BCA is a small regional airport in Belfast, Northern Ireland, located ten minutes by car from Belfast city centre In 2016 it served 2.7m inbound and outbound passengers. Its focus is domestic routes operated by scheduled carriers, serving business as well as leisure customers.
Currently four scheduled carriers (Flybe, British Airways, Aer Lingus and Eastern Airways) serve 17 domestic routes, including London Heathrow and London City. A small part of BCA’s traffic is international: Aer Lingus currently serves four sun routes (although this is due to drop to two) over the summer months; KLM serves Amsterdam; and Icelandair flies to Reykjavik.
Aeronautical revenues (airport charges) are not subject to economic regulation. Commercial revenues are generated principally from car parking, royalties on retail, food and beverage, car hire spend, rental income (lounges and offices) and advertising space.
Over 1,000 people are employed on the site, but only c.70 of those are employed by BCA. Many activities are outsourced (e.g. security, facilities management, air traffic control); and others are provided by third parties on-site (e.g. retail, food and beverage operations and ground handling). Fire services, maintenance, advertising, car parking and administration / management are the main activities that remain in-house.
Transport & logistics
Cross London Trains ('XLT') is a company established to procure and lease the rolling stock for use on the Thameslink passenger rail franchise. As part of a wider upgrade of the Thameslink rail network, XLT is investing £1.6 billion in a fleet of new Siemens Desiro City commuter rail carriages to be leased to the Thameslink rail franchise operator, with the continued leasing of the trains underpinned by the Department for Transport for a period of 20 years.
The Cross London Train programme continued to make good progress. The programme aims to deliver the contracted fleet of 115 class 700 trains by the second half of 2018 to operate across the Thameslink network.
Siemens had manufactured 95 trains as at 30 September 2017, out of which 70 had been accepted by the GTR rail franchise. The performance of the delivered trains continues to improve at the expected rate.
The Investment Adviser’s attention remains focused on both improving train performance and the ongoing acceptance of new trains. The discount rate remained unchanged from the previous period. It is expected to be reduced over time as the fleet becomes operational and the risk to the programme decreases.
ESP is an independent gas transporter (“iGT”) and independent electricity network operator (“iDNO”) providing the ‘last mile’ of connection between properties (predominantly residential, but also industrial and commercial) and the gas and electricity distribution networks.
It focuses on being an ‘independent asset owner’. It acquires (bids for) gas and electricity connections from ‘utility infrastructure providers’ (“UIP”), who have themselves designed and installed the connections for property developers. ESP is then responsible for maintaining the connections going forward and receives a regulated revenue stream for each connection from the gas and electricity companies who charge the end customer as part of their overall gas or electricity bill. Price regulation for both gas and electricity connections is based on the regimes of the gas and electricity distribution companies. Regulation is overseen by Ofgem.
Today ESP owns over 500,000 connections and has an order book for 200,000 more, making it the second largest iGT/iDNO in the UK. ESP also has a domestic metering business (representing almost one quarter of its revenues). Charges for meters are unregulated.
Elenia owns the second largest electricity distribution network in Finland (90% of its value) and owns and operates 16 local district heating networks (10% of its value).
Elenia’s two businesses (electricity distribution and district heating) continue to perform strongly.
The proportion of buried cables increased in line with expectation to reach 31% and 46% (vs. 9% and 31% at the start of 2012) of the medium and low-voltage networks respectively. This is strongly incentivised by the regulatory model in order to improve the networks’ long-term resilience to bad weather.
During the period, Elenia continued to take advantage of the favourable credit market conditions and, since March 2017, issued €214 million of new bonds with maturities between 2028 and 2034 on attractive terms. Following the agreement concluded in December 2016 to provide third-party customer service to Jyväskylän Energia, two further contracts were signed with other neighbouring networks (Tampereen Sähkölaitos and Auris Kaasunjakelu) in May 2017.
ESVAGT is a leading provider of emergency rescue and response vessels and related services to the offshore energy industry in and around the North Sea and the Barents Sea.
The market conditions in which ESVAGT operates remain challenging. The low oil price environment has reduced production profitability and is negatively impacting exploration investment in the North Sea, leading to a reduced utilisation rate for ESVAGT’s vessels. In this context, we have continued to focus on the cost base and increasing ESVAGT’s market share in the UK. We have also seen some improvements in the supply dynamics as competitors are retiring off-contract, older tonnage.
ESVAGT has maintained its position as a Service Operations Vessel (“SOV”) market leader and has recently announced a new contract with MHI Vestas. The pipeline of new opportunities continues to grow and ESVAGT is currently shortlisted amongst the final bidders for two ongoing tenders. This may lead to an equity injection from shareholders to fund the construction of new vessels.
Herambiente is the Italian leader in the waste treatment and disposal sector. The company owns and operates a portfolio of c.80 waste treatment facilities, mostly located in the Emilia Romagna. The plants include landfills, waste to energy plants, anaerobic digestion and other waste sorting facilities.
Herambiente’s revenues originate primarily from waste treatment and disposal and from sale of the resulting by-products, including electricity from incineration, biogas from landfills and recycled materials. In 2016, Herambiente treated c. 1.7m tons of urban waste, 4.7m tons of special waste and produced 161,455,167kWh of electricity.
Infinis is the largest generator of electricity from landfill gas in the UK, with a portfolio of 121 landfill sites and total installed capacity of over 300MW.
