REG - International PPL - Half-year Report for Six Months to 30 June 2022
08/09/2022 07:17
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RNS Number : 6861Y International Public Partnerships 08 September 2022
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8 September 2022
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
('INPP', the 'Company')
HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2022
International Public Partnerships ('INPP', the 'Company'), the FTSE 250-listed
infrastructure investment company, is pleased to announce its results for the
six months to 30 June 2022.
HIGHLIGHTS FOR THE SIX MONTHS TO 30 JUNE 2022
· NAV increased 18.9% to £3.0 billion (31 December 2021: £2.5
billion) whilst NAV per share increased 6.1% to 157.3 pence(31 December 2021:
148.2 pence). The increases were driven by, among other things, the
portfolio's inflation-linkage, the successful capital raise and the
revaluation of the Company's investment in Tideway during the period.
· Despite an uncertain macroeconomic backdrop, the Company has again
delivered robust, predictable shareholder returns with a c.2.5% increase in
its H1 2022 dividend to 3.87 pence per share (30 June 2021: 3.78 pence per
share). The Board has also reconfirmed its full-year dividend targets for 2022
and 2023 at 7.74 pence per share and 7.93 pence per share i (#_edn1) ,
respectively. The Company achieved cash dividend cover in the period of
1.2x ii (#_edn2) (H1 2021: 1.3x).
· The Company continued to perform well with the quality of the
portfolio's inflation-linked cash flows highlighted during the period, and the
overall inflation-linkage maintained at 0.7% (31 December 2021: 0.7%) iii
(#_edn3) .
· The Company's active asset management approach of its Investment
Adviser has ensured all the portfolio's investment performance objectives were
met during the period, including asset availability of 99.8% achieved against
a target of over 98%. Strong ongoing asset performance continues to create
long-term value for both investors and the local communities which our assets
serve.
· The Investment Adviser continued to originate high-quality
investments, with the Company making new investments and investment
commitments of £56.1 million during the period, covering the transport,
digital, education and waste water sectors.
· The Company has categorised itself as an 'Article 8' financial
product under the EU's Sustainable Finance Disclosure Regulation ('SFDR').
This illustrates the Company's continued focus on ESG and will support its
approach to enhancing ESG data collection to inform both SFDR and the
Taskforce on Climate-Related Financial Disclosures ('TCFD') reporting.
· The successful completion of the Company's significantly
oversubscribed capital raise totalling £325 million (before issue costs)
indicated strong endorsement of the Company's investment objectives from both
existing and new shareholders.
· The Company has delivered a total shareholder return ('TSR') of
238.3% since IPO, equivalent to an annualised TSR of 8.1% iv (#_edn4) .
· The Company's £250 million corporate debt facility ('CDF') is
undrawn in cash terms, with £16.4 million committed in respect of support for
the investment pipeline. The remaining proceeds of the capital raise total
£116.9 million, together with the CDF, can be used to support the investment
pipeline.
· IFRS profit before tax was £219.2 million (H1 2021: £27.2 million),
principally reflective of the unrealised fair value gain on the portfolio in
the period.
Mike Gerrard, Chair of International Public Partnerships, said: "I am pleased
to report another successful six-month period for the Company, characterised
by strong financial and operational performance. The quality of the
portfolio's inflation-linkage cash flows and their positive impact on the
Company's NAV demonstrates the resilience of our investment case against a
volatile economic backdrop."
INVESTMENT ACTIVITY
The Company's £56.1 million of new cash investments and investment
commitments included:
· Thames Tideway, UK: In June 2022, the Company conditionally agreed to
acquire a further shareholding in Tideway, London's new "super sewer",
increasing its stake to approximately 18% through the investment of
approximately £42.0 million of additional capital. This investment completed
on 7 September 2022. The project remains a key investment for the Company,
given its attractive financial proposition, positive future impact on the
environment and strong engagement with local communities, which closely
reflects the Company's own values as a responsible investor.
· Gold Coast Light Rail, Australia: The Company announced in April 2022
that financial close had been reached on Stage 3 of the Gold Coast Light Rail
project, where it will make an additional investment of c.£7.1 million in
2025. The Company's existing investment into Stages 1 and 2 of the project has
seen 60 million passenger trips in total, with usage increasing by 43% across
the transport network. This has made an important contribution to the
reduction of reliance on car transport in the Gold Coast region.
· Other: Further investments totalling £7.0 million were made during
the period, including into several availability-based UK public-private
partnership ('PPP') schemes, the Diabolo Rail Link ('Diabolo') and the
National Digital Infrastructure Fund ('NDIF').
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.
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 PPPs account for 29% of the Company's portfolio by
investment fair value with asset availability of 99.8% achieved against a
target of over 98% for those investments. The Company's public sector clients
commissioned and funded over 528 contract variations during the period, at a
combined value of £7 million. The completed changes ranged from cleaning
regimes to supporting operational assets throughout the pandemic within the
education and healthcare facilities, to the delivery of significant transport
facility upgrades.
Energy transmission | SDG 7: Affordable and clean energy
· OFTOs, UK: During the period, Ofgem released a second consultation
regarding the potential regulatory developments underpinning an extension of
the OFTO revenue stream. All parties recognise that the life extension of
renewable energy assets (including offshore transmission assets) is required
to meet the UK's net zero emissions targets. Ofgem expects to publish
summaries of feedback received as well as its decisions in Autumn 2022; the
Investment Adviser continues to be actively engaged with all relevant industry
stakeholders and will keep investors informed of forthcoming developments.
Transport | SDG 8, 9 & 11: Decent work and economic growth; industry
innovation and infrastructure; sustainable cities and communities
· Diabolo Rail Link, Belgium: Passenger numbers as of June 2022 had
increased to approximately 85% of pre-Covid levels. Of the €24 million
committed to the project by the Company in December 2020, €6.7 million
remains available to protect Diabolo's liquidity position and ensure
compliance with its debt covenants. The extent and timing of any further cash
injections is dependent on the trajectory of the recovery in passenger
numbers. Traffic forecasts for Diabolo estimate a return of pre-Covid levels
of usage by 2024. Discussions are continuing with Infrabel, the Belgian rail
network owner, over the implementation of a passenger fare adjustment which
could partially mitigate the impact of lower passenger numbers seen over the
past couple of years.
· Angel Trains, UK: Revenues have continued to be largely unaffected by
the Covid-19 pandemic, on account of the fact the majority of the asset's
revenues are generated from the contractual leasing of rolling stock to TOCs.
Unlike the TOCs, Angel Trains is not involved in, or directly impacted by, any
of the disputes underpinning the industrial action that occurred during the
period, though the Company continues to monitor the situation. During the
period, Angel Trains successfully acquired the Readypower Group, a specialist
rail and infrastructure services provider specialising in the supply of on and
off-track plant equipment as well as other maintenance and operating services
to the UK rail sector. The acquisition is evidence of Angel Trains' wider
commitment to investing in and supporting the enhancement of the UK rail
industry.
Gas distribution | SDG 8, 9 & 11: Decent work and economic growth;
industry innovation and infrastructure; sustainable cities and communities
· Cadent, UK: Whilst Cadent is largely insulated from changes in gas
prices and the associated energy price caps, aside from where the changes can
cause timing differences in certain cash flows, the Company continues to
closely monitor the implications of changes in gas prices and other
developments in the sector. During the period, Cadent's proposal to convert
2,000 homes in Ellesmere Port, Whitby, from natural gas to hydrogen was
shortlisted by Ofgem to be the UK's first ever 'hydrogen village'. Should the
proposal be successful, the 2,000 homes will be supplied with hydrogen for
cooking and heating fuel from 2025. The investment remains the Company's
largest by fair value, representing 15.1% of the portfolio, and is evidence of
the Company's ongoing support of the UK Government in meeting its net zero
targets through the transition to cleaner fuels.
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: During the period, Tideway reached the end of the
primary tunnelling phase, which was a key milestone for the project, and over
half of the secondary lining had been completed by the end of the period.
Overall construction works were 80% complete at the end of June 2022, with the
focus now principally being on the completion of the secondary lining as well
as the system commissioning phase. As reported above, an additional stake was
acquired on 7 September 2022.
OUTLOOK
The portfolio has demonstrated its resilience over its approximately 16-year
history by, among other things, consistently meeting its published forward
dividend guidance. The largely regulated or availability-based nature of the
underlying cash flows, with high levels of inflation-linkage, means the
portfolio is well positioned despite the uncertainty in the wider market.
The outlook for infrastructure investment remains strong. There continues to
be a need for infrastructure investment across the countries where the Company
invests, and the sectors where its activity is focused continue to drive the
transition towards climate goals. We remain confident in the ability of our
Investment Adviser to continue to generate a high-quality pipeline of future
investment opportunities that will deliver long-term benefits for all
stakeholders.
ENDS
NOTES TO EDITORS
Amber Infrastructure
Erica Sibree / Amy Edwards
+44 (0) 7557 646 499 / (0) 7827 238
355
FTI Consulting
Ed Berry / Mitch Barltrop / Jenny Boyd
+44 (0) 7703 330 199 / (0) 7807 296 032 / (0) 7971 005 577
About International Public Partnerships ('INPP'):
INPP is a listed infrastructure investment company that invests in global
public infrastructure projects and businesses, which meets societal and
environmental needs, both now, and into the future.
INPP is a responsible, long-term investor in over 140 infrastructure projects
and businesses. The portfolio consists of utility and transmission, transport,
education, health, justice and digital infrastructure projects and businesses,
in the UK, Europe, Australia and North America. INPP seeks to provide its
shareholders with both a long-term yield and capital growth.
Amber Infrastructure Group ('Amber') is the Investment Adviser to INPP and
consists of over 160 staff who are responsible for the management of, advice
on and origination of infrastructure investments.
Visit the INPP website at www.internationalpublicpartnerships.com
(http://www.internationalpublicpartnerships.com) for more information.
Important Information
This announcement contains information that is inside information for the
purposes of the Market Abuse Regulation (EU) No. 596/2014.
This announcement is an advertisement. It does not constitute a prospectus
relating to the Company and does not constitute, or form part of, any offer or
invitation to sell or issue, or any solicitation of any offer to purchase or
subscribe for, any shares in the Company in any jurisdiction nor shall it, or
any part of it, or the fact of its distribution, form the basis of, or be
relied on in connection with or act as any inducement to enter into, any
contract therefor.
Forward-looking statements are subject to risks and uncertainties and
accordingly the Company's actual future financial results and operational
performance may differ materially from the results and performance expressed
in, or implied by, the statements. These forward-looking statements speak only
as at the date of this announcement. The Company, Amber and Numis Securities
expressly disclaim any obligation or undertaking to update or revise any
forward-looking statements contained herein to reflect actual results or any
change in the assumptions, conditions or circumstances on which any such
statements are based unless required to do so by the Financial Services and
Markets Act 2000, the Prospectus Rules of the Financial Conduct Authority or
other applicable laws, regulations or rules.
i (#_ednref1) Future profit projection and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in future.
ii (#_ednref2) Cash dividend payments to investors are paid from net
operating cash flows before capital activity.
iii (#_ednref3) Calculated by running a 'plus 1.0%' inflation sensitivity
for each investment and solving each investment's discount rate to return the
original valuation. The inflation-linked return is the increase in the
portfolio weighted average discount rate.
iv (#_ednref4) Since inception in November 2006. Source: Bloomberg. Share
price appreciation plus dividends assumed to be reinvested.
International Public Partnerships Limited
HALF-YEARLY FINANCIAL Report for the SIX MONTHS TO 30 JUNE 2022
Registered number: 45241
www.internationalpublicpartnerships.com
(http://www.internationalpublicpartnerships.com)
Note: Page references in this announcement refer to the full formatted
Half-Yearly Financial Report for the period ended 30 June 2022 that can be
found on the Company's website. Certain charts cannot be reproduced for the
RNS format and can also be seen in the PDF version of this document available
on the Company's website.
OUR PURPOSE
Our purpose is to invest responsibly in social and public infrastructure that
delivers long-term benefits for all stakeholders.
We aim to provide our investors with stable, long-term, inflation-linked
returns, based on growing dividends and the potential for capital
appreciation.
We expect to achieve this by investing in a diversified portfolio of
infrastructure assets and businesses which, through our active management,
meets societal and environmental needs both now and into the future.
COMPANY FACTS
- London Stock Exchange trading code: INPP.L
- Member of the FTSE 250 and FTSE All-Share indices
- £3.1 billion market capitalisation at 30 June 2022
- 1,911 million shares in issue at 30 June 2022
- Eligible for ISA/PEPs and SIPPs
- Guernsey incorporated company
- International Public Partnerships Limited ('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
In support of its purpose, the Company is committed to responsible investment
that is beneficial to its shareholders, communities, society and wider
stakeholders. The Company believes that the financial performance of its
investments is linked to environmental and social success and, as such, the
Company considers issues that have the potential to impact the performance of
its investments, both now and in the future.
The Company draws on several frameworks and benchmarks to provide direction.
These frameworks are reviewed on an annual basis to ensure that the Company
remains at the forefront of sustainable investment, operations and reporting.
The Company has categorised itself as an 'Article 8' financial product, which
was communicated in the Company's prospectus, published in April 2022. The
Company has also published a website disclosure in accordance with the Level 1
requirements of the EU Sustainable Finance Disclosure Regulation ('SFDR').
The Company's Investment Adviser, Amber Infrastructure Limited ('Amber') is a
signatory of the UN-backed Principles for Responsible Investment ('PRI').
The Company supports the 2030 Agenda for Sustainable Development adopted by
the UN Member States in 2015. Alignment with the UN Sustainable Development
Goals ('SDGs') is a key part of the Company's approach to environmental,
social and governance ('ESG') integration. The Company contributes towards the
SDGs in two main ways: the positive impact investments have on sustainable
development and our aim to manage investments sustainably.
The Company has taken steps to strengthen the alignment of its investment
activity with the objectives of the Paris Agreement and is a supporter of the
recommendations of the Task Force on Climate-related Financial Disclosures
('TCFD').
GLOSSARY
Certain words and terms used throughout this Half-yearly Financial Report are
defined in the glossary on page 67. Where alternative performance measures
('APMs') are used, these are identified by being marked with an * and further
information on the measure can be found in the glossary.
COVER IMAGE
Thames Tideway Tunnel, UK
Photo credit: Tideway
HALF-YEAR FINANCIAL HIGHLIGHTS
We aim to provide our investors with stable, long-term, inflation-linked
returns, based on growing dividends and the potential for capital
appreciation.
DIVIDENDS
3.87p - H1 2022 dividend per share(1)
7.74p - 2022 full-year dividend target per share(2)
7.93p - 2023 full-year dividend target per share(2)
c.2.5% - H1 2022 dividend growth
1.2x - H1 2022 cash dividend cover(3) (H1 2021: 1.3x)
NET ASSET VALUE ('NAV') (4)
£3.0bn - NAV at 30 June 2022 (4) (31 December 2021: £2.5bn)
157.3p - NAV per share at 30 June 2022(4) (31 December 2021: 148.2p)
18.9% - Increase in NAV for the six months to 30 June 2022 (31 December 2021:
6.1%)
6.1% - Increase in NAV per share for the six months to 30 June 2022 (31
December 2021: 0.7%)
PORTFOLIO ACTIVITY
£56.1m - Cash investments and new commitments made during H1 2022 (31
December 2021: £252.7m)(5)
INFLATION-LINKAGE
0.7% - Portfolio inflation-linkage at 30 June 2022(6) (31 December 2021: 0.7%)
TOTAL SHAREHOLDER RETURN ('TSR')
238.3% - TSR since Initial Public Offering ('IPO')(7)
8.1% p.a. - Annualised TSR since IPO(7)
PROFIT
£219.2m - H1 2022 profit before tax (H1 2021: £27.2m)
1 The forecast date for payment of the dividend relating to the
six months to 30 June 2022 is 18 November 2022.
2 Future profit projection and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in future.
3 Cash dividend payments to investors are paid from net
operating cash flow before capital activity* as detailed on pages 23 to 24.
4 The methodology used to determine the NAV is described in
detail on pages 25 to 32.
5 As at 31 December 2021, this includes cash investments made
only.
6 Calculated by running a 'plus 1.0%' inflation sensitivity for
each investment and solving each investment's discount rate to return the
original valuation. The inflation-linked return is the increase in the
portfolio weighted average discount rate.
7 Since inception in November 2006. Source: Bloomberg. Share
price appreciation plus dividends assumed to be reinvested.
COMPANY OVERVIEW
CONSISTENT AND SUSTAINED RETURNS
INPP Dividend Payments
[Diagram can be found in PDF version of this document on the Company's
website].
PREDICTABLE portfolio performance
Projected 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
2022 are included.
