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

Good afternoon, and welcome to the International Public Partnership investor presentation. [Operator Instructions] Before we begin, I'd like to note the following poll. I'd now like to hand you over to Amy Edwards from Amber. Good afternoon.

Hi. Welcome, everyone, to the International Public Partnership results presentation for the 6 months to 30th of June 2024. Good afternoon, and thank you for joining us today. I'm Amy Edwards and working the Investor Relations at team -- Amber Infrastructure, the investment adviser to International Public Partnerships. Joining me today to present the detail of the presentation is Chris Morgan, Senior Investment Director at Amber and who has responsibility for INPP. Also joining him is Dan Watson Amber's Head of ESG. As you'll hear from Chris, INPP has continued to perform well during the period, delivering consistent financial returns despite the volatile macroeconomic environment. At the end of the presentation, we will be happy to take you through Q&A from the audience. Please register your questions through the Q&A function. And finally, before we start, as a reminder, this presentation is intended for a [ U.K. ] retail audience, and I would like to draw your attention to the important legal information on the screen. With that said, I will now hand over to Chris to take you through the detail of the 2024 interim result.

Thanks, Amy, and good afternoon, everyone. Thank you so much for joining. Now just before we get stuck into the results for the period, I just want to spend a moment talking about our approach and the resulting current investment case. So we seek to maintain a diversified portfolio of low-risk essential public infrastructure assets that we actively manage to generate consistent and predictable returns for investors as well as environmental or social benefits for individuals or communities that rely on our assets as part of their daily lives. The predictability and consistency of cash flows from the underlying assets is really underpinned by a few factors. And that's the revenues are, for the most part, availability based or regulated, the revenues are paid to us by government or government-backed entities, the revenues have a high degree of contractual inflation indexation. And finally, we adopt very robust capital structures within all of our projects and businesses. We then reduce risk by ensuring the portfolio is well diversified, and that's from a geographic perspective, a sectoral perspective, as well as the counterparties that we use on our assets. But fundamentally, all of the assets are very similar in the sense that they continue to support the delivery of essential public services. Within Amber Infrastructure, the investment adviser, we have an asset management team in-house that has presence across all the geographies in which INPP is invested. And that team has a really strong understanding of the assets and very positive relationships with stakeholders. And I think having that team in-house has delivered very real significant tangible benefits to INPP over the years and is still a key differentiator within the industry. And it's a real sort of demonstration as to the importance that the company places on actively and closely managing its critical infrastructure assets. Our commitment to being a responsible investor is demonstrated by our alignment to various different sustainability regulations and frameworks, and Dan will talk a little bit more about that later in the presentation. And I think importantly, all of those factors and characteristics combine to make the portfolio highly resilient, and that's been demonstrated throughout time. So the fund IPO-ed back in 2006. Obviously, since that period in time, it's endured various different macroeconomic conditions and geopolitical events. And throughout that period, has continued to achieve high levels of operational performance and provide investors with dividends that have grown every single year. Now, that approach hasn't changed since the fund was established back in 2006. And what I want to just talk about now for a second is actually what has that approach resulted in to, what is the current investment case. So first, if we look at it from a financial perspective, looking over the left-hand side of the screen, the projected net returns we're investing in INPP using the share price as at 30th of June 2024 was 9.3%, which is significantly above that offered by a U.K. government bond of similar duration. And actually, the premium over -- could be achieved by investors from investing in INPP over and above a bond is around 460 basis points, which I think is a really attractive premium relative to historical standards. The majority of those returns, so those 9.3% returns, those are total returns, but actually, the majority of those returns are delivered through dividend yield. And you can see that from the 6.6% statistic, which is the 12-month look-forward dividend yield, those available as at 30th of June. In terms of the inflation linkage, the 0.7%, that means what that was trying to say is that if inflation was to run 100 basis points above the assumptions that we assume, you would expect to see a 70 basis point pickup in returns, which hopefully provides investors with some comfort that the real value of their returns is largely