Pantheon Infrastrct. - Annual Financial Report
02/03/2023 07:00
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RNS Number : 5942R Pantheon Infrastructure PLC 02 March 2023
02 March 2023
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PANTHEON INFRASTRUCTURE PLC
Results for the period ended 31 December 2022
The Directors of the Company are pleased to announce the Company's full year
results for the period ended 31 December 2022. The full audited annual report
and audited condensed financial statements can be accessed via the Company's
website at www.pantheoninfrastructure.com or by contacting the Company
Secretary by telephone on +44 (0) 333 300 1950.
Highlights:
· Oversubscribed IPO in November 2021 raising gross proceeds of £400
million and a subsequent Subscription share issue raising gross proceeds of
£80.8 million
· Significant progress made in building a diversified portfolio of
high-quality infrastructure assets through a low-cost, co-investment model,
which provides access to opportunities not normally available to public market
investors
· Net asset value (NAV) of £475 million, 98.9 pence per share as at
31 December 2022
· In the period to 31 December 2022, the Company committed £346
million across ten investments, of which £288 million was invested across
nine investments, in line with deployment timetable outlined at IPO
· After the period end a further £43 million was committed to a
digital investment, GD Towers, and the total amount invested increased by £84
million to £372 million, principally due to funding calls on GD Towers and
NGT
· £62.5 million Revolving Credit Facility agreed with Lloyds Bank
Corporate Markets in December 2022 to provide additional working capital
liquidity and support further investment
· Full year dividend of 2 pence per share in respect of the period
from IPO to 31 December 2022, in line with guidance. Following payment of the
interim dividend of 1 pence per share on 22 October 2022, a second interim
dividend of 1 pence per share will be paid on 31 March 2023
· Target to double dividend to 4 pence per share in respect of the
financial year ending 2023 with a progressive dividend policy thereafter
· The Company has a robust pipeline of opportunities within a
supportive infrastructure investment environment
The portfolio comprises assets in the following sectors: Digital; including
data centres, fibre networks and telecom towers; Power & Utilities,
including electricity generation, gas transmission and district heating;
Renewables & Energy Efficiency, providing critical electricity
infrastructure and metering; and Transport & Logistics, with the asset
operating in the cold storage logistics sector.
Vagn Sørensen, Chair, Pantheon Infrastructure Plc, said: "I am pleased to
report the maiden full year results for Pantheon Infrastructure Plc, which
outlines the considerable progress made since IPO. Despite the turbulent
backdrop across geopolitics, macroeconomics and markets, PINT's investments
have proved very resilient, with the portfolio benefiting from geographic and
sector diversification and downside protections. I would like to thank
investors for their ongoing support."
Richard Sem, Partner at Pantheon Ventures, PINT's investment manager, said:
"We have assembled a strong portfolio of assets in our target sectors, and I
am excited about their growth prospects. PINT's strategy is to target assets
that benefit from strong secular tailwinds as the global requirement for
infrastructure assets grows, particularly in relation to the path towards
decarbonisation and net zero. This will require sustained investment and we
believe that private capital will play an ever-increasing role in funding
these projects. Although the market remains competitive, PINT will continue to
target assets with defensive characteristics that benefit from secular
tailwinds to deliver real terms growth across the economic cycle."
Ends
For further information, contact:
Pantheon Ventures (UK) LLP +44 (0) 20 3356 1800
Investment Manager pint@pantheon.com
Richard Sem, Partner
Harriet Alexander, Vice President
Investec Bank plc
Corporate Broker +44 (0) 20 7597 4000
Tom Skinner (Corporate Broking)
Lucy Lewis, Denis Flanagan (Corporate Finance)
TB Cardew +44 (0) 20 7930 0777
Public relations advisor pint@tbcardew.com
Ed Orlebar +44 (0)7738 724 630
Tania Wild +44 (0)7425 536 903
Henry Crane +44 (0)7918 207157
Notes to editors
Pantheon Infrastructure PLC (PINT)
Pantheon Infrastructure PLC is a closed-ended investment company and an
approved UK Investment Trust, listed on the Premium Segment of the London
Stock Exchange's Main Market. Its Ordinary Shares trade under the ticker
'PINT'. The independent Board of Directors of PINT have appointed Pantheon,
one of the leading private markets investment managers globally, as investment
manager. PINT aims to provide exposure to a global, diversified portfolio of
high-quality infrastructure assets through building a portfolio of direct
co-investments in infrastructure assets with strong defensive characteristics,
typically benefitting from contracted cash flows, inflation protection and
conservative leverage profiles.
Further details can be found at www.pantheoninfrastructure.com
LEI 213800CKJXQX64XMRK69
Pantheon
Pantheon is a leading global private equity, infrastructure & real assets,
private debt and real estate investor with 40 years' experience sourcing and
executing private market investment opportunities on behalf of clients.
Pantheon has US$88.9 billion in assets under management and advice (as at 30
September 2022) and employs over 450 staff, including more than 140 investment
professionals, across offices in London, San Francisco, New York, Chicago,
Hong Kong, Seoul, Bogotá, Tokyo, Dublin, Berlin and a presence in Tel Aviv.
Further details can be found at www.pantheon.com
Why invest in PINT
The Company aims to build a global portfolio of investments with blended
risk/return profiles, and set targets across deal types, sectors and
geographies for diversification.
