John Laing Infrastructure Share Discussion Threads

[cousin jack] 15/11/2017 11:10

And, going back to yesterday's point, would mean most of the discount covered after two further years of dividends ( although take your point re. possible retrospective windfall taxation). Depressing to watch the price slide recently but selling out now does not seem the best move as we are pretty well back to par with NAV and there are many reasons why the worst may not happen with regard to Labour's plans.

[jonwig] 15/11/2017 09:15

speeds - thanks. Nils Pratley is a clever chap. used to work for the BBC I think. Funnily enough, JLIF's 86% of book value is close to the 88% I gave as a rough estimate of a windfall tax impact.

So will JLIF trade at a 14% discouhnt to NAV anytime soon? A 6.7% yield would be tempting given the threats are no more than speculation.

[speedsgh] 15/11/2017 08:45

PFI firms are arming themselves for a Jeremy Corbyn government -

[mad foetus] 14/11/2017 11:08

While a windfall on utilities is straightforward, one on PFI or PPI is much more complex. When does lending to government bodies end and PFI begin? It would deeply unsettle the market if the UK government effectively imposed a surplus tax upon people who have lent to the UK government. Taxing an activity (utilities) is one thing, taxing lenders on the basis of who they lend to seems fraught with the risk of legal challenge I would have thought.

[jonwig] 14/11/2017 07:57

mad - both JLIF and HICL are domiciled in Guernsey, and pay no tax at holding company level. Their operating companies which are UK-domiciled (the PFI contractors) pay CT at the UK level before sending taxed dividends to the parent, which is in effect an investment trust.

Hence the valuation of the dividend stream improves as UK CT is reduced. It may well be the case that the underlying PFI companies must be legally domiciled in the UK since, if nothing else, they are given back to the UK government at the end of their contract.

I wouldn't think it's "up to parliament" to decide the value of compensation, but don't actually know. The idea of a windfall tax would be relatively straightforward compared with the legal minefield of nationalisation. And of course there are precedents for that!

[mad foetus] 14/11/2017 06:50

Without knowing the details I'm wondering how that would legally work. It would certainly drive vehicles offshore, and I think most PPI payments have to be made net of any tax. I am struggling to think how a UK government can tax a non-UK entity solely on the basis of investments it makes in the UK. It wouldn't be entirely straightforward, but I don't know the details of the proposal.

[jonwig] 14/11/2017 06:32

David Hardy of JLIF interviewed on R4 just now, commenting on yesterday's announcement. Gave a pretty robust defence of the PFI model and said the legal contracts would ensure fair compensation.

It's a pity the interviewer dind't press him on Stella Creasey's windfall tax suggestion, which I think a much more likely and insidious propsal.

[belgraviaboy] 14/11/2017 06:23

Yes - the 86% is a best case in the event of cancelling (what JLIF would ask for). Could well get negotiated / manipulated down further from there.

[zcaprd7] 13/11/2017 21:01

Article in the telegraph is a worry. The snarky comment from the Labour "spokesman" says it will be for Parliament to decide on the value of these contracts, so expect a Venezuelan style requisition by the comrades...

[belgraviaboy] 13/11/2017 15:01

Will cancellation value of contracts replace NAV as the new valuation measure?

Hospital administration and Catelonia exposure do not make this fund look cheap yet.

[jonwig] 13/11/2017 13:30

Jack - yes, unless they want to include historic dividends in their calculations!

This (and HICL) are trying to find a level, and political uncertainty is the worst kind to try to handle. Presently a 5.8% prospective yield might be enough to keep an even keel.

[cousin jack] 13/11/2017 12:52

However if present govt. runs full term to election ( if !) and is then replaced by Labour, there will have been several years dividends to offset possible future reduction in NAV resultibg from any resulting windfall tax or contract change.

[jonwig] 13/11/2017 11:54

nimbo - yes, clearly political concerns. Actually taking back into public ownership is probably a lesser evil than a windfall tax.

At worst, that would reduce the NAV to 88% (73/83) of its current value and maybe more to account for dividends already received.

[speedsgh] 13/11/2017 11:47

And also from today's update...

CATALONIA INDEPENDENCE
In October 2017, a referendum on Catalonian independence was called by the Regional Government. The Spanish Central Government deemed the referendum illegal under the country's constitution. Despite this, the referendum proceeded, with a majority voting in favour of independence on a low turnout. The Catalan government subsequently made a unilateral declaration of independence. In response to this, the Central Government triggered Article 155 of the Spanish constitution resulting in the imposition of direct rule and the sacking of many Catalan civil servants and government ministers. The Central Government has called for fresh regional elections in December 2017.

JLIF holds two availability-based investments in Barcelona, Catalonia, a 53.5% interest in the Line 9 Section II Metro Stations project and a 13.5% interest in the Line 9 Section IV Metro Stations project. At 30 September 2017, the combined value of the projects represented 14.1% of the Portfolio, reducing to approximately 12.7% following the recently announced acquisitions (see Acquisitions below). Both projects form part of the wider investment in the Line 9 project, a landmark and very important project for the city. Both projects have availability-based payment mechanisms, receiving payments from IFERCAT, an agency of the Catalan government responsible for transport. All payments have been and continue to be paid by IFERCAT, as per the contract. IFERCAT benefits from access to the Fondo de Liquidez Autonómico ("FLA"), a credit line from the Central Government. While in the past the decision as to how the FLA funds are used was made by the Catalan government, since September 2017 this decision as to how the FLA is utilised in Catalonia has been taken back by the Central Government. JLIF continues to monitor the situation closely.

[speedsgh] 13/11/2017 11:46

Also from today's update...