protected in a higher inflationary environment. Moving on to the diversification and nature of the underlying assets. We have over 140 different investments. They are spread across stable, developed OECD member countries. And for the most part, the revenues are availability based or regulated. And then finally, on the right-hand side, in terms of the way that we manage these assets, Amber, the investment adviser; has one of the largest independent teams within the sector. It's got a strong focus on active asset management and a very good track record of identifying attractive and accretive investment opportunities. I think it's that ability to continue to further optimize the assets, further optimize the portfolio and add to the portfolio through new investments over time that has in the past and can in the future result in us being able to outperform projected base case returns. And then finally, on the bottom right, we mentioned portfolio contribution. And what we're trying to say there is, actually, there's a very clear ESG story through our alignment with the UN Sustainable Development Goals, and you'll see those dotted throughout the presentation and within our interim report. Investors can clearly identify the nonfinancial contributions that their investment in INPP is helping to facilitate. So turning to the results for the period. The net asset value was down circa 2% to 149.5p per share, and that's really because of the discount rate [ value ] of the assets. Those rates have slightly increased, and I'll talk specifically about the rationale for that later on in the presentation. I think it's important to note that while the net asset value has reduced over the period, we obviously paid out just over 4p per share in terms of dividend. And therefore, on a total return basis, there was a small positive return for the period. We've increased our dividend for 16 consecutive years. And that trend continues with the 2024 dividend target being set at 8.37p per share, which is a 3% growth compared to what we paid out in the comparable period in 2023. And we expect those dividends to be fully covered by net operating cash flows as indeed was the dividend that was paid in the period, which is 1.1x covered. I'll talk a little bit about our capital allocation strategy later on in the presentation, but just to make a quick point with reference to the statistics at the bottom left of your screen in terms of the cash investments that were made in the period. I think whilst we have -- and we'll talk about the focus that we've had in terms of divestments over the past 18 months or so, it is important to stress that we are still able to identify very attractive investment opportunities into which we can reallocate capital within the portfolio to improve investor returns. And a key example of that within the period was the company's circa GBP 80 million acquisition of the Moray East OFTO. OFTO standing for offshore transmission owner. This is one of the project companies that owns the electricity transmission infrastructure that connects an offshore wind farm to the onshore grid, allowing that renewal electricity to flow through for people to use. Just on the right, I mentioned the UN Sustainable Development Goals already. But obviously, as I said, that is a key part of our -- the way we assess and demonstrate the positive contribution that the fund makes. Perhaps the only point that I'll pick up in the period is the increase in the number of homes that -- equivalent number of homes that are capable of being powered by the company's OFTO portfolio. Because of that acquisition in the Moray East OFTO that I mentioned a second ago, INPP has now 11 of those in its portfolio. And that increase is effectively resulting in an increased contribution by the fund towards the transition to net zero. Just turning to dividend growth. This chart just sets out our track record of growing the dividend every year. And as you'll see from the inception of the fund through to 2022, 2023, we had around 2.5% annual dividend growth. But what we did for the 2023 dividend and 2024 dividend was that we increased them by a greater rate of growth. And that was really to reflect the fact that we were going through a period of higher inflation, inflation linkage within our underlying assets resulted in greater revenues, and we want to be able to pass on some of those additional revenues to investors through high dividends. With inflation now moderating, we are currently assuming a reversion to our previous long-term average growth rate of 2.5%, such that our 2025 dividend target is currently 8.58p. I I've mentioned already the attractive dividend yield of just over 6.5%. And the other statistic that I wanted to draw out is around the confidence that we have in the underlying cash flows in being able to meet our progressive dividend policy for the next 20 years plus. And I think that's perhaps borne out even more when we look at the chart on the next slide. So you would have seen this chart previously, but this is perhaps a more detailed version. So what we've tried to do is try to enhance the disclosure in a couple of ways. Firstly, we've broken down the investment receipts between the 3 different categories of assets we have in the portfolio. So you can see we're showing through the dark blue segments, we're showing the cash flows from our PPP