TIDMINPP
RNS Number : 1890L
International Public Partnerships
09 September 2021
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT
FOR PUBLICATION, RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,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.
9 September 2021
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
('INPP', the 'Company')
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2021
OPERATIONAL HIGHLIGHTS
-- Solid continued performance from the Company's investment portfolio
-- The portfolio has continued to perform in line with
expectations, enabling a 2.7% half-year dividend increase to 3.78
pence per share ([i]) , and confidence in the portfolio's future
operational performance allows the Board to reconfirm its full-year
dividend targets for 2021 and 2022 at 7.55 pence per share and 7.74
pence per share, respectively ([ii])
-- The Company invested a total of GBP22.3 million into the
social accommodation and digital infrastructure sectors further
diversifying the portfolio
-- The Company's investment case and the attractiveness of the
portfolio was reaffirmed in successfully raising GBP135 million of
new capital, exceeding the Board's GBP100 million target, in July
2021
-- The impact of the UK corporation tax increase announced
earlier in 2021, the strength of Sterling against other currencies
and the period's interim dividend payment contributed to a 1.4%
decrease in NAV per share to 145.1 pence per share (31 December
2020: 147.1 pence)
-- During the period, the portfolio experienced limited further
disruption from the pandemic, however the Company has maintained
its precautionary approach to the valuation of certain specific
risks in the portfolio
-- Over the period, the Company began adopting the
recommendations of the Taskforce for Climate-related Financial
Disclosures ('TCFD') and aligning its investment approval processes
with the objectives of the Paris Agreement
-- The Company's revolving credit facility was renewed for the
next three years with a GBP250 million committed facility and a
GBP150 million accordion tranche. The facility was GBP56 million
drawn at the period end but this was subsequently paid down using
the proceeds from the July 2021 capital raise. The facility remains
available for re-drawing
FINANCIAL HIGHLIGHTS[iii]
-- Interim dividend increase of 2.7% to 3.78 pence per share (30
June 2020: 3.68 pence per share)[iv]
-- Total shareholder return ('TSR') of 231.4% since IPO,
equivalent to an annualised TSR of 8.5%[v]
-- NAV per share of 145.1 pence (31 December 2020: 147.1 pence)
-- IFRS profit before tax of GBP27.2 million (30 June 2020: GBP35.4 million)[vi]
-- Portfolio inflation-linkage of 0.75% (31 December 2020: 0.78%)[vii]
-- Interim cash dividend cover of 1.3x[viii]
Mike Gerrard, Chairman of International Public Partnerships,
said: "I am pleased to report another period of resilient
operational and financial performance by the Company. INPP's
portfolio continues to meet our expectations and provide reliable
income to our shareholders and valuable essential services to the
local communities in which our assets operate. The Board remains
confident in the portfolio's operational and financial resilience
and its future ability to generate highly visible cash flows which
underpins the Company's investment case."
INVESTMENT ACTIVITY
The Company's GBP22.3 million of new cash investments
included:
-- toob, UK : In July 2017, the Company agreed to invest up to
GBP45 million in UK digital infrastructure alongside the UK
Government, through the National Digital Infrastructure Fund
('NDIF'). During the period an additional c.GBP14.2 million was
approved for investment into toob, one of NDIF's existing
investments. 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
broadband at a time when reliance on digital connectivity
increases
-- Offenbach Police Centre, Germany : The Company invested
GBP8.1 million for a 45% shareholding of the new police
headquarters project in South-East Hesse in Offenbach, Germany. The
centre provides the Hesse State Police with modern working
facilities powered by low-carbon energy
-- Beatrice OFTO, UK : Post-period end, in July 2021, the
Company invested c.GBP50 million in the portfolio's eighth offshore
transmission ('OFTO') which links to the 588 MW Beatrice offshore
wind farm, Scotland's largest offshore wind farm. The Beatrice OFTO
will transmit green electricity equivalent to around 450,000 UK
homes, increasing the number of homes that are powered via the
Company's OFTO portfolio to c.1.8 million homes
OPERATIONAL PERFORMANCE AND ASSET STEWARDSHIP
Responsible investment is a core component of the Company's
ability to deliver essential public services, maintain
relationships with its clients and local communities, and preserve
and grow the long-term value of each investment. The references to
SDGs below refer to the contribution of each mentioned asset to
defined UN Sustainable Development Goals
Transport | SDG 8, 9 & 11: Decent work and economic growth;
industry innovation and infrastructure; sustainable cities and
communities
-- Diabolo Rail Link, Belgium : The majority of the revenues
generated by Diabolo Rail Link ('Diabolo') are linked to passenger
use of the rail link to Brussels Airport or Belgium's national rail
network, the concession for which runs until 2047. As previously
disclosed, the Company committed a further EUR24 million to Diabolo
in December 2020. EUR10 million was invested at that time and a
further contingent commitment of EUR14 million available to protect
Diabolo's liquidity position and ensure its debt covenants continue
to be met. The latest passenger traffic forecast report assumes a
more gradual return to pre-covid passenger numbers but continues to
indicate that the remaining EUR14 million commitment should be
sufficient. Whilst the cash flows have been updated to reflect the
latest passenger forecast, the Company's valuation of Diabolo has
not materially changed over the period (excluding the impact of the
change in foreign exchange rates)
-- BeNEX, Germany : BeNEX continued to see significant reduction
in passenger volumes as a result of Covid-19, but the impact on the
asset has been limited with compensation received form the Federal
Government and/or Federal States for the vast majority of
disruption caused. During the six months to 30 June 2021, two
concessions were re-won further reducing the risk profile of the
business
-- Angel Trains, UK : Angel Trains ('Angel') currently generates
the majority of its revenues from the contractual leasing of its
rolling stock to train operating companies and therefore its
revenues have continued to be largely unaffected by Covid-19.
Earlier in September, the Company announced that it had entered
into an agreement to acquire an additional interest in Angel,
taking its overall shareholding to 10%. Since making its original
acquisition in 2008, Angel has been a successful investment for the
Company, delivering both capital growth and strong yield
As a low carbon-form of transport, the Company's rail
investments collectively amount to more than 151 million annual
passenger journeys and over 825 million annual train kilometres
travelled ([ix]) .
Gas distribution | SDG 8, 9 & 11: Decent work and economic
growth; industry innovation and infrastructure; sustainable cities
and communities
-- Cadent, UK: As previously announced, Cadent exercised its
right to appeal Ofgem's final determination for the next five-year
regulatory period to the CMA. The CMA's provisional findings
announced post-period end are expected to, other things being
equal, have a modestly positive impact on the Company's valuation
of Cadent as reported at 30 June 2021. The Company will await the
CMA's final decision expected in October 2021. Cadent connects over
11 million homes and businesses to gas with a maximum energy
throughput of 5.7 million GJ/day. Cadent's HyDeploy project is a
pioneering pilot of hydrogen as a greener domestic fuel
Wastewater | SDG 6, 8, 9 & 11: clean water and sanitation;
decent work and economic growth; industry innovation and
infrastructure; sustainable cities and communities
-- Tideway, UK: despite the ongoing challenges posed by Covid-19
on the construction works undertaken by Tideway, the project is now
68% complete. In August 2021, Tideway published a thorough review
of the remaining activities to completion, which confirmed the
appropriateness of the existing schedule dates and only a minor
cost increase of c.1% on the previously announced cost estimate of
GBP4.1 billion, which has no material financial impact on
investors.
When operational, Tideway will divert over 37 million cubic
metres of sewage discharges, create three acres of new public
spaces, and employ over 2,200 full-time equivalent employees.
Energy transmission | SDG 7: Affordable and clean energy
Approximately 1.8 million homes are powered by renewable energy
transmission via the Company's OFTO holdings, with a total
transmission capacity of 2.1 GW including the Company's eighth OFTO
which reached financial close in July.
Social infrastructure | SDG 3, 4, 8 & 16: good health and
wellbeing; quality education; decent work and economic growth;
peace, justice and strong institutions
Availability-based private-public partnerships ('PPP') projects
account for c.33% of the Company's portfolio by investment fair
value and for those assets measured by availability and
performance, the availability rate was 99.7%, outperforming the
Company's target. The Company's public sector clients commissioned
and funded over 464 contract variations, resulting in a combined
value of GBP9.3 million.
The Company's portfolio provides essential facilities to over
195,000 pupils, 540,000 healthcare patients and 13 police stations
and judicial buildings.
OUTLOOK
The Company has identified an attractive near-term pipeline of
investments in the social infrastructure, regulated utilities,
transport and other essential infrastructure sectors. We remain
confident in the ability of our Investment Adviser to continue to
source and develop high-quality projects which can deliver
long-term, predictable cash flows for shareholders, and strong
inflation-linkage to meet the Company's risk-return profile.
S.
A copy of the results presentation can be downloaded from the
Company's website:
www.internationalpublicpartnerships.com
For further information:
Erica Sibree/Amy Edwards +44 (0)20 7939 0558/0587
Amber Fund Management Limited
Hugh Jonathan +44 (0)20 7260 1263
Numis Securities
Ed Berry/Mitch Barltrop +44 (0) 20 3727 1046/1039
FTI Consulting
About International Public Partnerships:
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 130
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 150 staff who are responsible for the
management of, advice on and origination of infrastructure
investments.
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.
(i) The forecast date for payment of the dividend relating to
the six months to 30 June 2021 is 17 November 2021.
(ii) There can be no assurance that these targets will be met or
that the Company will make any distributions at all. Whilst we
generally have good forward-visibility of cash flows generated by
the Company's investments, the current Covid-19 pandemic creates
additional uncertainty.
(iii) For the six months ended 30 June 2021 unless otherwise
stated.
(iv) Cash dividend payments to investors are paid from net
operating cash flow before non-recurring operating costs.
v Since inception in November 2006. Source: Bloomberg. Share
price appreciation plus dividends assumed to be reinvested.
(vi) IFRS profit before tax of GBP27.2 million (30 June 2020:
GBP35.4 million). The reduction compared to the prior corresponding
period reflects a decrease in the valuation of the portfolio
overall, primarily as a result of macroeconomic changes in the
period.
(vii) The Company's underlying revenues continue to be
underpinned by strong inflation-linkage with a projected increase
in return of 0.75% p.a. for a 1.00% p.a. increase in inflation (31
December 2020: 0.78% p.a.).
v (iii) Cash dividend payments to investors are paid from net
operating cash flow before capital activity.
i (x) Data reflects 2020 performance.
International Public Partnerships Limited
HALF-YEARLY Report and Financial Statements for the SIX MONTHS
ended 30 JUNE 2021
Registered number: 45241
www.internationalpublicpartnerships.com
Note: Page references in this announcement refer to the full
formatted Half-Yearly Financial Report for the period ended 30 June
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 deliver long-term benefits for all
stakeholders by investing responsibly in public and social
infrastructure.
We aim to provide our investors with long-term, inflation-linked
returns, by growing our dividend and creating the potential for
capital appreciation.
We support all our stakeholders through responsible investment
and active asset management, which meet societal and environmental
requirements 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
- GBP2.7 billion market capitalisation at 30 June 2021
- 1,624 million shares in issue at 30 June 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 ('FCA')
restrictions, which apply to non-mainstream investment products,
and can be recommended by independent financial advisers to their
clients
RESPONSIBLE INVESMENT
The Company is committed to responsible investment. Its
Investment Adviser, Amber Infrastructure Limited ('Amber') is a
signatory of the UN-backed Principles for Responsible Investment
('PRI'). The Company also draws on the Sustainable Development
Goals ('SDGs') to help drive environmental and social progress
across its investments. The Company has also aligned 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').
COVER IMAGE:
Beatrice Offshore Transmission Project ('OFTO'). The image
illustrates the Company's Beatrice offshore substation, which was
acquired in July 2021. The project's transmission cables link
between the onshore and offshore substations.
HALF-YEAR FINANCIAL HIGHLIGHTS
DIVIDS
3.78p - H1 2021 dividend per share(1)
7.55p - 2021 full-year dividend target per share(2)
7.74p - 2022 full-year dividend target per share(2)
2.7% - H1 2021 divident growth
1.3x - H1 2021 cash dividend cover(3) (H1 2020: 1.3x)
NET ASSET VALUE ('NAV') (4)
GBP2.4bn - NAV at 30 June 2021 (4) (31 December 2020:
GBP2.4bn)
145.1p - NAV per share at 30 June 2021(4) (31 December 2020:
147.1p)
1.2% - Decrease in NAV for the six months to 30 June 2021
1.4% - Decrease in NAV per share for the six months to 30 June
2021
PORTFOLIO ACTIVITY
GBP22.3m - Cash investments made during H1 2021
INFLATION PROTECTION
0.75% - Portfolio inflation-linkage at 30 June 2021(5) (31
December 2020: 0.78%)
TOTAL SHAREHOLDER RETURN ('TSR')
231.4% - TSR since Initial Public Offering ('IPO')(6)
8.5%p.a. - Annualised TSR since IPO(6)
PROFIT
GBP27.2m - H1 2021 profit before tax (H1 2020: GBP35.4m)
1 The forecast date for payment of the dividend relating to the
six months to 30 June 2021 is 17 November 2021.
2 There can be no assurance that these targets will be met or that the Company will make any distributions at all. Whilst we generally have good forward-visibility of cash flows generated by the Company's investments, the current Covid-19 pandemic creates additional uncertainty.
3 Cash dividend payments to investors are paid from net
operating cash flow before capital activity as detailed on pages 22
to 23.
4 The methodology used to determine the NAV is described in
detail on pages 24 to 26. . NAV represents the Company's net assets
as reported in the financial statements.
5 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-linkage is the
increase in the portfolio weighted average discount rate. This
measure is designed to provide an estimate of the weighted average
increase in the returns generated by the underlying investments,
based on the 30 June 2021 valuations, in the event that inflation
runs at 100bps above the relevant inflation assumption.
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 Growth
[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].
Note: This chart is not intended to provide any future profit
forecast. Cash flows shown are projections based on the current
individual asset financial models and may vary in the future. Only
investments committed as at 30 June 2021 are included.