LOW RISK AND DIVERSIFIED PORTFOLIO
Sector Breakdown
Energy Transmission 21%
Transport 20%
Education 17%
Gas Distribution 15%
Waste Water 13%
Health 4%
Military Housing 3%
Digital 2%
Courts 2%
Other 3%
142 investments in infrastructure investments and businesses across a variety
of sectors(1)
Geographic Split
UK 76%
Australia 8%
Belgium 7%
Germany 4%
US 3%
Canada 2%
Ireland <1%
Denmark <1%
Invested in selected global regions that meet INPP's specific risk and return
requirements
Investment Type
Risk Capital(2) 92%
Senior Debt 8%
Invested across the capital structure, taking into account appropriate
risk-return profiles
Invested across the capital structure, taking into account appropriate
risk-return profiles
Investment Ownership
100% 45%
50%-100% 6%
<50% 49%
Preference to hold majority stakes
Mode of Acquisition/Investment Status
Construction 13%
Operational 87%
Early Stage Investor(3) 66%
Later Stage Investor(4) 34%
Early stage investment gives first mover advantage maximises capital growth
opportunities
Investment Life
<20 years 46%
20-30 years 19%
>30 years 35%
Weighted average portfolio life of 37 years(5)
1 The majority of projects and businesses benefit from availability-based or
regulated revenues.
2 Risk Capital includes both investment and business level equity and
subordinated shareholder debt.
3 'Early Stage Investor' - investments developed or originated by the
Investment Adviser or predecessor team in primary or early phase investments.
4 'Later stage investor' -investments acquired from a third party investor in
the secondary market.
5 Includes non-concession entities which have potentially a perpetual life but
assumed to have finite lives for this illustration.
( )
International Public Partnerships invests in high-quality infrastructure
assets and businesses that are 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 160
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 environmental and social characteristics of
its investments
- 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 ESG risks and
opportunities throughout the investment lifecycle
- 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 invest responsibly in social and public infrastructure that
delivers long-term benefits for all stakeholders.
We aim to provide our investors with stable, long-term, inflation-linked
returns, based on growing dividends and the potential for capital
appreciation.
We expect to achieve this by investing in a diversified portfolio of
infrastructure assets and businesses which, through our active management,
meets societal and environmental needs both now and into the future.
what we do
SOURCE
The Company operates a rigorous framework of governance, incorporating a
streamlined screening, diligence and execution process. This includes
substantive input from the Company's Investment Adviser and, as appropriate,
external advisers, with the Company's Board providing robust challenge and
scrutiny
INVEST
We seek new investments through our extensive relationships, knowledge and
insights to:
- Enhance long-term, inflation-linked cash flows*
- Provide opportunities to create long-term value and enhance
returns
- Ensure ESG is core to the investment process
OPTIMISE
Using the Investment Adviser's highly experienced in-house asset management
team, we seek to actively manage the Company's investments, balancing risk and
return, and using detailed research and analysis to optimise the Company's
financial and ESG performance
DELIVER
Together with our Investment Adviser's active asset management of our
investments, we aim to deliver strong ongoing asset performance for
stakeholders and achieve target returns from the portfolio for investors
VALUE-FOCUSED PORTFOLIO DEVELOPMENT
- We seek a portfolio of investments with no or low exposure to
market demand risks and for which financial, macroeconomic, regulatory, ESG
and country risks are well understood and manageable
- The Investment Adviser has a strong investment team that
originates unique opportunities in line with the Company's investment strategy
- We continually monitor opportunities to enhance the Company's
existing investments
- The Company draws on the Investment Adviser's award-winning
sustainability programme, 'Amber Horizons', to inform areas for future
investment
ACTIVE ASSET MANAGEMENT
- The Investment Adviser has an in-house asset management team
dedicated to managing the Company's investments
- Where possible, through the Investment Adviser, we manage the
day-to-day activities of each of our investments internally
- We carry out extensive monitoring, 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
- Integrated ESG considerations across the investment lifecycle
- Robust ESG objectives to build resilience and drive
environmental and social progress
- Upholding high standards of business integrity and governance
VALUE CREATION
investor returns
Continuing to deliver consistent financial returns for investors through
dividend growth* and inflation-linked returns* from underlying cash flows and
provide opportunities for capital appreciation
PUBLIC SECTOR AND OTHER CLIENTS
Providing responsible investment in infrastructure to support the delivery of
essential public services and broader societal objectives (e.g. supporting the
path to net zero). Our ability to deliver services and maintain relationships
with our clients and other key stakeholders is vital for the long-term
prosperity of each investment
communities
Delivering sustainable social infrastructure for the benefit of local
communities. The Company's investments provide vital public assets which
strengthen communities, and seek to provide additional benefits through
deploying investment in local economies, for example via job creation
SUPPLIERS AND THEIR EMPLOYEES
The performance of our service providers, supply chain and their employees is
crucial for the long-term success of our investments. The Company promotes a
progressive approach to:
- Corporate social responsibility
- Safe, healthy, inclusive workplaces
- Opportunities for professional development
- Staff engagement
OBJECTIVES 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, inflation-linked returns to investors - Target an annual dividend increase of 2.5% - c.2.5% Dividend increase achieved for H1 2022
(H1 2021: 2.7%)
- Target a long-term total return of at least 7.0% per annum - 7.9% p.a. IRR achieved since IPO to 30 June 2022(1)
- Inflation-linked returns on a portfolio basis (31 December 2021: 7.7% p.a.)
- 0.7% Inflation-linked returns on a portfolio basis at 30 June
2022
(31 December 2021: 0.7%)
Value-focused portfolio development Originate investments with stable, long-term cash flows and potential growth New investments meet at least three of six attributes: 100% of the investments made in H1 2022 met at least three of the six
attributes, whilst maintaining a balanced portfolio of assets
attributes
1. Stable, long-term returns
(H1 2021: 100%)
2. Inflation-linked investor cash flows
3. Early stage investor
4. Investment secured through preferential access
5. Other capital enhancement attributes
6. Positive SDG contribution
ACTIVE ASSET MANAGEMENT Managing strong ongoing asset performance - Strong ongoing asset performance as demonstrated by: - 100% Forecast portfolio distributions received for H1 2022(2)
(H1 2021: 100%)
- 0.1% Asset performance deductions achieved against a target of
<3% during H1 2022
(H1 2021: 0.1%)
- 99.8% Asset availability achieved against a target of >98%
during H1 2022
(H1 2021: 99.7%)
Responsible Management of material ESG factors(3) - Robust integration of ESG into investment lifecycle - A+ The Company's Investment Adviser's score for the UN-backed
Investment PRI 2020 assessment for both the Strategy and Governance and the
Infrastructure modules(4)
- Positive SDG contribution for new investments - 100% Percentage of investments in the period that positively
support targets outlined by the SDGs(5)
efficient financial management Making efficient use of the Company's finances and working capital - Cash covered dividends - 1.2x Dividends fully cash covered for H1 2022
(H1 2021: 1.3x)
- Competitive ongoing charges - 1.09% Ongoing charges ratio for H1 2022
(H1 2021: 1.25%)
1 Calculated by reference to the November 2006 IPO issue price of
100p and reflecting NAV* appreciation plus dividends paid.
2 Measured by comparing forecast portfolio distributions against
actual portfolio distributions received. In the current year, actual portfolio
distributions exceeded forecast.
3 Please refer to page 36 for additional ESG KPIs that are linked to
the Company's approach to asset management
4 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.
5 The Company aims to manage and monitor any potential adverse
impacts as outlined on page 36.
CHAIR'S LETTER
Dear Shareholders,
I am pleased to report another successful six-month period for the Company to
30 June 2022. INPP has continued to deliver strong financial and operational
performance, with its portfolio of over 140 infrastructure projects and
businesses demonstrating resilience in an uncertain macroeconomic environment.
There have been a number of notable highlights during the period, including:
(- )Delivering a TSR since IPO in November 2006 to 30 June 2022 of
238.3% or 8.1% on an annualised basis(1)
- The successful completion of a significantly oversubscribed £325
million capital raising, exceeding the initial target of £250 million,
demonstrating strong support from both existing and new shareholders
- Over £56 million of new investments and commitments
- Continued strong inflation linkage (0.7%)(2)
- Enhanced ESG considerations including the Company being classified
as an Article 8 financial product under SFDR
The portfolio continues to exhibit resilient cash flows and the Company
remains confident that its business model and investment objectives remain
attractive for its investors.
OPERATIONAL AND FINANCIAL UPDATE
CONSISTENT AND PREDICTABLE RETURNS
Over the six months to 30 June 2022, NAV per share increased by 9.1 pence to
157.3 pence (31 December 2021: 148.2 pence), with the NAV increasing to £3.0
billion. The Company reported a profit for the six months to 30 June 2022 of
£219.2 million (30 June 2021: £27.2 million) which reflects the increase in
the fair value of the Company's investments over the period driven by, among
other factors, the updated near-term inflation assumptions and the revaluation
of the Company's investment in Tideway (more information on these changes can
be found on page 17).
I am pleased to also announce that the Company has achieved cash dividend
cover of 1.2x(3), while delivering further dividend growth. As a result of the
Company's performance, the Board has declared a dividend of 3.87 pence per
share(4) for the six months to 30 June 2022, in line with its stated dividend
target of 7.74 pence per share(5) for the 2022 financial year. This represents
c.2.5% growth on the prior corresponding period and is consistent with the
c.2.5% average annual dividend growth that has been delivered since the
Company's inception. The dividend will be paid on 18 November 2022. The Board
is also pleased to reaffirm its dividend target for 2022 of 7.74 pence per
share and reaffirm its guidance of 7.93 pence per share for 2023.
INVESTMENT ACTIVITY
Since the beginning of 2022, the Company has made new investments and
investment commitments of £56.1 million covering the transport, digital,
education and waste water sectors.
During the period, the Company conditionally agreed to acquire a further
shareholding in Tideway, the London waste water project, increasing its stake
to approximately 18% through the investment of approximately £42 million of
additional capital. At the time of writing, we expect this investment to
complete on or around the publication date of this report. We are very pleased
to make this additional investment in Tideway. The project is seen by the
Company as financially attractive and, moreover, its positive impact on the
environment and strong engagement with local communities, are closely aligned
with the Company's own values as a responsible investor.
In addition, the Company has announced that financial close had been reached
on Stage 3 of the Gold Coast Light Rail project where it will make an
additional investment totalling c.£7.1 million. The Company's existing
investment into Stages 1 and 2 of the project has seen over 60 million
passenger trips, with combined tram and bus usage increasing 43% across the
Gold Coast transport network since the light rail project opened in 2014,
making an important contribution to reduced reliance on car transport.
Further investments totalling £7.0 million were made during the period,
including in a UK public-private partnership ('PPP') portfolio, Diabolo Rail
Link ('Diabolo') and National Digital Infrastructure Fund ('NDIF') which the
Company committed to in July 2017. More information on these investments is
available on pages 14 to 15.
Post-period end, minority interests in four Lancashire Building Schools for
Future ('BSF') projects were successfully sold, with £8.5 million being
realised, and aligned with the carrying value on the disposal date. While the
sales values were relatively minor in the context of the overall portfolio, it
was nevertheless a reassuring demonstration of the continued quality of the
portfolio. As part of its active asset management approach and through the
lens of its divestment policy, the Company regularly reviews its portfolio
and, in these cases, determined that a sale was in the best interests of the
Company.
As previously reported, the Company is preferred bidder on two more offshore
transmission projects ('OFTOs') - Moray East and East Anglia One - which will
be the tenth and eleventh OFTO projects in the Company's portfolio. These
projects are progressing well and continue to be in line with the Company's
investment objectives, with availability-based revenue streams, protected
downside and inflation-linkage. The Company's current OFTO portfolio has the
capacity to transmit enough renewable electricity to power c.2.1 million
homes, in support of the UK's transition to net zero. This will increase to
3.7 million once the two preferred bidder OFTOs have been acquired. Please see
more information on the Company's investment activity on pages 14 to 15.
Following the successful capital raise, proceeds were partially utilised to
repay the drawn balance on the Corporate Debt Facility ('CDF'), and the
remaining capital is earmarked to support the current pipeline.
PORTFOLIO OVERVIEW
The priority for the Company's Investment Adviser, Amber Infrastructure, is
meeting or exceeding the Company's investment performance objectives, and
creating value for investors and communities. Its active asset management
approach has been fundamental to the Company's successful performance since
IPO in 2006. It is this performance that has enabled the Company to build a
reputation for delivering transparent, responsible stewardship of public
infrastructure assets that support essential services.
The following sets out some key updates over the six months to 30 June 2022.
The Company continues to monitor the energy regulator, Ofgem's, further
consultation on the OFTO regime that will apply once the contracted revenue
period comes to an end. In July 2021, Ofgem released its first decision
document, the contents of which were consistent with our expectations and, in
June 2022, Ofgem released a second consultation document regarding the
potential regulatory developments underpinning an extension of the OFTO
revenue stream. The Investment Adviser continues to be actively engaged with
all relevant industry stakeholders. All parties recognise that the life
extension of renewable energy assets (including offshore transmission assets
owned by the Company) is required to meet the UK net zero emissions targets.
The consultation is the second in a proposed multi-part consultation on the
end of tender revenue process and focuses on the regulatory financial
arrangements. Ofgem expects to publish summaries of the non-confidential
feedback and any updates on the issues covered in a further publication in
Autumn 2022. We will seek to keep investors informed of forthcoming
developments.
The Company's Investment Adviser continues to monitor Diabolo, the strategic
rail transportation asset linking Brussels Airport with Belgium's national
rail network, as it recovers from the reduction in demand as a result of
Covid-19 restrictions. Further to the €24 million committed to the project
in December 2020, €6.7 million remains available to protect Diabolo's
liquidity position and ensure compliance with its debt covenants. Of the €24
million, €17.3 million has been drawn to date, of which €5.0 million(6)
was drawn during the period. The extent and timing of any further cash
injections is dependent upon the trajectory of the recovery in passenger
numbers, which at the end of June were approximately c.85% of pre-Covid
levels. The latest traffic forecast report for Diabolo assumes a return of
pre-Covid levels by 2024. Discussions are continuing with Infrabel, the
Belgian rail network owner, over the implementation of a passenger fare
adjustment which could partially mitigate the impact of lower passenger
numbers.
Cadent continues to actively support the UK Government in meeting its net zero
target, by working on various initiatives to enable the transition to cleaner
fuels, including being shortlisted by Ofgem to develop the UK's first ever
'hydrogen village', which is discussed further on page 39. Whilst Cadent is
largely insulated from changes in gas prices and the associated energy price
caps, aside from where the changes can cause timing differences in certain
cash flows, the Company continues to closely monitor the implications of
changes in gas prices and other developments within the sector.
INVESTMENT STEWARDSHIP AND ESG
The Company considers sustainability and ESG integration to be fundamental
parts of its approach to investment risk management, investment origination
and value creation. During the period, the Company chose to categorise itself
as an Article 8 financial product, following an internal assessment of the
application of the SFDR.
In line with this new commitment, the Company's Investment Adviser is further
refining its ESG data collection policies and processes to support enhanced
disclosures under SFDR and TCFD. The aim of this will be to provide investors,
and other key stakeholders, with more granular information about the Company's
ESG risks and opportunities.
The Company's Investment Adviser continues to engage with its public sector
partners and key suppliers to ensure that the projects and businesses in which
the Company invests remain available and operational to deliver for the
communities which they serve, to the greatest extent possible, whilst
protecting the health and safety of staff and users. For those investments
measured by both availability and performance standards, for the six months to
30 June 2022, the availability of those assets was 99.8% (30 June 2021: 99.7%)
and there were performance deductions of no more than 0.1% (31 December 2021:
0.1%). Both of these measures represent outperformance relative to the
Company's targets and are a testament to the Investment Adviser's active asset
management approach.
The social considerations implicit in ESG are as important as the
environmental considerations, recognising that there can be much overlap
between the two. A good example of this would be the Investment Adviser's
activities at one of the Company's social accommodation investments, where it
is working with a specialist agent to donate equipment no longer required to
good causes. Through this one initiative, over £194,000 of in-kind donations
have been made to 10 charities, over 45 tonnes of waste has been diverted from
landfill, and over 61 tonnes of greenhouse gas emissions have been avoided.
Please refer to the Responsible Investment section on pages 33 to 42 for more
information
CORPORATE GOVERNANCE
At the Annual General Meeting ('AGM') in May, Claire Whittet retired from the
Board having completed nine years of service for the Company, during which
time she held various roles including Senior Independent Director and Chair of
the Management Engagement Commitment. I and my fellow Directors, past and
present, would like to thank Claire for her commitment and highly valued
contribution to the success of the Company during these years.
As a result of her retirement and the importance of ongoing Board rotation,
the following changes in Board responsibilities took place during the period:
- Meriel Lenfestey was appointed Chair of the Management
Engagement Committee;
- John Le Poidevin was appointed to the role of Senior Independent
Director; and
- Stephanie Coxon was appointed Chair of the Nomination and
Remuneration Committee, replacing Julia Bond who remains Chair of the ESG
Committee.