projects. There's sort of a medium blue over cash flows coming from our operating businesses. And the light-blue portion is that the cash flows coming from our regulated assets. So that's the first enhancement we've made to the chart. And the second enhancement is to add on a projection of the net asset value over time. So that's really just designed to illustrate how the NAV of the portfolio could evolve over time, other things being equal. I think it's important to stress that this chart goes out to 2054. That's not the end of the fund, we just selected the next 30 years because if you go to the longer term, sort of you can't see the detail that you might otherwise want to see. But you can see that the cash flows continued by the fact, the net asset value in 2054 is illustrated at being north of GBP 1 billion. Some people ask about why is the profile a little bit lumpy, and there are a couple of main reasons for that. The first is that with a public private partnerships, a PPP project, what you tend to find is that these are concession-based investments. So you have an operational period of, say, 20 to 25 years. But actually, before you get to the end of the concession, you've already paid off the debt financing. And therefore, you have additional cash flows within that project to distribute out to investors. And that's one reason why there's some additional lumpiness at the end of the certain concession period. So for example, you can see a greater dark blue bar in 2036. The other reason is because we ascribe some value to assets when they get to the end of the license period typically. And here, we're really talking about those OFTO assets that I mentioned a second ago. So with an offshore transmission assets, what happens is that Ofgem, the regulator, grants an availability-based initial revenue stream. That initial revenue stream is generally for 20 to 25 years. but actually, the economic lives of the component parts of the assets that we own are greater than the length of that initial revenue stream. And therefore, what we do in our modeling is we ascribe some value to the asset at the end of that initial revenue stream. And you might see that coming through, for example, in a greater light-blue portion in 2044 and 2047. I've mentioned it already, but we talk quite a bit about our ability to service the progressive dividend for the next 20-plus years from the existing portfolio. And some investors have said, "That sounds really good, but can I just understand a little bit more about capital value of the fund at the end of that time frame?" So that's one of the reasons that's prompted us to put on here the illustration of the evolution of the NAV over time. So if you want to get an idea as to the projected returns for investing in INPP over various different time horizons, hopefully, this chart allows you to do that. And the other takeaway, I hope, you'd have from this chart is, I guess, a reminder as to the predictability of the cash flows within the portfolio and the longevity and obviously, our associated expectation of continuing to be able to service that progressive dividend policy. In terms of discount rates, we obviously have to determine the fair value of our underlying assets. And of course, that goes through external audit by PwC. But when we're trying to determine those valuations, we use a discounted cash flow valuation methodology. So we determine a discount rate that we apply to each of the individual investments within the fund. And we don't set out all of the discount rates that we use here, but what we've tried to do is provide you with a little bit more detail. So we've got the weighted average discount rate that we used at 8.7%. And in the little schematic at the bottom left of the slide, we're trying to give an indication as to the range of discount rates that we use to value the assets in those 3 subsectors that I mentioned, PPP projects, regulated investments and operating businesses. And what we're seeing at the moment is that in the market, there are lots of discussions, there are lots of processes that are ongoing. But actually, perhaps the number of transactions that are completing are less than what we've seen in prior periods. And probably the total value of transactions that we're seeing is also less than what we've seen in recent years. And I think that's an indicator of a current reduction in liquidity, which we've had to try and consider as part of our valuation processes. So taking into account that sort of current lack of liquidity as well as other data points that we have, we've sought to increase the discount rates that we apply. So we've been prudent by increasing our discount rates from -- on a weighted average basis from 8.4% to 8.7%. And in terms of where those rates have changed, it's really the assets at the lower end of the range, as you can see from the chart at the bottom left. I think it's important to remind everyone that the sector remains very attractive. If you look at the amount of capital that was raised for infrastructure strategies in the first half of 2024, it was a marked improvement on what we saw in the first half of 2023 and the allocation to infrastructure across all types of institutions, again increased in the first half of the period. So there are positive signs that additional liquidity is coming, which would be supportive for valuations, but