LOW RISK AND DIVERSIFIED PORTFOLIO
Sector Breakdown
Energy Transmission 21%
--------------------- ----
Transport 19%
--------------------- ----
Education 19%
--------------------- ----
Gas Distribution 17%
--------------------- ----
Waste Water 9%
--------------------- ----
Health 4%
--------------------- ----
Military Housing 3%
--------------------- ----
Courts 2%
--------------------- ----
Other(1) 6%
130 investments in infrastructure projects and businesses across
a variety of sectors(2)
Geographic Split
UK 74%
----------- ----
Australia 9%
----------- ----
Belgium 7%
----------- ----
Germany 4%
----------- ----
US 3%
----------- ----
Canada 2%
----------- ----
Ireland 1%
----------- ----
Italy <1%
Invested in selected global regions that meet INPP's specific
risk and return requirements
Investment Type Risk Capital(3) 89%
----------------- ----
Senior Debt 11%
Invested across the capital structure, taking into account appropriate
risk-return profiles
Asset Ownership
100% 49%
--------- ----
50%-100% 7%
--------- ----
<50% 44%
Preference to hold majority stakes
Mode of Acquisition/Asset Status
Construction 9%
------------------------- ----
Operational 91%
------------------------- ----
Early Stage Investor(4) 68%
------------------------- ----
Later Stage Investor(5) 32%
Early stage investment gives first mover advantage maximises
capital growth opportunities
Investment Life
<20 years 52%
------------- ----
20-30 years 19%
------------- ----
>30 years 29%
Weighted average portfolio life of 32 years(6)
1. Includes the Company's digital investments representing 2.6%
of Investments at Fair Value.
2. The majority of assets and businesses benefit from
availability-based revenues.
3. Risk Capital includes both asset and business level equity
and subordinated shareholder debt.
4. 'Early Stage Investor' - assets developed or originated by
the Investment Adviser or predecessor team in primary or early
phase investments.
5. 'Later stage investor' - assets acquired from a third party
investor in the secondary market.
6. 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 projects and businesses that are resilient 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 assets 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 assets identified by Amber and for US investments,
by Amber's long-term investor, US Group, Hunt Companies LLC
('Hunt')
Relationship with the Investment Adviser
[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 environmental,
social and governance ('ESG') issues and opportunities
- Active engagement with all key stakeholders
- Strong independent Board (six of the seven Directors are
independent) with a diversity of experience and strong corporate
governance
BUSINESS MODEL
DELIVERING long-term benefits
OUR PURPOSE
Our purpose is to deliver long-term benefits for all
stakeholders by investing responsibly in public and social
infrastructure.
We aim to provide our investors with long-term, inflation-linked
returns, by growing our dividend and creating the potential for
capital appreciation.
We support all our stakeholders through responsible investment
and active asset management, which meet societal and environmental
requirements both now and into the future.
what we do
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
ASSESS
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
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 our investment 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, including 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 ensures successful ongoing performance
RESPONSIBLE INVESTMENT
- Fully integrating ESG considerations across the investment cycle
- Setting robust ESG objectives to build resilience and drive
environmental and social progress
- Uphold high standards of business integrity and governance
VALUE CREATION
investor returns
Continuing to deliver consistent financial returns for investors
through dividend growth and inflation-linkage from underlying cash
flows and provide opportunities for capital appreciation
PUBLIC SECTOR AND OTHER CLIENTS
Providing responsible investment in infrastructure to support
the delivery of essential public services. 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
- Healthy, inclusive workplaces
- Opportunities for professional development
- Staff engagement
OBEJCTIVES AND PERFORMANCE
The value we provide to our investors is monitored using our 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 - 2.7% Dividend increase
inflation-linked annual dividend achieved for H1 2021
returns to investors increase of 2.5% (H1 2020: 2.5%)
- Target a long-term - 7.6% p.a. IRR achieved
total return since IPO to 30 June 2021(1)
in excess of (31 December 2020: 7.7%)
7.0% per annum
- 0.75% Inflation-linked
returns on a portfolio
- Inflation-linked basis at 30 June 2021
returns on a (31 December 2020: 0.78%)
portfolio basis
------------------- --------------------------------- ------------------------- -----------------------------------
Value-focused Originate investments New investments 100% of the investments
portfolio with stable, long-term meet at least three made in H1 2021 met at
development cash flows and potential of six attributes: least three of the six
growth attributes, 1. Stable, long-term attributes
whilst maintaining returns (H1 2020: 100%)
a balanced portfolio 2. Inflation-linked
of assets investor cash flows
3. Early stage
investor
4. Investment secured
through preferential
access
5. Other capital
enhancement attributes
6. Positive UN
Sustainable Development
Goals ('SDGs')
contribution
----------------- --------------------------------- --------------------------- -----------------------------------
ACTIVE ASSET Managing strong ongoing - Strong ongoing - 100% Forecast distributions
MANAGEMENT asset performance asset performance received for H1 2021(2)
as demonstrated (H1 2020: 100%)
by:
- 0.1% Asset performance
deductions achieved against
a target of <3% during
H1 2021
(H1 2020: 0.1%)
- 99.7% Asset availability
achieved against a target
of >98% during H1 2021
(H1 2020: 99.6%)
Responsible Management of material - Robust integration - A+ UN-backed PRI rating(3)
Investment ESG factors of ESG into investment
lifecycle
----------------- --------------------------------- --------------------------- -----------------------------------
efficient Making efficient - Cash covered - 1.3x Dividends fully
financial use of the Company's dividends cash covered for H1 2021
management finances and working (H1 2020: 1.3x)
capital - Competitive - 1.25% Ongoing charges
ongoing charges ratio for H1 2021
(H1 2020: 1.21%)
----------------- --------------------------------- --------------------------- -----------------------------------
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.
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.
CHAIR'S LETTER
Dear Shareholders,
I am pleased to report another successful six-month period for
the Company to 30 June 2021. Highlights in this period include:
- Sustained levels of strong financial and operational
performance from our investment portfolio which continue to ensure
our dividend targets are met;
- Continued strength in origination delivering new asset
acquisitions with a value in excess of GBP22 million; and
- The continued development of our ESG initiatives, culminating
in the launch of the Company's own Sustainability Report shortly
after the period's end.
Since the period's end, the Company also completed a successful
capital raising of GBP135 million - exceeding a target of GBP100
million.
At the time of writing this letter, restrictions to control the
spread of Covid-19 are easing in many of the countries in which the
Company holds investments. This provides an encouraging context to
these interim results, albeit necessarily moderated by the scale of
challenges that still lie ahead for all countries recovering from
the effects of the pandemic. Against this backdrop, the Company has
continued to perform well with limited disruption from the
pandemic.
The Company will continue to take a prudent and realistic view
of the future environment for infrastructure investments and
remains confident that its business model and investment objectives
will continue to offer a significant degree of protection for our
investors. The Board continues to believe that long-term
responsible investment into public and social infrastructure will
remain a central feature of economic development across the
geographies in which the Company invests.
PORTFOLIO PERFORMANCE
The Company's approach to the stewardship of its investments
remains critical to the portfolio's ongoing performance. During the
period, the Company's Investment Adviser has continued to engage
actively with its public sector partners to ensure that the
infrastructure assets and businesses in which the Company invests
remain available and operational to serve the public, to the extent
possible, whilst protecting the health and safety of staff and
users.
Notwithstanding the limited new impacts on the portfolio's
performance arising from the pandemic, the Company has maintained
its precautionary approach to the valuation of specific risks in
the portfolio.
The Company's half year financial highlights are set out on page
one. Over the period, the NAV per share reduced by 1.4% from 147.1
pence at 31 December 2020 to 145.1 pence at 30 June 2021. This
modest reduction in NAV per share in the period is principally
attributable to:
- The UK corporation tax increase (which we have assumed to be
permanent) which has had a negative effect of 2.0 pence;
- Strengthening of Sterling against other currencies which has
had a negative effect of 1.2 pence;
- Payment of a dividend of 3.68 pence in the period; and
- A partial offset attributable to the positive effects of
unwinding the discount rate and some minor positive revaluations of
certain investments.
I am pleased to say that the Company has maintained its dividend
cover at 1.3x and has continued to deliver growth in its dividend.
In line with its stated dividend target of 7.55 pence per share for
the 2021 financial year, the Company declares a dividend of 3.78
pence per share for the six months to 30 June 2021. This represents
2.7% growth on the prior corresponding period and is consistent
with the c.2.5% average annual dividend growth that has been
delivered to investors since the Company's inception. This dividend
will be paid on 17 November 2021. Since its launch in 2006, the
Company has now delivered a Total Shareholder Return of 231.4%, or
8.5% on an annualised basis.
asset stewardship
The Company remains focused on actively managing certain risks
within specific assets which are caused by the effects of Covid-19.
Chief amongst these risks is our continued monitoring of passenger
numbers on the Diabolo Rail Link ('Diabolo'), which remain
depressed.
As previously disclosed, the Company committed a further EUR24.0
million to the Diabolo project in December 2020, with EUR10.0
million invested at that time, and a further EUR14.0 million
available to protect Diabolo's liquidity position and ensure its
debt covenants can 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 EUR14.0 million commitment should be sufficient. Whilst
forecast cash flows have been updated to reflect the latest advice
from our technical adviser, the valuation of our investment in
Diabolo has not materially changed over the period (excluding the
impact of the change in foreign exchange rates), with Diabolo
representing 7.5% of the Company's portfolio by investment at fair
value. We will of course continue to closely monitor passenger
numbers.
More positively, the duration of our investment with the
concession not expiring until 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 our ability to influence revenues via the passenger
fare adjustment mechanism, all give us confidence for the future
recovery and performance of this investment.
Cadent is the UK's largest gas distribution network, serving 11
million customers and is the Company's largest investment by fair
value, representing 16.5% of the Company's portfolio by investment
at fair value. As previously announced, in December 2020 Ofgem
published its final determination in respect of the next five-year
regulatory period which commenced on 1 April 2021. After careful
deliberation and consultation with its shareholders (of which the
Company is one), Cadent exercised its right to appeal Ofgem's final
determination to the Competition and Markets Authority ('CMA'). The
CMA announced its provisional findings in August 2021 and whilst
the Company commends certain aspects of the CMA's provisional
findings, there are areas on which we expect Cadent will continue
to work with stakeholders to ensure that the CMA's final decision
is in the best interests of its customers, both now and into the
future. The Company had previously sought to reflect the final
determination issued by Ofgem in its cash flow forecasts used at
the 31 December 2020 valuation date and accordingly, the CMA's
announcement, if confirmed, is expected to have a modestly positive
impact on the Company's valuation of its investment in Cadent
compared to that reported as at 30 June 2021. It should however be
noted that the findings are only provisional at this stage and the
CMA is expected to publish its final decision in October 2021.
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 infrastructure to distribute cleaner fuels, such as
hydrogen, in the future. Please see more information on page
18.
Despite the ongoing challenges posed by Covid-19 on the
construction works being undertaken by Tideway, the company
responsible for building the 25km 'super sewer' under the River
Thames, we are pleased to report that good progress was made during
the period with construction work 68% complete at the end of the
period. Please see more information in the asset management section
on pages 16 to 21.
The Company expects and strongly supports a continued policy
focus on climate change and other ESG-related topics in forthcoming
periods. The Board believes that in order for infrastructure
investments to be successful, they must deliver benefits beyond
financial returns. Whilst the Company has historically had a strong
focus on the ESG contributions made by each of its investments and
aligned its investment decision-making with sustainability goals,
the Company has now put in place a direct alignment of its
investment approval processes with the objectives of the Paris
Agreement. While not changing our overall approach, this formalises
the Company's commitment and will involve enhanced screening and
due diligence processes to ensure that we can evidence that all new
investments are aligned with the Paris Agreement.
In the period, the Company also formally became a supporter of
the recommendations of the TCFD, and is continuing to enhance its
disclosures in line with TCFD. The Company supports increased
disclosure and has recently published the first edition of its own
stand-alone Sustainability Report to complement the ESG reporting
already provided in its annual and other reporting. Please see more
information in the Responsible Investment section on pages 23 to
40.
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 key role it plays in
the long-term performance of the Company.
INVESTMENT ACTIVITY
During the six months to 30 June 2021, the Company completed
over GBP22 million of new investment in digital infrastructure and
social accommodation sectors.
In June 2021, the Company reached financial close on a new
police headquarters project in Offenbach in South-East Hesse,
Germany. The Company invested GBP8.1 million for a 45%
shareholding. The project was initially awarded to the Company in
December 2017; however, financial close took place only after
construction reached completion and successful handover to the
Federal State of Hesse.
In July 2017, the Company agreed to invest up to GBP45 million
in UK digital infrastructure alongside the UK Government, through
the National Digital Infrastructure Fund ('NDIF'). During the
period an additional c.GBP14.2 million was approved for investment
into toob, one of NDIF's existing investments. toob is a UK full
fibre broadband provider delivering broadband to homes, businesses,
public service and community groups in the South of England.
In July 2021, the Company also reached financial close on its
eighth OFTO for the long-term ownership and operation of the
transmission link to the 588MW Beatrice offshore wind farm,
Scotland's largest offshore wind farm.
This investment will increase the Company's contribution to the
UK's transition to a zero-carbon economy. The Beatrice OFTO will
transmit green electricity equivalent to around 450,000 UK homes,
increasing the number of homes that are powered via the Company's
OFTO portfolio to approximately 1.8 million homes.
More recently on 3 September 2021, the Company entered into an
agreement to acquire an additional c.5% interest in Angel Trains,
the largest rolling stock company in the UK. Following completion
of the transaction, which is expected to occur later in September
2021, the Company's investment in Angel Trains will, other things
being equal, be the third largest holding in its portfolio by
value.
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' business plan
fully supports the decarbonisation of the UK transport system and
benefits from the long-term trends towards modal shift and
transportation net zero targets. Please see more information
relating to the Company's investment activity on pages 12 to
15.
corporate governance
As reported at 31 December 2020, a comprehensive formal audit
tender was completed in late 2020. PricewaterhouseCoopers CI LLP
('PwC') was selected as the Company's new auditor and received
shareholder approval at the Company's Annual General Meeting
('AGM') in May 2021. PwC has assumed the role as the Company's
auditor for the 2021 financial year. A detailed handover plan has
been agreed and all parties are working closely to ensure a smooth
and effective auditor transition.
I previously wrote about the formation of the ESG Committee (the
'Committee') in the 2020 Annual Report as part of the Board's
culture of continuous improvement. I am pleased to report the
Committee formally convened in March 2021 and is chaired by Ms
Bond. The Committee will look to continue enhancing the Company's
actions, monitoring and disclosures of ESG-related risks and
opportunities. The Committee's work commenced with the first
edition of the Company's Sustainability Report, already mentioned.