In addition, the Company's Board of Directors continue to actively engage with
the Company's portfolio companies and during the period carried out a Cadent
site visit as well as meeting with Cadent colleagues.
CURRENT ENVIRONMENT AND OUTLOOK
The outlook for infrastructure investment remains strong, and I am pleased to
observe continued positive macro fundamentals that support the Company's
portfolio. Whilst the Company continues to manage and mitigate risk, the
portfolio has further demonstrated its resilience in the current macroeconomic
environment. The result of the Company's capital raising activities during the
period is a strong indication of the attractiveness of the Company's
investment case and we were encouraged by the support from new and existing
investor groups.
The Company maintains a high-quality pipeline of future investment
opportunities. Through the Investment Adviser, we are committed to ensuring
new and existing investments remain focused on the key characteristics
required to meet the Company's investment criteria, including yields that are
attractive relative to asset risk profile, the likelihood of long-term stable
cash flows, high barriers to entry to competition, strong ESG credentials and
opportunities to enhance the value of individual investments and the portfolio
overall.
There continues to be a need for infrastructure investment across the
countries in which the Company invests. Governments internationally have
acknowledged the key role infrastructure spending will play in driving
economic recovery, the creation of jobs and our ability to address key
challenges such as climate change. The sectors in which the Company invests
continue to drive the transition towards climate goals, for example in energy
transition, digital connectivity and social infrastructure. The Company is
also well positioned to take advantage of any future opportunities that may
emerge. As at the current date, the Company's £250 million revolving credit
facility was undrawn in cash terms, with £16.4 million committed in respect
of letters of credit to support our investment pipeline. The proceeds of the
capital raise, completed during the period, can be used to support our current
pipeline.
This year has seen rapidly increasing energy prices, growing concerns about
energy security and resurgent general inflation across the geographies in
which the Company invests, much of which can be traced back to the war in
Ukraine and, in the case of inflation, also to the ongoing fall-out from the
Covid-19 pandemic and the associated global recovery. Whilst the Company is
well positioned to mitigate these risks, it is not insulated from their
effects especially as it relates to the staff of our projects and investee
businesses, their supply chains, users of these infrastructure assets and
their wider stakeholders. At such a time, the importance of social aspects of
our commitment to ESG best practices, as described above, is clear. For more
information please see the current market and future opportunities section of
this report on pages 16 to 17.
I and my fellow Directors thank you for your continued support.
Mike Gerrard
Chair
7 September 2022
1 Since inception in November 2006. Source: Bloomberg. Share price
appreciation plus dividends assumed to be reinvested.
2 Calculated by running a 'plus 1.0%' inflation sensitivity for each
investment and solving each investment's discount rate to return the
original valuation. The inflation-linked return is the increase in the
portfolio weighted average discount rate. Please refer to pages 29 to 30 for
further detail.
3 Cash dividend payments to investors are paid from net operating
cash flow before capital activity as detailed on pages 23 to 24.
4 The forecast date for payment of the dividend relating to the six
months to 30 June 2022 is 18 November 2022.
5 Future profit projection and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in future.
6 An additional €0.5 million was drawn post-period end in July
2022.
tOP 10 INVESTMENTS
The Company's top ten investments by fair value at 30 June 2022 are summarised
below. A complete listing of the Company's investments is available on the
Company's website (www.internationalpublicpartnerships.com
(http://www.internationalpublicpartnerships.com) ).
Name of Investment Location Sector Status at % holding at % investment fair value 30 June 2022 % investment fair value
30 June 2022 30 June 2022(1) 31 December 2021
SDG Supported
Cadent UK Gas distribution Operational 7% Risk Capital 15.1% 15.5% 9
Cadent owns four of the UK's eight regional gas distribution networks ('GDNs')
and in aggregate provides gas to approximately 11 million homes and
businesses.
Tideway UK Waste water Under Construction 16% Risk Capital(2) 13.0% 9.1% 6
Tideway is the trading name of the company that was awarded the licence to
design, build, finance, commission and maintain a new 25km 'super-sewer' under
the River Thames.
Diabolo Belgium Transport Operational 100% Risk Capital 7.3% 7.0% 11
Diabolo integrates Brussels Airport with the national rail network allowing
passengers to access high-speed trains, such as Amsterdam-Brussels-Paris and
NS International trains.
Angel Trains UK Transport Operational 10% Risk Capital 6.7% 7.1% 11
Angel Trains is a rolling stock leasing company which owns more than 4,000
vehicles. Angel Trains has invested over £5 billion in new rolling stock and
refurbishment since 1994, and is the second largest investor in the industry
after Network Rail.
Lincs OFTO UK Energy transmission Operational 100% Risk Capital 6.6% 6.9% 7
The project connects the 270MW Lincs offshore wind farm, located 8km off the
east coast of England, to the National Grid. The transmission assets comprise
the onshore and offshore substations and under-sea cables, 100km in length.
Ormonde OFTO UK Energy transmission Operational 100% Risk Capital and 100% senior debt 3.9% 4.2% 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 Rail Australia Transport Operational 33% Risk Capital 3.2% 3.7% 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.
BeNEX Germany Transport Operational 100% Risk Capital 2.8% 2.8% 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.
US Military Housing(3) US Military housing Operational 100% Risk Capital 2.6% 2.5% 11
Two tranches of mezzanine debt underpinned by security over seven operational
PPP military housing projects, relating to a total of 19 operational military
bases in the US and comprising c.21,800 individual housing units.
Beatrice OFTO UK Energy transmission Operational 100% Risk Capital 1.8% 2.0% 7
The project connects the 588MW Beatrice offshore wind farm, located 13.5km off
the Caithness coastline of Scotland, to the National Grid. The transmission
assets comprise the onshore and offshore substations, 20km of onshore export
cables and 70km of offshore export cables.
1 Risk Capital includes both project level equity and
subordinated shareholder debt.
2 Upon completion of the Company's further investment in
Tideway, which was announced in June 2022, the Risk Capital will increase to
approximately 18%.
3 Includes two tranches of mezzanine debt into US military
housing.
More detail on significant movements in the Company's portfolio for the six
months to 30 June 2022 can be found on pages 13 to 15 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 that 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
2022 met at least three of the six attributes (31 December 2021: 100%)
During the six months to 30 June 2022, the Company invested or made investment
commitments up to £56.1 million (30 June 2021: £22.3 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 2022, 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 MADE DURING THE SIX MONTHS TO 30 JUNE 2022 LOCATION KEY ATTRIBUTES OPERATIONAL STATUS INVESTMENT INVESTMENT DATE
1 2 3 4 5 6
UK PPP Portfolio(1) UK ü ü ü ü Operational £1.5 million June 2022
Diabolo Belgium ü ü ü Operational £4.3 million(2, 3) June 2022
NDIF UK ü ü ü ü Operational £1.2 million Various
£7.0 million
INVESTMENT COMMITMENTS MADE DURING THE SIX MONTHS TO 30 JUNE 2022 LOCATION KEY ATTRIBUTES OPERATIONAL STATUS INVESTMENT INVESTMENT DATE
1 2 3 4 5 6
Gold Coast Light Rail - Stage 3 Australia ü ü ü ü ü In construction £7.1 million(2) March 2022
Tideway(4) UK ü ü ü ü ü ü In construction c.£42.0 million June 2022
c.£49.1 million
1 Portfolio includes interests in Durham BSF and Nottingham BSF
Phase 1 and Phase 2.
2 GBP translated value of investment.
3 A further £0.4 million (€0.5 million) was drawn in July
2022, post-period end. In addition, a contingent commitment of £5.8 million
(€6.7 million) is available, if required.
4 This investment is expected to complete on or around the
publication date of this report.
INVESTMENTS MADE DURING THE PERIOD
Uk PPP portfolio, uk
As previously reported, in December 2021, the Company acquired a small
portfolio of UK PPP investments, including initial interests in Townlands
Community Hospital in Henley, Eltham Community Hospital and minority interests
in BSF projects. Of those, STaG 1 and 2 were acquired in December 2021 with
the remainder to be acquired in 2022. In June 2022, the Company acquired an
additional 8% of Durham BSF and an additional 18% of Nottingham BSF phase 1
and phase 2, taking the Company's ownership in each of those three schemes to
100%. These investments totalled c.£1.5 million. The portfolio was accretive
to the Company's returns and provides education facilities to over 3,880
pupils.
Primary SDG supported: 4
Diabolo, Belgium
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 €24.0 million to
the Diabolo project in December 2020, and up to €6.7 million remains
available to protect Diabolo's liquidity position and ensure compliance with
its debt covenants and, based on current analysis, this is considered to be
adequate. Of the €24 million, €17.3 million has been drawn to date, of
which €5.0 million(1) was drawn during the period. The extent and timing of
any further cash injections is dependent upon the trajectory of the recovery
in passenger numbers, which at the end of June 2022 were at approximately
c.85% of pre-Covid levels.
Primary SDG supported: 11
DIGITAL INFRASTRUCTURE, UK
In July 2017, the Company agreed to invest up to £45 million in UK digital
infrastructure alongside the UK Government, through NDIF. During the period,
an additional £1.2 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 contribute to
transition the UK to full-fibre at a time when reliance on digital
infrastructure and connectivity continue to be of the utmost importance. 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 number of people that are working from home.
Primary SDG supported: 9
INVESTMENT COMMITMENTS MADE DURING THE PERIOD
GOLD COAST LIGHT RAIL - STAGE 3, aUSTRALIA
In March 2022, the Company reached financial close on Stage 3 of the Gold
Coast Light Rail project. Under the terms of the acquisition the Company will
make an investment totalling approximately A$12.5 million (c.£7.1 million at
current exchange rates) in addition to the Company's existing 30% interest.
The project extends the existing Gold Coast Light Rail network (known as
G:link) a further 6.7km south from Broadbeach to Burleigh Heads. It will
include eight new stations, five additional light rail trams, new bus and
light rail connections at Burleigh and Miami, and an upgrade of existing depot
and stabling facilities. Queensland's only light rail system will have a route
27km long from Helensvale to Burleigh Heads, stopping at 27 stations and
serviced by 23 trams, at completion of Stage 3 in 2025. This further
investment follows the success of Stages 1 and 2, in which the Company is
invested. Over 60 million passenger trips have taken place to date and one of
the many benefits of the rail system has been an overall increase in public
transport use on the Gold Coast with a 43% uplift for combined tram and bus
use since light rail opened in 2014.
Primary SDG supported: 11
TIDEWAY, UK
In June 2022, the Company conditionally agreed to acquire a further
shareholding in Tideway. The investment opportunity arose as a consequence of
another existing investor having to dispose of its stake, due to the maturing
of an underlying investment fund. The investment, which is expected to
complete on or around the publication date of this report, would result in the
Company increasing its stake in Tideway to approximately 18% and deploying
approximately £42 million of additional capital. The remainder of the stake
is being acquired by the other continuing investors in Tideway. Tideway
continues to be a successful investment for the Company and will provide
several significant environmental and social benefits once operational. Please
see more information on pages 19 to 20.
Primary SDG supported: 6
1 An additional €0.5 million was drawn post-period end in
July 2022.
Current market environment and future opportunities
The portfolio has continued to demonstrate its resilience in the current
macroeconomic environment. The year to date has seen rapidly increasing energy
prices, growing concerns about energy security and growing inflation across
the geographies in which the Company invests, much of which can be traced back
to the war in Ukraine and, in the case of inflation, also a result of the
Covid-19 pandemic and the global recovery therefrom. Whilst the Company has
shown resilience, it continues to manage and mitigate risk, whilst carefully
monitoring the implications of a higher inflationary environment and interest
rates reaching the highest level, since early 2009.
The nature of the Company's investments in long-term public and social
infrastructure assets and related businesses, provides its investors with a
stream of relatively predictable and long-term cash flows; and whilst the
duration of this high inflationary period remains uncertain, we take comfort
from the strong inflation-linked returns of the Company's income streams
(0.7%) and its mitigated exposure to demand risks within the portfolio. Whilst
the Company is well positioned to mitigate these risks, it is not insulated
from their effects on our projects and investee businesses, their supply
chains, users of these infrastructure assets, their staff and their wider
stakeholders.
The need for infrastructure investment across the geographies in which the
Company invests remains strong and investor appetite remains high for the type
of infrastructure assets the Company invests in. This was demonstrated by both
the volume and pricing of transactions in the market and further supported by
the completion of the Company's capital raise, which was significantly
oversubscribed, indicating strong support from both existing and new
shareholders.
Governments internationally have acknowledged the key role infrastructure
spending will play in driving economic recovery, the creation of jobs and our
ability to address key challenges such as climate change. Developments in
sustainable finance legislation, including the EU's Taxonomy Regulation, will
further guide investment towards sustainable economic activities, including
infrastructure that supports the transition to net zero. Initiatives in the
geographies where the Company invests support this, including in the UK,
Europe, the US and Australia, for instance:
- The UK Infrastructure Bank Bill was introduced in May 2022, to
establish a bank which supports the UK reaching its net zero targets and that
will have £22 billion of capital resources; the UK Infrastructure Bank will
also draw private sector finance to invest into sectors the Company targets,
including energy, water, waste, transport and digital;
- The European Commission has announced a number of initiatives, under
the Connecting Europe Facility, including the EU committing to invest €5.4
billion in sustainable, safe and efficient transport infrastructure;
- The US Bipartisan Infrastructure Law has been secured and the
Biden-Harris Administration has announced over $110 billion to rebuild roads
and bridges, modernise ports and airports, replace lead pipes to deliver clean
water and expand high-speed internet. The US has a poor infrastructure rating
and will require state and local governments, as well as alternative
procurement models such as Progressive Development, which leverages the
expertise of the private sector, in order to deliver this goal; and
- Australia has announced an additional A$18 billion for
infrastructure projects across the country, and the federal government's
rolling ten-year infrastructure investment has increased investments from
A$110 billion to over A$120 billion to help drive economic recovery following
Covid-19.
The Company maintains a high-quality pipeline of future investment
opportunities. Through the Investment Adviser, we are committed to ensuring
new and existing investments remain focused on the key characteristics
required to meet the Company's investment criteria, including yields that are
attractive relative to asset risk profile, the likelihood of long-term stable
cash flows, high barriers to entry, strong ESG credentials and opportunities
to enhance the value of investments.
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 OPPORTUNITIES LOCATION ESTIMATED INVESTMENT(1) EXPECTED INVESTMENT PERIOD INVESTMENT STATUS
Diabolo Belgium Up to £5.8 million(2) 26 years A further contingent commitment available, if required
Gold Coast Light Rail - Stage 3 Australia £7.1 million 5 years Investment commitment made. Expected to be funded in 2025
UK PPP Portfolio UK Up to £1.7m 12-13 years Investment expected over the course of 2022
Tideway(3) UK c.£42.0 million 120 years Conditionally agreed to acquire a further shareholding
Moray East OFTO UK Up to £75 million 24 years Preferred bidder. Investment expected Q4 2022 / Q1 2023
East Anglia One OFTO UK Up to £90 million 21.5 years Preferred bidder. Investment expected Q4 2022
Flinders University Health and Medical Research Building ('HMRB') Australia £9.8 million 25 years Investment commitment made. Expected to be funded in 2024
( )
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 has to date invested €17.3 million of funding
since making a contingent commitment of €24 million and a further €6.7
million (£5.8 million) is available, if required.
3 This investment is expected to complete on or around the
publication date of this report.
The Company has a longer-term pipeline of investments and has identified over
30 opportunities across the UK, Europe, North America and Australia. Future
areas of investment may include:
KEY AREAS OF FOCUS SOCIAL INFRASTRUCTURE REGULATED UTILITIES TRANSPORT AND MOBILITY OTHER ESSENTIAL INFRASTRUCTURE
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 45 asset managers globally, as part of the wider pool
of over 160 infrastructure professionals with a presence across 13 countries
within 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, oversight and optimisation of the Company's
investments. The Investment Adviser's priority is to meet or exceed asset
performance, creating value for investors and the communities in which the
investments are based. This 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 and
sustainable stewardship of public and social infrastructure assets that
support essential services.
OPERATIONAL PERFORMANCE
The Company's Investment Adviser adopts a hands-on approach to monitoring
asset performance, utilising robust internal processes and the expertise of a
dedicated global asset management team based in the geographies in which the
Company invests. Whilst the Investment Adviser's involvement varies depending
on each investment type, each investment is actively managed to optimise
performance. During H1 2022, 100% of forecast investment portfolio receipts
were received (H1 2021: 100.0%)(1).
The Company has a weighted average investment life of c.37 years and for those
assets where it is applicable, the Company's Investment Adviser actively
monitors investments within the portfolio to ensure that conditions for the
hand-back of investments are met on completion of the project contract, or at
the end of the expected investment holding period.