we've sought to take what might arguably be considered a relatively conservative view in the period. Obviously, if people have different views as to what an appropriate discount rate should be, they can use the sensitivity that we've included in the top right of the chart to work out what they think the net asset value of the fund should be, for example, if they want to do a comparison across the peer group. I won't spend too long on this chart, but just to pull out a couple of points because this chart is just setting out the component parts underpinning the change in the NAV over the period. The first is the share buyback program, which is part of our wider capital allocation strategy. And again, I'm going to talk about that in a moment. But what you see here is the cash outflow, i.e., the fund buying back its own shares. And that's because we're looking at it on a NAV perspective, we're not looking it on a NAV per share basis. But if you were to look at it on a NAV per share basis, you would see that the share buyback is accretive because, of course, whilst we're spending money to buy back shares, roughly removing and reducing the number of shares in circulation, which helps the NAV per share. I've already talked about the discount rate, so I won't mention those again other than just to say the net impact of discount rate changes was circa GBP [ 70 ] million, as you can see from the first green bar and the second orange bar. So paid out dividends in the period, they were just over 4p per share. The total was GBP 78 million, and they were paid in line with the guidance we provided investors with previously. And then we're on to sort of the macroeconomic changes. The foreign exchange rate changes are quite mechanical, just reflecting the change in the spot rates, and that's because we saw sterling strengthen against 5 of the currencies that the fund is exposed to. And then the macroeconomic assumptions is a relatively small movement of GBP 3 million, just reflecting the net impact of lower short-term inflation, but higher longer-term inflation assumptions. And then the NAV return is sort of the unwind of the discount rate, and that was in line with expectations for the period, indicating that the assets continue to perform. So as promised, I was just going to do a little bit of a sort of deeper dive into the capital allocation strategy. And I suppose, the reason why we're trying to be so clear in terms of how we're allocating capital is because, obviously, over the last 18 months or so, there have been various factors that resulted in the share prices of INPP and other investment trust trading in a discount to their net asset value. We've obviously been proactive in taking steps to try and remedy that and try to make sure the fund is as well positioned as possible. And the steps that we've taken have been in line with this capital allocation strategy, which has 3 sort of component parts. The first is prudent use of the company's corporate debt facility. So historically, we -- while we still have the -- historically, we've used the corporate debt facility to efficiently finance new acquisitions. But actually, given current market conditions -- and the fact that it's a floating rate facility, the Board made it a priority around a year ago to pay down that facility. And that's exactly what we did. So through asset sales that were completed towards the back end of 2023, we used the proceeds to pay down that corporate debt facility, which obviously reduces the interest burden on the fund and reduces the risk because it is a floating rate facility. We've also reduced the size of the facility from GBP 350 million down to GBP 250 million. As I said, there are no cash drawings under that fund, but obviously, we have to pay commitment fees on the amount or on the size of the facility. So reducing the size of the facility reduces the commitment fees that we have to pay while still providing us with access to liquidity, should we need it. The second principle of our capital allocation strategy is to maintain a targeted program divestment, and that's to both demonstrate the underlying values are achievable and to reallocate capital. I know if we look at what we've done over the last 18 months, we've realized assets across -- we've realized a U.K. PFI asset. We've sold regulated utilities, we sold [ OFTO ] investments. We sold the digital asset. So we've made sort of divestments across a few sectors that have totaled around GBP 235 million. And I think it's really important to stress that the divestments that have been made, have been made at prices that are in line with previously published valuations. We've always used debt prudently. And therefore, we were not and we are not in a position where we need to sell assets. But we want to continue to maintain a targeted program of divestments in order to demonstrate that the valuations that we hold our assets are achievable and robust, but also to be able to reallocate capital in a way that is attractive and efficient for shareholders. And the third principle really deals with that. So it talks about the way in which we're going to allocate or reinvest those divestment proceeds. And with the shares trading at a discount to the NAV, buying back our own shares is a really attractive investment opportunity. And therefore, that effectively sets the threshold through which the economics