The report reflects the Company's long-standing commitment to
sustainability and is designed to provide investors and other
stakeholders with an in-depth view of the Company's integrated
approach to this important subject. The Chair of the ESG Committee
will rotate amongst Board members, as we recognise this as a key
area of focus to which all Board members wish to and should
contribute.
Ms David was appointed Chair of the Risk Sub-Committee in March
2021, taking over from Ms Bond. I and my fellow Board members wish
to thank Ms Bond for her years of leadership of this important
Sub-Committee.
In addition, in July 2021, the Company advised that it intends
to add an additional tier to the annual investment management fee
paid to the Company's Investment Adviser. The investment management
fee will be reduced from 90bps to 80bps for fully operational
assets on that amount of the Company's adjusted gross asset value
as is in excess of GBP2.75 billion.
The Board complies with the Association of Investment Companies
Code of Corporate Governance and the UK Corporate Governance Code,
as set out in the Corporate Governance section of the 2020 Annual
Report and financial statements.
CURRENT ENVIRONMENT AND OUTLOOK
Dealing with Covid-19 continues to place heavy claims on
government resources which are at full stretch and, as such, I
believe that private sector investment in infrastructure - across
the world - will have an even greater role to play going forward,
complementing government initiatives for economic recovery.
The Board remains confident in the portfolio's operational and
financial resilience, and the Company believes that as a result of
the pandemic, which began in 2020, there is an increased
recognition from governments of the pivotal role infrastructure
will play in generating economic recovery and ensuring resilience
to future threats. All countries where the Company invests have
echoed similar sentiments that infrastructure investment will also
be vital in the transition to decarbonising their economies. For
example, infrastructure investment is a key focus of the Build Back
Better plan in the UK, recognising that high-quality infrastructure
is crucial for economic growth, boosting productivity and helping
the UK achieve net zero through its Ten Point Plan. As noted above,
we believe governments, globally, will require private capital to
help meet these transition targets.
The Company continues to hold an attractive pipeline of
near-term investments as well as over 40 additional opportunities
currently under examination. These include investments in areas
such as social infrastructure, regulated utilities, transport and
other essential infrastructure. Notwithstanding the sustained high
levels of demand for the types of assets in which the Company
invests, the Company remains confident in the ability of its
Investment Adviser to continue to source and develop high-quality,
well-performing opportunities, across the Company's target
geographies. For the Company's shareholders, these will seek to
deliver long-term, predictable cash flows with strong
inflation-linkage that meet the Company's risk-return profile.
Please see more information on pages 14 to 15.
I and my fellow Directors thank you for your continued
support.
Mike Gerrard
Chair
8 September 2021
tOP 10 INVESTMENTS
The Company's top ten investments by fair value at 30 June 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
Name of 30 June 30 June 30 June 31 December SDG
Investment Location Sector 2021 2021(1) 2021 2020 Supported
-------------- ----------- -------------- --------------- ----------- ------------- ------------- -------------
Gas 7% Risk
Cadent UK distribution Operational Capital 16.5% 16.5% 9
-------------- ----------- -------------- --------------- ----------- ------------- ------------- -------------
Cadent owns four of the UK's eight regional gas distribution
networks ('GDNs') and in aggregate provides gas to approximately
11 million consumers.
------------------------------------------------------------------------------------------------------- -------------
Waste Under 16% Risk
Tideway UK water Construction Capital 9.3% 9.1% 6
-------------- ----------- -------------- --------------- ----------- ------------- ------------- -------------
Tideway is the trading name of the company that was awarded
the licence to design, build, commission, maintain and finance
a new 25km 'super-sewer' under the River Thames.
------------------------------------------------------------------------------------------------------- -------------
Energy 100% Risk
Lincs OFTO UK transmission Operational Capital 7.7% 7.9% 11
-------------- ----------- -------------- --------------- ----------- ------------- ------------- -------------
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.
------------------------------------------------------------------------------------------------------- -------------
Diabolo 100% Risk
Rail Link Belgium Transport Operational Capital 7.5% 8.6% 7
-------------- ----------- -------------- --------------- ----------- ------------- ------------- -------------
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.
------------------------------------------------------------------------------------------------------- -------------
100% Risk
Capital
and 100%
Ormonde Energy senior
OFTO UK transmission Operational debt 4.8% 5.3% 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 4.8% 5.3% 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 3.5% 3.5% 11
-------------- ----------- -------------- --------------- ----------- ------------- ------------- -------------
BeNEX is both a rolling stock leasing company as well as
an investor in train operating companies ('TOCs'), providing
approximately 42 million train km of annual rail transport.
------------------------------------------------------------------------------------------------------- -------------
5% Risk
Angel Trains UK Transport Operational Capital 3.0% 3.3% 11
-------------- ----------- -------------- --------------- ----------- ------------- ------------- -------------
Angel Trains is a rolling stock leasing company asset base
comprising over 4,400 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.
------------------------------------------------------------------------------------------------------- -------------
US Military Military 100% Risk
Housing(2) US housing Operational Capital 2.8% 2.7% 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.
------------------------------------------------------------------------------------------------------- -------------
100% Risk
Capital
and 100%
Robin Rigg Energy senior
OFTO UK transmission Operational debt 2.3% 2.3% 7
-------------- ----------- -------------- --------------- ----------- ------------- ------------- -------------
The project connects the 180MW Robin Rigg East and West offshore
wind farms, located 12km off the coast of Cumbria, to the
National Grid. The transmission assets comprise the onshore
and offshore substations and under-sea cables, 25km in length.
------------------------------------------------------------------------------------------------------- -------------
1. Risk Capital includes both project level equity and subordinated shareholder debt.
2. Includes two tranches of mezzanine debt into US military housing.
Significant movements in the Company's portfolio for the six
months to 30 June 2021 can be found on pages 12 to 13 of the
Operating Review.
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
higher 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 the Company's portfolio.
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 H1 2021 met at least three of the six attributes (31
December 2020: 100%)
As discussed in the Chair's Letter, the six-month period to 30
June 2021 saw the Company continue to focus on its existing
portfolio and the impact of Covid-19. However, despite this, the
Company invested GBP22.3 million (30 June 2020: GBP11.7 million).
These opportunities were sourced by the Investment Adviser through
existing commitments or increasing its interest in existing
investments. These origination approaches avoid bidding in the
competitive secondary market and are preferred routes to market for
the Company. Details of investment activity for the six months to
30 June 2021, and post-period end, are provided below.
The investments made by the Company during the period meet or
exceed the Company's performance indicator of having at least three
of the required six key investment attributes. Please refer to the
key performance indicators on pages 6 to 7. Further details for
each of these transactions are provided below.
INVESTMENTS LOCATION KEY ATTRIBUTES OPERATIONAL INVESTMENT INVESTMENT
MADE DURING STATUS DATE
THE SIX
MONTHS
TO 30 JUNE
2021
1 2 3 4 5 6
-------------------------- ------- ------- ------- ------- ------- ------------ -------------- -----------
toob UK ü ü ü ü Operational GBP14.2 April 2021
million
-------------- ---------- ------- ------- ------- ------- ------- ------------ -------------- -----------
Offenbach Germany ü ü ü ü ü Operational GBP8.1 June 2021
Police million
Centre
-------------- ---------- ------- ------- ------- ------- ------- ------------ -------------- -----------
GBP22.3
million
----------------------------------------------------------------------------------------- -------------- -----------
INVESTMENTS LOCATION KEY ATTRIBUTES OPERATIONAL INVESTMENT INVESTMENT
MADE AFTER STATUS DATE
PERIOD
1 2 3 4 5 6
------------------------- ------- ------- ------- ------- ------- ------- ------------ ----------- -----------
Beatrice UK ü ü ü ü ü Operational GBP49.8 July 2021
OFTO million
Angel Trains ü ü ü ü ü Operational c.GBP98 September
million 2021
------------------------- ------- ------- ------- ------- ------- ------- ------------ ----------- -----------
INVESTMENTS 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 multi-purpose 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 INFRASTRUCTURE, U.K.
In July 2017, the Company agreed to invest up to GBP45 million
in UK digital infrastructure alongside the UK Government, through
the 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 current volume of
people working from home.
Primary SDG Supported: 11
INVESTMENTS MADE POST-PERIOD
BEATRICE OFTO, UK
In July 2021, the Company reached financial close on its eighth
OFTO for 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 This investment will
increase the Company's contribution to the UK's transition to a
zero-carbon economy. The Beatrice OFTO will transmit green
electricity equivalent to around 450,000 UK homes, increasing the
number of homes that are powered via the Company's OFTO portfolio
to approximately 1.8 million homes.
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, reached an agreement which included it acquiring a
further c.5% shareholding in Angel Trains.
The acquisition, leveraging INPP's existing shareholding
position, will increase the Company's shareholding and provide it
with further governance rights through direct board representation.
Since making its original acquisition in 2008, Angel has been a
successful investment for INPP, delivering both capital growth and
yield. Angel is the largest rolling stock company in the UK,
serving the passenger rail sector with a diversified fleet of more
than 4,000 vehicles, the majority of which are electric multiple
units. Angel Trains' business plan fully supports the
decarbonisation of the UK transport system.
Primary SDG Supported: 11
Current market environment and future opportunities
The pipeline for the types of assets the Company invests in
remains strong and the Company continues to be confident in its
ability to source and develop quality, high-performing
opportunities, across the Company's target geographies, that
deliver long-term, predictable cash flows with inflation-linkage
that meet the Company's risk-return profile. As part of the
Investment Adviser's appraisal process, it considers the long-term
viability of investments to ensure they are fit for the future and
it considers ESG aspects such as resilience to technology changes,
environmental impact and shifting societal expectations. This
approach and the types of sectors the Company invests in has meant
the majority of the Company's portfolio has not been severely
affected by the pandemic, and the Company's portfolio, driven by
its active stewardship and prudent approach, benefits from
substantial mitigations to Covid-19.
In the UK, following the onset of the pandemic, the government
released its 'Build Back Better' paper and announced the
establishment of a new national infrastructure bank, which opened
in June 2021 and will support private infrastructure projects in
sectors including clean energy, transport, digital, water and
waste, initially with GBP12 billion of capital to deploy and with
the capability to issue GBP10 billion of government guarantees.
This follows the 2020 Spending Review that announced a commitment
to spend GBP100 billion of capital in 2021/2022 on infrastructure
as part of the UK government's commitment to delivering GBP600
billion of gross public sector investment over the next five years
to improve infrastructure, drive economic growth, boost
productivity and help the UK achieve net zero by 2050. The UK
Infrastructure Bank will have the capacity to invest in sectors
such as sustainable fuels, carbon capture usage and storage, and
heat efficiency, and will look to increase investment in
less-established green industries and into local infrastructure
projects. These initiatives highlight the need for private capital
to support these ambitions.
Governments outside the UK similarly recognise the role of
infrastructure to transition to net zero and help drive economic
recovery as a consequence of the Covid-19 pandemic. The Next
Generation EU Recovery Fund is focused on infrastructure to address
the social and economic impacts of Covid-19 and to become more
sustainable and resilient. The emphasis of this package is on
providing funding and direction for pan-European infrastructure
projects to contribute to net zero by 2050 and on improved digital
connectivity. In the US, President Biden announced the 'Build Back
Better Recovery Plan' to focus on infrastructure investment with a
clear climate-driven agenda; and in Australia, the 2021
infrastructure plan allocated over A$15 billion for new
infrastructure projects for 2021/2022 to support post-Covid-19
recovery building on its A$110 billion 10-year infrastructure
investment pipeline.
The release of the latest assessment of climate science from the
Intergovernmental Panel on Climate Change further emphasises the
need for swift action. The speed of transitions and of
technological change required to limit warming to 1.5degC above
pre-industrial levels are larger and have no documented historic
precedent. This is particularly relevant for the energy, urban and
infrastructure sectors. Whilst this presents a huge challenge, it
presents a significant opportunity and strengthens the investment
case for net zero infrastructure globally.
While the full consequences of the pandemic and its long-term
effects, both economic and social, remain unclear, the Company
believes its business model and investment objectives continue to
offer a significant degree of protection for investors and there is
sustained appetite for long-term responsible investment into public
and social infrastructure across the geographies that the Company
invests in.
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
---------------- --------- -------------------------- -------------------- -----------------------
A further contingent
commitment available,
Diabolo Belgium GBP12.0 million(2) 26 years if required
---------------- --------- -------------------------- -------------------- -----------------------
Investment reached
financial close
post-period end
Beatrice OFTO UK c.GBP50 million c.23 years on 27 July 2021
---------------- --------- -------------------------- -------------------- -----------------------
Agreement to
acquire additional
c.5% interest
Operational made on 3 September
Angel Trains UK c.GBP98 million business 2021
---------------- --------- ------------------------ -------------------- -----------------------
Preferred bidder.
Investment expected
Rampion OFTO UK Up to GBP40 million c.20 years H2 2021
---------------- --------- -------------------------- -------------------- -----------------------
Preferred bidder.
East Anglia Investment expected
One OFTO UK Up to GBP90 million c.21 years H2 2021
---------------- --------- -------------------------- -------------------- -----------------------
1 Represents the current 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.
2 The Company invested EUR10 million of funding in 2020 and made
a contingent commitment of a further EUR14.0 million (GBP12.0
million).
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 INFRASTRUCTURE REGULATED UTILITIES TRANSPORT OTHER ESSENTIAL
OF 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
* Other social accommodation
------------ --------------------------------- ------------------------------------ -------------------------------------------------- ---------------------------
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
in 11 offices 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 asset 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 global asset management team.
The Investment Adviser's involvement will vary depending on each
investment type, noting that each investment is actively managed to
optimise performance. During H1 2021, 100% of forecast investment
portfolio receipts were received (H1 2020: 100.0%)(1) .
The Company has a weighted average investment life of c.32 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 inherently involve health and safety
risk during construction through to operations. 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 0.34 per 100,000
hours worked (as at 30 June 2021)(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)
99.7% Asset availability achieved against a target of
>98%
PPP PROJECTS
PPP projects account for c.41% 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. 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, are key deliverables, and the Company's Investment
Adviser works closely with its partners to ensure these standards
are met. For those investments whose achievement is measured by
both availability and performance, for the six months to 30 June
2021, the availability of those assets was 99.7% (30 June 2020:
99.6%) and across all projects there were performance deductions of
0.1% (30 June 2020: 0.1%), both exceeding the Company's
targets.
In addition, the Company's public sector clients commissioned
and funded over 464 contract variations during the period,
resulting in a combined value of over GBP9.3 million of additional
project work conducted 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. One benchmarking exercise was
performed and agreed within our social accommodation project (which
included reviewing facilities management services delivered on the
asset in order to assess value for money for the public sector.