Infrastructure projects and businesses inherently involve health and safety
risk both during construction and whilst operational. The health and safety of
the clients, delivery partners, employees and members of the public who come
into contact with our assets are of the utmost importance to the Company, and
we accord the highest priority to health and safety. 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 2022(2) (30 June 2021: 0.34 per
100,000 hours worked). 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)
99.8% Asset availability achieved against a target of >98%
PPP PROJECTS
PPP projects account for 39%(3) of the Company's portfolio (by investment at
fair value), and the Company's Investment Adviser has extensive experience in
this sector, having been responsible for the development of the majority of
the PPP projects in the Company's portfolio. Key deliverables for the Company
include ensuring that the facilities are available for their intended use,
that areas are safe and secure, and that the performance standards set out in
the underlying agreements are achieved. The Company's Investment Adviser works
closely with its partners to ensure these standards are met. For those
investments, measured by both availability and performance, for the six months
to 30 June 2022 the availability of those assets was 99.8% (30 June 2021:
99.7%) and across all projects there were performance deductions of 0.1% (30
June 2021: 0.1%), both exceeding the Company's targets.
In addition, the Company's public sector clients commissioned and funded over
528 contract variations during the period, resulting in over £7.0 million of
additional project work conducted on behalf of the commissioning bodies. The
completed changes during the period ranged from cleaning regimes to supporting
operational assets throughout the pandemic within the education and healthcare
facilities, to the delivery of significant transport facility upgrades.
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.
3 This includes availability-based PPPs, Diabolo and US Military Housing.
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 €24.0 million to
Diabolo in December 2020, up to €6.7 million remains available to protect
Diabolo's liquidity position and ensure compliance with its debt covenants
and, based on current analysis, this is considered to be adequate. The extent
and timing of any further cash injections is dependent upon the trajectory of
the recovery in passenger numbers, which at the end of June were approximately
c.85% of pre-Covid levels.
The latest traffic forecast report for Diabolo assumes a return of pre-Covid
levels by 2024. Discussions are continuing with Infrabel, the Belgian rail
network owner, over the implementation of a passenger fare adjustment which
could partially mitigate the impact of lower 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
In June 2022, Ofgem released a second consultation document regarding the
potential regulatory developments underpinning an extension of the OFTO
revenue stream. The Investment Adviser continues to be actively engaged with
all relevant industry stakeholders. All parties recognise that the life
extension of renewable energy assets (including offshore transmission assets
owned by the Company) is required to meet the UK net zero emissions targets.
The consultation is the second in a proposed multi-part consultation on the
end of tender revenue process and focuses on the regulatory financial
arrangements. In particular, it seeks stakeholders' views on the use of
competition to determine future OFTO licensees and revenues, the valuation of
OFTO assets and future period revenue incentive design. Ofgem expects to
publish summaries of the non-confidential feedback and any updates on the
issues covered in a further publication in Autumn 2022. The Investment Adviser
will seek to keep investors informed of forthcoming 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. During the period, Tideway reached the end of the primary tunnelling
phase which was a key milestone for the project and over half of the secondary
lining had been completed by the end of the period. Overall construction works
were 80% complete at the end of June 2022 with the focus now principally on
completion of the secondary lining as well as the system commissioning phase.
The estimated cost of the project is currently £4.3 billion representing a 2%
increase since costs were last reported but importantly, the cost to Thames
Water customers remains well within the initial estimate provided at the
outset of the project.
The amendments to Tideway's licence that were agreed with the regulator in
order to mitigate the impact of both Covid-19 related cost overruns and the
Financing Cost Adjustment Mechanism came into effect in March 2022. These
amendments provide greater certainty for the business and have been reflected
within the forecast cash flows.
As announced in June 2022, the Company has conditionally agreed to acquire a
further shareholding in Tideway, and is expected to complete on or around the
publication date of this report. This opportunity arose as a consequence of
another existing investor, DIF Capital Partners, having to dispose of its
stake as an underlying investment fund is approaching the end of its life. The
additional stake is being acquired together with the other continuing
investors in Tideway. The investment will result in the Company increasing its
stake in Tideway to approximately 18% and deploying approximately £42 million
of additional capital.
Cadent
Cadent is the UK's largest gas distribution network, serving 11 million homes
and businesses, and is the Company's largest investment by fair value,
representing 15.1% of the Company's portfolio by fair value. Cadent continues
to actively support the UK Government in meeting its net zero target by
working on various initiatives to enable the transition to cleaner fuels.
During the period, Cadent's proposal to convert 2,000 homes in Ellesmere Port,
Whitby, from natural gas to hydrogen, was shortlisted by Ofgem to be the UK's
first ever 'hydrogen village'. If Ellesmere Port is confirmed as the preferred
location, the 2,000 homes will be supplied with hydrogen for heating and
cooking fuel from 2025.
Whilst Cadent is largely insulated from changes in gas prices and the
associated energy price caps, aside from where the changes can cause timing
differences in certain cash flows, the Company continues to closely monitor
the implications of changes in gas prices and other developments in the
sector.
OTHER Operating businesses
The Company invests in a number of operating businesses including BeNEX, Angel
Trains and digital infrastructure businesses. The Investment Adviser holds a
board position on each of its operating businesses and uses these positions to
influence and strengthen company policies and procedures; for example,
enhancing ESG credentials, ensuring health and safety is the top 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 BeNEX's annual revenues (currently less than 20%) are linked to passenger
numbers and therefore whilst Germany, like many other countries, continued to
see a reduction in the number of people using public transport during H1 2022
as a result of Covid-19, the financial impact on BeNEX was limited.
In addition, BeNEX continues 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. By the end of H1 2022,
passenger numbers observed by the TOCs in which BeNEX is invested were broadly
back to pre-pandemic levels.
Angel Trains
Angel Trains generates the majority of its revenues from the contractual
leasing of its rolling stock to TOCs and therefore its revenues have continued
to be largely unaffected by Covid-19. Unlike the TOCs, Angel Trains is not
involved in or directly impacted by any of the disputes underpinning the
industrial action that occurred during the period but will continue to monitor
the situation and support TOCs where possible.
During the period, Angel Trains successfully acquired the Readypower Group - a
specialist rail and infrastructure services provider that supplies specialised
on and off-track plant equipment as well as other maintenance and operating
services to the UK rail sector. Readypower plays a crucial role in the
maintenance and modernisation of the UK rail network and is supporting various
infrastructure improvement projects across the UK. The acquisition is evidence
of Angel Trains' wider commitment to investing in and supporting the UK rail
industry.
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. During H1 2022, these businesses have
continued to capitalise on the increased consumer and business demand for high
bandwidth full fibre connectivity, gaining momentum and market share in their
respective markets. Full fibre roll-out continues to ramp up for several
businesses in which NDIF is invested, with strong progress being made in
scaling their fibre deployment and commercialisation capabilities.
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 to normal service delivery, aside
from the Royal Melbourne Showgrounds. This site, up until Q2 2022, had been
used as a testing and vaccination centre, but is currently temporarily closed
upon instruction from the public sector client. Events are expected to resume
during Q3 2022.
In response to the challenges posed by Covid-19, and more recently rising
inflation and interest rates, the Company's Investment Adviser has continued
to monitor each counterparty at an increased frequency to ensure that any
issues are identified as soon as possible such that, where necessary,
corrective actions can be undertaken in a timely manner.
INPP Service Providers
[Chart can be found within the PDF document of the report on the company
website.]
Two of the Company's counterparties (Equans and OCS) are, separately, the
subject of acquisitions. The proposed transactions demonstrate that the UK
facilities management sector continues to be attractive. While it is
anticipated that the completion of these transactions should not affect the
day-to-day operation of the assets, the Company's Investment Adviser will
closely monitor the affected facilities during and after the transition period
to mitigate the risk of any disruptions.
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 the
construction in order to deliver the expected project performance and create
value for investors and communities. As at 30 June 2022, there were three
investments under construction; Tideway, HMRB and Gold Coast Light Rail -
Stage 3.
During the six months to 30 June 2022, Tideway made good progress on the
construction of the tunnel and the associated infrastructure. Overall
construction works were 80% complete at the end of the period and, in April
2022, Tideway reached the end of its tunnelling phase which was a key
milestone for the project. More than 90% of the excavated soil removed during
the tunnelling phase was transported from site by barge to disposal and
beneficial reuse sites, keeping lorries off the road and hence providing
substantial environmental and health and safety benefits. The tunnel now
constructed runs 25km from east to west London and handover of operations to
Thames Water is expected to occur in March 2025 following the completion of
the secondary lining and system commissioning.
The HMRB is the flagship development of the Flinders Village project, an
integrated health and education precinct development at Flinders University's
Bedford Park campus, in Australia. The HMRB will co-locate research, clinical
and technological platforms to further the University's longstanding
contributions to the health, education and medical sectors. The building of
the HMRB commenced in December 2021 and is expected to complete in 2024.
Gold Coast Light Rail - Stage 3 reached financial close during the period. The
project extends the existing Gold Coast Light Rail network a further 6.7km
south from Broadbeach to Burleigh Heads. It will include eight new stations,
five additional light rail trams, new bus and light rail connections at
Burleigh and Miami, and an upgrade of existing depot and stabling facilities.
Completion is expected in 2025.
The Company has three projects under construction as at 30 June 2022, as set
out in the table below.
ASSET LOCATION CONSTRUCTION COMPLETION DATE DEFECTS COMPLETION DATE STATUS AT PERIOD END % OF INVESTMENT AT FAIR VALUE
Tideway UK 2025(1) 2028 Behind original schedule(2) 13.0%
HMRB Australia 2024 N/A(3) On schedule 0.0%(4)
Gold Coast Light Rail - Stage 3 Australia 2025 2027 On schedule 0.0%(4)
1 Scheduled handover date.
2 Handover is currently scheduled for March 2025, which is
12 months later than the original schedule. The delay can largely be
attributed to the impact of Covid-19.
3 This is not applicable as the authority is assuming all
risk associated with the construction work that is being undertaken.
4 The Company's investment is only due to be made following
construction completion. The valuation of the commitment is currently
immaterial.
efficient FINANCIAL MANAGEMENT
The Company aims to manage its finances efficiently, to provide the financial
flexibility to pursue new investment opportunities, whilst minimising levels
of unutilised cash holdings. Efficient financial management is achieved
through actively monitoring cash held and generated from operations, ensuring
cash covered dividends and managed levels of corporate costs. This is
supported by appropriate hedging strategies and prudent use of the CDF.
During the period, the Company achieved its objective to generate dividends
paid to investors through its operating cash flows. Cash dividends paid in the
period of £62.0 million (H1 2021: £55.2 million), were 1.2 times (H1 2021:
1.3 times) covered by the Company's net operating cash flows before capital
activity*. Cash receipts from investments were £91.4 million (H1 2021: £87.1
million), reflecting the continued good operational performance of the
portfolio. The Company expects the current higher levels of inflation to
contribute to an increase in cash flows from investments. However, there is
typically a delay before the impact of changes in inflation is seen in these
cash flows, owing to the timing of the indexation mechanisms within the
contracts held by the portfolio companies as well as the distribution
schedules adopted by such portfolio companies.
Corporate costs were effectively managed during the period and ongoing charges
were 1.09% for the six-month period ended 30 June 2022 (H1 2021: 1.25%), a
decrease in part due to the increase in average NAV over the period. Corporate
costs include management fees of £13.7 million for the period to 30 June 2022
(H1 2021: £13.0 million).
As outlined on page 48 of the financial statements, IFRS profit before tax of
£219.2 million was reported (H1 2021: £27.2 million). The increase in profit
in the year is principally reflective of the unrealised fair value gain on the
portfolio in the year.
The Company's cash balance as at 30 June 2022 was £224.7 million, an increase
on the year-end balance at 31 December 2021 of £168.6 million underpinned by
strong portfolio performance and proceeds from capital raising. As detailed in
note 12 of the financial statements, as well as on page 13 of the Operating
Review earlier in this report, £7.0 million of new capital was invested
during the period (H1 2021: £22.3 million). Proceeds of capital raisings in
the period net of issue costs were £320.2m (H1 2021: £nil). Proceeds were
used in part to pay down the cash drawn balance on the Company's CDF, with the
remaining amount to be deployed in the Company's investment pipeline (see page
17).
At 30 June 2022, the Company's CDF was nil cash drawn (31 December 2021:
£156.2 million cash drawn), with £16.4 million drawn under letter of credit
(31 December 2021: £9.3 million drawn under letter of credit). Net financing
costs paid were £1.8 million, (H1 2021: £3.3 million) reflecting the level
of utilisation of the Company's CDF during the period. The facility is
structured to support the Company's near-term pipeline, with £250 million
available on a fully committed basis, with a flexible 'accordion' component
which will, subject to lender approval, allow for a future extension by an
additional £150 million. The facility is available for drawdown until March
2024. The banking group for the facility consists of National Australia Bank,
the Royal Bank of Scotland International, Sumitomo Mitsui Banking Corporation
and Barclays Bank.
Performance against strategic priority KPIs:
1.2x Dividends fully cash covered (H1 2021: 1.3x)
1.09% Ongoing charges ratio (H1 2021: 1.25%)
SUMMARY OF CASH FLOWS
SUMMARY OF CONSOLIDATED CASH FLOW Six months to 30 June 2022 Six months to 30 June 2021 YEAR TO 31 DECEMBER 2021
£ million
£ million
£ MILLION
Opening cash balance 56.1 44.3 44.3
Cash from investments 91.4 87.1 167.9
Corporate costs (for ongoing charges ratio) (15.1) (14.7) (28.5)
Net financing costs (1.8) (3.3) (4.8)
Net operating cash flows before capital activity(1) 74.5 69.1 134.6
Cost of new investments (7.0) (22.3) (252.7)
Investment transaction costs (0.9) (0.1) (3.0)
Net movement of CDF (156.2) 17.6 117.8
Proceeds of capital raising (net of costs) 320.2 - 133.6
Dividends paid (62.0) (55.2) (118.5)
Closing cash balance 224.7 53.4 56.1
Cash dividend cover 1.2x 1.3x 1.1x
1 Net operating cash flows before capital activity as disclosed above
of c.74.5 million (30 June 2021: c.£69.1 million) include net repayments from
Investments at Fair Value through profit or loss of c.£25.2 million (30 June
2021: c.£30.8 million), and finance costs paid of c.£1.8 million (30 June
2021: c.£3.3 million) and exclude investment transaction costs of c.£0.9
million (30 June 2021: c.£0.1 million) when compared to net cash inflows from
operations of c.£49.1 million (30 June 2021: c.£41.9 million) as disclosed
in the consolidated cash flow statement on page 51 of the financial
statements.
CASH FLOWS ASSOCIATED WITH ONGOING CHARGES RATIO
CORPORATE COSTS Six months to 30 June 2022 Six months to 30 June 2021 YEAR TO 31 DECEMBER 2021
£ million
£ million
£ MILLION
Management fees (13.7) (13.0) (25.7)
Audit fees (0.2) (0.4) (1.0)(1)
Directors' fees (0.2) (0.2) (0.4)
Other running costs (1.0) (1.1) (1.4)
Corporate costs (15.1) (14.7) (28.5)
ONGOING CHARGES RATIO Six months to 30 June 2022 Six months to 30 June 2021 YEAR TO 31 DECEMBER 2021
£ million
£ million
£ MILLION
Annualised ongoing charges(1) (30.2) (29.4) (28.5)
Average NAV(2) 2,767.5 2,351.0 2,423.2
Ongoing charges (1.09%) (1.25%) (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
DIVIDEND GROWTH
The Company targets predictable and, where possible, growing dividends. During
the period, the Company paid a dividend of 3.77 pence per share in respect of
the six months ended 31 December 2021. This brought the total dividends paid
in respect of 2021 to 7.55 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 the IPO. The Company
is currently maintaining its previously announced dividend targets of 7.74
pence and 7.93 pence per share in respect of 2022 and 2023, respectively(1).
TOTAL SHAREHOLDER RETURN ('TSR')
The Company's annualised TSR since the IPO to 30 June 2022 was 8.1%(2). This
compares to the annualised FTSE All-Share index TSR over the same period of
5.1%. The total return based on the NAV appreciation plus dividends paid since
the IPO to 30 June 2022 is 7.9%(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 and financial markets worldwide, it has since reduced to
pre-pandemic levels. For reference, the correlation with the FTSE All-Share
index was 0.27 over the 12 months to 30 June 2022 which compares to 0.18 over
the 12 months to 30 June 2019 (being the most recent comparable 12-month
period prior to the outbreak of Covid-19).
Performance against strategic priority KPIs:
7.9% p.a. IRR achieved since IPO(3) (31 December 2021: 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 2022, the majority of assets in the
portfolio had some degree of inflation-linkage and, in aggregate, the weighted
average return of the portfolio (before fund-level costs) would be expected to
increase by 0.7% per annum in response to a 1.00% per annum increase in all of
the assumed inflation rates(4).