1 Unique access to private infrastructure co‑investment assets
Pantheon, PINT's Investment Manager, has a large and global infrastructure
network
PINT is managed by Pantheon's global infrastructure investment team, which has
a deep and broad sourcing network with leading private asset investment
managers. PINT invests in infrastructure assets via co‑investments alongside
highly experienced general partners ('Sponsors'), typically on a management
fee and carried interest free basis. This is attractive for several reasons,
including:
Unique opportunities
PINT provides investors with the opportunity to access Pantheon's extensive
deal flow network of blue‑chip infrastructure investors. There are fewer
public market infrastructure opportunities to access private infrastructure
assets, as infrastructure companies often remain private for long periods of
time. Therefore, investing in PINT provides access to high‑quality
co‑investment infrastructure assets not normally accessible to public market
investors.
Portfolio construction
Pantheon uses co‑investments to select individual assets to gain exposure
to, and tilt the Portfolio towards, sectors based on the Investment Manager's
view on relative value.
Enhanced economics
The use of co‑investments can reduce the overall expense ratio and
gross‑to‑net performance spread of a portfolio, as most deals are offered
with no ongoing management fee nor carried interest.
Sponsor specialisation
Pantheon, on behalf of PINT, is able to choose deals alongside a Sponsor with
a distinct edge who may be best placed to create value in that particular
sub‑strategy.
ESG
Pantheon is able to apply its integrated ESG approach to investments to the
direct co‑investment as well as to the Sponsor.
Pantheon's infrastructure experience
$19.0bn
AUM
188
Investments
30
Investment professionals
21 years
Average years' experience of Investment Committee
2. Favourable defensive long‑term characteristics
Infrastructure assets can offer reliable income streams with inflation
protection
Infrastructure assets combine a range of attractive characteristics for
long‑term investors. Distinctively, infrastructure may mitigate the adverse
effects of rising inflation and may provide an income‑generating investment
outside of traditional fixed income. Infrastructure assets may also provide
embedded value and downside protection across market cycles given the
regulated and contracted nature of many of the underlying cash flows.
Infrastructure assets may provide a range of attractive investment attributes,
including the following:
Stable cash flow profile
Infrastructure may provide a compelling, stable distribution profile similar
to traditional fixed income. Infrastructure assets often offer reliable
income streams governed by regulation, hedges or long‑term contracts with
reputable counterparties.
Inflation hedge
Infrastructure investments can provide a natural hedge to rising inflation in
portfolios, as many sub‑sectors have contracts with explicit
inflation‑linkage or implicit protection through regulation or market
position. The majority of PINT's assets have explicit inflation-linkage or
implicit protection through regulation or market position.
Embedded downside protection
The vital role that many infrastructure sub‑sectors play in our daily lives
can make them an innately defensive investment. The tangible nature of
infrastructure investments can provide a basis for liquidation and recovery
value in downside cases. Cash flows that have a high portion of protection
through contractual structures with high‑quality counterparties offer
further downside protection.
Diversification
Infrastructure can be a valuable portfolio diversifier alongside traditional
and alternative investments. Historically, listed infrastructure returns have
been only moderately correlated to traditional asset classes. The
sub‑sectors within the infrastructure universe and the drivers of such
sub‑sector returns tend not to be correlated with one another.
3. Access to secular trends
PINT continues to develop its diversified Portfolio across sectors that
benefit from secular trends
Pantheon has taken and continues to take a disciplined approach to PINT's
strategy to construct a globally diversified portfolio with exposure across
sub‑sectors and geographies, while maintaining the flexibility to tilt
exposures based on opportunities which may present compelling relative value.
The Company aims to build a global portfolio of investments with blended
risk/return profiles, and set targets across deal types, sectors and
geographies for diversification. Please see below for more detail.
Digital Infrastructure
41%(1)
Data centres, fibre networks and towers
Power & Utilities
25%(1)
Energy utilities, water and conventional power
Renewables & Energy Efficiency
9%(1)
Wind, solar, sustainable waste and smart infrastructure
Transport & Logistics
8%(1)
Ports, rail and road, airports and e-mobility
1. Proportion of gross assets of £484.3 million at 31 December 2022.
Includes assets which have been invested, committed and/or were in legal
closing as at 31 December 2022. Figures do not total to 100% because of
uncommitted cash totalling 17% of gross assets.
4. PINT seeks to generate attractive risk‑adjusted returns
Targeting capital growth and dividend returns
The Company seeks to generate attractive risk‑adjusted total returns for
shareholders over the longer term. This comprises capital growth with a
progressive dividend, through the acquisition of equity or equity‑related
investments in a diversified portfolio of infrastructure assets with a primary
focus on developed OECD markets.
The Company is targeting a NAV Total Return per share of 8‑10% p.a.
following full investment of IPO and subscription share proceeds.
8‑10% p.a.(1)
Target NAV Total Return per share
2p per share(2)
Full‑year 2022 dividend
4p per share(2)
Target 2023 dividend, progressive thereafter
1. NAV Total Return per share is defined as the growth in the NAV per
share, together with all distributions (of an income or capital nature) paid
in respect of such share.
2. Following the first year dividend of 2p per share, the Company is
targeting an increased dividend of 4p per share for the year ending
31 December 2023 and, thereafter, a progressive dividend.
Chair's statement
Investing in infrastructure has never been so important.
We are pleased with the Portfolio assembled to date and have confidence in the
future of the Company and its Portfolio, and the high‑quality pipeline of
opportunities.
Vagn Sørensen
Chair, Pantheon Infrastructure Plc
£389 million of net IPO and subscription share proceeds committed(1)
1p per share
Second interim dividend declared for the period
Introduction
I would like to thank all of PINT's investors who have supported the Company
since its launch and have been instrumental in its success.