1 Measured by comparing forecast portfolio distributions against
actual portfolio distributions received.
2 This includes UK social accommodation (where the Investment
Adviser provides oversight of the management services), BSF
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 (on instruction
from the client): Royal Melbourne Showgrounds in Australia, which
has been commandeered 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). In addition, there was one
temporary school closure for a one-week period in relation to a
minority BSF investment, due to a high number of Covid-19
cases.
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.
As previously disclosed, the Company committed a further EUR24
million to the Diabolo project in December 2020 with EUR10 million
invested at that time and a further contingent commitment of EUR14
million available to protect Diabolo's liquidity position and
ensure 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 EUR14 million commitment should be sufficient. Whilst
forecast cash flows have been updated to reflect the latest advice
from our technical adviser, the valuation of our investment in
Diabolo has not materially changed over the period (excluding the
impact of the change in foreign exchange rates). We will of course
continue to closely monitor passenger numbers.
More positively, the duration of our investment, with the
concession not expiring until 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 our 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 contracted revenue stream
comes to an end, typically after c.20-25 years. 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's intention to publish a further
consultation on the policy framework in November 2021, with a
response due to be published in spring 2022. 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. The impact of Covid-19 on both the
cost and schedule of the project has been reported previously and
it was noted that, in addition to existing contractual and
regulatory safeguards, Tideway has been in discussions with Ofwat
on a package of measures that would further mitigate the financial
impact of Covid-19 on Tideway's shareholders (the Company is a 16%
shareholder in Tideway). Progress has been made in these
discussions and the proposed measures were the subject of a public
consultation run by Ofwat during the period. The consultation
closed in May 2021 and Tideway expects the cost-sharing measures to
be formally implemented via modifications to its licence before the
end of 2021. The Company is pleased that these modifications seem
likely to ensure an appropriate allocation is achieved between
stakeholders of the impact that Covid-19 is expected to have on the
project's cost and schedule.
Despite the ongoing challenges posed by Covid-19 on the
construction works being undertaken by Tideway, good progress was
made during the period with construction work 68% complete as at 30
June 2021. Progress towards system commissioning and handover is an
increasing area of focus and, as commonly undertaken by major
projects at this stage of delivery, Tideway has been working with
stakeholders over the past few months on a thorough review of the
remaining activities to provide clarity on the schedule to
completion. The results of this review were published by Tideway in
August 2021 and confirm the appropriateness of the existing
schedule dates with only a minor cost increase of c.1% on the
previously announced cost estimate of GBP4.1 billion, which has no
material financial impact on investors.
Cadent
Cadent is the UK's largest gas distribution network, serving 11
million customers and is the Company's largest investment by fair
value, representing 16.5% of the Company's portfolio by investment
at fair value. As previously announced, in December 2020 Ofgem
published its final determination in respect of the next five-year
regulatory period which commenced on 1 April 2021. After careful
deliberation and consultation with its shareholders (of which the
Company is one), Cadent exercised its right to appeal Ofgem's final
determination to the CMA. The CMA announced its provisional
findings in August 2021 and whilst the Company commends certain
aspects of the CMA's provisional findings, there are areas on which
we expect Cadent will continue to work with stakeholders to ensure
the CMA's final decision is in the best interests of its customers,
both now and into the future. The Company had previously sought to
reflect the final determination issued by Ofgem in its cash flow
forecasts used at the 31 December 2020 valuation date and,
accordingly, the CMA's announcement, if confirmed, is expected to
have a modestly positive impact on the Company's valuation of its
investment in Cadent compared to that reported as at 30 June 2021.
It should however be noted that the findings are only provisional
at this stage and the CMA is expected to publish its final decision
in October 2021.
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.
HyNet is an innovative net zero carbon project, based on the
production of hydrogen from national gas based in the North West
and North Wales. From 2025, HyNet will produce, store and
distribute hydrogen as well as capture and store carbon from
industry in the North West of England and North Wales. Cadent will
continue to work closely with the Government to turn hydrogen
targets into carbon reductions and new jobs and hopes to see the
Government's hydrogen ambitions continue to grow.
OTHER OPERATING BUSINESSES
The Company invests in a number of operating businesses
including BeNEX, Angel Trains and digital infrastructure
businesses. With the exception of Angel Trains, 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,
ensuring health and safety is a priority, 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 the first
half of 2021 as a result of the ongoing pandemic, the 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. Moreover, during the
first six months of 2021, two concessions were re-won, reducing the
risk profile of the business.
Angel Trains
Angel Trains currently 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 in the six months to 30 June 2021. Following the 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 the period and
the Company received a dividend from Angel Trains shortly after the
period end. 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 "The 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.
Throughout 2020 and H1 2021, many businesses within the digital
infrastructure sector faced unprecedented challenges, with
government mandated lockdown restrictions impacting staff movement,
while also creating a surge in demand for fibre connectivity due to
the volume of people working from home. NDIF's portfolio of
companies has played a critical role in keeping people connected
while at the same time executing their value creation plans.
Throughout 2021, and with the easing of lockdown restrictions, the
businesses in which NDIF is invested have continued to gain
momentum and market share, which again highlights the resilience of
digital infrastructure and the continued consumer and business
demand 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.
During the period, all of the Company's facilities have remained
operational and available for use, with no disruptions, aside from
the three facilities that were repurposed/temporarily closed upon
instruction from clients in the public sector (Covid-19 related),
there were no disruptions to service delivery. In response to
Covid-19, the Company's Investment Adviser has continued to monitor
each counterparty as normal, but it has increased the frequency of
its reviews to ensure that any issues as a result of Covid-19 are
identified as soon as possible.
INPP Service Providers
[Chart can be found within the PDF document of the report on the
company website.]
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
for other non-public information. 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.
As at 30 June 2021, Tideway is the Company's only project under
construction, representing 9.3% of the Company's portfolio.
During the six months to 30 June 2021, Tideway made good
progress on the construction of the tunnel and associated
infrastructure. The construction works were 68% complete at the end
of the period despite the ongoing challenges posed by Covid-19 and
the schedule remains unchanged from the previous update, with
handover to Thames Water scheduled to occur in March 2025.
The proportion of assets under construction in the portfolio is
no longer reported as a separate KPI, as it was judged that this is
no longer a significant performance metric for the Company. Updates
on the progress of assets in construction in the portfolio, as well
as the proportion of the portfolio which is under construction,
will continue to be provided in this section of the Company's
annual and interim reports.
The Company has one project under construction as at 30 June
2021, as set out in the table below.
ASSET LOCATION CONSTRUCTION DEFECTS COMPLETION STATUS AT PERIOD % OF INVESTMENT
COMPLETION DATE AT FAIR
DATE VALUE
--------- ---------- -------------- ------------------- ------------------ ----------------
Behind original
Tideway UK 2025(1) 2028 schedule(2) 9.3%
--------- ---------- -------------- ------------------- ------------------ ----------------
1 Scheduled handover date. Source: Tideway Annual Report 2020/2021.
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.
efficient FINANCIAL MANAGEMENT
The Company aims to manage its finances efficiently. It achieves
this through the active monitoring of cash held and generated from
operations to ensure cash covered dividends while managing
corporate costs. It also seeks to minimise levels of unutilised
cash holdings while retaining the financial flexibility to pursue
new investment opportunities. Financial management is supported by
appropriate hedging strategies and prudent use of the Company's
corporate debt facility ('CDF').
Cash dividends paid in the period of GBP55.2 million (H1 2020:
GBP51.5 million) were 1.3 times (H1 2020: 1.3 times) covered by the
Company's net operating cash flows before capital activity. This
achieved the Company's objective to generate dividends paid to
investors through its operating cash flows.
Corporate costs were managed effectively during the period and
represent 1.25% for the first six months of 2021 (H1 2020: 1.21%).
This ratio has increased in the period due to the timing impact of
a reduction in NAV during the period and corporate fees being
calculated in arrears. Corporate costs include management fees paid
of GBP13.0 million for the period to 30 June 2021 (H1 2020: GBP13.5
million). There were no changes in the status of the Company's
related parties in the period from those reported in the December
2020 Annual Report.
As outlined on page 46 of the financial statements, IFRS profit
before tax of GBP27.2 million was reported (30 June 2020: GBP35.4
million). The reduction compared to the prior corresponding period
reflects a decrease in the valuation of the portfolio overall,
primarily as a result of macroeconomic changes in the period.
The Company's cash balance as at 30 June 2021 was GBP53.4
million, an increase of GBP11.7 million on the year-end balance at
31 December 2020 of GBP44.3 million and resulting from portfolio
distributions received in the period. Cash receipts from
investments increased in the period, to GBP87.1 million (H1 2020:
GBP82.9 million), reflecting the further growth and maturity of the
portfolio. As detailed in note 10 of the financial statements, as
well as on page12 of the Operating Review earlier in this report,
GBP22.3 million of investments were made during the period to 30
June 2021, an increase on the same period last year (H1 2020:
GBP11.7 million). Investment transaction costs paid in H1 2021 were
GBP0.1 million (H1 2020: GBP0.5 million), a decrease due to the
timing of payments, with remaining fees due accrued at the period
end.
In March 2021, the Company's CDF was renewed and now matures in
March 2024. The new facility has the same overall GBP400 million
capacity as the previous fully committed arrangement but is
structured to support the Company's near-term pipeline more
efficiently with GBP250 million available on a fully committed
basis together with a flexible 'accordion' component which will,
subject to lender approval, allow for a future extension by an
additional GBP150 million. The banking group for the existing
facility has been retained, being National Australia Bank, the
Royal Bank of Scotland International, Sumitomo Mitsui Banking
Corporation and Barclays Bank. At 30 June 2021, the CDF was GBP56.0
million cash drawn (31 December 2020: GBP38.4 million cash drawn).
Net financing costs paid were GBP3.3 million, an increase compared
to the prior corresponding period (H1 2020: GBP2.1 million),
reflecting the renewal and level of utilisation of the CDF during
the period.
Performance against strategic priority KPIs:
1.3x Dividends fully cash covered
1.25% Ongoing charges ratio
SUMMARY OF CASH FLOWS
SUMMARY OF CONSOLIDATED Six months Six months to YEAR TO 31 DECEMBER
CASH FLOW to 30 June 30 June 2020 2020
2021 GBP million GBP MILLION
GBP million
Opening cash balance 44.3 45.6 45.6
Cash from investments 87.1 82.9 153.0
Corporate costs (for ongoing
charges ratio) (14.7) (14.6) (28.3)
Net financing costs (3.3) (2.1) (4.2)
============================== ============= ============= ===================
Net operating cash flows
before capital activity(1) 69.1 66.2 120.5
============================== ============= ============= ===================
Cost of new investments (22.3) (11.7) (30.0)
Investment transaction costs (0.1) (0.5) (0.8)
Net movement of CDF 17.6 (7.7) 10.5
Dividends paid (55.2) (51.5) (101.5)
Closing cash balance 53.4 40.4 44.3
============================== ============= ============= ===================
Cash dividend cover 1.3x 1.3x 1.2x
============================== ============= ============= ===================
1 Net operating cash flows before capital activity as disclosed
above of c.GBP69.1 million (30 June 2020: c.GBP66.2 million)
include net repayments from Investments at Fair Value through
profit and loss of c.GBP30.8 million (30 June 2020: c.GBP17.8
million), and finance costs paid of c.GBP3.3 million (30 June 2020:
c.GBP2.1 million) and exclude investment transaction costs of
c.GBP0.1 million (30 June 2020: GBP0.5 million) when compared to
net cash inflows from operations of c.GBP41.9 million (30 June
2020: c.GBP49.8 million) as disclosed in the statutory cash flow
statement on page 49 of the financial statements.
CASH FLOWS ASSOCIATED WITH ONGOING CHARGES RATIO
CORPORATE COSTS Six months to 30 Six months to YEAR TO 31 DECEMBER
June 2021 30 June 2020 2020
GBP million GBP million GBP MILLION
Management fees (13.0) (13.5) (26.4)
Audit fees (0.4) (0.2) (0.2)
Directors' fees (0.2) (0.2) (0.4)
Other running costs (1.1) (0.7) (1.3)
===================== ================= ============= ===================
Corporate costs (14.7) (14.6) (28.3)
===================== ================= ============= ===================
ONGOING CHARGES RATIO Six months to 30 Six months to 30 YEAR TO 31 DECEMBER
June 2021 June 2020 2020
GBP million GBP million GBP MILLION
Annualised ongoing
charges(1) (29.4) (29.2) (28.3)
Average NAV(2) 2,351.0 2,417.3 2,393.3
Ongoing charges (1.25%) (1.21%) (1.18%)
======================= ================= ================ ===================
1 The Ongoing Charges ratio was prepared in accordance with the
Association of Investment Companies' ('AIC') recommended
methodology, noting this excludes non-recurring costs.
2 Average of published NAVs for the relevant period.
INVESTOR RETURNS
DIVID GROWTH
The Company targets predictable and, where possible, growing
dividends. During the period, the Company paid a dividend of 3.68
pence per share in respect of the six months ended 31 December
2020. This brought the total dividends paid in respect of 2020 to
7.36 pence per share, consistent with forward guidance provided
previously. As illustrated in the chart on page 2, the Company has
delivered a c.2.5% average annual dividend increase since initial
public offering ('IPO'). The Company is currently maintaining its
previously announced dividend targets of 7.55 pence and 7.74 pence
per share in respect of 2021 and 2022, respectively(1) .
TOTAL SHAREHOLDER RETURN ('TSR')
The Company's annualised TSR since the IPO to 30 June 2021 was
8.5%(2) . This compares to the annualised FTSE All-Share index TSR
over the same period of 5.3%. The total return based on the NAV
appreciation plus dividends paid since the IPO to 30 June 2021 is
7.6%(3) on an annualised basis compared to the Company's long-term
target of 7.0%(3) .
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 worldwide, it began to fall in
the 12 months to 30 June 2021 and we anticipate the correlation to
return to more normal levels over the longer term. For reference,
the correlation with the FTSE All-Share index was 0.179 and 0.481
over the 12 months to 30 June 2019 (being the most recent
comparable period prior to Covid-19) and 30 June 2021,
respectively.
Performance against strategic priority KPIs:
7.6% p.a. IRR achieved since IPO(3) (31 December 2020: 7.7%)
Share Price Performance
[Diagram can be found in PDF version of this document on the
Company's website].
