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International Public Partnerships: a high inflation haven?

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Historically, diversified infrastructure investment companies have had a record of strong returns amidst high inflation rates, and 2022 appears to be no different. Diversified infrastructure funds continue to prosper, delivering rising dividends and asset values from investment in cyclical businesses and facilities.

International Public Partnerships (LSE: INPP) is one of the most well-established diversified infrastructure investment companies in the UK. Founded in 2006 as Babcock & Brown Public Partnerships, the London-based company has grown significantly and now stands as a constituent of the FTSE 250 Index. Amidst the intense inflationary pressures seen in today’s economies, International Public Partnerships could serve as a sound investment to shelter investors’ income against high inflation.

What is International Public Partnerships?

International Public Partnerships invest in public and social infrastructure assets and related businesses with the aim of providing investors with stable, long-term, inflation-linked returns, based on growing dividends and the potential for capital appreciation. The company is also focused on diversifying its portfolio with infrastructure assets which meet its societal and environmental standards both now and in the future.

Through the active management of its existing asset portfolio and the use of gearing, the company has stated that it targets a long-term return in excess of 7% per annum. Since listing in November 2006, the company has grown its portfolio to 142 investments with a market captalisation in excess of £2.5 billion.

In March 2022, the Company reached financial close on Stage 3 of the Gold Coast Light Rail Project, an Australian public-private partnership (PPP) contract to design, build, finance, operate and maintain a light rail network between Broadbeach and Helensvale. In April, International Public Partnerships managed to successfully raise £325 million of new capital for further investment in the future.

International Public Partnerships’ Portfolio Composition

International Public Partnerships is regarded as having one of the most diversified portfolios, though 75% is in the UK.  Pure PPP projects with no revenue risk account for 31%, whilst PPP with some revenue risk account for 10%, regulated assets for 47%, railway rolling stock for 10% and digital infrastructure for 2%. Assets include electricity transmission, gas distribution, waste water, military housing and schools.

The discount rate – the implied future return on investment – is 7% but International Public Partnerships has a good record of adding value, making long-term shareholder returns sustainable.

The Appeal of Investment Infrastructure Companies

Private sector investment in the development of infrastructure is as important as ever. By improving transportation services, creating better access to resources and increasing economic and geographical mobility, infrastructure development can support the domestic economy in a variety of ways and facilitate substantial expansions in economic growth worldwide.

The predictable, long-term revenue streams in public infrastructure mean it is an attractive investment opportunity. Payment streams to infrastructure providers can be agreed up front and can be based on the physical availability of the asset or provide for a regulated return on capital invested, rather than the level of demand or usage of the asset. Today’s inflationary pressures act as a further incentive to invest in diversified infrastructure investment companies such as International Public Partnerships.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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