The business has performed well operationally and financially since our acquisition in December 2016, although long-term power price forecasts have decreased. As expected in our investment case, Infinis was a strong contributor to the Company’s income in the period, counter-balancing some other growth-orientated businesses in the portfolio.
Good progress has been made identifying opportunities to exploit the business’s spare engine and grid connection capacity. Together with the management team, we are reviewing projects in non-landfill gas generation activities, with 30MW of reserve power generation now under development. The Company has agreed to provide further equity of £12 million to support these projects.
In August 2017, Infinis appointed Tony Cocker as Chairman of the Board and Scott Longhurst as Non-executive Director and Chairman of the Audit Committee. Tony was previously CEO of E.ON UK. Scott is currently Group Finance Director at AWG and Managing Director of AWG’s non-regulated business.
In March 2018, 3i Infrastructure plc announced a follow-on investment of c. £125 million to fund Infinis’s acquisition of Alkane Energy, an independent power generator from both coal mine methane and Reserve Power operations and the largest generator from CMM in the UK.
Transport & logistics
Oystercatcher is the holding company through which 3i Infrastructure plc holds 45% interests in five subsidiaries of Oiltanking, located in Belgium, Malta, the Netherlands and Singapore. These businesses provide over five million cubic metres of oil, petroleum and other oil-related storage facilities and associated services to a broad range of clients, including private and state oil companies, refiners, petrochemical companies and traders.
The five terminals all performed well in the period, generating EBITDA in line with or ahead of budgeted levels. Each terminal enjoys a strong position in its market and benefits from Oiltanking’s reputation for excellent service standards. Capacity at each location remains substantially let.
In Singapore, favourable conditions underpin the terminal’s key activity, which is gasoline storage and provision of associated services. During the period, a new marine jetty entered operation. This additional jetty capacity will improve customer turnaround times and further cement the competitive position of the terminal.
Customer demand for capacity generally remains strong, but we have seen some softening of demand for storage of certain product types.
Transport & logistics
Headquartered in White Bear Lake, Minnesota, Smarte Carte is a leading supplier and manager of vended equipment in the travel and leisure industry. The company owns and manages baggage carts as the sole provider in 125 locations (including 49 of the top 50 airports in the U.S.). The company also owns and manages lockers and other consumer-rental equipment in amusement parks, fitness clubs, shopping malls and ski resorts.
Transport & logistics
TCR is Europe’s largest independent asset manager of airport ground support equipment and operates at over 100 airports.
TCR performed well during the period. Contract renewal in its core European markets remains very high, demonstrating the defensive nature of the cashflows and TCR’s strong position in a growing market.
In the last six months, TCR has expanded its footprint (notably in Italy and Germany) and added new asset classes to its offering. It has won contracts with new customers including British Airways and Norwegian Air and has started operating the first equipment pooling system in the UK at Luton Airport.
Outside Europe, TCR continues to expand its foothold in Malaysia through additional contract wins with Malaysian Airlines. In Australia, it acquired Emerge Engineering & Maintenance, the leading local repair and maintenance business with workshops at six major airports. This provides TCR with an entry point to the Australian market.
Valorem is a leading independent renewable energy development and operating company. It is one of the largest onshore wind developers in France, having developed over 480MW of capacity over the last 10 years.
Since acquisition in September 2016, Valorem has grown its existing onshore wind asset base from 142MW in operation to 191MW as at 30 September 2017. These projects sell their electricity through 15-year fixed-indexed power purchase agreements to EDF.
The pipeline has also developed in line with expectations, with 42MW currently in construction and 630MW in advanced pipeline.
Since our investment, Valorem has closed its first 36MW of photovoltaic projects, and secured a feed-in-tariff for an additional 32MW in the last photovoltaic tariff auction in June 2017.
To support the company’s expansion and strengthen the senior management team, Frédéric Lanoé was appointed COO in May 2017.
WIG is an independent communications infrastructure provider which builds and operates communication towers (masts) in rural and suburban areas, together with fibre based networks, to improve mobile coverage in large buildings and on city streets.
WIG’s core tower business performed well in the period, supporting customers with the expansion of their networks to deliver greater wireless bandwidth and geographic coverage, and increased resilience. WIG’s organic growth is benefiting from new greenfield infrastructure investment including new communication towers and fibre-connected small cell networks.
WIG’s small cell business unit delivers high capacity infrastructure into large public venues such as shopping centres, office blocks and stadiums. The business unit is targeting new infrastructure opportunities in busy outdoor city locations and recently announced its first 5G-ready deployment in Aberdeen.
WIG continues to review opportunities to acquire new towers where these are complementary to the existing portfolio.
Attero owns two energy from waste (‘EfW’) plants, two sorting and pre-treatment facilities, six anaerobic digestion facilities, seven composting facilities and 10 landfills. The company processes waste from a diverse mix of domestic municipalities, commercial and industrial customers, as well as a number of UK and Irish exporters.
Attero has good revenue visibility due to its long-term contracts with customers. It is well positioned within the Dutch market with two of the largest and most efficient EfW plants in the country, strategically positioned with good port, road and rail access for both import and domestic waste supply. In addition, Attero is strongly positioned to benefit from favourable underlying trends in the European waste market, driven by EU directives targeting more recycling.
Attractive opportunity in a new sector for the Company, with favourable long-term dynamics
Attero operates two of the largest and best located waste treatment facilities in Western Europe, resulting in high efficiency and a low marginal cost
The European Union requires member states to reduce landfill use, increasing the volume of waste requiring incineration
Good revenue visibility from long-term waste supply contracts with municipalities, industrial customers, and waste exporters