TIDMINPP
RNS Number : 8879F
International Public Partnerships
24 March 2022
The Full Year Results for the 12 months to 31 Dec 21
announcement released on 24 March 2022 at 7am under RNS 8325F is
replaced by the announcement below. The amendment includes the
covering information in the first 5 pages. All other information is
unchanged.
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT
FOR PUBLICATION, RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,
IN, OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH
AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL OR
TO U.S. PERSONS. THE INFORMATION CONTAINED HEREIN DOES NOT
CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION.
24 March 2022
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
('INPP', 'the Company')
FULL YEAR RESULTS FOR THE YEARED 31 DECEMBER 2021
A successful year with strong operational and financial
performance. Well-positioned for growth with continuing high levels
of inflation linkage in its cashflows
London - International Public Partnerships (LON: INPP), the FTSE
250-listed infrastructure investment company, is pleased to
announce its results for the year ended 31 December 2021.
FINANCIAL HIGHLIGHTS[i]
-- Increase in NAV per share to 148.2 pence per share (31 December 2020: 147.1 pence per share).
-- Full-year dividend growth of 2.6% to 7.55 pence per share (31
December 2020: 7.36 pence per share) supported by 2021 cash
dividend cover of 1.1x[ii].
-- Reaffirmed dividend guidance for 2022 of 7.74 pence per
share, and issued new guidance for 2023 of 7.93 pence per
share[iii] which is consistent with the Company's historic c.2.5%
average annual dividend growth.
-- IFRS profit before tax of GBP129.2 million (31 December 2020: GBP60.8 million).
-- The cash flows generated by the Company's investment
portfolio continue to be underpinned by strong inflation-linkage (
a 1.0% increase in assumed inflation rates across all assets is
projected to result in a 0.7% increase in portfolio
returns)[iv].
-- The Company's shares also maintained a continued low
correlation to the FTSE All Share Index of 0.22 over the 12 months
to 31 December 2021 (31 December 2020: 0.53) demonstrating the
resilience of the Company's activities.
OPERATIONAL HIGHLIGHTS
-- The Company delivered a further year of strong investment portfolio performance in 2021.
-- Approximately GBP253 million of capital was deployed into new
investments across transport, energy, social infrastructure and
digital sectors, including the Company's first investment in
Denmark.
-- The Company raised GBP135 million of capital for deployment
into new investment opportunities, exceeding the Board's GBP100
million target for the raise.
-- The Company further enhanced its ESG reporting capability,
with the publication of the Company's inaugural sustainability
report underpinning INPP as a leading choice for sustainability
focused investors.
PORTFOLIO OVERVIEW
The year to 31 December 2021 was successful for the Company. It
was characterised by strong portfolio performance with cash
generation in line with projections which allowed the Company to
continue its established trend of dividend growth.
The Company continued to source attractive new investments that
are expected to enhance the Company's overall portfolio cashflow as
well as contribute to additional projected future inflation
protection.
The Company through its Investment Adviser has the benefit of a
pipeline of future investment opportunities with an estimated
investment value in excess of GBP185 million. Other things being
equal, and subject to the availability of capital, these
opportunities are expected to be capable of being invested into by
the Company in 2022.
Whilst overall the portfolio has performed well throughout the
pandemic, it has continued to experience some impact to a small
number of the Company's investments. The performance of these
assets has started to improve and is expected to continue to do so
during the course of 2022.
Diabolo Rail Link experienced the greatest impact during the
period, as Brussels airport continued to see reduced numbers of
passengers using its services. However, independent forecasts
predict a gradual recovery in passenger volumes during 2022 and
thereafter.
Tideway has continued to make good progress with construction
works 73% complete at 31 December 2021. Tideway continued
discussions with Ofwat regarding additional measures to mitigate
the impact on Tideway's investors of both Covid-19 related costs
and the Financing Cost Adjustment Mechanism. Subsequent to a
provisional agreement with Tideway, Ofwat launched the requisite
public consultation in December 2021. As the consultation was
ongoing at the valuation date, the 31 December 2021 valuation of
the Company's investment in Tideway included a prudent assessment
of the outcome of the consultation and the necessary licence
modification process. The consultation closed post-period end in
January 2022 and the license modifications came into effect in
March 2022.
In addition, the appeal by Cadent to the Competition and Markets
Authority ('CMA') of Ofgem's final determination in respect of the
five-year regulatory period beginning April 2021 closed during the
period. The CMA published its final determination in October 2021
and the findings were modestly positive for the Company's valuation
of Cadent relative to the valuation published at 30 June 2021.
INVESTMENTS IN THE PERIOD
During 2021, the Company completed GBP252.7 million of new and
follow-on investments across the education, judicial, energy
transmission, transport, digital and health sectors. Highlights
include:
-- Energy transmission, UK | SDGs 7 and 13: Affordable and clean energy, and climate action
The Company reached financial close on the Beatrice and Rampion
Offshore Transmission projects ('OFTOs'), the eighth and ninth OFTO
investments in the portfolio. The investments increase the number
of homes that the Company's OFTO portfolio is capable of powering
to approximately 2.1 million. INPP is also preferred bidder on East
Anglia One OFTO and post-period end has been named preferred bidder
on Moray East OFTO, with both investments due to complete in H2
2022. This will bring the total number of OFTO investments in the
Company's portfolio to 11, underpinning its contribution to the
UK's transition to a zero-carbon economy.
-- Transport, UK | SDG 11: Sustainable cities and communities
The Company completed an additional c.5% investment in Angel
Trains, the UK's largest rolling stock company serving the UK
passenger rail sector with a diversified fleet of more than 4,000
vehicles (the majority of which are electric multiple units). The
Company's additional investment of c.GBP98 million makes Angel
Trains the third largest investment holding in the portfolio, by
value.
-- Judiciary, Germany | SDG 16: Peace, justice and strong institutions
The Company reached financial close on Offenbach Police Centre,
a new police headquarters project in South-East Hesse in Offenbach,
Germany. The Company invested GBP8.1 million for a 45%
shareholding. The newly-built centre will provide office space,
meeting areas, cells, forensic laboratories, a nursery and
cafeteria for c.1,000 staff. The building has also been designed
sustainability, with key features including c.890 solar power
panels generating 302kWp, a combined head and power plant, and a
low-energy heating and cooling system.
-- PPP Portfolio, UK | SDGs 3 and 4: Good Health and Wellbeing, and Quality education
The Company acquired a small portfolio of UK PPP investments
including initial interests in Townlands Community Hospital,
Henley; Eltham Community Hospital and minority interests in
Building Schools for Future ('BSF') projects sTaG 1 and 2.
Investments in minority interests of a further five BSF schemes for
the same portfolio is expected to be made by the Company during
2022; the first of these is expected to close in H1 2022.
-- BSF Projects and Private Finance Initiative ('PFI') schemes,
UK | SDGs 3 and 4: Good Health and Wellbeing, and Quality
education
Building on the Company's existing portfolio of education
investments in the UK, the Company acquired additional interests in
Bradford and Lewisham BSF projects and interests in three
healthcare PFI schemes. The BSF projects comprise 14 schools
providing education facilities to over 17,000 pupils across the
Bradford and Lewisham areas in the UK. The Three Shires schemes
comprise the design, build, funding and partial operation of four
small community healthcare facilities under the Three Shires banner
located in East Lincolnshire, Leicester and Derbyshire.
-- PPP Portfolio, Denmark | SDGs 4, 9 & 16: Quality
education; Industry, innovation and infrastructure; Peace, justice
and strong institutions
The Company acquired an interest in a portfolio of four PPP
projects that deliver availability-based, long-term, predictable
cash flows. The projects are geographically spread across Denmark
and deliver essential infrastructure to local communities,
including a land registry court building, a hospital car park
facility, and two schools accommodating 900 and 600 pupils
respectively.
-- Flinders University Health and Medical Research Building
('HMRB'), Australia | SDGs 3 and 4: Good Health and Wellbeing, and
Quality education
The Company was awarded the project as part of a consortium
which included Amber and Tetris Capital. The HMRB is the flagship
development of the Flinders Village project, an integrated health
and education precinct development on Flinders University's Bedford
Park campus. The HMRB will co-locate research, clinical and
technological platforms to further Flinders University's
longstanding contributions to the health, education and medical
sectors.
OUTLOOK
The Company has remained resilient throughout the pandemic,
delivering robust performance amid turbulent macroeconomic
conditions. Rising levels of inflation have emerged as a new key
issue across the economies in which the Company invests. The
Company takes comfort from the strong inflation-linked nature of
the cash flows generated by the Company's investment portfolio (a
1.0% increase in assumed inflation rates across all assets is
projected to result in a 0.7% increase in portfolio returns)(iv)
.
Climate change remains a significant long-term risk facing
society. Given infrastructure investment's long-term approach to
public policy, capital allocation and economic growth, the Company
is confident in the role infrastructure will play at the heart of
governments' efforts to deliver sustainable, fairer societies. With
a strong foundation in long-term PPP and infrastructure businesses,
and a proven capability to invest sustainability, INPP is
well-placed to lead the response to these challenges.
While the Company's chosen markets offer opportunities for
further investment and growth, the impact of geopolitical unrest
cannot be underestimated, as the events of the war in Ukraine
unfold. The Company continues to actively monitor the situation, to
ensure the portfolio of investments is protected from the direct
and indirect impacts of the war, to the extent it can be. The
Company's Investment Adviser and employees continue to offer
support via donations to humanitarian charities, and the Board and
its Investment Adviser's thoughts are with those affected in the
region.
Mike Gerrard, Chair of International Public Partnerships, said:
"I am pleased to report another period of resilient operational and
financial performance by the Company, against the persistently
complex backdrop of post-pandemic recovery, rising inflation and,
increasingly, the global impact of the shocking war in Ukraine.
INPP's portfolio continues to meet our expectations and we are
optimistic for the year ahead. The Board remains confident in the
Company's ability to play a central role in the development of
infrastructure that meets the needs of local communities,
institutions and the environment, while simultaneously generating
highly visible, inflation-linked cash flows to underpin the
Company's investment case."
A copy of the results presentation can be downloaded from the
Company's website:
www.internationalpublicpartnerships.com
S
NOTES TO EDITORS
Amber Infrastructure FTI Consulting
Erica Sibree / Amy Edwards Ed Berry / Mitch Barltrop
+44 (0) 7557 646 499 / (0) 7827 238 355 +44 (0) 7703 330 199 /
(0) 7807 296 032
About International Public Partnerships ('INPP'):
INPP is a listed infrastructure investment company that invests
in global public infrastructure projects and businesses, which
meets societal and environmental needs, both now, and into the
future.
INPP is a responsible, long-term investor in over 140
infrastructure projects and businesses. The portfolio consists of
utility and transmission, transport, education, health, justice and
digital infrastructure projects and businesses, in the UK, Europe,
Australia and North America. INPP seeks to provide its shareholders
with both a long-term yield and capital growth.
Amber Infrastructure Group ('Amber') is the Investment Adviser
to INPP and consists of approximately 150 staff who are responsible
for the management of, advice on and origination of infrastructure
investments.
Visit the INPP website at
www.internationalpublicpartnerships.com for more information.
Important Information
This announcement contains information that is inside
information for the purposes of the Market Abuse Regulation (EU)
No. 596/2014.
This announcement is an advertisement. It does not constitute a
prospectus relating to the Company and does not constitute, or form
part of, any offer or invitation to sell or issue, or any
solicitation of any offer to purchase or subscribe for, any shares
in the Company in any jurisdiction nor shall it, or any part of it,
or the fact of its distribution, form the basis of, or be relied on
in connection with or act as any inducement to enter into, any
contract therefor.
Forward-looking statements are subject to risks and
uncertainties and accordingly the Company's actual future financial
results and operational performance may differ materially from the
results and performance expressed in, or implied by, the
statements. These forward-looking statements speak only as at the
date of this announcement. The Company, Amber and Numis Securities
expressly disclaim any obligation or undertaking to update or
revise any forward-looking statements contained herein to reflect
actual results or any change in the assumptions, conditions or
circumstances on which any such statements are based unless
required to do so by the Financial Services and Markets Act 2000,
the Prospectus Rules of the Financial Conduct Authority or other
applicable laws, regulations or rules.
International Public Partnerships Limited
Annual Report and Financial Statements for the year ended 31
December 2021
Registered number: 45241
www.internationalpublicpartnerships.com
Note: Page references in this announcement refer to the full
formatted Annual Financial Report for the period ended 31 December
2021 that can be found on the Company's website. Certain charts
cannot be reproduced for the RNS format and can also be seen in the
PDF version of this document available on the Company's
website.
OUR PURPOSE
Our purpose is to invest responsibly in social and public
infrastructure that delivers long-term benefits for all
stakeholders.
We aim to provide our investors with stable, long-term,
inflation-linked returns, based on growing dividends and the
potential for capital appreciation.
We expect to achieve this by investing in a diversified
portfolio of infrastructure assets and businesses which, through
our active management, meets societal and environmental needs both
now and into the future
COMPANY FACTS
- London Stock Exchange trading code: INPP.L
- Member of the FTSE 250 and FTSE All-Share indices
- GBP2.9 billion market capitalisation at 31 December 2021
- 1,706 million shares in issue at 31 December 2021
- Eligible for ISA/PEPs and SIPPs
- Guernsey incorporated company
- International Public Partnerships (the 'Company', 'INPP', the
'Group' (where including consolidated entities)) shares are
excluded from the Financial Conduct Authority's restrictions, which
apply to non-mainstream investment products, and can be recommended
by independent financial advisers to their clients
RESPONSIBLE INVESTMENT
In support of its purpose, the Company is committed to
responsible investment that is beneficial to its shareholders,
communities, society and wider stakeholders. The Company believes
that the financial performance of its investments is linked to
environmental and social success and, as such, the Company
considers issues that have the potential to impact the performance
of its investments, both now and in the future.
The Company draws on several frameworks and benchmarks to
provide direction. These frameworks are reviewed on an annual basis
to ensure that the Company remains at the forefront of sustainable
investment, operations and reporting. The Company's Investment
Adviser, Amber Infrastructure Limited ('Amber') is a signatory of
the UN-backed Principles for Responsible Investment ('PRI').
The Company supports the 2030 Agenda for Sustainable Development
adopted by the UN Member States in 2015. Alignment with the SDGs is
a key part of the Company's approach to ESG integration. The
Company contributes towards the SDGs in two main ways: the positive
impact investments have on sustainable development and our aim to
manage investments sustainably.
The Company has taken steps to strengthen the alignment of its
investment activity with the objectives of the Paris Agreement and
is a supporter of the recommendations of the Task Force on
Climate-related Financial Disclosures ('TCFD').
GLOSSARY
Certain words and terms used throughout the Annual Report and
financial statements are defined in the glossary on page 116. Where
alternative performance measures ('APMs') are used, these are
identified by being marked with an * and further information on the
measure can be found in the glossary.
COVER IMAGE
Investment: Tinglysningsretten in Hobro, Design: Cubo Arktekter,
Photo: Helene Høyer Mikkelsen.
FULL-YEAR FINANCIAL HIGHLIGHTS
We aim to provide our investors with stable, long-term,
inflation-linked returns, based on growing dividends and the
potential for capital appreciation.
DIVIDS
7.55p - 2021 full-year dividend per share(1)
7.74p - 2022 full-year dividend target per share(2)
7.93p - 2023 full-year dividend target per share(2)
2.6% - 2021 divident growth(2*)
1.1x - Cash dividend covered(3) (2020: 1.2x)
NET ASSET VALUE ('NAV') (4*)
GBP2.5bn - NAV at 31 December 2021 (4) (2020: GBP2.4bn)
148.2p - NAV per share at 31 December 2021(4) (2020: 147.1p)
6.1 % - Increase in NAV (2020: -1.7%)
0.7% - Increase in NAV per share* (2020: -2.3%)
PORTFOLIO ACTIVITY
GBP252.7m - Cash investments made during 2021 (2020:
GBP30.0m)
REAL RETURNS
0.7% - Portfolio inflation-linked returns* at 31 December
2021(5) (2020: 0.8%)
TOTAL SHAREHOLDER RETURN ('TSR')*
245.0% - TSR since Initial Public Offering ('IPO')(6)
8.5%p.a. - Annualised TSR since IPO(6)
PROFIT
GBP129.2m - Profit before tax (2020: GBP60.8m)
1 The forecast date for payment of the dividend relating to the
six months to 31 December 2021 is 7 June 2022.
2 Future profit projection and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in
future.
3 Cash dividend payments to investors are paid from net
operating cash flow before capital activity* as detailed on pages
28 to 29.
4 The methodology used to determine the NAV is described in detail on pages 30 to 37.
5 Calculated by running a 'plus 1.0%' inflation sensitivity for
each investment and solving each investment's discount rate to
return the original valuation. The inflation-linked return is the
increase in the portfolio weighted average discount rate.
6 Since inception in November 2006. Source: Bloomberg. Share
price appreciation plus dividends assumed to be reinvested.
COMPANY OVERVIEW
CONSISTENT AND SUSTAINED RETURNS
INPP Dividend Payments
[Diagram can be found in PDF version of this document on the
Company's website].
PREDICTABLE portfolio performance
P rojected Investment Receipts
[Diagram can be found in PDF version of this document on the
Company's website].
LOW RISK AND DIVERSIFIED PORTFOLIO
Sector Breakdown Energy Transmission 22%
--------------------- ----
Transport 21%
--------------------- ----
Education 18%
--------------------- ----
Gas Distribution 15%
--------------------- ----
Waste Water 9%
--------------------- ----
Health 4%
--------------------- ----
Military Housing 3%
--------------------- ----
Digital 2%
--------------------- ----
Courts 2%
--------------------- ----
Other 4%
142 investments in infrastructure investments and businesses across
a variety of sectors(1)
Geographic Split UK 75%
----------- ----
Australia 8%
----------- ----
Belgium 7%
----------- ----
Germany 4%
----------- ----
US 3%
----------- ----
Canada 2%
----------- ----
Ireland 1%
----------- ----
Denmark <1%
----------- ----
Italy <1%
Invested in selected global regions that meet INPP's specific risk
and return requirements
Investment Type Risk Capital(2) 91%
----------------- ----
Senior Debt 9%
Invested across the capital structure, taking into account appropriate
risk-return profiles
Investment Ownership
100% 47%
--------- ----
50%-100% 7%
--------- ----
<50% 46%
Preference to hold majority stakes
Mode of Acquisition/Investment Status
Construction 9%
------------------------- ----
Operational 91%
------------------------- ----
Early Stage Investor(3) 65%
------------------------- ----
Later Stage Investor(4) 35%
Early stage investment gives first mover advantage maximises
capital growth opportunities
Investment Life
<20 years 48%
------------- ----
20-30 years 20%
------------- ----
>30 years 32%
Weighted average portfolio life of 33 years(5)
1. The majority of projects and businesses benefit from
availability-based or regulated revenues.
2. Risk Capital includes both investment and business level
equity and subordinated shareholder debt.
3. 'Early Stage Investor' - investments developed or originated
by the Investment Adviser or predecessor team in primary or early
phase investments.
4. 'Later stage investor' - assets acquired from a third party
investor in the secondary market.
5. Includes non-concession entities which have potentially a
perpetual life but assumed to have finite lives for this
illustration.
International Public Partnerships invests in high-quality
infrastructure assets and businesses that are sustainable over the
long term
We have a long-standing relationship with Amber, the Company's
Investment Adviser
Amber has sourced and managed the Company's investments since
IPO in 2006
- Amber is a specialist international infrastructure investment
manager and one of the largest independent teams in the sector with
over 150 employees working internationally. It is a leading
investment originator, asset and fund manager with a strong track
record
- Amber applies an active asset management approach to the
underlying investments to support sustainable performance
- The Company has first right of refusal over qualifying
infrastructure investments identified by Amber and for US
investments, by Amber's long-term investor, US Group, Hunt
Companies LLC ('Hunt')
[Diagram can be found in PDF version of this document on the
Company's website].
OUR STRENGTHS
- Long-term alignment of interests between the Company, Amber and other key suppliers
- Amber has physical presence in all of the major countries in
which we invest, which provides local insights and
relationships
- A vertically integrated model with direct relationships with public sector authorities
- Experienced team in all aspects of infrastructure development, investment and management
- Active approach to investment stewardship which is the cornerstone of successful investment
- Consideration and integration of material ESG risks and opportunities
- Active engagement with all key stakeholders
- Strong independent Board (seven of the eight Directors are
independent) with a diversity of experience and strong corporate
governance
STRATEGIC REPORT
BUSINESS MODEL - DELIVERING long-term benefits
OUR PURPOSE
Our purpose is to invest responsibly in social and public
infrastructure that delivers long-term benefits for all
stakeholders.
We aim to provide our investors with stable, long-term,
inflation-linked returns, based on growing dividends and the
potential for capital appreciation.
We expect to achieve this by investing in a diversified
portfolio of infrastructure assets and businesses, which through
our active management, meets societal and environmental needs both
now and into the future.
what we do
SOURCE
The Company operates a rigorous framework of governance,
incorporating a streamlined screening, diligence and execution
process. This includes substantive input from the Company's
Investment Adviser and, as appropriate, external advisers, with the
Company's Board providing robust challenge and scrutiny
INVEST
We seek new investments through our extensive relationships,
knowledge and insights to:
- Enhance long-term, inflation-linked cash flows
- Provide opportunities to create long-term value and enhance returns
- Ensure ESG is core to the investment process
OPTIMISE
Using the Investment Adviser's highly experienced in-house asset
management team, we seek to actively manage the Company's
investments, balancing risk and return, and using detailed research
and analysis to optimise the Company's financial and ESG
performance
DELIVER
Together with our Investment Adviser's active asset management
of our investments, we aim to deliver strong ongoing asset
performance for stakeholders and achieve target returns from the
portfolio for investors
VALUE-FOCUSED PORTFOLIO DEVELOPMENT
- We seek a portfolio of investments with no or low exposure to
market demand risks and for which financial, macroeconomic,
regulatory, ESG and country risks are well understood and
manageable
- The Investment Adviser has a strong investment team that
originates unique opportunities in line with the Company's
investment strategy
- We continually monitor opportunities to enhance the Company's existing investments
- The Company draws on the Investment Adviser's award-winning
sustainability programme, 'Amber Horizons', to inform areas for
future investment
ACTIVE ASSET MANAGEMENT
- The Investment Adviser has an in-house asset management team
dedicated to managing the Company's investments
- Where possible, through the Investment Adviser, we manage the
day-to-day activities of each of our investments internally
- We carry out extensive monitoring, for example, asset level
board and management meetings occur on a quarterly basis
- The Company works with public sector clients, partners and
service providers to ensure investments are being managed both
responsibly and efficiently to deliver the required outputs
- We focus on investment stewardship across the portfolio and
recognise the broader value created from our investments
efficient financial management
- Efficient financial management of investment cash flows and working capital
- Maintaining cash covered dividends
- Ensuring cost-effective operations
CONTINUOUS risk management
- Robust risk analysis during investment origination ensures strong portfolio development
- Integrated risk management throughout the investment cycle to support strategic objectives
- Ongoing risk assessment and mitigation supports successful ongoing asset performance
RESPONSIBLE INVESTMENT
- Integrated ESG considerations across the investment lifecycle
- Robust ESG objectives to build resilience and drive environmental and social progress
- Upholding high standards of business integrity and governance
VALUE CREATION
investor returns
Continuing to deliver consistent financial returns for investors
through dividend growth* and inflation-linked returns from
underlying cash flows and providing opportunities for capital
appreciation
PUBLIC SECTOR AND OTHER CLIENTS
Providing responsible investment in infrastructure to support
the delivery of essential public services and broader societal
objectives (e.g. supporting the path to net zero). Our ability to
deliver services and maintain relationships with our clients and
other key stakeholders is vital for the long-term prosperity of
each investment
communities
Delivering sustainable social infrastructure for the benefit of
local communities. The Company's investments provide vital public
assets for their communities, and seek to provide additional
benefits through deploying investment in local economies, job
creation and by using investments to help strengthen
communities
SUPPLIERS AND THEIR EMPLOYEES
The performance of our service providers, supply chain and their
employees is crucial for the long-term success of our investments.
The Company promotes a progressive approach to:
- Corporate social responsibility
- Safe, healthy, inclusive workplaces
- Opportunities for professional development
- Staff engagement
STRATEGIC REPORT
OBJECTIVES AND PERFORMANCE
The value we provide to our investors is monitored using our
Investor Return Key Performance Indicators ('KPIs'). The delivery
of value to both investors and our wider stakeholders is achieved
by carefully monitoring our performance against related strategic
priorities
INVESTOR RETURNS Delivering long-term, - Target an annual - 2.6% Annual dividend
inflation-linked dividend increase increase achieved
returns to investors of 2.5% (2020: 2.5%)
- Target a long-term - 7.7% p.a. IRR achieved
total return of at since IPO(1)
least 7.0% per annum (2020: 7.7%)
- Inflation-linked - 0.7% Inflation-linked
returns on a portfolio returns* on a portfolio
basis basis
(2020: 0.8%)
----------------- --------------------------- ------------------------------ -------------------------------------
Value-focused Originate investments New investments meet 100% of the investments
portfolio with stable, at least three of made in 2021 met at least
development long-term cash six attributes: three of the six attributes
flows and potential 1. Stable, long-term (2020: 100%)
growth attributes, returns
whilst maintaining 2. Inflation-linked
a balanced portfolio investor cash flows
of assets 3. Early stage investor
4. Investment secured
through preferential
access
5. Other capital enhancement
attributes
6. Positive SDG contribution
----------------- --------------------------- -------------------------------- -----------------------------------
ACTIVE ASSET Managing strong - Strong ongoing - 100% Forecast distributions
MANAGEMENT ongoing asset asset performance received for 2021(2)
performance as demonstrated by: (2020: 88.4%)
- 0.1% Asset performance
deductions achieved against
a target of <3% during
2021
(2020: 0.1%)
- 99.8% Asset availability
achieved against a target
of >98% during 2021
(2020: 99.7%)
efficient Making efficient - Cash covered dividends* - 1.1x Dividends fully
financial use of the Company's cash covered for 2021
management finances and - Competitive ongoing (2020: 1.2x)
working capital charges - 1.18% Ongoing charges
ratio for 2021
(2020: 1.18%)
----------------- --------------------------- -------------------------------- -----------------------------------
Responsible Management of - Robust integration - A+ The Company's Investment
Investment material ESG of ESG into investment Adviser's score for the
factors lifecycle UN-backed PRI 2020 assessment
for both the Strategy
and Governance and the
Infrastructure modules(3)
- Positive SDG contribution - 100% Percentage of
for new investments investments in the period
that positively support
targets outlined by the
SDGs(4)
----------------- --------------------------- -------------------------------- -----------------------------------
1 Calculated by reference to the November 2006 IPO issue price
of 100p and reflecting NAV appreciation plus dividends paid.
2 Measured by comparing forecast portfolio distributions against
actual portfolio distributions received. In the current year,
actual portfolio distributions exceeded forecast.
3 In its first year of participation, the Company's Investment
Adviser achieved A+ in the UN-backed PRI 2020 assessment for both
the Strategy and Governance and the Infrastructure modules.
4 The Company aims to manage and monitor any potential adverse
impact as outlined on page 41.
CHAIR'S LETTER
This has again been a difficult year for the people who use,
build, operate, maintain and manage the Company's investments. So
foremost I and my fellow directors wish to thank our stakeholders,
supply chain partners and, especially, our Investment Adviser, who
have all had to deal with the ongoing and wide-ranging impacts of
the Covid-19 pandemic on their working and personal lives, whilst
striving to ensure that public services have continued to be
delivered by the Company's investments. Within this challenging
context, I am therefore doubly pleased to be able to report that
the Company had another successful year in 2021. Notable highlights
during the 12 months to 31 December 2021 included:
- Maintaining our record of dividend growth;
- Further strong operational performance of the Company's portfolio;
- Approximately GBP253 million of capital deployed into new
investments across the transport, energy, social infrastructure and
digital sectors, including the Company's first investments in
Denmark;
- Raising GBP135 million of new capital; and
- Further enhancement of our ESG reporting, establishing INPP as
a leading choice of investment for sustainability focused
investors.
Whilst some individual asset performance was inevitably impacted
by the pandemic over the course of the year, overall the portfolio
experienced limited disruption which illustrates its resilience to
such shocks.
Looking forward, the Company remains confident that its business
model and investment objectives will continue to offer a
significant degree of protection for our investors. Moreover, the
Board continues to see a positive outlook for new investment
opportunities.
FINANCIAL PERFORMANCE
Over the period, the Company's NAV per share increased from
147.1 pence at 31 December 2020 to 148.2 pence at 31 December 2021.
The Company reported a profit for the year of GBP129.2 million (31
December 2020: GBP60.8 million).
Furthermore, the Company grew its dividend to 7.55 pence per
share for the 2021 financial year, whilst maintaining fully cash
covered dividends (cash dividend cover at 1.1x (2020: 1.2x)). The
Board continues to expect to deliver further growth in our
dividend. The dividend growth for the 12 months to 31 December 2021
of 2.6% is consistent with the c.2.5% average annual dividend
growth that has been delivered to investors since the Company's
inception, and the Board is also pleased to reaffirm its dividend
target for 2022 of 7.74 pence per share and provide new guidance of
7.93 pence per share for 2023.
The Company's overall robust performance and ability to deliver
a growing dividend have been consistent features throughout its
history. I note that investors who became shareholders in the
Company at its inception in 2006 have achieved a TSR of 245.0%, or
8.5% on an annualised basis on their initial investment. The
Company's full-year financial highlights are set out on page 1.
PORTFOLIO OVERVIEW
Whilst overall the portfolio performed well in 2021, the
pandemic continued to impact a small number of the Company's
investments, whose performance has already started to improve and
is expected to continue to do so during the course of 2022.
Diabolo Rail Link ('Diabolo') has experienced the greatest
impact, as Brussels airport saw much reduced numbers of passengers
using its services. However, independent forecasts predict a
gradual recovery in passenger volumes during 2022 and thereafter.
Discussions are ongoing with Infrabel, the Belgian rail network
owner, over the implementation of contractual protections that have
the potential to mitigate some of this impact, although no such
mitigation is assumed within the Company's current valuation of its
investment in Diabolo.
Tideway, the company building the 25km 'super sewer' under the
River Thames in London, has continued to make good progress with
construction 73% complete as at 31 December 2021 and with the
primary tunnelling expected to be complete in the coming months. As
reported previously, Tideway has been in discussions with Ofwat
regarding additional measures to mitigate the impact on Tideway's
investors of both Covid-19 related cost overruns and the Financing
Cost Adjustment Mechanism ('FCAM'). Subsequent to a provisional
agreement with Tideway, Ofwat launched a public consultation in
December 2021 to gain views from interested parties on the proposed
amendments. As the consultation was ongoing at the valuation date,
the 31 December 2021 valuation of the Company's investment in
Tideway included a prudent assessment of the outcome of the
consultation and the necessary licence modification process. The
consultation subsequently closed in January 2022 and the licence
modifications came into effect in March 2022.
There has also been satisfactory resolution of the appeal by
Cadent (our gas distribution investment) to the Competition and
Markets Authority ('CMA') against regulator Ofgem's final
determination in respect of the five-year regulatory period
beginning April 2021. The CMA published its final determination in
October 2021 and the findings were modestly positive for the
Company's valuation of Cadent.
Overall, the activities in this period have continued to
emphasise the need for, and success of, the Investment Adviser's
active asset management approach, given the central role it plays
in delivering the long-term performance of the Company.
INVESTMENT ACTIVITY
During 2021, the Company has completed GBP252.7 million of new
and follow-on investments across the education, judicial, energy
transmission, transport, digital and health sectors. Highlights
include:
- Financial close of a new police headquarters in Offenbach,
Germany, investing GBP8.1 million for a 45% shareholding;
- Acquisition of Beatrice and Rampion Offshore Transmissions
projects ('OFTOs'), which are the eighth and ninth OFTO investments
undertaken by the Company and increases the number of homes that
the Company's OFTO portfolio is capable of powering to
approximately 2.1 million;
- Completion of an additional c.5% investment in Angel Trains,
the largest rolling stock company in the UK. Angel Trains serves
the UK passenger rail sector with a diversified fleet of more than
4,000 vehicles, the majority of which are electric multiple units.
Angel Trains is now the Company's third largest investment holding
in its portfolio, by value;
- The Company's first investments in Denmark, where it acquired
four Public-Private Partnership ('PPP') projects, including two
schools, a specialist land registry court archive building and a
hospital car parking facility; and
- A commitment to invest GBP9.2 million in the Flinders
University Health and Medical Research Building ('HMRB') in South
Australia.
Please see more information on the Company's investment activity
on pages 15 to 17.
INVESTMENT STEWARDSHIP AND ESG
The Company's stewardship of its investments is fundamental to
its performance. The Company's Investment Adviser continues to
engage with its public sector partners and key suppliers to ensure
that the projects and businesses in which the Company invests
remain available and operational to deliver for the communities
which they serve, to the greatest extent possible, whilst
protecting the health and safety of staff and users.
The Company aims to be a leader in demonstrating a commitment to
ESG issues and has developed a series of ESG KPIs to evidence and
monitor this, hand-in-hand with its alignment with TCFD, the EU
Sustainable Financial Disclosure Regulation ('SFDR') and
anticipated UK-specific SDR disclosures. These KPIs are detailed
within the Responsible Investment Section on pages 38 to 48.
During the course of the year, the Company issued its inaugural
Sustainability Report(1) . This report reflects the Company's
commitment to sustainability and provides investors and other
stakeholders with an in-depth view of the Company's integrated
approach.
CORPORATE GOVERNANCE
Board succession is of the utmost importance and I am delighted
that Stephanie Coxon was appointed to the Board with effect from 1
January 2022. Stephanie is a Fellow of the Institute of Chartered
Accountants in England and Wales and is a non-executive director on
several London listed companies. Prior to becoming a full-time
non-executive director, Stephanie led the investment trust capital
markets team at PricewaterhouseCoopers CI LLP ('PwC') for the UK
and Channel Islands. Her appointment anticipates the retirement of
Claire Whittet from the Board during 2022.
The Company's ESG Committee, which is chaired by Julia Bond,
convened its inaugural meeting in March 2021. The ESG Committee
provides oversight and challenge to the Company's ESG-related
risks, opportunities and reporting. The Committee's work commenced
with the first edition of the Company's Sustainability Report
referred to above.
Sally-Ann David was appointed Chair of the Risk Sub-Committee in
March 2021, taking over from Julia Bond.
As previously reported, the Company changed its auditors during
2021. Following a formal audit tender completed in 2020, PwC was
selected as the Company's new auditor and received shareholder
approval at the Company's Annual General Meeting ('AGM') in May
2021. All parties have been working closely to ensure a smooth and
effective auditor transition.
The Management Engagement Committee ('MEC'), chaired by Claire
Whittet, undertakes regular reviews of the Investment Adviser's
performance and that of the other suppliers to the Company. We
continue to be well served by our Investment Adviser and,
consistent with this productive and engaged relationship, during
the course of 2021 we were pleased to agree a further reduction in
the investment management fee charged to the Company. This has now
been reduced from 90bps to 80bps in respect of fully operational
assets with an adjusted gross asset value in excess of GBP2.75
billion.
The approach of the Board to corporate governance is one of
continuous improvement and, during 2021, the Board implemented the
recommendations of an externally-facilitated review of its
performance, completed at the end of 2020. The Board continues to
comply with the Association of Investment Companies ('AIC') Code of
Corporate Governance, which ensures the requirements of the UK
Corporate Governance Code relevant to an investment fund are
adhered to. Further details are set out in the Corporate Governance
section of this Report.
CURRENT ENVIRONMENT AND OUTLOOK
Our portfolio's performance has been robust throughout the
pandemic; and now, as societies and markets continue their recovery
to post-pandemic norms, general levels of inflation have emerged as
a new key issue across the economies in which we invest. Whilst the
levels at which inflation will peak and the duration of these
inflationary periods remain uncertain, we take comfort from the
strong inflation-linked returns* of the Company's income streams
(0.7%(2) ) and its mitigated exposure to demand risks within the
portfolio.
Infrastructure investment is fundamentally about long-termism in
public policy, capital allocation and economic growth. It is also
the long-term investment horizon of infrastructure which places it
front-and-centre of efforts by governments to deliver sustainable
and fairer societies. Therefore, whilst events such as the pandemic
and the return of inflation may disrupt short-term plans, they do
not alter the fundamental investment case for modern
infrastructure; in fact, arguably, they strengthen it, as the need
for economic resilience becomes ever greater. Moreover, these
objectives need to be met within the constraint of stressed public
sector balance sheets. Accordingly, we expect that over the
medium-term, governments will bring forward a growing number of new
infrastructure investment plans, based upon funding solutions
requiring private capital. Our strong pipeline of opportunities
already reflects this and includes over GBP185 million of
investment to which we are already committed or which our
Investment Adviser has under development.
We have all learned a great deal from the last two years about
the complementary roles of public and private sectors in delivering
priority outcomes for society, and of the need for close
cooperation in working to common goals. It is this learning which
will be applied in tackling climate change - the single greatest
long-term risk facing society and in the mitigation of which
infrastructure investment will play a pivotal role. The COP26
conference in November last year made clear the scale of challenges
that we all face. The Company, with its foundations in long-term
PPP and infrastructure businesses, and a proven capability to
invest sustainably, is well placed to respond to these challenges.
So it is with confidence that we face growing opportunities within
our chosen markets.
As I write, the tragic events of the war in Ukraine are
unfolding and there has already been significant loss of life and
human suffering, with millions of people affected and displaced to
neighbouring countries. First and foremost our thoughts are with
those people whose lives have been impacted. We are aware that the
Company's Investment Adviser and its employees are taking practical
steps to provide assistance both through its corporate and social
responsibility programme as well as at an individual level where
they are able, including donating to humanitarian support
charities. We also continue to actively monitor the situation, to
ensure that our portfolio of investments is protected, to the
extent it can be, from the direct and indirect impacts of the war,
as well as continuing to review sanctioned entities / individuals.
The Company does not hold any investments in the affected region
and we are not aware of any material direct implications for the
Company or its portfolio.
I and my fellow Directors thank you for your continued
support.
Mike Gerrard
Chair
23 March 2022
1
https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf.
2 Calculated by running a 'plus 1.0%' inflation sensitivity for
each investment and solving each investment's discount rate to
return the original valuation. The inflation-linked return is the
increase in the portfolio weighted average discount rate. Please
refer to page 30 for further detail.
TOP 10 INVESTMENTS
The Company's top ten investments by fair value at 31 December
2021 are summarised below. A complete listing of the Company's
investments can be found on the Company's website (
www.internationalpublicpartnerships.com ).
Status % holding % investment % investment
at at fair value fair value Primary
Name of 31 December 31 December 31 December 31 December SDG
Investment Location Sector 2021 2021 2021 2020 Supported
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
Gas 7% Risk
Cadent UK distribution Operational Capital 15.5% 16.5% 9
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
Cadent owns four of the UK's eight regional gas distribution networks
and in aggregate provides gas to approximately 11 million homes and
businesses.
----------------------------------------------------------------------------------------------------------------------
Waste Under 16% Risk
Tideway UK water Construction Capital 9.1% 9.1% 6
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
Tideway relates to the design, build and operation of a 25km
'super sewer' under the River Thames.
-------------------------------------------------------------------------------------------------------- ------------
10% Risk
Angel Trains UK Transport Operational Capital 7.1% 3.1% 11
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
Angel Trains is a rolling stock leasing company which owns more than
4,000 vehicles. Angel Trains has invested over GBP5 billion in new
rolling stock and refurbishment since 1994, and is the second largest
investor in the industry after Network Rail.
