TRUE Infrastructure Management Pty Ltd (‘Manager’ or ‘Trustee’), as trustee for TRUE Infrastructure Fund (‘Fund’), has today provided an update on its recent performance and outlook, together with details of an exciting new investment by the Fund and a significant associated fundraising initiative.
2021 PERFORMANCE AND OUTLOOK
TRUE Infrastructure Fund generated a total return to unitholders (including unit price growth, cash distributions declared and associated franking credits) of 11.1% for the 12 months to 31 December 2021. This comfortably exceeded the Fund’s target return of 8.0% per annum and its benchmark return (CPI + 4.0%) of 6.2% for the same period.
Since its inception in late 2020, the Fund has provided unitholders with an annualised total return of 11.7%.
The strong return for the year was driven by a combination of factors, including:
• Active portfolio construction and management by the TRUE Infrastructure Management as the Manager of the Fund.
In particular, we have been able to match fund inflows with new investment opportunities to ensure an efficient portfolio and to optimise returns.
• Strong performances by the underlying funds in the portfolio (Energy Infrastructure Trust and ATLAS Global Infrastructure Fund).
This reflected excellent portfolio and asset management by our fund managers, Infrastructure Capital Group (‘ICG’) and ATLAS Infrastructure (‘ATLAS’) respectively.
• The focus on ‘Core’ and ‘Super Core’ infrastructure assets within the portfolio.
This focus has resulted in our underlying assets being largely immune from the volatility in global and markets and GDP (largely driven by the COVID pandemic) during the year.
• Opportunistic acquisitions undertaken by the Manager.
We took advantage of opportunities to acquire secondary stakes in Energy Infrastructure Trust on favourable terms.
The Manager believes that the Fund is exceptionally well-placed to continue to perform strongly and deliver growth and income to unitholders during 2022 and beyond.
Commenting on the outlook for the Fund, TRUE Infrastructure Management Pty Ltd CEO, Peter McGregor, said:
“We continue to live in uncertain times, as the economic impact of the ongoing COVID pandemic and current geopolitical instability in both Europe and Asia impact on markets and economies.
“Labour shortages driven by COVID have had a major impact on supply chains, affecting virtually all industries to some degree. These supply chain disruptions have also contributed significantly to the re-emergence of inflation as a key theme in the underlying economy and in investment markets during the year.
“In light of this current economic and geopolitical environment, our expectation is that some degree of ongoing volatility in GDP and global markets will persist throughout 2022. Similarly, we anticipate inflationary pressure to continue to emerge in the year ahead.
“The positive news is that we see the Fund’s portfolio as being exceptionally well-placed to weather the impacts of, and in some cases even benefit from, these ongoing trends. Our underlying portfolio of ‘Core’ and ‘Super Core’ infrastructure assets is characterised by having a low degree of correlation with both GDP and global markets and a high degree of correlation with inflation (through the structure of the revenue contracts for many of the underlying businesses and assets in the portfolio).
“The other key reason we are optimistic about the Fund’s prospects for 2022 is the solid pipeline of new investment opportunities driven by ongoing M&A activity by our underlying fund managers, particularly Infrastructure Capital Group, together with new development opportunities within the existing portfolios.”
NEW INVESTMENTS
The Manager has also announced a transformational new investment for the TRUE Infrastructure Fund. During December 2021 and January 2022, a total of $25 million was invested in Australian Renewables Income Fund (‘ARIF’), managed by ICG, introducing a third underlying fund to the portfolio.
ARIF is an unlisted unit trust that has a platform of established operational assets in the Australian renewable energy infrastructure sector. TRUE Infrastructure’s $25m investment in ARIF provides support for two key strategic business acquisitions ICG has made on behalf of ARIF in recent months.
On 22 November 2021, ICG announced that, on behalf of ARIF and in conjunction with Shell Energy Operations Pty Ltd, a wholly owned subsidiary of Shell, it had agreed to acquire the Meridian Energy Australia Group (MEA), the Australian operations of Meridian Energy Limited.