PINT's IPO was oversubscribed and hit its hard cap, reaching £400 million of
gross proceeds (the largest new infrastructure investment company launch of
2021), which were augmented by £80.8 million of gross proceeds from the
exercise of its subscription share offering in the summer of 2022.
PINT's purpose is to enable investors to gain exposure to a mix
of high-quality growth and income-generating private infrastructure assets
in developed markets. We target those assets with strong downside and
inflation protection and invest alongside leading Sponsors and institutional
investors.
The Company is targeting a NAV Total Return per share of between 8% and 10%
p.a. Following the payment of the interim dividend of 1p per share in October,
the Board is recommending a further dividend of 1p per share for the period to
31 December 2022, in line with our targets, which we expect to rise to 4p
per Ordinary Share for the financial year ending 31 December 2023, and
a progressive dividend thereafter. The Company intends to pay dividends
on a semi‑annual basis.
Market environment and C shares
The period under review, which covers a little over a year since the Company's
IPO in November 2021, was challenging in terms of geopolitics, macroeconomic
factors and broad market volatility. In February 2022, Russia's invasion of
Ukraine caused a spike in energy prices and higher inflation at a time when
concerns were already rising about slowing global growth. The UK's so called
'mini-budget' in September included significant unfunded tax cuts to which
markets reacted negatively and strongly. The cost of UK government debt rose
with unprecedented speed, and the associated fall in value of gilts triggered
a sell-off in UK equities as pension funds were forced to liquidate assets to
meet collateral calls.
With this backdrop, it was pleasing that PINT's portfolio of infrastructure
assets proved very resilient, benefiting from geographic and sector
diversification and downside protections. However, the shares of investment
trusts across all sectors, including infrastructure, were not immune to the
fall in the broader UK equity indices. PINT's shares fell to trading at a
discount for the first time since launch and, as a result, the Board concluded
that the issue of new equity C shares proposed for September 2022 should not
proceed.
Since that time, under a new UK Prime Minister and Chancellor of the
Exchequer, the destabilising changes proposed under the mini‑budget have
been reversed. Whilst the listed infrastructure sector continues to trade at a
discount, we remain confident of the high quality characteristics of
infrastructure assets which are largely uncorrelated with more volatile asset
classes.
Deployment and performance
As at 31 December 2022, the Company had committed to ten assets totalling
£346 million, with a further £43 million committed post the year end into
GD Towers. In total this amounts to £389 million, which compares favourably
with our initial target of committing to up to twelve assets in the first
twelve months and means that the Company is substantially fully invested,
after allowing for required working capital and cash retentions.
NAV per share as at 31 December 2022 was 98.9p, up 0.9p per share for the
period since IPO, principally attributable to underlying gains on the
Portfolio, which was valued at £301 million, reflecting the nine assets
invested at 31 December 2022. Given the recency of the Company's new
investments, these were modest gains and no significant valuation movements
were recognised in the period.
Strategy and portfolio
The Company seeks to generate attractive risk-adjusted returns by constructing
a diversified portfolio of high-quality assets across the global
infrastructure investment universe, with a focus on assets that offer downside
and inflation protection, which is particularly relevant in the current market
environment. Leveraging Pantheon's extensive 13-year experience in
infrastructure investing and its c.$19 billion infrastructure platform, PINT
targets specific transactions that Pantheon deems to be most attractive,
notably opportunities in businesses with strong operations and growth
potential, in sub‑sectors benefiting from long‑term positive trends and
managed by high-quality Sponsors.
We do, however, remain alert to the challenges in the current environment and
there are several key themes that we believe are important to consider:
Inflation
Despite policy intervention, inflation is at levels which have not been seen
for over 40 years. PINT's Portfolio is positively correlated against inflation
as many of its underlying cash flows are contractually index-linked, or
capture inflationary benefits through regulation or market position.
Interest rates
Rates have risen faster than at any other time in history, with bond yields
driving up risk-free rates; however, transactional evidence is showing limited
to modest increases in discount rates. Portfolio financings have been executed
on favourable terms, which mitigate this risk; however, new platforms are
factoring in higher debt costs.
Global economic slowdown
Real GDP growth expectations have been cut sharply, with global demand
expected to weaken throughout 2023 as central bank intervention continues. GDP
correlation and leverage continue to be areas of diligence focus when
considering investments for PINT.
Strong governance
The Board takes its responsibilities to its shareholders, in accordance with
good governance standards, very seriously. To that end, we have assembled a
highly experienced and independent Board of Directors. All the Board members
have worked extensively in the infrastructure sector and have a combined
experience across the industry in excess of 100 years. All the Directors are
non-executive and are independent of Pantheon. We have recently completed our
first internal Board Evaluation, a process which we will carry out annually
hereafter.
At present, the Board has concluded it is of an appropriate size relative to
the assets of the Company, with good diversity of skills, gender and
experience. As a relatively new Board, no Directors are expected to retire in
the short term. However, we are aware of the need to consider Board tenure and
ensure continuity and a smooth transition of Directors in the future, as well
as adding further diversity, and will consider this in our succession planning
in the coming years.
The Board of Directors is responsible for managing the business affairs of the
Company in accordance with the Articles and has overall responsibility for the
Company's activities, including setting strategy, approving future capital
raising activity, the review of investment activity and performance, and the
overall supervision of Pantheon as Investment Manager. The PINT team at
Pantheon is led by Richard Sem, a Partner with over 25 years of experience
investing in infrastructure. The Board is confident that the Pantheon team has
the depth and expertise to enable PINT to achieve its long‑term objectives.