----------------------------------------------------------------------------------------------------------------------
Diabolo 100% Risk
Rail Link Belgium Transport Operational Capital 7.0% 7.8% 11
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
Diabolo integrates Brussels Airport with the national rail network
allowing passengers to access high-speed trains, such as Amsterdam-Brussels-Paris
and NS International trains.
----------------------------------------------------------------------------------------------------------------------
Energy 100% Risk
Lincs OFTO UK transmission Operational Capital 6.9% 7.6% 7
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
The project connects the 270MW Lincs offshore wind farm, located 8km
off the east coast of England, to the National Grid. The transmission
assets comprise the onshore and offshore substations and under-sea
cables, 100km in length.
----------------------------------------------------------------------------------------------------------------------
100% Risk
Capital
and 100%
Ormonde Energy senior
OFTO UK transmission Operational debt 4.2% 5.0% 7
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
The project connects the 150MW Ormonde offshore wind farm, located
10km off the Cumbrian coast, to the National Grid. The transmission
assets comprise the onshore and offshore substations and under-sea
cables, 41km in length.
----------------------------------------------------------------------------------------------------------------------
Reliance 33% Risk
Rail Australia Transport Operational Capital 3.7% 3.9% 11
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
Reliance Rail is responsible for financing, designing, delivering
and ongoing maintenance of 78 next-generation, electrified, 'Waratah'
train sets serving Sydney in New South Wales, Australia.
----------------------------------------------------------------------------------------------------------------------
100% Risk
BeNEX Germany Transport Operational Capital 2.8% 3.2% 11
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
BeNEX is both a rolling stock leasing company and an investor in train
operating companies ('TOCs'), providing approximately 44 million train
km of annual rail transport.
----------------------------------------------------------------------------------------------------------------------
US Military Military 100% Risk
Housing(2) US housing Operational Capital 2.5% 2.8% 11
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
Two tranches of mezzanine debt underpinned by security over seven
operational Public-Private Partnerships ('PPP') military housing projects,
relating to a total of 19 operational military bases in the US and
comprising c.21,800 individual housing units.
----------------------------------------------------------------------------------------------------------------------
Beatrice Energy 100% Risk
OFTO UK transmission Operational Capital 2.0% N/A 7
------------- ----------- -------------- -------------- -------------- ------------- ------------- ------------
The project connects the 588MW Beatrice offshore wind farm, located
13.5km off the Caithness coastline of Scotland, to the National Grid.
The transmission assets comprise the onshore and offshore substations,
20km of onshore export cables and 70km of offshore export cables.
----------------------------------------------------------------------------------------------------------------------
1. Risk Capital includes both project level equity and subordinated shareholder debt.
2. Includes two tranches of mezzanine debt into US military housing.
More detail on significant movements in the Company's portfolio
for the year to 31 December 2021 can be found on pages 13 to 17 of
the Operating Review.
STRATEGIC REPORT
CASE STUDY - danish ppp portfolio
DIFFERENTIATION OF THE OPERATING MODEL
A key differentiator for the Company is the relationship with
its Investment Adviser. The Investment Adviser supports the Company
(and its investment portfolio entities) with investment
origination, financial and asset management services to deliver the
best value for its shareholders and wider stakeholders. The
Investment Adviser's team of over 150 infrastructure professionals,
spread across three continents, are focused on delivering and
maintaining high-quality portfolio performance. The Investment
Adviser has a demonstrable track record, with high standards of
governance, stewardship and relationship management across the
Company's investment portfolio of over 140 projects and
businesses.
The Company's recent investment in the Danish PPP portfolio
demonstrates the Investment Adviser's ability to originate in new
geographies delivering assets that are in line with the Company's
investment objectives.
DANISH PPP PORTFOLIO
The Company acquired an interest in a portfolio of four PPP
projects that deliver availability-based, long-term, predictable
cash flows.
The projects, which provide essential infrastructure and are
geographically spread across Denmark, include:
- A specialist land registry court archive building in Hobro
that accommodates 150 public sector employees;
- A hospital car parking facility with c.550 parking spaces
adjoined to a regional hospital in Randers;
- A 900-pupil school in Ørsted for 1-16 year olds;
- A 600-pupil school in Vildbjerg for 1-16 year olds.
Key features of the projects include:
- 100% availability-based revenue streams with public sector
counterparties backed by the Danish State;
- Long-term stable cashflows with project length of up to 19 years;
- A track record of strong operational performance;
- Essential infrastructure - the Portfolio's investments all
provide social infrastructure services to their respective
communities.
SUSTAINABLE MANAGEMENT
The Company views the development and maintenance of social
infrastructure as a key component of delivering the SDGs. In line
with its ESG philosophy, the Company believes all investments
should be managed sustainably. From a social infrastructure
perspective, this starts with the design and construction of the
buildings themselves. For example, through the Company's due
diligence process, it identified that sustainability was considered
in relation to Ørsted school's energy efficiency. Specific design
features include classrooms with significant heat loss face south
or east, and daylight is used so that the need for artificial
lighting is minimised. At the time the school was built, its energy
requirements were at least 25% lower than the regulatory
requirements.
The Company is now working with its Investment Adviser to
identify opportunities for continuous improvement through active
management, in line with its Sustainability Policy Aims. Please
refer to the Responsible Investment section of this report for a
summary of the Company's exploratory work on net zero within its
wider Social Infrastructure portfolio.
OUTLOOK
The Company's Investment Adviser has a local presence and the
team is continuing to see a number of potential pipeline
opportunities in the region.
PRIMARY SDGS SUPPORTED
The investments directly support targets outlined in Sustainable
Development Goals 4 (Quality Education), 9 (Industry, Innovation
and Infrastructure) and 16 (Peace, Justice and Strong
Institutions).
STRATEGIC REPORT
OPERATING REVIEW
Value -Focused Portfolio Development
New investments that meet the Company's Investment Policy are
made after assessing their risk and return profile relative to the
existing portfolio. In particular, we seek investments to
complement the existing portfolio through enhancing long-term,
inflation-linked cash flows and/or to provide the opportunity for
capital growth. The Board regularly reviews the overall composition
of the portfolio to ensure it continues to remain aligned with the
Company's investment objectives and ensure it is achieving a broad
balance of risk. In addition, for all new investments, positive SDG
contribution is now a requirement. This is reflected by a
standalone ESG KPI, presented on pages 6 to 7.
Desirable key attributes for the portfolio include:
1. Long-term, stable returns
2. Inflation-linked investor cash flows
3. Early stage investor (e.g. the Company is an early stage
investor in a new opportunity developed by our Investment
Adviser)
4. Investment secured through preferential access (e.g. sourced
through pre-emptive rights or through the activities of our
Investment Adviser)
5. Other capital enhancement attributes (e.g. potential for
additional capital growth through 'de-risking' or the potential for
residual/terminal value growth)
6. Positive SDG contribution
Performance against strategic priority KPIs: 100% of investments
made in 2021 met at least three of the six attributes (2020:
100%)
During the year to 31 December 2021, the Company invested
GBP252.7 million (2020: GBP30.0 million). These opportunities were
sourced by the Investment Adviser, either from the start of the
project (e.g. early stage developments); through increasing the
Company's interest in existing investments; or accessing
opportunities as a result of the Company's previous investments and
experience. These three origination approaches are the Company's
preferred routes to market, as they limit bidding in the
competitive secondary market.
Details of investment activity during 2021 are provided below.
Please refer to the key performance indicators on pages 6 to 7.
Further details for each of these transactions are provided
overleaf.
INVESTMENTS LOCATION KEY ATTRIBUTES OPERATIONAL INVESTMENT INVESTMENT
MADE DURING STATUS DATE
2021
1 2 3 4 5 6
-------------------------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
toob UK ü ü ü ü Operational GBP14.2 Various
million
-------------- ---------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
Offenbach Germany ü ü ü ü ü Operational GBP8.1 June 2021
Police million(1)
Centre
-------------- ---------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
Beatrice OFTO UK ü ü ü ü ü Operational GBP49.8 July 2021
million
-------------- ---------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
Angel Trains UK ü ü ü ü ü Operational GBP97.5 September
million 2021
-------------- ---------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
Rampion OFTO UK ü ü ü ü ü Operational GBP35.4 November
million 2021
-------------- ---------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
Bradford and UK ü ü ü ü ü Operational GBP29.1 November
Lewisham BSF million 2021
and Three
Shires
Private
Finance
Initiatives
('PFI')
schemes
-------------- ---------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
Danish PPP Denmark ü ü ü ü Operational GBP14.0 December
Portfolio million(1) 2021
-------------- ---------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
Diabolo Belgium ü ü ü Operational GBP1.5 December
million(1,2) 2021
-------------- ---------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
UK PPP UK ü ü ü ü ü Operational GBP3.1 December
Portfolio(3) million(4) 2021
-------------- ---------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
GBP252.7
million
------------------------- ------- ------- ------- ------- ------- ------- ------------ ------------- -----------
1 GBP translated value of investment.
2 In addition, a contingent commitment of GBP10.2 million is available, if required.
3 Portfolio includes interests in Townlands Community Hospital
in Henley, Eltham Community Hospital and minority interests in the
BSF projects sTaG 1 and 2.
4 An additional c.GBP3 million has been committed to invest in 2022.
INVESTMENT LOCATION KEY ATTRIBUTES OPERATIONAL INVESTMENT INVESTMENT
COMMITMENT STATUS COMMITMENT DATE
MADE DURING VALUE
2021
1 2 3 4 5 6
----------------------------- ------- ------- ------- ------- ---------------- ------------ -----------
HMRB(1) Australia ü ü ü ü In Construction GBP 9.2 2024
million
---------------- ----------- ------- ------- ------- ------- ---------------- ------------ -----------
1 The Company's investment is only due to be made following
construction completion. The valuation of the commitment is
currently immaterial.
INVESTMENTS and commitments MADE DURING THE PERIOD
OFFENBACH POLICE CENTRE, GERMANY
In June 2021, the Company reached financial close on a new
police headquarters project in South-East Hesse in Offenbach,
Germany. The Company invested GBP8.1 million for a 45%
shareholding. The project was initially awarded to the Company in
December 2017 to a consortium comprising INPP Public Infrastructure
Germany GmbH & Co. KG, Amber Infrastructure GmbH, and Goldbeck
Public Partner GmbH. Financial close took place after construction
reached completion and successful handover to the Federal State of
Hesse in June 2021. The 36,645sqm newly built centre will provide a
headquarters to the police in South-East Hesse in Offenbach, which
is approximately 5km from Frankfurt, accommodating c.1,000 staff.
The centre provides the Hesse State Police with office space,
meeting areas, a police station, cells, forensic science
laboratories, a nursery, a cafeteria, a multipurpose hall, a
parking deck for cars and bicycles, and outside facilities.
Alongside the provision of these core functions, the headquarters
have been sustainably designed and built. Key energy features
include c.890 solar power panels generating 302kWp, a combined heat
and power plant and a low-energy heating/cooling system.
Primary SDG supported: 16
DIGITAL INFRASTUCTURE), UK
In July 2017, the Company agreed to invest up to GBP45 million
in UK digital infrastructure alongside the UK Government, through
Amber's National Digital Infrastructure Fund ('NDIF'). During the
period, an additional GBP14.2 million was approved for investment
into one of NDIF's existing investments, toob. toob is a UK full
fibre broadband provider delivering broadband to homes, businesses,
public service and community groups in the South of England. The
Company's commitment to digital infrastructure will help to
transition the UK to full fibre at a time when reliance on digital
infrastructure has never been greater. There has been increased
recognition that digital infrastructure is becoming a more
defensive asset class as the critical nature of digital
connectivity services has been amplified by the continued shift to
more people working from home.
Primary SDG supported: 11
OFFSHORE TRANSMISSION PORTFOLIO, UK
The Company reached financial close on its eighth and ninth OFTO
projects increasing the Company's contribution to the UK's
transition to a zero-carbon economy. These two OFTOs have the
ability to transmit green electricity equivalent to the needs of
approximately 800,000 homes, increasing the number of homes that
the Company's OFTO portfolio is capable of powering to
approximately 2.1 million.
BEATRICE OFTO, UK
In July 2021, the Company reached financial close on the
long-term ownership and operation of the transmission link to the
588MW Beatrice offshore wind farm, Scotland's largest offshore wind
farm, as part of the Transmission Capital Partners consortium,
comprising the Company, Amber and Transmission Investment. The
project relates to the transmission cable connection to the
offshore wind farm located in the Outer Moray Firth, approximately
13.5km off the Caithness coastline in Scotland. The wind farm
consists of 84 x 7MW wind turbine generators connected to two
offshore substation platforms located within the boundaries of
Beatrice wind farm.
RAMPION OFTO, UK
In November 2021, the Company reached financial close on its
ninth OFTO for the long-term ownership and operation of the
transmission link to the 400MW Rampion offshore windfarm, as part
of the Transmission Capital Partners consortium, comprising the
Company, Amber and Transmission Investment. The project relates to
the transmission cable connection to the offshore wind farm located
approximately 13km off the Sussex coast. The wind farm consists of
116 x 3.45MW wind turbine generators connected to an offshore
substation platform ('OSP') located within the boundaries of the
Rampion wind farm.
Primary SDG supported: 7
ANGEL TRAINS, UK
In September 2021, the Company, as part of a consortium
including the Public Sector Pension Investment Board of Canada and
other investors, acquired a further c.5% shareholding in Angel
Trains providing it with further governance rights through direct
board representation. The Company invested c.GBP98 million and the
additional investment means that Angel Trains is now the third
largest holding in its portfolio. Since making its original
acquisition in 2008, Angel Trains has been a successful investment
for the Company, delivering both capital growth and yield. Angel
Trains is the largest rolling stock company in the UK, serving the
passenger rail sector with a diversified fleet of more than 4,000
vehicles with the majority being electric multiple units and its
business plan supports the decarbonisation of the UK transport
system.
Primary SDG supported: 11
bradford and lewisham building schools for future ('bsf')
projects and PFI schemes, UK
The Company built on its existing portfolio of education
investments in the UK during the period. In December 2021, the
Company acquired additional interests in the Bradford and Lewisham
BSF projects and interests in three healthcare PFI schemes ('Three
Shires'). The BSF projects collective comprise 14 schools providing
education facilities to over 17,000 pupils across the Bradford and
Lewisham areas in the UK. The investment builds on the Company's
existing portfolio of BSF projects supporting the Company's
commitment to providing a high-quality teaching environment to
pupils across the portfolio. The Three Shires schemes comprise the
design, build, funding and partial operation of four small
community healthcare facilities under the Three Shires banner
located in East Lincolnshire, Leicester and Derbyshire. The
facilities provide a range of community health services including
dentistry, diagnostics and mental health rehabilitation.
Primary SDG supported: 11
ppp portfolio, denmark
The Company made its first investments in Denmark during the
period acquiring a majority interest in four Danish PPP projects,
in Hobro, Randers, Ørsted and Vildbjerg, that deliver
availability-based, long-term, predictable cash flows. The projects
all provide essential infrastructure services to their respective
communities and include a specialist land registry court archive
building in Hobro that accommodates 150 public sector employees, a
hospital car parking facility with c.550 parking spaces adjoined to
a regional hospital in Randers, a 900-pupil school in Ørsted and a
600-pupil school in Vildbjerg. Please see more information in the
case study on page 12.
Primary SDG supported: 9
UK ppp portfolio, UK
In December 2021, the Company acquired a small portfolio of UK
PPP investments including initial interests in Townlands Community
Hospital in Henley, Eltham Community Hospital and minority
interests in the BSF projects sTaG 1 and 2. The interests will be
acquired from an affiliate of the Company's Investment Adviser,
following an independent valuation prepared by Newbridge Advisors
LLP. Investment in minority interests of a further five BSF schemes
from the same portfolio is expected to be made by the Company
during the course of 2022, with the first of these expected to
close in H1 2022.
- Eltham is a community hospital project located in the London
Borough of Greenwich that has been developed under the NHS LIFT
framework with an availability-based revenue stream. Amber has been
involved in the scheme since its inception and the team has
overseen all aspects of project delivery, including design and
development. The Company has acquired a 49.8% interest in the
subordinated debt of the project.
- Townlands is a community hospital scheme based in
Henley-on-Thames which provides sub-acute care and comprises an
ambulatory care centre and a palliative care centre. The project
benefits from an availability-based revenue stream arising under a
direct contract with the NHS. The Company acquired a 100% interest
in the equity and subordinated debt of Townlands.
- StaG 1 and 2 comprises education facilities in South Shields
and Jarrow in the UK. The investment builds on the Company's
existing portfolio of BSF projects, supporting the Company's
commitment to providing a high-quality teaching environment to
pupils across the portfolio. The Company acquired an 8.00% interest
in the project's subordinated debt and a 4.36% interest in the
equity.
Primary SDG supported: 4
FLINDERS UNIVERSITY HEALTH AND MEDICAL RESEARCH BUILDING
('HMRB') australia
In December 2021, the Company reached financial close on HMRB.
The Company was awarded the project as part of a consortium which
included Amber and Tetris Capital. The HMRB is the flagship
development of the Flinders Village project, an integrated health
and education precinct development on Flinders University's Bedford
Park campus. The HMRB will co-locate research, clinical and
technological platforms to further Flinders University's
longstanding contributions to the health, education and medical
sectors. With over 26,000 students, Flinders University is a public
institution and the third largest university in South Australia.
The project is being developed in accordance with the University's
sustainability guidelines and is targeting a minimum of 'gold'
ratings for WELLv2 and LEEDv4 certification and a 5-star rating for
Green Star certification. By fully integrating health and
sustainability into the design of HMRB, the project will support
several of the Company's Sustainability Policy Aims.
Primary SDG supported: 4
MARKET ENVIRONMENT IN 2022 AND FUTURE OPPORTUNITIES
UNITED KINGDOM
Following the outbreak of Covid-19, there has been increased
focus in the UK on ensuring resilience against future exogenous
threats, and the role that infrastructure plays in delivering this
resilience and generating economic recovery by creating
opportunities for private sector investment. The UK remains
committed to the development of infrastructure as part of achieving
its ambitious net zero targets alongside the government's pledges
to 'Build Back Better' and 'Level Up' the country.
At the budget spending review in October 2021, the government
outlined plans to support the Build Back Better plan with over
GBP35 billion of rail investment for 2022 to 2025, to boost
connectivity across the country. Then, in November, a further GBP96
billion of investment was announced for the Integrated Rail Plan.
The aim of which is to deliver faster, more frequent and more
reliable journeys across the North of England and the Midlands.
The UK government has further emphasised the importance of
infrastructure to deliver the required climate change mitigation to
achieve net zero by 2050. With GBP26 billion of public capital
investment for the green industrial revolution and transition to
net zero announced. The strategy is targeted to unlock GBP90
billion in private investment by 2030. The sector is also expected
to benefit from the formation of the UK Infrastructure Bank which
has released a discussion paper that articulates its two strategic
objectives:
- To help tackle climate change, particularly meeting the
government's net zero emissions target by 2050; and
- To support regional and local economic growth through better
connectivity, opportunities for new jobs and higher levels of
productivity.
The government has made clear that high-quality infrastructure
is critical to national progress. The 2021 National Infrastructure
and Construction Pipeline sets out nearly GBP650 billion of public
and private investment, over the next ten years, that aims to drive
economic recovery and growth.
Meanwhile, the UK has also taken its own regulatory path since
the end of the Brexit transition period. The UK government has
stated its commitment to 'match the ambitions' of the SFDR, while
also publicising its commitment to align itself with the TCFD. The
government also aims to remove some of the bureaucracy and red tape
involved in infrastructure, hence they have created 'Project
Speed', a Taskforce to support the creation of faster, better and
greener infrastructure.
As demonstrated by the investments made over the course of 2021,
the Company continues to see a high-quality pipeline of
opportunities in the UK, including in the energy transmission and
social infrastructure sectors, and we remain confident that the
need for infrastructure investment will continue to offer
opportunities that meet the Company's criteria. Please see more
information on page 21.
EUROPE
Overall investment into European infrastructure continues to be
supported by wider EU frameworks and initiatives. The EU recognises
the role of infrastructure in support of the goal to transition to
net zero and help drive economic recovery.
The EU has announced its Global Gateway Strategy with the
ambition of redesigning how it connects with the world. The
strategy seeks to increase digital, transport, energy, and trade
projects by investing in both hard and soft infrastructure. The
strategy aims to generate EUR300 billion in public and private
funds by 2027. Possible projects the EU could support include green
hydrogen, underwater data cables and spending in schools. Global
Gateway will make available up to EUR135 billion for guaranteed
investments for transformational infrastructure projects between
2021 and 2027. The EU aims to offer solid financial conditions for
partners, bringing grants, favourable loans, and budgetary
guarantees to de-risk investments and improve debt sustainability.
The EU will also seek to provide technical assistance to partners
to enhance their capacity to prepare credible projects ensuring
value for money in infrastructure.
These initiatives sit alongside the European Green Deal. As part
of the European Green Deal, the EU has set itself the target of
climate neutrality by 2050, with at least 55% of emissions cut by
2030, known as Fit for 55. This offers a significant opportunity
for infrastructure, as the proposed policy framework is intended to
spur the technological innovation needed to deliver decarbonisation
and digitalisation of European economies.
As such, the Company anticipates there will be increasing
opportunities in infrastructure that will be critical for
facilitating a transition to net zero, particularly in transport
and energy sectors across Europe, exhibiting investment criteria
that the Company will find attractive. In particular, the Company
is focusing on stable and well-structured Northern and Western
European economies which offer a steady flow of opportunities
across all traditional infrastructure sectors.
In addition, as the tragic events of the war in Ukraine are
unfolding the Company and its Investment Adviser continue to
actively monitor the situation to ensure that our portfolio of
investments is protected, to the extent it can be, from the direct
and indirect impacts of the war. The Company does not hold any
investments in the impacted region and we are not aware of any
material direct implications for the Company or its portfolio.
AUSTRALIA
Australia has a long history of private sector delivery and
financing of public infrastructure facilitated by a stable and
transparent legal and regulatory framework, with active
infrastructure financing and investor markets.
Infrastructure Australia set out its medium to long-term
aspirations for a A$110 billion investment into the country's
infrastructure to drive the national Covid-19 recovery and enhance
resilience. Building on the 2019 infrastructure plan, the 2021
Australian Infrastructure Plan establishes the agenda for the next
15 years identifying a pipeline across the various infrastructure
sub-sectors, as well as including a planned response to Covid-19 in
respect to infrastructure. Infrastructure Partnerships Australia
forecast pipeline expenditure across the country to exceed A$12
billion per quarter through to 2026 and reach a peak of A$19
billion in late 2024. Spending is primarily concentrated in New
South Wales and Victoria to cater for increasing populations that
outstrip the national population growth rate(1) . A key component
of the pipeline is a number of large-scale transport (both
passenger and freight) projects that are either in procurement or
planning stages.
The States and Territories of Australia continue to develop
smaller-scale social infrastructure projects, primarily in the
health and social housing sectors. In keeping with policy
recommendations in the Australian Infrastructure Plan, some States
are also adopting infrastructure procurement models that outsource
operator services to the private sector, as well as seeking private
sector capital in development.
Australian state and federal governments are yet to outline a
set of decarbonisation policies which could catalyse investment in
more sustainable projects. Notwithstanding this, the Company's view
is positive about the prospects for further investments in the
region and it is well positioned to actively pursue
opportunities.
NORTH AMERICA
The US relies on a vast network of infrastructure; however, as
demonstrated in its most recent report card on the condition of
America's infrastructure, the American Society of Civil Engineers
('ASCE') gave the US a C or 'poor' rating. ASCE estimated in 2021
that the US needed to spend, by 2025, US$5.9 trillion to ensure
that infrastructure in the United States be brought to a good state
of repair. To maintain the existing condition of infrastructure,
ASCE estimated that an additional US$2.6 trillion was required
beyond the funding that is currently in place. With such
significant levels of investment required, there is a great deal of
optimism and a bipartisan commitment within Congress to foster a
considerable pipeline of projects in the US for many years.
To address this, the Infrastructure and Jobs Act was signed into
law in November 2021. The Act pledges US$1.2 trillion in funds,
including $550 billion in new investments on roads, bridges and
tunnels, as well as airports, broadband and other infrastructure
improvements with the aim of replacing America's deteriorating
infrastructure with new and more fit for purpose public
services.
Arguably, the opportunity in the US is not only in the federal
mandated 'mega' projects, but in sectors such as transport
including airports, ports, bridges and logistics where much of the
existing infrastructure ownership is in the hands of local
municipalities and other government-backed entities. As a result,
state and local governments are seeking to implement more P3
(Public-Private Partnerships) and alternative procurement models
such as Progressive Development, which leverages the expertise of
the private sector.
The ability to source projects through collaborative procurement
processes makes the US an attractive geography on which to focus
resource. However, the growing amount of domestic capital pursuing
projects in the US and the generally lower commitment given by the
public sector to follow through on privately funded procurement,
create competition and barriers to entry for many European
investors. The Investment Adviser actively monitors the development
of projects that fit the Company's investment objectives and is
able to utilise its greenfield development expertise to foster
projects that progress under alternative procurement models.
Canada has a strong track record of infrastructure investment,
and the Investing in Canada plan has a long-term aim to deliver
C$180 billion of infrastructure investment by 2028 to support
local, provincial and territorial projects over 12 years. In the
shorter-term, Canada has launched a three-year C$10 billion
infrastructure plan to help the economy recover after the Covid-19
pandemic. The funds will come from the Canada Infrastructure Bank
which manages C$35 billion. It will focus on providing high-speed
internet connectivity for households and small businesses,
strengthening Canadian agriculture, and accelerating towards a
low-carbon economy. The Canadian model increasingly relies upon
Progressive Development and alternative forms of procurement to
deliver critical infrastructure projects.
The ability for the private sector to participate in more North
American infrastructure projects provides the Company with a broad
variety of investment opportunities. The Company is well positioned
to capitalise on these developments through its Investment
Adviser's relationship with US group, Hunt Companies LLC.
1 Australia and New Zealand Infrastructure Pipeline Forecast by
Expenditure (Produced by Infrastructure Partnerships
Australia).
CURRENT PIPELINE
The Company's performance does not depend upon additional
investments to deliver current projected returns. Further
investment opportunities will be judged by their anticipated
contribution to overall portfolio returns relative to risk.
Selected commitments and future opportunities that may be
considered for investment in due course, as identified by the
Investment Adviser, are outlined below.
KNOWN/COMMITTED LOCATION ESTIMATED INVESTMENT(1) EXPECTED INVESTMENT INVESTMENT STATUS
OPPORTUNITIES PERIOD
------------------- ---------- -------------------------- -------------------- ------------------------
Diabolo Belgium GBP10.2 million 25 years A further contingent
commitment remains
available, if required
------------------- ---------- -------------------------- -------------------- ------------------------
East Anglia UK Up to GBP90 c.21 years Preferred bidder.
One OFTO million Investment expected
H2 2022
------------------- ---------- ------------------------ -------------------- ------------------------
UK PPP Portfolio UK c.GBP3.0 million 12-19 years Investment expected
over the course
of 2022
------------------- ---------- -------------------------- -------------------- ------------------------
HMRB Australia GBP9. 2 million 25 years Investment commitment
made. Expected
to be funded in
2024
------------------- ---------- -------------------------- -------------------- ------------------------
Moray East OFTO UK Up to GBP75 million c.24 years Preferred bidder.
Investment expected
H2 2022
----------------- ------------ -------------------------- -------------------- ------------------------
1 Represents the current commitment or estimate of total future
investment commitment or preferred bidder positions that meet the
Company's investment criteria. There is no certainty that potential
opportunities will translate into actual investments for the
Company.
The Company has a longer-term pipeline of investments and has
identified over 40 opportunities across the UK, Europe, North
America and Australia. Future areas of investment may include:
KEY AREAS SOCIAL REGULATED UTILITIES TRANSPORT OTHER ESSETNIAL
OF INFRASTRUCUTRE AND MOBILITY INFRASTRUCTURE
FOCUS
------------ ---------------- ------------------------------------ -------------------------------------------------- ---------------------------
Example
investments * Education * OFTOs * Government-backed transport including: * Digital connectivity
* Health * Distribution and transmission * Light rail * Energy management
* Justice * Direct procurement * Regional rail
------------ ---------------- ------------------------------------ -------------------------------------------------- ---------------------------
ACTIVE ASSET MANAGEMENT
The Company's Investment Adviser has a highly experienced,
well-resourced, dedicated team of over 40 asset managers globally,
as part of the wider pool of over 150 infrastructure professionals
with presence across 11 countries across the UK, Europe, Australia
and North America. The Company's Investment Adviser operates a
full-service approach to infrastructure, and this includes
day-to-day asset management and oversight of the Company's
investments. The Investment Adviser's priority is to meet or exceed
investment performance, creating value for investors and
communities, and its active asset management approach has been
fundamental to the Company's performance since IPO in 2006. It is
this performance that has enabled the Company to build a reputation
of delivering transparent, responsible stewardship of public
infrastructure assets that support essential services. These skills
have been evidenced by the Company's robust performance during the
current and ongoing unprecedented uncertainty caused by the
Covid-19 pandemic.
OPERATIONAL PERFORMANCE
The Company's Investment Adviser adopts a hands-on approach to
monitoring asset performance, utilising robust internal processes
and the expertise of its dedicated asset management team across the
geographies in which the Company holds investments. Whilst the
Investment Adviser's involvement varies depending on each
investment type, each investment is actively managed to optimise
performance. During 2021, 100% of forecast investment portfolio
receipts were received (2020: 88.4%)(1) .
The Company has a weighted average investment life of c.33 years
and actively monitors the relevant investments within the portfolio
to ensure that conditions for the hand-back of investments are met
on completion of the project contract, or at the end of the
expected investment holding period.
Infrastructure projects and businesses inherently involve health
and safety risk both during construction and whilst operational.
The health and safety of the clients, delivery partners, employees
and members of the public who come into contact with our assets are
of the utmost importance to the Company, and we accord the highest
priority to health and safety management.
During construction through to operations, the Company's
accident frequency rate for occupational accidents that resulted in
lost time was low at 0.35 per 100,000 hours worked as at 31
December 2021 (31 December 2020: 0.29)(2) . Health and safety data
is reported and evaluated on a quarterly basis, and includes hours
worked, minor injuries, near misses, critical incidents and the
number of lost time injuries which occurred as a result of work
activities.
Performance against strategic priority KPIs:
100% Forecast distributions received(1) (2020: 88.4%)
99.8% Asset availability achieved against a target of >98%
(2020: 99.7%)
PPP PROJECTS
PPP projects account for 39% of the Company's portfolio (by
investment at fair value), and the Company's Investment Adviser has
extensive experience in this sector, having been responsible for
the development of the majority of the PPP projects in the
Company's portfolio. Key deliverables for the Company include
ensuring that the facilities are available for their intended use,
that areas are safe and secure, and that the performance standards
set out in the underlying agreements are achieved. The Company's
Investment Adviser works closely with its partners to ensure these
standards are met. For those investments measured by both
availability and performance standards, for the 12 months to 31
December 2021, the availability of those assets was 99.8% (31
December 2020: 99.7%) and across all projects there were
performance deductions of 0.1% (31 December 2020: 0.1%), both
exceeding the Company's targets.
In addition, the Company's public sector clients commissioned
and funded over 908 contract variations during the period,
resulting in over GBP19.5 million of additional project work being
delivered on behalf of the commissioning bodies. The completed
changes during the period ranged from minor building fabric
alterations within education facilities, to the delivery of
transport facility upgrades.
1 Measured by comparing forecast portfolio distributions against
actual portfolio distributions received. In the current year,
actual portfolio distributions exceeded forecast.
2 This includes UK social accommodation (where the Investment
Adviser provides oversight of the management services), BSFI
Minority, NDIF, Cadent, Tideway and all investments in Germany,
Australia and Canada.
The vast majority of the Company's social accommodation
investments remained open throughout the period. Two social
accommodation assets were closed during the period (at the request
of the client), including Royal Melbourne Showgrounds in Australia,
which has been repurposed as an Urgent Medical Care Centre and is
being used as a vaccination centre; and one Neighbourhood Support
centre in the UK that is part of a LIFT Project Company, as a
result of Covid-19 and government guidelines. The latter was open
for normal use at the end of the year.
Diabolo
Diabolo is a rail infrastructure investment which integrates
Brussels Airport with Belgium's national rail network. The majority
of the revenues generated by Diabolo are linked to passenger use of
either the rail link itself, or the wider Belgian rail network.
Accordingly, Diabolo has been impacted by the restrictions on
international travel and national lockdowns implemented in Belgium
as a result of the Covid-19 pandemic and we see the timing of the
recovery of Diabolo as directly linked to the resumption of
pre-pandemic levels of use of Brussels Airport.
In December 2020, the Company committed a further EUR24 million
to the Diabolo project, EUR10 million of that commitment was
invested at the time and a further EUR1.8 million was invested in
2021 leaving a contingent commitment of EUR12.2 million available
to protect Diabolo's liquidity position and ensure that its debt
covenants continue to be met. The extent and timing of any further
cash injections will depend upon the trajectory of the recovery in
passenger numbers over the coming months and years. However, the
latest traffic forecast report indicates that the outstanding
EUR12.2 million commitment continues to be sufficient. We will
continue to closely monitor passenger numbers.
More positively, the duration of our investment (the concession
expires in 2047), the high levels of historic passenger use,
continued high levels of operational performance, the positive and
engaged relationship with the Belgian railway authorities and the
Investment Adviser's ability to influence revenues through the
passenger fare adjustment mechanism, all give us confidence for the
future recovery and performance of this investment.
REGULATED INVESTMENTS
The Company invests in a number of regulated investments,
including OFTOs, Cadent and Tideway. The Company owns 100% of each
of its OFTO investments and whilst the Company does not hold
majority positions in Cadent or Tideway, the Company engages
through its Investment Adviser's board director positions and
membership of committees. The Company's Investment Adviser actively
works with respective boards to maintain alignment and focus on
strategic goals to drive financial and operational best practice
and ensure effective risk management.
OFTOs
The Company's OFTO investments are regulated by Ofgem, but the
revenues are not linked to electricity production or price, instead
the OFTO is paid a pre-agreed, availability-based revenue stream
for the duration of the licence. The Company's OFTO investments
continue to be relatively unaffected by the Covid-19 pandemic and
have continued to remain available and meet performance
standards.
Ofgem has begun consulting stakeholders on its approach to
dealing with the OFTO regime once the initial revenue stream comes
to an end, typically after c.20-25 years. OFTO transmission assets
have a life of approximately 40 years, which extends beyond the
initial revenue stream period. As an owner of these assets, OFTOs
are in a strong position to benefit from any extension to the
revenue stream beyond the initial c.20-25 year period. In March
2021, Ofgem issued a consultation which the Company, through its
Investment Adviser, responded to. Ofgem released its first decision
document covering the initial steps in establishing an economic and
efficient process for extending, where appropriate, regulatory
revenue periods within the current OFTO regime, in July 2021. It is
not possible to assess any likely impact on the Company at this
time. The Company notes Ofgem had intended to publish a further
consultation on the policy framework in November 2021, but this is
now expected in Spring 2022 and Ofgem are expected to publish their
response in late 2022. The announcements to date have been
consistent with our expectations and the Company, through its
Investment Adviser, will continue to actively engage with Ofgem and
industry stakeholders on this consultation and will seek to keep
investors informed of any material developments.
Tideway
Tideway is building a 25km 'super sewer' under the River Thames
to create a healthier environment for London by cleaning up the
city's greatest natural asset. Good progress has been made with
construction 73% complete as at 31 December 2021 and with the
primary tunnelling expected to be completed in the coming months.
As reported previously, Tideway has been in discussions with Ofwat
regarding additional measures to mitigate the impact of both
Covid-19 related cost overruns and the FCAM on Tideway's investors.
Subsequent to a provisional agreement with Tideway, Ofwat launched
a public consultation in December 2021 to gain views from
interested parties on the proposed amendments. As the consultation
was ongoing at the valuation date, the 31 December 2021 valuation
of the Company's investment in Tideway included a prudent
assessment of the outcome of the consultation and the necessary
licence modification process. The consultation subsequently closed
in January 2022 and the licence modifications came into effect in
March 2022.
Progress towards system commissioning and handover is an
increasing area of focus and, as reported previously, in the
earlier part of 2021 Tideway had been working with its stakeholders
on a thorough review of the remaining activities to provide clarity
on the schedule and costs to completion. This is a review that is
commonly undertaken by major projects at this stage of delivery.
The results of this review were published by Tideway in August 2021
and confirmed the appropriateness of the existing schedule dates
with a cost increase of c.1% which, with rounding, took the cost
estimate from GBP4.1 billion to GBP4.2 billion. The cost increase
had no material financial impact on investors. It is worth noting
that the Tideway project documentation includes provisions to share
additional construction costs with construction contractors and
consumers, mitigating the impact of construction cost increases on
investors.
Cadent
Cadent is the UK's largest gas distribution network, serving 11
million homes and businesses and is the Company's largest
investment by fair value, representing 15.5% of the Company's
portfolio by investment at fair value. As previously announced, in
March 2021 Cadent exercised its right to appeal Ofgem's final
determination in respect of the five-year regulatory period which
commenced in April 2021 to the CMA as it believed this approach
would best serve Cadent's customers' interests. The CMA published
its final determination in October 2021 and the findings had a
modestly positive impact on the Company's valuation of its
investment in Cadent compared to that reported at 30 June 2021.
The cost of wholesale gas increased significantly during 2021
which caused numerous gas suppliers to fail as they were unable to
pass increased costs on to their customers. Customer interests
remain protected by the Supplier of Last Resort regime which
transfers customers to alternative energy suppliers to ensure
continuity of supply. Cadent is not an energy supplier and instead
earns its revenues from providing a safe and reliable gas
transportation network to its customers, the gas shippers, who in
turn sell the gas to gas suppliers. Accordingly, Cadent is largely
insulated from changes in gas prices albeit such changes can cause
timing differences in certain revenues and costs linked to the
price of gas. Such timing differences had no material impact in the
period or to date.
The Company, via its Investment Adviser, also continues to
actively engage with Cadent's management team and the Company's
co-shareholders in Cadent in relation to the future role of gas
initiatives, where Cadent continues to play a role in supporting
the UK Government's net zero target and is working on several
projects designed to demonstrate the feasibility and safety of
using its existing gas infrastructure to distribute cleaner fuel in
the future (see page 18 for further information).
In early August 2021, the Government published its long-awaited
UK Hydrogen Strategy, the aim of which is to create a
'world-leading hydrogen economy'. The publication of the Hydrogen
Strategy marks the beginning of the next stage for the development
of the UK's hydrogen economy and is positive news for Cadent. The
strategy contained numerous references to the potential conversion
of the existing gas network, as well as Cadent's key HyNet project.
Further information relating to Cadent's HyNet projects is
available on page 44.
OTHER OPERATING BUSINESSES
The Company invests in a number of operating businesses
including BeNEX, Angel Trains and digital infrastructure
businesses. The Investment Adviser holds a board position on each
of its operating businesses and uses these positions to influence
and strengthen company policies and procedures; for example,
enhancing ESG credentials, monitoring the approach to health and
safety, as well as protecting value and mitigating operational
risk.