1 Future profit projection and dividends cannot be
guaranteed. Projections are based on current estimates and may vary in future.
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 an 18.9% increase in NAV from £2,528.8
million at 31 December 2021 to £3,006.2 million at 30 June 2022. Over the
same period, the NAV per share increased by 6.1% from 148.2 pence to 157.3
pence. The key drivers of the change in NAV are described in more detail
below.
NAV Movements (£m)
[Diagram can be found in PDF version of this document on the Company's
website].
The movements seen in the chart above are explained further below:
- During the period, the Company raised additional equity totalling
£325.0 million (£320.2 million net of issuance costs) by way of a Placing,
Open Offer, Offer for Subscription and Intermediaries Offer of Ordinary Share
Capital
- The yields on the government bonds used as part of the valuation
process increased during the period, resulting in a net £218.2 million
decrease in the NAV
- The negative impact of the increase in government bond yields was
more than offset by changes to the investment risk premia designed to ensure
that the valuations continue to reflect recent market-based evidence of
pricing for infrastructure investments. This includes a reduction in the
discount rate used to value the Company's investment in Tideway to ensure the
valuation reflects the price indicated by the transaction announced in June
2022 (see page 15 for further details). The net impact of these adjustments on
the NAV was £231.7 million
- In line with forward guidance provided previously, a cash dividend
of 3.77 pence per share was paid to the Company's shareholders during the six
months to 30 June 2022, totalling £62.0 million. This dividend was paid in
respect of the six months ended 31 December 2021
- During the period, Sterling weakened against the Australian Dollar,
Euro, US Dollar, Canadian Dollar and the Danish Krone (these being the five
foreign currencies the Company is exposed to). Including the change in the
value of the forward foreign exchange contracts, the net positive impact on
the NAV was £27.5 million with the most significant impact seen on the
Company's Australian Dollar-denominated investments
- Inflation assumptions across all applicable geographies were
increased in the near-term as inflation is expected to remain above the
Company's longer term inflation assumptions throughout 2022 and 2023. Further
details of these changes to inflation assumptions can be seen from the table
on page 29 and in aggregate these had a positive £95.4 million impact on the
NAV; and
- Among other things, the NAV Return of £82.8 million captures the
impact of the following:
- Unwinding of the discount rate
- Return generated from the portfolio's strong inflation-linkage where
actual inflation rates were higher than the Company's assumptions for the
period
- Updated operating assumptions to reflect current expectations of
forecast cash flows
- Actual distributions received above the forecast amount due to
active management of the Company's portfolio; and
- 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 5.8%
increase in the Investments at Fair Value, from £2,579.4 million at 31
December 2021 to £2,728.2 million at 30 June 2022. The key drivers of the
change in the Investments at Fair Value are described in more detail below.
Investments at Fair Value Movements (£m)
[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 £7.0 million owing to new investments made during
the period
- A decrease of £91.4 million due to distributions paid out from the
portfolio during the period
- The Rebased Investments at Fair Value of £2,495.0 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 £93.2 million captures broadly the same
items as the NAV Return (set out in detail on page 26) with the principal
exception being the fund-level operating costs and portfolio working capital
movements
- The majority of the discount rates used by the Company to value its
investments were increased slightly during the period, principally to reflect
higher inflation expectations (the impact is mitigated by the inflation-linked
nature of the cash flows). However, the impact of these movements was more
than offset by the accretive impact of a reduction in the discount rate used
to value the Company's investment in Tideway which was made to ensure the
valuation reflects the price indicated by the transaction announced in June
2022 (see page 15 for further details). This adjustment resulted in a c.£85.0
million increase in the valuation of Tideway. The net positive impact of these
movements on the Investments at Fair Value is £13.5 million.
- During the period, Sterling weakened against the Australian Dollar,
Euro, US Dollar, Canadian Dollar and the Danish Krone (these being the five
foreign currencies the Company is exposed to). The positive impact on the
Investments at Fair Value was £31.1 million with the most significant impact
seen on the Company's Australian Dollar-denominated investments and
- Inflation assumptions across all applicable geographies were
increased in the near-term as inflation is expected to remain above the
Company's longer term inflation assumptions throughout 2022 and 2023. Further
details of these changes to inflation assumptions can be seen from the table
on page 29 and in aggregate these had a positive £95.4 million impact on
Investments at Fair Value
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 (£m)
[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 inflation rates, and foreign
exchange rates used to value the Company's overseas assets. Inflation
assumptions across all applicable geographies were increased in the near-term
as inflation is expected to remain above the Company's longer term assumptions
throughout 2022 and 2023.
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 2022 31 December 2021
Inflation rates UK RPI: 9.00% (2022), 2.75% RPI
5.00% (2023), 2.75% thereafter
CPIH: 7.00% (2022),
4.00% (2023), 2.00% thereafter 2.00% CPIH
Australia 5.00% (2022), 2.50% thereafter 2.50%
Europe 6.00% (2022), 2.00% thereafter 2.00%
Canada 3.00% (2022), 2.00% thereafter 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 1.76 1.86
GBP/DKK 8.65 8.86
GBP/EUR 1.16 1.19
GBP/CAD 1.57 1.72
GBP/USD 1.21 1.35
Tax rates(3) UK 19.00%/25.00%(4) 19.00%/25.00%(4)
Australia 30.00% 30.00%
Europe Various (12.50% - 32.28%) Various (12.50% - 32.28%)
Canada Various (23.00% - 26.50%) Various (23.00% - 26.50%)
US(1) 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.
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.
4 The UK Government announced a corporate tax rate of 25%
applicable from 1 April 2023 at the Spring Budget 2021.
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 (92.2%) comprises Risk Capital
investments, while the remaining portion (7.8%) 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.
30 JUNE 2022 31 DECEMBER 2021 MOVEMENT
Weighted average government bond yield - portfolio 1.82% 0.96% 86bps
Weighted average investment premium - portfolio 5.29% 6.01% (72bps)
Weighted average discount rate - portfolio 7.11% 6.97% 14bps
Weighted average discount rate - risk capital 7.40% 7.38% 2bps
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 2022 NAV per share of
157.3 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 remaining
life of 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 2022 NAV of 157.3
pence 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 0.7% increase in returns (31 December
2021: 0.7%). The returns generated by the Company's non-UK investments are
typically linked to the relevant Consumer Price Index ('CPI') for that
jurisdiction whilst the Company's UK investments are typically linked to
variations of the Retail Price Index ('RPI') or CPIH (CPI including owner
occupied housing costs).
Given the ongoing higher-inflation environment, two additional NAV
sensitivities have now been prepared (as seen in the chart opposite) to allow
investors to understand the estimated impact, other things being equal, of
higher inflation rates sustained over a three-year period of 100bps and 200bps
above the Company's current inflation assumptions as seen on page 30.
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 are currently linked to the RPI and do not benefit from
protective contractual agreements or regulatory precedents, was previously
adjusted to align with the Company's CPIH assumption 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.
Short-term inflation sensitivities as at 30 June 2022
[Diagram can be found in PDF version of this document on the Company's
website].
FOREIGN EXCHANGE
The Company has a geographically diverse portfolio and forecast cash flows
from investments are subject to foreign exchange rate risk in relation to
Australian Dollars, Canadian Dollars, Danish Krone, Euros and US Dollars. The
Company seeks to mitigate the impact of foreign exchange rate changes on
near-term cash flows by entering into forward contracts, but the Company does
not hedge exposure to foreign exchange rate risk on long-term cash flows. The
impact of a 10% increase or decrease in these rates is provided for
illustration.
DEPOSIT RATES
The long-term weighted average deposit rate assumption across the portfolio is
1.03% 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 SPEND
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 2021 Annual Report and financial statements (pages 50 to 62),
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
Intermediaries Offer Prospectus published on 8 April 2022). As noted within
the Annual Report, the war in Ukraine has created geopolitical unrest as well
as some volatility in financial markets. Additionally, the implications from
rising inflation and higher interest rates are causing further uncertainty.
However, despite these developments, due to its risk nature, the Company's
portfolio continues to operate in line with our expectations. Therefore, the
assessment of the risk environment for the Company remains unchanged and there
have been no significant changes in the nature or assessment of the principal
and emerging risks reported in the 2021 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 - a 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;
supply chain management; and changes in the competitive environment which may
have an adverse impacts 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
7 September 2022 7 September 2022
RESPONSIBLE INVESTMENT
RESPONSIBLE INVESTMENT
APPROACH
The Company believes that the financial performance of its investments is
linked to environmental and social success and, as such, the Company considers
issues that have the potential to impact the performance of its investments,
both now and in the future.
Consideration of ESG drivers is an essential part of how the Company assesses
the long-term viability of the investments that it makes and its associated
asset management strategies. ESG drivers are non-financial factors that can
influence and be influenced by the Company's business activities and include
factors such as climate change, demographics, resources, technology and social
values.
ESG is important to the Company for the following key reasons:
- ESG drivers present an opportunity for new markets and
investments;
- Incorporating ESG into the Company's management processes
supports its high standards of financial rigour and requirements for long-term
financial performance; and
- By investing in infrastructure and associated businesses, the
Company can meaningfully support sustainable development.
The Company's approach to sustainability and ESG integration is described in
more detail in its 2021 Sustainability Report(1).
POLICY
The Company has a common ESG Policy(2) with its Investment Adviser. It defines
the objectives and approach to embedding ESG in investments, operations, and
the communities in which the Company's investments operate.
GOVERNANCE
THE ROLE OF THE BOARD AND COMMITTEES
The Board has overall responsibility for ensuring ESG is fully integrated into
all aspects of the investment strategy. To support it in this role, the Board
established an ESG Committee in March 2021. The ESG Committee provides a forum
for discussion, support and challenge, with respect to ESG. This includes the
policies adopted by the Company in relation to both investments and
divestments and by its Investment Adviser regarding its asset management and
reporting activities on such matters that relate to the Company. The ESG
Committee meets quarterly, and its full Terms of Reference can be found on the
Company's website(3).
In addition to the ESG Committee, ESG factors are considered through the
following committees:
- Investment Committee: The Company's Investment Committee ensures
ESG has been appropriately considered in the investment and divestment
processes and provides a robust challenge to the Investment Adviser on such
processes;
- Audit and Risk Committee: The Company's Audit and Risk Committee
oversees the Company's approach to ESG disclosures and reporting to its
stakeholders and ensures all risk management frameworks consider material ESG
risks (e.g. climate change); and
- Management Engagement Committee: The Company's Management
Engagement Committee reviews the effectiveness of ESG integration by the
Investment Adviser.
For more information, please refer to the 2021 Company's Sustainability
Report, which can be found on the Company's website(1).
ROLE OF THE INVESTMENT ADVISER
The Company's Investment Adviser is responsible for implementing the Company's
ESG policies into the Company's activities on a day-to-day basis. This
includes the integration of ESG considerations through investment origination
and the management of the Company's investments.
Amber's Executive Committee is responsible for the stewardship of Amber's
business and affairs. The Executive Committee discharges its sustainability
responsibilities directly through its internal Risk Committee, ESG Steering
Committee and Corporate Social Responsibility ('CSR') Sub-Committee.
Amber's ESG Steering Committee also interfaces with the Company's ESG
Committee, ensuring the Company can monitor its ESG performance, and is kept
abreast of emerging ESG risks and opportunities, such as climate change, to
inform its strategy.
For more information, please refer to Amber's Global Sustainability Report(4).
1
https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf
2
https://www.amberinfrastructure.com/media/2231/esg-policy_final.pdf.
3
https://www.internationalpublicpartnerships.com/media/2391/inpp-esgc-tor-march-21.pdf.
4
https://www.amberinfrastructure.com/media/2699/amber-2022-sustainability-report.pdf
SUSTAINABILITY AND ESG FRAMEWORKS
To deliver the ESG Policy and guide the Company's ESG strategy, the Company
draws on several frameworks and benchmarks to provide direction. These
frameworks are reviewed on an annual basis to ensure that the Company remains
fully transparent in its approach to sustainable investment, operations and
reporting.
Sustainable Finance Disclosure Regulation
The SFDR is the EU Regulation governing ESG disclosure obligations for
financial market participants ('FMPs') who market financial products to
clients in the European Union. The Company satisfies the two-pronged criteria
set out in the SFDR and therefore has obligations under the Disclosure
Regulation:
- As a self-managed alternative investment fund ('AIF'), the
Company is categorised as an Alternative Investment Fund Manager ('AIFM')
pursuant to the Alternative Investment Fund Managers Directive, thereby
qualifying as an FMP for the purposes of SFDR
- The marketing in certain EU countries by the Company, as part of
its recent capital raise, qualifies as marketing a financial product ('FP')
into the European Union, by virtue of the Company being an AIF itself
Therefore, the Company has categorised itself as an 'Article 8' financial
product, which was communicated in the Company's prospectus, published in
April 2022(1). The Company has also published a website disclosure in
accordance with the Level 1 requirements of the SFDR regulation(2). To align
with the periodic reporting timeframes for SFDR, the Company has elected to
disclose all relevant sustainability and ESG disclosures in line with the 2022
year-end financial reporting cycle. This will include the Level 2 SFDR
periodic reporting, alongside updates against the sustainability and ESG
frameworks listed below.
The Company's Investment Adviser is updating its ESG data collection policies
and processes on behalf of the Company, which will incorporate the disclosure
requirements of the SFDR regulation, metrics recommended by the TCFD and other
material ESG indicators. The finalised data collection system will be rolled
out at year-end, to collect ESG performance data from the Company's
investments for the 2022 reporting period, to be included in the Company's
2023 Annual Report and updated Sustainability Report.
Ambition
The Company believes that investing in infrastructure which supports a
sustainable, prosperous, equitable and resilient society should deliver robust
financial performance for its shareholders. It is supportive of the 2030
Agenda for Sustainable Development adopted by the UN Member States in 2015.
Alongside the research of its Investment Adviser into emerging trends and
technologies, the Company draws on the SDGs to help guide its approach to
sustainability.
ESG integration
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 PRI 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. There are continued delays to the PRI reporting module, which means an
update on scoring is now expected in the Company's next Sustainability Report.
Climate change
Climate change presents both transitional and physical risks to the Company's
investments. As such, it continues to be a high priority for the Company. The
Company is aligning all new investments with the objectives of the Paris
Agreement and has commenced the process of adopting the TCFD recommendations.
The Company is continuing efforts to enhance its approach and disclosures
according to the TCFD Guidelines. Please see more information on pages 40 to
42.
Infrastructure performance standards
The Company recognises its biggest impact on sustainable development is
through its investments, which are wide-ranging in their nature. The Company's
priority is to ensure it focuses on material issues for each sector in which
it invests, and it draws on international industry practice to help identify
what is important for each sector.
Where possible, the Company draws on recognised third-party benchmarks to
serve as a proxy for assessing whether an investment meets or manages material
sustainability factors.
1
https://www.internationalpublicpartnerships.com/news-media/press-releases/2021/placing-open-offer-and-offer-for-subscription-and-publication-of-prospectus-and-circular/
2
https://www.internationalpublicpartnerships.com/media/2629/amber-sfdr-website-disclosures.pdf
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)
3 Good Health and Wellbeing. The Company has investments in 38 health >544,000 4%
facilities, including the award-winning Royal Children's Hospital in
Melbourne, providing access to quality essential health-care services. Patients treated annually in healthcare facilities developed and maintained by
the Company
6 Clean Water and Sanitation. The Thames Tideway Tunnel is the biggest 37,000,000m(3) 13%
infrastructure project undertaken to date by the privatised UK water industry.
The three components of the London Tideway improvements work conjunctively to
reduce discharges in a typical year by about 37 million cubic metres(3)
9 Industry, Innovation and Infrastructure. Investing in resilient infrastructure 131,000km 19%
is at the heart of what we do. The Company's portfolio is invested into
quality, reliable, sustainable and resilient infrastructure. Length of gas transportation pipeline
16 Peace, Justice and Strong Institutions. Through the provision of high-quality 13 4%
judicial buildings, the Company is supporting effective, accountable, and
transparent institutions at all levels. Police Stations and Judicial buildings
4 Quality Education. Good infrastructure is at the base of quality education. By >168,000 16%
investing directly in 269 education facilities, and maintaining them
sustainably, the Company can support effective learning environments for all. Students attending schools developed and maintained by the Company
7 Affordable and Clean Energy. Through the Company's investments in offshore >2,100,000 21%
transmission investments, we are supporting the provision of affordable and
clean energy. Homes capable of being powered by renewable energy transmitted through
offshore transmission investments
11 Sustainable Cities and Communities. The Company's investments in transport >93,000,000 23%
provide safe, affordable, accessible and sustainable transportation.