of any new investment need to be assessed. So if we think about what we've done with the divestment proceeds to date, we've paid down the corporate debt facility, as I mentioned. And then we've used proceeds to acquire the Moray East OFTO, I mentioned that at the start of the presentation, that was circa GBP 80 million, and that OFTO was acquired on very attractive terms. And then we started the buyback program. So we initially started a buyback program of GBP 30 million, and we said the program is going to run for the calendar year 2024. But we're now saying we intend to increase that buyback program to up to GBP 60 million and extend the duration of the program out to March 2025. So that should provide greater and ongoing support for the share price, as well as being a demonstration of our confidence in the quality of the assets that we have and the values that we ascribed to them. And just finally, before I move on from this slide, I set out at the bottom of that slide some other initiatives that we've undertaken. The first, I've alluded to a couple of times already, that it's the formalization of a new return target for new investments to give investors comfort that we are considering the relative economics of the share buyback whenever we consider the attractiveness of any new investments. And the second and third point within that box at the bottom around the dividends, we've both increased dividend growth, as I talked about earlier, and we are increasing the dividend frequency. So we have now announced that we will increase dividend frequency as of June next year. So from June next year, investors will not only receive dividends on a semiannual basis, but actually on a quarterly basis, which hopefully is positive. Despite the actions that we have taken, we continue to believe the share price materially undervalues the company. And of course, the share price will continue to be impacted by macroeconomic factors. We would hope that we get more positive macroeconomic data, which will be supportive to the share price. But notwithstanding that, we are committed to continuing to proactively take steps in line with our capital allocation strategy, which should ultimately help to mitigate risk, improve values and enhance returns. Now just moving on to the next few slides, I just wanted to give a little bit of an update on the operational performance of the assets within the portfolio. And I'll start with the regulated assets. So we have 13 assets within the portfolio, whose revenues are regulated by U.K. independent economic regulators, Ofgem and Ofwat, the only energy regulator and [ water ] regulator. And these assets make up around half of the portfolio. But just starting with Cadent, Cadent is a critical U.K. infrastructure asset. It facilitates the distribution of gas to around half of the population. It's not an energy supplier, it earns regulated returns from providing a safe and reliable distribution network. And that business continues to perform very well. So that business is achieving outstanding levels of safety, outstanding levels of reliability. And if we look at it from a financial perspective, we look at what's -- in the period to 30th of June, what cash flows did we expect to receive from Cadent, we received slightly in excess of what we forecast. So it's performing well from both an operational and a financial perspective. The Cadent revenues are regulated by Ofgem, and Ofgem's terms the revenues available to Cadent for a 5-year price control period. And we're currently in the middle or perhaps just past the middle of the current period, which ends in March 2026. And Ofgem is currently consulting on what revenues will be available to Cadent in the next price control period, which starts in April 2026. The consultation process is very well known to us, we've been through it before, and we'll obviously continue to engage in the process in the lead up to the publication of final determinations in late 2025. The most recent announcements from Ofgem have been very helpful. They've indicated that the approach they will take to regulation in the next price control period won't significantly change from the approach they're adopting in the current regulatory period. And I've also noted the importance of the regulatory framework to be adaptable to protect investors in the context of various possible pathways to net zero. So the gas network distributions more generally have a critical role to play in facilitating the transition to net zero because they're continuing to safely and reliably provide gas, which is obviously facilitating the incremental introduction of more and more intermittent renewable technologies. And of course, the gas networks more generally are working with government to demonstrate the opportunities offered by cleaner fuels, such as hydrogen, biomethane; in the future. So it's really the extensive nature of Cadent's assets, its role in the transition and the inherent protections afforded to Cadent through the regulatory regime, which provide us with a great deal of confidence that Cadent will play a key role in the U.K. energy system for decades to come. Moving on to Tideway, this is the second largest asset within the portfolio. This is a company that's building the 25-kilometer super sewer under the River Thames, construction works have now been completed. Commissioning is due