Inflation-linked cash flows
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 30
June 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 0.75% per annum in response to a 1.00% per annum
increase in all of the assumed inflation rates(4) .
1 There can be no assurance that these targets will be met or
that the Company will make any distributions at all. Whilst we
generally have good forward-visibility of cash flows generated by
the Company's investments, the current Covid-19 pandemic creates
additional uncertainty.
2 Since inception in November 2006. Source: Bloomberg. Share
price appreciation plus dividends assumed to be reinvested.
3 Calculated by reference to the November 2006 IPO issue price
of 100 pence and reflecting NAV appreciation plus dividends
paid.
4 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-linkage 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 reviewed by the Company's auditor on a sample
basis. The Company reports a 1.2% decrease in NAV from GBP2,384.4
million at 31 December 2020 to GBP2,356.5 million at 30 June 2021.
Over the same period, the NAV per share decreased by 1.4% from
147.1 pence to 145.1 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:
- The yields on the overwhelming majority of government bonds
used as part of the valuation process increased during the period,
resulting in a net GBP101.0 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, and (ii) the discount rate used to value the Company's
investment in Diabolo Rail 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 GBP148.2 million;
- In line with forward guidance provided previously, a cash
dividend of 3.68 pence per share totalling GBP55.2 million was paid
to the Company's shareholders during the six months to 30 June
2021. This dividend was paid in respect of the six months ended 31
December 2020;
- During the period, Sterling strengthened against the Euro,
Australian Dollar and US Dollar, whereas it marginally weakened
against the Canadian Dollar (these being the four foreign
currencies the Company is exposed to). Including the change in the
value of the forward foreign exchange contracts, the net negative
impact on the NAV was GBP19.5 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 from the
table on page 28 and in aggregate these had a negative GBP33.0
million impact on the NAV; and
- Among other things, the NAV Return of GBP32.6 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 updated forecasts for Diabolo
rail 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;
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 1.1% decrease in the investments at fair
value, from GBP2,345.4 million at 31 December 2020 to GBP2,320.3
million at 30 June 2021. The key drivers of the change in the
Investments at Fair Value are described in more detail below.
Investments at Fair Value 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.
- An increase of GBP22.3 million owing to new investments made during the period;
- A decrease of GBP87.1 million due to distributions paid out
from the portfolio during the period;
- The Rebased Investments at Fair Value of GBP2,280.6 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 GBP48.0 million captures broadly the
same items as the NAV Return (set out in detail on page 24) 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 positive GBP47.2
million impact on the Investments at Fair Value. Further
information on the component parts of the impact shown is provided
on page 25;
- During the period, Sterling strengthened against the Euro,
Australian Dollar and US Dollar; whereas it marginally weakened
against the Canadian Dollar (these being the four foreign
currencies the Company is exposed to). The net negative impact on
the Investments at Fair Value was GBP22.5 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 from the table on page 28 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 effectively represent 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 (GBPm)
[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 certain adjustments should be made
to the deposit rates and foreign exchange rates used to value the
Company's overseas assets.
The key macroeconomic assumptions used as the basis for deriving
the Company's investment valuations are summarised below, with
further details provided in note 9 of the financial statements.
MACROECONOMIC ASSUMPTIONS 30 june 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 1.84 1.77
GBP/EUR 1.16 1.11
GBP/CAD 1.72 1.74
GBP/USD 1.38 1.37
--------------------------- ----------- ----------------- -----------------
Tax rates(3) UK 19.00%/25.00% 19.00%
Australia 30.00% 30.00%
Europe Various (12.50% Various (12.50%
Canada - 32.28%) - 32.28%)
US(1) Various (23.00% Various (23.00%
- 26.50%) - 26.50%)
N/A 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 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 and
opportunities 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 (89.2%) comprises Risk
Capital investments, while the remaining portion (10.8%) 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
overleaf.
31 DECEMBER
30 JUNE 2021 2020 MOVEMENT
------------------------------------- ------------- ------------ ---------
Weighted average government bond
yield - portfolio 0.99% 0.56% 43bps
------------------------------------- ------------- ------------ ---------
Weighted average investment premium
- portfolio 5.82% 6.41% (59bps)
------------------------------------- ------------- ------------ ---------
Weighted average discount rate
- portfolio 6.81% 6.97% (16bps)
------------------------------------- ------------- ------------ ---------
Weighted average discount rate
- risk capital 7.29% 7.52% (23bps)
------------------------------------- ------------- ------------ ---------
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 homogenous);
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 30 June 2021 NAV
per share of 145.1 pence to changes in key assumptions. Further
details can be found in note 9.5 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 on the 30 June 2021
NAV of 145.1p 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 1.00% sustained
increase in the assumed inflation rates projected to generate a
0.75% increase in returns (31 December 2020: 0.78%). 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 CPI from 2030. For the avoidance of doubt, the
impact of this approach on the NAV is negligible. Furthermore, the
inflation sensitivities by geographical region are provided in note
9.5 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 Euros, Australian Dollars, Canadian Dollars 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 these rates is provided for
illustration.
DEPOSIT RATES
The long-term weighted average deposit rate assumption across
the portfolio is 1.05% 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 will typically aim to recover
any changes in lifecycle costs through the prices they charge their
end-users.
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 and operating businesses is
provided for illustration.
PRINCIPAL and emerging RISKS AND UNCERTAINTIES
The Board seeks to mitigate and manage risks relating to the
Company through continual review, policy setting and enforcement of
contractual obligations. It also regularly monitors the investment
environment and the management of the Company's portfolio. The
Company's approach to risk is set out in the Risk Report in the
2020 Annual Report and financial statements (pages 48 to 60), the
Risk Report includes an overview of the principal and emerging
risks and their mitigation. Risk factors are also detailed further
in the Company's last Prospectus (the Placing, Open Offer and Offer
for Subscription and Placing Programme Prospectus published on 12
April 2017). There have been no significant changes in the nature
or assessment of the principal and emerging risks reported in the
2020 Annual Report and financial statements. These risks and
uncertainties are expected to remain relevant to the Company for
the next six months of its financial year and include (but are not
limited to):
- Political and regulatory risk - the businesses in which the
Company invests are subject to potential changes in policy and
legal requirements;
- Asset performance and physical asset risk - the Company's
ability to meet investment return targets is affected by the
performance of the assets in its portfolio;
- Counterparty risk - the Company's investments are dependent on
the performance of a series of counterparties to contracts
- Macroeconomic risk - the Company's ability to meet target
returns may be adversely or positively impacted by macroeconomic
changes including inflation, foreign exchange and interest rate
movements;
- Contract risk - the ability of counterparties to operate
contracts to the detriment of the Company and the risk of default
under contract whether by the Company, its subsidiaries or their
counterparties;
- Climate change - an emerging risk which has the potential to
impact infrastructure assets through such effects as physical
damage as a result of extreme weather, change in demand and usage
and impact from new regulatory requirements; and
- Other risks - including other regulatory risks (including tax
and accounting policies and practices) associated with the Company
and its projects, financial forecasting, IT and cyber risks;
Covid-19-related risks; and changes in the competitive environment
which may have an adverse impact on the Company.
The Board considers and reviews, on a regular basis, the risks
to which the Company is exposed.
By order of the Board
Mike Gerrard John Le Poidevin
Chair Director
8 September 2021 8 September 2021
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, which can be found on the Company's website(1) .
POLICY
The Company has a common ESG Policy2 with its Investment
Adviser. It defines the objectives and approach to embedding ESG in
operations, investments and the communities in which the Company's
investments operate.
governance
the role of the board and committees
The Board has overall responsibility for ESG and ensuring it 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.
In addition to the ESG Committee, ESG responsibilities are
applied through the following committees:
- Investment Committee: The Company's Investment Committee
ensures ESG has been appropriately considered through 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.
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 is able to monitor
the ESG performance of the Company's portfolio, and is kept abreast
of emerging ESG risks and opportunities, such as climate change, to
inform the Company's strategy.
For more information, please refer to Amber's Global
Sustainability Report, which can be found on the Amber website:
www.amberinfrastructure.com.
1
https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf
2 https://www.amberinfrastructure.com/media/2231/esg-policy_final.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
will maintain 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.
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 has aligned its investment
activity with the objectives of the Paris Agreement and has
commenced the process of adopting the TCFD recommendations.
As previously noted, during 2020, the Company's Investment
Adviser commissioned an external third party to review the
Company's current practices and make recommendations as to how it
can enhance its approach and
disclosures according to the TCFD Guidelines. Please see more information on page 40.
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 ('designated index') to serve as a proxy for assessing
whether an investment meets or manages material sustainability
credentials.
[Relevant logo graphics can be found in PDF version of this
document on the Company's website].
Emerging regulatory frameworks
The Company is mindful and supportive of several emerging
regulatory frameworks in relation to sustainable finance,
particularly the EU Sustainable Finance Disclosure ('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 and appreciates the importance of considering
sustainability risks and opportunities as part of its investment
process.
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 its investments are positively supporting.
The Company's contribution to the SDGs at the macro level is
summarised below(1) .
SDG Contribution Impact SDG Portfolio
alignment(2)
-------------------------- ------------------------------------ ------------------------------------ --------------
Good Health and Wellbeing.
The Company has investments
in over 35 health facilities,
including the award-winning >544,000
Royal Children's Hospital in Patients treated annually
Melbourne, providing access in healthcare facilities
to quality essential health-care developed and managed by
3 services. the Company 4%
-------------------------- ------------------------------------ ------------------------------------ --------------
37,000,000
The three components of
Clean Water and Sanitation. the London Tideway improvements
The Thames Tideway Tunnel is work conjunctively to reduce
the biggest infrastructure discharges in a typical
project ever undertaken by year by about 37 million
6 the UK water industry. cubic metres 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 resilient 131,000km
infrastructure(1) Length of gas transportation
9 . pipeline 20%
-------------------------- ------------------------------------ ------------------------------------ --------------
Peace, Justice and Strong
Institutions. Through the provision
of high-quality judicial buildings,
the Company is supporting
effective, 13
accountable, and transparent Police Stations and Judicial
16 institutions at all levels. buildings 5%
-------------------------- ------------------------------------ ------------------------------------ --------------
Quality Education. Good
infrastructure
is at the base of quality
education.
By investing directly in 267
education facilities, and managing >195,000
them sustainably, the Company Students attending schools
can support effective learning developed and managed by
4 environments for all. the Company 19%
-------------------------- ------------------------------------ ------------------------------------ --------------
Affordable and Clean Energy.
Through the Company's investments
in offshore transmission >1,300,000
investments, Homes powered by renewable
we are supporting the provision energy transmitted through
7 of affordable and clean energy. offshore transmission investments 22%
-------------------------- ------------------------------------ ------------------------------------ --------------
Sustainable Cities and Communities.
The Company's investments in >151,000,000
transport provide safe, affordable, Annual passenger journeys
accessible and sustainable through sustainable transport
11 transportation. investments 21%
-------------------------- ------------------------------------ ------------------------------------ --------------
1 Data reflects annual
performance.
2 Investment Fair Value.
SUSTAINABLE MANAGEMENT
The Company's metrics against the SDGs illustrate the positive
social effects that its portfolio of investments can provide.
However, there are also potential adverse impacts from any
investment and these need to be managed responsibly.
The Company is focused on managing material ESG risks and
opportunities at the individual investment level. This allows the
Company to target and manage material ESG issues, which can vary
considerably across a diverse portfolio of investments. The
Company's Investment Adviser monitors over 30 indicators to assess
portfolio performance against its minimum requirements and active
management sustainability aims through its bi-annual survey.
The Company is working towards producing a harmonised suite of
portfolio level indicators that will support its shareholders in
monitoring progress and provide them with disclosures to support
their own reporting requirements, including TCFD, SFDR and expected
UK-specific SDR. To support the Company in developing these
overarching disclosures, it is working towards ensuring all its
investments:
- Monitor energy, water and waste and provide appropriate metrics;
- Implement a robust Diversity and Inclusion Policy and develop appropriate metrics; and
- Implement a robust Health and Safety Policy and monitor and
disclose Accident Frequency Rate.
Progress against these is disclosed on the following pages,
along with selected sector-specific indicators across five asset
categories(1) : social infrastructure, waste water, transport,
energy transmission and gas distribution. Where the Company has
relevant data, e.g. greenhouse gas ('GHG') emissions, they have
been disclosed. Please see more information in the Company's
Sustainability Report, which can be found on the Company's
website(2) .
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 powered by renewable energy transmitted 1.3 million SDG 7
by OFTOs
Transmission capacity 1.5GW
KEY SECTOR SUSTAINABILITY METRICS
OFTO investments monitor energy 100%
Accident Frequency Rate 0
OFTO investments monitor waste 100%
OFTO investments monitor water usage 100%
case study
Sustainability aim - Encourage a zero-harm culture across all
investments.
Whilst the positive impacts of the Company's OFTO investments
are clear, it's imperative that they are managed safely. The
Company, through its Investment Adviser, directly manages the
Company's OFTO investments. This enables it to directly manage its
approach to health and safety, which is extremely strong with a
zero-accident frequency rate.
The asset management framework is governed by the ISO9001
(Quality) and OHSAS 18001 (Health and safety) management system
that is used to control and measure all activities discharged by
Transmission Capital Services.
1 The data described in this section does not include the
Company's investments in NDIF, US Military Housing or Brescia
Hospital.
2
https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf
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 >151m SDG 8 and 11
Annual train km travelled >825m
Full time equivalent employees >2,290
KEY SECTOR SUSTAINABILITY METRICS
Rail investments monitor energy 100%
Rail investments monitor waste 60%
Rail investments monitor water usage 80%
Accident Frequency Rate 2.39
Female employees 24%
Composition of train fleet that is
electric 89%
CASE STUDY
Sustainability aim - Reduce carbon emissions to work towards
alignment with the goals of the Paris Agreement.
Rail is a low-carbon mode of transport, and there is an
opportunity to improve environmental performance further and help
support net zero ambitions. Angel Trains has developed HyDrive, an
innovative, intelligent and flexible hybrid drive system for rail
vehicles. It will result in smarter trains through intelligent
management of energy to enable maximum energy recovery and enable
high levels of efficiency. Trains will be quieter through the use
of the smaller, modern range engines with less noise and vibration
and battery only running in stations and other urban areas.