BeNEX
BeNEX generates revenues through the contractual leasing of its
rolling stock to TOCs as well as through its investments in TOCs
themselves. Only a minority of annual revenues (currently less than
20%) are linked to passenger numbers and therefore whilst Germany,
like many other countries, continued to see a significant reduction
in the number of people using public transport during 2021 as a
result of the pandemic, the financial impact on BeNEX has been
limited. In addition, BeNEX should continue to receive compensation
from the Federal Government and/or the relevant Federal State for
the vast majority of revenues lost as a result of the disruption
caused by Covid-19 during 2022. Finally, during 2021 several
expiring concessions were re-won for the next concession term
(typically approximately ten years in length) which reduces the
risk profile of the business.
Angel Trains
Angel Trains generates the majority of its revenues from the
contractual leasing of its rolling stock to TOCs and therefore its
revenues have continued to be largely unaffected by Covid-19.
Following a period in which dividends had been deferred owing to
the uncertainty caused by Covid-19, the board of Angel Trains,
which includes shareholder representatives, agreed to resume
dividends during 2021. As referenced earlier in this Annual Report,
the Company acquired a further c.5% interest in Angel Trains during
the period, demonstrating the Company's confidence in the business.
See more information on page 16.
During the period, the results from the Williams Rail Review,
which was established in 2018 to review the structure of the rail
industry and the way passenger rail services are delivered in the
UK, was published. The white paper was titled 'Great British
Railways: William-Shapps plan for rail', with the main focus of the
recommendations being the establishment of the new public body,
Great British Railways, and the replacement of the franchising
system with passenger service contracts. The white paper goes on to
note that "T he reforms set out in this white paper do not assume
any direct change to the current industry model for procurement of
train fleets" .
Digital Infrastructure
The Company's Investment Adviser continues to actively monitor
the four businesses in which the Company is invested (via NDIF),
including Community Fibre, Airband, NextGenAccess and toob. Since
the beginning of the pandemic, many businesses within the digital
infrastructure sector have faced unprecedented challenges, with
government mandated lockdown restrictions impacting staff movement
and availability. In parallel, certain investments within the
portfolio have also witnessed a surge in demand for fibre
connectivity due to the volume of people working from home. Several
of NDIF's portfolio of companies have played a critical role,
during the period, in keeping people connected while at the same
time executing their value creation plans. Throughout 2021, and
with the easing of lockdown restrictions, several businesses in
which NDIF is invested have continued to gain momentum and market
share and such factors continue to highlight the resilience of
digital infrastructure and the continued consumer and business
demand across certain geographical regions for the rollout of
fibre.
COUNTERPARTY RISK
Counterparty risk exists to some extent across all investments;
however, the risk is particularly significant when considered in
relation to PPPs which have a long-term fixed-price contract with a
facilities management provider. The Company has a diverse exposure
to service providers across its portfolio and the Investment
Adviser's asset management team ensures counterparty risk is
actively managed and mitigated. The chart below illustrates the
Company's service providers (by investment fair value),
highlighting the diversification across the portfolio.
INPP Service Providers
[Chart can be found within the PDF document of the report on the
Company website.]
During 2021, all of the Company's facilities have continued to
remain operational and available for use, with no disruptions to
service delivery, aside from the two facilities, as referred to
above, that were repurposed/temporarily closed upon instruction
from clients in the public sector due to Covid-19. In response to
Covid-19, the Company's Investment Adviser has continued to monitor
each counterparty, but has increased the frequency of its reviews
to ensure that any issues as a result of Covid-19 are identified as
soon as possible.
The Investment Adviser takes a holistic approach to monitoring
counterparty risk. A key aspect of the Investment Adviser's risk
management activities is a focus on the early identification of
signs that a counterparty is encountering problems through regular
contract performance monitoring and internal performance
benchmarking of contracts, in-depth reviews of counterparty
financial and market data, information available in the trade press
and drawing upon the Investment Adviser's contacts in the industry.
Through contingency planning and identifying any increased
counterparty risk early, it allows for corrective measures
identified in the contingency plans to be taken early, mitigating
potential losses to the Company. Those measures may include working
more closely with the contractor to support it in its efforts to
improve contract performance or, ultimately, the implementation of
the full contingency plan designed to facilitate the replacement of
that contractor.
Ultimately, the Company's desire is to see its service providers
succeed and to deliver a high-quality service; and the Investment
Adviser makes all efforts to ensure this is achieved. However,
where a subcontractor does fail, the Investment Adviser has the
necessary processes and procedures in place to mitigate and manage
the risk to the Company.
PROJECTS UNDER CONSTRUCTION
The Investment Adviser's asset management team has extensive
experience and possesses the key skillsets needed to successfully
deliver projects through construction and throughout the
operational phase. The Company has a strong track record of
delivering construction projects safely, on time, to budget and to
a high-quality by understanding the project environment and the
potential risks that may occur. The team works closely with the
contractors, technical advisers and management companies, where
applicable, throughout this stage in order to deliver the expected
project performance and create value for investors and
communities.
There are currently two investments under construction as at 31
December 2021, Tideway and HMRB. During the 12 months to
31 December 2021, Tideway made good progress on the construction
of the tunnel and associated infrastructure. The construction works
were 73% complete at the end of the period and the schedule remains
unchanged from the previous update, with operational handover to
Thames Water scheduled to occur in March 2025.
The HMRB is the flagship development of the Flinders Village
project, an integrated health and education precinct development at
Flinders University's Bedford Park campus. The HMRB will co-locate
research, clinical and technological platforms to further the
University's longstanding contributions to the health, education
and medical sectors. The building of the HMRB commenced in December
2021 and is expected to complete in 2024. Please see more
information on the project on page 17.
ASSET LOCATION CONSTRUCTION DEFECTS COMPLETION STATUS AT PERIOD % OF INVESTMENTS
COMPLETION DATE AT FAIR
DATE VALUE
--------- ----------- -------------- ------------------- ------------------ -----------------
Behind original
Tideway UK 2025(1) 2028 schedule(2) 9.1%
--------- ----------- -------------- ------------------- ------------------ -----------------
HMRB Australia 2024 N/A(3) On schedule 0.0%(4)
--------- ----------- -------------- ------------------- ------------------ -----------------
1 Scheduled handover date.
2 Handover is currently scheduled for March 2025, which is 12
months later than the original schedule. The delay can largely be
attributed to the impact of Covid-19.
3 This is not applicable as the authority is assuming all risk
associated with the construction work that is being undertaken.
4 The Company's investment is only due to be made following
construction completion. The valuation of the commitment is
currently immaterial.
EFFicient FINANCIAL MANAGEMENT
The Company aims to manage its finances efficiently, to provide
the financial flexibility to pursue new investment opportunities,
whilst minimising levels of unutilised cash holdings. Efficient
financial management is achieved through actively monitoring cash
held and generated from operations, ensuring cash covered dividends
and managed levels of corporate costs. This is supported by
appropriate hedging strategies and prudent use of the Company's
corporate debt facility ('CDF').
During the period, the Company achieved its objective to
generate dividends paid to investors through its operating cash
flows. Cash dividends paid in the year of GBP118.5 million (31
December 2020: GBP101.5 million), were 1.1 times (31 December 2020:
1.2 times) covered by the Company's net operating cash flows before
capital activity*.
Corporate costs were effectively managed during the period and
ongoing charges were comparable year on year at 1.18% for the year
ended 31 December 2021 (31 December 2020: 1.18%). Corporate costs
include management fees of GBP25.7 million for the year to 31
December 2021 (31 December 2020: GBP26.4 million).
Performance against strategic priority KPIs:
1.1x Dividends fully cash covered (2020: 1.2x)
1.18% Ongoing charges ratio (2020: 1.18%)
As outlined on page 89 of the financial statements, IFRS profit
before tax of GBP129.2 million was reported (31 December 2020:
GBP60.8 million). The increase in profit in the year is principally
reflective of the unrealised fair value gain on the portfolio in
the year, following an unrealised fair value loss in 2020 as a
result of Covid-19 related uncertainty in the portfolio that
impacted overall prior year profit.
The Company's cash balance as at 31 December 2021 was GBP56.1
million, an increase on the corresponding balance at 31 December
2020 of GBP44.3 million. Cash receipts from investments increased
by GBP14.9 million in the year, to GBP167.9 million (31 December
2020: GBP153.0 million), reflecting a resumption of distributions
from assets which in the prior year were impacted or deferred as a
result of uncertainty caused by Covid-19. As detailed in note 12 of
the financial statements, as well as on page 13 of the Operating
Review earlier in this report, GBP252.7 million of new capital was
invested during the year (31 December 2020: GBP30.0 million). As a
result, investment transaction costs paid in 2021 increased in the
year to GBP3.0 million (31 December 2020: GBP0.8 million).
At 31 December 2021, the Company's CDF was GBP156.2 million cash
drawn (31 December 2020: GBP38.4 million cash drawn), with GBP9.3
million drawn under letter of credit (31 December 2020: GBPnil).
Net financing costs paid were GBP4.8 million, a small increase
compared to the prior year (31 December 2020: GBP4.2 million)
reflecting the level of utilisation of the Company's CDF during the
year. The facility is structured to support the Company's near-term
pipeline, with GBP250 million available on a fully committed basis,
with a flexible 'accordion' component which will, subject to lender
approval, allow for a future extension by an additional GBP150
million. The facility is available for drawdown until March 2024.
The banking group for the facility consists of National Australia
Bank, the Royal Bank of Scotland International, Sumitomo Mitsui
Banking Corporation and Barclays Bank.
SUMMARY OF CASH FLOWS
SUMMARY OF CONSOLIDATED CASH YEAR TO 31 DECEMEBER YEAR TO 31 DECEMEBER
FLOW 2021 2020
GBP MILLION GBP MILLION
------------------------------ --------------------- ---------------------
Opening cash balance 44.3 45.6
Cash from investments 167.9 153.0
Corporate costs (for ongoing
charges ratio) (28.5) (28.3)
Net financing costs (4.8) (4.2)
------------------------------ --------------------- ---------------------
Net operating cash flows
before capital activity(1) 134.6 120.5
------------------------------ --------------------- ---------------------
Cost of new investments (252.7) (30.0)
Investment transaction costs (3.0) (0.8)
Net movement of CDF 117.8 10.5
Proceeds of capital raisings 133.6 -
(net of costs)
Dividends paid (118.5) (101.5)
Closing cash balance 56.1 44.3
------------------------------ --------------------- ---------------------
Cash dividend cover 1.1x 1.2x
------------------------------ --------------------- ---------------------
1 Net operating cash flows before capital activity as disclosed
above of c.GBP134.6 million (31 December 2020: c.GBP120.5 million)
include net repayments from Investments at Fair Value through
profit or loss of c.GBP53.4 million (31 December 2020: c.GBP39.5
million), and finance costs paid of c.GBP4.8 million (31 December
2020: c.GBP4.2 million) and exclude investment transaction costs of
c.GBP3.0 million (31 December 2020: c.GBP0.8 million) when compared
to net cash inflows from operations of c.GBP83.3 million (31
December 2020: c.GBP84.2 million) as disclosed in the consolidated
cash flow statement on page 92 of the financial statements.
CASH FLOWS ASSOCIATED WITH ONGOING CHARGES RATIO
CORPORATE COSTS YEAR TO 31 DECEMBER 2021 YEAR TO 31 DECEMBER
GBP MILLION 2020
GBP MILLION
--------------------- ------------------------- --------------------
Management fees (25.7) (26.4)
Audit fees (1.0)(1) (0.2)
Directors' fees (0.4) (0.4)
Other running costs (1.4) (1.3)
Corporate costs (28.5) (28.3)
--------------------- ------------------------- --------------------
ONGOING CHARGES RATIO YEAR TO 31 DECEMBER 2021 YEAR TO 31 DECEMBER
GBP MILLION 2020
GBP MILLION
---------------------------- ------------------------- --------------------
Annualised Ongoing Charges (28.5) (28.3)
Average NAV(2) 2,423.2 2,393.3
Ongoing Charges (1.18%) (1.18%)
---------------------------- ------------------------- --------------------
1 Audit fees include the impact from a timing difference in fee
payments between 2020 and 2021. The 2021 figures include portion of
2020 audit fees which were accrued at December 2020 and paid in
2021, resulting in this unusual difference between periods. Audit
fees payable for each period are disclosed in the notes to the
financial statements.
2 Average of published NAVs for the relevant period.
3 The Ongoing Charges ratio was prepared in accordance with the
AIC recommended methodology, noting this excludes non-recurring
costs.
There is no information to report under the requirements of LR
9.8.4. in this Annual Report.
INVESTOR RETURNS
DIVID GROWTH
The Company targets predictable and, where possible, growing
dividends. The Company forecasts to pay the second dividend in
respect of the 12 months to 31 December 2021, of 3.77 pence per
share(1) in June 2022. Once paid, this would bring the total
dividends paid in respect of 2021 in line with the previously
announced target of 7.55 pence per share (2020: 7.36 pence per
share).
As illustrated in the chart on page 2, the Company has delivered
a c.2.5% average annual dividend increase since IPO. The Company is
currently maintaining its previously announced dividend targets of
7.74 pence per share in respect of 2022 and provides new guidance
of 7.93 pence per share for 2023(2) .
Tsr*
The Company's annualised TSR since the IPO to 31 December 2021
was 8.5%(3) . The total return based on the NAV appreciation plus
dividends paid since the IPO to 31 December 2021 is 7.7%(4) on an
annualised basis compared to the Company's long-term target of
7.0%(4) .
As shown in the share price performance graph below, the Company
has historically exhibited relatively low levels of correlation
with the market. Whilst the correlation in 2020 increased owing to
the impacts of Covid-19 on economies and financial markets
worldwide, it has since reduced to pre-pandemic levels. For
reference, the correlation with the FTSE All-Share index was 0.22
over the 12 months to 31 December 2021 which compares to 0.25 and
0.53 over the 12 months to 31 December 2019 and 31 December 2020
respectively.
Share Price Performance
[Diagram can be found in PDF version of this document on the
Company's website].
Performance against strategic priority KPIs
7.7% p.a. IRR achieved since IPO(3) (31 December 2020: 7.7%)
Inflation-linked RETURNS*
In an environment where investors are focused on achieving
long-term real rates of return on their investments, inflation
protection is an important consideration for the Company. At 31
December 2021, the majority of assets in the portfolio had some
degree of inflation-linkage and, in aggregate, the weighted average
return of the portfolio (before fund-level costs) would be expected
to increase by 0.7%(5) per annum in response to a 1.0% per annum
increase in all of the assumed inflation rates. The reduction
compared to the 0.8% as at 31 December 2020 is principally due to
the additional investments made in the period which have a lower
level of inflation linkage.
1 The dividend in respect of H2 2021 is 3.77 pence per share
bringing the total dividend paid in respect of 2021 in line with
the guidance of 7.55 pence per share.
2 Future profit projection and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in
future.
3 Since inception in November 2006. Source: Bloomberg. Share
price appreciation plus dividends assumed to be reinvested.
4 Calculated by reference to the November 2006 IPO issue price
of 100 pence and reflecting NAV appreciation plus dividends
paid.
5 Calculated by running a 'plus 1.0%' inflation sensitivity for
each investment and solving each investment's discount rate to
return the original valuation. The inflation-linked return is the
increase in the portfolio weighted average discount rate.
VALUATIONS
NAV*
The NAV represents the fair value of the Company's investments
plus the value of other net assets or liabilities held within the
Group. The fair values of the Company's investments are determined
by the Board, with the benefit of advice from the Investment
Adviser, and are independently audited as part of the annual audit
of the Company's financial statements. The Company reports a 6.1%
increase in NAV from GBP2,384.4 million at 31 December 2020 to
GBP2,528.8 million at 31 December 2021. Over the same period, the
NAV per share increased by 0.7% from 147.1 pence to 148.2 pence.
The key drivers of the change in NAV are described in more detail
below.
NAV Movements (GBPm)
[Diagram can be found in PDF version of this document on the
Company's website].
The movements seen in the chart above are explained further
below:
- During the year, the Company raised additional equity
totalling GBP135 million (net of issuance costs - GBP133.6 million)
by way of a tap issuance of ordinary share capital;
- The yields on the overwhelming majority of government bonds
used as part of the valuation process increased during the period,
resulting in a net GBP82.4 million decrease in the NAV;
- The net negative impact of the increase in government bond
yields was more than offset by a decrease in the investment risk
premia designed to ensure that (i) the valuations continue to
reflect recent market-based evidence of pricing for infrastructure
investments (this includes a reduction in the discount rate used to
value the Company's investment in Angel Trains to reflect the
transaction that occurred during the period), and (ii) the discount
rate used to value the Company's investment in Diabolo reflects the
lower level of risk within the forecast cash flows which assume a
more conservative recovery in passenger numbers. The net impact of
these adjustments was an increase in the NAV of GBP107.2
million;
- In line with forward guidance provided previously, two cash
dividends of 3.68 pence and 3.78 pence per share were paid to the
Company's shareholders during the year, in relation to the
six-month periods to 31 December 2020 and 30 June 2021
respectively, totalling GBP118.5 million;
- Over the year, Sterling strengthened against the Australian
Dollar and the Euro, whereas it marginally weakened against the
Canadian Dollar and the US Dollar (these being the four foreign
currencies the Company was exposed to over the year, and with the
recent addition of the Danish Krone the Company is now exposed to
five foreign currencies). Including the change in the value of the
forward foreign exchange contracts, the net negative impact on the
NAV was GBP25.9 million with the most significant impact seen on
the Company's Euro-denominated investments;
- The long-term assumption for the UK Corporate Tax rate was
increased from 19% to 25% (applicable from 1 April 2023 onwards)
following the 2021 Budget announcement during the period, which was
the most significant impact (negative GBP31.7 million) caused by
changes to macroeconomic assumptions. Other, much less significant,
changes to the macroeconomic assumptions include a one-year delay
in the step up to the long-term deposit rate assumptions and an
alignment of UK RPI to CPIH from 2030 onwards for relevant
investments. Further details of these changes can be seen in the
table on page 34 and in aggregate these had a negative GBP33.0
million impact on the NAV; and
- Among other things, the NAV Return of GBP163.4 million captures the impact of the following:
o Unwinding of the discount rate;
o Updated operating assumptions to reflect current expectations
of forecast cash flows. This includes an uplift in Cadent's
forecast cash flows attributable to the successful CMA appeal as
well as updated forecasts for Diabolo passenger numbers which
continue to be subdued owing to travel restrictions caused by
Covid-19. This risk had previously been accounted for through the
discount rate but is now reflected in the revised forecast cash
flows. More widely, and owing to the strong inflation-linkage of
the portfolio cash flows, NAV return has been further supported by
recent inflationary pressures, especially in the UK;
o Actual distributions received above the forecast amount due to
active management of the Company's portfolio; and
o Changes in the Company's working capital position.
INVESTMENTS AT FAIR VALUE
The Investments at Fair Value represents the fair value of the
Company's investments without consideration of the other net assets
or liabilities held within the Group which are captured within the
NAV. The Company reports a 10% increase in the investments at fair
value, from GBP2,345.4 million at 31 December 2020 to GBP2,579.4
million at 31 December 2021. The key drivers of the change in the
Investments at Fair Value are described in more detail below.
Investments at Fair Value Movements
[Diagram can be found in PDF version of this document on the
Company's website].
The movements seen in the chart above are explained further
below:
- An increase of GBP252.7 million owing to new investments made during the period;
- A decrease of GBP167.9 million due to distributions paid out
from the portfolio during the period;
- The Rebased Investments at Fair Value of GBP2,430.2 million is
presented in order to allow an assessment of the Portfolio Return
assuming that the investments and distributions occurred at the
start of the relevant period;
- The Portfolio Return of GBP187.2 million captures broadly the
same items as the NAV Return (set out in detail on page 31) with
the principal exception being the fund-level operating costs and
portfolio working capital movements;
- There was a net decrease in the discount rates used by the
Company to value its investments which had a posi tive GBP24. 8
million impact on the Investments at Fair Value. Further
information on the component parts of the impact shown is provided
on page 35;
- Sterling strengthened against the Australian Dollar and the
Euro, whereas it marginally weakened against the Canadian Dollar
and the US Dollar (these being the four foreign currencies the
Company was exposed to over the year, and with the recent addition
of the Danish Krone the Company is now exposed to five foreign
currencies). The net negative impact on the Investments at Fair
Value was GBP29.7 million with the most significant impact seen on
the Company's Euro-denominated investments; and
- The long-term assumption for the UK Corporate Tax rate was
increased from 19% to 25% (applicable from 1 April 2023 onwards)
following the 2021 Budget announcement during the period, which was
the most significant impact caused by changes to macroeconomic
assumptions. Other, much less significant, changes to the
macroeconomic assumptions include a one-year delay in the step up
to the long-term deposit rates assumption and an alignment of UK
RPI to CPIH from 2030 onwards for relevant investments. Further
details of these changes can be seen in the table on page 34 and in
aggregate these had a negative GBP33.0 million impact on the
NAV.
PROJECTED CASH FLOWS
The Company's investments are generally expected to continue to
exhibit predictable cash flows, owing to the principally contracted
or regulated nature of the underlying cash flows. As the Company
has a large degree of visibility over the forecast cash flows of
its current investments, the chart below sets out the Company's
forecast investment receipts from its current portfolio before
fund-level costs.
The majority of the forecast investment receipts are in the form
of dividends or interest and principal payments from subordinated
and senior debt investments. The Company's portfolio comprises both
investments with finite lives (determined by concession or licence
terms) and perpetual investments that may be held for a much longer
term. Over the term of investments with finite lives, the Company's
receipts from these investments includes a return of capital as
well as income, and the fair value of such investments is expected
to reduce to zero over time.
Projected Investment Receipts
[Diagram can be found in PDF version of this document on the
Company's website].
Macroeconomic Assumptions
The Company reviews the macroeconomic assumptions underlying its
forecasts on a regular basis. Following a thorough market
assessment, it was resolved that, (i) a minor adjustment should be
made to the deposit rate assumptions (a one-year delay to the start
of the long-term assumption), (ii) the spot foreign exchange rates
used to value the Company's overseas assets should be updated, and
(iii) the long-term UK Corporate Tax rate should be increased from
19% to 25% (applicable from 1 April 2023 onwards) following the
2021 Budget announcement during the period. The Company notes both
the recent higher levels of inflation observed in certain
geographies in which it is invested as well as the uncertainty as
to how long such levels will last. After careful consideration, the
Company has chosen not to amend its inflation assumption until
there is greater clarity on the likely extent and duration of any
inflationary pressures, and it continues to take a long-term view
of inflation in each geography. The Company and its Investment
Adviser acknowledge that the war in Ukraine is likely to have
macroeconomic consequences which will of course be reflected, to
the extent appropriate, within the assumptions used at subsequent
valuation dates.
The key macroeconomic assumptions used as the basis for deriving
the Company's 31 December 2020 and 31 December 2021 investment
valuations are summarised below, with further details provided in
note 11 of the financial statements.
MACROECONOMIC ASSUMPTIONS 31 DECEMBER 2021 31 DECEMBER 2020
--------------------------- ----------- ------------------------- ------------------
Inflation rates UK 2.75% RPI / 2.00% 2.75% RPI / 2.00%
CPIH CPIH
Australia 2.50% 2.50%
Europe 2.00% 2.00%
Canada 2.00% 2.00%
US(1) N/A N/A
--------------------------- ----------- ------------------------- ------------------
Long-term deposit rates(2) UK 1.00% 1.00%
Australia 2.00% 2.00%
Europe 0.50% 0.50%
Canada 1.50% 1.50%
US(1) N/A N/A
--------------------------- ----------- ------------------------- ------------------
Foreign exchange rates GBP/AUD 1.86 1.77
GBP/DKK 8.86 N/A
GBP/EUR 1.19 1.11
GBP/CAD 1.72 1.74
GBP/USD 1.35 1.37
--------------------------- ----------- ------------------------- ------------------
Tax rates(3) UK 19.00% / 25.00% 19.00%
Australia 30.00% 30.00%
Europe Various (12.50%-32.28%) Various (12.50%
Canada Various (23.00%-26.50%) - 32.28%)
US(1) N/A Various (23.00%
- 26.50%)
N/A
--------------------------- ----------- ------------------------- ------------------
1 The Company's US investment is in the form of subordinated
debt and therefore not directly impacted by inflation, deposit and
tax rate assumptions.
2 The portfolio valuation assumes actual current deposit rates
are maintained until 31 December 2023 before adjusting to the
long-term rates noted in the table above from 1 January 2024.
The
31 December 2020 valuation assumed the long-term rates noted in
the table above would apply from 1 January 2023.
3 Tax rates reflect those substantively enacted as at the
valuation date or those that could reasonably be expected to be
substantively enacted shortly after the valuation date. Please note
the UK tax rate assumptions include the increase from 19% to 25%
applicable from 1 April 2023 onwards.
Discount Rates
The discount rate used to value each investment comprises the
appropriate long-term government bond yield plus an
investment-specific risk premium which reflects the risks
associated with that particular investment and is designed to
ensure that the resulting valuation reflects prevailing market
conditions.
The majority of the Company's portfolio (91%) comprises Risk
Capital investments, while the remaining portion (9%) comprises
senior debt investments. To provide investors with a greater level
of transparency, the Company publishes both a Risk Capital weighted
average discount rate and a portfolio weighted average discount
rate - the latter of which captures the discount rates of all
investments including the senior debt interests.
The weighted average discount rates are presented in the table
below.
31 DECEMBER 31 DECEMBER
2021 2020 MOVEMENT
----------------------------- ------------ ------------ ---------
Weighted average government
bond yield - portfolio 0.96% 0.56% 40bps
----------------------------- ------------ ------------ ---------
Weighted average investment
premium - portfolio 6.01% 6.41% (40bps)
----------------------------- ------------ ------------ ---------
Weighted average discount
rate - portfolio 6.97% 6.97% -
----------------------------- ------------ ------------ ---------
Weighted average discount
rate - Risk Capital 7.38% 7.52% (14bps)
----------------------------- ------------ ------------ ---------
The Company is aware that there are differences in approach to
the valuation of investments among listed infrastructure funds
similar to the Company. In the Company's view, comparisons of
discount rates between different listed infrastructure funds are
only meaningful if there is a comparable level of confidence in the
quality of forecast cash flows (i.e. assumptions are homogeneous);
the risk and return characteristics of different investment
portfolios are understood; and allowance is made for differences in
the quality of asset management employed to manage risk and deliver
returns. Any focus on average discount rates without an assessment
of these and other factors would be incomplete and could therefore
lead to misleading conclusions.
VALUATION SENSITIVITIES
This section indicates the sensitivity of the 31 December 2021
NAV per share of 148.2 pence to changes in key assumptions. Further
details can be found in note 16 of the financial statements. This
analysis is provided as an indication of the potential impact of
these assumptions on the NAV per share on the unlikely basis that
the changes occur uniformly across the portfolio. The movement in
each assumption could be higher or lower than presented. Further,
forecasting the impact of these assumptions on the NAV in isolation
cannot be relied on as an accurate guide to the future performance
of the Company as many other factors and variables will combine to
determine what actual future returns are available. These
sensitivities should therefore be used only for general guidance
and not as an accurate prediction of outcomes.
Estimated impact of Changes in Key Variables to 31 December 2021
NAV of 148.2 p per Share
[Diagram can be found in PDF version of this document on the
Company's website].
DISCOUNT RATES
The chart above indicates the sensitivity of the NAV per share
to uniform changes to the discount rates applied to the forecast
cash flows from each individual investment.
INFLATION
The impact of inflation on the value of each investment depends
upon the extent to which the revenues and costs of that particular
investment are linked to an inflation index. On a portfolio basis,
there is a positive correlation to inflation with a 1.0% sustained
increase in the assumed inflation rates projected to generate a
0.7% increase in returns (31 December 2020: 0.8%). The returns
generated by the Company's UK investments are typically linked to
the Retail Price Index ('RPI'), whereas the Company's non-UK
investments are typically linked to the relevant Consumer Price
Index ('CPI') for that jurisdiction. Further to recent
announcements by the UK's energy and water regulators, the revenues
earned by Cadent and Tideway will be linked to the CPIH (CPI
including owner occupied housing costs) from 2021 and 2030,
respectively. The regulators have stated that this is not designed
to negatively impact companies but rather to reflect the perceived
shortcomings of the RPI (i.e. the regulators' intention is for the
transition from RPI to CPIH to be valuation neutral).
In anticipation of the UK Government's previously announced
intention to align the RPI to the CPIH from 2030 onwards, the
inflation assumption used for UK investments which do not benefit
from protective contractual agreements or regulatory precedents has
been aligned to CPIH from 2030. For the avoidance of doubt, the
impact of this approach on the NAV is negligible.
The inflation sensitivities by geographical region are provided
in note 16 of the financial statements.
FOREIGN EXCHANGE
The Company has a geographically diverse portfolio and forecast
cash flows from investments are subject to foreign exchange rate
risk in relation to Australian Dollars, Canadian Dollars, Danish
Krone, Euros and US Dollars. The Company seeks to mitigate the
impact of foreign exchange rate changes on near-term cash flows by
entering into forward contracts, but the Company does not hedge
exposure to foreign exchange rate risk on long-term cash flows. The
impact of a 10% increase or decrease in all foreign exchange rates
is provided for illustration.
DEPOSIT RATES
The long-term weighted average deposit rate assumption across
the portfolio is 1.04% per annum. While operating cash balances
tend to be low given the structured nature of the investments,
project finance structures typically include reserve accounts to
mitigate certain costs and therefore variations to deposit rates
may impact valuations. The impact of a 1.00% increase or decrease
in these rates is provided for illustration.
TAX RATES
Post-tax investment cash inflows are impacted by tax rates
across all relevant jurisdictions. The impact of a 1.00% increase
or decrease in these rates is provided for illustration. Other
potential tax changes are not covered by this scenario.
LIFECYCLE SP
There is a process of renewal required to keep physical assets
fit for use and the proportion of total cost that represents this
'lifecycle spend' will depend on the nature of the asset.
PPPs will typically need to ensure that the assets are kept at
the standard required of them under agreements with relevant public
sector counterparties. To enhance the certainty around cash flows,
the majority of the Company's PPP investments, and all of the
Company's OFTO investments, are currently structured such that
lifecycle cost risk is taken by a subcontractor for a fixed price
(isolating equity investors from such downside risk). As a result,
the impact of changes to the forecast lifecycle costs for the
Company's PPP investments is relatively small.
The Company's investments in rolling stock leasing or operating
businesses, or businesses providing digital infrastructure, are
also distinct from PPPs which have fixed revenue streams from which
they need to pay lifecycle costs. These businesses will still
expect to incur lifecycle costs, but over time will typically
reflect changes in lifecycle costs through the prices they charge
their end-users. No lifecycle sensitivity has been run in respect
of the Company's digital infrastructure investments as the
short-term nature of the revenue contracts is assumed to allow
changes in lifecycle costs to be passed on to consumers through
changes in the price of services in a timely manner.
Tideway and Cadent are treated differently due to the
protections offered by the regulatory regimes under which they
operate. Regulated assets have their revenues determined for a
known regulatory period and each settlement includes revenue
sufficient to allow the owner to undertake the efficient lifecycle
management of its assets due in that regulatory period. It is
common practice to employ reputable subcontractors to undertake
lifecycle work under contracts which include incentive and penalty
regimes aligned with the businesses' regulatory targets. This
approach ensures an alignment of interest and helps to mitigate the
risk of increased lifecycle costs falling on the equity investor.
Accordingly, no lifecycle sensitivity has been run in respect of
the Company's investments in Tideway and Cadent.
The impact of a 10% increase or decrease in the lifecycle costs
incurred by the Company's PPPs, OFTOs, rolling stock leasing or
operating businesses is provided for illustration.
By order of the Board
Mike Gerrard John Le Poidevin
Chair Director
23 March 2022 23 March 2022
RESPONSIBLE INVESTMENT
RESPONSIBLE INVESTMENT
APPROACH
The Company believes that the financial performance of its
investments is linked to environmental and social success and, as
such, the Company considers issues that have the potential to
impact the performance of its investments, both now and in the
future.
Consideration of ESG drivers is an essential part of how the
Company assesses the long-term viability of the investments that it
makes and its associated asset management strategies. ESG drivers
are non-financial factors that can influence and be influenced by
the Company's business activities and include factors such as
climate change, demographics, resources, technology and social
values.
ESG is important to the Company for the following key
reasons:
- ESG drivers present an opportunity for new markets and investments;
- Incorporating ESG into the Company's management processes
supports its high standards of financial rigour and requirements
for long-term financial performance; and
- By investing in infrastructure and associated businesses, the
Company can meaningfully support sustainable development.
The Company's approach to sustainability and ESG integration is
described in more detail in its recently published Sustainability
Report(1) .
POLICY
The Company has a common ESG Policy(2) with its Investment
Adviser. It defines the objectives and approach to embedding ESG in
investments, operations, and the communities in which the Company's
investments operate.
GOVERNANCE
THE ROLE OF THE BOARD AND COMMITTEES
The Board has overall responsibility for ensuring ESG is fully
integrated into all aspects of the investment strategy. To support
it in this role, the Board established a new ESG Committee in March
2021. The ESG Committee provides a forum for discussion, support
and challenge, with respect to ESG. This includes the policies
adopted by the Company in relation to both investments and
divestments and by its Investment Adviser regarding its asset
management and reporting activities on such matters that relate to
the Company. The ESG Committee meets quarterly, and its full Terms
of Reference can be found on the Company's website(3) .
In addition to the ESG Committee, ESG factors are considered
through the following committees:
- Investment Committee: The Company's Investment Committee
ensures ESG has been appropriately considered in the investment and
divestment processes and provides a robust challenge to the
Investment Adviser on such processes;
- Audit and Risk Committee: The Company's Audit and Risk
Committee oversees the Company's approach to ESG disclosures and
reporting to its stakeholders and ensures all risk management
frameworks consider material ESG risks (e.g. climate change);
and
- Management Engagement Committee: The Company's Management
Engagement Committee reviews the effectiveness of ESG integration
by the Investment Adviser.
For more information, please refer to the Company's
Sustainability Report, which can be found on the Company's
website(1) .
ROLE OF THE INVESTMENT ADVISER
The Company's Investment Adviser is responsible for implementing
the Company's ESG policies into the Company's activities on a
day-to-day basis. This includes the integration of ESG
considerations through investment origination and the management of
the Company's investments.
Amber's Executive Committee is responsible for the stewardship
of Amber's business and affairs. The Executive Committee discharges
its sustainability responsibilities directly through its internal
Risk Committee, ESG Steering Committee and Corporate Social
Responsibility ('CSR') Sub-Committee.
Amber's ESG Steering Committee also interfaces with the
Company's ESG Committee, ensuring the Company can monitor its ESG
performance, and is kept abreast of emerging ESG risks and
opportunities, such as climate change, to inform its strategy.
For more information, please refer to Amber's Global
Sustainability Report(4) .
1
https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf
2 https://www.amberinfrastructure.com/media/2231/esg-policy_final.pdf.
3 https://www.internationalpublicpartnerships.com/media/2391/inp p-esgc-tor-march-21.pdf.
4
https://www.amberinfrastructure.com/media/2469/amber-2021-global-sustainability-report.pdf.
SUSTAINABILITY AND ESG FRAMEWORKS
To deliver the ESG Policy and guide the Company's ESG strategy,
the Company draws on several frameworks and benchmarks to provide
direction. These frameworks are reviewed on an annual basis to
ensure that the Company remains at the forefront of sustainable
investment, operations and reporting.
Ambition
The Company believes that investing in infrastructure which
supports a sustainable, prosperous, equitable and resilient society
should deliver robust financial performance for its shareholders.
It is supportive of the 2030 Agenda for Sustainable Development
adopted by the UN Member States in 2015. Alongside the research of
its Investment Adviser into emerging trends and technologies, the
Company draws on the SDGs to help guide its approach to
sustainability.
ESG integration
To benchmark its ESG integration performance, the Company's
Investment Adviser became a signatory of the PRI in August 2019.
The Company's investment-related activities, as overseen by the
Investment Adviser, are in line with commitments to the
Principles.
The Company is pleased to report that its Investment Adviser
obtained an A+ ranking for both the Strategy and Governance and the
Infrastructure modules in 2020. The PRI is currently carrying out
updates to its reporting module, resulting in a delay to receiving
an updated score. We expect to provide an update during the course
of 2022.
Climate change
Climate change presents both transitional and physical risks to
the Company's investments. As such, it continues to be a high
priority for the Company. The Company is aligning all new
investments with the objectives of the Paris Agreement and has
commenced the process of adopting the TCFD recommendations.
The Company is continuing efforts to enhance its approach and
disclosures according to the TCFD Guidelines. Please see more
information on pages 45 to 47.
Infrastructure performance standards
The Company recognises its biggest impact on sustainable
development is through its investments, which are wide-ranging in
their nature. The Company's priority is to ensure it focuses on
material issues for each sector in which it invests, and it draws
on international industry practice to help identify what is
important for each sector.
Where possible, the Company draws on recognised third party
benchmarks to serve as a proxy for assessing whether an investment
meets or manages material sustainability factors.
Emerging regulatory frameworks
The Company is mindful and supportive of several emerging
regulatory frameworks in relation to sustainable finance,
particularly the SFDR, EU Taxonomy for Sustainable Activities ('EU
Taxonomy') and expected UK Sustainability Disclosure Requirements
('SDR'). As a Guernsey-based investment company listed on the
London Stock Exchange, the Company is not required to make any
specific disclosures at the time of publishing this report.
However, the Board is committed to supporting its shareholders and
upholding the highest levels of transparency which includes the
importance of considering sustainability risks and opportunities as
part of its investment process.
[Graphics can be found in PDF version of this document on the
Company's website].
IMPACT
By investing in the 'right type' of infrastructure, the Company
believes its investments can significantly support the targets set
out by the SDGs. For each investment sector, the Company has
identified which SDGs these are positively supporting. The
Company's contribution to the SDGs at the macro level is summarised
below(1) .
SDG Contribution Impact Portfolio
SDG contribution(2)
---- --------------------------------------- --------------------------------- ---------------------
Good Health and Wellbeing.
The Company has investments
in 38 health facilities, including >544,000
the award-winning Royal Children's Patients treated annually
Hospital in Melbourne, providing in healthcare facilities
access to quality essential developed and maintained
3 health-care services. by the Company 4%
---- --------------------------------------- --------------------------------- ---------------------
37,000,000
The three components of
Clean Water and Sanitation. the London Tideway improvements
The Thames Tideway Tunnel work conjunctively to
is the biggest infrastructure reduce discharges in a
project ever undertaken by typical year by about
6 the privatised UK water industry. 37 million cubic metres(3) 9%
---- --------------------------------------- --------------------------------- ---------------------
Industry, Innovation and
Infrastructure. Investing
in resilient infrastructure
is at the heart of what we
do. The Company's portfolio
is invested into quality,
reliable, sustainable and 131,000km
resilient infrastructure(1) Length of gas transportation
9 . pipeline 19%
---- --------------------------------------- --------------------------------- ---------------------
Peace, Justice and Strong
Institutions. Through the
provision of high-quality
judicial buildings, the Company
is supporting effective, accountable, 13
and transparent institutions Police stations and judicial
16 at all levels. buildings 4%
---- --------------------------------------- --------------------------------- ---------------------
Quality Education. Good infrastructure
is at the base of quality
education. By investing directly
in 269 education facilities,
and maintaining them sustainably, >168,000
the Company can support effective Students attending schools
learning environments for developed and maintained
4 all. by the Company 18%
---- --------------------------------------- --------------------------------- ---------------------
Affordable and Clean Energy. >2,100,000
Through the Company's investments Homes capable of being
in offshore transmission investments, powered by renewable energy
we are supporting the provision transmitted through offshore
7 of affordable and clean energy. transmission investments 22%
---- --------------------------------------- --------------------------------- ---------------------
Sustainable Cities and Communities.