The Directors may delegate certain functions to other parties such as the
Investment Manager, the Administrator, the Depositary and the Registrar. In
particular, the Directors have delegated responsibility for managing the
Company's investment portfolio to Pantheon as the Investment Manager.
Pantheon has selected a number of top-tier advisers for PINT, including
Investec as broker, Hogan Lovells as Legal Counsel and EY as auditors.
Pantheon has a proven track record of delivering strong returns by applying a
disciplined investment process across a globally diversified portfolio and we
are confident that its approach, to focus on co-investing, thus minimising
fees while maximising the number of investment opportunities it can access,
offers a compelling and differentiated opportunity for investors.
PINT's Directors collectively own a total of 240,000 shares in the Company. In
addition, thirteen Partners of Pantheon collectively hold a further 1,232,570
shares.
ESG
The Board recognises the importance of ESG to the operations of the Company as
well as to the operations of those whose services it uses and the companies it
invests in. The Board as a whole fulfils the responsibilities of the ESG
Committee, which include:
· monitoring the Company's compliance with applicable ESG policies
and regulations; and
· oversight of new and developing ESG legislation.
As part of fulfilling its responsibilities, the committee receives ESG updates
from Pantheon.
We are impressed with the ESG activities and plans proposed by the portfolio
companies. More details can be found in the 'ESG' and the 'PINT Investments'
sections of this report.
Annual General Meeting
The first Annual General Meeting (AGM) of the Company will be held at 11.00am
on 30 March 2023 at 10 Finsbury Square, 4th Floor, London, EC2A 1AF. All
shareholders are encouraged to attend.
Outlook
The need for new infrastructure has not diminished because of the global
economic outlook. The developed world continues to embark on an aggressive
path towards decarbonisation, and the road to net zero globally will require
sustained and extraordinary investment in new infrastructure. Private
infrastructure has demonstrated a necessary role in filling that gap, and we
believe it will continue to play an important part in funding global
infrastructure investments.
The market for infrastructure investments remains competitive, with
significant fundraising activity in private markets further driving strong
demand for high-quality infrastructure assets.
PINT's strategy continues to be to identify and target companies that benefit
from key sectoral tailwinds whilst exhibiting defensive characteristics,
delivering growth in real terms across the economic cycle. Pantheon's wide
capability to source new investments through its vast network and established
partnerships, as demonstrated since PINT's IPO, is all the more crucial in
current market conditions. The Board remains optimistic about PINT's future
investment opportunities and value creation potential.
Vagn Sørensen
Chair
1 March 2023
1. This refers to the capital committed to assets which are: invested,
committed and in legal closing at 31 December 2022.
Investment Manager's report
Founded in 1982, Pantheon has established itself as a leading global
multi‑strategy investor in private equity, infrastructure and real assets,
private debt and real estate.
Pantheon's infrastructure experience
Since 2009, Pantheon has completed 188 infrastructure investments across
primaries, secondaries and co-investments alongside more than 56 asset
sourcing partners, solidifying its position as one of the largest managers
investing in infrastructure. Total infrastructure co-investment and Sponsor
relationships exceeded 50 as of December 2022, including investments closed
or in legal closing. The global infrastructure investment team managed $19.0
billion in AUM as at 30 September 2022.
Pantheon platform
143
Investment professionals
$88.9bn(1)
Funds under management
>960
Institutional investors globally
11
Global offices
Pantheon private infrastructure
$19.0bn(1)
AUM
188
Investments
30
Investment professionals
21 years
Average years' experience of investment Committee
Pantheon private infrastructure co‑investments
$4.4bn
Total commitments
52
Total investments
50+
Asset sourcing partners
12.3%
Notional net IRR(2)
1. As at 30 September 2022. This figure includes assets subject to
discretionary or non-discretionary management or advice. Infrastructure AUM
includes all infrastructure and real asset programmes which have an allocation
to natural resources.
2. Performance data as of 30 September 2022. Past performance is not
indicative of future results. Future performance is not guaranteed and a loss
of principal may occur. Performance data includes all infrastructure
co-investments approved by Pantheon's Global Infrastructure and Real Assets
Committee (GIRAC) since 2015, when Pantheon established its infrastructure
co-investment strategy. Notional net performance is based on an average
forecast annualised fee of 1.5% of NAV.
Pantheon has extensive experience of and expertise in primary, secondary and
co-investments, which are defined as follows:
· Primary investments: involve a commitment to a newly launched
limited life fund managed by a Sponsor, seeking to exit improved businesses in
the later years of the fund term at a profit
· Secondary investments: traditionally involve the purchase of an
interest in an established private fund or a portfolio of companies from an
existing investor
· Co-investments: afford the opportunity for investors to invest
alongside Sponsors in specific Portfolio Companies, typically on a fee and
carried interest‑free basis
PINT focuses on gaining exposure to infrastructure assets via
co‑investments.
Pantheon primary funds strategy Sponsors require co‑investment partner Pantheon co‑investment strategy
AUM in primary companies since 2009(1) Co‑investment opportunities screened since 2015(2) Committed across 52 co‑investment assets
$9.0bn $70bn $4.4bn
Committed across 52 co-investment assets(3)
· Pantheon develops long‑term relationships with top tier sponsors Sponsors may offer co‑investments for the following reasons: · Access to co‑investment assets, typically on a no-fee,
by investing in their underlying flagship funds.
no‑carry basis.
· Sponsors consider Pantheon to be a strategic partner, rather than a
· Proven track record as a valuable partner by providing experience
direct competitor. · size of transaction; in complex deals; speed and certainty of deal execution within short
time frames.