RECENT POLITICAL COMMENTS AROUND PFI
At the annual UK Labour Party conference in September 2017, the UK's Shadow Chancellor of the Exchequer, John McDonnell, made comments regarding his party's intentions with respect to UK PFI contracts should the Labour Party come to power. These included an intent to abandon PFI as a tool for future infrastructure investment and to bring in-house existing PFI contracts. This statement was subsequently softened by other members of the Labour Party, narrowing the range of potential PFI contracts to which the comments would apply to those not deemed value for money.

In practice, bringing PFI contracts in-house would require local public sector counterparties to exercise their right to terminate voluntarily the contract (where such a right exists) and, at the same time, make alternative arrangements for running the projects for the local communities. Where this is the case, there are legal contract provisions regarding the compensation to which a project's equity investors would be entitled.

As disclosed in the risk committee reports in its annual results, JLIF monitors the UK political situation carefully. In the event that all its UK projects were voluntarily terminated by each and every local public sector counterparty, JLIF would receive compensation equating to approximately 86% of its UK portfolio value (including JLIF's recent acquisitions announced in October)(2) . JLIF's UK portfolio value, including the recently announced acquisitions, represents approximately 71% by value of JLIF's entire portfolio. JLIF's UK portfolio comprises 57 projects spread across seven sectors and approximately 50 different public sector counterparties, resulting in limited exposure to any single public sector client.

[speedsgh] 13/11/2017 11:45

From today's update...

WRITE-OFF OF ROSEBERRY PARK HOSPITAL PROJECT
As noted in JLIF's interim results, a long-standing dispute was ongoing at the Roseberry Park Hospital project in which the Company was investing significant effort and resources, alongside the other project parties, towards finding a solution to the disputed issues. These related to the provision of certain Hard FM services, the operation of the Service Helpdesk and certain alleged construction defects. JLIF believes the issues related to this project were specific to the specialist nature of the mental health facility at Roseberry Park, particularly around the challenges of being able to access areas where there were purported construction defects. Unfortunately, due to the protracted nature of the discussions with the Trust and other project parties, and the apparent lack of an acceptable solution being imminent, in September 2017 the senior lenders decided to take the project holding company into administration and to take control of attempting to settle the dispute. As at 30 June 2017, the project represented less than 0.5% of the portfolio value.

JLIF's value of the entire portfolio as at 30 September 2017 represents a roll-forward of the portfolio value as at 30 June 2017, save for the Roseberry Park Hospital project that has been written off.

[nimbo1] 13/11/2017 09:42

wow this really has lost all momentum. Will some infrastructure funds start trading at discounts to NAV?! JLIF is nearly there....

[skinny] 13/11/2017 07:03

Trading Update Statement

JLIF, the international infrastructure investment company, today announces its Trading Update Statement ("TUS") for the period 1 July 2017 to 10 November 2017.


FINANCIAL HIGHLIGHTS
· Underlying growth in Portfolio value for the nine months to 30 September 2017 of 5.5% to £1,227.8 million, on a rebased value of £1,163.8 million

· Net Asset Value1 ("NAV") of £1,219.6 million as at 30 September 2017, including £34.5 million of cash allocated to the dividend that was paid in October 2017

· NAV per share as at 30 September 2017 of 123.1 pence cum-div (119.6 pence ex-div), up 2.4% on 31 December 2016

· Paid a dividend of 3.48 pence per share in October 2017, resulting in total dividends paid in 2017 of 6.96 pence per share

· Agreed the acquisition of interests in six UK-based PPP projects for a combined consideration of approximately £148.8 million

more.....

[jonwig] 23/10/2017 12:29

I think Labour's plan to 'take back control' of PFI businesses would in practice apply to some of the earlier ones (say 15 years ago) where the contracts were written more advantageously for the private operator. More recent ones are rather fairer I believe.

Of course, that was Conference Talk, and the reality will be rather different.

A more sensible plan from their point of view would be to impose a windfall tax on the operators. (Suggested by Stella Creasey who is a canny one, but no pal of Corbyn.) Many of the contracts were written when CT was 25% or over, so the reduction to 17% will have led to higher dividend payments than would have happened otherwise.

[mach100] 23/10/2017 11:48

Thanks Jonwig.

I am not sure what to make of today's acquisition. Is it folly in a time of dogwhistle politics where attacks on PPP's play well with voters? Or a shrewd move to keep investing witha benevolent off-shoot of the family?

[jonwig] 18/10/2017 07:29

Mach shares issued at premium to nav should be a benefit.

[mach100] 17/10/2017 22:55

I think a lot of the froth round these PFI's is already died down after the conference season so the share price should start to recover. The yield is not likely to be affected short-term and this is a good income stock. Already off its lows and now it is back around 130p perhaps we can move back to 135p.
What effect does the scrip dividend have on the share usually? Does it rise because shares are being bought or does it fall because more shares are issued?

[jonwig] 12/10/2017 18:57

Their view was that these funds would not be high on a Labour hit list owing to cost and complexity of contracts. That's my own, though I won't be adding (JLIF, HICL) in the near term. 3IN is a different proposition altogether, with no PFI contracts in its portfolio.

[josephrobert] 12/10/2017 18:25

Fair enough jonwig, I used to provide advisory and discretionary services on individual stock bonds etc. For what it's worth I bought 3,030 on behalf of mum on Monday. Have noticed the price firming up here and the HICLs since then.

[jonwig] 09/10/2017 18:32

Most of our portfolio is with an execution only broker, but we've moved part to an advisory broker (it's an age thing!) and this is a half-yearly meeting.