to start shortly. And once commissioning will be -- is complete, which is scheduled for the second half of 2025, the asset will be fully operational. And it's at that point that it should be able to intercept 95% of the current overflows or the polluting overflows from the existing sewerage network, which will obviously have a significant positive environmental benefits for London and the wildlife. The financial challenges being faced by Thames Water -- and just to put it in context, Thames Water is Tideway's direct revenue counterparty. So Tideway doesn't build consumers directly. Thames Water has a legal obligation that sets out within its license to collect money for Tideway. So when it builds consumers, part of that money is collected by Thames Water and paid over to Tideway. And obviously, the financial challenges being faced by Thames Water are very well publicized. But we continue to have confidence in the adequacy of the existing statutory and regulatory protections there are afforded to Tideway, which themselves are designed to mitigate the risk of any disruption to the flow of revenues from Thames Water. So we don't expect the financial challenges posed by Thames Water or indeed a change in the status of Thames Water to have any material impact on Tideway. Just moving on to the offshore transmission assets. We have 11 in the portfolio. They are all, bar one, performing extremely well. The one that is not performing as well as it should be is the East Anglia One OFTO, and that's because that asset has suffered a cable fault. Firstly, just to say that the repair works for that cable are already scheduled. They should start in the next few weeks, and we expect the cable to return to full service within the next couple of months or so. But I think it's important to stress that the cable fault is, in our view, an issue due to the -- or initially with the manufacturer installation of the cable itself. And therefore, we expect the regulatory protections that are set out in our license to hold us harmless for any revenue deductions that we would otherwise have faced. And because the cables remained under warranty with the original manufacturer, we expect the original manufacturer to pick up any cost of repairing those tables. So whilst this is an operationally disappointing factor, it's not something that will have any financial material impact on the portfolio. Just quickly on the final bullet point, and we've been talking about this for probably about 3 years since Ofgem started the consultation, but Ofgem continued to consult on the most appropriate way to extend the revenue framework of these assets. As I mentioned earlier, they have an initial revenue stream, circa 20 to 25 years. And Ofgem, the regulator, is currently consulting on how they extend that framework to ensure the continued use of these assets because obviously, they continue to use the assets is critical, given the government's ambitious offshore wind targets and then its zero ambitions more generally. Just moving on to our PPP projects. We have just over 100 individual PPP projects. These are concession-based investments. They represent around 40% of the portfolio. And these assets have continued to perform very well during the period. I mentioned these are availability-based projects for the most part. And therefore, the availability statistic is really important for us. Availability in the period was 99.8%. And actually, if you think that, that 0.2% deduction is something that impacts us, it actually doesn't because we pass on that deduction to third-party facilities management contractor in any case, but it is actually an important statistic because it demonstrates how well our assets are performing for our public sector clients. And that's, of course, very important to us. For the vast majority of PPPs, what happens at the end of that concession period, which again is circa 20 to 25 years, the assets and the associated services need to be handed back to the public sector. And this is becoming increasing common talking point or discussion point within the industry because there are a lot of PPPs in the market that are getting towards their hand-back dates. The first of ours -- our PPPs goes through that process next year. It's a very small U.K. courts project. It represents around 0.1%, 0.2% of the portfolio and activities are well underway. But actually, for the vast majority of our portfolio, be hand-back data is not until the mid-2030s. So in some ways, it's a little bit of shame talking about the hand-back of these projects when they've still got 10, 15 years or so still to run. But I think it's important that we talk about it, I think it's important that we set out the reasons why we believe investors should have confidence in our ability to facilitate an efficient transfer of these assets in the future when the time arises. And those factors are sort of threefold. One is we have a strong in-house asset management team that I mentioned earlier in the presentation. And that team is focused on proactively monitoring asset condition, monitoring maintenance and life cycle works that need to be undertaken and ultimately seeking to ensure that the assets will meet the criteria set out in the hand-back specification when we get to that point in time. The second is that actually, if it turns out that some remedial works need to be undertaken