· manage concentration limits;
· Co-investment track record has produced notional net IRR
· raise follow‑on capital; and of 12.3%(4).
· strengthen investor relationships.
1. As at 30 September 2022. This figure includes assets subject to
discretionary or non-discretionary management or advice. Infrastructure AUM
includes all infrastructure and real asset programmes which have an allocation
to natural resources.
2. Pantheon internal data from 2015 to December 2022. Screened deal flow
is based on total value of transactions ($).
3. Total infrastructure co-investment count and committed amount as of
December 2022, includes all Pantheon infrastructure co-investments closed or
in legal closing.
4. Performance data as of 30 September 2022. Performance data includes
all consummated infrastructure co-investments approved by GIRAC since 2015,
when Pantheon established its infrastructure co-investment strategy.
Portfolio
PINT is constructing a diversified global portfolio with a focus on developed
market OECD countries, with the majority of exposure in Western Europe and
North America. Over the medium term, the Investment Manager expects, in line
with the initial prospectus, the composition of the Portfolio to include
investments in the following sub-sectors: Digital Infrastructure, Power &
Utilities, Transport & Logistics, Renewables & Energy Efficiency and
Social & Other Infrastructure.
In the period to 31 December 2022, the Company committed £346 million across
ten investments, of which £288 million was invested across nine investments.
After the period end a further £43 million was committed to a digital
investment, GD Towers, and the total amount invested increased by
£84 million to £372 million, principally due to funding calls on GD Towers
and NGT.
The Portfolio assembled to date is diversified across sectors and geographies,
and the Investment Manager believes that it will endure through the current
and near‑term volatile market environment. The Portfolio investments
typically benefit from defensive characteristics, including long-term
contracted cash flows, inflation protection and robust capital structures.
Five investments are in Digital Infrastructure, representing 41% of gross
assets, across the data centre, towers and fibre sub‑sectors. Three
investments, representing 25%, are in the Power & Utilities sector
including: gas transmission, district heating and electricity generation, with
the remaining investments in Renewables & Energy Efficiency (9%) and
Transport & Logistics (8%). The largest percentage of the exposure is in
North America (41%), with the remaining exposure in Europe (34%), and the UK
(8%).
The weighted average Sponsor case IRR of the Portfolio, based on total
commitments at 31 December 2022, was 13.9%. The weighted average gearing was
38%.
NAV pence per share movement (period to 31 December 2022)
NAV per share over the period increased by 0.9p per share, after adjusting for
the interim dividend paid of 1.0p per share paid in October 2022. The movement
in the period was principally driven by fair value gains of 2.0p per share and
foreign exchange movements of 2.1p per share attributable to the strengthening
of the USD in the period, which was partially offset by a (1.8)p per share
movement from the foreign exchange hedging programme. Investment Income from
the Portfolio and interest on cash deposits contributed 0.4p per share, offset
by (1.0)p per share related to fund operating expenses, and (1.0)p per share
dividend, resulting in a closing NAV of 98.9p per share. This will be reduced
after the second interim dividend of 1p per share, which will be paid on
31 March 2023. There are no dilutive securities in issue.
The breakdown of the Company's gross assets(1) as at 31 December 2022 is shown
below by reference to sector and geography. The breakdowns are shown relative
to amounts invested(2) and committed(3).
Sector diversification (as at 31 December 2022)
invested + committed breakdown
Digital Infrastructure | 41%
Invested | 29% Committed | 12%
Power & Utilities | 25%
Invested | 17% Committed | 8%
Renewables & Energy Efficiency | 9%
Invested | 9% Committed | <1%
Transport & Logistics | 8%
Invested | 8% Committed | <1%
Remaining Cash(4) | 17%
Geographic diversification (as at 31 December 2022)
invested and committed breakdown
Europe | 41%
Invested | 30% Committed | 11%
North America | 34%
Invested | 32% Committed | 2%
UK | 8%
Invested | - Committed | 8%
Remaining cash(4) | 17%
1. Gross assets of £484.3 million consisting of the £301.4 million
Portfolio fair value and £182.9 million of cash and cash equivalents at 31
December 2022.
2. Invested amounts at 31 December 2022 totalled £301.4 million,
representing the fair value of the Company's funded investments in those
sectors or geographies.
3. Committed amounts at 31 December 2022 totalled £101.2 million,
representing cash held in respect of as yet undrawn commitments and/or deals
in legal closing in those sectors or geographies. Undrawn commitments are a
feature of the Company's investments and occur when completions are deferred
due to commercial or regulatory approval processes, or where capital calls are
intentionally staggered over time for follow-on purposes, for example for
capex or M&A requirements.
4. Remaining Cash at 31 December 2022 totalled £81.7 million,
representing £9.7 million of cash retained against buffers not covered by
the Company's revolving credit facility, and £72.0 million of remaining
funds available to invest.
