LONDON (Alliance News) - 3i Infrastructure PLC Wednesday said it will review its return target as the sale of its stake in UK train-leasing company Eversholt Rail Group is completed and the pipeline of opportunities for investment becomes clearer over the coming months.
In a statement, the infrastructure investor, which is advised by 3i Group PLC's 3i Investments, said it will review its return objective in order to ensure that this is sustainable over the long-term. The move comes as part of an annual review of the company's strategy, with the outcome expected to be disclosed before the company reports annual results in May.
The sale of its Eversholt stake earlier this month will generate an "exceptional return" for shareholders, according to Chairman Peter Sedgwick.
"While we generally aim to hold our core infrastructure investments over the long term, after a careful evaluation of the price offered against our assessment of the long-term potential for the business, we decided that a sale of our holding in the business would generate significant additional value for our shareholders. The other assets in the portfolio continue to perform well and the portfolio overall is generating good levels of income," Sedgwick said in a statement.
According to the co-heads of infrastructure at 3i Investments, Ben Loomes and Phil White, work has already been done on identifying potential new investments.
"We have been busy developing a healthy pipeline of investment opportunities and the company looks forward to bidding on a number of core infrastructure opportunities over the coming months. We will continue to be disciplined in bidding for new investments, maintaining our focus on investments that deliver attractive risk-adjusted returns to the company's shareholders," Loomes and White said in the company's statement.
3i Infrastructure is selling its 28% stake in Eversholt, one of three train rolling stock leasing companies in the UK, to CK Investments SARL, a company jointly owned by Hong Kong-based Cheung Kong Infrastructure Holdings Ltd and Cheung Kong (Holdings) Ltd.
The sale is to generate GBP358 million for 3i Infrastructure, while it also received a distribution of GBP15.5 million from Eversholt Rail at the end of December 2014, bringing total proceeds to GBP374 million, representing an uplift of about GBP131 million to a valuation of GBP240.8 million and interest accrual of GBP1.2 million at the end of September last year.
3i Infrastructure expects to receive the GBP358 million in March. Completion of the deal remains conditional upon receiving clearance from the European Commission.
The news came as 3i Infrastructure said its portfolio generated GBP28.2 million of income in the third quarter, which ended at the end of December 2014, including the GBP15.5 million dividend received from Eversholt Rail.
3i Infrastructure committed to invest GBP26.5 million in the quarter in two primary public-private partnership investments, La Santé prison in France and A9 Gaasperdammerweg in the Netherlands.
The company reiterated that rising infrastructure asset prices are continuing, meaning returns are likely to be lower.
"While the returns compression in the infrastructure market has positive value implications for the company's existing European portfolio, these competitive market conditions make it more challenging for the company to find new investment opportunities in core infrastructure consistent with its current annual return objective," the company said.
3i Infrastructure shares were down 0.2% at 155.75 pence on Wednesday morning.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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3i Infrastructure (3IN)