The Company's investments >93,000,000
in transport provide safe, Annual passenger journeys
affordable, accessible and through sustainable transport
11 sustainable transportation. investments(4) 24%
---- --------------------------------------- --------------------------------- ---------------------
1 Data reflects performance over the reporting period. SDG
metrics apply to investments where the Company has a majority
equity investment, or a minority equity holding over GBP2
million.
2 Investment at Fair Value.
3
https://www.tideway.london/media/5097/j0115_sustainable-finance-report-vis7a-2.pdf
4 Annual passenger journeys include those made on BeNEX,
Diabolo, Gold Coast and Reliance Rail
[Graphics can be found in PDF version of this document on the
Company's website].
SUSTAINABLE MANAGEMENT
The Company's metrics against the SDGs illustrate the breadth of
positive social impacts its portfolio of investments can deliver.
The Company seeks to improve the sustainability performance of its
investments and closely monitors and manages against any potential
adverse impacts. An overview of the Company's approach to
sustainable management, including its Sustainability Policy Aims,
can be found in the Sustainability Report located on the Company's
website1. The following pages provide some case studies of the
Company's approach to active management over the period.
The Company continues to focus on managing material ESG risks
and opportunities at the individual investment level, monitoring
over 40 different ESG indicators as part of its ESG data collection
processes. This allows the Company to target and manage material
ESG issues, which can vary considerably across a diverse portfolio
of investments. To help streamline ESG data for financial reporting
and monitor progress at the portfolio level, the Company has
developed a set of preliminary KPIs2, which will be further
developed over time. These will support the Company in delivering
its ESG Policy Objectives and provide an important stepping-stone
towards gathering the detailed data that may be required for
reporting in line with EU Taxonomy, SFDR and TCFD. Further detail
on the Company's approach will be included within an updated
sustainability report, along with enhanced sustainability
disclosures, which will be published later in the year.
POLICY OBJECTIVE KPI TARGET PERFORMANCE DURING THE
YEAR
-------------------------- ----------------------------------------------------- ------ -------------------------
The Company will use ESG
drivers to create
investment opportunities
in new and existing 1. Contribution to Sustainable Development Goals.
markets Positive SDG contribution for new investments(3) 100% 100%
-------------------------- ----------------------------------------------------- ------ -------------------------
The Company will identify 2. Investment Adviser ESG Integration Performance. A+ A+
and integrate ESG factors Investment Adviser PRI score
into all aspects of its
investment, development
and management decision
making and analysis to
protect and enhance value
-------------------------- ----------------------------------------------------- ------ -------------------------
3. Robust corporate governance. Investments
with appropriate policies and procedures
concerning:
* Health and Safety
* Sustainability
* Equality, Diversity and Inclusion
* Modern Slavery and Human Rights
The Company will actively
work towards improving * Conflicts of interest
the environmental and
social performance
of its investments by * Anti-corruption and financial crime risk
focusing on material ESG
issues and Sustainable
Development Goals * Tax and transparency 100% 96%
-------------------------- ----------------------------------------------------- ------ -------------------------
4. Environmental performance. Investments with appropriate systems and processes
in place
to improve environmental performance. Specific indicators include:
4.1 Investments with an environmental management system
4.2 Investments with initiatives to improve environmental performance of
material issues 100% 95%
-------------------------------------------------------------------------------- ------ -------------------------
100% 79%
-------------------------------------------------------------------------------- ------ -------------------------
5. Health and safety performance. Investments with appropriate systems and
processes in place
to improve health and safety performance. Specific indicators include:
5.1 Investments with health and safety management system
5.2 Investments with initiatives to improve health and safety performance 100% 97%
-------------------------------------------------------------------------------- ------ -------------------------
100% 93%
-------------------------------------------------------------------------------- ------ -------------------------
6. Greenhouse gas management. Investments with appropriate systems and processes
in place
to support management of energy efficiency and greenhouse gases. Specific
indicators include:
6.1 Investments monitoring Scope 1 and 2 emissions
6.2 Investments with initiatives to improve energy efficiency and greenhouse
gas performance 100% 94%
-------------------------------------------------------------------------------- ------ -------------------------
100% 88%
-------------------------------------------------------------------------------- ------ -------------------------
1
https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf.
2 KPIs apply to all investments where the Company has a majority
equity investment, or a minority equity holding over GBP2
million.
3 The Company aims to manage and monitor any potential adverse
impacts of investments as per KPIs 3, 4, 5 and 6.
ENERGY TRANSMISSION
As the impacts of a changing climate become more apparent to our
society and the solutions more urgent, it has never been more
important to transition towards efficient, sustainable energy
systems. Offshore wind generation is a success story for the UK.
Long-term government support has underpinned innovation and
investment in the sector, helping to drive down costs while
contributing to decarbonisation of the economy.
impact
Homes capable of being powered >2.1 million SDG 7
by renewable energy transmitted
by OFTOs
Transmission capacity >2.5GW SDG 7
Case study
Sustainability aim - Reduce consumption of natural resources,
work towards elimination of waste to landfill and move towards a
circular economy
The environmental commitment by the management of the OFTO
portfolio is demonstrated by its continued certification to the
ISO14001 environmental standard. This was first achieved in 2019
and has been subject to annual reviews since. This standard covers
all aspects of operations and environmental management from
practical maintenance-based process to waste disposal and
appointment of appropriately certified contractors.
Maintenance routines and actions are accurately recorded, where
events such as an unlikely SF6 gas leak are immediately attended
to. The management of SF6 is a critical aspect of HV switchgear and
Supervisory Control and Data Acquisition ('SCADA') remote
monitoring systems are reviewed on a 24/7 basis to alert the team
of the very rare event of recorded pressure loss that may have
developed.
The team has a spill response framework with a nationally
recognised onshore and marine environmental response provider,
which can be called up on at very short notice in the event of a
major asset failure and subsequent fluid loss. This framework
remains unused to date.
[Relevant SDG graphics can be found in PDF version of this
document on the Company's website].
SOCIAL INFRASTRUCTURE
Social infrastructure is pivotal to the development of
sustainable communities. While the provision of housing, clean
water and electricity are vital for meeting basic human needs,
other services such as schools and healthcare facilities are
equally important for ensuring the long-term wellbeing of
people.
impact
Pupils >169,000 SDG 4
Patients >544,000 SDG 3
Police stations and judicial 13 SDG 16
buildings
Full-time equivalent employees >3,700 SDG 8
Case study
Sustainability aim - Reduce carbon emissions to move towards
alignment with the goals of the Paris Agreement to limit global
warming to well below 2degC and, ideally to 1.5degC
The Company is committed to identifying ways to work with its
public sector partners to reduce emissions and work towards net
zero. Due to the structure of these investments, any progress needs
to come through collaboration of the Company, its public sector
partners and key supply chain partners.
In 2021, the Company commissioned 20 net zero studies across the
portfolio it manages to identify meaningful ways to support its
public sector partners in reducing the emissions of their
buildings.
This work is intended to inform a framework approach to
delivering net zero solutions alongside developing the Company's
approach at the portfolio level.
[Relevant SDG graphics can be found in PDF version of this
document on the Company's website].
TRANSPORT
Well-planned and coordinated transport infrastructure is
fundamental to the economic and social wellbeing of a community. It
is also becoming increasingly important to combat climate change
and has been identified as a crucial part of net zero carbon
strategies emerging internationally.
impact
Annual passenger journeys >93 million SDG 11
Annual train km travelled >799 million SDG 11
Full-time equivalent employees >2,300 SDG 8
Case study
Sustainability aim - Reduce consumption of natural resources,
work towards elimination of waste to landfill and move towards a
circular economy
Reliance Rail has developed a sustainability framework, which
builds on its existing risk management approaches to focus on the
specific sustainability issues that matter most to its business and
operations and its contractors and stakeholders. Consistent with
the Global Reporting Initiative ('GRI'), Reliance Rail has
undertaken a materiality assessment to maintain an up to date
understanding of evolving issues and expectations both internally
and externally, which will help to refine its strategic priorities
and ensure sustainability efforts remain relevant over the near and
long-term.
In 2021, Reliance Rail obtained an overall GRESB Infrastructure
score of 96 out of 100. This ranks it 1(st) out of 114 PPP
investments internationally, with a five-star rating.
[Relevant SDG graphics can be found in PDF version of this
document on the Company's website].
WASTE WATER
Environmental infrastructure provides cities and towns with
water supply, waste disposal and pollution control services. These
municipal works serve two important purposes, including protecting
human health and safeguarding environmental quality.
impact
Diverted waste water discharges >37 million m(3) SDG 6
when operational
New public space following 3 acres SDG 11
construction
Full-time equivalent employees >2,100 SDG 8
Case study
Sustainability aim - Support investments to create an open and
inclusive working environment
In a traditionally male-dominated industry such as construction,
Tideway continues to look at ways to address this imbalance through
measures such as inclusive recruitment, a focus on new talent in
underrepresented groups in their succession planning activity,
mentoring and promoting flexible working.
In support of SDG 5 - Gender Equality and SDG 10 - Reduced
Inequalities, Tideway continually attempts to make the industry
attractive to all members of the community through its STEM
programme, 'returnship' programmes, flexible working, and
gender-specific and maternity personal protective equipment.
Over the period, approximately 40% of staff employed were women.
In addition, Tideway supports Women into Construction ('WiC'), a
small not-for-profit organisation which promotes gender equality in
the industry as well as mentoring women in the industry. In
addition, the project is actively funding the development of a
self-assessment tool to help further the gender diversity progress
of smaller organisations.
[Relevant SDG graphics can be found in PDF version of this
document on the Company's website].
GAS DISTRIBUTION
Gas distribution infrastructure plays a critical role in
delivering energy to keep customers safe, warm and connected,
whether that is natural gas, biogas or hydrogen. Cadent's network
of gas pipes will play a vital role in meeting Britain's future
energy needs and delivering the UK's net zero strategy. The network
is a national asset consisting of over 80,000 miles of pipework,
connected to 11 million homes; fuelling industrial sites and
supplying domestic gas turbines.
impact
Maximum energy throughput 5.7 million GJ/day SDG 9
Homes and businesses connected >11 million SDG 11
to gas
Full-time equivalent employees >5,600 SDG 8
Case study
Sustainability aim - Reduce carbon emissions to work towards
alignment with the goals of the Paris Agreement
The Company is actively engaging with Cadent on its approach to
enabling the transition to cleaner fuels. Over the period, the
Company is pleased that HyNet has been awarded 'track one' status
from the Government's carbon capture, utilisation and storage
('CCUS') scheme, and will now enter into negotiations with
viability checks ahead of pulling in support from a GBP1 billion
fund. HyNet North West is a significant clean growth opportunity
for the UK. The fund is aimed at low cost, deliverable projects
which meet the major challenges of reducing carbon emissions from
industry, domestic heat and transport.
HyNet North West is based on the production of hydrogen from
natural gas. It includes the development of a new hydrogen pipeline
and creating the UK's first carbon capture and storage ('CCS')
infrastructure. CCS is a vital technology to achieve the widespread
emissions savings needed to meet the 2050 carbon reduction targets,
as outlined in the UK Government's ten-point plan. The new
infrastructure built by HyNet is readily extendable beyond the
initial project, and provides a replicable model for similar
programmes across the UK.
[Relevant SDG graphics can be found in PDF version of this
document on the Company's website].
DIGITAL INFRASTRUCTURE
Digital infrastructure underpins the potential of the internet.
Over the next few decades, digital networks will be the enabling
infrastructure that helps drive economic growth and productivity.
The recent Covid-19 crisis underlines this, where remote working
has been a financial and social lifeline to millions of businesses
and families.
impact
Premises passed >999,000 SDG 9
Premises connected >45,000 SDG 11
Case study
Sustainability aim - Ensure investments are accessible to the
widest group of users and available to serve local communities
In an increasingly digital age, those who are not engaging
effectively with the digital world are at risk of being left
behind. Technological change means that digital skills are
increasingly important for connecting with others, accessing
information and services and meeting the changing demands of the
workplace and economy. As a result, this is leading to a digital
divide between those who have access to information and
communications technology and those who do not, giving rise to
inequalities in access to opportunities, knowledge, services and
goods.
The Company's Investment Adviser is actively involved in
managing the underlying investments of NDIF and working to support
the objectives of each investment. As an example, Airband, founded
in 2009, is an independent internet service provider bringing high
speed broadband to homes, business and industry in rural and
hard-to-reach areas. Since its inception, it has passed 178,000
properties, connecting over 7,000 rural businesses and homes,
helping to drive productivity, connect communities and reduce the
digital divide in the UK.
[Relevant SDG graphics can be found in PDF version of this
document on the Company's website].
CLIMATE-RELATED FINANCIAL DISCLOSURES
Climate change presents both transitional and physical risks to
the Company's investments. As such, it continues to be a high
priority for the Company which, accordingly, has voluntarily
adopted the recommendations of the TCFD. As previously reported,
during 2020, the Company's Investment Adviser commissioned an
external third party to undertake a review of the Company's current
practices and make recommendations as to how the Company can
enhance its approach and disclosures in accordance with the TCFD
Guidelines.
Climate change is considered alongside other ESG risks by the
Company's ESG Committee, Investment Committee and Audit and Risk
Committee. During the period, the Company commissioned an
additional third party to support the enhancement of its approach
to assessing physical and transition climate risks and
opportunities across its portfolio, in line with TCFD
recommendations.
Although there is no mandatory requirement for the Company to
adopt nor explain areas of non-compliance with the framework, the
Company aims to integrate climate risk assessment consistently
within investment decision-making and risk management processes,
for existing and future investments.
The table below shows a summary of our progress to date against
the TCFD recommendations.
GOVERNANCE
Disclose the organisation's governance around climate-related risks
and opportunities.
a) Describe the Board's The Board sets the strategy for the Company
oversight of climate-related and makes decisions on changes to the portfolio
risks and opportunities. (including approval of acquisitions, disposals
and valuations). Through Board committees
and the advice of external independent advisers,
it manages the governance and risks of the
Company.
The Board has overall responsibility for
ESG and ensuring it is integrated into the
Company's investment strategy, including
in relation to climate change. The Board
maintains oversight of climate risk in the
following ways:
* Investment Committee: The Company's Investment
Committee ensures climate change risks and
opportunities have been appropriately considered
through the investment and divestment processes and
provides a robust challenge to the Investment
Adviser.
* Audit and Risk Committee: The Company's Audit and
Risk Committee oversees the Company's approach to ESG
disclosures and ensures all risk management
frameworks consider material climate change
disclosures. Risks are reviewed quarterly, including
climate change risks.
* ESG Committee: The Company's ESG Committee monitors
its approach to climate change, including
consideration of climate change strategy, disclosures
and targets.
The Company's Investment Adviser is responsible
for implementing the Company's ESG policies
in the Company's activities on a day-to-day
basis. This includes the integration of ESG,
and specifically climate change, considerations
through investment origination and management
of the Company's investments.
b) Describe management's
role in assessing and
managing climate-related
risks and opportunities.
STRATEGY
Disclose the actual and potential impacts of climate-related risks
and opportunities on the organisation's businesses, strategy and
financial planning where such information is material.
a) Describe the climate-related Both the risks and opportunities presented
risks and opportunities by climate change are a key focus for the Board.
the organisation has The Company has strengthened the alignment
identified over the of its investment activity with the objectives
short, medium and long-term. of the Paris Agreement. In practice the Company
has a greater formal emphasis on:
* Enhanced screening and due diligence processes to
ensure new investments are aligned, or can directly
support, the transition to net zero;
* Fuller deployment of emerging policy and frameworks,
such as the UK ten-point plan and EU Taxonomy, to
help guide investment decision making; and
* Increased cooperation with public counterparties to
reduce emissions from existing investments, and to
ensure that all assets continue to help deliver on
international commitments.
The Company's investments are located in the
UK, Ireland, continental Europe, North America
and Australia. All these regions are forecast
to experience a changing climate, including
increasing episodes of extreme heat, water
stress, flooding and extreme precipitation
to varying degrees. As an investor in infrastructure
projects and businesses, the Company's investments
are likely to be directly exposed to changes
in weather. These potential physical impacts
present the following risks to the Company:
* Unavailability of assets;
* Property damage;
* Insurance premiums;
* Insurance;
* Operational costs;
* Maintenance costs;
* Market value depreciation Capex for resilience; and
* Potential future liabilities.
The majority of the Company's investments generate
availability-based or regulated revenues, with
most costs contractually determined or compensated
for via a regulatory regime. The ability for
changes in revenues or costs to have a material
impact on the portfolio's net cash flows is
limited owing to the contracts and/or regulatory
frameworks under which the assets currently
operate.
The transition to a low-carbon economy will
largely depend on the right types of infrastructure
to allow communities to live net zero lifestyles.
The changes required are wide-ranging, including
decarbonisation of heat, increased electrification
of transportation and other systems previously
dependent on fossil fuels, and decarbonisation
of construction. Several of the regions in
which the Company invests have set legally
binding net zero targets, although only a small
number of the Company's investments face transition
risks, due to the nature of contracted or regulated
frameworks.
The Company is focused on identifying current
risks and evolving its assessment and understanding
of longer-term risks, along with mitigation
of climate risks. The Company's Investment
Adviser is also working towards obtaining a
better understanding of the potential financial
impacts and its resilience with regard to different
climate scenarios. This enhanced approach will
directly inform a suite of indicators, which
will support the Company's objectives and investors'
understanding of the physical and transition
risks.
As an investor in infrastructure, the Company
will seek to support this transition and believes
it represents a significant opportunity and
this forms part of the work of the ESG Committee.
b) Describe the impact
of climate-related
risks and opportunities
on the organisation's
businesses, strategy
and financial planning.
c) Describe the resilience
of the organisation's
strategy, taking into
consideration different
climate-related scenarios,
including a 2degC or
lower scenario.
RISK
Disclose how the organisation identifies, assesses and manages climate-related
risks.
a) Describe the organisation's During the period, the Company commissioned
processes for identifying a third party to support it in enhancing its
and assessing climate-related assessment of climate change risks. The results
risks. of this process will be disclosed later in
2022, providing greater detail on the tools,
scenarios and sensitivities that are in the
process of being implemented. This enhanced
risk assessment process will provide a more
in-depth view of the climate risk across the
portfolio.
Climate risk identification and management
is integrated within the risk management process
as a subset of wider risk categories, including
political, financial, operational and strategic
risks.
The Board is ultimately responsible for risk
management. Oversight of the risk framework
and management process is delegated to the
Audit and Risk Committee. The risk framework
has been designed to manage, rather than eliminate,
the risk of failure to meet business objectives.
No system of control can provide absolute assurance
against the incidence of risk, misstatement
or loss. Regard is given to the materiality
of relevant risks in designing systems of risk
management and internal control. While responsibility
for risk management ultimately rests with the
Board, the aim is for the risk management framework
to be embedded as part of the everyday operations
and culture of the Company and its key advisers.
Although the Company is aligning with TCFD
recommendations voluntarily, the Company's
approach to climate change risk sits alongside
other requirements to which we are subject
under applicable law and the Company's internal
policies and procedures, such as the requirement
to have robust risk management policies and
procedures. Please refer to the Continuous
Risk Management section for more information
in relation to the Company's approach to risk
management.
b) Describe the organisation's
processes for managing
climate-related risks.
c) Describe how processes
for identifying, assessing
and managing climate-related
risks are integrated
into the organisation's
overall risk management.
METRICS
Disclose the metrics and targets used to assess and manage relevant
climate-related risks and opportunities where such information is
material.
a) Disclose the metrics The Company qualitatively assesses the risk
used by the organisation of all investments and is in the process of
to assess climate-related reviewing relevant climate-related metrics
risks and opportunities and targets at the portfolio level, which include
in line with its strategy the consideration of TCFD's supplementary guidance
and risk management on metrics. The Company is currently in the
process. process of collating the information and as
yet the data is too incomplete to draw a reasonable
and accurate baseline, given the number and
breadth of assets.
To support the Company in developing these
overarching disclosures, it set an interim
target for 100% of investments to monitor and
disclose Scope 1 and Scope 2 emissions. During
the period, the Company is pleased to report
that 94% are monitoring these metrics.
The Company is actively developing a carbon
footprint across all its investments to establish
a baseline and will be developing ways to enhance
its consideration and disclosure of transition
and physical risks of climate change. This
baseline is focusing on Scope 1 and 2 emissions
initially and will seek to include Scope 3
emissions where available.
b) Disclose Scope 1,
Scope 2 and, if appropriate,
Scope 3 GHG emissions,
and the related risks.
c) Describe the targets
used by the organisation
to manage climate-related
risks and opportunities
and performance against
targets.
STAKEHOLDER ENGAGEMENT
VALUE CREATION - HOW WE ENGAGE
The Company takes a proactive approach to identifying and
engaging with key stakeholders. This is to ensure that there is
clear two-way communication that can be used to support the mutual
success of the Company and its stakeholders. Good governance is the
cornerstone of these relationships, and the Company is focused on
leading with high standards of business conduct. It achieves this
through a combination of Board engagement and oversight and
leveraging the Investment Adviser's expertise and networks. The
Company believes robust stakeholder engagement is a critically
important component to delivering its purpose over the long term
and is considered at a strategic level by the Board. The Board has
promoted the success of the Company having regard to the
requirements of section 172 of the UK Companies Act 2006, as
outlined below.
1. InvestorS
Consistent and growing returns
We aim to provide our investors with stable, long-term,
inflation-linked returns, based on growing dividends and the
potential for capital appreciation. Through engagement with all our
investors, we aim to inform our strategic objectives and to ensure
that the Company understands all views on topical issues. This
approach is intended to maximise investor buy-in to current
objectives and performance whilst also helping shape the Company's
future plans.
The key mechanisms for the Company's engagement with investors
include:
- Regular and timely updates on performance, including through
the annual and half-yearly reporting cycle
- The Company's AGM
- Investor days
- One-to-one meetings or calls with the Board's Chair and other Directors
- One-to-one meetings or calls with representatives from the Company's Investment Adviser
- Other Group engagement with representatives from the Company's Investment Adviser
- The Company's website
Over the period, the Company has increased engagement with
investors around its approach to ESG. For example, in September
2021, the Company held an investor webinar following the release of
its Sustainability Report. In addition, the Company has held
several one-to-one meetings to increase its understanding of
investor requirements as a result of regulations such as TCFD, EU
Taxonomy and EU SFDR.
2. PUBLIC SECTOR & OTHER STAKEHOLDERS
A TRUSTED PARTNER
We aim to provide the public sector and other customers with a
highly reliable, robust service through our investments. Our
ability to deliver contracted services and maintain strong
relationships with our clients through our Investment Adviser is
vital for the long-term success of the business. Through close
engagement with our clients, we aim to meet high levels of
satisfaction and quickly respond to any potential issues and
emerging challenges.
The key mechanisms for engagement with our clients include:
- Regular meetings (where possible in person and/or virtually)
between the Investment Adviser and public sector clients including
local authorities and regulators
- Active asset management, which provides monitoring of the
facilities management arrangements on compliance with maintenance
obligations
- Asset managers directly engaging with the client on a day-to day basis
The Company's Investment Adviser has been proactively engaging
with the Company's public sector clients to provide them with
options on how to work towards net zero solutions. Please refer to
the case study on Page 12 for more information.
3. COMMUNITIES
STRENGTHENING COMMUNITIES
We strive to make our investments an integral part of the
communities they serve. Engaged communities can play an important
role in successful delivery of new assets and their long-term
operations. As part of our approach to active asset management, the
Investment Adviser ensures critical services are delivered with a
focus on the end-user, ensuring that the community is at the heart
of all that we do. This approach is intended to help our
communities thrive and create robust environments for our
investments to flourish.
The key mechanisms for community engagement include:
- Active asset management providing facilities for community use
- Local Education Partnership agreements
- Supporting community initiatives
Throughout the pandemic, the Company has been seeking to support
those who have been negatively impacted by Covid-19. The Company,
through its Investment Adviser, has been supportive of its supply
chain and has engaged with the communities in which they and the
Company's investments operate.
4. KEY SUPPLIERS
AN ENGAGED SUPPLY CHAIN
Our ambition is to work with a high-quality, sustainable supply
chain with a focus on long-term value for our stakeholders. The
performance of our service providers, their employees, and
investment supply chain is crucial for the long-term success of our
business. The Company takes a progressive approach to engaging with
key suppliers. A key component of this is ensuring our Investment
Adviser is proactively maintaining an engaged supply chain for our
investments.
The examples of mechanisms for engagement with key suppliers
include:
- Annual Management Engagement Committee review
- Ad hoc engagement
- Quarterly Board meetings and reporting
- Investment Adviser managing investment supply chain
Throughout the pandemic, the Board has ensured that its direct
supply chain's safety and wellbeing has been appropriately
prioritised and managed in line with its Sustainability Policy Aim
to Encourage a Zero Harm Culture. This has been monitored through
pre-existing channels, such as quarterly Board meetings.
CONTINUOUS RISK MANAGEMENT
CONTINUOUS RISK MANAGEMENT
The Board is ultimately responsible for risk management.
Oversight of the risk framework and management process is delegated
to the Audit and Risk Committee. The risk framework has been
designed to manage, rather than eliminate, the risk of failure to
meet business objectives. No system of control can provide absolute
assurance against the incidence of risk, misstatement or loss.
Regard is given to the materiality of relevant risks in designing
systems of risk management and internal control.
[Diagram can be found in PDF version of this document on the
Company's website].
risk management
Risk Framework and Management Process
The Company has in place a risk management framework. The Board
recognises the importance of identifying and actively monitoring
the risks facing the business. The framework involves an ongoing
process for identifying, evaluating and managing significant risks
faced by the Company. While responsibility for risk management
ultimately rests with the Board, the aim is for the risk management
framework to be embedded as part of the everyday operations and
culture of the Company and its key advisers.
The risk framework is applied holistically across the Company
and, to the extent possible, to the underlying investment portfolio
as illustrated in the Business Model on pages 4 to 5. The framework
has been in place for the year under review and up to the date of
approval of these annual financial statements.
Direct communication between the Company, its Investment Adviser
and the portfolio investment level asset manager, is a key element
in the effective management of risk through the investment
portfolio.
The Board continues to monitor the need for an internal audit
function, but believes the controls and assurance processes applied
at the key service providers, alongside the external controls
process reviews performed annually, provide robust and sufficient
assurance.
The risk framework is implemented through the following risk
control processes:
[Diagram can be found in PDF version of this document on the
Company's website].
RISK IDENTIFICATION
The Board, Audit and Risk Committee and the Risk Sub-Committee
identify risks with additional input from the Company's Investment
Adviser and the Administrator. Key risks are identified at the
investment approval stage, where the investment papers include an
assessment of key risks as well as potential mitigations. This
reflects work performed at the due diligence phase, incorporating
input where relevant from specialist advisors appointed to support
the investment process. For investments held by the Company, the
Board receives detailed quarterly asset management reports
highlighting performance and potential risk issues on an
investment-by-investment basis. The Audit and Risk Committee has an
open dialogue with its advisers to assist with assessment of
significant risks, if any, that might arise between reporting
periods. A risk register is reviewed and updated by the Board and
Audit and Risk Committee on a quarterly basis. An annual workshop
with the Investment Adviser considers emerging risks and the
positions of the current risks.
Risk assessment
Each identified risk is assessed in terms of probability of
occurrence, potential impact on financial performance and any
movements in the relative significance of each risk between
periods. A robust assessment of principal and emerging risks facing
the Company is performed. The assessments build on the wealth of
knowledge acquired by the Company and Investment Adviser through
both bidding and asset management phases, with risk assessments
carried out to quantify and assess risks. Where risks might impact
viability, these are assessed further and the Viability Statement
on page 62 contains more information of this review.
Mitigation plan
For newly identified risks or existing risks with increased
likelihood or impact, the Audit and Risk Committee assists the
Company in developing an action plan to mitigate the risk, with
enhanced monitoring and reporting put in place.
Risk monitoring, reporting and reassessment
Risks are monitored and risk mitigation plans are reassessed by
the Audit and Risk Committee, where applicable, with input from any
relevant key service providers, and reported to the Board on a
quarterly basis. Annual external controls and process reviews help
ensure the robustness of control processes. No significant failings
or weaknesses were identified in the review of controls during the
year.
Whilst challenges arising from the Covid-19 pandemic remain, the
principal risks affecting the Company and its investment portfolio
did not, in the view of the Board, materially change during the
year, in part due to the typically long-term contractual and
regulated nature of the Company's portfolio investments. Details of
the activities performed by the Audit and Risk Committee during the
year can be found on pages 75 to 78 in the Audit and Risk Committee
report.
developments in the year
UK REGULATORY REGIME ANNOUNCEMENTS
Two of the Company's investments are subject to regulatory
regimes which are designed by the regulators to, amongst other
things, protect the interests of consumers whilst ensuring that
regulated companies are able to earn a reasonable return on their
capital. Changes in the regulatory regimes have the potential to
impact the returns of these regulated assets.
As previously announced, in March 2021 Cadent exercised its
right to appeal Ofgem's final determination in respect of the
five-year regulatory period which commenced in April 2021 to the
CMA as it believed this approach would best serve Cadent's
customers' interests. The CMA published its final determination in
October 2021 and the findings had a modestly positive impact on the
Company's valuation of its investment in Cadent compared to that
reported at 30 June 2021.
Also as reported previously, Tideway has been in discussions
with Ofwat regarding additional measures to mitigate the impact of
both Covid-19 related cost overruns and the FCAM on Tideway's
investors. Subsequent to a provisional agreement with Tideway,
Ofwat launched a public consultation in December 2021 to gain views
from interested parties on the proposed amendments. As the
consultation was ongoing at the valuation date, the 31 December
2021 valuation of the Company's investment in Tideway included a
prudent assessment of the outcome of the consultation and the
necessary licence modification process. The consultation
subsequently closed in January 2022 and the licence modifications
came into effect in March 2022.
The Company believes its regulated asset valuations continue to
remain appropriate. In addition, investments in regulated assets
are considered very long-term, beyond any individual regulatory
cycle. Therefore, our long-term view of such assets takes into
account the robustness of yield as well as potential for increases
in the regulated asset base over time.
Counterparties and service providers
Counterparty risk continues to be closely monitored following
issues affecting certain service providers to the Group in the last
three years as well as the challenges placed on those businesses by
the Covid-19 pandemic. The Investment Adviser, building on the
experience gained following the liquidation of Carillion Plc and
the administration of Interserve Plc, is well placed to respond to
any future events of a similar nature and has contingency plans in
place to allow for a smooth transition of contracts to an
alternative service provider. The Investment Adviser continues to
monitor the Group's counterparty exposures and contingency plans
are reviewed and updated where appropriate. Please see further
information on page 26.
CLIMATE CHANGE
Climate change could lead to more frequent or severe weather
events such as flooding, fires, droughts and storms. Investments
may be subject to extreme weather and changes in precipitation and
temperature, all of which may result in physical damage or a
decrease in demand or availability for infrastructure assets
located in the areas affected by these conditions. Should the
impact of climate change be material in nature or occur for lengthy
periods of time, the financial condition or results of operations
of the investments could be adversely affected. In addition,
changes in legislation and regulation on climate change could
result in increased capital expenditures to improve the energy
efficiency or reduce the carbon footprint of the Company's
investments. This transition could also lead to certain fuels and
business models becoming obsolete if unable to adapt to emerging
regulation and customer preference.
The Company takes climate change very seriously and continues to
devote attention to managing this risk. Climate change is a key
focus for the newly formed ESG Committee, ensuring that the Company
continues to evolve its approach to considering both the risks and
opportunities it presents. During the period, the Company
commissioned a third party to support it in enhancing its
assessment of climate change risks. The results of this process
will be available later in 2022, providing greater detail on the
tools, scenarios and sensitivities that are in the process of being
implemented. The enhanced risk assessment process will provide a
more in-depth view of the climate risk across the portfolio.
Climate change would most likely manifest itself through impact on
physical assets (risk 4) and changes in climate-related regulation
(risk 9). Climate change is therefore considered both as a current
and emerging risk. Further information on the Company's approach to
responsible investing can be found in the Responsible Investment
section on pages 38 to 48.
COVID-19 Coronavirus
The effects of the Covid-19 pandemic continue to impact all
businesses across the world in a variety of ways. The Company is
reassured by the operational performance of its portfolio to date.
Short-term impacts have been witnessed in certain assets with
demand-based risk, although operational performance of these assets
has remained strong.
The Company notes that there are a range of contingent risks
stemming from Covid-19. These include, but may not be limited to,
staff shortages and supply chain breakdowns and their consequences.
The Company continues to monitor and where possible take action to
avoid or mitigate any such impacts on its portfolio. The Company
notes that the overwhelming majority of its revenues come from
availability-based payments or regulated cash flows that generally
provide a range of protections against adverse scenarios. The
Company has exposure to demand risk on a small portion of the
portfolio where restrictions on movements had an adverse impact on
the performance of the asset. The Company continues to hold
reserves to manage unforeseen outcomes over the next 12 to 18
months.
Whilst the full long-term consequences of the pandemic and its
effects over the long-term are not yet known, the Company believes
that its business model continues to offer a significant degree of
protection to shareholders. Please see more information on pages 50
to 51.
WAR in Ukraine
The Company continues to actively monitor the situation in
Ukraine to ensure that the portfolio of investments is protected,
to the extent it can be, from the direct and indirect impacts of
the war. The Company does not hold any investments in the impacted
region and we are not aware of any material direct implications for
the Company or its portfolio.
Further information
A description of broader risk factors relevant to investors is
disclosed in the latest Company prospectus available on the website
www.internationalpublicpartnerships.com.
RISKS ASSESSMENT
aggregate risk assessment
The Company's identified risks have been mapped to the five
different risk categories: political, portfolio operations,
macroeconomic, regulation and compliance, and central
operations.
[Diagram can be found in PDF version of this document on the
Company's website].
The chart summarises the overall residual level of risk facing
the Company, presenting a combined assessment which incorporates
the potential impact arising from not only the Company's principal
risks, but from all of the Company's other identified risks:
- Political risk incorporates risks arising from government policy and actions;
- Portfolio operations risk incorporates risks arising from
asset operations and ongoing investment performance, including
regulatory risk impacting at asset level;
- Macroeconomic risk incorporates risks arising in the wider
economy, including inflation and interest rates;
- Regulation and compliance risk incorporates risks arising from
new laws and regulations applicable to the Company and its
assets;
- Central operations risk incorporates risks arising from the management of the portfolio.
The relative impact assessed to be arising from each risk has
been combined to present a holistic position, giving stakeholders a
more complete picture of the Company's residual risk position.
Those risks of the Company which are assessed to be the principal
risks are separately identified, and further discussed below.
PRINCIPAL RISKS
This section provides a summary of the Board's assessment of the
Company's principal risks. This is not intended to highlight all
the potential risks to the business. There may be other risks that
are currently unknown or regarded as less material, which could
turn out to materially impact the performance of the Company, its
assets, capital resources and reputation. Where the Company has
applied mitigation processes, it is unlikely that the techniques
applied will fully mitigate the risk.
RISK TYPE
INCREASE Risk exposure has increased in the period
DECREASE Risk exposure has reduced in the period
NO SIGNIFICANT No significant change in risk exposure since last
CHANGE reporting period
RISK DESCRIPTION MITIGATION
------------------------- ------------------------------------- --------------------------------------
Political
--------------------------------------------------------------------------------------------------------
Political The businesses in which Most of the Company's existing
Policy the Company invests are investments benefit from
subject to potential changes long-term service and asset
in policy and legal requirements. availability-based pricing
All investments have a public contracts or regulatory frameworks
sector infrastructure service and the countries in which
aspect and are exposed to the Company operates do not
political scrutiny and the tend to have a tradition
potential for adverse public of penal retrospective legislation.
sector or political criticism. Governments tend to be long-term
supporters of infrastructure
and similar investment and
recognise the risk of deterring
future investment in the
event that penal or disproportionate
steps are taken in respect
of existing contractual engagements.
------------------------------------- --------------------------------------
1
------------------------------------- --------------------------------------
NO SIGNIFICANT
CHANGE
Change in political policy
Political policy and financing Current global policy practice
decisions may adversely continues to support the
impact either on existing use of private sector capital
investments, or on the Company's to finance public infrastructure,
ability to source new investments despite challenge from some
at attractive prices or political parties, particularly
at all. This may impact in the UK, around the role
the Company's reputation. of the private sector in
A certain degree of reputational the provision of such services.
risk exists in this area The Company seeks to maintain
as policy decisions adversely strong and positive relationships
impacting the Company have with its public sector clients
the potential to be made where possible. It also has
as a direct or indirect an active relationship with
result of reputational developments other external stakeholders
seen across the wider sector. including investors.
Termination of contracts
Often contracts between The Company engages with
public sector bodies and its public sector clients
the Company's investment in developing cost-saving
entities contain rights initiatives and seeks to
for the public sector to act as a 'good partner' including
terminate contracts in certain by focusing on the ESG aspects
situations. While the contracts of its investments. None
typically provide for some of the Company's investments
compensation in such cases, have been identified, by
this may be less than required any government audit or public
to sustain the Company's sector report, as poor value
valuation, causing loss for money or not in the public
of value. There have been interest.
instances of contracts being The Investment Adviser is
voluntarily terminated in a signatory to the Code of
the UK (although not affecting Conduct for Operational PFI/PPP
the Company). contracts in the UK. The
voluntary Code of Conduct
sets out the basis on which
public and private sector
partners agree to work together
to make savings in operational
PPP contracts.
Compensation on termination
clauses within such contracts
serve to partially mitigate
the risk of voluntary termination.
Furthermore, in the current
financial climate where voluntary
termination leads to a requirement
to pay compensation, such
compensation is likely, in
many cases to represent an
unattractive immediate call
on the public finances for
the public sector.
Nationalisation
Longer term political policy The Company believes significant
pressures arising as a consequence compensation would be required
of Brexit in the UK or the in order to enact this policy
Covid-19 pandemic more globally legitimately within existing
remain uncertain, so the contractual arrangements.
possible risk of nationalisation Therefore, we maintain the
can be seen to remain over view that the Company is
the medium-term. defensively positioned in
this regard.
------------------------- ------------------------------------- --------------------------------------
Asset Performance Construction
For the Company's assets
under construction, there
is an element of construction
risk that takes the form of
cost overruns or delays that
could impact on investment
returns. The construction
industry continues to see
implications resulting from
the Covid-19 pandemic, which
contain potential consequential
impacts on the Company.
2
NO SIGNIFICANT Contractual mechanisms
CHANGE allow for significant pass-down
of construction cost overrun
and delay risk to subcontractors
and/or consumers, subject
to credit risk (see below).
The Company's investment
in Tideway benefits from
a government support mechanism
which ultimately backstops
investors' downside risk
in the event of a major
construction cost overrun.