Asset Status Investment date Sector Region Sponsor Portfolio NAV 31 December 2022 (£m) Unfunded Commitments(1) (£m)
Portfolio assets 31 December 2022
CyrusOne Invested March 2022 Digital: Data Centre North America KKR 23 4
Cartier Energy Holdings Invested April 2022 Power & Utilities: District Heating North America Vauban 35 -
Delta Fiber Invested May 2022 Digital: Fibre Europe Stonepeak 23 2
Vertical Bridge Invested May 2022 Digital: Towers North America Digital Bridge 27 -
Calpine Invested July 2022 Power & Utilities: Electricity Generation North America ECP 47 -
Fudura Invested July 2022 Renewables & Energy Efficiency Europe DIF 41 2
Primafrio Invested July 2022 Transport & Logistics Europe Apollo 40 1
Vantage Data Centres Invested August 2022 Digital: Data Centre North America Digital Bridge 22 5
National Broadband Ireland Invested November 2022 Digital: Fibre Europe Asterion Industrial Partners 43 4
National Gas(2) Invested January 2023 Power & Utilities: Gas Transmission UK Macquarie - 41
301 58
Assets committed and in legal closing at 31 December 2022
GD Towers(3) Invested January 2023 Digital: Towers Europe Digital Bridge 43
301 101
1. Commitments based on undrawn amounts of deals committed or in legal
closing, converted into GBP as necessary, at 31 December 2022.
2. The financial close of National Gas was subject to regulatory
clearances, with the investment completing post 31 December 2022.
3. The financial close of GD Towers occurred post 31 December 2022.
Performance
During the period the Portfolio generated underlying growth of £9.6 million,
reflecting a 3.3% movement on the capital invested, before adjusting for
capital distributions totalling £4.0 million. Movements in foreign
currencies resulted in a foreign exchange gain of £7.7 million,
before adjusting for the impact of the foreign exchange hedging programme,
resulting in a closing value of £301.4 million at 31 December 2022.
There were no material performance updates across the Portfolio during the
period, and the Investment Manager remains confident of the investment theses
and underwriting that underpins the Company's investments. No changes were
proposed by Sponsors to any of their underlying business plans, and in some
cases additional high conviction growth opportunities were identified.
Under the Company's valuation policy investments are carried at fair value in
accordance with FRS 102 and the International Private Equity and Venture
Capital Valuation (IPEV) guidelines. In private market transactions, the
purchase cost of the investment is an indication of its initial fair value and
is thereafter calibrated for subsequent events and changes in valuation
inputs. At the period end a number of the Company's investments were valued at
a price consistent with the purchase price, and Pantheon does not consider
this to be unexpected or unreasonable given the recency and stage of some of
the Portfolio investments by the Sponsors, all of which have been held for
less than twelve months.
The Portfolio had a weighted average discount rate (WADR) of 14.2%(1) at the
period end. This is slightly higher than the weighted average Sponsor case IRR
of the Portfolio of 13.9%(2), due to some modest increases in discount rates
across the Digital Infrastructure sector, and the effect of undrawn
commitments.
Outlook
The Investment Manager remains confident in the volume of attractive
opportunities for the Company going forward. The tailwinds that support the
demand for new infrastructure and the growth opportunities that accompany it
remain strong across all the sub-sectors the Company is active in, which
provides protection against any potential market softening.
Overall, the Investment Manager does not expect to see significant movements
in the Company's valuations arising due to current market considerations.
There has been limited transactional evidence to support downward valuation
trends, and reference valuations for private market infrastructure funds have
traditionally been marked lower than the prices ultimately realised at exit,
which adds in further long-term headroom and supports the notion that private
markets assets demonstrate less volatility than public proxies in times of
market disruption.
Higher debt costs arising from increasing interest rates do have the potential
to impact valuations where capital structures do not allow for interest rate
risk to be fully mitigated, as more cash flows are diverted to servicing debt.
However, in general gearing levels remain low compared to previous financial
crises, and the Investment Manager continues to exercise a diligent approach
to underwriting which typically involves allowing for additional pricing
premiums for any uncommitted debt financing packages, relative to Sponsor base
cases.
The consensus amongst Sponsors that the Investment Manager works with is that
discount rates will either remain flat or see some modest increases. Most
Sponsors believe that valuations will more generally likely remain flat in the
short term as underlying performance is offset by higher operating costs
and/or capital expenditure.
From a wider market perspective, there continue to be significant allocations
to infrastructure as an asset class, and to the private infrastructure market
specifically, which creates sustained competition for assets and further
supports valuations. Specifically, there remains high interest in assets with
some form of inflation linkage and those that play a role in the energy
transition.
1. WADR of 14.0% is based on the discount rate of each completed
investment at 31 December 2022, weighted by total contribution to Portfolio
NAV at that date.
2. Based on the Sponsor base case IRR of each completed investment at 31
December 2022, weighted by total commitment size, converted to GBP as
necessary.
Dividend
In the IPO Prospectus, the Company said it would target a NAV Total Return of
8-10% p.a. following full investment of the IPO proceeds and an initial
dividend of at least 2p per share for the first financial period ended 31
December 2022, rising to 4p per share for the year ending 31 December 2023
and a progressive dividend thereafter.
As part of this annual results announcement, the Board is declaring the
Company's second interim dividend of 1p per share in respect of the period 1
July 2022 to 31 December 2022, which will be paid on 31 March 2023. This is
in line with the Company's target.
Over the medium term, the Company expects the Portfolio to generate both yield
and capital growth to support the progressive dividend policy and expects to
maintain a healthy dividend cover from income distributions and surplus
capital profits through realisations.
Foreign exchange impact
In order to limit the potential impact from material movements in major
foreign exchange rates on non‑local currency investments, the Company has
put in place a foreign exchange hedging programme. The aim of this programme
is to reduce (rather than eliminate) the impact of movements in foreign
exchange rates on the Company's NAV, and to this end the Company has adopted
an internal policy to seek to limit its unhedged exposure to 25% of NAV at any
time. This is achieved through the execution of foreign exchange hedging
contracts relative to the ongoing non-local currency investment exposure. Any
such hedging strategy for PINT is subject to, inter alia, market liquidity and
pricing for hedges, foreign exchange volatilities, the composition of the
Company's portfolio and the Company's balance sheet.
