Financial Close for Lincs Offshore Transmission Project

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Financial Close for Lincs Offshore Transmission Project

International Public Partnerships Limited (INPP) has announced that Transmission Capital Partners, the consortium comprising INPP, Amber Infrastructure and Transmission Investment, has achieved financial close and INPP has completed its investment in the Lincs offshore transmission project.

This is the fifth offshore transmission project that Transmission Capital Partners has closed under Ofgem's tenders for the long-term licence and operation of offshore transmission assets in the United Kingdom and is the company's single largest investment to date.

INPP has invested approximately £171 million, which was funded from the company's existing cash and debt resources, to acquire 100% of the equity and junior debt of the project, with the senior debt being provided by the European Investment Bank.

The company's projected returns from its investment in the Lincs project will be in line with the returns it is receiving from its existing portfolio of transmission assets and will be RPI linked. This will enhance the proportion of revenues from investments in the company's portfolio that are inflation linked to 84%. The investment is expected to provide immediate yield to the company.

The investment represents c.17% of the company's portfolio and will see the company's overall investment in the offshore transmission1 sector increase to c.33% of the portfolio (based on 30 June 2014 NAV). However each of these investments, like all others in the portfolio, have been acquired on a stand-alone basis with no recourse to the Company or other projects within the portfolio.

The project links the 270MW Lincs windfarm to the National Grid via 100 kilometres of subsea cables and other related infrastructure including substations. The Company takes no exposure to electricity production or price risk but is paid a pre-agreed, availability-based revenue stream over 20 years which is fully linked to UK inflation (RPI).

Key features of the project are:

  • A 20 year revenue term
  • An availability-based revenue stream, with protected downside (potential deductions capped at 10% of base revenue in any year), and fully linked to UK RPI
  • An availability-based revenue stream with no exposure (either revenue or penalties) to wind farm performance or credit
  • Revenues contracted by National Grid Electricity Transmission plc (NGET), a subsidiary of National Grid, in their statutory ring-fenced role as national electricity systems operator
  • A robust financial structure with no refinancing risk
  • The asset has an established operating record.

Of the 13 projects tendered by Ofgem under the first two rounds of bids, ten offshore transmission projects have now reached financial close, with Transmission Capital Partners being responsible for five of them, reinforcing its reputation as a market leader in this asset class.

As a result of this investment being partly funded from the company's £175 million revolving debt facility, the company will have drawn debt of approximately £110 million.

In August 2014, the consortium was also shortlisted by Ofgem for a further two OFTO projects: Westermost Rough and Humber Gateway both located in the North Sea off the coast of Yorkshire with a combined investment value of £400 million.

Preferred Bidder status is expected to be announced during 2015.

Commenting on the acquisition Rupert Dorey, Chairman of INPP said:

"The scale of the investment makes this a significant transaction for INPP and further reinforces its leading position in the offshore transmission sector. The asset is an appealing addition to our portfolio with exactly the sort of characteristics that we like to invest in. We believe the long-term, fully inflation-linked revenue that arises from this asset fits well with INPP's ongoing investment strategy and should enhance the attractiveness of the Company to investors."

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