Annual passenger journeys through sustainable transport investments(4)
1 Data reflects performance for the year to 31 December 2021.
2 Investment at Fair Value.
3
https://www.tideway.london/media/5097/j0115_sustainable-finance-report-vis7a-2.pdf
4 Annual passenger journeys include those made on BeNEX,
Diabolo, Gold Coast and Reliance Rail.
SUSTAINABLE MANAGEMENT
The Company's metrics against the SDGs illustrate the breadth of positive
social impacts its portfolio of investments can deliver. The Company seeks to
improve the sustainability performance of its investments and closely monitors
and manages against any potential adverse impacts. Further details on the
Company's approach to sustainable management, including its Sustainability
Policy Aims can be found in the Sustainability Report located on the Company's
website(1).
The Company is in the process of significantly updating its ESG data
collection processes, to incorporate SFDR, the EU Taxonomy and TCFD. The
updated ESG data collection tool will be rolled out across the Company's
investment portfolio in the first quarter of 2023, to collect data for the
2022 reporting period. The Company's next standalone Sustainability Report is
due to be published in 2023, to incorporate these enhanced ESG metrics,
including its portfolio carbon footprint.
As previously reported, in 2021, the Company developed a set of preliminary
KPIs(2), which support the Company in delivering its ESG Policy Objectives and
provide an important stepping-stone towards enhanced KPIs that the Company
will develop, following the update to its ESG data collection processes. These
KPIs, along with case studies of the Company's approach to active management
over the period, are detailed below and on the following pages.
POLICY OBJECTIVE KPI TARGET 30 JUNE 2022 31 DEC 2021
The Company will use ESG drivers to create investment opportunities in new and 1. Contribution to Sustainable Development Goals. Positive SDG contribution 100% 100% 100%
existing markets for new investments(3)
The Company will identify and integrate ESG factors into all aspects of its 2. Investment Adviser ESG Integration Performance. Investment Adviser PRI A+ A+ (2020) A+ (2020)
investment, development and management decision making and analysis to protect score
and enhance value
The Company will actively work towards improving the environmental and social 3. Robust corporate governance. Investments with appropriate policies and 100% 99% 96%
performance of its investments by focusing on material ESG issues and procedures concerning:
Sustainable Development Goals
- Health and safety
- Sustainability
- Equality, Diversity and Inclusion
- Modern Slavery and Human Rights
- Conflicts of interest
- Anti-corruption and financial crime risk
- Tax and transparency
4. Environmental performance. Investments with appropriate systems and
processes in place to improve environmental performance. Specific indicators
include:
4.1 Investments with an environmental management system
4.2 Investments with initiatives to improve environmental performance of
material issues
100% 98% 95%
100% 84% 79%
5. Health and safety performance. Investments with appropriate systems and
processes in place to improve health and safety performance. Specific
indicators include:
5.1 Investments with health and safety management system
5.2 Investments with initiatives to improve health and safety performance
100% 100% 97%
100% 99% 93%
6. Greenhouse gas management. Investments with appropriate systems and
processes in place to support management of energy efficiency and greenhouse
gases. Specific indicators include:
6.1 Investments monitoring Scope 1 and 2 emissions
6.2 Investments with initiatives to improve energy efficiency and greenhouse
gas performance
100% 98% 94%
100% 90% 88%
1
https://www.internationalpublicpartnerships.com/media/2471/inpp-2021-sustainability-report.pdf.
2 KPIs apply to all investments where the Company has a majority
equity investment, or a minority equity holding over £2 million.
3 The Company aims to manage and monitor any potential adverse
impacts of investments as per KPIs 3, 4, 5 and 6.
Energy transmission
As the impacts of a changing climate become more apparent to our society and
the solutions more urgent, it has never been more important to transition
towards efficient, sustainable energy systems. Offshore wind generation is a
success story for the UK. Long-term government support has underpinned
innovation and investment in the sector, helping to drive down costs while
contributing to decarbonisation of the economy.
impact
Homes capable of being powered by renewable energy transmitted by OFTOs >2.1 million SDG 7
Transmission capacity 2.5GW SDG 7
case study
Sustainability aim - Encourage a zero-harm culture across all investments.
Transmission Capital Services Limited ('TCSL') (a consortium comprising the
Company, the Company's Investment Adviser and Transmission Capital Partners),
acquire and manage Electrical Infrastructure assets, including the nine OFTO
investments it has made on behalf of the Company. TCSL believes that all
work-related injuries and illnesses are preventable, and no activity should be
dangerous.
TCSL is committed to prevention of injury and ill health and continual
improvement in Operational Health and Safety ('OH&S') management and
performance. TCSL is committed to the protection of the health, safety and
welfare of its employees whilst they are at work. This protection also extends
to invited visitors and contractors whilst on company premises or others who
may be affected by TCSL activities.
TCSL has a good safety record and since formal recording started in 2018 and
has not recorded any Lost time incidents incurred in 26,000 internal and
24,000 contractor site based working hours.
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 >168,000 SDG 4
Patients >544,000 SDG 3
Police stations and judicial buildings 13 SDG 16
Full-time equivalent employees >3,700 SDG 8
CASE STUDY
Sustainability aim - Reduce consumption of natural resources, work towards
elimination of waste to landfill and move towards a circular economy
The Company is committed to identifying ways to improve resource efficiency
and support the communities in which it works. During the course of 2022,
through its Investment Adviser, the Company has worked with the specialist
agent Collecteco to support local communities through the donation of
fixtures, fittings and equipment no longer suitable for use in social
infrastructure investments.
Collecteco partners with companies across the UK to generate social value, net
zero and circular economy benefits by donating furniture and equipment to
charities, schools, community groups, NHS trusts and other not for profit good
causes.
During the period, this has resulted in the following positive impacts through
our approach to asset management:
- £194,070 value donated to the community
- 10 good causes supported
- 61,335kg CO(2)e avoided (~61 tCO(2)e)
- 45,141kg diverted from landfill (45 tonnes)
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(1) >93 million SDG 11
Annual train km travelled >799 million SDG 11
Full time equivalent employees >2,300 SDG 8
CASE STUDY
Sustainability aim - Reduce consumption of natural resources, work towards
elimination of waste to landfill and move towards a circular economy
Having categorised as an Article 8 Financial Product, the Company has
integrated these requirements into periodic reporting at the investment level.
This is well demonstrated through the Company's BeNEX investment.
As a company that both leases rolling stock and invests in TOCs, BeNEX
provided a good opportunity to pilot the new SFDR and Taxonomy regulatory
frameworks on a complex investment.
The Company's Investment Adviser supported the BeNEX management board to
identify relevant ESG indicators to capture both positive and potential
adverse impacts of its business and to determine potential compliance with the
EU Taxonomy. Initial data from the first half of 2022 is provided below. This
includes positive impact data, Principal Adverse Impact data (as defined by
SFDR) and Taxonomy alignment. Following a review of the delegated act, the
initial estimates are that 69% of BeNEX's revenues are from activities that
meet the EU Taxonomy's technical criteria for making a 'substantial
contribution to climate change mitigation', with the remaining 31% being
classified as 'transitional activities' which support the transition towards a
net zero economy.
This exercise is being undertaken across the Company's investments and will be
used to disclose SFDR-aligned portfolio-level disclosures in the next
Sustainability Report.
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 operational >37m million m(3) SDG 6
New public space following construction 3 acres SDG 11
Full-time equivalent employees >2,100 SDG 8
CASE STUDY
Sustainability aim - Consider biodiversity and enhance it where possible
By reducing waste water flowing into the Thames, Tideway will provide
significant benefits for biodiversity once operational. As part its legacy
programme Tideway has funded research into the ecology of the tidal Thames -
the fish, seals and other species that call the river home. Some of these
reports establish baseline data which will provide comparisons for future
research into the river and its wildlife. This programme was completed in the
period.
One of the studies which was funded includes The Zoological Society for London
('ZSL') ongoing programme of marine mammal monitoring and undertaking annual
seal population surveys. In 2018, Tideway contributed funds to enable a seal
breeding survey to take place that year for the first time since 2011. The
survey showed clear evidence that harbour seals are breeding in growing
numbers in the river - a total of 138 pups were recorded during the pup-count,
an increase at all sites compared with 2011. More information is available on
ZSL's website(2).
1 Annual passenger journeys include those made on BeNEX,
Diabolo, Gold Coast and Reliance Rail.
2
https://www.zsl.org/conservation/regions/uk-europe/thames-marine-mammal-conservation
GAS DISTRIBUTION
Gas distribution infrastructure plays a critical role in delivering energy to
keep customers safe, warm and connected, whether that is natural gas, biogas
or hydrogen. Cadent's network of gas pipes will play a vital role in meeting
Britain's future energy needs and delivering the UK's net zero strategy. The
network is a national asset consisting of over 130,000 km of pipework,
connected to 11 million homes; fuelling industrial sites and supplying
domestic gas turbines.
impact
Maximum energy throughput 5.7 million GJ/day SDG 9
Homes and businesses connected to gas >11 million SDG 11
Full-time equivalent employees >5,000 SDG 8
CASE STUDY
Sustainability aim - Reduce carbon emissions to work towards alignment with
the goals of the Paris Agreement
Hydrogen will play an essential role in the UK's effort to achieve net zero by
2050, as a low-carbon fuel for the decarbonisation of heat, power and
vehicles. UK homes currently rely on natural gas for heating and cooking;
however, hydrogen gas is viable alternative with the potential to
significantly reduce domestic carbon emissions.
Over the period, the Company is pleased that Cadent's proposal to convert
Ellesmere Port into the UK's first hydrogen village has made Ofgem's shortlist
(of two). It will focus on the possibility of converting around 2,000 homes in
Whitby, Ellesmere Port to hydrogen from natural gas. This is a key milestone
in converting to a low carbon hydrogen network to demonstrate how hydrogen can
be used at scale to cut emissions from heating and cooking. If Ellesmere Port
is confirmed as the preferred location, the project will begin supplying
Ellesmere Port with hydrogen in 2025.
DIGITAL INFRASTRUCTURE
Digital infrastructure underpins the potential of the internet. Over the next
few decades, digital networks will be the enabling infrastructure that helps
drive economic growth and productivity. The recent Covid-19 crisis underlines
this, where remote working has been a financial and social lifeline to
millions of businesses and families.
impact
Premises passed >870,000 SDG 9
Premises connected >93,000 SDG 11
CASE STUDY
Sustainability aim - Ensure investments are accessible to the widest group of
users and available to serve local communities
In an increasingly digital age, those who are not engaging effectively with
the digital world are at risk of being left behind. Technological change means
that digital skills are increasingly important for connecting with others,
accessing information and services and meeting the changing demands of the
workplace and economy.
As part of NDIF investment, Community Fibre's mission to bring faster
broadband to all Londoners, it offers 1 Gbps full fibre broadband to some of
the community centres and libraries in the London boroughs it operates in for
free. The hubs selected are the heart of community life. A free high-quality
connection means that both work and leisure activities can happen seamlessly
for the centre's attendees.
So far Community Fibre has connected over 300 community centres to London's
fastest full fibre broadband network, providing access to 1 Gbps Internet.
Further connections are planned in the coming months.
CLIMATE-RELATED FINANCIAL DISCLOSURES
Climate change presents both transitional and physical risks to the Company's
investments. As such, it continues to be a high priority for the Company
which, accordingly, is voluntarily working to achieve alignment with the
recommendations of the TCFD. As previously reported, during 2020, the
Company's Investment Adviser commissioned an external third-party to undertake
a review of the Company's current practices and make recommendations as to how
the Company can enhance its approach and disclosures in accordance with the
TCFD Guidelines.
Climate change is considered alongside other ESG risks by the Company's ESG
Committee, Investment Committee and Audit and Risk Committee. During the
period, the Company commissioned an additional third-party to support the
enhancement of its approach to assessing physical and transition climate risks
and opportunities across its portfolio, in line with TCFD recommendations. The
results of this analysis are due to be published in the Company's 2023 Annual
Report and updated Sustainability Report.
Although there is no mandatory requirement for the Company to adopt or explain
areas of non-compliance with the framework, the Company aims to integrate
climate risk assessment consistently within investment decision-making and
risk management processes, for existing and future investments.
The table below shows a summary of our progress to date against the TCFD
recommendations.
GOVERNANCE
Disclose the organisation's governance around climate-related risks and
opportunities.
a) Describe the board's oversight of climate-related risks and opportunities The Board sets the strategy for the Company and makes decisions on changes to
the portfolio (including approval of acquisitions, disposals and valuations).
Through Board committees, and the advice of external independent advisers, it
manages the governance and risks of the Company.
The Board has overall responsibility for ESG and ensuring it is integrated
into the Company's investment strategy, including in relation to climate
change. The Board maintains oversight of climate risk in the following ways:
- Investment Committee: The Company's Investment Committee ensures
climate change risks and opportunities have been appropriately considered
through the investment and divestment processes and provides a robust
challenge to the Investment Adviser
- Audit and Risk Committee: The Company's Audit and Risk Committee
oversees the Company's approach to ESG disclosures and ensures all risk
management frameworks consider material climate change disclosures. Risks
are reviewed quarterly, including climate change risks
- ESG Committee: The Company's ESG Committee monitors its approach
to climate change, including consideration of climate change strategy,
disclosures and targets
The Company's Investment Adviser is responsible for implementing the Company's
ESG policies 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 risks and opportunities the organisation has Both the risks and opportunities presented by climate change are a key focus
identified over the short, medium and long-term for the Board. The Company has strengthened the alignment of its investment
activity with the objectives of the Paris Agreement. In practice the Company
has a greater formal emphasis on:
- Enhanced screening and due diligence processes to ensure new
investments are aligned, or can directly support, the transition to net zero
- Fuller deployment of emerging policy and frameworks, such as the
UK ten-point plan and EU Taxonomy, to help guide investment decision making;
and
- Increased cooperation with public counterparties to reduce
emissions from existing investments, and to ensure that all assets continue to
help deliver on international commitments.
The Company's investments are located in the UK, Ireland, continental Europe,
North America and Australia. All these geographies are forecast to experience
a changing climate, including increasing episodes of extreme heat, water
stress, flooding and extreme precipitation to varying degrees. As an investor
in infrastructure projects and businesses, the Company's investments are
likely to be directly exposed to changes in weather. These potential physical
impacts present the following risks to the Company:
- Unavailability of assets
- Property damage
- Insurance premiums
- Operational costs
- Maintenance costs
- Market value depreciation Capex for resilience; and
- Potential future liabilities.
The majority of the Company's investments generate availability-based or
regulated revenues, with most costs contractually determined or compensated
for via a regulatory regime. The ability for changes in revenues or costs to
have a material impact on the portfolio's net cash flows is limited owing to
the contracts and/or regulatory frameworks under which the assets currently
operate.
The transition to a low-carbon economy will largely depend on the right types
of infrastructure to allow communities to live net zero lifestyles. The
changes required are wide-ranging, including decarbonisation of heat,
increased electrification of transportation and other systems previously
dependent on fossil fuels, and decarbonisation of construction. Several of the
geographies in which the Company invests have set legally binding net zero
targets, although only a small number of the Company's investments face
transition risks, due to the nature of contracted or regulated frameworks.
The Company is focused on identifying current risks and evolving its
assessment and understanding of longer-term risks, along with mitigation of
climate risks. The Company's Investment Adviser is also working towards
obtaining a better understanding of the potential financial impacts and the
Company's and its investments' resilience with regard to different climate
scenarios. This enhanced approach will directly inform a suite of indicators,
which will support the Company's objectives and investors' understanding of
the physical and transition risks.
As an investor in infrastructure, the Company will seek to support this
transition and believes it represents a significant opportunity and this forms
part of the work of the ESG Committee.
b) Describe the impact of climate-related risks and opportunities on the
organisation's businesses, strategy and financial planning
c) Describe the resilience of the organisation's strategy, taking into
consideration different climate-related scenarios, including a 2°C or lower
scenario
RISK
Disclose how the organisation identifies, assesses and manages climate-related
risks.
a) Describe the organisation's processes for identifying and assessing During the period, the Company commissioned third-party climate modelling
climate-related risks experts to support it in enhancing its assessment of climate change risks,
including the physical risks posed to the Company's investments in both the
present day and in future climate scenarios. The results of this process will
be disclosed in the Company's next Sustainability Report in 2023, along with
greater detail on the tools, scenarios and sensitivities that are in the
process of being implemented.
Climate risk identification and management is integrated within the risk
management process as a subset of wider risk categories, including political,
financial, operational and strategic risks.
The Board is ultimately responsible for risk management. Oversight of the risk
framework and management process is delegated to the Audit and Risk Committee.
The risk framework has been designed to manage, rather than eliminate, the
risk of failure to meet business objectives. No system of control can provide
absolute assurance against the incidence of risk, misstatement or loss. Regard
is given to the materiality of relevant risks in designing systems of risk
management and internal control. While responsibility for risk management
ultimately rests with the Board, the aim is for the risk management framework
to be embedded as part of the everyday operations and culture of the Company
and its key advisers.