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 when >37m cubic SDG 6, 8 and 11
operational metres
New public space following construction 3 acres
Full-time equivalent employees >2,200
KEY SECTOR SUSTAINABILITY METRICS
Scope 2 Greenhouse gas emissions 12 tCO (2)
e
Scope 3 Greenhouse gas emissions 79,295 tCO
(2) e
Beneficial reuse of excavated material 100%
Accident Frequency Rate 0.45
Female employees 55%
CASE STUDY
Sustainability aim - Reduce all types of pollution and work
towards improved air quality.
Through Tideway's More by River strategy, the project ensures
that it transports as many materials as possible by river, keeping
lorry movements off London's roads to limit pollution, congestion
and to protect road users.
The project's use of river transport is on a scale unprecedented
in the UK in modern times. Tideway has committed to transport 90%
of tunnel spoil - about 4.2 million tonnes - by river. This
requires a major modernisation of the fleet of commercial boats
operating on the river, and Tideway has been a key partner in a new
training centre for river boat operators called the Thames Skills
Academy ('TSA').
1 Tideway monitors energy, water, waste and has robust health
and safety and diversity and inclusion policies.
GAS DISTRIBUTION
Natural gas is one of the mainstays of global energy. Where it
replaces more polluting fuels, it improves air quality and limits
emissions of carbon dioxide. Since 2010, coal to gas as a source of
energy has saved around 500 million tonnes of CO2. Natural gas is
also a potential complement to renewable energy in that it can
provide cover for the intermittency of power generated by
renewables when the wind is not blowing or when the sun is not
shining.
impact
Maximum energy throughput 5.7 million SDG 8,9 and 11
GJ/day
Homes and businesses connected to gas >11 million
Full-time equivalent employees >6,00
KEY SECTOR SUSTAINABILITY METRICS(1)
Scope 1 Greenhouse gas emissions 11,018tCO
(2) e
Scope 2 Greenhouse gas emissions 3,037tCO
(2) e
Waste diverted from landfill 98%
Accident Frequency Rate 0.05
Female employees 21%
CASE STUDY
Sustainability aim - Reduce carbon emissions to work towards
alignment with the goals of the Paris Agreement.
HyDeploy is a pioneering hydrogen energy project designed to
help reduce UK CO(2) emissions and reach the Government's net zero
target for 2050. As the first-ever live demonstration of hydrogen
in homes, HyDeploy aims to prove that blending up to 20% volume of
hydrogen with natural gas is a safer and greener alternative to the
gas we use now. It is providing evidence on how customers do not
have to change their cooking or heating appliances to take the
blend, which means less disruption and cost.
We see this as a significant step towards supporting the
transition to clean forms of hydrogen, and decarbonisation of
heat.
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 >195,000 SDG 3, 4, 8 and
16
Patients >540,000
Police stations and judicial buildings 13
Full-time equivalent employees >4,000
KEY SECTOR SUSTAINABILITY METRICS
Social infrastructure investments monitor
energy 99%
Social infrastructure investments monitor
waste 33%
Social infrastructure investments monitor
water usage 96%
Accident Frequency Rate 0.48
CASE STUDY
Sustainability aim - Investments actively considering future
technology-driven risks and opportunities.
Melbourne's Royal Children's Hospital ('RCH') has been providing
outstanding care for Victoria's children and their families for
over 150 years. The new hospital was built in 2011, bringing
together six levels of clinical, research and education facilities
over 200,000 square metres within the 4.1 hectare site. Inspired by
the quality of light, the textures and forms of its parkland
setting, the new RCH delivers a patient and family-focused healing
environment based on the latest evidence and research-based design
principles. Innovative features incorporated into the design
include a meerkat enclosure, interactive gaming screen, an
aquarium, and a children-only activity room. These types of
features present the hospital, not as a frightening or intimidating
place for the children who are the recipients of care, but as an
exciting hub of activity with things to do and friends to meet.
1 Cadent monitors energy, water, waste and has robust health and
safety and diversity and inclusion policies.
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, and it has commenced adopting 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 we can enhance our 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. The table below shows a summary of our progress against
the TCFD recommendations, which will be enhanced in due course.
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 acq uisitions, 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.
* ESG Committee: The Company's ESG Committee monitors
its approach to climate cha nge, including
consideration of climate change strategy, disclosures
and targets.
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,
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 . Alongside aligning with the recommendations
identified over the of the TCFD, t he Company has aligned its investment
short, medium and long-term. activity with the objectives of the Paris Agreement.
The Company's investments are located in the
UK, Ireland, mainland 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 associated businesses, the Company's
investments will be directly exposed to changes
in weather.
The transition to a low-carbon economy will
largely be dependent on the right types of
infrastructure being in place 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.
As an investor in infrastructure, which will
be required to support this, there is a significant
opportunity for the Company.
The Company believes its portfolio is well
positioned to align with a low-carbon economy.
By way of example, over 80 % of the portfolio
is either directly linked to clean energy transmission,
sustainable transport or other easier to transition
sectors (e.g. waste water, social infrastructure).
21% of the portfolio is committed to rail investments,
where the majority use electric trains and
are playing an important role in modal shift
(e.g. encouraging people out of cars and into
cleaner public transport). Only a small minority
of the value is linked to diesel units where
the railway is not yet electrified. The Company
is reassured that, within this small minority,
plans are in place to align fleets with a low-carbon
economy. For example, the product management
team within Angel Trains has developed a decarbonisation
road map which focuses on new propulsion technologies
that eliminate classic diesel propulsion or
reduce its impac t in terms of emissions and
fuel usage. This includes its innovative programme,
HyDrive, which is looking to retrofit diesel
units with hybrid technology. Please see more
information on page 35.
The remaining 16.5% of the portfolio is invested
in Cadent, a gas distribution network. Whilst
currently distributing natural gas, Cadent
is taking great strides to advance research
required to support hydrogen within its networks.
The UK Government's ten-point plan outlines
the integral role of hydrogen and Carbon Capture
and Storage in its net zero strategy. One of
the great advantages of using hydrogen to decarbonise
the gas grid is the reuse of existing infrastructure,
rather than building hydrogen infrastructure
from scratch, at great financial and environmental
cost. There is much to be gained from using
existing infrastructure. Cadent is very much
leading this initiative with its innovative
hydrogen pilot, HyDeploy, as described on page
36.
The Company is focused on identifying current
and evolving climate risks and mitigating these
risks. The Company's Investment Adviser is
also working towards obtaining a better understanding
of the potential financial impacts and our
resilience with regard to different climate
scenarios.
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 The Company anticipates that parts of its investment
processes for identifying portfolio may need to adapt, adjust and manage
and assessing climate-related risks in response to climate-related exposures.
risks. As a result, the Company is implementing a
process that see ks to improve its existing
framework for identifying climate-related risks
across the portfolio and to assess areas requiring
greater scrutiny. The climate risk identification
and management process is integrated within
the risk management process where climate risk
is 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.
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 Company's Annual Report 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 has been monitoring and disclosing
used by the organisation greenhouse gas in its reporting since 2018.
to assess climate-related Please refer to pages 35 to 36 for emissions.
risks and opportunities The Company is actively developing a carbon
in line with its strategy footprint across all its investments to establish
and risk management a baseline and will be developing ways to enhance
process. 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 Scope 3 emissions where
available.
The Company is in the process of reviewing
relevant climate-related metrics and targets,
which include the consideration of TCFD's supplementary
guidance on metrics. To support the Company
in developing these overarching disclosures,
it is working towards ensuring 100% of its
investments monitor energy, water and waste
and provide appropriate metrics. Currently
99% of the investments within the Company's
portfolio monitor energy.
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.
CORPORATE GOVERANCE
BOARD OF DIRECTORS
The table below details all Directors of the Company during the
six month period ended 30 June 2021.
Mike Gerrard John Le Claire Whittet(1) Julia Sally-Ann Meriel Giles
Board Chair, Poidevin(1) Chair, Management Bond (1) David(1) Lenfestey(1) Frost
Chair, Investment Chair, Audit Engagement Chair,
Committee and Risk Committee Risk
Committee Senior Independent Sub-Committee;
Director, Chair,
with effect Nomination
from 28 May and
2020 Remuneration
Committee
------------------- ---------------- ----------------------------- --------------- ----------------- ---------------- -----------------
A resident A resident A resident A resident A resident A resident A resident
in the UK, of Guernsey, of Guernsey, in the of Guernsey, of Guernsey, in the
Mike has John has Claire has UK, Julia Sally-Ann Meriel has UK, Giles
over 30 years over 25 years over 40 years' has 27 has over 27 years is a founder
of financial of business experience years' 35 years of multi-sector of Amber
and management experience. in the banking experience of experience business Infrastructure
experience John is a industry of capital in experience. and has
in global Fellow of with Bank markets infrastructure With a worked
infrastructure the Institute of Scotland, in the projects background in the
investment. of Chartered Bank of Bermuda financial in the energy in infrastructure
He has held Accountants and Rothschild sector sector, human-centred investments
a number in England and Co Bank and held including design for sector
of senior and Wales International, senior international technology, for over
positions, and a former where she positions offshore she brings 20 years.
including partner of was latterly within transmission a strategic Giles
as an assistant BDO LLP, managing Credit systems and end-user is Chair
director where he director Suisse, the challenges focus and and a
of Morgan held a number and co-Head including of the energy a broad director
Grenfell of leadership until May Head of transition. set of of Amber
plc, a director roles, 2016 when One Bank Having held experiences Infrastructure
of HM Treasury including she became Delivery senior positions encompassing Group
Taskforce, Head of a non-executive and Global within the many sectors Holdings
deputy CEO Consumer director. Head of power utility and scales Ltd, the
and later Markets, She is also Sovereign arena, Sally-Ann of organisation ultimate
CEO of where he a non-executive Wealth is currently ranging holding
Partnerships developed director funds the Chief from her company
UK plc and, an extensive of a number activity. Operating own start-ups of the
most recently, breadth of of listed Officer of through Investment
a managing experience and private Guernsey global Adviser
director and knowledge equity investment Electricity corporations to the
of Thames across the companies, Ltd. She and Company
Water Utilities real estate, none of which is a Chartered governmental and various
Limited. leisure and is a trading Engineer programmes. of its
Mike has retail sectors company. and Chartered subsidiaries.
a breadth in the UK Claire is Director.
of experience and overseas. a member
across a John is a of the Chartered
range of non-executive Institute
economic director of Bankers
and social on several in Scotland,
infrastructure plc boards the Chartered
sectors and and chairs Insurance
has been a number Institute
involved of audit and the Institute
in some of committees. of Directors
the largest and is a
infrastructure Chartered
projects Banker and
in the UK. holds the
He is a Fellow Institute
of the Institution of Directors
of Civil Diploma in
Engineers. Company Direction.
DATE OF
APPOINTMENT
------------------- ------------------------------ --------------------------------------------------------------------------------------
4 September 1 January 10 September 1 September 10 January 10 January 2 August
2018 2016 2012 2017 2020 2020 2006
------------------- ---------------- ----------------------------- --------------- ----------------- ---------------- -----------------
LISTED COMPANY AND OTHER RELEVANT DIRECTORSHIPS
-----------------------------------------------------------------------------------------------------------------------------------------
Mike Gerrard John Le Poidevin(1) Claire Julia Bond Sally-Ann Meriel Giles Frost
Mike holds BH Macro Whittet(1) (1) David Lenfestey Giles is
no other Limited BH Macro European Assets Guernsey Bluefield also a
listed company TwentyFour Ltd Trust ('EAT') Electricity Solar Income director
positions Income Fund Eurocastle NED of Foreign, Ltd Fund Limited of a number
but holds Limited Investment Commonwealth Channel Meriel of the
several Ltd & Development Islands sits on Company's
non-executive Riverstone Office and Electricity a number subsidiary
positions Energy Strategic Grid of other and investment
within boards Ltd Command. Sally-Ann commercial holding
and committees TwentyFour is also boards entities
that oversee Select a director including and of
the development Monthly of a Gemserv, other entities
and delivery Income health-related Jersey in which
of Fund Ltd charity. Telecom the Company
infrastructure Third and Aurigny has an
investments Point Air Services investment.
in the UK Offshore and is He does
and Europe. Investors a committee not receive
Ltd member directors'
for the fees from
Guernsey such roles
Institute for the
of Directors. Company.
----------------- -------------------------------- ------------- ----------------- --------------- ---------------- -----------------
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.
DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing the Half-yearly
Financial Report in accordance with applicable law and
regulations.
The Directors confirm to the best of their knowledge:
The condensed set of financial statements have been prepared in
accordance with UK-adopted International Accounting Standard 34
'Interim Financial Reporting' as contained within UK-adopted
International Accounting Standards;
The Interim Management Report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
The Interim Management Financial Report includes a fair review
of the information required by DTR 4.2.8R (disclosure of related
parties' transactions and changes therein).
By order of the Board
Mike Gerrard John Le Poidevin
Chair Director
8 September 2021 8 September 2021
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF INTERNATIONAL PUBLIC
PARTNERSHIPS LIMITED
Report on the interim condensed consolidated financial
statements
OUR CONCLUSION
We have reviewed International Public Partnerships Limited's
interim condensed consolidated financial statements (the "interim
financial statements") in the Half-yearly Financial Report of
International Public Partnerships Limited for the 6-month period
ended 30 June 2021. Based on our review, nothing has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with UK-adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
WHAT WE HAVE REVIEWED
The interim financial statements comprise:
- the interim condensed consolidated balance sheet (unaudited) as at 30 June 2021;
- the interim condensed consolidated statement of comprehensive
income (unaudited) for the period then ended;
- the interim condensed consolidated cash flow statement
(unaudited) for the period then ended;
- the interim condensed consolidated statement of changes in
equity (unaudited) for the period then ended; and
- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half-yearly
Financial Report have been prepared in accordance with UK-adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
The Companies (Guernsey) Law, 2008 and International Financial
Reporting Standards ('IFRSs') as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half-yearly Financial Report, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Half-yearly Financial Report in accordance with
UK-adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Half-yearly Financial Report based on
our review. This report, including the conclusion, has been
prepared for and only for the Company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, 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.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'
issued by the International Auditing and Assurance Standards Board.