Under the terms of the acquisition, ICG takes ownership of ownership of the wind, hydro and development assets within the portfolio. The operational assets being acquired by ICG include:
• Mount Millar Wind Farm, South Australia – 70 MW
• Mount Mercer Windfarm, Victoria – 131 MW
• Hume Hydro Power Station, Victoria/NSW border – 58 MW
• Burrinjuck Hydro Power Station, NSW – 34 MW
• Keepit Hydro Power Station, NSW – 7 MW
The development assets acquired by ICG include:
• Rangoon Wind Farm, near Glen Innis, NSW – 108 MW
• Hume BESS, Victoria/NSW border – 20 MW / 40 MWh
On 19 January 2022, ICG announced that it will, on behalf of ARIF, acquire a majority interest a solar and storage portfolio, known as the Ginan Solar Portfolio, from Providence Asset Group. As a result, ARIF will take a majority interest in 16 operational solar sites in Victoria with exclusive rights to develop a further 25 solar projects across NSW.
As a consequence of these acquisitions and the Fund’s investment in ARIF, the Fund has:
1. Increased the number of underlying funds in its portfolio from 2 to 3, with the ARIF investment sitting alongside the existing investments in Energy Infrastructure Trust and ATLAS Global Infrastructure Fund;
2. Increased the number of renewable energy assets in the portfolio from 6 windfarms to 9 windfarms, 2 hydro power stations, 16 solar installations and a substantial pipeline of new solar and windfarm development opportunities; and
3. Increased the proportion of the Fund’s portfolio invested in renewable assets from 29% at the end of November 2021 to over 50% today.
With respect to these recent acquisitions by ARIF and the Fund’s investment in ARIF, Mr McGregor stated:
“In addition to these acquisitions cementing ICG’s reputation as one of Australia’s largest and most active investors in the renewables sector, they also represent a significant step in TRUE Infrastructure Fund’s ongoing objective of transitioning its portfolio to a materially higher focus on renewable and sustainable energy sources, and presenting unitholders in the Fund with the opportunity to increase their exposure to this scarce but attractive investment class.
“We see these developments as transformational for the Fund and believe the Fund represents a unique opportunity for wholesale investors to gain access to a quality portfolio of renewable energy assets and opportunities.”
The Fund has settled the investments in ARIF through the use of existing cash resources together with a drawdown of short-term debt under the Fund’s existing borrowing facilities.
ENTITLEMENT OFFER OF NEW UNITS IN THE FUND
TRUE Infrastructure Management, as Trustee for the Fund, now proposes to undertake an entitlement offer to raise additional equity to repay the debt drawn down to fund the investments in ARIF, and to fund other growth opportunities and working capital requirements.
Offer
A non-renounceable rights offer of 1 new unit in TRUE Infrastructure Fund for every 2 units held by eligible unit holders at 7:00pm (Melbourne time) on Friday 8 April 2022 (record date).
Units issued as a result of accepted applications for units received on or prior to 31 March 2022 will be eligible to participate in the Offer.
Offer Period
Monday 11 April 2022 to Tuesday 26 April 2022.
(Offer documentation, including an application form, will be distributed to eligible unit holders on Monday 11 April 2022.)
Offer Price
The offer price will represent a discount of 5% to the net asset value of the Fund per unit as at 31 March 2022 (as determined by the Manager).
Shortfall Facility
Eligible unit holders who subscribe for their full entitlement will also have the opportunity to apply for additional units in any shortfall units at the same price. There is no guarantee of the number of shortfall units (if any) that will be available. The shortfall units will be allocated to those unit holders that apply for them in a way that best approximates a pro rata allocation by reference to their respective unit holding on the record date (at the ultimate discretion of the board of the Trustee).
Payment
Payment for the total number of units applied for (including shortfall units) under the Offer must be made in full at the time the application is submitted. To the extent that unitholders are not allocated the full number of shortfall units subscribed for, unitholders will be provided with a refund of the unused funds.
Issuance
New units issued pursuant to the Offer will be issued on 29 April 2022.
Commenting on the proposed Entitlement Offer, Mr McGregor said:
“Recent M&A activity involving ASX-listed infrastructure companies has seen the range of options available for investors to access high-quality infrastructure assets continue to shrink. In this environment, we are delighted to provide our existing unitholders and new applicants over the coming month with the opportunity to acquire units in the Fund on attractive terms. We believe TRUE Infrastructure Fund offers a number of key attributes which meet current investor demands.
These include:
• a focus on ‘core’ and ‘super-core’ infrastructure assets characterised by low volatility and a high degree of inflation protection;
• a substantial exposure to renewable energy, which now accounts for over 50% of the Fund’s portfolio;
• a focus on predominantly unlisted infrastructure assets, resulting in a low correlation to global market volatility.
Given these attributes, and the positive outlook for the Fund in the current environment, we see this as an attractive opportunity for wholesale investors.”
