INPP acquires interests in Building Schools for the Future Investments
International Public Partnerships Limited (INPP) is pleased to announce that it has acquired the UK Government's investment interest in the Building Schools for the Future (BSF) programme.
INPP has acquired 100% of the interests in Building Schools for the Future Investments LLP (BSFI) from the Department for Education and Partnerships UK. BSFI will be acquired for approximately £60 million which will be funded by INPP partly through available cash and partly through use of its corporate debt facility.
The BSF programme was an initiative launched in 2004 by the previous government, with the aim of rebuilding or re-modelling every secondary school in England over a 20 year period. Although the longer term BSF programme has now been cancelled by the Government, BSFI continues to hold between a 10% - 20% interest in all BSF projects developed to date utilising private sector investment capital. There are some 48 such projects in which BSFI has investment.
INPP has built up a wealth of experience in managing investments in schools delivered under PFI and PPP programmes and the acquisition of BSFI compliments the existing portfolio of 106 schools across the UK. In total, school projects will represent 32% of the net asset value (NAV) of the portfolio.
The portfolio meets INPP's key investment criteria and attractive features include:
- Project revenues are predominantly inflation linked and are 100% availability based
- Debt is non-recourse at the project level and matched to the life of the project
- An attractive 70:30 construction: operational split between schools in the portfolio, mirroring the current balance in the wider INPP portfolio
- Long duration projects, with an average remaining life of 24 years
- Typical UK PFI project funding structure with well established and standard form risk framework
- Projects are well diversified in terms of their geographic spread and the number of counterparties and local authorities participating in the scheme
- No cross collateralisation of individual investments in the portfolio
- BSFI benefits from enhanced shareholder rights compared to other investors in the underlying PFI school projects
- BSFI has the opportunity through pre-emption rights to increase its holding in the underlying PFI school projects if other shareholders seek to sell their interests
- The projects are already contributing yield and will continue to yield through the portfolio's life
As noted above, the majority of the portfolio is operational (c.70% by value), which is broadly consistent with the level of operational assets currently in INPP's portfolio. Of the 19 projects in construction, all but one project is due to be operational by October 2012 with the final project due to be operational by September 2014. Consistent with its other construction assets, INPP would expect to benefit from an uplift in NAV in the portfolio, provided the construction assets complete as anticipated.
Giles Frost, Director of Amber Infrastructure Limited, said: "INPP is delighted to have acquired the UK Government's investment portfolio in the Building Schools for the Future programme. This is a significant acquisition for INPP and our largest single commitment to date.
"INPP will bring significant expertise to the BSF assets, having built a strong track record of managing our existing portfolio of 106 schools. In addition, the stake provides an exciting means to further extend our presence in the sector through the pre-emption rights and potential development opportunities associated with the portfolio."