A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half-yearly
Financial Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
8 September 2021
a) The maintenance and integrity of International Public
Partnerships Limited's website is the responsibility of the
directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to
the financial statements since they were initially presented on the
website.
b) Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
interim CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
SIX MONTHSED 30 JUNE 2021
Six months Six months
ended ended
30 June 30 June
2021 2020
Notes GBP'000s GBP'000s
---------------------------------------- ----- --------------- ----------
Interest income 4 39,377 39,775
Dividend income 4 18,032 17,439
Net change in investments at fair value
through profit or loss 4 (16,684) (1,418)
----------------------------------------- ----- --------------- ----------
Total investment income 40,725 55,796
Other operating (expense) / income 5 2,785 (4,251)
========================================= ===== =============== ==========
Total income 43,510 51,545
Management costs 15 (12,861) (13,027)
Administrative costs (1,132) (852)
Transaction costs 15 (335) (150)
Directors' fees (200) (209)
----------------------------------------- ----- --------------- ----------
Total expenses (14,528) (14,238)
----------------------------------------- ----- --------------- ----------
Profit before finance costs and tax 28,982 37,307
Finance costs 6 (1,765) (1,888)
----------------------------------------- ----- --------------- ----------
Profit before tax 27,217 35,419
Tax credit 7 48 171
----------------------------------------- ----- --------------- ----------
Profit for the period 27,265 35,590
----------------------------------------- ----- --------------- ----------
Earnings per share
Basic and diluted (pence) 8 1.68 2.21
----------------------------------------- ----- --------------- ----------
All results are from continuing operations in the period.
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
period (30 June 2020: nil). The profit for the period represents
the Total Comprehensive Income for the period.
interim condensed CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
SIX MONTHSED 30 JUNE 2021
SHARE CAPITAL
and share OTHER DISTRIBUTABLE RETAINED
NOTES premium RESERVE EARNINGS TOTAL
GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------- ------ -------------- -------------------- ---------- ----------
Balance at 31 December
2020 1,769,582 182,481 432,373 2,384,436
----------------------------- ------ -------------- -------------------- ---------- ----------
Total comprehensive income - - 27,265 27,265
Issue of Ordinary Shares 13 4,413 - - 4,413
Distributions in the period 13 - - (59,650) (59,650)
Balance at 30 June 2021 1,773,995 182,481 399,988 2,356,464
----------------------------- ------ -------------- -------------------- ---------- ----------
SIX MONTHSED 30 JUNE 2020
SHARE CAPITAL
and share OTHER DISTRIBUTABLE RETAINED
NOTES premium RESERVE EARNINGS TOTAL
GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------- ------ -------------- -------------------- ---------- ----------
Balance at 31 December
2019 1,753,840 182,481 488,918 2,425,239
----------------------------- ------ -------------- -------------------- ---------- ----------
Total comprehensive income - - 35,590 35,590
Issue of Ordinary Shares 13 6,364 - - 6,364
Distributions in the period 13 - - (57,828) (57,828)
Balance at 30 June 2020 1,760,204 182,481 466,680 2,409,365
----------------------------- ------ -------------- -------------------- ---------- ----------
INTERIM condensed CONSOLIDATED BALANCE SHEET (unaudited)
AS AT 30 june 2021
31 DECEMBER
30 june 2021 2020
NOTES GBP'000S GBP'000S
---------------------------------- ----- ------------ -----------
Non-current assets
Investments at fair value through
profit or loss 9 2,320,276 2,345,433
---------------------------------- ----- ------------ -----------
Total non-current assets 2,320,276 2,345,433
================================== ===== ============ ===========
Current assets
Other financial assets 9, 11 45,523 42,188
Cash and cash equivalents 9 53,431 44,263
Derivative financial instruments 9 2,398 268
Total current assets 101,352 86,719
================================== ===== ============ ===========
Total assets 2,421,628 2,432,152
---------------------------------- ----- ------------ -----------
Current liabilities
Trade and other payables 9, 12 9,167 9,316
Bank loans 6, 9 - 38,400
---------------------------------- ----- ------------ -----------
Total current liabilities 9,167 47,716
---------------------------------- ----- ------------ -----------
Non-current liabilities
---------------------------------- ----- ------------ -----------
Bank loans 6, 9 55,997 -
---------------------------------- ----- ------------ -----------
Total non-current liabilities 55,997 -
---------------------------------- ----- ------------ -----------
Total liabilities 65,164 47,716
Net assets 2,356,464 2,384,436
---------------------------------- ----- ------------ -----------
Equity
Share capital and share premium 13 1,773,995 1,769,582
Other distributable reserve 13 182,481 182,481
Retained earnings 13 399,988 432,373
---------------------------------- ----- ------------ -----------
Equity attributable to equity
holders of the parent 2,356,464 2,384,436
---------------------------------- ----- ------------ -----------
Net assets per share (pence per
share) 14 145.1 147.1
---------------------------------- ----- ------------ -----------
The financial statements were approved by the Board of Directors
on 8 September 2021.
They were signed on its
behalf by:
Mike Gerrard John Le Poidevin
Chair Director
8 September 2021 8 September 2021
INTERIM condensed CONSOLIDATED CASH FLOW STATEMENT
(unaudited)
six months ended 30 june 2021
Six months Six months
ended ended
30 June 30 June
2021 2020
Notes GBP'000s GBP'000s
----------------------------------------------- ------ ------------ ------------
Profit before tax in the Interim Consolidated
Statement of Comprehensive Income(1) 27,217 35,419
Adjusted for:
Net change in investments at fair value
through profit or loss 4 16,684 1,418
Finance costs(2) 6 1,765 1,888
Fair value movement on derivative financial
instruments 5 (2,130) 4,788
Working capital adjustments
(Increase) / decrease in receivables (1,437) 2,940
(Decrease) / increase in payables (149) 2,996
----------------------------------------------- ------ ------------ ------------
41,950 49,449
Income tax received/(paid) (3) (68) 340
----------------------------------------------- ------ ------------ ------------
Net cash inflow from operations (4) 41,882 49,789
----------------------------------------------- ------ ------------ ------------
Investing activities
Acquisition of investments at fair value
through profit or loss 10 (22,343) (11,741)
Net repayments from investments at fair
value through profit or loss 30,816 17,789
----------------------------------------------- ------ ------------ ------------
Net cash flow from investing activities 8,473 6,048
----------------------------------------------- ------ ------------ ------------
Financing activities
Dividends paid 13 (55,237) (51,463)
Finance costs paid(2) (3,338) (2,098)
Loan drawdowns(2) 21,997 11,302
Loan repayments(2) (4,400) (19,000)
----------------------------------------------- ------ ------------ ------------
Net cash used in financing activities (40,978) (61,259)
----------------------------------------------- ------ ------------ ------------
Net movement in cash and cash equivalents 9,377 (5,422)
Cash and cash equivalents at beginning
of period 44,263 45,610
Foreign exchange (loss) / gain on cash
and cash equivalents (209) 176
Cash and cash equivalents at end of period 53,431 40,364
----------------------------------------------- ------ ------------ ------------
1 Includes interest received of GBP37.6 million (H1 2020:
GBP46.8 million) and dividends received of GBP18.0 million (H1 2020
GBP17.4 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
Operating Review on pages 22 to 23.
NOTES TO THE INTERIM condensed set of FINANCIAL STATEMENTS
(unaudited)
FOR THE six months ended 30 june 2021
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.
The financial information for the year ended 31 December 2020
included in this Half-yearly Financial Report is derived from the
31 December 2020 Annual Report and financial statements and does
not constitute statutory accounts as defined in the Companies
(Guernsey) Law, 2008. The auditors reported on those accounts;
their report was unqualified, did not draw attention to any matters
by way of emphasis, and did not contain a statement under section
263 (2) and (3) of the Companies (Guernsey) Law, 2008.
Accounting Policies
The annual financial statements of the Company were prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union. This set of interim condensed
consolidated financial statements included in this Half-yearly
Financial Report have been prepared in accordance with UK adopted
International Accounting Standard 34 - 'Interim Financial
Reporting' and should be read in conjunction with the consolidated
financial statements for the year ended 31 December 2020, as they
provide an update of previously reported information.
The Company transitioned to UK-adopted International Accounting
Standards on 1 January 2021 and 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 same accounting policies, presentation and
methods of computation are followed in this set of interim
condensed consolidated financial statements as applied in the
Group's latest annual audited financial statements for the year
ended 31 December 2020. 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 and an assessment of the
Group's committed banking facilities, it has been considered
appropriate to prepare these interim condensed 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 GBP53.4 million as at 30 June 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, all of the fully
committed portion is available, with cash drawn amounts on the
facility being repaid following the GBP135 million capital raise
which took place in July 2021. 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.
2. Significant Judgements and Estimates
Fair Valuation of Investments at Fair Value through Profit or
Loss
Fair values 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
9.
3. SEGMENTAL REPORTING
Based on a review of information provided to the chief operating
decision makers of the Company (determined to be the Board), the
Group has identified four reportable segments based on the
geographical risk associated with the jurisdictions in which it
operates. The factors used to identify the Group's reportable
segments are centred 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. The four reportable segments are UK,
Europe (excl. UK), North America and Australia.
Six months ended 30 June 2021
---------- -----------------------------------------------------------------
UK Europe (EXCL. North America Australia Total
GBP'000s UK) GBP'000s GBP'000s GBP'000s
GBP'000s
------------------------ ---------- ----------------------- -------------- ---------- ----------
Segmental results
Dividend and interest
income 43,279 4,170 3,711 6,249 57,409
Fair value (loss)
/ gain on investments (14,916) (1,099) 1,189 (1,858) (16,684)
------------------------ ---------- ----------------------- -------------- ---------- ----------
Total investment income 28,363 3,071 4,900 4,391 40,725
------------------------ ---------- ----------------------- -------------- ---------- ----------
Reporting segment
profit (1) 12,119 4,632 4,933 5,581 27,265
------------------------ ---------- ----------------------- -------------- ---------- ----------
Segmental financial
position
Investments at fair
value 1,703,241 299,629 105,630 211,776 2,320,276
Current assets 101,352 - - - 101,352
------------------------ ---------- ----------------------- -------------- ---------- ----------
Total assets 1,804,593 299,629 105,630 211,776 2,421,628
Total liabilities (65,164) - - - (65,164)
------------------------ ---------- ----------------------- -------------- ---------- ----------
Net assets 1,739,429 299,629 105,630 211,776 2,356,464
------------------------ ---------- ----------------------- -------------- ---------- ----------
Six months ended 30 June 2020
---------- -----------------------------------------------------------------
Europe (EXCL.
UK UK) North America Australia Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------- ---------- ----------------------- -------------- ---------- ------------
Segmental results
Dividend and interest
income 42,274 4,371 4,310 6,259 57,214
Fair value (loss)
/ gain on investments (11,753) (5,463) 6,686 9,112 (1,418)
------------------------- ---------- ----------------------- -------------- ---------- ------------
Total investment income 30,521 (1,092) 10,996 15,371 55,796
------------------------- ---------- ----------------------- -------------- ---------- ------------
Reporting segment
profit (1) 14,566 (3,174) 9,859 14,339 35,590
------------------------- ---------- ----------------------- -------------- ---------- ------------
Segmental financial
position
Investments at fair
value 1,745,345 309,863 111,141 208,830 2,375,179
Current assets 64,111 - - - 64,111
------------------------- ---------- ----------------------- -------------- ---------- ------------
Total assets 1,809,456 309,863 111,141 208,830 2,439,290
Total liabilities (29,925) - - - (29,925)
------------------------- ---------- ----------------------- -------------- ---------- ------------
Net assets 1,779,531 309,863 111,141 208,830 2,409,365
------------------------- ---------- ----------------------- -------------- ---------- ------------
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 GBP5.8
million (30 June 2020: GBP14.2 million).
4. Investment Income
Six months Six months
ended ended
30 June 2021 30 June 2020
GBP'000s GBP'000s
------------------------------------------- ------------- -------------
Interest income
Interest on investments 39,377 39,770
Interest on bank deposits - 5
------------------------------------------- ------------- -------------
Total interest income 39,377 39,775
Dividend income 18,032 17,439
------------------------------------------- ------------- -------------
Net change in fair value of investments at
fair value through profit or loss (16,684) (1,418)
------------------------------------------- ------------- -------------
Total investment income 40,725 55,796
------------------------------------------- ------------- -------------
Dividend and interest income includes that from 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 (expense) / Income
Six months Six months
ended ended
30 June 2021 30 June 2020
GBP'000s GBP'000s
--------------------------------------------- ------------- -------------
Fair value gain / (loss) on foreign exchange
contracts 2,130 (4,788)
Other foreign exchange movements 655 537
---------------------------------------------- ------------- ---------------
Total other operating (expense) / income 2,785 (4,251)
---------------------------------------------- ------------- ---------------
6. Finance Costs
Finance costs for the period were GBP1.8 million (30 June 2020:
GBP1.9 million). The Group has a corporate debt facility ('CDF')
available consisting of GBP250 million on a fully committed basis,
together with a flexible 'accordion' component which will, subject
to lender approval, allow for a future extension by an additional
GBP150 million. The drawdowns in the period were in the form of
cash drawdowns, used to partially fund investments. As at 30 June
2021, the facility was GBP56.0 million cash drawn (31 December
2020: GBP38.4 million). The interest rate margin on the CDF is 170
basis points over SONIA. The previous facility was due to expire in
July 2021, so was shown as current in the December 2020 Annual
Report and financial statements. The facility was renegotiated in
March 2021, maturing in March 2024, so is now shown as non-current.
The loan facility is provided by Royal Bank of Scotland
International, National Australia Bank, Barclays Bank and Sumitomo
Mitsui Banking Corporation, and is secured over the assets of the
Group.
7. Tax
Six months
Six months ended
ended 30 June
30 June 2021 2020
GBP'000s GBP'000s
----------------------------------------------- ------------- ----------
Current tax:
UK corporation tax credit - current period (2) (196)
UK corporation tax credit - prior period (1) -
Other overseas tax (credit) / charge - current
period (45) 25
----------------------------------------------- ------------- ----------
Tax credit for the period (48) (171)
----------------------------------------------- ------------- ----------
Reconciliation of effective tax rate
Six months
Six months ended
ended 30 June
30 June 2021 2020
GBP'000s GBP'000s
------------------------------------------------ --------------- -----------
Profit before tax 27,217 35,419
------------------------------------------------ --------------- -----------
Exempt tax status in Guernsey - -
Application of overseas tax rates (45) 25
Group tax losses surrendered to unconsolidated
investee entities (2) (196)
Adjustment to prior period (1) -
------------------------------------------------ --------------- -----------
Tax credit for the period (48) (171)
------------------------------------------------ --------------- -----------
The income tax credit 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 the 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 (30 June 2020:
GBP1 billion) over their full concession lives.
