INPP invests £115m in latest transmission deal(3)

International Public Partnerships Limited (INPP) is investing “100 percent of the capital required” at the financial close of the UK’s Ormonde offshore transmission project, which totals approximately £115 million (€146 million; $179 million).

INPP is part of the Transmission Capital Partners consortium which also includes its investment adviser Amber Infrastructure and transmission specialist Transmission Capital. The consortium has closed four transmission projects awarded as part of an initial round of nine tenders for the long-term licence and operation of offshore transmission assets by UK electricity regulator Ofgem.

The Ormonde project was identified as a likely target when INPP closed a £200 million placing, open offer and offer for subscription which was concluded towards the end of last month. Some of this money also went towards the £30.3 million purchase of stakes in eight Building Schools for the Future projects from Carillion Private Finance last week.

INPP’s latest investment will pay for the transmission apparatus needed to connect the UK mainland to the Ormonde offshore wind farm in the Irish Sea, 10 kilometres west of Walney Island on the Cumbrian coastline in north-west England. The asset comprises onshore and offshore substations and undersea cables, has been operational since last year and is expected to provide immediate yield to INPP investors.

The project has a 20-year revenue term, with the potential for this to be extended; an availability-based revenue stream, with any deductions capped at 10 percent of base revenue in any year and fully linked to the UK Retail Price Index (RPI) with no exposure to wind farm performance or credit; and revenues contracted by National Grid Electricity Transmission, a subsidiary of National Grid, in their “statutory ring-fenced role” as national electricity systems operator.

Of the five first-round UK offshore projects to have reaced financial close – out of nine in total – Transmission Capital Partners has been responsible for four of them. In May this year, it was selected as preferred bidder for the first of the second-round projects, the Lincs offshore wind farm, which is scheduled to reach financial close in the fourth quarter of this year. It has also been shortlisted for two other second-round projects which are due to be awarded later this year. In all, transmission deals worth up to £8 billion are expected to be tendered to the private sector over the next nine years.

Giles Frost, director of Amber Infrastructure, said INPP had now invested more than £145 million in such projects over the last 15 months. “We believe the stable, long-term revenue generation that will arise from these assets fits well with INPP’s ongoing investment strategy,” he said in a statement.

*To learn more about INPP's plans for 2012, be sure to check our interview with Giles Frost, a director at INPP, in the July/August issue of Infrastructure Investor magazine.