Although the Company is aligning with TCFD recommendations voluntarily, the
Company's approach to climate change risk sits alongside other requirements to
which we are subject under applicable law and the Company's internal policies
and procedures, such as the requirement to have robust risk management
policies and procedures. Please refer to the Continuous Risk Management
section on pages 50 to 62 of the 2021 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 used by the organisation to assess climate-related The Company qualitatively assesses the risk of all investments and is in the
risks and opportunities in line with its strategy and risk management process process of reviewing relevant climate-related metrics and targets at the
portfolio level, which include the consideration of TCFD's supplementary
guidance on metrics. The Company is actively developing a carbon footprint
across all its investments to establish a baseline and will be developing ways
to enhance its consideration and disclosure of transition and physical risks
of climate change. This baseline is focusing on Scope 1 and 2 emissions
initially and will seek to include Scope 3 emissions where available. These
metrics will be disclosed in the Company's next Sustainability Report, due to
be published in 2023. To support the Company in developing these overarching
disclosures, it set an interim target for 100% of investments to monitor and
disclose Scope 1 and Scope 2 emissions. During the period, the Company is
pleased to report that 98% are monitoring these metrics.
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 2022.
Mike Gerrard Board Chair, Julia Bond(1) Chair, ESG Committee Stephanie Coxon(1) Chair, Nomination and Remuneration Committee (with effect Sally-Ann David(1) Chair, Risk Sub-Committee Meriel Lenfestey(1) Chair, Management Engagement Committee John Le Poidevin(1) Senior Claire Whittet(1) Giles Frost
from 25 May 2022)
Independent Director (with
Chair, Investment Committee
effect from 25 May
2022); Chair, Audit and Risk
Committee
A resident in the UK, Mike has over 30 years of financial and management A resident in the UK, Julia has 27 years' experience of capital markets in the Stephanie is a Fellow of the Institute of Chartered Accountants in England and A resident of Guernsey, Sally-Ann has over 35 years of experience in A resident of Guernsey, Meriel has 28 years of multi-sector A resident of Guernsey, John has A resident of Guernsey, Claire has over 40 years' experience in the banking A resident in the UK, Giles is a founder of Amber Infrastructure
experience in global infrastructure investment. financial sector and held senior positions within Credit Suisse, including Wales and is a non-executive director on several London listed companies. infrastructure projects in the energy sector, including international offshore business over 30 years of business industry with Bank of Scotland, Bank of Bermuda and Rothschild and Co Bank and has
Head of One Bank Delivery and Global Head of Sovereign Wealth funds activity. Prior to becoming a non-executive director, Stephanie led the investment trust transmission systems and the challenges of the energy transition. experience. experience. International, where she was latterly managing director and co-head until May worked in the infrastructure investments sector for over 20 years.
He has held a number of senior positions, including as an assistant director capital markets team at PwC for the UK and Channel Islands. During her time at
2016 when she became a non-executive director. She is also a non-executive
of Morgan Grenfell plc, a director of HM Treasury Taskforce, deputy CEO and PwC, Stephanie specialised in advising FTSE 250 and premium London listed Having held senior positions within the power utility arena, Sally-Ann is With a background in human-centred design for technology, she John is a Fellow of the director of a number of listed and private equity investment companies, none Giles is Chair and a director of Amber Infrastructure Group
later CEO of Partnerships UK plc and, most recently, a managing director of companies on accounting, corporate governance, risk management and strategic currently the Chief Operating Officer of Guernsey Electricity Ltd. She is a brings a Institute of Chartered of which is a trading company. Holdings Ltd, the
Thames Water Utilities Limited. matters. Chartered Engineer and Chartered Director. strategic end-user focus and a broad set of experiences Accountants in England and
ultimate holding company of the Investment Adviser to the Company
encompassing many Wales and a former partner of Claire is a member of the Chartered Institute of Bankers in Scotland, the and various
Mike has a breadth of experience across a range of economic and social sectors and scales of organisation ranging from her own start-ups BDO LLP, where he held a number Chartered Insurance Institute and the Institute of Directors and is a of its subsidiaries.
infrastructure sectors and has been involved in some of the largest through of leadership Chartered Banker and holds the Institute of Directors Diploma in Company
infrastructure projects in the UK. He is a Fellow of the Institution of Civil global corporations and governmental programmes. roles, including Head of Direction.
Engineers. Consumer Markets, where he
developed an extensive
breadth of experience and
knowledge across the real
estate, leisure and retail
sectors in the UK and overseas.
John is a non-executive director
on several plc boards and chairs
a number of
audit committees.
DATE OF APPOINTMENT
4 September 2018 1 September 2017 1 January 2022 10 January 2020 10 January 2020 1 January 2016 10 September 2012 2 August 2006
Date of Retirement:
25 May 2022
LISTED COMPANY AND OTHER RELEVANT DIRECTORSHIPS
Mike Gerrard Julia Bond(1) Stephanie Coxon(1) Sally-Ann David(1) Meriel Lenfestey(1) John Le Poidevin(1) Claire Whittet(1) Giles Frost
Mike holds no other listed company positions but holds several non-executive European Assets Trust ('EAT') PPHE Hotel Group Limited Guernsey Electricity Ltd Bluefield Solar Income Fund Limited BH Macro Limited BH Macro Ltd Giles is also a director of a number of the Company's subsidiary and
positions within boards and committees that oversee the development and
investment holding entities and of other entities in which the Company has an
delivery of infrastructure investments in the UK and Europe. NED of Foreign, Commonwealth & Development Office and Strategic Command JLEN Environmental Assets Group Limited Channel Islands Electricity Grid Meriel sits on a number of other commercial boards including TwentyFour Income Fund Limited Eurocastle Investment Ltd investment. He does not receive directors' fees from such roles for the
Gemserv, Jersey
Company.
Apax Global Alpha Limited European Marine Energy Centre Ltd Telecom and Aurigny Air Services and is a committee member for the Super Group (SGHC) Limited Riverstone Energy Ltd
Guernsey
Sally-Ann is also a director of a Guernsey based health-related Institute of Directors. TwentyFour Select Monthly Income Fund Ltd
charity.
Third Point Offshore Investors Ltd
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. Ms Whittet retired from
the Board on 25 May 2022.
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:
a) The condensed consolidated 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
b) 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
c) 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
7 September 2022 7 September 2022
INDEPENDENT REVIEW REPORT TO INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
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 2022. 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 2022;
- 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.
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
7 September 2022
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 MONTHS ENDED 30 JUNE 2022
Notes Six months Six months
ended ended
30 June 2022
30 June 2021
£'000s £'000s
Interest income 4 45,336 39,377
Dividend income 4 27,911 18,032
Net change in investments at fair value through profit or loss 4 166,934 (16,684)
Total investment income 240,181 40,725
Other operating (expense) / income 5 (2,963) 2,785
Total income 237,218 43,510
Management costs 15 (13,999) (12,861)
Administrative costs (934) (1,132)
Transaction costs 15 (759) (335)
Directors' fees (242) (200)
Total expenses (15,934) (14,528)
Profit before finance costs and tax 221,284 28,982
Finance costs 6 (2,048) (1,765)
Profit before tax 219,236 27,217
Tax credit 7 9 48
Profit for the period 219,245 27,265
Earnings per share
Basic and diluted (pence) 8 12.38 1.68
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
2021: nil). The profit for the period represents the Total Comprehensive
Income for the period.
interim condensed CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
SIX MONTHS ENDED 30 JUNE 2022
NOTES SHARE CAPITAL and share premium OTHER DISTRIBUTABLE RESERVE RETAINED EARNINGS TOTAL
£'000s £'000s £'000s £'000s
Balance at 31 December 2021 1,908,849 182,481 437,470 2,528,800
Profit for the period and total comprehensive income - - 219,245 219,245
Issue of Ordinary Shares 13 327,273 - - 327,273
Issue costs applied to new shares 13 (4,846) - - (4,846)
Dividends in the period 13 - - (64,320) (64,320)
Balance at 30 June 2022 2,231,276 182,481 592,395 3,006,152
SIX MONTHS ENDED 30 JUNE 2021
NOTES SHARE CAPITAL and share premium OTHER DISTRIBUTABLE RESERVE RETAINED EARNINGS TOTAL
£'000s £'000s £'000s £'000s
Balance at 31 December 2020 1,769,582 182,481 432,373 2,384,436
Profit for the period and total comprehensive income - - 27,265 27,265
Issue of Ordinary Shares 13 4,413 - - 4,413
Dividends in the period 13 - - (59,650) (59,650)
Balance at 30 June 2021 1,773,995 182,481 399,988 2,356,464
INTERIM condensed CONSOLIDATED BALANCE SHEET (unaudited)
AS AT 30 june 2022
NOTES 30 june 2022 31 DECEMBER 2021
£'000S
£'000S
Non-current assets
Investments at fair value through profit or loss 9 2,728,151 2,579,434
Total non-current assets 2,728,151 2,579,434
Current assets
Trade and other receivables 9, 11 65,252 57,378
Cash and cash equivalents 9 224,730 56,090
Derivative financial instruments 9 - 2,713
Total current assets 289,982 116,181
Total assets 3,018,133 2,695,615
Current liabilities
Trade and other payables 9, 12 10,634 10,597
Derivative financial instruments 9 1,347 -
Total current liabilities 11,981 10,597
Non-current liabilities
Bank loans 6, 9 - 156,218
Total non-current liabilities - 156,218
Total liabilities 11,981 166,815
Net assets 3,006,152 2,528,800
Equity
Share capital and share premium 13 2,231,276 1,908,849
Other distributable reserve 13 182,481 182,481
Retained earnings 13 592,395 437,470
Equity attributable to equity holders of the Parent 3,006,152 2,528,800
14 157.3 148.2
Net assets per share (pence per share)
The financial statements were approved by the Board of Directors on 7
September 2022.
They were signed on its behalf by:
Mike Gerrard John Le Poidevin
Chair
Director
7 September 2022 7 September
2022
INTERIM condensed CONSOLIDATED CASH FLOW STATEMENT (unaudited)
six months ended 30 june 2022
Notes Six months Six months
ended ended
30 June 2021
30 June 2020
£'000s £'000s
Profit before tax in the Interim Condensed Consolidated Statement of 219,236 27,217
Comprehensive Income (unaudited)(1)
Adjusted for:
(Gain) / loss on investments at fair value through profit or loss 4 (166,934) 16,684
Finance costs(2) 6 2,048 1,765
Fair value movement on derivative financial instruments 5 4,059 (2,130)
Working capital adjustments
Increase in receivables (9,299) (1,437)
Increase / (decrease) increase in payables 38 (149)
Income tax paid(3) (95) (68)
Net cash inflow from operations(4) 49,053 41,882
Investing activities
Acquisition of investments at fair value through profit or loss 10 (6,984) (22,343)
Net repayments from investments at fair value through profit or loss 25,201 30,816
Net cash inflow from investing activities 18,217 8,473
Financing activities
Proceeds of issue of shares net of issue costs 320,154 -
Dividends paid 13 (62,047) (55,237)
Finance costs paid(2) (1,691) (3,338)
Loan drawdowns(2) - 21,997
Loan repayments(2) (156,218) (4,400)
Net cash inflow / (outflow) from financing activities 100,198 (40,978)
Net increase in cash and cash equivalents 167,468 9,377
Cash and cash equivalents at beginning of period 56,090 44,263
Foreign exchange gain / (loss) on cash and cash equivalents 1,172 (209)
Cash and cash equivalents at end of period 224,730 53,431
1 Includes interest received of £37.0 million (H1 2021: £37.6
million) and dividends received of £27.9 million (H1 2021 £18.0 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 23 to 24.
NOTES TO THE INTERIM condensed set of FINANCIAL STATEMENTS (unaudited)
FOR THE six months ended 30 june 2022
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 interim condensed consolidated 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 (£'000), except where otherwise
indicated.
The financial information for the year ended 31 December 2021 included in this
half-yearly financial report is derived from the 31 December 2021 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 UK adopted International Accounting Standards. 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 2021, as they provide an update of previously
reported information. 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 2021. 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 interim condensed consolidated 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.
New standards that the Group has applied from 1 January 2022
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.
- Annual improvements to IFRS Standards 2018-2020 (1 January 2022)
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
£224.7 million as at 30 June 2022. 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 £250 million on a
fully committed basis, and a flexible 'accordion' component which, subject to
lender consent, allows for a future extension by an additional £150 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 £325
million capital raise which took place in H1 2022. A £20 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. CRITICAL Judgements and Estimates
Investment entity
In the judgement of the Directors, International Public Partnerships Limited
has been accounted for as an investment entity as defined by IFRS 10, further
details of which are given in note 1, Basis of preparation.
Fair valuation of investments at fair value through profit or loss
Fair values are 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 2022
UK Europe North America Australia Total
£'000s (Excl. UK) £'000s £'000s £'000s
£'000s
Segmental results
Dividend and interest income 47,297 5,379 4,547 16,024 73,247
Fair value gain / (loss) on investments 142,678 16,153 10,524 (2,421) 166,934
Total investment income 189,975 21,532 15,071 13,603 240,181
Reporting segment profit(1) 172,013 20,904 13,525 12,803 219,245
Segmental financial position
Investments at fair value 2,073,467 327,890 115,954 210,840 2,728,151
Current assets 289,982 - - - 289,982
Total assets 2,363,449 327,890 115,954 210,840 3,018,133
Total liabilities (11,981) - - - (11,981)
Net assets 2,351,468 327,890 115,954 210,840 3,006,152
Six months ended 30 June 2021
UK Europe (EXCL. UK) North America Australia Total
£'000s £'000s £'000s £'000s £'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
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 £22.4 million (30 June
2021: £5.8 million).
4. Investment Income
Six months Six months
ended
ended
30 June 2021
30 June 2022
£'000s
£'000s
Interest income
Interest on investments at fair value through profit or loss 45,336 39,377
Total interest income 45,336 39,377
Dividend income 27,911 18,032
Net change in fair value of investments at fair value through profit or loss 166,934 (16,684)
Total investment income 240,181 40,725
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 2022
£'000s
£'000s
Fair value movement on foreign exchange contracts (4,059) 2,130
Other foreign exchange movements 1,096 655
Total other operating (expense) / income (2,963) 2,785
6. Finance Costs and bank loans
Finance costs for the period were £2.0 million (30 June 2021: £1.8 million).
The Group has a corporate debt facility ('CDF') available consisting of £250
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 £150 million. As at 30 June 2022, the facility was nil cash
drawn having been repaid following capital raising in the period (31 December
2021: £156.2 million). The interest rate margin on the CDF is 170 basis
points over SONIA. The facility matures in March 2024. 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 2021
30 June 2022
£'000s
£'000s
Current tax:
UK corporation tax credit - current period - (2)
UK corporation tax credit - prior period - (1)
Other overseas tax credit - current period (9) (45)
Tax credit for the period (9) (48)
Reconciliation of effective tax rate
Six months Six months
ended
ended
30 June 2021
30 June 2022
£'000s
£'000s
Profit before tax 219,236 27,217
Exempt tax status in Guernsey - -
Application of overseas tax rates (9) (45)
Group tax losses surrendered to unconsolidated investee entities - (2)
Adjustment to prior period - (1)
Tax credit for the period (9) (48)
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 interim condensed
consolidated 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 £1 billion (30 June 2021: £1
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 2021
30 June 2022
£'000s
£'000s
Earnings for the purposes of basic and diluted earnings per share being net
profit attributable to equity holders of the Parent
219,245 27,265
Number Number
Weighted average number of Ordinary Shares for the purposes of basic and 1,770,401,054 1,621,326,795
diluted earnings per share
Basic and diluted (pence) 12.38 1.68
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. Specific financial asset and liability accounting policies are
provided below.
9.1 Financial assets
30 June 2022 31 December 2021
£'000s £'000s
Investments at fair value through profit and loss 2,728,151 2,579,434
Financial assets at amortised cost
Trade and other receivables 65,252 57,378
Cash and cash equivalents 224,730 56,090
Derivative financial instruments at fair value through profit or loss
Foreign exchange contracts - 2,713
Total financial assets 3,018,133 2,695,615
9.2 Financial liabilities
30 June 2022 31 December 2021
£'000s £'000s
Financial liabilities at amortised cost
Trade and other payables 10,634 10,597
Bank loans - 156,218
Derivative financial instruments at fair value through profit or loss
Foreign exchange contracts 1,347 -
Total financial liabilities 11,981 166,815
The carrying value of financial assets and liabilities held at amortised cost
is considered to approximate their fair value.
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 49 to 62 of the 2021 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 overleaf.