8. Earnings Per Share
The calculation of basic and diluted earnings per share is based
on the following data:
Six months Six months
ended ended
30 June 30 June
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 27,265 35,590
-------------------------------------------------- ------------- -------------
Number Number
-------------------------------------------------- ------------- -------------
Weighted average number of Ordinary Shares for
the purposes of basic and diluted earnings per
share 1,621,326,795 1,611,047,072
-------------------------------------------------- ------------- -------------
Basic and diluted (pence) 1.68 2.21
-------------------------------------------------- ------------- -------------
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.
9. 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. Carrying values of financial assets and financial
liabilities are considered to approximate their fair value.
9.1 Financial assets
30 June 31 December
2021 2020
GBP'000s GBP'000s
-------------------------------------------------- --------- -----------
Investments at fair value through profit and loss 2,320,276 2,345,433
Financial assets at amortised cost
Other financial assets 45,523 42,188
Cash and cash equivalents 53,431 44,263
Derivative financial instruments
Foreign exchange contracts 2,398 268
Total financial assets 2,421,628 2,432,152
-------------------------------------------------- --------- -----------
9.2 Financial liabilities
31 December
30 June 2021 2020
GBP'000s GBP'000s
---------------------------------------- ------------ -----------
Financial liabilities at amortised cost
Trade and other payables 9,167 9,316
Bank loans 55,997 38,400
Total financial liabilities 65,164 47,716
---------------------------------------- ------------ -----------
9.3 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 48 to 60 of the 2020 Annual Report and
financial statements). 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
9.4.
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, 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. The Group doesn't 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
30 June 2021 2020
GBP'000s GBP'000s
------------------------------------------------- ------------ -----------
Cash
Euro 888 414
Canadian Dollar 526 675
Australian Dollar 69 68
US Dollar 406 517
------------------------------------------------- ------------ -----------
1,889 1,674
Current receivables
Euro receivables 692 126
US Dollar receivables 974 989
------------------------------------------------- ------------ -----------
1,666 1,115
Investments at fair value through profit or loss
Euro 299,629 295,824
Canadian Dollar 40,406 39,391
Australian Dollar 211,776 215,455
US Dollar 65,224 65,572
------------------------------------------------- ------------ -----------
617,035 616,242
------------------------------------------------- ------------ -----------
Total 620,590 619,031
------------------------------------------------- ------------ -----------
Sensitivity analysis showing the impact of variations of the
above risks on the fair value of investments is shown in section
9.5.
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 management
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. The Group
considers that any impairment under the expected credit losses
model was not material at the balance sheet date.
Liquidity risk
Liquidity risk is defined as the risk that the Group would
encounter difficulty in meeting obligations 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 subcontractors. Regulated asset regimes allow for the pass
through of efficiently incurred costs to the purchaser.
9.4 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 30 June 2021, the Group's only derivative financial instruments
were currency forward contracts amounting to an asset of GBP2.4
million (31 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 30 June 2021, the fair value of
financial instruments classified within Level 3 totalled GBP2,320.3
million (31 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 and reviewed by the
senior members of the Investment Adviser.
(1 Indicative valuations are calculated in respect of each at 31
March and 30 September.)
Valuation methodology
The valuation methodologies used are primarily based on
discounting 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 the
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.
The significant unobservable inputs and assumptions used in
projecting the Group's net future cash flows are shown below.
Europe
30 June 2021 UK (Excl. UK) North America Australia
------------------------- ------------ -------------- ---------------- ----------
Inflation rates 2.75% RPI, 2.00% 2.00% 2.50%
2.00% CPIH
12.50% -
Long-term tax 25.00% 32.28% 23.00% - 26.50% 30.00%
Foreign exchange rates N/A 1.16 1.38 - 1.72 1.84
Long-term deposit rates 1.00% 1.00% 2.00% 2.00%
------------------------- ------------ -------------- ---------------- ----------
Europe
31 December 2020 UK (Excl. UK) North America Australia
------------------------- ------------ -------------- ---------------- ----------
Inflation rates 2.75% RPI, 2.00% 2.00% 2.50%
2.00% CPIH
Long-term tax 19.00% 12.50%-32.28% 23.00% -26.50% 30.00%
Foreign exchange rates N/A 1.11 1.37-1.74 1.77
Long-term deposit rates 1.00% 0.50% 1.50% 2.00%
------------------------- ------------ -------------- ---------------- ----------
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.
Over the period, the weighted average government bond yield
increased by 0.43%. The weighted average investment premium
decreased, reflecting observable market-based evidence.
30 June 2021 31 December
Valuation assumptions 2020 Movement
----------------------------- ------------- ------------ ---------
Weighted Average Government
Bond Yield 0.99% 0.56% 0.43%
Weighted Average Investment
Risk Premium 5.82% 6.41% (0.59)%
----------------------------- ------------- ------------ ---------
Weighted Average Discount
Rate 6.81% 6.97% (0.16)%
----------------------------- ------------- ------------ ---------
Weighted Average Discount
Rate on Risk Capital(1) 7.29% 7.52% (0.23)%
----------------------------- ------------- ------------ ---------
1 Weighted average discount rate on Risk Capital only (equity and subordinated debt).
31 December
Reconciliation of Level 3 fair value 30 June 2021 2020
measurements of financial assets : GBP'000s GBP'000s
------------------------------------------ ------------- -------------
Opening balance 2,345,433 2,382,645
Additional investments during the period 22,343 29,984
Net repayments during the period (30,816) (39,465)
Net change in fair value of investments
at fair value through profit or loss (16,684) (27,731)
------------------------------------------ ------------- -------------
Closing balance 2,320,276 2,345,433
------------------------------------------ ------------- -------------
9.5 Sensitivity analysis
The valuation requires management to make certain assumptions in
relation to unobservable inputs to the model. There are no
straightforward inter-relationships between the unobservable
inputs. A sensitivity analysis for reasonably possible alternative
assumptions is provided below:
Change in Change in
Weighted average fair value fair value
Significant assumptions rate in base Sensitivity of investment Sensitivity of investment
at 30 June 2021 case valuations factor GBP'000s factor GBP'000s
------------------------ ------------------- ----------- -------------- ----------- --------------
Discount rate 6.81% +1.00% (214,496) -1.00% 257,045
------------------------ ------------------- ----------- -------------- ----------- --------------
Inflation rate
(overall) 2.40% +1.00% 231,043 -1.00% (197,418)
UK 2.00% / 2.75% +1.00% 181,697 -1.00% (153,627)
Europe 2.00% +1.00% 37,491 -1.00% (32,848)
North America 2.00% +1.00% 965 -1.00% (1,607)
Australia 2.50% +1.00% 10,915 -1.00% (9,329)
------------------------ ------------------- ----------- -------------- ----------- --------------
FX rate N/A +10.00% 61,971 -10.00% (61,985)
------------------------ ------------------- ----------- -------------- ----------- --------------
Tax rate 25.56% +1.00% (12,497) -1.00% 11,356
------------------------ ------------------- ----------- -------------- ----------- --------------
Deposit rate 1.05% +1.00% 22,871 -1.00% (21,869)
------------------------ ------------------- ----------- -------------- ----------- --------------
Change in Change in
Weighted average fair value fair value
Significant assumptions rate in base Sensitivity of investment Sensitivity of investment
31 December 2020 case 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 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)
------------------------ ------------------- ----------- -------------- ----------- --------------
10. Investments
Consideration % Ownership
Date of investment Description GBP'000's post investment
-------------------- ----------------------------------------- -------------- -----------------
The Group made an investment into
toob, utilising part of its commitment
to invest in digital infrastructure,
April 2021 UK 14,270 59.1%
The Group made an investment into
June 2021 the Offenbach police centre, Germany 8,073 95%
Total capital spend on investments during the
period 22,343
--------------------------------------------------------------- -------------- -----------------
11. other FINANCIAL ASSETS
30 June 2021 31 December
GBP'000s 2020
GBP'000s
------------------------------ ------------- -------------
Accrued interest receivable 42,577 40,769
Other debtors 2,946 1,419
------------------------------ ------------- -------------
Total other financial assets 45,523 42,188
------------------------------ ------------- -------------
Other debtors included GBP1.2 million (31 December 2020: GBP1.1
million) of receivables from unconsolidated subsidiary entities for
the surrender of Group tax losses.
12. Trade and Other Payables
30 June 2021 31 December
GBP '000s 2020
GBP'000s
-------------------------------- ------------- -------------
Accrued management fee 7,691 7,790
Other creditors and accruals 1,476 1,526
-------------------------------- ------------- -------------
Total trade and other payables 9,167 9,316
-------------------------------- ------------- -------------
13. Share Capital and Reserves
30 June 2021 31 December
Shares 2020 Shares
Share capital '000s '000s
---------------------------------------- ------------ -------------
In issue 1 January 1,620,953 1,610,795
Issued as a scrip dividend alternative 2,603 10,158
----------------------------------------- ------------ -------------
Closing balance 1,623,556 1,620,953
----------------------------------------- ------------ -------------
30 June 2021 31 December
GBP'000s 2020
Share capital GBP'000s
------------------------------------------ ------------ ------------
Opening balance 1,769,582 1,753,840
------------------------------------------- ------------ ------------
Issued as a scrip dividend alternative 4,413 15,742
------------------------------------------- ------------ ------------
Total share capital issued in the period 4,413 15,742
------------------------------------------- ------------ ------------
Closing balance 1,773,995 1,769,582
------------------------------------------- ------------ ------------
The Company has one class of Ordinary Shares 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.
30 June 2021 31 December
GBP'000s 2020
Other distributable reserve GBP'000s
---------------------------- ------------ ------------
Opening balance 182,481 182,481
Movement in the period - -
---------------------------- ------------ ------------
Closing balance 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.
30 June 2021 31 December
GBP'000s 2020
Retained earnings GBP'000s
-------------------------- ------------ ------------
Opening balance 432,373 488,918
Net profit for the period 27,265 60,713
Dividends paid(1) (59,650) (117,258)
-------------------------- ------------ ------------
Closing balance 399,988 432,373
-------------------------- ------------ ------------
1 Includes scrip element of GBP4.4 million in 2021 (December 2020: GBP15.7 million).
Dividends
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 2020. The Board has approved an interim
distribution of 3.78 pence per share (six months ended 30 June
2020: 3.68 pence per share).
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 CDF 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 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.
14. Net Assets per Share
30 June 2021 31 December
GBP'000s 2020
GBP'000s
---------------------------------------------- ------------- -------------
Net assets attributable to equity holders of
the parent 2,356,464 2,384,436
----------------------------------------------- ------------- -------------
Number Number
---------------------------------------------- ------------- -------------
Number of shares
Ordinary Shares outstanding at the end of the
period 1,623,555,833 1,620,952,892
----------------------------------------------- ------------- -------------
Net assets per share (pence per share) 145.1 147.1
----------------------------------------------- ------------- -------------
15. Related Party Transactions
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
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 the majority of 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 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 period 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 six
six months
months to to At At
30 June 30 June 30 June 31 December
2021 2020 2021 2020
GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------- -------------- ----------- --------- -------------
International Public Partnerships
GP Limited 12,861 13,027 7,691 7,790
Amber Fund Management Limited(1) 335 150 223 17
----------------------------------- -------------- ----------- --------- -------------
Total 13,196 13,177 7,914 7,807
----------------------------------- -------------- ----------- --------- -------------
1 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 the Gross Asset Value ('GAV') of investments bearing construction risk.
For existing fully operational assets:
- 1.2% per annum of the 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 30 June 2021, Amber Infrastructure held 8,002,379 (31
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.
Transactions with Directors
Director remuneration and shares held by each Director is
reported in the Company's December 2020 Annual Report and financial
statements. Shares acquired by Directors in the six-month period
ended 30 June 2021 are disclosed below:
Director Number of New Ordinary Shares
---------------- ------------------------------
Julia Bond 11,951
---------------- ------------------------------
Giles Frost 12,561
---------------- ------------------------------
Claire Whittet 1,654
---------------- ------------------------------
16. Contingent Liabilities and commitments
As at 30 June 2021, the Group has committed funding of up to
c.GBP37.1 million (31 December 2020: GBP46.8 million), which
includes committed investment amounts as noted in the Operating
Review on page 15.
There were no contingent liabilities at the date of this
report.
17. Events after THE Balance Sheet Date
In July 2021, the Group raised new capital of GBP135 million
before costs by way of a tap issuance.
The Group invested GBP49.8 million following financial close of
the Beatrice OFTO project in July 2021.
On 3 September 2021, the Group entered into an agreement to
acquire an additional interest in Angel Trains from an existing
co-shareholder. Under the agreement the Group is committed to
invest approximately c.GBP98 million.
18. 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 as adopted by the UK (1
January 2021)
KEY CONTACTS
Investment Adviser Auditor Corporate Brokers
Amber Fund Management PricewaterhouseCoopers Numis Securities Limited
Limited CI LLP 31 Gresham Street
3 More London Riverside Royal Bank Place London
London 1 Glategny Esplanade EC2V 7QA
SE1 2AQ 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
St Peter Port Guernsey London
Guernsey Channel Island EC1A 4HD
Channel Islands GY1 4BZ
GY1 4LY
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
St Peter Port Channel Islands
Guernsey GY1 4BQ
Channel Islands
GY1 4LY
[i] The forecast date for payment of the dividend relating to
the six months to 30 June 2021 is 17 November 2021.
[ii] There can be no assurance that these targets will be met or
that the Company will make any distributions at all. Whilst we
generally have good forward-visibility of cash flows generated by
the
Company's investments, the current Covid-19 pandemic creates
additional uncertainty.
[iii] For the six months ended 30 June 2021 unless otherwise
stated.
[iv] Cash dividend payments to investors are paid from net
operating cash flow before non-recurring operating costs.
[v] Since inception in November 2006. Source: Bloomberg. Share
price appreciation plus dividends assumed to be reinvested.
[vi] IFRS profit before tax of GBP27.2 million (30 June 2020:
GBP35.4 million). The reduction compared to the prior corresponding
period reflects a decrease in the valuation of the portfolio
overall,
primarily as a result of macroeconomic changes in the
period.
[vii] The Company's underlying revenues continue to be
underpinned by strong inflation-linkage with a projected increase
in return of 0.75% p.a. for a 1.00% p.a. increase in inflation (31
December 2020: 0.78% p.a.).
[viii] Cash dividend payments to investors are paid from net
operating cash flow before capital activity.
[ix] Data reflects 2020 performance.
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END
IR FLFFAAEITIIL
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September 09, 2021 02:00 ET (06:00 GMT)
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