International Public Partnerships Share Price (INPP)

Markus, the company's stated intention is to increase dividends by 2.5% every year. Their financial modelling (including the inflation linkage) shows they can afford to do this for the next 25 years without any new asset investment, which they are likely to make anyway. Since BBGI went private, INPP is probably considered to be the top/ amongst the top funds in this field and history suggests they will be able to meet their progressive dividend promises.

Guitarsolo

Thanks for patiently trying to explain the inflation linkage though I'm still confused but in a different way.

If as titchtitch quotes.

"The inflation linked return is the increase in the weighted average discount rate" then why does that not result in a reduction in NAV as it seems to do in other situations? I suppose now that I understand the meaning of .7 inflation linkage all I really need to know is can we expect dividend payouts to rise by 70% of any future increase in inflation or does it not work that way? Thanks.

Tichtich, I concur with your assessment of the inflation linkage.

Whilst I can't speak with much authority across INPP's 140 investments if we look at two of the larger ones, Thames Tideway and Sizewell C, my understanding is that they are not capped albeit they follow the lower CPI rather than RPI. I recall looking at the details of the Sizewell C investment and concluding that INPP had learned a few things from previous investments (that had caps) made during periods when inflation was a distant prospect. But I am happy to be corrected by anyone who is more across the finer details than I am.

In other news, the share buyback has reached 116m shares which is now over 6% of the shares in issue. Shares are held in treasury rather than cancelled.

"About 70% of the portfolio’s revenues or cash flows rise in line with inflation."

That's not quite what the figure means. According to the last INPP fact sheet, the inflation linkage figure is "calculated by running a ‘plus 1.0%’ inflation sensitivity for each investment and solving each investment’s discount rate to return the original valuation. The inflation-linked return is the increase in the weighted average discount rate. "

My interpretation: if future inflation is 1 percentage point higher than currently assumed (say 3.5% instead of 2.5%), then the nominal return on investment will be 0.7 percentage points higher than currenty expected. That means that the real return will be 0.3 percentage points lower.

I believe that this only applies to the first additional percentage point of inflation. It tells us nothing about what would happen if inflation was 2 percentage points or more higher than assumed. If, for example, a lot of assets had inflation indexing capped at 4%, the inflation linking above 4% inflation might be very poor.

I used to have an investment in BBGI, a similar infrastructure fund. I recall that they explicitly stated that they had no caps on their inflation indexing (but not all revenues were indexed). I've seen no such statement from INPP, so it's possible they do have some caps.

ChatGPT says:

The “inflation linkage” figure for International Public Partnerships Limited refers to how much of its underlying cash flows (and therefore returns) are tied to inflation.

A figure of 0.7 (i.e. 70%), not 0.7%, typically means:

- About 70% of the portfolio’s revenues or cash flows rise in line with inflation.

- These increases are usually built into contracts (e.g. government-backed infrastructure agreements).

- So when inflation goes up, a large portion of INPP’s income should also increase

If you genuinely saw 0.7%, that’s almost certainly a typo or misunderstanding—it would imply virtually no inflation protection, which contradicts how INPP is structured. Most infrastructure funds report linkage as a fraction (e.g. 0.7 = 70%), not a percentage.