Tideway construction works
were 73% complete as at
31 December 2021.
Operational performance
Assets in the portfolio have The Board reviews the performance
revenues which are based on of each investment on a
the availability of the asset, quarterly basis and historically
as well as revenues not solely has seen consistently high
dependent on availability levels of asset availability.
but also have linkage to other For regulated assets, the
factors including demand risk regulatory regimes under
being subject to regulatory which the assets operate
frameworks. provide a level of protection
The entitlement of the Company's of cash flows for these
PPP and OFTO investments to assets.
receive revenues is generally Contractual mechanisms and
dependent on underlying physical underlying regulatory frameworks
assets remaining available also allow for significant
for use and continuing to pass-down of unavailability
meet certain performance standards. and performance risk to
Failure to maintain assets subcontractors in many cases,
available for use or operating subject to credit risk (see
in accordance with pre-determined below).
performance standards may In addition, investments
result in a reduction in the in regulated assets are
income that the Company has considered very long-term
projected to receive. by the Company, beyond any
Two of the Company's investments individual regulatory cycle.
are subject to regulatory This long-term view of such
regimes which are designed assets takes into account
by the regulators to, among the robustness of yield
other things, protect the as well as the potential
interests of consumers whilst for increases in the regulated
ensuring that regulated companies asset base over time.
are able to earn a reasonable The Company, through its
return on their capital. Changes Investment Adviser, has
in the regulatory regimes sight of detailed business
have the potential to impact continuity plans of its
the returns of the Company's counterparties designed
two regulated assets. to manage services in adverse
Disruption arising from Covid-19 circumstances. In addition,
may continue to affect services the Company has the ability
provision as well as impact to pass down certain costs
the facilities management to the service providers
industry. Certain assets within and can potentially rely
the portfolio have demand on business interruption
risk based on the usage of cover where available.
the underlying infrastructure. A small portion of the portfolio
A number of investments in has exposure to demand risk;
the portfolio assume residual cash reserves have been
values which are expected maintained to manage unforeseen
to be received from the assets exposures whilst Covid-19
on completion of the project related uncertainties persist.
contract or at the end of Certain demand-based assets
the expected investment holding have contractual arrangements
period. Amounts which are to adjust pricing in the
realised may be different event of a substantial decrease
from current assumptions. in usage.
Residual value assumptions
are based on prevailing
market expectations and
where possible recent market
evidence. The nature of
the Company's assets should
provide some mitigation
to the risk of a reduction
in demand for the assets
at the end of the expected
investment holding period.
--------------------- ----------------------------------------- --------------------------------------
Termination
In serious cases where In the event of
the terms of the significant
underlying and continuing
contract with the public unavailability
sector are breached due across the
to default or force Company's
majeure portfolio,
then that contract can the Company is able
usually be terminated to
without terminate the
compensation. Failure to Investment
receive the amount of Advisory Agreement.
revenue This
projected or termination serves to reinforce
of a contract will have alignment
a consequential impact of interest between
on the Company's cash the
flow Company and the
and value. Investment
Adviser.
The risk of
termination
of contracts as a
result
of political policy
is
addressed on page
54.
------------------------- --------------------
The Company's The Company has a
Counterparty Risk investments broad
are dependent on the range of suppliers
performance and
of a series of believes that
counterparties supplier
to contracts including counterparty risk
public sector bodies, is diversified
consortium across its
partners, construction investments.
contractors, facilities All contracts
management and include
maintenance the provision of a
contractors, asset and security
investment managers package from
(including counterparties
the Investment Adviser), to mitigate the
banks and lending impact
institutions of supplier
and others. Failure by failure. In
one or more of these addition, generally
counterparties payments
to perform their are made in arrears
obligations to
fully or as anticipated service providers
could adversely affect giving
the performance of the Company some
affected protection
investments. There may against failures in
be disruption or delay performance.
to the services provided The credit quality
to investments, or of
replacement supplier
counterparties (where counterparties
they is reviewed as part
can be obtained) may of
only the Company's due
be obtained at a greater diligence
cost. These risks would at the time of
negatively impact the making
Company's its investments and
cash flows and for
valuation. key suppliers on a
regular
basis.
Most of the
services provided
to the Company's
investments
are reasonably well
established
with a number of
competing
providers.
Therefore,
there are
expectations
that there will be
a pool
of potential
replacement
supplier
counterparties
in the event that a
service
counterparty fails,
albeit
not necessarily at
the
same cost.
The Company closely
monitors
the risk of adverse
developments
occurring in
relation
to its significant
counterparties,
and develops
contingency
plans as
appropriate to
ensure risk of
counterparty
failure is
minimised.
Information
regarding
relevant
counterparty
risk developments
during
the year can be
found
on page 47.
------------------------- --------------------
3
------------------------- -------------------
NO SIGNIFICANT
CHANGE
Where borrowings exist The credit risk of
in respect of the such
Company's swap counterparties
investments, interest is
rates considered at the
are generally fixed time
through of entering into
the use of interest rate these
swaps. The Company is arrangements and is
therefore regularly
exposed if the reviewed. However,
counterparties there
of these swaps were to is a risk of credit
default or the swaps deterioration
otherwise which could impact
become ineffective. affected
investments. The
Company
continues to aim to
use
reputed financial
institutions
with good credit
ratings.
In most cases, the
swaps
are out of money,
therefore
reducing the risk
of counterparty
default.
------------------------------------------------ ------------------------- --------------------
The Company indirectly The Company's
Physical Asset invests in physical investments
Risk assets benefit from
4 used by the public and regular risk
NO SIGNIFICANT thus is exposed to reviews and
CHANGE possible external insurance
risks, both reputational advice which is
and legal, in the event intended
of damage or destruction to ensure that
to such assets and their those assets
users, including loss of continue to benefit
life, personal injury from
and insurance cover
property damage. While that is
the assets the Company standard for such
invests in benefit from assets.
insurance policies,
these During the year,
may not be effective in the Company
all cases. commissioned a
third party
Climate change to work alongside
Investments may be its
subject Investment Adviser
to extreme weather and to
changes in precipitation assess alignment
and temperature, all of with
which may result in the recommendations
physical of
damage to assets. TCFD. The Company
has
continued to update
its
investment
processes,
further
strengthening
climate
considerations
within investment
screening
and diligence,
ensuring
these are
considered from
the earliest point
in
the investment
cycle.
----------------------------------------------- ------------------------- --------------------
Contract Risk The performance of the Such contracts have
5 Company's investments is been
NO SIGNIFICANT dependent on the complex entered into,
CHANGE set of contractual usually
arrangements only after
specific to each extensive
investment negotiations
continuing to operate as and with the
intended. The Company is benefit of
exposed to the risk that external legal
such contracts do not advice.
operate A legal review of
as intended, are contract
incomplete, documentation is
contain unanticipated undertaken
liabilities, as part of the
are subject to Company's
interpretation due diligence at
contrary to its the time
expectations of making new
or otherwise fail to investments.
provide See Political
the protection or Policy risk
recourse for further
anticipated. commentary
on contractual risk
of
voluntary
termination.
----------------------------------------------- ------------------------- --------------------
MACROECONOMIC
-----------------------------------------------------------------------------------------------
Inflation Inflation may be higher The Company uses a
6 or lower than expected. long-term
NO SIGNIFICANT The net cash flows from view of inflation
CHANGE the Company's investment within
Despite recent portfolio are positively its forecasts,
increases in inflation, correlated to inflation. benchmarked
the Company continues Should actual inflation where possible to
to take a long-term turn out to be higher or independent
view of inflation lower than the rates assumed analysis. It also
in each geography. by the Company at the relevant provides
valuation date, this would sensitivities to
be expected to impact positively investors
or negatively, respectively, indicating the
on the Company's projected projected
cash flows. impact on the
The level of inflation-linkage Company's
across the investments held NAV of alternative
by the Company varies and inflation
is not consistent. The consequences scenarios,
of higher or lower levels offering investors
of inflation than that assumed an ability to
by the Company will not anticipate
be uniform across its portfolio. the likely effects
The Company is also exposed alternative
to the risk of changes to inflation
the manner in which inflation scenarios may
is calculated by the relevant have on their
authorities. investment.
The Company
monitors the
effect of
inflation on
its portfolio
through
its biannual
valuation
process.
--------------------------- --------------------------------------------- -------------------
Foreign Exchange A portion of the Company's The Company uses
Movements investment portfolio has forward
7 cash flows which are denominated foreign exchange
NO SIGNIFICANT in currencies other than contracts
CHANGE Sterling, but the Company to mitigate the
borrows corporate level risk of
debt, reports its NAV and short-term
pays dividends in sterling. volatility
Changes in the rates of in foreign
foreign currency exchange exchange rates
are outside the Company's on the Sterling
control and may impact positively value
or negatively on cash flows of cash flows from
and valuation. overseas
investments. These
may
not be fully
effective
and rely on the
strength
of the
counterparties
to those contracts
to
be enforceable.
The Company
monitors the
effect of foreign
exchange
on its portfolio
through
its biannual
valuation
process and
reports this
to investors. The
Company
also provides
sensitivities
to investors
indicating
the projected
impact on
the NAV of a
limited number
of alternative
foreign
exchange
scenarios,
offering
investors the
ability
to anticipate the
likely
effects of some
foreign
exchange scenarios
on
their investment.
The
Company continues
to be
mindful of the
potential
for exchange rate
volatility
in light of
international
economic and
political
change. The
Company notes
that a devaluation
of
Sterling against
the relevant
currencies would
typically
have a positive
impact
on the NAV. The
opposite
would be true for
an increase
in the value of
Sterling.
--------------------------- --------------------------------------------- -------------------
Interest Rates Changes in market rates of interest can affect
8 the Company in a variety of different ways:
INCREASE
------------------------------------------------------------------
The Company is Valuation discount rate
monitoring the The Company, in valuing In determining
potential impacts its investments, uses a the discount
of the move away discounted cash flow methodology. rates used to
from London Inter-Bank Changes in market rates value its
Offered Rate ('LIBOR'). of interest (particularly investments, the
government bond yields) Company
may directly impact the generally uses
discount rate used to value nominal
the Company's future projected government bond
cash flows and thus its yields
valuation. Higher rates to which specific
will have a negative impact investment
on valuation while lower risk premia are
rates will have a positive added
impact. to determine the
overall
discount rates.
The investment
risk premia may
provide
a buffer against
rising
bond yields
assuming market
demand for
investment
is sustained.
Higher interest
rates can often
be precipitated
by higher
inflation
expectations,
and therefore any
inflation-linkage
(discussed above)
may
partly mitigate
the effect
of interest rate
changes.
--------------------------------------------- -------------------
Corporate Debt Facility
The Company has a CDF that In the event that
may be drawn from time to the
time. Interest is charged interest rate
on a floating rate basis, increases,
so higher than anticipated the Company has
interest rates will increase the option
the cost of this facility of repaying its
adversely impacting on cash CDF at
flow and the Company's valuation. any time with
minimal
notice, providing
sufficient
funds are
available. The
CDF remains
available
to March 2024. The
maximum
facility is GBP400
million
(including the
GBP150
million
'accordion')
compared
to a current
investment
portfolio
valuation of
c.GBP2.6 billion.
--------------------------- --------------------------------------------- -------------------
Underlying portfolio considerations
Changes in interest rates As presented in
have potential impacts on the the sensitivity
portfolio at underlying investee analysis,
entity level. Portfolio entities variations in
typically choose or can be cash deposit rates
required to hold various cash have
balances, including contingency little impact on
reserves for future costs (such the Company's
as major lifecycle maintenance NAV. Due to the
or debt service reserves). spread
These are generally held on of cash holdings
interest-bearing accounts and within
under the contractual terms ring-fenced
applicable to certain investments Special Purpose
which in many cases are projected Vehicle ('SPV')
to be held for the long-term. structures
The Company assumes that it and relatively
will earn interest on such smaller
deposits over the long-term. balances in the
Changes in interest rates may SPVs,
mean that the actual interest it is not
receivable by the Company is economically
different to that projected. feasible to hedge
If the Company receives less against
interest than it projects this adverse deposit
will impact cash flows and rate movements.
NAV adversely. Certain assets The Company
within the portfolio contain monitors the
refinancing assumptions. Increases effect of
in lending rates available historical and
to these projects would have projected interest
the potential to increase their rates
cost of financing and therefore on its portfolio
impact the overall returns through
from these assets. its biannual
valuation
process and
reports this
to investors. It
also
provides
sensitivities
to investors
indicating
the projected
impact on
the Company's NAV
of a
limited number of
alternative
scenarios,
offering investors
the ability to
anticipate
the likely effects
of
some deposit
interest
rate scenarios on
their
investment.
The risk of
adverse movements
in debt interest
rates
for unhedged debt
within
regulated entities
is
limited through
protections
provided by the
regulatory
regime, however,
the Company
may potentially be
exposed
to interest rate
risk
on debt outside of
the
regulatory
structure.
---------------------------------------------------------------- -------------------
The Company is monitoring the The third-party
potential impacts of the move loans
away from LIBOR. A number of at investee entity
the portfolio assets contain level
references to LIBOR within are typically
the project contracts. fully hedged.
It is expected
that both
the loan and the
swaps
will switch to the
new
risk-free rate at
the
same time and
therefore
the protection
against
fluctuations in
the new
risk-free rate
will be
mitigated as has
been
the case with
LIBOR denominated
loan. To date, the
Company
has made good
progress
in terms of
switching
the loans and the
related
hedging
arrangements to
the SONIA
benchmark as
well as obtaining
local
authority consents
where
necessary.
Synthetic LIBOR
may also
be available as a
fallback
mechanism where
the loan
arrangements do
not convert
to the new
benchmark rate
and LIBOR is no
longer
available.
---------------------------------------------------------------- -------------------
REGULATION AND COMPLIANCE
Law and Regulation Change in law or
regulation
Changes in law or
regulation
may increase costs of
operating and
maintaining
facilities or impose
other costs or
obligations
that indirectly
adversely
affect the Company's
cash flow from its
investments
and/or valuation of
them.
-------------------------
9
-------------------------
INCREASE
Climate change
and the transition
to net zero presents
increased potential
of associated regulatory
changes going forward.
Some investments
maintain
a reserve or
contingency
designed to meet a
change
in law costs
and/or have
a mechanism to
allow some
change in law
costs (typically
building
maintenance
related)
to be passed back
to the
public sector. The
possibility
remains for there
to be
changes in law or
regulation
(including, for
example,
in relation to
climate
change or as a
result of
Brexit) that have
the potential
to impact costs or
obligations
of the Company or
portfolio
projects, which
may not
be fully capable
of mitigation.
----------------------------------------------- ------------------------- -------------------
Transition to net zero A large portion of
In 2019, the UK the
Government Company's
committed to the net investments are
zero target as availability type
recommended assets
by the Climate Change where the cash
Committee. Reaching net flows are
zero greenhouse gas based on making
('GHG') the asset
emissions requires available in a
extensive pre-agreed
changes across the manner. The cash
economy. flows
Major infrastructure from such
decisions need to be investments are
made in the near future. largely insulated
These changes are from
unprecedented changes to the net
in their overall scale zero
and therefore may impact transition.
the use case of a The changes
variety arising from
of infrastructure a transition to a
including low-carbon
altering the way economy have the
infrastructure potential
is operated and to be
utilised. wide-ranging,
including
adapting to
decarbonisation
of heat, increased
electrification
of transportation
and other
systems previously
dependent
on fossil fuels,
and
decarbonisation
of construction.
It is
expected
infrastructure
will continue to
play a
key role in the
transition
to a low-carbon
economy.
The Company
believes the
portfolio to be
well placed
for the transition
to net
zero.
Tax and Accounting Change in tax rates
Rates of tax, both in
the UK and overseas
jurisdictions
in which the Company
operates, may increase
in the future if
government
policy were to change.
-------------------------
10
-------------------------
The Company
typically
incorporates
changes in
tax rates within
its forecast
cash flows and NAV
once
substantively
enacted,
or where there is
a reasonable
expectation of
substantial
enactment shortly
after
the valuation
date.
--- ------------------------- -------------------
DECREASE Change in tax
Headline rates legislation The Company takes
of Corporation Changes in tax a cautious
tax increased in legislation approach to tax
the UK reducing across the multiple planning.
the likelihood jurisdictions The Board monitors
of another imminent in which the Company changes
increase. However has investments can in tax legislation
other jurisdictions reduce and
may look to increase returns, impacting on takes advice as
rates in a post-Covid the Company's future appropriate
environment. cash flow returns and from external,
hence valuation independent,
(calculated qualified
on a discounted cash advisers. While
flow basis). the Board and the
The OECD's Action Plan Company's
on Base Erosion and Investment Adviser
Profit seek
Shifting ('BEPS'), to minimise the
published impact
in 2013, seeks to of adverse changes
address in tax
perceived flaws in requirements, its
international ability
tax rules. It sets out to do so is
15 actions to counter naturally limited.
BEPS in a comprehensive The Company's
and coordinated way. Investment
Countries in which the Adviser continues
Company invests have to monitor
been assessing their developments
compliance or otherwise relating to
with this guidance. tax reform across
the jurisdictions
in which the
Company has
operations. Future
legislation
in response to the
OECD
proposals, or
changes in
approach to
existing
legislation
as a consequence
of market
practice or
updated guidance,
continue to have
the potential
to negatively
impact the
Company.
----------------------------------------------- ------------------------- -------------------
CENTRAL OPERATIONS
-----------------------------------------------------------------------------------------------
The Company's The financial
Financial Forecasts projections models used
depend on the use of to generate
11 financial models to financial
NO SIGNIFICANT calculate its future forecasts
CHANGE projected investment are generally
returns. These are subject to model
in turn dependent on audit by external
the outputs from other professional
financial model service firms,
forecasts which is a
at the underlying process designed
investment to identify
entity level. There errors. The
may be errors in any comparison of
of these financial past actual
models, including performance of
calculation, investments
input, logic, and output against past
errors. Once corrected, projected
such errors may lead performance also
to a revision in gives confidence
projected in financial
cash flows and thus models where
impact valuation. actual performance
The financial forecasts has closely
of certain operating matched projected
infrastructure performance.
businesses However, there can
can have more be no assurance
variability that forecasts
than contracted will be realised,
concessions particularly in
given the wider range relation to
of variables that apply operational
and are therefore infrastructure
inherently businesses where
more difficult to more variables
forecast apply.
accurately. Investments in
regulated
businesses
are considered
very long-term,
beyond the much
shorter regulatory
cycles. Valuations
of such
businesses should
take into
account robustness
of yield
and potential for
increases
in regulated asset
base over
time.
------------------------- -------------------
Sensitivities
The Company publishes Financial models
information relating are managed
to its portfolio by a dedicated
including team with a
projections of how background in
portfolio performance financial
and valuation might modelling
be impacted by changes and experience of
in various factors managing
e.g. interest rates, models in a manner
inflation, deposit that seeks
rates, etc. The to minimise the
sensitivity risk of error.
analysis and projections Sensitivities are
are not forecasts and produced
actual performance for the
is likely to differ information of
(possibly significantly) relevant
from that projection stakeholders and
as in practice the are accompanied
impact of changes to by disclaimers and
such factors will be guidance
unlikely to apply evenly explaining that
across the portfolio limited reliance
or in isolation from can be placed upon
other factors. them.
----------------------------------------------- ------------------------- -------------------
VIABILITY STATEMENT
In accordance with provision 31 of the 2018 revision of the UK
Code of Corporate Governance, we have considered the Company's
viability as summarised below. Due to the long-term and/or
contractual nature of our investments, we have a significant level
of confidence over the endurance and longevity of our business;
however, it is difficult to assess the regulatory, tax and
political environment on a long-term basis. Whilst we consider the
valuation of investment cash flows for the purposes of the NAV over
a considerably longer period than five years, we view five years as
an appropriate timeframe for assessing the Company's viability
given these inherent uncertainties.
The viability assessment process is embedded within the
Company's annual risk review cycle and involves the following:
1 An Audit and Risk Committee review and assessment of the risks
facing the Company. A summary of the review process is detailed on
pages 76 to 77;
2 Identification of those principal risks that are deemed more
likely to occur and have a potential impact on the Company's
viability over the viability period. This exercise has included
consideration of: a persistent low inflation rate environment
(noting that a high rate environment would typically be positive
for the Company's investment cash flows giving linkage of revenues
to inflation across many investments); large currency fluctuations
impacting on receipts from overseas investments; and the impact
from the loss of income from investments (whether due to key
subcontractor default, or other assets underperformance). We note
that a number of risks identified during the risk review process in
step one above may have implications for the Company's valuation
but may be considered insignificant from a five-year viability
perspective;
3 Quantification analysis of the potential impact of those
principal risks occurring in isolation and under plausible combined
sensitivity scenarios over the viability period;
4 Assessment of potential mitigation strategies to mitigate the
potential impact of principal risks over the viability period. This
exercise has considered the potential to liquidate investments
and/or refinance investments if necessary.
The viability assessment is approved by the Board. Following the
assessment, the Board has a reasonable expectation that the Company
will be able to continue in operation and meet all of its
liabilities as they fall due up to March 2027. This assessment is
based on the following assumptions which are not within the
Company's control:
- No significant changes to government policy, tax, laws and
regulations affecting the Company or its investments other than the
impacts already factored into future cash flows as part of the 31
December 2021 NAV valuation; and
- Continued availability of sufficient capital and market
liquidity to allow for refinancing/repayment of any short-term
recourse debt facility obligations as they become due, including in
relation to the Company's debt facility which remains available to
March 2024.
By order of the Board
Mike Gerrard John Le Poidevin
Chair Director
23 March 2022 23 March 2022
CORPORATE GOVERANCE
SUMMARY OF INVESTMENT POLICY
OVERVIEW
The Company invests in public or social infrastructure assets
and related businesses located in the UK, Australia, Europe, North
America and other parts of the world where the risk profile meets
the Company's risk and return requirements.
The Company has a long-term view and invests in operational and
construction phase assets for the life of the asset or concession,
or under a licence issued by a regulator unless there is a
strategic rationale for earlier realisation. The Company seeks to
enhance the capital value and the income derived from its
investments to optimise returns for its investors. The Investment
Policy is summarised below and available in full at
www.internationalpublicpartnerships.com.
INVESTMENT PARAMETERS
Maintaining the performance of the existing portfolio is the
Company's key focus. However, it will also seek attractive
opportunities to expand its portfolio, including:
- Investments with characteristics similar to the existing portfolio;
- Investments in other assets or concessions or regulated
businesses having a public or social infrastructure character with
either availability, property rental or user paid payment
mechanisms or appropriate regulatory frameworks;
- Investments in infrastructure assets or concessions
characterised by high barriers to entry and expected to generate an
attractive total rate of return over the life of the
investment;
- Divestments where an investment is no longer aligned with the
Company's investment objectives or where circumstances offer an
opportunity to enhance the value of the portfolio.
PORTFOLIO COMPOSITION
The Company will, over the long-term, maintain a spread of
investments both geographically and across industry sectors in
order to achieve a broad balance of risk in the Company's
portfolio. It does not expect to invest in non-OECD countries,
unless it can get comfortable with the risk-return profile.
Asset allocation will depend on the maturity of the local
infrastructure investment market, wider market conditions and the
judgement of the Investment Adviser and the Board on the
suitability of the investment from a risk and return perspective.
The Company Overview on pages 2 to 3 has details of the current
composition of the investment portfolio.
INVESTMENT RESTRICTIONS
The Company's Investment Policy restricts it from making any
investment of more than 20% of the total assets in any one
investment in order to limit the risk of any one investment to the
overall portfolio.
As a London Stock Exchange listed company, the Company is also
subject to certain restrictions pursuant to the UKLA Listing
Rules.
MANAGING CONFLICTS OF INTEREST
Further investments will continue to be sourced by the
Investment Adviser, Amber Fund Management Limited. Some of these
investments will have been originated and developed by, and in
certain cases may be acquired from, members of the Amber
Infrastructure Group.
The Company has established detailed procedures to deal with
conflicts of interest that may arise and manage conduct in respect
of any such acquisition. The Corporate Governance Report sets out
more details on the conflicts management process.
Financial management
The Company may also make prudent use of leverage to enhance
returns to investors, to finance the acquisition of investments in
the short-term and to satisfy working capital requirements.
Under the Company's Articles, outstanding borrowings at the
Company level, including any financial guarantees to support
subscription obligations in relation to investments, are limited to
50% of the Gross Asset Value ('GAV') of the Company's investments
and cash balances. The Company has the ability to borrow in
aggregate up to 66% of such GAV on a short-term basis (i.e. less
than 365 days) if considered appropriate. Details of the Company's
CDF can be found on page 28.
Changes to investment policy
Material changes to the Investment Policy summarised in this
section may only be made by ordinary resolution of the shareholders
in accordance with the UK Listing Rules.
CORPORATE GOVERANCE
BOARD OF DIRECTORS
The table below details all directors of the Company at the date
of this report.
Mike Julia Bond(1) Stephanie Sally-Ann Meriel John Le Claire Giles
Gerrard Chair, Nomination Coxon(1) David Lenfestey Poidevin(1) Whittet(1) Frost
Board and Remuneration Date Chair, Chair, Senior
Chair, Committee; of Risk Date of Audit and Independent Date of
Chair, Chair, ESG Appointment: Sub-Committee Appointment: Risk Committee Director, Appointment:
Investment Committee 1 January (with 10 January Chair, 2 August
Committee (with effect 2022 effect 2020 Date of Management 2006
from 22 from 23 Appointment: Engagement
Date of March 2021); March 1 January Committee
Appointment: Chair, Risk 2021) 2016
4 September Sub-Committee Date of
2018 (until 22 Date of Appointment:
March 2021) Appointment: 10 September
10 January 2012
Date of 2020
Appointment:
1 September
2017
--------------- ------------------ -------------- ----------------- ---------------- ---------------- ----------------- ---------------
A resident A resident Stephanie A resident A resident A resident A resident A resident
in the in the UK, is a of Guernsey, of Guernsey, of Guernsey, of Guernsey, in the
UK, Mike Julia has Fellow Sally-Ann Meriel John has Claire has UK, Giles
has over 27 years' of the has over has 27 over 30 over 40 is a founder
30 years experience Institute 35 years years of years of years' of Amber
of financial of capital of Chartered of experience multi-sector business experience Infrastructure
and management markets Accountants in business experience. in the banking and has
experience in the financial in England infrastructure experience. John is industry worked
in global sector and and Wales projects With a a Fellow with Bank in the
infrastructure held senior and is in the background of the of Scotland, infrastructure
investment. positions a energy in Institute Bank of investments
He has within Credit non-executive sector, human-centred of Chartered Bermuda sector
held a Suisse, director including design Accountants and Rothschild for over
number including on several international for technology, in England and Co Bank 20 years.
of senior Head of London offshore she brings and Wales International, Giles
positions, One Bank listed transmission a strategic and a former where she is Chair
including Delivery companies. systems end-user partner was latterly and a
as an and Global Prior and the focus and of BDO managing director
assistant Head of to becoming challenges a broad LLP, where director of Amber
director Sovereign a of the set of he held and co-Head Infrastructure
of Morgan Wealth funds non-executive energy experiences a number until May Group
Grenfell activity. director, transition. encompassing of leadership 2016 when Holdings
plc, a Stephanie Having many sectors roles, she became Limited,
director led the held senior and scales including a non-executive the ultimate
of HM investment positions of organisation Head of director. holding
Treasury trust within ranging Consumer She is also company
Taskforce, capital the power from her Markets, a non-executive of the
deputy markets utility own start-ups where he director Investment
CEO and team arena, through developed of a number Adviser
later at PwC Sally-Ann global an extensive of listed to the
CEO of for the is currently corporations breadth and private Company
Partnerships UK and the Chief and of experience equity and various
UK plc Channel Operating governmental and knowledge investment of its
and, later, Islands. Officer programmes. across companies, subsidiaries.
a managing During of Guernsey the real none of
director her time Electricity estate, which is
of Thames at PwC, Ltd. She leisure a trading
Water Stephanie is a Chartered and retail company.
Utilities specialised Engineer sectors Claire is
Limited. in advising and Chartered in the a member
Mike has FTSE Director. UK and of the Chartered
a breadth 250 and overseas. Institute
of experience premium John is of Bankers
across London a non-executive in Scotland,
a range listed director the Chartered
of economic companies on several Insurance
and social on plc boards Institute
infrastructure accounting, and chairs and the
sectors corporate a number Institute
and has governance, of audit of Directors
been involved risk committees. and is a
in some management Chartered
of the and strategic Banker and
largest matters. holds the
infrastructure Institute
projects of Directors
in the Diploma
UK. He in Company
is a Fellow Direction.
of the
Institution
of Civil
Engineers.
--------------- ------------------ -------------- ----------------- ---------------- ---------------- ----------------- ---------------
LISTED COMPANY AND OTHER RELEVANT DIRECTORSHIPS
------------------------------------------------------------------------------------------------------------------------------------------------
Mike Gerrard Julia Bond(1) Stephanie Sally-Ann Meriel John Le Claire Giles Frost
Coxon(1) David (1) Lenfestey Poidevin(1) Whittet(1)
----------------- -------------- ------------------ ----------------- ---------------- ---------------- --------------- -----------------
Mike holds European PPHE Hotel Guernsey Bluefield BH Macro BH Macro Giles is
no other Assets Group Limited Electricity Solar Income Limited Ltd also a
listed Trust ('EAT') JLEN Ltd Fund Limited TwentyFour Eurocastle director
company NED of Environmental Channel Meriel Income Investment of a number
positions Foreign, Assets Islands sits on Fund Limited Ltd of the
but holds Commonwealth Group Limited Electricity a number Super Group Riverstone Company's
several & Development Apax Global Grid of other (SGHC) Energy subsidiary
non-executive Office Alpha Limited Sally-Ann commercial Limited Ltd and investment
positions and Strategic is also boards TwentyFour holding
within Command a director including Select entities
boards of a Gemserv, Monthly and of
and committees health-related Jersey Income other entities
that oversee charity. Telecom Fund Ltd in which
the development and Aurigny Third Point the Company
and delivery Air Services Offshore has an
of and is Investors investment.
infrastructure a committee Ltd He does
investments member not receive
in the for the directors'
UK and Guernsey fees from
Europe. Institute these roles.
of Directors.
----------------- -------------- ------------------ ----------------- ---------------- ---------------- --------------- -----------------
1 All of the independent directors are members of all Committees
with the exception of Mr Gerrard, who is not a member of the Audit
and Risk Committee. Mr Frost is a non-independent director.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT
Introduction
The Board of Directors are committed to high standards of
corporate governance and has put in place a framework for corporate
governance which it believes is appropriate for an investment
company that is a constituent of the FTSE 250 All-Share Index.
The Board is responsible to shareholders for the overall
direction and oversight of the Company, for agreeing its strategy,
monitoring its financial performance, and setting and monitoring
its risk appetite.
This section describes how the Company is governed. It explains
how the Board is organised and operates, including the roles and
composition of each of its Committees, and provides details on its
Board members and how they are remunerated. As an investment
company, the Company has no employees and relies on the advice and
expertise of its key suppliers, notably its Investment Adviser,
Amber Fund Management Limited ('Amber'). This section therefore
also explains the nature of the Company's relationship with the
Investment Adviser , and how this is managed, including the
remuneration of the Investment Adviser.
Compliance with Corporate Governance Codes and regulations
The Company has a Premium Listing on the London Stock Exchange
and, in common with other companies listed on the Exchange, is
required to confirm its compliance with (or explain departures
from) the UK Corporate Governance Code (the 'UK Code'). This
requirement applies regardless of where a company is incorporated.
A revised UK Code was issued in July 2018, which applies to
accounting periods beginning on or after 1 January 2019 and
therefore applies to the Company for the financial year ended 31
December 2021.
The Company is a member of the Association of Investment
Companies (the 'AIC'). The Financial Reporting Council (the 'FRC')
acknowledges that the AIC Corporate Governance Code issued in
February 2019 (the 'AIC Code') can assist externally managed
companies in meeting their obligations under the UK Code in areas
that are of specific relevance to investment companies. This also
applied to accounting periods beginning on or after 1 January
2019.
The Guernsey Financial Services Commission (the 'GFSC') has also
confirmed that companies that report against the UK Code or AIC
Code are deemed to meet the Guernsey Code of Corporate
Governance.
The AIC Code is available from the AIC website
(www.theaic.co.uk). The UK Code is available from the FRC website
(www.frc.co.uk).
The Company has complied throughout the year with all the
provisions of the AIC Code and as such also meets the requirements
of the UK Code. However, as an investment company, most of the
Company's day-to-day responsibilities are delegated to third
parties. The Company does not have any executive directors. The UK
Code's two separate principles of setting out the responsibilities
of the chief executive and disclosing the remuneration of executive
directors (Principles G and Q of the UK Code) are therefore not
applicable.
Although the Company is registered in Guernsey, in accordance
with the guidance set out in the AIC code, this Annual Report
contains a description of how the Directors have considered matters
set out in Section 172 of the UK Companies Act 2006 in relation to
stakeholder engagement and the success of the Company. See page 48
for more information.
During the year, the Company was subject to EU Regulation
(2017/653) ('the Regulation') which deemed it to be a packaged
retail and insurance-based investment product ('PRIIPs'). In
accordance with the requirements of the Regulation, the Company
published and updated its three-page Key Information Document
('KID') on 9 September 2021. The KID is available on the Company's
website, www.internationalpublicpartnerships.com/investors, and
will continue to be updated at least every 12 months in accordance
with the relevant UK PRIIPs regulations in force at the time.
Board and Committees
The Board sets the strategy for the Company and makes decisions
on changes to the portfolio (including approval of acquisitions,
disposals and valuations). Through Committees, and the use of
external independent advisers, it manages risk and governance of
the Company. The Board has a majority of independent directors -
currently seven of the eight directors are independent.
Board of Directors
The Board of Directors currently consists of eight non-executive
directors, whose biographies, on pages 64 to 65, demonstrate a
breadth of investment and business experience.
The Board consists solely of non-executive directors and, for
the period of this report, was chaired by Mr Gerrard, who was
responsible for leadership of the Board and ensuring its
effectiveness in all aspects of its role. The Board considered that
Mr Gerrard was independent upon appointment and remained
independent throughout his term of service for the purposes of the
AIC Code.
For the purposes of the AIC Code, Mr Frost is not treated as
being an independent director, due to his relationship with the
Company's Investment Adviser. In accordance with the AIC Code, all
other non-executive directors were independent of the Company's
Investment Adviser on appointment to the Board and continue to
remain so.
Board Tenure and Re-election
Directors do not have service contracts. Directors are appointed
under letters of appointment, copies of which are available at the
registered office of the Company. All directors offer themselves
for re-election on an annual basis. The Board considers its
composition and succession planning on an ongoing basis.
In accordance with the AIC Code, when and if any director has
been in office (or on re-election would at the end of that term of
office have been in office) for more than nine years, the Company
will consider further whether there is a risk that such a director
might reasonably be deemed to have lost independence through such
long service. Ms Whittet joined the Board on 10 September 2012 and
will not be standing for re-election at the forthcoming AGM when
she will retire. The Board will then revert to seven Directors.
On 1 January 2022, the Board appointed Ms Coxon as part of its
ongoing succession planning. An independent external search agency,
OSA, was used for the appointment of Ms Coxon, and the Board can
confirm there is no connection with the Company or the Investment
Adviser. In addition, the Company can confirm Ms Coxon ceased
employment with PwC prior to the audit tender process in 2021 and
subsequent appointment of PwC as external auditor of the
Company.
Directors' Duties and Responsibilities
The Directors have adopted a set of Reserved Powers, which
establish the key purpose of the Board and detail its major
duties.
These duties cover the following areas of responsibility:
- Statutory obligations and public disclosure;
- Approval of the Company's mandate, objectives and strategy;
- Strategic matters and financial reporting;
- Board composition and accountability to shareholders;
- Overall risk assessment and management, including reporting,
compliance, monitoring, governance and control;
- Other matters having material effects on the Company.
These reserved powers of the Board have been adopted by the
Directors to demonstrate clearly the importance with which the
Board takes its fiduciary responsibilities and as an ongoing means
of measuring and monitoring the effectiveness of its actions.
The Board monitors the Company's share price and NAV and
regularly considers ways in which shareholder value may be
enhanced. These may include implementing marketing and investor
relations activities, appropriate management of share price
premium/discount and the relative positioning and performance of
the Company to its competitors. The Board is also responsible for
safeguarding the assets of the Company and for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Individual directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns them in
the furtherance of their duties. The Company maintains appropriate
Directors' and Officers' liability insurance in respect of legal
action against its directors on an ongoing basis and the Company
has maintained appropriate cover throughout the period.
All new directors receive introductory support and education
about the infrastructure sector, and the Company, from the
Investment Adviser upon joining the Board and, in consultation with
the Board Chair, all directors are entitled to receive other
relevant ongoing training as necessary.
Board Diversity
The Board is committed to maintaining the appropriate balance of
skills, gender, knowledge and experience among its members to
ensure strong leadership of the Company. When appointing Board
members, its priority will always be based on merit, but will be
influenced by the strong desire to maintain Board diversity. The
Board currently has five female directors making the gender balance
63% female and 37% male. Following the forthcoming AGM and Ms
Whittet's retirement, the gender balance will be 57% female and 43%
male. In addition, post-year end, the Company was listed as one of
the FTSE 250's 'Top 10 Best Performers' for gender diversity in the
FTSE Women Leaders review 2021.
Board Remuneration
The Nomination and Remuneration Committee considers matters
relating to the Directors' remuneration, taking into account
benchmark information (including fees paid to directors of
comparable companies). All fees payable to the Directors should
also reflect the time spent by the Directors on the Company's
affairs and the responsibilities borne by the Directors and be
sufficient to attract, retain and motivate Directors of a quality
required to run the Company successfully.
During the latter half of 2021, the Nomination and Remuneration
Committee recommended, having considered the Investment Company
Non-Executive Directors' Fees Review 2020 report published by Trust
Associates, and in line with the recommendations made by Trust
Associates in their evaluation of the Company's Board remuneration
undertaken in 2018, that Board remuneration be increased annually
in line with inflation. In line with the Nomination and
Remuneration Committee's desire to conduct an external market
review of Director fees every three years, the Board appointed
Condign Board Consulting Ltd in early 2022 to conduct this work and
their recommendations were subsequently adopted by the Board.
As a result, the Board resolved to increase Board remuneration
with effect from 1 January 2022 as outlined in the table below.
2022 FEE P.A. 2021 FEE P.A.
POSITION GBP GBP
Board Chair 96,600 87,600
Audit and Risk Committee Chair 69,500 59,800
Director (Independent and Non-Independent) 53,500 46,400
Senior Independent Director(1) 3,600 2,000
Risk Sub-Committee Chair(1) 3,100 2,000
Management Engagement Committee
Chair(1) 3,100 2,000
Nomination and Remuneration
Committee Chair(1) 3,100 2,000
ESG Committee Chair(1,2) 5,100 2,000
------------------------------------------- ------------- -------------
1 These are additional fees payable to directors chairing a committee.
2 The ESG Committee was formed on 22 March 2021.
The Chair of the Board is paid a higher fee in recognition of
additional responsibilities, as are the Chairs of all the
Committees of the Board and the Senior Independent Director.
There are no long-term incentive schemes provided by the Company
and no performance fees, or bonuses paid to directors. Any changes
to directors' aggregate remuneration are considered at the AGM of
the Company.
2021 FEES 2020 FEES
DIRECTOR GBP GBP
------------------- --------- ---------
Mike Gerrard 87,600 86,800
Julia Bond 50,400 49,900
Stephanie Coxon(1) nil nil
Sally-Ann David 48,400 44,765
Meriel Lenfestey 46,400 44,765
John Le Poidevin 59,800 59,200
Claire Whittet 50,400 49,080
Giles Frost(2) 46,400 45,900
------------------- --------- ---------
1 Ms Coxon was appointed to the Board on 1 January 2022.
2 The emoluments for Mr Frost are paid to his employer Amber
Infrastructure Limited, a related company of the Company's
Investment Adviser.
Mr Frost is also a director of a number of other companies in
which the Company directly or indirectly has an investment,
although he does not control or receive remuneration in relation to
these entities.