for the vast majority of PPPs in our portfolio, we've passed that cost risk on to a third-party contractor. So it's not something that will impact on our projects. And then finally and more for the avoidance of doubt, we do not assume any additional revenues will be generated from the projects when they reach the end of their concession date. So those are the 3 factors that should hopefully provide some confidence in terms of our ability to efficiently transfer the assets in the future. A quick note on the other 2 points on this slide, Diabolo Rail, it's unlike the rest of the portfolio because most of the portfolio is generating availability-based or regulated cash flows, whereas actually the majority of the cash flows on the Diabolo are linked to usership of the asset. That's not unmitigated exposure to usership because we've actually got the contractual right to change the passenger fare that passengers paid to use the asset, but I think it's important to stress that we've got the contractual right to change the fair, and that is something we did last year, actually following the reduction in passenger numbers that we saw during and in the immediate aftermath of the COVID-19 pandemic. Secondly, we are seeing very strong passenger numbers. So in the first half of 2024, we had around 3 million people use the Diabolo Rail link. That was in excess of the number of passengers that we saw in the first half of 2019, i.e., prior the pandemic, and is slightly ahead of the forecast we had assumed as part of our modeling. And then in terms of the divestment of the [ Three Shires ], that's a U.K. PPP project. We disposed off that post period end. And I have disposed of the price that was in line with our previous carrying value, which hopefully gives you some confidence in terms of the values that we ascribe to our assets. And then just one more slide before I hand over to Dan. In terms of the operating businesses, there are 4 of them in the portfolio. They make up 10% of the portfolio and the largest is Angel Trains, which is a U.K. rolling stock leasing business. Angel owns over 4,000 vehicles. These vehicles are out on lease to train operating companies or TOCs across the U.K. as planned. So that asset is performing as expected. People often ask about the proposals by the new Labor government to take measures in terms of the passenger railway in the U.K. The initiatives that the Labor government has set out are not particularly new. They're largely inherited from the previous government, and they're definitely twofold. One is to nationalize the operations of passenger services, and the second is to create GBR, or Great British Railways, which will act as a direct in mind for the railway industry. But these initiatives are really focused on improving the operations, the passenger services rather than the provision of rolling stock. And so they are not initiatives that are expected to have any material impact on Angel trains. If you look at the lease agreements that Angel has that govern the leases for these assets, their contracted rates, they are not exposed to the number of passengers that are on the train or the number of services that are around, they are contracted. But I think it is very positive that we continue to see increases in the number of people using the railways. So I think we're up to around 95% of the number of people that we saw pre-pandemic, which whilst it doesn't directly impact Angel now, I think it's more positive for the Rail Industry going forward and should hopefully provide more investment opportunities for the Angel business over time. BeNEX is a rail business in Germany. And we've talked about this platform previously and talked about the potential to further grow this platform. And we're really pleased that during the period, BeNEX signed an agreement to acquire Abellio's German rail business. Abellio's German rail business principally comprises 2 train operating companies. They're operating availability-based passenger rail concessions in regions within Germany in which BeNEX currently has little or no presence. I think that's really important because that will allow BeNEX to build relationships and to build a reputation in new areas. And hopefully, over time, again, that should add to new opportunities to further build the BeNEX business. That acquisition will cost in the region of GBP 15 million and is expected to be financed through existing cash reserves held by INPP and proceeds from near-term divestment activities. And I think because I've referenced it a couple of times already in terms of how we assess the relative attractiveness of new investments, it's really important that I stress that whilst we don't publish the individual returns we expect to generate from these investments, the rate of return on this investment is projected to be significantly ahead of the rate of return achievable on share buyback. And finally, just in terms of digital infrastructure businesses, we have 2 in the portfolio. They're very small in the context of the portfolio, representing around 1%. And they continue to perform well. And they're obviously continuing to build out their fiber network. But importantly, their business plans are fully funded. So they have no near-term capital requirements that are not already committed. So Dan, if it's okay, I'll just hand over to you for the next slide.

