Infrastructure

Infrastructure assets generally have a strong market position, often operating within regulated markets, or with revenues underpinned by strong, long-term contracts.

3i invests in Infrastructure through two vehicles

3i Infrastructure plc

3i Infrastructure plc (“3iN”) is a closed-ended investment company that invests in infrastructure businesses and assets, and is incorporated in Jersey. It is building a diversified portfolio of infrastructure investments across the globe, with a focus on Europe and India. 3iN listed on the London Stock Exchange in March 2007 and is a constituent of the FTSE 250 index. 3i owns a 35% holding in 3iN and acts as its Investment Adviser.

3i India Infrastructure Fund

The 3i India Infrastructure Fund (“3iIIF”), managed by 3i, is a $1.2 billion LP fund that invests in the rapidly growing Indian infrastructure market. It focuses on the power, ports, road and airport sectors. 3i and 3iN have each committed $250 million to this fund alongside other private investors.

3i acts as Investment Adviser to 3i Infrastructure plc. Notable investments made by 3iN include:

• Anglian Water Group (UK), the fourth largest water and wastewater company in England and Wales (cost of £162 million)
• Eversholt Rail Group (UK), one of the three leading rail rolling stock companies in the UK, which owns and leases out approximately 29% of the current British rail fleet (£151 million)
• Oystercatcher (Netherlands, Malta, Singapore), the vehicle through which 3iN invested in 45% holdings in three subsidiaries of Oiltanking GmbH, a provider of third-party storage facilities for oil and petroleum products (£85 million)
• Octagon (UK), a concession company under a 35-year PFI contract to build, operate and maintain the Norfolk and Norwich University Hospital (£20 million)

3i also manages the 3i India Infrastructure Fund. Notable investments made by 3iIIF include:

• Adani Power Limited, one of the largest independent power producers in India, with a total operating capacity of 2,640MW, a further 2,640MW scheduled to become operational in the next six months and a further 9,900MW under construction (cost of $243 million)

• Krishnapatnam Port Company Limited, which has a concession to develop, operate and maintain the port of Krishnapatnam in the state of Andhra Pradesh ($161 million)

• Soma Enterprise Limited, one of the fastest growing infrastructure developers in India, focused on build-operate-transfer (“BOT”) road projects, as well as on projects diversified across sectors such as hydro power, irrigation, railways, power transmission and urban infrastructure ($101 million)

• Strong market positions
• Capital-intensive businesses
• Some degree of inflation linkage
• Low cyclical volatility
• Predictable, income-oriented returns when operational
• Potential for capital growth

Infrastructure assets usually have a low correlation with other asset classes, including equities and fixed income. The quality and predictability of cash flows tends to result in attractive distributions to shareholders.

As shown in the chart below, returns from these assets typically range between 8% and 15% or greater, depending on the risks associated with the investment.