In addition to the director fees above, Mr Le Poidevin served as
a director to four Luxembourg subsidiary entities of International
Public Partnerships and was entitled to fees of GBP3,000 per entity
for the year ended 2021.
Directors' Interests
Directors, who held office at 31 December 2021, had the
following interests in the shares of the Company:
31 DECEMBER 2021 31 DECEMBER 2020
DIRECTOR NUMBER OF ORDINARY SHARES(1) NUMBER OF ORDINARY SHARES(1)
------------------- ----------------------------- -----------------------------
Mike Gerrard 159,181 159,181
Julia Bond 72,444 48,372
Stephanie Coxon(2) nil nil
Sally-Ann David 30,303 nil
Meriel Lenfestey 9,979 9,979
John Le Poidevin 160,653 130,350
Claire Whittet(3) 76,248 74,594
Giles Frost(4) 971,676 944,109
------------------- ----------------------------- -----------------------------
1 All shares are beneficially held.
2 Ms Coxon was appointed to the Board on 1 January 2022.
3 Holds shares through a Retirement Annuity Trust Scheme jointly with Ms Whittet's spouse.
4 Holds some shares through a personal investment company.
There have been no changes to the holdings of existing directors
between 31 December 2021 and the date of this report.
Committees of the Board
[Diagram can be found in PDF version of this document on the
Company's website].
The Board has established five Committees consisting of the
independent non-executive directors. The responsibilities of these
Committees are described below. Terms of reference for each
committee have been approved by the Board and are available on the
Company's website (www.internationalpublicpartnerships.com). In
addition to the Chair of the Board, a Senior Independent Director
is appointed as an alternative point of contact for shareholders
and leads on matters where it is not appropriate for the Chair to
do so.
AUDIT AND RISK COMMITTEE
The Audit and Risk Committee is comprised of the full Board,
with the exception of Mr Gerrard as Board Chair and Mr Frost as the
Non-Independent Director. However, Mr Gerrard and Mr Frost
routinely attend meetings of the Audit and Risk Committee as
observers.
Mr Le Poidevin is the current Chair of the Audit and Risk
Committee and Ms David is the current Chair of the Risk
Sub-Committee. Ms David was appointed Chair of the Risk
Sub-Committee in March 2021, taking over from Ms Bond, who was
appointed Chair of the ESG Committee in March 2021.
The duties of the Audit and Risk Committee in discharging its
responsibilities are outlined in the Audit and Risk Committee
Report.
In respect of its risk management function, the Audit and Risk
Committee, through the separately convened Risk Sub-Committee, is
also responsible for reviewing the Company's risk management
function and framework, in relation to the Investment Policy of the
Company including the acquisition and disposal of assets, the
valuation of assets and ensuring that the risk management function
of the Investment Adviser, Administrator and other third-party
service providers are adequate and to seek assurance of the
same.
The Audit and Risk Committee formally reviews the Company's
overall approach to risk management on an annual basis and its risk
register on at least a quarterly basis. Topics considered during
the year can be found in the Audit and Risk Committee Report on
pages75 to 78. The Committee is satisfied that the key risks that
could impact the Company and its investments were effectively
mitigated and reported upon and were broadly in line with those of
the Company's relevant industry peers.
INVESTMENT COMMITTEE
The Investment Committee is comprised of the full Board, with
the exception of Mr Frost as the Non-Independent Director, and is
chaired by Mr Gerrard, as Chair of the Company.
The Committee considers proposals relating to the acquisition
and disposal of investments and, if thought fit, approves those
proposals. Details of the transactions completed during the period
are outlined on pages 13 to 17 of this Annual Report.
MANAGEMENT ENGAGEMENT COMMITTEE
The Management Engagement Committee is comprised of the full
Board, with the exception of Mr Frost as the Non-Independent
Director; it is chaired by Ms Whittet. The duties of the Management
Engagement Committee in discharging its responsibilities are
outlined in the diagram on page 70.
The Management Engagement Committee carries out its review of
the Company's advisers through consideration of objective and
subjective criteria and through a review of the terms and
conditions of the advisers' appointments; with the aim of
evaluating performance, identifying any weaknesses and ensuring
value for money for the Company's shareholders.
During the year, the Management Engagement Committee formally
reviewed the performance of the Investment Adviser and other key
service providers to the Company and no material weaknesses were
identified. Overall, the Committee confirmed its satisfaction with
the services and advice received.
NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee is comprised of the
full Board, with the exception of Mr Frost as the Non-Independent
Director; it is chaired by Ms Bond.
The Committee is formally charged by the Board to consider the
structure, size, remuneration, skills and composition of the Board.
This includes its diversity and inclusion development in line with
the Company's responsible investment objective and management of
material ESG factors, ensuring diversity is strongly reflected at
Board level as outlined on page 68. It also oversees the
appointment and reappointment of directors, taking into account the
expertise and diversity of the candidates and their independence
(see pages 66 to 67 for more detail on the Committee).
In accordance with the Corporate Governance Code required for
listed companies of the premium segment of the London Stock
Exchange, the Company undertakes an externally facilitated
evaluation every three years. The last review was undertaken in the
later part of 2020 and its recommendations implemented during 2021.
In 2021, the Nomination and Remuneration Committee undertook an
internal evaluation of the performance of the Board and Chair. Each
Director was asked to provide written feedback regarding the
performance of the Board as a whole and the Chair set against a
range of best practice corporate governance criteria. A report of
this feedback was considered by the Nomination and Remuneration
Committee. No material issues were identified by the Directors
regarding the performance of the Board and Chair. An external
review of the performance of the Board and its Committees is
planned to take place again during 2023.
ESG Committee
The ESG Committee was formed on 22 March 2021. It is comprised
of the full Board and is chaired by Ms Bond.
The ESG Committee meets at least twice a year and supports the
Board in managing the Company's ESG performance and provides a
forum for mutual discussion and challenge on ESG policies with
respect to investments and divestments.
Board and Committee Meeting Attendance
The full Board meets at least four times per year and in
addition there is regular additional contact between the Board, the
Investment Adviser, the Administrator and the Company Secretary.
The agenda and supporting papers are distributed in advance of
quarterly Board and Committee meetings to allow time for
appropriate review and to facilitate full discussion at the
meetings.
The table below lists Directors' attendance at Board and
Committee meetings during the year(1) . In addition, during the
year, six ad hoc Board meetings and two Board Committee meetings(2)
took place to finalise matters that had been approved in principle
at full meetings of the Board.
MANAGEMENT NOMINATION
QUARTERLY AUDIT AND INVESTMENT ENGAGEMENT AND REMUNERATION
DIRECTORS BOARD RISK COMMITTEE ESG COMMITTEE COMMITTEE COMMITTEE COMMITTEE
------------------ ---------- ---------------- ---------------- ----------- ------------ ------------------
Maximum number 4 5 4 2 1 2
------------------ ---------- ---------------- ---------------- ----------- ------------ ------------------
Mike Gerrard 4 5 4 2 1 2
Julia Bond 4 5 4 2 1 2
Sally-Ann David 4 5 4 2 1 1
Meriel Lenfestey 4 5 4 2 1 2
John Le Poidevin 4 5 4 2 1 2
Claire Whittet 4 5 4 2 1 2
Giles Frost(3) 4 n/a 4 n/a n/a n/a
------------------ ---------- ---------------- ---------------- ----------- ------------ ------------------
1. Ms Coxon was appointed to the Board on 1 January 2022 and
therefore did not attend any Board or Committee meetings over the
course of 2021.
2. Board Committee meetings are formed of any two or more
members of the Board and do not require full attendance. All
members of the Board are appraised of the matters to be discussed
at the Committee meeting and have the opportunity to raise
questions to the Board Chair, Investment Adviser or other advisers,
as required.
3. Mr Frost is not a member of the Audit and Risk Committee,
Management Engagement Committee, Nomination and Remuneration
Committee or the Investment Committee. While Mr Frost attended the
majority of ad hoc Board and Committee meetings, as these meetings
considered recommendations from the Investment Adviser, his
presence does not count towards the quorum so has been excluded
from this tally.
The Board has reviewed the composition, structure and diversity
of the Board, succession planning, the independence of the
Directors and whether each of the Directors has sufficient time
available to discharge their duties effectively. The Board confirms
that it believes it has an appropriate mix of skills and
backgrounds, that a majority of directors should be considered as
independent in accordance with the provisions of the AIC Code and
that all Directors have the time available to discharge their
duties effectively.
Notwithstanding that a number of the independent directors sit
on the boards of other listed companies, the Board noted that these
individuals are exclusively non-executive directors and that listed
investment companies generally require less day-to-day
responsibility and time commitment than trading companies.
Furthermore, the Board noted that attendance of all Board and
Committee meetings during the year is high by all Directors and
that each Director has always shown the time commitment necessary
to fully and effectively discharge their duties as a director.
Accordingly, the Board recommends that shareholders vote in
favour of the re-election of all Directors at the forthcoming AGM.
As Ms Whittet will be retiring from the Board, she will not be
recommended in favour of re-election at the 2022 AGM. Please refer
to pages 67 to 68 outlining the Board's approach to diversity and
re-election.
Relationship with Administrator and Company Secretary
Ocorian Administration (Guernsey) Limited ('Ocorian') acts as
Administrator and Company Secretary and is responsible to the Board
under the terms of the Administration Agreement. Noting that final
responsibility lies with the Board, the Administrator ensures
compliance with Guernsey Company Law, London Stock Exchange listing
requirements, the regulatory requirements of the Guernsey Financial
Services Commission, anti-money laundering regulations, corporate
governance best practice and observation of the Reserved Powers of
the Board and in this respect the Board receives detailed quarterly
reports. The Directors have access to the advice and services of
the Company Secretary, who is responsible to the Board for ensuring
that Board procedures are followed and that it adheres to
applicable legislation, rules and regulations as referred to
above.
Relationship with the Investment Adviser
The Directors are responsible for the overall management and
direction of the affairs of the Company. Under the Investment
Advisory Agreement ('IAA'), Amber Fund Management Limited (a member
of the Amber Infrastructure Group Holdings Limited group of
companies) acts as Investment Adviser to the Company to review and
monitor current investments and to advise the Company in relation
to strategic management of the investment portfolio.
Contractual arrangements and fees
The IAA allows for the provision of investment advisory and
certain other financial services to the Board. In return, the
Investment Adviser receives fees based on the GAV and composition
of the investment portfolio as well as a contribution to expenses.
The annual base fees are detailed in note 17 to the financial
statements and calculated at the following rates:
- 1.2% for that part of the portfolio that bears construction
risk (i.e. the asset has not fully completed all construction
stages including any relevant defects period and achieved
certification by the relevant counterparty and senior lender);
- For fully operational assets:
o 1.2% for the first GBP750 million of the GAV of the
portfolio;
o 1.0% for that part of the portfolio that exceeds GBP750
million in GAV but is less than GBP1.5 billion;
o 0.9% for that part of the portfolio that exceeds GBP1.5
billion in GAV but is less than GBP2.75 billion;
o 0.8% per annum where GAV value exceeds GBP2.75 billion.
In addition, the GAV excludes uncommitted cash from capital
raisings.
The Company has a long-standing relationship with the Investment
Adviser and the Board believes that the continuation of this
relationship, on a long-term basis, is in the Company's best
interest. The current IAA was renegotiated in 2013 and has a
10-year fixed term with a five-year notice period. The Board
considers that, given the long-term nature of the Company's
investments, its responsibility for the detailed day-to-day
delivery of management services and relationships with public
sector clients, it is important that it benefits from the
continuity of service provided by a long-term advisory partner. To
ensure that shareholder interests are protected, termination
provisions have been put in place to ensure that, in the event of
poor investment performance, the Company has the flexibility to
remove the Investment Adviser.
The Investment Adviser is also entitled to receive an asset
origination fee of 1.5% of the value of new investments acquired by
the Company. It should be noted that, generally, the Investment
Adviser bears the risk of abortive transaction origination costs
and that this fee has been waived or reduced by agreement in the
past where it has been deemed appropriate to do so for the
transaction in question.
Cash receipts from capital raisings and tap issuances are not
included in the GAV for the purposes of the calculation of base
fees until such receipts are invested for the first time.
Investment APPROVAL PROCESS
As outlined above, the Investment Committee, comprised of
independent directors of the Company, make decisions with respect
to new investments or divestments after reviewing recommendations
made by the Company's Investment Adviser. The Investment Adviser
has a detailed set of procedures and approval processes in relation
to the recommendation it makes to the Board.
It is expected that further investments will be sourced by the
Investment Adviser. It is likely that some of these investments
will have been originated and developed by, and in certain cases
may be acquired from, other members of the Investment Adviser's
group. Where that is the case, the conflicts management process
summarised overleaf is followed.
Managing Conflicts of Interest
The Company has established detailed procedures to deal with
conflicts of interest that may arise on investments acquired from
the Investment Adviser's group and manage conduct in respect of any
such acquisitions. The Company's Board has a majority of
independent members and a Chair who is independent of the
Investment Adviser. Each Director is required to inform the Board
of any potential or actual conflicts of interest prior to Board
discussions.
The potential conflicts of interest that may arise include when
an Amber entity is an existing investor in the target entity while
an associated company, AFML, acts on the 'buyside' as Investment
Adviser to the Company. The Investment Advisory Agreement contains
procedures with the intention of ensuring that the terms on which
the vendors of such assets dispose of their assets are fair and
reasonable to the vendors; and on the 'buyside' the Company as
Investment Adviser must be satisfied as to the appropriateness of
the terms for and the price of the acquisition. For more detail on
the features of this procedure please refer to the Company's latest
prospectus available on the website:
www.internationalpublicpartnerships.com.
The acquisition of all assets, including those from any
associate of the Investment Adviser is considered and approved in
advance by the Investment Committee. In considering any such
acquisition, the Investment Committee will, as it deems necessary,
review and ask questions of the Buyside Committee of the Investment
Adviser and the Group's other advisers and the acquisition will be
approved by the Committee on the basis of this advice. The purpose
of these procedures is to ensure that the terms upon which any
investment is acquired from a member of the Amber group is on an
arm's length basis.
Risk Management and Internal Controls
The Board is responsible for overall risk management with
delegation provided to the Audit and Risk Committee. The system of
risk management and internal control has been designed to manage,
rather than eliminate, the risk of failure to meet the business
objectives. Regard is given to the materiality of relevant risks
and therefore the system of internal control cannot provide
absolute assurance against material misstatement or loss.
This process, which covers the Company and its consolidated
subsidiaries and therefore the consolidated group taken as a whole,
is outlined in further detail in the Risk Report found on pages 49
to 62.
Relations with Shareholders
The Board places great importance on communication with
shareholders and encourages shareholders to share their views. It
has responsibility for communication with the investor base and is
directly involved in major communications and announcements.
The Board receives regular reports on the views of shareholders
and the Board Chair and other Directors, including the Senior
Independent Director, are happy to make themselves available to
meet shareholders as required.
Despite the challenges presented by Covid-19, the Investment
Adviser, on behalf of the Company, has maintained an active
investor engagement programme. During the year, the Company's
Results Presentations and day-to-day investor relations activities
moved online with limited impact on the overall programme. During
2021, the Investment Adviser and members of the Board held formal
meetings with over 185 shareholders in addition to more informal
interaction, including other forms of correspondence. The Company
also maintained an active programme of sell-side engagement and the
Board is also informed on a regular basis of all relevant market
commentary on the Company by the Investment Adviser, Administrator
and the Company's Broker.
The AGM of the Company usually provides a forum for shareholders
to meet and discuss issues with the Directors and with the
Investment Adviser of the Company. As a result of Covid-19, the
Company encouraged shareholders to submit proxy forms in respect of
the AGM and to appoint the chair of the meeting as their proxy and
vote on the shareholders' behalf as they would not be permitted to
attend in person due to Covid-19 restrictions. It is the Board's
policy to publish the results of the voting at the AGM via the
Regulatory News Service ('RNS') at the completion of the
meeting.
To promote a clear understanding of the Company, its objectives
and financial results, the Board aims to ensure that information
relating to the Company is disclosed in a timely manner. The
Company's website (www.internationalpublicpartnerships.com) enables
investors to easily find publicly disclosed documents including
Annual Reports and RNS announcements, together with additional
background information on its assets and corporate practice.
Investors can register to receive notifications (via email) of RNS
announcements that the Company issues. The Board encourages
investors to utilise this useful online resource.
Any shareholder issues of concern, including on corporate
governance or strategy, can be addressed in writing to the Company
at its registered office address (see Key Contacts).
AUDIT AND RISK COMMITTEE REPORT
The Audit and Risk Committee (the 'Committee' for the purposes
of this Annual Report) is an essential part of the Company's
governance framework. The Board has delegated oversight of the
Company's financial reporting, internal controls, compliance and
external audit to the Committee. The terms of reference for the
Committee, together with details of the standard business
considered by the Committee, have been approved by the Board and
are available on the Company's website
(www.internationalpublicpartnerships.com).
The Committee is chaired by Mr Le Poidevin. Ms Bond led
responsibility for risk within the Risk Sub-Committee until March
2021, whereupon Ms David was appointed Chair of the Risk
Sub-Committee. An overview of the Committee's work during the year
and details of how the Committee has discharged its duties are set
out below.
Committee Meetings
The Committee meetings during the year were attended by the
Investment Adviser and Administrator by invitation. A
representative of the Company's external auditor also attended
those meetings where the annual audit cycle, the Annual Report and
financial statements and the half-yearly financial report were
considered.
All Committee members are considered to be appropriately
experienced to fulfil their role, having significant, recent and
relevant financial experience in line with the Corporate Governance
Code. Biographies of the Committee members can be found on pages 64
to 65.
Committee Agenda
The Committee's agenda during the year included:
- Review of the Company's risk profile, specific risks and
mitigation practices, with a special focus on emerging risks
including climate change;
- Review of the effectiveness of the Company's systems of internal control;
- Review of the regulatory environment within which the Company operates;
- Review of the Annual Report and financial statements and
half-yearly financial report and matters raised by management and
the external auditors (including significant financial reporting
judgements and estimates therein);
- Review of the appropriateness of the Company's accounting policies;
- Consideration and challenging of the draft valuation of the
Company's investments prepared by the Investment Adviser and
recommendations made to the Board on the appropriateness of the
portfolio valuation;
- Review of the effectiveness, objectivity and independence of
the external auditors, and the terms of engagement, cost
effectiveness and the scope of the audit;
- Overseeing transition of the Company's auditor;
- Approving the external auditor's plan for the current year end; and
- Review of the policy on the provision of non-audit services by the external auditor.
Key activities considered during the year
The Committee undertook the following activities in discharging
its responsibilities during the year:
FINANCIAL REPORTING
The Committee reviewed the Company's Annual Report and financial
statements, the half-yearly financial report and interim quarterly
updates prior to approval by the Board and advised the Board with
respect to meeting the Company's financial reporting obligations.
The Committee reviewed the Company's accounting policies and
practices, including approval of critical accounting policies;
consideration of the appropriateness of significant judgements and
estimates; and advising the Board as to its views on whether the
Annual Report and financial statements, taken as a whole, was fair,
balanced and understandable.
The Committee considered the most significant accounting
judgement exercised in preparing the consolidated financial
statements to be the basis for determining the fair value of the
Company's investments, as detailed overleaf.
Fair Value of Investments
The Company's investments are typically in unlisted securities,
including shares and debt, hence market prices for such investments
are not typically readily available. Instead, the Company uses a
discounted cash flow methodology and benchmarks to market
comparables to derive the Directors' valuation of investments.
Valuations are prepared by the Investment Adviser and the
methodology requires a series of judgements to be made, as
explained in note 11 to the financial statements. The valuation
process and methodology were discussed with the Investment Adviser
regularly during the year. Key areas of focus subject to challenge
were also discussed with the auditor as part of the year end audit
planning and interim review processes. The Committee challenged the
Investment Adviser on the year end Fair Value of Investments as
part of its consideration of the audited statements.
During the year, the Committee reviewed the Investment Adviser's
quarterly valuation reports, reports on the performance of the
underlying assets and the Investment Adviser's assessment of
macroeconomic assumptions. Minor changes were made in the year to
the approach taken in applying foreign exchange rates when
converting non-GBP cash flows as part of the valuation process,
with immaterial overall impact. The Investment Adviser confirmed
that, other than these changes, the valuation methodology has been
applied consistently with prior years. The Committee also reviewed
and challenged the valuation assumptions (reasonableness of
underlying cash flows, discount rates, interest rates, foreign
exchange rates, inflation rates and tax rates).
The Committee scrutinised the quality and findings of the
external auditor in relation to their audit of the valuations,
including its assessment of management's underlying cash flow
projections and assumptions; macroeconomic assumptions; and
discount rate methodology and output. The auditor confirmed no
material adjustments were proposed.
The Committee concluded that a consistent valuation methodology
has been applied throughout the year and any forecast assumptions
applied were appropriate.
Revenue recognition
The Committee has considered the risk of inappropriate
accounting recognition of revenue to be a relatively low risk given
the nature of the Company's activities.
Internal controls over financial reporting
The Committee satisfied itself that the system of internal
control and compliance over financial reporting was effective,
through consideration of regular reports from the Investment
Adviser, the Administrator and external third-party advisers.
The Committee also considered the adequacy of resources,
qualifications and experience of staff in the finance function and
had direct access to and independent discussions with the external
auditor throughout the year.
Fair, balanced and understandable
The Committee seeks to establish arrangements to ensure fair,
balanced and understandable reporting. The Committee engaged in
extensive dialogue with management throughout the year and
considered the interim and annual financial statements as well as
quarterly updates and reports prepared by management of the
Investment Adviser. Following review of the Company's 2021 Annual
Report and financial statements, the Committee advised the Board
that, in its opinion, the Annual Report and financial statements,
taken as a whole, is fair, balanced and understandable and provides
the information necessary to assess the Company's performance,
operating model and strategy.
EXTERNAL AUDITOR
The Committee recommended to the Board the scope and terms of
engagement of the external auditor. The Committee considered
auditor objectivity and independence, audit tenure, audit tendering
and auditor effectiveness, as detailed below.
Objectivity and independence
In assessing the objectivity of the auditor, the Committee
considered the terms under which the external auditor may be
appointed to perform non-audit services, mindful of the ethical
standards for auditors and auditor independence.
Under the Company's policy for non-audit services, there is a
list of permitted services for which the external auditor may be
engaged, where the Committee considers that the provision of such
services would not necessarily impact its independence. Potential
services to be provided by the external auditor with an expected
value of up to GBP50,000, and which are permitted by the policy,
must be pre-approved by the Chair of the Committee; any services
above this value require pre-approval by the full Audit and Risk
Committee. Non-audit fees represented 13% of total audit fees
during the period under review, relating only to the half-yearly
review. PwC undertook its standard independence and objectivity
procedures in relation to non-audit engagements and confirmed
compliance with these to the Committee. Further details on the
amounts of non-audit fees paid to the auditor are set out in note 7
to the financial statements. These were reported to us and were not
considered to be a significant risk impacting the objectivity and
independence of PwC as external auditor.
Review of auditor effectiveness
The Committee performs an annual review of the objectivity,
quality and effectiveness of the audit, with consideration where
appropriate given to FRC Audit Quality Inspection Reports and FRC
Practice Aid guidance. The Committee conducted an in-depth review
in 2021 of the auditor's performance and the Committee was
satisfied in this regard. This was facilitated through the
completion of a questionnaire by relevant stakeholders (including
members of the Committee and senior members of the Investment
Adviser's finance team), review and challenge of the audit plan for
consistency with the Company's financial statement risks, and
review of the audit findings report. In accordance with the
relevant Corporate Governance Code principles, the Committee will
continue to review the effectiveness of the external auditor in
line with best practice.
Review of auditor's remuneration
The Committee carried out a benchmarking exercise of the
proposed audit fees for 2021, by carrying out a formal tendering
exercise, discussed further below.
Audit tendering and tenure
The Committee annually considers the reappointment of the
external auditor, including rotation of the audit partner. The
external auditor is required to rotate the audit partner
responsible for the Group audit every five years and the year to 31
December 2021 was the first year for John Luff, the current lead
audit partner.
During the year to 31 December 2021, following a formal tender
of its audit in line with best practice and continued audit
quality, the Company transitioned its audit to PwC. The Board
initiated a formal tender process in late 2019 with a longlist of
suitable audit firms approached. Following an initial dialogue and
screening process, shortlisted firms were formally invited to
tender for the audit of the Company. Formal tender proposals from
participating firms and meetings with the Board of Directors took
place during the year 2020. The key criteria considered by the
Audit Committee in reaching its tender decision included those of
audit quality, infrastructure audit and valuation experience, audit
approach, potential for added value, and fees. Following a
comprehensive assessment process, PwC was selected as the preferred
firm and, following approval at the AGM, assumed the role of the
Company's auditor for financial periods beginning 2021. A detailed
transition plan was agreed, with all parties working closely to
ensure an efficient and effective transition.
Risk Management
During the year, the Committee continued to ensure that the
Company's risk management framework and processes remained
effective in managing the Company's risks. Areas of note for the
year are discussed below. A review of significant developments
relating to the Company's risks arising in the year can be found in
the Risk Management section of this report, starting on page
49.
Viability assessment
The Committee carried out a robust assessment of the principal
and emerging risks facing the Company with a view to identify risks
which may impact the Company's viability. Detailed stress tests,
including an impact assessment on the Company's forecasted cash
flows, showed significant resilience in the Company's ability to
remain viable. The results of the risk assessment process are
detailed in the Viability Statement on page 62.
External controls review
During the year an independent external review of the Company's
controls framework in relation to bank payments, supplier
procurement and systems security was commissioned. The review is
currently ongoing, and further details will be provided in the
Company's half year Interim report later in the year.
Climate change
The Committee continued to strengthen the Company's approach to
managing climate change risk. During the year, continued
improvements were made to embed climate change further in the
reporting and risk management process. Further details can be found
in the Responsible Investment section from page 38, and in the
review of principal and emerging risks, from page 53.
REGULATORY AND TAX ENVIRONMENT
The Committee received regular reports from the Administrator
and Investment Adviser on regulation and regulatory developments.
The Company continues to maintain compliance with the requirements
of the Common Reporting Standard, the Retail distribution of
unregulated collective investment schemes (regulation which the
Company remains excluded from), the UK Criminal Finance Act 2017,
AIFMD, The Foreign Account Tax Compliance Act ('FATCA'), and UK
Packaged Retail and Insurance-based Investment Products (EU Exit)
Regulations 2019 as amended ('UK PRIIPs').
Focus for 2022
The Company will continue to focus on the impacts arising from
the Covid-19 pandemic, keep focus on regular and routine matters,
as well as continuing to monitor any political, tax and regulatory
developments in its applicable geographies.
John Le Poidevin
Chair, Audit and Risk Committee
23 March 2022
DIRECTORS' REPORT
Introduction
The Directors present their Annual Report on the performance of
the Company and Group for the year ended 31 December 2021.
Principal Activity
The Company is a limited liability, Guernsey-incorporated and
domiciled, authorised closed-ended investment company under
Companies (Guernsey) Law, 2008. The Company's shares have a premium
listing on the Official List of the UK Listing Authority and are
traded on the main market of the London Stock Exchange.
The Chair's Letter and Strategic Report contain a review of the
business during the year. A Corporate Governance Report is provided
on pages 64 to 74.
Directors' Indemnities
The Company has made qualifying third-party indemnity provisions
for the benefit of its Directors, which were made during the period
and remain in force at the date of this report.
Substantial Shareholdings
As at 31 December 2021, the Company had been notified, in
accordance with Chapter 5 of the Disclosure and Transparency Rules,
of the following interests in 5% or more of the Company's Ordinary
Shares to which voting rights are attached:
NO. OF ORDINARY
NAME OF HOLDER % ISSUED CAPITAL SHARES DATE NOTIFIED
--------------------------- ----------------- ---------------- --------------
11 October
Tilney Smith & Williamson 5.01 85,524,350 2021
--------------------------- ----------------- ---------------- --------------
There have been no additional notices between 31 December 2021
and the date of this report.
Directors' Authority to Buy Back Shares and Treasury Shares
The Company did not purchase any shares for treasury or
cancellation during the year.
The current authority of the Company to make market purchases of
up to 14.99% of the issued Ordinary Share Capital expires on 24 May
2022. The Company will seek to renew such authority at the AGM to
take place on 25 May 2022. Any buy back of Ordinary Shares will be
made subject to Guernsey law and within any guidelines established
from time-to-time by the Board and the making and timing of any buy
backs will be at the absolute discretion of the Board.
Purchases of Ordinary Shares will only be made through the
market at prices below the prevailing NAV of the Ordinary Shares
(as last calculated) where the Directors believe such purchases
will enhance shareholder value. Such purchases will also only be
made in accordance with the Listing Rules of the UK Listing
Authority, which provide that the price to be paid must not be more
than 5% above the average of the middle market quotations for the
Ordinary Shares for the five business days before the shares are
purchased (unless previously advised to shareholders). No such
shares were bought back by the Company during the prior year. Up to
10% of the Company's shares may be held as treasury shares.
Going Concern
The Company and Group's business activities, together with the
factors likely to affect the Company's future development,
performance and position, are set out in the Strategic Report on
pages 4 to 62. The financial position, cash flows, liquidity
position and borrowing of the Company and Group are described in
the financial statements on page 89 to 114.
The Directors have considered significant areas of possible
financial risk, and comprehensive financial forecasts have been
prepared and submitted to the Board for review. The Directors have,
based on the information contained in these forecasts and the
assessment of the committed banking facilities in place, formed a
judgement, at the time of approving the financial statements, that
the Company (and consolidated subsidiaries) have adequate resources
to continue in operational existence for the 15-month going concern
assessment review period, and at least 12 months from the approvals
of these financial statements.
After consideration, the Directors are satisfied that it is
appropriate to adopt the going concern basis in preparing the
financial statements.
Director Declaration
Each person who is a Director at the date of approval of this
Annual Report confirms that:
- So far as the Director is aware, there is no relevant audit
information of which the Company's external auditor is unaware.
- Each Director has taken all the steps that he/she ought to
have taken as a Director in order to make himself/herself aware of
any relevant audit information and to establish that the Company's
auditor is aware of that information. This confirmation is given
and should be interpreted in accordance with the provisions of
Section 249 of the Companies (Guernsey) Law, 2008.
Mike Gerrard John Le Poidevin
Chair Director
23 March 2022 23 March 2022
DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing financial statements
for each year which give a true and fair view, in accordance with
applicable Guernsey law and UK adopted international accounting
standards, of the state of affairs of the Company and its
consolidated subsidiaries (the 'Group') and of the profit or loss
of the Group for that year. In preparing those financial
statements, the Directors are required to:
- Select suitable accounting policies and then apply them consistently;
- Make judgements and estimates that are reasonable;
- State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
- Prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting
records, which disclose with reasonable accuracy at any time, the
financial position of the Group and to enable them to ensure that
the financial statements comply with the Companies (Guernsey) Law,
2008. They are also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for the prevention and
detection of fraud, error and non-compliance with law and
regulations.
The maintenance and integrity of the Company's website is the
responsibility of the Directors; the work carried out by the
auditor does not involve considerations of these matters and,
accordingly, the auditor accepts no responsibility for any change
that may have occurred to the financial statements since they were
initially presented on the website. Legislation in Guernsey
governing the preparation and dissemination of the financial
statements may differ from legislation in other jurisdictions.
Responsibility Statement of the Directors in respect of the
Consolidated Annual Report and Financial Statements
The Directors each confirm to the best of their knowledge
that:
- The consolidated financial statements, prepared in accordance
with UK adopted international accounting standards, give a true and
fair view of the assets, liabilities, financial position and net
return of the Group; and
- The Annual Report and financial statements includes a fair
review of the development and performance of the business and the
position of the Group, together with a description of the principal
risks and uncertainties faced.
Directors' Statement under the UK Corporate Governance Code
The Board, as advised by the Audit and Risk Committee, has
considered the Annual Report and financial statements and, taken as
a whole, consider it to be fair, balanced and understandable and
that it provides the information necessary for shareholders to
assess the Company's performance, business model and strategy.
By order of the Board
Mike Gerrard John Le Poidevin
Chair Director
23 March 2022 23 March 2022
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF INTERNATIONAL PUBLIC
PARTNERSHIPS LIMITED
Report on the audit of the consolidated financial statements
Our opinion
In our opinion, the consolidated financial statements give a
true and fair view of the consolidated financial position of
International Public Partnerships Limited (the "Company") and its
subsidiaries (together the "Group") as at 31 December 2021, and of
their consolidated financial performance and their consolidated
cash flows for the year then ended in accordance with UK-adopted
international accounting standards and have been properly prepared
in accordance with the requirements of The Companies (Guernsey)
Law, 2008.
What we have audited
The Group's consolidated financial statements comprise:
-- the consolidated balance sheet as at 31 December 2021;
-- the consolidated statement of comprehensive income for the year then ended;
-- the consolidated statement of changes in equity for the year then ended;
-- the consolidated cash flow statement for the year then ended; and
-- the notes to the consolidated financial statements, which
include significant accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the consolidated financial statements section of
our report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the consolidated
financial statements of the Group, as required by the Crown
Dependencies' Audit Rules and Guidance. We have fulfilled our other
ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
Audit scope
* The Company is a closed-ended investment company,
incorporated in Guernsey, whose ordinary shares are
admitted to trading with a premium listing on the
Main Market of the London Stock Exchange;
* Following a formal audit tender the Company changed
its auditor during 2021, this is therefore the first
year we are serving as the appointed independent
auditor of the Company;
* The Group comprises both consolidated and
unconsolidated entities. As disclosed under note 1 to
these consolidated financial statements, the Company
meets the definition of an 'investment entity' in
accordance with IFRS 10 'Consolidated Financial
Statements' and therefore accounts for its
subsidiaries, with the exception of certain
subsidiaries that are not themselves investment
entities, at fair value through profit or loss under
IFRS 9 'Financial Instruments'. The Company only
consolidates those subsidiaries that are not
themselves investment entities and whose main purpose
is to provide services relating to the Company's
investment activities;
* We conducted our audit of the consolidated financial
statements in Guernsey principally, using the
consolidated financial information and supporting
documentation provided by Amber Fund Management
Limited ("Amber") and Ocorian Administration
(Guernsey) Limited ("Ocorian"); both of whom the
board of directors have delegated the provision of
certain functions to; and
* We tailored the scope of our audit, and structured
our audit team to incorporate support from our PwC
valuation experts, taking into account the nature and
industry sector of the assets held within the
investment portfolio; the involvement of third
parties referred to above and the accounting
processes and controls
-----------------------------------------------------------------
Key audit matters
* Risk of fraud in revenue recognition
* Fair value measurement of investments at fair value
through profit or loss
-----------------------------------------------------------------
Materiality
* Overall Group materiality: GBP63.2 million based on
2.5% of equity attributable to equity holders of the
parent (i.e. net asset value)
* Performance materiality: GBP47.4 million
-----------------------------------------------------------------
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the consolidated
financial statements. In particular, we considered where the
Directors made subjective judgements; for example, in respect of
significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain, and we
considered the risk of climate change and the potential impact
thereof on our audit approach. As in all of our audits, we also
addressed the risk of management override of internal controls,
including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement
due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements of the current period and include
the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including
those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters, and any comments we make on
the results of our procedures thereon, were addressed in the
context of our audit of the consolidated financial statements as a
whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks identified by our
audit.
Key audit matter How our audit addressed the key audit
matter
------------------------------ ------------------------------------------------------------------
Risk of fraud in revenue We assessed the accounting policies in
recognition relation to the recognition of interest
Interest income of GBP81.9 and dividend income for compliance with
million and dividend the financial reporting framework and
income of GBP45.2 million, checked that revenue has been recognised
as reflected in the in accordance with the stated accounting
consolidated statement policies.
of comprehensive income
and note 4, are measured We understood and evaluated the internal
in accordance with the control environment in place at the Group
stated accounting policies. around the recognition of interest and
We considered the risk dividend income.
that management may We performed the following substantive
seek to manipulate revenue audit procedures to test revenue and check
in order to report the for any indication of fraudulent manipulation:
desired level of return * On a sample basis, we agreed dividend income
to investors, to be recognised to the relevant supporting documentation,
a significant audit including dividend notices or board approvals, and
risk, and accordingly traced the cash receipts to the Group's bank
this has been reported statements. For the sample of dividends received from
as a key audit matter. UK entities, we considered whether these have been
paid from sufficient distributable reserves and are
therefore valid distributions;
* On a sample basis, we recalculated interest income
based on the contractual agreements in place;
* Furthermore, we considered whether the interest and
dividends in our sample testing described above had
been recorded in the correct financial year. We
obtained further evidence over cut off and the
recording of dividend income in the correct financial
year through our audit work performed over investment
valuation, specifically in relation to our 'lookback'
testing in which we compared the actual vs forecast
cash flows and investigated variances exceeding an
established threshold; and
* We included specific consideration of any unusual
journals impacting revenue within our journals
testing.
We have not identified any matters to
report to those charged with governance
in relation to the risk of fraud in revenue
recognition.
------------------------------ ------------------------------------------------------------------
Fair value measurement We assessed the investment valuation accounting
of Investments at fair policy for compliance with the accounting
value through profit framework and best practice, and we checked
or loss that the investment valuations are measured
The investment portfolio, in accordance with the stated policy.
valued at GBP2.6 billion We understood and evaluated the Group's
at year end as reflected processes, internal controls and methodology
in the consolidated applied in determining the fair value
balance sheet and note of the investment portfolio in tailoring
11, comprises investments our audit approach.
in infrastructure companies We tested the key controls in relation
which largely generate to the review and approval of the significant
long-term predictable assumptions impacting the valuation models
cash flows. (including macroeconomic assumptions and
The valuation of the discount rates), as well as the quarterly
Group's investment portfolio performance and actual vs forecast distribution
involves complexity variance analysis and certain investment
and subjective management model review controls.
judgements and estimates. We performed the following substantive
The magnitude of the procedures:
amounts involved means * We assessed the appropriateness of the key
that there is the potential assumptions (i.e. macroeconomic assumptions, discount
for material misstatement. rates, terminal value assumptions) which impact the
Since the driver of entire investment portfolio, with the support of our
the Group's value is valuation experts as described below;
the valuation of the
investment portfolio,
this is the area of * We obtained the overall fair value reconciliation of
focus for stakeholders opening to closing fair value from management and
and a significant audit corroborated significant fair value movements during
risk area, and accordingly the year, thereby assessing the reasonableness and
this has been reported completeness of the movement in fair value for the
as a key audit matter. year;
* We stratified the portfolio based on the nature of
the underlying assets and performed a 'look back'
comparison of the forecast vs actual cash flows for
the current financial year for each stratification
category. This testing was supplemented with a
risk-based assessment performed to identify, and
investigate, investments deemed to be at a higher
risk of suffering an adverse valuation impact as a
result of Covid-19 and climate change related risk
exposure;
* We performed detailed testing over a sample of models
and significant inputs for the selected sample of
investments, selected via risk and value-based
targeted sampling, which comprised 65% of the
investment portfolio by value. This testing entailed
challenging key inputs in the models and obtaining
appropriate supporting documentation and evidence;
and
* With the support of our PwC valuation experts, we
checked and challenged the significant assumptions
made by management in valuing the risk-based selected
sample of assets, as well as performed a sensitivity
analysis of significant subjective assumptions and
checked the reasonableness of the overall valuation
of these assets with reference to comparable market
transactions and our experts' market knowledge. With
further support from our valuation experts, we
considered the reasonableness of the overall
portfolio valuation with reference to our industry
understanding and assessment of the fair value
analysis prepared by Amber on behalf of, and subject
to the review and approval of, the Directors.