To date the Company has arrangements with five hedging counterparties, all on
an unsecured basis and subject only to margin calls if pre-specified credit
limits are breached on an individual counterparty (not aggregate) basis.
Furthermore, in line with the Investment Manager's risk policies, the Company
has adopted a policy to maintain strict liquidity buffers in relation to these
hedging positions to protect against extreme volatility‑driven margin
requirements. The details of the Company's hedging positions and associated
cash buffers are set out in the table opposite.
The depreciation of GBP resulted in a positive Portfolio and non‑Portfolio
foreign exchange movement in the period to 31 December 2022 of
£9.9 million, which was offset by a loss on the hedging programme of
£8.5 million.
EUR Notional USD Notional Mark-to-market Buffer
Counterparty (€m) ($m) (£m) (£m)
A - 82.3 (3.2) 6.2
B - 84.2 (3.4) 6.3
C 91.0 12.4 (1.4) 9.1
D 23.7 - (0.2) 1.8
E 23.7 8.8 (0.3) 2.5
Total 138.4 187.7 (8.5) 25.8
Borrowings
In December 2022, the Company entered into a new three year multi-currency
revolving credit facility ('RCF') for an aggregate commitment of
£62.5 million with Lloyds Bank Corporate Markets plc. The RCF allows the
Company to maintain liquidity for unfunded commitments and working capital
requirements whilst minimising the inefficiencies of holding excessive cash.
The RCF, which is secured on the assets of the Company, includes an
uncommitted accordion feature, which will be accessible, subject to approval,
by additional lenders, and is intended to increase over time in line with the
Company's NAV and its borrowing policy.
Cash and liquidity management
At the period end, the Company had total available liquidity of
£245.4 million, comprising £182.9 million of cash and £62.5 million of
undrawn RCF.
The Company maintains a policy to hold liquidity sufficient to cover all
investment commitments and amounts in legal closing due in the next twelve
months. At the period end, this amount totalled £101.2 million, inclusive of
£84.2 million in respect of the National Gas and GD Towers transactions
which were subsequently drawn post period end.
In addition to this, the Company has adopted a risk-based policy to hold
specific cash buffers in respect of potential further liquidity requirements.
These buffers include forecast operating costs, dividend payments, FX hedge
settlements due (based on mark-to-market valuations), an allowance for
emergency co-investment capital across the portfolio, allowances for FX
movements on undrawn non‑GBP commitments, and amounts held against the
Company's FX hedging positions (calculated relative to notional amounts and
contractual maturity). At the period end, these amounts totalled
£72.2 million.
The net balance of all these considerations represents the funds available to
the Company for further investment. As at the period end this amount stood at
£72.0 million, which was significantly boosted after completion of the
Company's RCF in December 2022.
£m
Sources
Cash & equivalents 182.9
RCF 62.5
Total (A) 245.4
Commitments
Undrawn investment commitments 57.9
Investments in legal closing 43.4
Total (B) 101.2
Buffers
Operating costs 7.4
FX MtM 4.5
Dividends 14.4
Co-investment buffers 16.0
FX buffers on undrawn investment commitments 4.1
FX hedging buffers 25.8
Total (C) 72.2
Available funds (= A - B - C) 72.0
1. Totals do not match due to rounding.
Ongoing Charges
The Company's ongoing charges figure is calculated in accordance with the
Association of Investment Companies ('AIC') recommended methodology and was
1.02% for the period to 31 December 2022, reported on an annualised basis.
The ongoing charges are lower in the first year as no management fee was paid
on undeployed cash until 75% of the Net Issue Proceeds were deployed. This was
achieved in the quarter to 30 September 2022.
Inflation
Impact of inflation
Since IPO, inflation across the Company's target geographies has been at
historic highs and materially above central bank targets. Accordingly it has
become an area of even greater focus to investors and therefore during the
transaction underwriting process.
Historically, infrastructure as an asset class has benefited from strong
inflation linkage owing to the nature of its underlying revenue mechanisms and
pricing power. Typically this would serve to at least protect against the
impact inflation has on an infrastructure asset's cost base, and in some cases
would provide for an inflationary element to net returns.
The extent to which an investment's valuation will be impacted by material
changes in actual and forecast inflation, and therefore the Company's
correlation to it, is determined by the proportion of income and costs that
are linked to inflation. This varies across sectors and specific investments,
and no two businesses will behave identically to changes in inflation.
The revenues and costs of infrastructure assets can be considered to fall
within a number of broad categories which all capture inflation in different
ways, as set out in the exhibit below.
Inflationary characteristics of infrastructure revenues and costs:
Contractual Demand Regulated
Contractual revenues subject to specific uprating provisions, usually annually Non-contractual revenues (or short-term contracts) without explicit inflation Regulated revenues determined by real price control mechanisms which allow for
and by reference to either a fixed escalator or a specified inflation measure. linkage but where market dynamics (such as high barriers to entry or monopoly annual uprating by reference to a specified inflation measure.
In some cases such uprating will be subject to caps or floors which limit the positioning) provide potential for repricing that can capture inflation.
extent to which inflation is captured.
Valuation impact
The impact of changes in inflation assumptions on the valuation of assets is
determined by the types of underlying revenues and input costs, and the size
of the cost base relative to its revenues. Where expected increases in
revenues exceed any expected increases in costs in a higher inflation
scenario, forecast net cash flows will increase resulting in positive
inflation correlation. Where expected increases in costs exceed any expected
increases in revenues, forecast net cash flows will decrease resulting in
negative inflation correlation.
