. And obviously, the actual risk profile and nature of the assets fit well with our existing portfolio because we acquired 5 operational PPP assets in the country. I think will we see further opportunities in the region, I hope so. As I mentioned during the presentation, we've opened Amber's office in New Zealand now so we have people permanently based there. And hopefully, over time, that will drive further opportunities in the region.

Yes, fantastic. And that's obviously all kind of taking into account the focus on capital allocation more generally. So obviously, opportunities have to meet certain criteria above and beyond just being a good strategic fit. The next question relates to approach to ESG, Dan. I wonder if you're still around and might like to comment on how ESG factors play, in terms of our asset management investment strategies as well.

Yes, sure thing. I'm very happy to. So I think the first thing to note on ESG is, it is very important for how we look at both asset management and investment strategies. And I think we have a very clear focus on what's important. They're looking at what's material. And I guess to bring it to life [indiscernible] is probably climate provides a good example of that. So when we're looking at future investment opportunities, I think the transition to net zero is bringing some really exciting opportunities and a lot of the infrastructure investment, certainly from a policy perspective is really gearing towards decarbonizing energy systems. So we feel that ESG drivers are leading to quite a lot of potential future opportunities when the company would be in a position to look at more investments. But then from an asset management perspective, I think -- the company has a variety of investments and the ESG risks and opportunities are quite different say, a super sewer going in under London is very different to what's a school PPP, for example. So I think we're very focused on what's was important for each of those. But again, taking climate, net zero is quite an important one. So we are a public sector partner with a lot of our investments. So we are looking to support our public sector clients to deliver their own decarbonization initiatives. So as part of this round of reporting, we've introduced some new ESG KPIs and specifically net zero KPIs, where we're looking to deliver on what's within our control. So that we have a range of ESG KPIs, which are influencing our approach to asset management. So I think in summary, it's across the investment piece, but very specific to individual investments.

Thanks, Dan. And I think the last one, which conveniently I think, kind of brings us to a nice close. Chris, it's probably one for you, how confident do you feel in the outlook for INPP in the short term?

I think -- I mean we feel very confident for the outlook for INPP both in the short term and in the long term. I mean, obviously, in the short term, our focus is on continuing to manage the portfolio to make sure we're generating maximum returns for shareholders, the assets have performed throughout various economic cycles in the past, and we expect that to continue going forward. And obviously, we see a lot of attractive investment opportunities notwithstanding the fact that we will maintain our disciplined approach to capital allocation, given the current environment. Obviously, we've also set out the actions that we're seeking to take and we'll continue to take to influence the share price as best we can and make sure the fund is well positioned.

Fantastic. Thank you. [ That was nice ] point to conclude. So that I think that's all for us. We really do appreciate you spending the time this afternoon to listen to the presentation and your excellent questions. Naturally, the team remains at your disposal to the extent that you have any further questions, and I understand that this presentation can be reviewed on the Investor Meet website as well, if you want to review anything in due course, but I'll hand back to you, Mike -- Mark.

That's great. That's great. Erica, Daniel, Chris, thank you once again for updating investors and yes, this recording will be available within about 30 minutes of the close of this meeting. I guess all that's left to me is to thank you, guys. And if I could ask investors not to close this session as I will now automatically redirect you for the opportunity to provide your feedback in order that the team can better understand your views and expectations. It went to take a few moments for you to complete, but I'm sure it will be greatly appreciated by the company. On behalf of the team from International Public Partnerships, I would like to thank you for attending today's presentation. Have a very good Easter break.