* Further substantive tests performed over the risk and
value-based sample of investments included: -
o Back testing comparison of the forecast
vs actual cash flows for the current financial
year earned on each individual asset in
the sample; and
o Utilisation of a software tool to test
the model integrity for each individual
asset selected in our sample.
* In addition to the controls testing and substantive
testing performed over the entire portfolio, as
detailed above, we performed a risk-based year on
year variance analysis to identify, and investigate,
any unusual movements within the remaining 35% of the
portfolio.
* Finally, for a sample of investments, to test
ownership and existence we obtained third party
evidence of investment holdings and checked whether
the details obtained corroborated or contradicted the
records held by the Group and those used for
investment valuation purposes.
We have not identified any matters to
report to those charged with governance
in relation to the fair value measurement
of Investments at fair value through profit
or loss.
------------------------------ ------------------------------------------------------------------
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the consolidated
financial statements as a whole, taking into account the structure
of the Group, the accounting processes and controls, and the
industry in which the Group operates.
We have considered whether the consolidated subsidiary entities
included within the Group comprise separate components for the
purpose of our audit scope. However, we have taken account of the
Group's financial reporting system and the related controls in
place at Ocorian and Amber, and based on our professional judgement
have tailored our audit scope to account for the Group's
consolidated financial statements as a single component.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the consolidated financial statements as a whole.
Based on our professional judgement, we determined materiality
for the consolidated financial statements as a whole as
follows:
Overall group materiality GBP63.2 million.
-------------------------- ---------------------------------------------------
How we determined 2.5% of the equity attributable to equity
it holders of the parent (i.e. net asset value).
-------------------------- ---------------------------------------------------
Rationale for benchmark We believe that net assets is the most appropriate
applied benchmark because this is the key metric
of interest to investors. It is also a generally
accepted measure used for companies in this
industry.
-------------------------- ---------------------------------------------------
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% of overall
materiality, amounting to GBP47.4 million for the Group financial
statements.
In determining the performance materiality, we considered a
number of factors - risk assessment and aggregation risk and the
effectiveness of controls - and concluded that an amount at the
upper end of our normal range was appropriate.
We agreed with those charged with governance that we would
report to them misstatements identified during our audit above
GBP3.2 million as well as misstatements below that amount that, in
our view, warranted reporting for qualitative reasons.
Reporting on other information
The other information comprises all the information included in
the Annual Report and Financial Statements (the "Annual Report")
but does not include the consolidated financial statements and our
auditor's report thereon.
The Directors are responsible for the other information which
includes reporting based on the Task Force on Climate-related
Financial Disclosures (TCFD) recommendations.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report based on these responsibilities.
Responsibilities for the consolidated financial statements and
the audit
Responsibilities of the Directors for the consolidated financial
statements
As explained more fully in the Directors' responsibilities
statement, the Directors are responsible for the preparation of the
consolidated financial statements that give a true and fair view in
accordance with UK-adopted international accounting standards, the
requirements of Guernsey law and for such internal control as the
Directors determine is necessary to enable the preparation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the
Directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
Auditor's responsibilities for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the Directors.
-- Conclude on the appropriateness of the Directors use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group's
ability to continue as a going concern over a period of at least
twelve months from the date of approval of the consolidated
financial statements. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor's report
to the related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date
of our auditor's report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
-- Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters. We
describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Use of this report
This report, including the opinions, has been prepared for and
only for the members as a body in accordance with Section 262 of
The Companies (Guernsey) Law, 2008 and for no other purpose. We do
not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Report on other legal and regulatory requirements
Company Law exception reporting
Under The Companies (Guernsey) Law, 2008 we are required to
report to you if, in our opinion:
-- we have not received all the information and explanations we require for our audit;
-- proper accounting records have not been kept; or
-- the consolidated financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this
responsibility.
Corporate governance statement
The Listing Rules require us to review the Directors' statements
in relation to going concern, longer-term viability and that part
of the corporate governance statement relating to the Company's
compliance with the provisions of the UK Corporate Governance Code
specified for our review. Our additional responsibilities with
respect to the corporate governance statement as other information
are described in the Reporting on other information section of this
report.
The Company has reported compliance against the 2019 AIC Code of
Corporate Governance (the "Code") which has been endorsed by the UK
Financial Reporting Council as being consistent with the UK
Corporate Governance Code for the purposes of meeting the Company's
obligations, as an investment company, under the Listing Rules of
the FCA.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement, included within the continuous risk
management section, the corporate governance report, the audit and
risk committee report, the Directors' report and the Directors'
responsibilities statement, is materially consistent with the
consolidated financial statements and our knowledge obtained during
the audit, and we have nothing material to add or draw attention to
in relation to:
-- The Directors' confirmation that they have carried out a
robust assessment of the emerging and principal risks;
-- The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or
mitigated;
-- The Directors' statement in the consolidated financial
statements about whether they considered it appropriate to adopt
the going concern basis of accounting in preparing them, and their
identification of any material uncertainties to the Group's ability
to continue to do so over a period of at least twelve months from
the date of approval of the consolidated financial statements;
-- The Directors' explanation as to their assessment of the
Group's prospects, the period this assessment covers and why the
period is appropriate; and
-- The Directors' statement as to whether they have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of its
assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.
Our review of the Directors' statement regarding the longer-term
viability of the Group was substantially less in scope than an
audit and only consisted of making inquiries and considering the
Directors' process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the
Code; and considering whether the statement is consistent with the
consolidated financial statements and our knowledge and
understanding of the Group and its environment obtained in the
course of the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the
consolidated financial statements and our knowledge obtained during
the audit:
-- The Directors' statement that they consider the Annual
Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the
Group's position, performance, business model and strategy;
-- The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
-- The section describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to
report when the Directors' statement relating to the Company's
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
Other matter - Predecessor auditor
The consolidated financial statements of the Group for the year
ended 31 December 2020 were audited by another firm of auditors
whose report, dated 24 March 2021, expressed an unmodified opinion
on those statements.
Other matter - ESEF
In due course, as required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R, these
consolidated financial statements will form part of the
ESEF-prepared annual financial report filed on the National Storage
Mechanism of the Financial Conduct Authority in accordance with the
ESEF Regulatory Technical Standard ("ESEF RTS"). This auditor's
report provides no assurance over whether the annual financial
report will be prepared using the single electronic format
specified in the ESEF RTS.
John Luff
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants and Recognised Auditor
Guernsey, Channel Islands
23 March 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 DECEMBER 2021
Year ended Year ended
31 December 31 December
2021 2020
GBP'000 s GBP'000
Notes s
---------------------------------------- ----- --------------- ------------
Interest income 4 81,930 81,204
Dividend income 4 45,247 42,822
Net change in investments at fair value
through profit or loss 4 34,626 (27,731)
----------------------------------------- ----- --------------- ------------
Total investment income 161,803 96,295
Other operating income / (expense) 5 3,560 (3,326)
========================================= ===== =============== ============
Total income 165,363 92,969
Management costs 17 (26,173) (25,888)
Administrative costs (2,281) (1,825)
Transaction costs 6, 17 (3,896) (286)
Directors' fees (393) (416)
----------------------------------------- ----- --------------- ------------
Total expenses (32,743) (28,415)
----------------------------------------- ----- --------------- ------------
Profit before finance costs and tax 132,620 64,554
Finance costs 8 (3,453) (3,797)
----------------------------------------- ----- --------------- ------------
Profit before tax 129,167 60,757
Tax credit / (charge) 9 44 (44)
----------------------------------------- ----- --------------- ------------
Profit for the year 129,211 60,713
----------------------------------------- ----- --------------- ------------
Earnings per share
From continuing operations
Basic and diluted (pence) 10 7.78 3.76
----------------------------------------- ----- --------------- ------------
All results are from continuing operations in the year.
All income is attributable to the equity holders of the parent.
There are no non-controlling interests within the Consolidated
Group.
There are no other Comprehensive Income items in the current
year (2020: nil). The profit for the year represents the Total
Comprehensive Income for the year.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 DECEMBER 2021
Share capital
and share Other distributable Retained
premium reserve earnings Total
======
GBP'000 GBP'000 GBP'000 GBP'000
Notes s s s s
============================= ====== ============== ==================== ========== ==========
Balance at 1 January 2021 1,769,582 182,481 432,373 2,384,436
============================= ====== ============== ==================== ========== ==========
Profit for the year and
total comprehensive income - - 129,211 129,211
Issue of ordinary shares 15 140,629 - 140,629
Issue costs applied to
new shares 15 (1,362) - (1,362)
Dividends in the year 15 - - (124,114) (124,114)
============================= ====== ============== ==================== ========== ==========
Balance at 31 December
2021 1,908,849 182,481 437,470 2,528,800
============================= ====== ============== ==================== ========== ==========
YEARED 31 DECEMBER 2020
Share capital
and share Other distributable Retained
premium reserve earnings Total
======
GBP'000 GBP'000 GBP'000 GBP'000
Notes s s s s
============================= ====== ============== ==================== ========== ==========
Balance at 1 January 2020 1,753,840 182,481 488,918 2,425,239
============================= ====== ============== ==================== ========== ==========
Profit for the year and
total comprehensive income - - 60,713 60,713
Issue of ordinary shares 15 15,742 - - 15,742
Dividends in the year 15 - - (117,258) (117,258)
============================= ====== ============== ==================== ========== ==========
Balance at 31 December
2020 1,769,582 182,481 432,373 2,384,436
============================= ====== ============== ==================== ========== ==========
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2021
31 December 31 December
2021 2020
GBP'000 GBP'000
Notes s s
================================== ====== =========== ===========
Non-current assets
Investments at fair value through
profit or loss 11 2,579,434 2,345,433
================================== ====== =========== ===========
Total non-current assets 2,579,434 2,345,433
================================== ====== =========== ===========
Current assets
Trade and other receivables 11, 13 57,378 42,188
Cash and cash equivalents 11 56,090 44,263
Derivative financial instruments 11 2,713 268
Total current assets 116,181 86,719
================================== ====== =========== ===========
Total assets 2,695,615 2,432,152
================================== ====== =========== ===========
Current liabilities
Trade and other payables 11, 14 10,597 9,316
Bank loans 8, 11 - 38,400
Total current liabilities 10,597 47,716
================================== ====== =========== ===========
Non-current liabilities
Bank loans 8, 11 156,218 -
================================== ====== =========== ===========
Total non-current liabilities 156,218 -
================================== ====== =========== ===========
Total liabilities 166,815 47,716
================================== ====== =========== ===========
Net assets 2,528,800 2,384,436
================================== ====== =========== ===========
Equity
Share capital and share premium 15 1,908,849 1,769,582
Other distributable reserve 15 182,481 182,481
Retained earnings 15 437,470 432,373
================================== ====== =========== ===========
Equity attributable to equity
holders of the parent 2,528,800 2,384,436
================================== ====== =========== ===========
Net assets per share (pence per
share) 16 148.2 147.1
================================== ====== =========== ===========
The financial statements were approved by the Board of Directors
on 23 March 2022.
They were signed on its
behalf by:
Mike Gerrard John Le Poidevin
Chair Director
23 March 2022 23 March 2022
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
GBP'000 GBP'000
Notes s s
================================================= ====== ============= =============
Profit before tax in the Consolidated Statement
of Comprehensive Income(1) 129,167 60,757
Adjusted for:
(Gain) / loss on investments at fair value
through profit or loss 4 (34,626) 27,731
Finance costs(2) 8 3,453 3,797
Fair value movement on derivative financial 5,
instruments 11 (2,445) 3,894
Working capital adjustments
(Increase) in receivables (13,431) (13,349)
Increase / (decrease) in payables 1,282 (1,155)
Income tax (paid) / received (3) (105) 2,533
================================================= ====== ============= =============
Net cash inflow from operations (4) 83,295 84,208
================================================= ====== ============= =============
Investing activities
Acquisition of investments at fair value
through profit or loss 12 (252,725) (29,984)
Net repayments from investments at fair
value through profit or loss 53,350 39,464
------------------------------------------------- ------ ------------- -------------
Net cash (outflow) / inflow from investing
activities (199,375) 9,480
================================================= ====== ============= =============
Financing activities
Proceeds from issue of shares net of issue
costs 133,638 -
Dividends paid 15 (118,485) (101,516)
Finance costs paid(2) (4,825) (4,170)
Loan drawdowns(2) 178,215 29,544
------------------------------------------------- ------ ------------- -------------
Loan repayments(2) (60,397) (19,000)
------------------------------------------------- ------ ------------- -------------
Net cash inflow / (outflow) from financing
activities 128,146 (95,142)
================================================= ====== ============= =============
Net increase / (decrease) in cash and cash
equivalents 12,066 (1,454)
Cash and cash equivalents at beginning
of year 44,263 45,610
Foreign exchange (loss) / gain on cash
and cash equivalents (239) 107
================================================= ====== ============= =============
Cash and cash equivalents at end of year 56,090 44,263
================================================= ====== ============= =============
1 Includes interest received of GBP70.0 million (December 2020:
GBP66.7 million) and dividends received of GBP45.2 million
(December 2020: GBP42.8 million).
2 These cash flows represent the changes in liabilities arising
from financing liabilities during the period in accordance with IAS
7, 44A-E.
3 Includes cash flows received from unconsolidated subsidiary
entities in respect of surrender of tax losses.
4 Net cash flows from operations above are reconciled to net
operating cash flows before capital activity* as shown in the
Strategic Report on pages 28 to 29.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
1. Basis of Preparation
International Public Partnerships Limited is a closed-ended
authorised investment company incorporated in Guernsey under the
Companies (Guernsey) Law, 2008. The address of the registered
office is given on the inside back cover. The nature of the Group's
('Parent and consolidated subsidiary entities') operations and its
principal activities are set out on pages 4 to 5.
These financial statements are presented in pounds sterling as
this is the currency of the primary economic environment in which
the Group operates and represents the functional currency of the
Parent and all values are rounded to the nearest (GBP'000), except
where otherwise indicated.
Basis of Preparation
These financial statements have been prepared in accordance with
UK-adopted International Accounting Standards ('IFRS'), applicable
legal and regulatory requirements of Guernsey, and the Listing
Rules of the UK Listing Authority. These financial statements
follow the historical cost basis, except for financial assets held
at fair value through profit or loss and derivatives that have been
measured at fair value. The principal accounting policies adopted
are set out in relevant notes to the financial statements. The
Company voluntarily transitioned to UK-adopted International
Accounting Standards ('IAS') on 1 January 2021, following the UK's
departure from the EU, and reflecting the Company's place of
listing on the London Stock Exchange. This change constitutes a
change in accounting framework. However, there is no impact on
recognition, measurement or disclosure in the period reported as a
result of the change in framework. The new and revised standards
and interpretations becoming effective in the period have had no
material impact on the accounting policies of the Group.
The Directors have determined that International Public
Partnerships Limited is an investment entity as defined by IFRS 10
on the basis that the Company:
a) Obtains funds from one or more investor(s) for the purpose of
providing those investor(s) with investment management
services;
b) Commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
c) Measures and evaluates the performance of substantially all
of its investments on a fair value basis.
Accordingly, these financial statements consolidate only those
subsidiaries that provide services relevant to its investment
activities, such as management services, strategic advice and
financial support to its investees, and that are not themselves
investment entities. Subsidiaries that do not provide
investment-related services are required to be measured at fair
value through profit or loss in accordance with IFRS 9 Financial
Instruments.
Going Concern
The Directors have reviewed cash flow forecasts prepared by
management. Based on those forecasts, consideration of the Group's
operating costs and obligations as well as capital commitments, and
an assessment of the Group's committed banking facilities, it has
been considered appropriate to prepare these consolidated financial
statements of the Group on a going concern basis. In arriving at
their conclusion that the Group has adequate financial resources,
the Directors were mindful that the Group had unrestricted cash of
GBP56.1 million as at 31 December 2021. The Company continues to
fully cover operating costs and distributions from underlying cash
flows from investments. The Company has access to a corporate debt
facility of GBP250 million on a fully committed basis, and a
flexible 'accordion' component which, subject to lender consent,
allows for a future extension by an additional GBP150 million. At
the date of this report, approximately GBP85 million of the fully
committed portion remains available. A GBP20 million portion of the
facility is available to be utilised for working capital purposes.
The facility is forecast to continue in full compliance with the
associated banking covenants. The facility is available for
investment in new and existing assets until March 2024.
Accounting Policies
The same accounting policies, presentation and methods of
computation are followed in this set of financial statements as
applied in the previous financial year. The new and revised IFRS
and interpretations becoming effective in the period have had no
material impact on the accounting policies of the Group. Note 20
sets out a comprehensive listing of all new standards applicable
from 1 January 2021.
2. CRITICAL Judgements and Estimates
Investment Entity
In the judgement of the Directors, International Public
Partnerships Limited has been accounted for as an investment entity
as defined by IFRS 10, further details of which are given in note
1, Basis of preparation.
Fair Valuation of Investments at Fair Value through Profit or
Loss
Fair values are a critical estimate and are determined using the
income approach which discounts the expected cash flows at a rate
appropriate to the risk profile of each investment. In determining
the discount rate, relevant long-term government bond yields,
specific investment risks and evidence of recent transactions are
considered. Details of the valuation process and key sensitivities
are provided in note 11.
3. SEGMENTAL REPORTING
Based on a review of information provided to the chief operating
decision makers of the Group (determined to be the Board), the
Group has identified four operating and reportable segments based
on the geographical risk associated with the jurisdictions in which
it operates. The factors used to identify the Group's operating and
reportable segments are centered on the risk-free rates and the
maturity of the infrastructure sector within each region. Further,
foreign exchange and political risk is identified, as these also
determine where resources are allocated. Management has concluded
that the Group is currently organised into four operating and
reportable segments being UK, Europe (excl. UK), North America and
Australia.
Year ended 31 December 2021
=================================================================
Europe
UK (Excl. UK) North America Australia Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
s s s s s
========================= ========== ============= ============== ========== ==========
Segmental results
Dividend and interest
income 99,428 8,487 7,111 12,151 127,177
Fair value gain /
loss on investments 28,840 (2,839) 1,979 6,646 34,626
========================= ========== ============= ============== ========== ==========
Total investment income 128,268 5,648 9,090 18,797 161,803
========================= ========== ============= ============== ========== ==========
Reporting segment
profit (1) 92,142 7,803 8,868 20,398 129,211
========================= ========== ============= ============== ========== ==========
Segmental financial
position
Investments at fair
value 1,947,001 313,241 105,931 213,261 2,579,434
Current assets 116,181 - - - 116,181
========================= ========== ============= ============== ========== ==========
Total assets 2,063,182 313,241 105,931 213,261 2,695,615
Total liabilities (166,815) - - - (166,815)
========================= ========== ============= ============== ========== ==========
Net assets 1,896,367 313,241 105,931 213,261 2,528,800
========================= ========== ============= ============== ========== ==========
Year ended 31 December 2020
=================================================================
Europe
UK (Excl. UK) North America Australia Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
s s s s s
========================= ========== ============= ============== ========== ==========
Segmental results
Dividend and interest
income 95,371 7,723 8,494 12,438 124,026
Fair value gain /
loss on investments (20,364) (24,777) 1,021 16,389 (27,731)
========================= ========== ============= ============== ========== ==========
Total investment income
/ (loss) 75,007 (17,054) 9,515 28,827 96,295
========================= ========== ============= ============== ========== ==========
Reporting segment
profit / (loss) (1) 42,768 (18,569) 9,582 26,932 60,713
========================= ========== ============= ============== ========== ==========
Segmental financial
position
Investments at fair
value 1,729,191 295,824 104,963 215,455 2,345,433
Current assets 86,719 - - - 86,719
========================= ========== ============= ============== ========== ==========
Total assets 1,815,910 295,824 104,963 215,455 2,432,152
Total liabilities (47,716) - - - (47,716)
========================= ========== ============= ============== ========== ==========
Net assets 1,768,194 295,824 104,963 215,455 2,384,436
========================= ========== ============= ============== ========== ==========
1 Reporting segment results are stated net of operational costs including management fees.
Revenue from investments which individually represent more than
10% of the Group's interest and dividend income approximates
GBP15.4 million (2020: GBP26.7 million).
4. Investment Income
Accounting Policy
Interest income
Interest income is recognised when it is probable that the
economic benefits will flow to the Group and the amount of income
can be measured reliably. Interest income is accrued on a
time-apportioned basis and is recognised gross of withholding tax,
if any.
Dividend income
Dividend income is recognised gross of withholding tax on the
date the Company's right to receive the dividend income is
established.
Net change in Investments at fair value through profit or
loss
Net change in investments at fair value through profit or loss
includes all realised and unrealised fair value changes (including
foreign exchange movements) other than interest and dividend income
recognised separately.
Year ended Year ended
31 December 31 December
2021 2020
GBP'000 s GBP'000 s
------------------------------------------------ ------------ ------------
Interest income
Interest on investments at fair value through
profit or loss 81,930 81,202
Interest on financial assets at amortised
cost - 2
------------------------------------------------ ------------ ------------
Total interest income 81,930 81,204
Dividend income 45,247 42,822
Net change in Investments at fair value through
profit or loss 34,626 (27,731)
------------------------------------------------ ------------ ------------
Total investment income 161,803 96,295
------------------------------------------------ ------------ ------------
Dividend and interest income includes transactions with
unconsolidated subsidiary entities. Changes in investments at fair
value through profit or loss are also recognised in relation to the
Group's investments in unconsolidated subsidiaries.
5. Other Operating INCOME /(EXPENSE)
Year ended Year ended
31 December 31 December
2021 2020
GBP'000 s GBP'000 s
-------------------------------------------------- ------------ ------------
Fair value movement on foreign exchange contracts 2,445 (3,894)
Other gains on foreign exchange movements 1,089 550
Other income 26 18
--------------------------------------------------- ------------ --------------
Total other operating income / (expense) 3,560 (3,326)
--------------------------------------------------- ------------ --------------
6. Transaction Costs
Year ended
31 December Year ended
2021 31 December
GBP'000 2020
s GBP'000 s
-------------------------- ------------ ------------
Investment advisory costs 3,896 286
Total transaction costs 3,896 286
-------------------------- ------------ ------------
Details of total transaction costs paid to the Investment
Adviser are provided in note 17.
7. Auditor's Remuneration
Year ended
31 December Year ended
2021 31 December
GBP'000 2020
s GBP'000 s
--------------------------------------------------------------- ------------ ------------
Fees payable to the Group 's auditor for the
audit of the Group 's financial statements 542 485
Fees payable to the Group 's auditor and their
associates for other services to the Group
* The audit of the Group 's consolidated subsidiaries 11 49
* The audit of the Group 's unconsolidated subsidiaries 20 121
--------------------------------------------------------------- ------------ ------------
Total audit fees 573 655
--------------------------------------------------------------- ------------ ------------
Other fees
* Interim review 73 17
* Other services - -
--------------------------------------------------------------- ------------ ------------
Total non-audit fees 73 17
--------------------------------------------------------------- ------------ ------------
8. Finance Costs AND BANK LOANS
Accounting Policy
Interest bearing loans and overdrafts are initially recorded as
the proceeds received net of any directly attributable issue costs.
Subsequent measurement is at amortised cost, with borrowing costs
recognised in the Consolidated Statement of Comprehensive Income in
the period in which they are incurred, using the effective interest
rate method. Arrangement fees are amortised over the term of the
corporate debt facility.
Finance costs for the year were GBP3.5 million (2020: GBP3.8
million). The Group has a corporate debt facility with GBP250
million available on a fully committed basis, with a flexible
'accordion' component which will, subject to lender approval, allow
for a future extension by an additional GBP150 million. The
interest rate margin on the corporate debt facility in the year was
170 basis points over SONIA. The facility matures in March 2024
with no repayments due ahead of maturity, and is secured over the
assets of the Group. The banking group for the facility consists of
National Australia Bank, the Royal Bank of Scotland International,
Sumitomo Mitsui Banking Corporation and Barclays Bank. The
drawdowns in the period were in the form of cash drawdowns used to
partially fund investments. As at December 2021 the facility was
GBP156.2 million cash drawn (December 2020: GBP38.4 cash drawn),
with GBP9.3 million drawn as letter of credit (December 2020: no
drawings under letter of credit). The uncommitted balance of the
facility which was not cash drawn or notionally drawn via letters
of credit, was GBP84.5 million (December 2020: GBP361.6 million).
Tax
Accounting Policy
Current tax is based on taxable profit for the period. Taxable
profit differs from net profit as reported in the Consolidated
Statement of Comprehensive Income as it excludes items of income or
expense that are taxable or deductible in past or future years and
it further excludes items that are never taxable or deductible. The
Group's asset/liability for current tax is calculated using tax
rates that have been enacted or substantively enacted at the
balance sheet date. The current tax charge/credit in the
Consolidated Statement of Comprehensive Income is recognised net of
receivables recognised for losses surrendered to unconsolidated
subsidiary entities.
Under the current system of taxation in Guernsey, the Company
itself is exempt from paying taxes on income, profits or capital
gains. Dividend income and interest income received by the Group
may be subject to withholding tax imposed in the country of origin
of such income.
Year ended Year ended
31 December 2021 31 December
GBP'000 s 2020
GBP'000 s
========================================= ================= ============
Current tax:
UK corporation tax credit - current year - -
UK corporation tax - prior year (2) -
Other overseas tax - current year (44) 75
Other overseas tax - prior year 2 (31)
Tax (credit) / charge for the year (44) 44
========================================= ================= ============
Reconciliation of effective tax rate: Year ended
31 December
Year ended 2020
31 December 2021 GBP'000
GBP'000 s s
================================================ ================== =============
Profit before tax 129,167 60,757
================================================ ================== =============
Exempt tax status in Guernsey - -
Application of overseas tax rates (44) 75
Group tax losses surrendered to unconsolidated - -
investee entities
Adjustments to previous year's assessment - (31)
================================================ ================== =============
Tax (credit) / charge for the year (44) 44
================================================ ================== =============
The income tax (credit) / charge above does not represent the
full tax position of the entire Group as the investment returns
received by the Company are net of tax payable at the underlying
investee entity level. As a consequence of the adoption of IFRS 10
investment entity consolidation exception, underlying investee
entity tax is not consolidated within these financial statements.
To provide an indication of the tax paid across the wider
portfolio, total forecasted corporation tax payable by the Group's
underlying investments is in excess of GBP1 billion (December 2020:
GBP1 billion) over their full concession lives.
9. Earnings Per Share
The calculation of basic and diluted earnings per share is based
on the following data:
Year ended Year ended
31 December 31 December
2021 2020
GBP'000s GBP'000s
================================================== ============= =============
Earnings for the purposes of basic and diluted
earnings per share being net profit attributable
to equity holders of the parent 129,211 60,713
================================================== ============= =============
Number Number
================================================== ============= =============
Weighted average number of Ordinary Shares for
the purposes of basic and diluted earnings per
share 1,660,869,679 1,613,799,526
================================================== ============= =============
Basic and diluted (pence) 7.78 3.76
================================================== ============= =============
The denominator for the purposes of calculating both basic and
diluted earnings per share is the same as the Group has not issued
any share options or other instruments that would cause
dilution.
10. Financial Instruments
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
instrument. Financial assets are derecognised when the contractual
rights to the cash flows from the instrument expire or the asset is
transferred, and the transfer qualifies for derecognition in
accordance with IFRS 9 Financial Instruments. Financial liabilities
are derecognised when the obligation is discharged, cancelled or
expired. Specific financial asset and liability accounting policies
are provided below.
11.1 Financial assets
31 December 31 December
2021 2020
GBP'000s GBP'000s
============================================================= ===========
Investments at fair value through profit and loss 2,579,434 2,345,433
Financial assets at amortised cost
Trade and other receivables 57,378 42,188
Cash and cash equivalents 56,090 44,263
Derivative financial instruments at fair value
through profit or loss
Foreign exchange contracts 2,713 268
=================================================== ========= =============
Total financial assets 2,695,615 2,432,152
=================================================== ========= ===========
Accounting Policy
The Group classifies its financial assets as at fair value
through profit or loss or as financial assets at amortised cost.
The classification depends on the purpose for which the financial
assets were acquired, with investments in unconsolidated
subsidiaries (other than those providing investment-related
services) being at fair value through profit or loss as required by
IFRS 10. The accounting policy for bank loans is included earlier
in note 8.
Investments at fair value through profit or loss
Investments in underlying unconsolidated subsidiaries and other
non-controlled investments are held in a portfolio, the business
model of which is to manage them on a fair value basis. The Group's
policy is to fair value both the equity and debt investments in
underlying assets together. All transaction costs relating to the
acquisition of new investments are recognised directly in profit or
loss. Subsequent to initial recognition, equity and debt
investments are measured at fair value with changes in fair value
recognised within total investment income in the Consolidated
Statement of Comprehensive Income.
Trade and other receivables
Trade and other receivables that meet the contracted cash flow
test as solely payments of principal and interest and which are
held in a business model to receive these contractual cash flows
are classified as trade and other receivables. Financial assets
with maturities less than 12 months are included in current assets,
financial assets with maturities greater than 12 months after the
balance sheet date are classified as non-current assets.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term highly liquid investments with an
original maturity of three months or less that are readily
convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Derivative financial instruments
Derivatives are classified as financial assets and liabilities
at fair value through profit or loss, held for trading. Derivatives
are recognised initially, and are subsequently remeasured, at fair
value. Derivatives are shown as assets when their fair value is
positive or as liabilities when their fair value is negative. Fair
value movements on derivative financial instruments held for
trading are recognised in the Consolidated Statement of
Comprehensive Income.
Impairment of financial assets
Financial assets, other than those classified at fair value
through profit or loss, being trade and other receivables, adopt a
simplified approach to calculate any expected credit losses.
11.2 Financial liabilities
31 December 31 December
2021 2020
GBP'000s GBP'000s
---------------------------------------- ----------- -----------
Financial liabilities at amortised cost
Trade and other payables 10,597 9,316
Bank loans 156,218 38,400
---------------------------------------- ----------- -----------
Total financial liabilities 166,815 47,716
---------------------------------------- ----------- -----------
Accounting Policy
Trade and other payables
Financial liabilities, other than those specifically accounted
for under a separate policy, are measured at amortised cost and
stated based on the amounts which are considered to be payable in
respect of goods or services received up to the financial reporting
date. The carrying value of financial liabilities at amortised cost
is considered to approximate their fair value.
11.3 Financial risk management
The Group's objective in managing risk is the protection of
stakeholder value. Risk is inherent in the Group's activities and
is managed through a process of ongoing identification, measurement
and monitoring, subject to risk limits and other controls. The
Group is exposed to market risk (which includes currency risk,
interest rate risk and inflation risk), credit risk and liquidity
risk arising from the financial instruments it holds. The Board of
Directors is ultimately responsible for the overall risk management
of the Group, with delegation of oversight and activities
(including identifying and controlling risks) provided to the Audit
and Risk Committee and the Group's Investment Adviser. The Group's
risk management framework and approach is set out within the
Strategic Report (pages 49 to 62). The Board takes into account
market, credit and liquidity risks in forming the Group's risk
management strategy.
MARKET RISK
Market risk is the risk that the fair value or future cash flows
of financial instruments will fluctuate due to changes in market
variables such as changes in inflation, foreign exchange rates and
interest rates.
Inflation risk
The majority of the Group's cash flows from underlying
investments are linked to inflation indices. Changes in inflation
rates can have a positive or negative impact on the Group's cash
flows from investments. The long-term inflation assumptions applied
in the Group's valuation of investments at fair value through
profit or loss are disclosed in the fair value hierarchy section in
note 11.4.
The Group's portfolio of investments has been developed in
anticipation of continued inflation at or above the levels used in
the Group's valuation assumptions. Where inflation is at levels
below the assumed levels for a sustained period of time, investment
performance may be impaired. The level of inflation-linkage* across
the investments held by the Group varies and is not consistent.
Interest rate risk
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows from underlying
investments therefore impacting the value of investments at fair
value through profit or loss. The Group has limited exposure to
interest rate risk as the underlying borrowings within the
unconsolidated investee entities are either hedged through interest
rate swap arrangements via an economic hedge, are fixed rate loans
or the risk of adverse movement in interest rates is limited
through protections provided by the regulatory regime. For example,
it is generally a requirement under a PFI/PPP concession that any
borrowings are matched to the life of the concession. Hedging
activities are aligned with the period of the loan, which also
mirrors the concession period and are highly effective. However,
particularly in Australia, refinancing risk exists in a number of
such investments. The Group's corporate debt facility is unhedged
on the basis it is utilised as an investment bridging facility and
therefore drawn for a relatively short period of time. Therefore,
the Group is not significantly exposed to cash flow risk due to
changes in interest rates over its variable rate borrowings.
Interest income on bank deposits held within underlying investments
is included within the fair value of investments.
Foreign currency risk
The Group undertakes certain transactions denominated in foreign
currencies and therefore is exposed to exchange rate fluctuations.
Currency risk arises in financial instruments that are denominated
in a foreign currency other than the functional currency in which
they are measured. The Group uses forward foreign exchange
contracts to mitigate the risk of short-term volatility in foreign
exchange on significant investment returns from overseas
investments via an economic hedge. The Group does not hedge its
exposure to foreign exchange in relation to foreign currency
denominated investment balances. The carrying amounts of the
Group's foreign currency denominated monetary financial instruments
at the reporting date are set out in the table below:
31 December 31 December
2021 2020
GBP'000s GBP'000s
================================================= =========== ===========
Cash
Euro 875 414
Canadian Dollar 250 675
Australian Dollar 6,220 68
US Dollar 1,603 517
================================================= =========== ===========
8,948 1,674
Current receivables
Euro receivables 712 126
US Dollar receivables - 989
================================================= =========== ===========
712 1,115
Investments at fair value through profit or loss
Euro 299,262 295,824
Danish Krone 13,979 -
Canadian Dollar 39,439 39,391
Australian Dollar 213,261 215,455
US Dollar 66,492 65,572
================================================= =========== ===========
632,433 616,242
================================================= =========== ===========
Total 642,093 619,031
================================================= =========== ===========
Sensitivity analysis showing the impact of variations of the
above risks on the fair value of investments is shown in note
11.5.
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in a financial loss to the
Group. The Group has adopted a policy of dealing with creditworthy
counterparties and reviewing this on a regular basis at the
underlying entity level. The majority of underlying investments are
in public-private partnerships and similar concessions (which are
entered into with government, quasi government, other public,
equivalent low risk bodies), or in regulated businesses that
inherently exhibit low levels of credit risk. The maximum exposure
of credit risk over financial assets as a result of counterparty
default is the carrying value of those financial assets in the
balance sheet. In addition, the underlying investee entities
contract with third-party construction and facilities managements
contractors. The Group seeks to mitigate this risk through using a
diverse range of sub-contractors and through at least quarterly
review of the credit position of major contractors.
Liquidity risk
Liquidity risk is defined as the risk that the Group would
encounter difficulty in meeting obligations as and when they fall
due associated with financial liabilities that are settled by
delivering cash or another financial asset. The Group invests in
relatively illiquid investments (mainly non-listed equity and
loans). As a closed-ended investment vehicle there are no automatic
capital redemption rights. The Group manages liquidity risk by
maintaining adequate cash reserves, banking facilities and reserve
borrowing facilities and by continuously monitoring forecast and
actual cash flows. Cash flow forecasts assume full availability of
underlying infrastructure to the relevant public sector body or
end-user. Failure to maintain assets available for use or operating
in accordance with pre-determined performance standards or licence
conditions may lead to a reduction (wholly or partially) in the
investment income that the Group has projected to receive. The
Directors review the underlying performance of each investment on a
quarterly basis, allowing asset performance to be monitored. The
terms of public-private partnership contractual mechanisms also
allow for significant pass-down of unavailability and performance
risk to sub-contractors. Regulated asset regimes allow for the pass
through of efficiently incurred costs to the purchaser. The Group's
financial liabilities comprise trade and other payables, payable
within 12 months of the year end, and bank loans, repayable in
March 2024 as disclosed under note 8.
11.4 Fair value hierarchy
All financial instruments for which fair value is recognised or
disclosed are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
Level 1 - Quoted market prices in an active market (that are
unadjusted) for identical assets or liabilities;
Level 2 - Valuation techniques (for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable);
Level 3 - Valuation techniques (for which the lowest level input
that is significant to the fair value measurement is
unobservable).
During the period there were no transfers between Level 2 and
Level 3 categories.
Level 1:
The Group has no financial instruments classified as Level
1.
Level 2:
This category includes derivative financial instruments such as
interest rate swaps, RPI swaps and currency forward contracts. As
at
31 December 2021, the Group's only derivative financial
instruments were currency forward contracts amounting to an asset
of
GBP2.7 million (December 2020: asset of GBP0.3 million).
Financial instruments classified as Level 2 have been valued
using models whose inputs are observable in an active market (spot
exchange rates, yield curves, interest rate curves). Valuations
based on observable inputs include financial instruments such as
swaps and forward contracts which are valued using market standard
pricing techniques where all the inputs to the market standard
pricing models are observable.
Level 3:
This category consists of investments in equity and loan
instruments in underlying unconsolidated subsidiary entities and
other non-controlled investments which are classified at fair value
through profit or loss. At 31 December 2021, the fair value of
financial instruments classified within Level 3 totalled GBP2,579.4
million (December 2020: GBP2,345.4 million).
Financial instruments are classified within Level 3 if their
valuation incorporates significant inputs that are not based on
observable market data (unobservable inputs). A valuation input is
considered observable if it can be directly observed from
transactions in an active market, or if there is compelling
external evidence demonstrating an executable exit price.
Valuation process
Valuations are the responsibility of the Board of Directors. The
valuation of unlisted equity and debt investments is performed on a
quarterly(1) basis by the Investment Adviser. The valuation is
reviewed by the senior members of the Investment Adviser, and
reviewed and approved by the Board.
Valuation methodology
The valuation methodologies used are primarily based on
discounting the underlying investee entities' future projected net
cash flows at appropriate discount rates. Valuations are also
reviewed against recent market transactions for similar assets in
comparable markets observed by the Group or Investment Adviser and
adjusted where appropriate.
Cash flow forecasts for the full-term of each underlying
investment are generated by detailed investment specific financial
models. These models forecast the dividend, shareholder loan
interest payments, capital repayments and senior debt repayments
(where applicable) expected from the underlying investments. The
cash flows included in the forecasts used to determine fair value
are typically fixed under contracts, however there are certain
variable cash flows which are based on management's estimations
(see also pages 28 to 29 of the strategic report). The significant
unobservable inputs and assumptions used in projecting the Group's
net future cash flows are shown overleaf.
1 Indicative valuations are calculated in respect of each at 31
March and 30 September.
31 December 2021 31 December 2020
======================= =============== ========================= ==================
Inflation rates UK 2.75% RPI / 2.00% 2.75% RPI / 2.00%
CPIH CPIH
Australia 2.50% 2.50%
Europe (excl. 2.00% 2.00%
UK)
Canada 2.00% 2.00%
US(1) N/A N/A
======================= =============== ========================= ==================
Long-term deposit UK 1.00% 1.00%
rates(2)
Australia 2.00% 2.00%
Europe (excl. 0.50% 0.50%
UK)
Canada 1.50% 1.50%
US(1) N/A N/A
======================= =============== ========================= ==================
Foreign exchange rates GBP/AUD 1.86 1.77
GBP/DKK 8.86 N/A
GBP/EUR 1.19 1.11
GBP/CAD 1.72 1.74
GBP/USD 1.35 1.37
======================= =============== ========================= ==================
Tax rates(3) UK 19.00% / 25.00% 19.00%
Australia 30.00% 30.00%
Europe (excl. Various (12.50%-32.28%) Various (12.50%
UK) Various (23.00%-26.50%) - 32.28%)
Canada N/A Various (23.00%
US(1) - 26.50%)
N/A
======================= =============== ========================= ==================
1 The Company's US investment is in the form of subordinated
debt and therefore not directly impacted by inflation, deposit and
tax rate assumptions.