30 June 2022 31 December 2021
£'000s £'000s
Cash
Euro 4,771 875
Canadian Dollar 877 250
Australian Dollar 12,468 6,220
US Dollar 962 1,603
19,078 8,948
Current receivables
Euro receivables 27 712
US Dollar receivables 571 -
598 712
Investments at fair value through profit or loss
Euro 318,269 299,262
Danish Krone 9,621 13,979
Canadian Dollar 43,364 39,439
Australian Dollar 210,840 213,261
US Dollar 72,590 66,492
654,684 632,433
Total 674,360 642,093
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.
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. The Group's
financial liabilities comprise trade and other payables, payable within 12
months of the year end, and bank loans, repayable in March 2024 as disclosed
in note 6.
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 2022, the
Group's only derivative financial instruments were currency forward contracts
amounting to a liability of £1.3 million (31 December 2021: asset of £2.7
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 2022, the fair value of financial instruments classified within Level 3
totalled £2,728 million (31 December 2021: £2,579.4 million).
Financial instruments are classified within Level 3 if their valuation
incorporates significant inputs that are not based on observable market data
(unobservable inputs). A valuation input is considered observable if it can be
directly observed from transactions in an active market, or if there is
compelling external evidence demonstrating an executable exit price.
Valuation process
Valuations are the responsibility of the Board of Directors. The valuation of
unlisted equity and debt investments is performed on a quarterly(1) basis by
the Investment Adviser. The valuation is reviewed by the senior members of the
Investment Adviser, and reviewed and approved by the Board.
Valuation methodology
The valuation methodologies used are primarily based on discounting 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.
(1 Indicative valuations are calculated in respect of each at 31
March and 30 September.)
30 June 2022 Europe North America Australia
UK (Excl. UK)
Inflation rates 7.00% until Dec 22, 6.00% until Dec 22, thereafter 2.00% 3.00% until Dec 22, thereafter 2.00% 5.00% until Dec 22, thereafter 2.50%
4.00% until Dec 23,
2.00% thereafter (CPIH),
9.00% until Dec 22,
5.00% until Dec 23,
2.75% thereafter (RPI)
Long-term tax 25.00% 12.50% - 32.28% 23.00% - 26.50% 30.00%
Foreign exchange rates N/A 1.16 - 8.65 1.57 - 1.21 1.76
Long-term deposit rates 1.00% 0.50% 1.50% 2.00%
( )
31 December 2021 Europe North America Australia
UK (Excl. UK)
Inflation rates 2.75% RPI, 2.00% 2.00% 2.50%
2.00% CPIH
Long-term tax 25.00% 12.50% - 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%
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
86bps. The weighted average investment premium decreased, reflecting
observable market-based evidence.
Valuation assumptions 30 June 2022 31 December 2021 Movement
Weighted Average Government Bond Yield 1.82% 0.96% 86bps
Weighted Average Investment Risk Premium 5.29% 6.01% (72bps)
Weighted Average Discount Rate 7.11% 6.97% 14bps
Weighted Average Discount Rate on Risk Capital(1) 7.40% 7.38% 2bps
1 Weighted average discount rate on Risk Capital only
(equity and subordinated debt).
Reconciliation of Level 3 fair value measurements of financial assets: 30 June 2022 31 December 2021
£'000s
£'000s
Opening balance 2,579,434 2,345,433
Additional investments during the period 6,984 252,725
Net repayments during the period (25,201) (53,350)
Net change in fair value of investments at fair value through profit or loss 166,934 34,626
Closing balance 2,728,151 2,579,434
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:
Significant assumptions Weighted average rate in base case valuations Sensitivity factor Change in fair value of investment Sensitivity factor Change in fair value of investment
at 30 June 2022
£'000s £'000s
Discount rate 7.11% +1.00% (265,821) -1.00% 324,489
Inflation rate (overall) 2.34% +1.00% 272,088 -1.00% (234,871)
UK 2.00%/2.75% +1.00% 233,316 -1.00% (192,329)
Europe 2.00% +1.00% 38,212 -1.00% (32,946)
North America 2.00% +1.00% 947 -1.00% (1,117)
Australia 2.50% +1.00% 9,582 -1.00% (8,499)
FX rate N/A +10.00% 65,540 -10.00% (65,576)
Tax rate 25.47% +1.00% (14,078) -1.00% 13,059
Deposit rate 1.04% +1.00% 21,884 -1.00% (22,657)
Significant assumptions Weighted average rate in base case valuations Sensitivity factor Change in fair value of investment Sensitivity factor Change in fair value of investment
at 31 December 2021
£'000s £'000s
Discount rate 6.97% +1.00% (245,454) -1.00% 295,025
Inflation rate (overall) 2.37% +1.00% 231,029 -1.00% (197,787)
UK 2.00%/2.75% +1.00% 179,431 -1.00% (151,850)
Europe 2.00% +1.00% 40,393 -1.00% (35,843)
North America 2.00% +1.00% 738 -1.00% (1,218)
Australia 2.50% +1.00% 10,451 -1.00% (8,875)
FX rate N/A +10.00% 63,273 -10.00% (63,279)
Tax rate 25.47% +1.00% (13,757) -1.00% 13,541
Deposit rate 1.04% +1.00% 24,626 -1.00% (13,723)
10. Investments
Date of investment Description Consideration % Ownership post investment
£'000's
April - June 2022 The Group made further investments into the National Digital Infrastructure 1,205 45.0%
Fund, UK
June 2022 The Group made follow on investments into a portfolio of Building Schools for 1,477 Various
the Future assets, UK
June 2022 The Group made a follow-on investment into the Diabolo Rail Link project, 4,302 100.0%
Belgium
Total capital spend on investments during the period 6,984
11. TRADE AND OTHER RECEIVABLES
30 June 2022 31 December 2021
£'000s £'000s
Accrued interest receivable 61,222 52,657
Other debtors 4,030 4,721
Total trade and other receivables 65,252 57,378
Other debtors included £2.0 million (31 December 2021: £1.2 million) of
receivables from unconsolidated subsidiary entities for the surrender of Group
tax losses.
12. Trade and Other Payables
30 June 2022 31 December 2021
£ '000s £'000s
Accrued management fee 8,649 8,308
Other creditors and accruals 1,985 2,289
Total trade and other payables 10,634 10,597
13. Share Capital and Reserves
Share capital 30 June 2022 31 December 2021 Shares
Shares '000s
'000s
In issue 1 January 1,706,104 1,620,953
Issued for cash 203,762 81,818
Issued as a scrip dividend alternative 1,377 3,333
Closing balance 1,911,243 1,706,104
Share capital 30 June 2022 31 December 2021
£'000s £'000s
Opening balance 1,908,849 1,769,582
Issued for cash (excluding issue costs) 325,000 135,000
Issued as a scrip dividend alternative 2,273 5,629
Total share capital issued in the period 327,273 140,629
Costs on issue of Ordinary Shares (4,846) (1,362)
Closing balance 2,231,276 1,908,849
The Company has one class of Ordinary Shares which carry no right to fixed
income.
On 4 May 2022, the Group raised additional capital of £325 million through an
issue of 203,761,755 new Ordinary Shares.
On 13 June 2022, 1,377,796 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 2021.
Other distributable reserve 30 June 2022 31 December 2021
£'000s £'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.
Retained earnings 30 June 2022 31 December 2021
£'000s £'000s
Opening balance 437,470 432,373
Net profit for the period 219,245 129,211
Dividends paid(1) (64,320) (124,114)
Closing balance 592,395 437,470
1 Includes scrip element of £2.3 million in 2021 (December 2021:
£5.6 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 2021. The Board
has approved an interim distribution of 3.87 pence per share (six months ended
30 June 2021: 3.78 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 2022 31 December 2021
£'000s £'000s
Net assets attributable to equity holders of the parent 3,006,152 2,528,800
Number Number
Number of shares
Ordinary Shares outstanding at the end of the period 1,911,243,132 1,706,103,581
Net assets per share (pence per share) 157.3 148.2
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:
Related party expense in the Income Statement Amounts owing to related parties in the Balance Sheet
For the six For the six At At
months to months to 30 June 2022 31 December 2021
30 June 2022 30 June 2021
£'000s £'000s £'000s £'000s
International Public Partnerships GP Limited 13,999 12,861 8,649 8,308
Amber Fund Management Limited(1) 759 335 759 217
Total 14,758 13,196 9,408 8,525
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 £750 million
- 1.0% per annum where GAV (excluding uncommitted cash from
capital raisings) is between £750 million and £1.5 billion
- 0.9% per annum where GAV (excluding uncommitted cash from
capital raisings) is between £1.5 billion and £2.75 billion
- 0.8% per annum where GAV (excluding uncommitted cash from
capital raisings) value exceeds £2.75 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 2022, Amber held 8,002,379 (31 December 2021: 8,002,379) shares
in the Company. The shares held by the Investment Adviser in the Company helps
further strengthen the alignment of interests between the two parties.
During the period the Company acquired further interests in a small portfolio
of UK PPP investments from an affiliate of the Company's Investment Adviser,
Amber. The interests were acquired for £1.4 million following an independent
valuation of the assets. Protocols provided in the Company's Investment
Advisory Agreement were followed with respect to the sale of the Projects from
Amber to INPP, including the establishment of separate buy side and sell side
teams within Amber.
Transactions with Directors
Director remuneration and shares held by each Director is reported in the
Company's December 2021 Annual Report and financial statements. Shares
acquired by Directors in the six-month period ended 30 June 2022 are disclosed
below:
Director Number of New Ordinary Shares
Michael Gerrard 31,347
Julia Bond 18,808
Meriel Lenfestey 15,163
John Le Poidevin 62,695
Claire Whittet 37,854
16. Contingent Liabilities and commitments
As at 30 June 2022, the Group has committed funding of up to c.£89.7 million
(31 December 2021: c.£44.7 million), which includes committed investment
amounts as noted in the Operating Review on page 13.
There were no contingent liabilities at the date of this report.
17. Events after THE Balance Sheet Date
Following the balance sheet date, in July 2022 the Company divested of
minority interests in 4 BSFI assets for consideration of £8.5 million. In
July 2022, further investments of £0.4m were drawn on the Diabolo commitment.
In September 2022, the Company is expected to invest a further £42.0 million
in Tideway, increasing its interest to c.18% (see page 15 for more
information).
Glossary
AGM
The Company's Annual General Meeting
AIC
Association of Investment Companies
AFML
Amber Fund Management Limited, a member of the Amber Group
Amber / Amber Infrastructure
The Company's Investment Adviser (Amber Fund Management Limited and its
corporate group)
Amber Group
Amber Infrastructure Group Holdings Limited and its subsidiaries
APMs
In accordance with ESMA Guidelines on Alternative Performance Measures
('APMs') the Board has considered what APMs are included in the Annual Report
and financial statements which require further clarification. An APM is
defined as a financial measure of historical or future financial performance,
financial position, or cash flows, other than a financial measure defined or
specified in the applicable financial reporting framework. APMs included in
the Annual Report and financial statements are identified as non-GAAP measures
and are defined within this glossary.
ASCE
American Society of Civil Engineers
Average NAV
Average of published NAVs for the relevant periods
BEPS
Base Erosion and Profit Shifting
BSF
Building Schools for Future projects
Cash Dividend cover
Non-GAAP measure. Cash dividend payments to investors covered by the Net
operating cash flow before capital activity. This measure shows the
sustainability of the dividend payments made by the Company. Net operating
cash flows before capital activity include net repayments from Investments at
Fair Value through profit and loss and finance costs paid and exclude
investment transaction costs when compared to net cash inflows from operations
as disclosed in the statutory cash flow statement in the financial statements.
CDF
The Company's corporate debt facility
CMA
Competition and Markets Authority
CSR
Corporate Social Responsibility
CPI
Consumer Price Index
CPIH
CPI including owner occupied housing costs
Dividend Growth
Non-GAAP measure. Represents the growth in dividend per share paid to
shareholders compared to the prior year. This measure provides information on
the Company's dividend performance. Dividends paid and number of issued shares
can be found disclosed in the financial statements and notes to the financial
statements.
Dividend per share
Non-GAAP measure. Represents dividends paid per Ordinary Share issued, as
disclosed in the financial statements. This measure provides information on
the Company's dividend performance. Dividends paid and number of issued shares
can be found disclosed in the financial statements and notes to the financial
statements.
EAT
European Assets Trust
ESG
Environmental, Social and Governance
EU Taxonomy
EU Taxonomy for Sustainable Activities
FCA
Financial Conduct Authority
FRC
The Financial Reporting Council
GAV
Gross Asset Value
GDNs
Gas distribution networks
GFSC
The Guernsey Financial Services Commission
GHG
Greenhouse gas emissions
GRESB Infrastructure
The Infrastructure Asset Assessment assesses ESG performance at the asset
level for infrastructure asset operators, fund managers and investors that
invest directly in infrastructure.
HMRB
Flinders University Health and Medical Research Building
IAA
Investment Advisory Agreement
IFRS
International Financial Reporting Standards
International Public Partnerships
The 'Company', 'INPP', the 'Group' (where including consolidated entities)
Investment Adviser
Amber (see above)
IPO
Initial Public Offering
IRR
The Internal Rate of Return
Hunt
Amber's long-term investor, US Group, Hunt Companies LLC
KPIs
Key Performance Indicators
NDIF
National Digital Infrastructure Fund
Net Asset Value ('NAV')
Non-GAAP measure. Represents the equity attributable to equity holders of the
Parent in the Balance Sheet. This terminology is used as it is common
investment sector terminology and so is the most understandable to the users
of the Annual Report. Components of NAV are further discussed throughout the
Annual Report, including from page 30.
Net Asset Value ('NAV') per share
Non-GAAP measure. Represents the equity attributable per share to equity
holders of the Parent in the Balance Sheet. This terminology is used as it is
common investment sector terminology and so is the most understandable to the
users of the Annual Report.
Net operating cash flows before capital activity
Non-GAAP measure. Represents the cash flows from the Company's operations
before capital activity relating to the acquisition of new investments, issues
of new capital or payment of dividends. This approach is used to provide
investors with an indication of cash flows generated from operational activity
and is used as part of the cash dividend cover calculations. Components of net
operating cash flows before capital activity are further discussed throughout
the Annual Report, including from page 28.
Net Zero
Net Zero refers to balancing the amount of emitted greenhouse gases with the
equivalent emissions that are either offset or sequestered. This should
primarily be achieved through a rapid reduction in carbon emissions, but where
zero carbon cannot be achieved, offsetting through carbon credits or
sequestration through rewilding or carbon capture and storage needs to be
utilised.
OECD
Organisation for Economic Co-operation and Development
OFTO
Offshore Electricity Transmission project
PFI
Projects and Private Finance Initiative
Portfolio Inflation-linked return / Inflation-linked cash flows
Non-GAAP measure. Calculated by running a 'plus 1.00%' inflation sensitivity
for each investment and solving each investment's discount rate to return the
original valuation. The inflation-linked cash flows is the increase in the
portfolio weighted average discount rate. This measure provides an indication
of the portfolio's inflation protection. There is no near comparable in the
financial statements.
PPP
Public-Private Partnerships
PRI
The UN-backed Principles for Responsible Investment
PwC
The Company's independent auditor PricewaterhouseCoopers CI LLP
RNS
Regulatory News Service
RPI
UK Retail Price Index
Scope 1 emissions
Direct emissions from owned or controlled sources
Scope 2 emissions
Indirect emissions from the generation of purchased energy
Scope 3 emissions
All indirect emissions (not included in scope 2) that occur in the value chain
of the reporting company, including both upstream and downstream emissions
SDGs
Sustainable Development Goals
SDR
The proposed UK Sustainability Disclosure Requirements
SFDR
The EU Sustainable Finance Disclosure Regulation
SONIA
SONIA is the effective reference for overnight indexed swaps for unsecured
transactions in the Sterling market
SPV
Special Purpose Vehicle
TCFD
Task Force on Climate-related Financial Disclosures
The Company
International Public Partnerships Limited
TOCs
Train Operating Companies
Total Shareholder Return ('TSR')
Non-GAAP measure. Share price appreciation plus dividends assumed to be
reinvested since IPO. The total return based on the NAV appreciation plus
dividends paid since the IPO. There is no direct reconciliation to the
financial statements, being a calculation instead
derived from the Company's share price. However a nearest comparison were this
measure based on a figure in the financial statements is provided in the
Strategic Report, Investor Relations, Total Shareholder Return paragraph.
Transition risk
Transition risks include policy changes, reputational impacts, and shifts in
market preferences, norms and technology. Transition opportunities include
those driven by resource efficiency and the development of new technologies,
products and services, which could capture new markets and sources of funding.
KEY CONTACTS
Investment Adviser Auditor Corporate Brokers
Amber Fund Management Limited PricewaterhouseCoopers CI LLP Numis Securities Limited
31 Gresham Street
3 More London Riverside Royal Bank Place
London
EC2V 7QA
London 1 Glategny Esplanade
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
Corporate Banker
Administrator and Company Secretary
Ocorian Administration (Guernsey) Limited Royal Bank of Scotland 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
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