Absolutely. Thank you very much, Chris, and good afternoon to you all. Now I'm going to take you through the progress we've made in the first half of 2024 regarding our responsible investment strategy and also share some of the actions that we have planned for the second half of the year. Now this progress underscores our commitment to responsible investing in our ongoing work towards achieving our ESG policy objectives. Now in the first half of 2024, we took further steps to enhance transparency and align with regulatory standards. We released the third edition of our sustainability report, which included updated disclosures aligned with key frameworks such as TCFD, SFDR and the EU taxonomy. Additionally, we revised our internal disclosure processes to align with the U.K.'s anti-green washing rules, helping to evolve our approach to nonfinancial reporting. A central focus has been the development of an engagement plan aimed at driving performance improvements across our investments, particularly with a focus on working towards our new net zero KPIs. The results of this engagement plan will be communicated in our year-end results, but we're really pleased that we've actually been progressing things at a practical level and have achieved all approvals required to install a roof-mounted solar PV array at one of our education investments, marking the first retrofit of solar technology within our social infrastructure portfolio. Now looking ahead to the second half of 2024, we'll continue to explore the evolving landscape of ESG requirements, particularly as they relate to the U.K. sustainability disclosure requirements. Although we are not currently required to report in line with these regulations, we're actively assessing how we can better align our disclosures to support shareholders and investors. In the coming months, we will intensify our engagement with investments based on the KPI engagement plan. Additionally, we will be forecasting emissions from these investments as of 2030, which will support setting targeted investment level goals were as economically feasible and within our control. Finally, we plan to further engage with public sector clients and operating companies to support their efforts in meetings at net zero targets. Now this collaboration is essential in infrastructure to ensure we can continue to reduce emissions across the investment portfolio while aligning with wider climate ambitions. So in summary, we've again made solid progress in the first half of 2024 and are well positioned to continue this momentum into the second half. Our focus remains on transparency, stakeholder engagement and contributing to global sustainability aims. Thanks very much for your time, and I'm going to hand back to Chris now to conclude the presentation of the results.

Thanks, Dan. And I've just got two more slides to go through before we move over to Q&A. So the first is around the investment commitments and the future opportunities and taking the commitments first. We have 3 long-standing investment commitments that we've talked about many times previously. Those are the Flinders University, the Gold Coast Light Rail and tube commitments. And in addition to that, we now have the additional GBP 15 million that we've committed to BeNEX to help facilitate the acquisition of Abellio’s German rail business. So that means we've got 4 investment commitments that total circa GBP 35 million. And as you can see from the chart at the top there, we've tried to provide a little bit more detail in terms of the timing of making those investments. I think the key point is that we expect those investments to be funded from existing cash reserves and from cash that we expect to generate in the short term, including through ongoing divestment activities. In terms of future opportunities, the first point that we always like to make is that actually we don't need to make any further investments in order to deliver current projected returns. And I think that's a really important point to bear in mind. But there are various factors that underpin the pressing needs for governments to both upgrade existing infrastructure and to build new infrastructure. And I think if you couple that with the competing demands on public finances, we see that being a key role for private capital to play. So whilst there is a very high threshold for us in terms of making a new investment because we need to consider the relative economics of buying back our own shares, there should be plenty of attractive investment opportunities for us to invest in public infrastructure assets across our core geographies. And then finally, in terms of a summary and an outlook, the portfolio continues to perform very well. It's demonstrating its resilience against the volatile macroeconomic backdrop. And I think the reasons for that resilience are the same points that I mentioned at the start of the presentation, the nature of the cash flows, the government or government-backed counterparties that we have, the inflation linkage and the robust capital structures. We've continued to meet published dividend guidance, with dividends being paid during the period having been well covered by net operating cash flows. And of course, we continue to grow the dividend as we have done every year since the IPO. The yield of just over 6.5%, I think, is really important, but I also think it's sensible to look at the total returns available. And as at 30th of June, the projected net total returns was 9.3% per annum, which was 4.6% or 460 basis points above that offered by comparable U.K. government bonds. So I think it's a really attractive investment premium that can be generated by investors. So the outlook is really positive. We remain very confident in terms of the future performance of our existing assets. We're in a very strong liquidity position, having paid down our corporate debt facility. So we've got a robust platform from which we can continue to actively manage the portfolio and reallocate capital in a way that further enhances shareholder returns.