2 The portfolio valuation assumes actual current deposit rates
are maintained until 31 December 2023 before adjusting to the
long-term rates noted in the table above from 1 January 2024. The
31 December 2020 valuation assumed the long-term rates noted in the
table above would apply from 1 January 2023.
3 Tax rates reflect those substantively enacted as at the
valuation date or those that could reasonably be expected to be
substantively enacted shortly after the valuation date.
Discount rate
The discount rate used in the valuation of each investment is
the aggregate of the following:
- Yield on a government bond with a remaining term equivalent to
(or as close as possible to) the investment being valued, issued by
the national government for the location of the relevant investment
('government bond yield');
- A premium to reflect the inherent greater risk in investing in
infrastructure assets over government bonds;
- A further premium to reflect the state of maturity of the
asset with a larger premium applied to immature assets and/or
assets in construction and/or to reflect any current asset specific
or operational issues. Typically, this risk premium will reduce
over the life of any asset as an asset matures, its operating
performance becomes more established, and the risks associated with
its future cash flows decrease. However, the rate may increase in
relation to investments with unknown residual values at the end of
the relevant concession life as that date nears;
- A further adjustment reflective of market-based transaction
valuation evidence for similar assets. Such adjustment is
considered to implicitly include the market's assessment of the
risk posed by climate factors to that particular investment.
Over the period, the weighted average government bond yield
increased by 0.40%. The weighted average investment premium
decreased, reflecting observable market-based evidence.
31 December 2021 31 December
Valuation assumptions 2020 Movement
================================ ================= ============ ==========
Weighted Average Government
Bond Yield 0.96% 0.56% 0.40bps
Weighted Average Investment
Risk Premium 6.01% 6.41% (0.40)bps
================================ ================= ============ ==========
Weighted Average Discount Rate 6.97% 6.97% -
================================ ================= ============ ==========
Weighted Average Discount Rate
on Risk Capital(1) 7.38% 7.52% (0.14)bps
================================ ================= ============ ==========
1 Weighted average discount rate on Risk Capital only (equity and subordinated debt).
31 December 31 December
2021 2020
Reconciliation of Level 3 fair value measurements GBP'000 GBP'000
of financial assets s s
=================================================== ============= =============
Balance at 1 January 2,345,433 2,382,645
Additional investments during the year 252,725 29,984
Net repayments during the year (53,350) (39,465)
Net change in Investments at fair value through
profit or loss 34,626 (27,731)
=================================================== ============= =============
Balance at 31 December 2,579,434 2,345,433
=================================================== ============= =============
11.5 Sensitivity analysis
The valuation requires management to make certain assumptions in
relation to unobservable inputs to the model. There are no straight
forward inter-relationships between the unobservable inputs. A
sensitivity analysis for reasonably possible alternative
assumptions is provided below:
Weighted Change in Change in
average rate fair value fair value
Significant assumptions in base case Sensitivity of investment Sensitivity of investment
31 December 2021 valuations factor GBP'000s factor GBP'000s
======================== ================ =========== ============== =========== ==============
Discount rate 6.97% +1.00% (245,454) -1.00% 295,025
======================== ================ =========== ============== =========== ==============
Inflation rate
(overall) 2.37% +1.00% 231,029 -1.00% (197,787)
UK (CPI/RPI) 2.00%/2.75% +1.00% 179,431 -1.00% (151,850)
Europe 2.00% +1.00% 40,393 -1.00% (35,843)
North America 2.00% +1.00% 738 -1.00% (1,218)
Australia 2.50% +1.00% 10,451 -1.00% (8,875)
======================== ================ =========== ============== =========== ==============
FX rate N/A +10.00% 63,273 -10.00% (63,279)
======================== ================ =========== ============== =========== ==============
Tax rate 25.47% +1.00% (13,757) -1.00% 13,541
======================== ================ =========== ============== =========== ==============
Deposit rate 1.04% +1.00% 24,626 -1.00% (13,723)
------------------------ ---------------- ----------- -------------- ----------- --------------
Weighted Change in Change in
average rate fair value fair value
Significant assumptions in base case Sensitivity of investment Sensitivity of investment
31 December 2020 valuations factor GBP'000s factor GBP'000s
======================== ================ =========== ============== =========== ==============
Discount rate 6.97% +1.00% (224,463) -1.00% 272,586
======================== ================ =========== ============== =========== ==============
Inflation rate
(overall) 2.40% +1.00% 259,082 -1.00% (213,162)
UK (CPI/RPI) 2.00%/2.75% +1.00% 207,854 -1.00% (167,786)
Europe 2.00% +1.00% 39,622 -1.00% (34,525)
North America 2.00% +1.00% 916 -1.00% (1,525)
Australia 2.50% +1.00% 10,682 -1.00% (9,309)
======================== ================ =========== ============== =========== ==============
FX rate N/A +10.00% 62,014 -10.00% (62,007)
======================== ================ =========== ============== =========== ==============
Tax rate 21.66% +1.00% (20,082) -1.00% 18,937
======================== ================ =========== ============== =========== ==============
Deposit rate 1.05% +1.00% 23,369 -1.00% (23,225)
------------------------ ---------------- ----------- -------------- ----------- --------------
12. Investments
2021
Consideration % Ownership
Date of investment Description GBP'000s post investment
==================== ========================================== ============== =================
The Group made an investment into
toob, utilising part of its commitment
to invest in digital infrastructure,
April 2021 UK 14,270 46.1%
The Group made an investment into
June 2021 the Offenbach police centre, Germany 8,073 45%
The Group made an investment in the
Beatrice offshore transmission project,
July 2021 UK 49,751 100%
The Group made an investment to acquire
an additional interest in Angel Trains,
September 2021 UK 97,496 10%
The Group made an investment in the
Rampion offshore transmission project,
November 2021 UK 35,400 100%
November 2021 The Group made an investment to acquire 29,074 Various
interests in a portfolio of Building
Schools for the Future and UK PPP
projects, UK
The Group made an investment to acquire
an interest in a portfolio of Danish
December 2021 PPP projects, Denmark 14,045 66.7%
December 2021 The Group made an investment to acquire 3,053 Various
interests in a small portfolio UK
PPP projects, UK
The Group made a follow on investment
into the Diabolo Rail Link Project,
December 2021 Belgium 1,563 100%
Total capital spend on investments during the year 252,725
================================================================ ============== =================
2020
Consideration % Ownership
Date of investment Description GBP'000s post investment
==================== ============================================ ============== =================
The Group made further investments
January - December as part of its commitment to the National
2020 Digital Infrastructure Fund, UK 9,489 45%
The Group made a follow on investment
into the Essex 1 and 2 Building Schools
May 2020 for the Future projects, UK 6,655 28% - 100%
The Group made a series of follow
on investments into the Bradford Phases
1 & 2, and Lewisham Phases 1 to 4
Building Schools for the Future projects, 15.5% -
August 2020 UK 3,636 54%
The Group made a follow on investment
into the Blackburn 1 and 2 Building
October 2020 Schools for the Future projects, UK 1,136 100%
The Group made a follow on investment
into the Diabolo Rail Link Project,
December 2020 Belgium 9,068 100%
Total capital spend on investments during the year 29,984
================================================================== ============== =================
13. TRADE AND OTHER RECEIVABLES
31 December 31 December
2021 2020
GBP'000s GBP'000s
----------------------------------- ------------ -------------
Accrued interest receivable 52,657 40,769
Other debtors 4,721 1,419
----------------------------------- ------------ -------------
Total trade and other receivables 57,378 42,188
----------------------------------- ------------ -------------
Other debtors included GBP1.2 million (December 2020: GBP1.1
million) of receivables from unconsolidated subsidiary entities for
surrender of Group tax losses.
14. Trade and Other Payables
31 December 31 December
2021 2020
GBP'000s GBP'000s
-------------------------------- ------------ -------------
Accrued management fee 8,308 7,790
Other creditors and accruals 2,289 1,526
-------------------------------- ------------ -------------
Total trade and other payables 10,597 9,316
-------------------------------- ------------ -------------
15. Share Capital and Reserves
31 December 31 December
2021 2020
shares shares
Share capital '000s '000s
================================================ =========== ===========
Authorised and in issue at 1 January 1,620,953 1,610,795
Issued for cash 81,818 -
Issued as a scrip dividend alternative 3,333 10,158
================================================= =========== ===========
Authorised and in issue at 31 December - fully
paid 1,706,104 1,620,953
================================================= =========== ===========
31 December 31 December
2021 2020
GBP'000s GBP'000s
========================================= =========== ===========
Balance at 1 January 1,769,582 1,753,840
========================================== =========== ===========
Issued for cash (excluding issue costs) 135,000 -
Issued as a scrip dividend alternative 5,629 15,742
========================================== =========== ===========
Total share capital issued in the year 140,629 15,742
========================================== =========== ===========
Costs on issue of Ordinary Shares (1,362) -
========================================== =========== ===========
Balance at 31 December 1,908,849 1,769,582
========================================== =========== ===========
At present, the Company has one class of Ordinary Shares with a
par value of 0.01 pence which carry no right to fixed income.
On 4 June 2021, 2,602,941 new Ordinary fully paid shares were
issued as a scrip dividend alternative in lieu of cash for the
interim dividend in respect of the six months ended 31 December
2020.
On 13 July 2021, the Group raised an additional GBP135 million
of equity through a tap issue of 81,818,178 Ordinary Shares at an
issue price per share of 165 pence.
On 17 November 2021, 729,570 new Ordinary fully paid shares were
issued as a scrip dividend alternative in lieu of cash for the
interim dividend in respect of the six months ended 30 June
2021.
31 December 31 December
2021 2020
Other distributable reserve GBP'000s GBP'000s
---------------------------- ----------- -----------
Balance at 1 January 182,481 182,481
Movement in the year - -
---------------------------- ----------- -----------
Balance at 31 December 182,481 182,481
---------------------------- ----------- -----------
On 19 January 2007, the Company applied to the Royal Court of
Guernsey, following the initial placing of shares, to reduce its
share premium account. This was in order to provide a distributable
reserve to enable the Company to repurchase its shares if and when
the Board of Directors consider it beneficial to do so. Following
court approval, the distributable reserve account was created.
31 December 31 December
2021 2020
Retained earnings GBP'000s GBP'000s
======================== =========== ===========
Balance at 1 January 432,373 488,918
Net profit for the year 129,211 60,713
Dividends paid(1) (124,114) (117,258)
======================== =========== ===========
Balance at 31 December 437,470 432,373
======================== =========== ===========
1 Includes scrip element of GBP5.6 million in 2021 (December 2020: GBP15.7 million).
DIVIDS
The Board is satisfied that, in every respect, the solvency test
as required by the Companies (Guernsey) Law, 2008, was satisfied
for the proposed dividend and the dividend paid in respect of the
year ended 31 December 2021.
The Board has approved interim dividends as follows:
Year ended Year ended
31 December 31 December
2021 2020
GBP'000s GBP'000s
====================================================== ============ ============
Amounts recognised as distributions to equity
holders for the year ended 31 December 124,114(1) 117,258
Declared and proposed
Interim dividend for the period 1 January to 30
June 2021 was 3.78 pence per share (2020: 3.68
pence per share) 64,463 59,430
Interim dividend for the period 1 July to 31 December
2021 was 3.77 pence per share(2) (2020: 3.68 pence
per share) 64,320 59,651
====================================================== ============ ============
1 Includes the 2020 interim dividend for the period 1 July to 31 December 2020.
2 The dividend for the period 1 July to 31 December 2021 was
approved by the Board on 23 March 2022 and therefore has not been
included as a liability in the balance sheet for the year ended 31
December 2021.
Capital risk management
The Group seeks to efficiently manage its financial resources to
ensure that it is able to continue as a going concern while
providing improved returns to shareholders through the management
of the debt and equity balances. The capital structure consists of
the Group's corporate debt facility and equity attributable to
equity holders of the parent, comprising issued capital, reserves
and retained earnings. The Group aims to deliver its objective by
investing available cash and using leverage whilst maintaining
sufficient liquidity to meet ongoing expenses and dividend
payments. The Group's investment policy is set out in the Corporate
Governance Report on page 63.
The Group's Investment Adviser reviews the capital structure on
a semi-annual basis. As part of this review, the Investment Adviser
considers the cost of capital and the associated risks.
16. Net Assets per Share
31 December 31 December
2021 2020
GBP'000s GBP'000s
---------------------------------------------- ------------- -------------
Net assets attributable to equity holders of
the parent 2,528,800 2,384,436
----------------------------------------------- ------------- -------------
Number Number
---------------------------------------------- ------------- -------------
Number of shares
Ordinary Shares outstanding at the end of the
year 1,706,103,581 1,620,952,892
----------------------------------------------- ------------- -------------
Net assets per share (pence per share) 148.2 147.1
----------------------------------------------- ------------- -------------
17. Related Party Transactions
Details of the Company's significant consolidated and
unconsolidated subsidiaries are included in note 20.
During the period, Group companies entered into certain
transactions with related parties that are not members of the Group
but are related parties by reason of being in the same group as
Amber Infrastructure Group Holdings Limited, which is the ultimate
holding company of the Investment Adviser, Amber Fund Management
Limited ('AFML').
Under the Investment Advisory Agreement ('IAA'), AFML was
appointed to provide investment advisory services to the Group
including advising the Group as to the strategic management of its
portfolio of investments.
AFML and International Public Partnerships GP Limited are
subsidiary companies of Amber Infrastructure Group Holdings Limited
('Amber Group'), in which Mr G Frost is a Director and also a
substantial shareholder.
Mr G Frost is also a Director of International Public
Partnerships Limited (the 'Company'); International Public
Partnerships Lux 1 Sarl; (a wholly owned subsidiary of the Group);
and certain other companies in which the Group indirectly has an
investment. The transactions with the Amber Group are considered
related party transactions under IAS 24 'Related Party
Disclosures'.
The Director's fees of GBP48,500 (2020: GBP45,900) for Mr G
Frost's directorship of the Company are paid to his employer, Amber
Infrastructure Limited (a member of the Amber Group).
The amounts of the transactions in the year that were related
party transactions are set out in the table below:
Amounts owing to
Related party expense related parties in
in the Income Statement the Balance Sheet
---------------------------- ------------------------------
For the For the
year ended year ended At
31 December 31 December At 31 December 31 December
2021 2020 2021 2020
GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------- ------------- ------------- --------------- -------------
International Public Partnerships
GP Limited(1) 26,173 25,888 8,308 7,790
Amber Fund Management Limited(2) 3,896 286 247 17
----------------------------------- ------------- ------------- --------------- -------------
Total 30,069 26,174 8,555 7,807
----------------------------------- ------------- ------------- --------------- -------------
1 Represents amounts paid to related parties for investment advisory fees.
2 Represents amounts paid to related parties to acquire or make
investments or advisory fees associated with investments which are
subsequently recorded in the balance sheet.
Investment advisory arrangements
Investment advisory fees payable during the period are
calculated as follows:
For existing construction assets:
- 1.2% per annum of gross asset value of investments bearing construction risk.
For existing fully operational assets:
- 1.2% per annum of the gross asset value ('GAV') excluding
uncommitted cash from capital raisings up to GBP750 million;
- 1.0% per annum where GAV (excluding uncommitted cash from
capital raisings) is between GBP750 million and GBP1.5 billion;
- 0.9% per annum where GAV (excluding uncommitted cash from
capital raisings) is between GBP1.5 billion and GBP2.75
billion;
- 0.8% per annum where GAV (excluding uncommitted cash from
capital raisings) value exceeds GBP2.75 billion.
Asset origination fees in connection with new acquisitions are
charged at a rate of 1.5% of the value of new acquisitions.
The IAA can be terminated where less than 95% of the Group's
assets are available for use for certain periods and the Investment
Adviser fails to implement a remediation plan agreed with the
Group. The IAA may also be terminated by either party giving to the
other five years notice of termination, expiring at any time after
10 years from the date of the IAA.
As at 31 December 2021, the Amber Group held 8,002,379 (December
2020: 8,002,379) shares in the Company. The shares held by the
Investment Adviser in the Company helps further strengthen the
alignment of interests between the two parties.
During the year the Company acquired interests in a small
portfolio of UK PPP investments from an affiliate of the Company's
Investment Adviser, Amber. The interests were acquired for GBP3.1
million following an independent valuation of the assets. Further
interests in the portfolio representing up to GBP3.0 million will
be acquired over the coming months. Protocols provided in the
Company's Investment Advisory Agreement were followed with respect
to the sale of the Projects from Amber to INPP, including the
establishment of separate buy side and sell side teams within
Amber.
Transactions with directors
Shares acquired by Directors in the year are disclosed
below:
Number of New Ordinary Shares
Year ended Year ended
31 December 2021 31 December
Director 2020
================== ================================ =======================
Mike Gerrard - 22,330
Julia Bond 24,072 5,358
Sally Ann David 30,303 -
Meriel Lenfestey - 9,979
John Le Poidevin 30,303 -
Claire Whittet 1,654 3,460
Giles Frost 27,567 26,276
Total purchased 113,899 67,403
================== ================================ =======================
Remuneration paid to the Non-Executive Directors is disclosed on
page 68. Directors received dividends on total shares held as
disclosed on page 68, in accordance with the approved dividends
detailed under note 15.
18. Contingent Liabilities and commitments
As at 31 December 2021 the Group has committed funding of up to
c.GBP44.7 million (December 2020: c.GBP46.8 million), which
includes committed investment amounts as noted in the Strategic
Report on page 21, and a deferred commitment of GBP14.5 million for
BeNEX (December 2020: GBP18.2 million) which is due to be settled
from future returns generated by BeNEX.
There were no contingent liabilities at the date of this
report.
19. Events after THE Balance Sheet Date
In March 2022, the Company reached preferred bidder status for
Moray East OFTO. The Company expects to make an investment of up to
GBP75 million later in the year.
20. Other Mandatory Disclosures
New standards that the Group has applied from 1 January 2021
Standards and amendments to standards applicable to the Group
that became effective during the period are listed below. These
have no material impact on the reported performance or financial
statements of the Group.
- Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (1 January 2021);
Standards issued but not yet effective
Standards applicable to the Group which are issued but not yet
effective up to the date of issuance of the Group's financial
statements are listed below. This listing is of standards and
interpretations issued, which the Group reasonably expects to be
applicable at a future date. The Group intends to adopt these
standards when they become effective, however does not currently
anticipate the standards to have a significant impact on the
Group's financial statements. Current assumptions regarding the
impact of future standards will remain under consideration in light
of interpretation notes as and when they are issued.
- Annual improvements to IFRS Standards 2018-2020 (1 January 2022);
Unconsolidated subsidiaries
A list of the significant investments in unconsolidated
subsidiaries, including the name, country of incorporation as at 31
December 2021 and proportion of ownership is shown below:
Place of incorporation Proportion of
(or registration) ownership interest
Name and operation %
============================================== ======================= ===================
Abingdon Limited Partnership UK 100
Aggregator PLC UK 100
Access Justice Durham Limited Canada 100
AKS Betriebs GmbH & Co. KG Germany 98
Arden Partnership (Derby) Limited UK 50
Arden Partnership (Lincolnshire)
Limited UK 50
Arden Partnership (Leicester) Limited UK 50
BBPP Alberta Schools Limited Canada 100
Blackburn with Darwen Phase 1 Limited UK 100
Blackburn with Darwen Phase 2 Limited UK 100
BPSL No. 2 Limited Partnership UK 100
Building Schools for the Future Investments
LLP UK 100
Calderdale Schools Partnership UK 100
CHP Unit Trust Australia 100
Derby City BSF Limited UK 90
Derbyshire Courts Limited Partnership UK 100
Derbyshire Schools UK 100
Derbyshire Schools Phase Two Partnership UK 100
Essex Schools Limited UK 100
Future Ealing Phase 1 Limited UK 80
4 Futures Phase 1 Limited UK 90
4 Futures Phase 2 Limited UK 90
Hertfordshire Schools Building Partnership
Phase 1 Limited UK 100
H&W Courts Limited Partnership UK 100
INPP Infrastructure Germany GmbH
& Co. KG Germany 100
Inspire Partnership Limited Partnership UK 100
IPP CCC Limited Partnership Ireland 100
Inspiredspaces Durham (Project Co
1) Limited UK 91
Kent PFI (Project Co 1) Limited UK 58
Inspiredspaces Nottingham (Project
Co 1) Limited UK 82
Inspiredspaces Nottingham (Project
Co 2) Limited UK 82
Inspiredspaces STaG (Project Co 1)
Limited UK 90.1
Inspiredspaces STaG (Project Co 2)
Limited UK 90.1
Inspiredspaces Wolverhampton (Project
Co 1) Limited UK 100
Inspiredspaces Wolverhampton (Project
Co 2) Limited UK 100
Transform Islington (Phase 1) Limited UK 90
Transform Islington (Phase 2) Limited UK 90
IPP (Moray Schools) Holdings Limited UK 100
LCV Project Trust Australia 100
Lewisham Schools for the Future SPV
Limited UK 90
Lewisham Schools for the Future SPV
2 Limited UK 90
Lewisham Schools for the Future SPV
3 Limited UK 90
Lewisham Schools for the Future SPV
3 Limited UK 81
Maesteg School Partnership UK 100
Norfolk Limited Partnership UK 100
Northampton Schools Limited Partnership UK 100
Northern Diabolo N.V. Belgium 100
Oldham BSF Limited UK 99
OPP Hobro Tinglysningsret A/S Denmark 66.7
OPP Ørstedskolen A/S Denmark 66.7
OPP Vildbjerg Skole A/S Denmark 66.7
OPP Randers P-Hus A/A Denmark 66.7
PSBP Midlands Limited UK 92.5
Pinnacle Healthcare (OAHS) Trust Australia 100
Plot B Partnership UK 100
St Thomas More School Partnership UK 100
PPP Solutions (Long Bay) Partnership Australia 100
PPP Solutions (Showgrounds) Trust Australia 100
Strathclyde Limited Partnership UK 100
TH Schools Limited Partnership UK 100
TC Robin Rigg OFTO Limited UK 100
TC Barrow OFTO Limited UK 100
TC Gunfleet Sands OFTO Limited UK 100
TC Ormonde OFTO Limited UK 100
TC Lincs OFTO Limited UK 100
TC Westermost Rough OFTO Limited UK 100
TC Dudgeon OFTO PLC UK 100
TC Beatrice OFTO Limited UK 100
TC Rampion OFTO Limited UK 100
---------------------------------------------- ----------------------- -------------------
The entities listed above in aggregate represent 58.2% (December
2020: 58.1%) of investments at fair value through profit or loss.
The remaining fair value is driven from joint ventures, associate
interests and minority stakes held by the Group.
C onsolidated s ubsidiaries
The subsidiary undertakings of the Company, all of which have
been included in these consolidated financial statements are as
follows:
Place of incorporation Proportion of
(or registration) ownership interest
Name and operation %
========================================== ======================= ===================
International Public Partnerships Limited
Partnership UK 100
International Public Partnerships Lux
1 Sarl Luxembourg 100
International Public Partnerships Lux
2 Sarl Luxembourg 100
IPP Bond Limited UK 100
IPP Holdings 1 Limited UK 100
IPP Investments UK Limited UK 100
IPP Investments Limited Partnership UK 100
========================================== ======================= ===================
21. Investments
The Group holds 142 investments across energy transmission,
education, transport, health, courts, wastewater, police, military
housing and other sectors. The table overleaf sets out the Group's
investments that are recorded at fair value through profit or
loss.
Per cent.
Status at Risk Capital
31 December Owned by the Investment
Investment Name Country 2021 Group(1) end
==================================== ========== ============= ================== ================
UK
UK PPP Assets
Calderdale Schools UK Operational 100.0 April 2030
Derbyshire Schools Phase
Two UK Operational 100.0 February 2032
December
Northamptonshire Schools UK Operational 100.0 2037
Derbyshire Courts UK Operational 100.0 August 2028
Derbyshire Schools Phase
One UK Operational 100.0 April 2029
North Wales Police HQ UK Operational 100.0 December 2028
St Thomas More Schools UK Operational 100.0 April 2028
Tower Hamlets Schools UK Operational 100.0 August 2027
Norfolk Police HQ UK Operational 100.0 December 2036
Strathclyde Police Training September
Centre UK Operational 100.0(2) 2026
Hereford & Worcester Courts UK Operational 100.0(2) September
2025
Abingdon Police Station UK Operational 100.0 April 2030
Bootle Government Offices UK Operational 100.0 December
2022
Maesteg Schools UK Operational 100.0 July 2033
Moray Schools UK Operational 100.0 February
2042
Liverpool Library UK Operational 100.0 November
2037
Three Shires - Derbyshire UK Operational 50.0 October 2037
Three Shires - Leicestershire UK Operational 50.0 June 2037
Three Shires - Lincolnshire UK Operational 50.0 May 3028
Townlands Hospital UK Operational 100.0 November 2041
Priority Schools Building Aggregator
Programme
Batch 1 - Schools in North UK Operational 0.0(2) August 2040
East England
Batch 2 - Schools in Hertfordshire,
Luton and Reading UK Operational 0.0(2) November 2040
Batch 3 - Schools in North UK Operational 0.0(2) August 2041
West of England
Batch 4 - Schools in the UK Operational 92.5(2) December
Midlands Region 2041
Batch 5 - Schools in Yorkshire UK Operational 0.0(2) September
2041
OFTOs
Robin Rigg OFTO UK Operational 100.0(2) March 2031
Gunfleet Sands OFTO UK Operational 100.0(2) July 2031
Barrow OFTO UK Operational 100.0(2) March 2030
Ormonde OFTO UK Operational 100.0(2) July 2032
Lincs OFTO UK Operational 100.0 November
2034
Westermost Rough OFTO UK Operational 100.0 February 2036
Dudgeon OFTO UK Operational 100.0 November 2038
Beatrice OFTO UK Operational 100.0 April 2045
Rampion OFTO UK Operational 100.0 November 2041
Building Schools for the
Future Portfolio
Minority Shareholdings
in 22
Building Schools for the
Future Projects UK Operational Various Various
Blackburn with Darwen Phase UK Operational 100.0 September
One 2036
Blackburn with Darwen Phase UK Operational 100.0 September
Two 2039
Derby City UK Operational 90.0 August 2037
Durham Schools UK Operational 91.0 January 2036
Ealing Schools Phase One UK Operational 80.0 March 2038
Essex Phase Two UK Operational 100.0 December 2036
Hertfordshire Schools Phase UK Operational 100.0 August 2037
One
Islington Phase One UK Operational 90.0 August 2034
Islington Phase Two UK Operational 90.0 March 2039
Lewisham Phase 1 UK Operational 90.0 December
2034
Lewisham Phase 2 UK Operational 90.0 August 2037
Lewisham Phase 3 UK Operational 90.0 August 2037
Lewisham Phase 4 UK Operational 81.0 March 2038
Oldham Schools UK Operational 99.0 August 2037
Tameside Schools One UK Operational 46.0 August 2036
Tameside Schools Two UK Operational 46.0 August 2037
Nottingham Schools One UK Operational 82.0 August 2034
Nottingham Schools Two UK Operational 82.0 August 2038
South Tyneside and Gateshead UK Operational 90.1 October 2034
Schools One
South Tyneside and Gateshead UK Operational 90.1 September
Schools Two 2036
Southwark Phase One UK Operational 90.0 January
2036
Southwark Phase Two UK Operational 90.0 December
2036
Wolverhampton Schools Phase UK Operational 100.0 September
One 2037
Wolverhampton Schools Phase UK Operational 100.0 August 2040
Two
Kent Schools UK Operational 58.0 August 2035
NHS LIFT Portfolio
Beckenham Hospital UK Operational 49.8 December
2033
Garland Road Health Centre UK Operational 49.8 December
2031
Alexandra Avenue Primary
Care Centre, Monks Park
Health Centre (two projects) UK Operational 49.8 June 2031
Gem Centre Bentley Bridge,
Phoenix Centre December
(two projects) UK Operational 49.8 2030
Sudbury Health Centre UK Operational 49.8 November
2032
Mt Vernon UK Operational 49.8 December
2033
Lakeside UK Operational 49.8 November
2032
Fishponds Primary Care
Centre, Hampton House Health January
Centre (two projects) UK Operational 33.4 2031
Shirehampton Primary Care
Centre, Whitchurch Primary
Care Centre (two projects) UK Operational 33.4 May 2032
Blackbird Leys Health Centre,
East Oxford Care Centre
(two projects) UK Operational 33.4 May 2031
Brierley Hill UK Operational 34.3 April 2035
Ridge Hill Learning Disabilities
Centre, Stourbridge Health
& Social Care Centre October
(two projects) UK Operational 34.3 2031
Harrow NRC (three projects) UK Operational 49.8 June 2034
Goscote Palliative Care UK Operational 49.8 November
Centre 2035
South Bristol Community UK Operational 33.4 February
Hospital 2042
East London LIFT Project UK Operational 30.0 October
One (four projects) 2030
East London LIFT Project UK Operational 30.0 April 2033
Two (three projects)
East London LIFT Project
Three
(Newby Place) UK Operational 30.0 May 2037
East London LIFT Project UK Operational 30.0 August 2036
Four (two projects)
Eltham Community Hospital UK Operational 49.8 January 2040
Other UK
Angel Trains UK Operational 10.0 December
2058
Tideway UK Construction 15.99 March 2150
Cadent UK Operational 7.25 June 2069
National Digital Infrastructure UK Operational 45.0 July 2027
Fund
Australia
Royal Melbourne Showgrounds Australia Operational 100.0 August 2031
Long Bay Forensic & Prisons Australia Operational 100.0 July 2034
Hospital Project
Reliance Rail Australia Operational 33.0 February
2044
Royal Children's Hospital Australia Operational 100.0 December
2036
Orange Hospital Australia Operational 100.0 December
2035
NSW Schools Australia Operational 25.0 December
2035
Gold Coast Rapid Transport Australia Operational 30.0 May 2029
Victoria Schools Two Australia Operational 100.0 December
2042
Flinders University Australia Construction 100.0 March 2049
North America
Alberta Schools Canada Operational 100.0 June 2040
Durham Courts Canada Operational 100.0 November
2039
US Military Housing US Operational 0.0(2) October 2052
Europe (ex UK)
Diabolo Rail Link Belgium Operational 100.0 June 2047
Dublin Courts Ireland Operational 100.0 February
2035
BeNEX Germany Operational 100.0 December
2049
Federal German Ministry
of Education and Research
Headquarters Germany Operational 98.0 July 2041
Pforzheim Schools Germany Operational 98.0 September
2039
Offenbach Police Centre Germany Construction 45.0 June 2050
Brescia Hospital Italy Operational 37.0 November
2021
Hobro Court Denmark Operational 66.7 December 2027
Randers Hospital Parking Denmark Operational 66.7 April 2041
Facility
Ø rsted School Denmark Operational 66.7 June 2038
Vildbjerg School Denmark Operational 66.7 December 2036
==================================== ========== ============= ================== ================
1 Risk Capital includes project level equity and/or subordinated shareholder debt
2 Investment contains senior or mezzanine debt in addition to
any Risk Capital ownership shown
GLOSSARY INCLUDING ALTERNATIVE PERFORMANCE MEASURES
AGM
The Company's Annual General Meeting
AIC
Association of Investment Companies'
AFML
Amber Fund Management Limited, a member of the Amber Group
Amber / Amber Infrastructure
The Company's Investment Adviser (Amber Fund Management Limited
and its corporate group).
Amber Group
Amber Infrastructure Group Holdings Limited and its
subsidiaries
APMs
In accordance with ESMA Guidelines on Alternative Performance
Measures ('APMs') the Board has considered what APMs are included
in the Annual Report and financial statements which require further
clarification. An APM is defined as a financial measure of
historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework. APMs included in the
Annual Report and financial statements are identified as non-GAAP
measures and are defined within this glossary.
ASCE
American Society of Civil Engineers
Average NAV
Average of published NAVs for the relevant periods
BEPS
Base Erosion and Profit Shifting
BSF
Building schools for future projects
Cash Dividend cover
Non-GAAP measure. Cash dividend payments to investors covered by
the Net operating cash flow before capital activity. This measure
shows the sustainability of the dividend payments made by the
Company. Net operating cash flows before capital activity include
net repayments from Investments at Fair Value through profit and
loss and finance costs paid and exclude investment transaction
costs when compared to net cash inflows from operations as
disclosed in the statutory cash flow statement in the financial
statements.
CDF
The Company's corporate debt facility
CMA
Competition and Markets Authority
CSR
Corporate Social Responsibility
CPI
Consumer Price Index
CPIH
CPI including owner occupied housing costs)
Dividend Growth
Non-GAAP measure. Represents the growth in dividend per share
paid to shareholders compared to the prior year. This measure
provides information on the Company's dividend performance.
Dividends paid and number of issued shares can be found disclosed
in the financial statements and notes to the financial
statements.
Dividend per share
Non-GAAP measure. Represents dividends paid per Ordinary share
issued, as disclosed in the financial statements. This measure
provides information on the Company's dividend performance.
Dividends paid and number of issued shares can be found disclosed
in the financial statements and notes to the financial
statements.
EAT
European Assets Trust
ESG
Environmental, Social and Governance
EU Taxonomy
EU Taxonomy for Sustainable Activities
FCA
Financial Conduct Authority
FRC
The Financial Reporting Council
GAV
Gross asset value
GDNs
Gas distribution networks
GFSC
The Guernsey Financial Services Commission
GHG
Greenhouse gas emissions
GRESB Infrastructure
The Infrastructure Asset Assessment assesses ESG performance at
the asset level for infrastructure asset operators, fund managers
and investors that invest directly in infrastructure.
HMRB
Flinders University Health and Medical Research Building
IAA
Investment Advisory Agreement
IFRS
International Financial Reporting Standards
International Public Partnerships
The 'Company', 'INPP', the 'Group' (where including consolidated
entities))
Investment Adviser
Amber (see above)
IPO
Initial public offering
IRR
The internal rate of return
Hunt
Amber's long-term investor, US Group, Hunt Companies LLC
KPIs
Key performance indicators
LIBOR
The London Inter-Bank Offered Rate is an interest-rate average
calculated from estimates submitted by the leading banks in
London
NDIF
National Digital Infrastructure Fund
Net Asset Value ('NAV')
Non-GAAP measure. Represents the equity attributable to equity
holders of the parent in the Balance Sheet. This terminology is
used as it is common investment sector terminology and so is the
most understandable to the users of the Annual Report. Components
of NAV are further discussed throughout the Annual Report,
including from page 30.
Net Asset Value ('NAV') per share
Non-GAAP measure. Represents the equity attributable per share
to equity holders of the parent in the Balance
Sheet. This terminology is used as it is common investment sector terminology and so is the most understandable to the users of the Annual Report.
Net operating cash flows before capital activity
Non-GAAP measure. Represents the cash flows from the Company's
operations before capital activity relating to the acquisition of
new investments, issues of new capital or payment of dividends.
This approach is used to provide investors with an indication of
cash flows generated from operational activity and is used as part
of the cash dividend cover calculations. Components of net
operating cash flows before capital activity are further discussed
throughout the Annual Report, including from page 28.
Net Zero
Net Zero refers to balancing the amount of emitted greenhouse
gases with the equivalent emissions that are either offset or
sequestered. This should primarily be achieved through a rapid
reduction in carbon emissions, but where zero carbon cannot be
achieved, offsetting through carbon credits or sequestration
through rewilding or carbon capture and storage needs to be
utilised.
OECD
Organisation for Economic Co-operation and Development
OFTO
Offshore Electricity Transmission project
PFI
Projects and private finance initiative
Portfolio Inflation-linked return / Inflation-linked cash
flows
Non-GAAP measure. Calculated by running a 'plus 1.00%' inflation
sensitivity for each investment and solving each investment's
discount rate to return the original valuation. The
inflation-linked cash flows is the increase in the portfolio
weighted average discount rate. This measure provides an indication
of the portfolio's inflation protection. There is no near
comparable in the financial statements.
PPP
Public-private partnerships
PRI
The UN-backed Principles for Responsible Investment
PwC
The Company's auditors PricewaterhouseCoopers CI LLP
RNS
Regulatory news service
RPI
UK Retail Price Index
Scope 1 emissions
direct emissions from owned or controlled sources.
Scope 2 emissions
indirect emissions from the generation of purchased energy.
Scope 3 emissions
all indirect emissions (not included in scope 2) that occur in
the value chain of the reporting company, including both upstream
and downstream emissions.
SDGs
Sustainable Development Goals
SDR
The proposed UK Sustainability Disclosure Requirements
SFDR
The EU Sustainable Finance Disclosure Regulation
SONIA
SONIA is the effective reference for overnight indexed swaps for
unsecured transactions in the Sterling market
SPV
Special Purpose Vehicle
TCFD
Task Force on Climate-related Financial Disclosures
The Company
International Public Partnerships Limited
TOCs
Train operating companies
Total Shareholder Return ('TSR')
Non-GAAP measure. Share price appreciation plus dividends
assumed to be reinvested since IPO. The total return based on the
NAV appreciation plus dividends paid since the IPO. There is no
direct reconciliation to the financial statements, being a
calculation instead
derived from the Company's share price. However a nearest
comparison were this measure based on a figure in the financial
statements is provided in the Strategic Report, Investor Relations,
Total Shareholder Return paragraph.
Transition risk
Transition risks include policy changes, reputational impacts,
and shifts in market preferences, norms and technology. Transition
opportunities include those driven by resource efficiency and the
development of new technologies, products and services, which could
capture new markets and sources of funding.
KEY CONTACTS
Investment Adviser independent Auditor Corporate Brokers
Amber Fund Management PricewaterhouseCoopers Numis Securities Limited
Limited CI LLP 31 Gresham Street
3 More London Riverside PO Box 321 London
London Royal Bank Place EC2V 7QA
SE1 2AQ 1 Glategny Esplanade
St Peter Port
Guernsey
Channel Islands
GY1 4ND
Registered Office Legal Adviser Public Relations
PO Box 286 Carey Olsen FTI Consulting
Floor 2, Trafalgar Court PO Box 98, Carey House 200 Aldersgate
Les Banques Les Banques Aldersgate Street
Guernsey Guernsey London
Channel Islands Channel Islands EC1A 4HD
GY1 4LY GY1 4BZ
Administrator and Company
Secretary Corporate Banker
Ocorian Administration Royal Bank of Scotland
(Guernsey) Limited International
PO Box 286 1 Glategny Esplanade
Floor 2, Trafalgar Court St Peter Port
Les Banques Guernsey
Guernsey Channel Islands
Channel Islands GY1 4BQ
GY1 4LY
[i] For the full year ended 31 December 2021 unless otherwise
stated.
[ii] Cash dividend payments to investors are paid from net
operating cash flows before capital activity.
[iii] Future profit projection and dividends cannot be
guaranteed. Projections are based on current estimates and may vary
in future.
[iv] Calculated by running a 'plus 1.0%' inflation sensitivity
for each investment and solving each investment's discount rate to
return the original valuation. The inflation-linked return is the
increase in the portfolio weighted average discount rate.
This information is provided by RNS, the news service of the
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