Capital costs Operating costs Financing costs
Capital expenditure costs such as construction, equipment and labour costs Operating costs such as labour and utilities costs which more broadly align Borrowing costs are impacted by inflation either directly, where index-linked
that are often subject to unique and sector‑specific supply side with wider inflationary outturn. debt is in place, or indirectly due to the fact that central bank rates are
inflationary pressures. On larger capital initiatives this risk may be passed used as a tool to curb high inflation. This impact may be avoided or reduced
down to suppliers. where interest rate hedging has been used.
PINT's Portfolio
All of the Company's investments are unique and the extent to which inflation
impacts them varies according to sector:
· Data centre and towers assets tend to be characterised by fixed or
capped escalators, which limits revenue upsides in high inflationary
scenarios. However, these investments also often include separate pass-through
mechanisms for utility costs, which limits cost inflationary pressures.
· Fibre assets may have greater direct linkage to inflation measures
through wholesale pricing contracts, but also carry a greater degree of
exposure to capex inflation that is not usually passed on to suppliers.
· Utility assets typically have regulated indexing arrangements where
ongoing revenues are a direct function of inflation.
· Power and Renewables assets will normally benefit from a mixture of
short and medium term "fixed price" contracted revenues with a variety of
different escalators, and long-term un-contracted wholesale revenues that are
assumed to increase in line with inflation and over time. For new
developments, spikes in capex cost inflation can be mitigated with
pass-through or price adjustment mechanisms in offtake agreements.
· Transport assets exposed to demand risk or short-term contracts may
only have implicit inflation protection depending on the ability to re-price
tariffs/tolls.
Methodology
The inflation or escalation assumptions that impact on the valuation and
forecast returns of the Portfolio are determined by Sponsors, reflective of
underlying contractual or market specific factors, as noted above, as well as
the inflationary environment more generally. Where revenues or costs are not
expressly linked to an inflation measure, Sponsors will take a view on the
extent to which those revenues or costs will change relative to inflation more
generally.
All inflation assumptions are subject to detailed review and analysis by the
Investment Manager during the underwriting process, and may be adjusted in the
Company's underwriting base case. Where revenues or costs have express linkage
to a local inflationary measure, such as CPI, the underwriting base case will
adopt long term central bank forecasts, and where future business growth is
included in the underwriting case, associated revenues and costs are assumed
to respond in the same manner as current revenues and costs.
Sensitivity
In line with their information reporting obligations, Sponsors are required to
perform a number of valuation sensitivities on the Company's behalf against
key inputs including inflation, interest rates and discount rates. The
aggregated results of these sensitivities across the Portfolio are shown in
the chart in the annual report. Owing to the nature of the underlying
revenues across the Portfolio, the Company benefits from a net positive
correlation with inflation. Conversely, the Portfolio is negatively correlated
to interest rate movements, where rises would result in reduced free cash
flow. The impact of this across the Portfolio is mitigated by hedged or fixed
rate debt at investment level.
Post balance sheet events
The Company has seen significant activity since the accounts date of 31
December 2022, most notably the commitment of £43.4 million to GD Towers, of
which £37.9 million was invested, and the movement to legal closing of a
£25.0 million transaction in a US renewables asset. Additionally, a further
£45.0 million was invested in respect of prior investment commitments across
a number of deals, most notably £40.8 million in respect of NGT. The updated
breakdown of the Company's gross assets(1) as at 24 February 2023 is shown
below by reference to sector and geography. The breakdowns are shown relative
to amounts invested(2) and committed(3).
Sector diversification (as at 24 February 2023)
invested + committed
Digital Infrastructure | 41%
Invested | 38% Committed | 3%
Power & Utilities | 25%
Invested | 25% Committed | -
Renewables & Energy Efficiency | 14%
Invested | 9% Committed | 5%
Transport & Logistics | 8%
Invested | 8% Committed | <1%
Remaining cash(4) | 12%
Geographic diversification (as at 24 February 2023)
invested + committed
Europe | 41%
Invested | 38% Committed | 3%
North America | 39%
Invested | 33% Committed | 6%
UK | 8%
Invested | 8% Committed | -
Remaining cash(4) | 12%
1. Gross assets of £482.8 million consisting of £383.0 million of
adjusted (for invested amounts and distributions) Portfolio fair value and
£99.8 million of cash and cash equivalents at 24 February 2023.
2. Invested amounts at 24 February 2023 totalled £383.0 million,
representing the adjusted (for invested amounts and distributions) fair value
of the Company's funded investments in those sectors or geographies.
3. Committed amounts at 24 February 2023 totalled £42.4 million,
representing cash held in respect of as yet undrawn commitments and/or deals
in legal closing in those sectors or geographies. Undrawn commitments are a
feature of the Company's investments and occur when completions are deferred
due to commercial or regulatory approval processes, or where capital calls are
intentionally staggered over time for follow-on purposes, for example for
capex or M&A requirements.
4. Remaining cash at 24 February 2023 totalled £57.4 million,
representing £9.7 million of cash retained against buffers not covered by the
Company's RCF, and £47.7 million of remaining funds available to invest.
Alternative performance measures (APMs)
PINT assesses its performance using a variety of measures that are not
specifically defined under FRS 102 and are therefore termed APMs. The APMs
used may not be directly comparable with those used by other companies.
These APMs provide additional information as to how the Company has performed
over the period and allow the Board, management and stakeholders to compare
its performance.
APM Details Calculation Reconciliation to FRS 102
NAV Total Return Total return comprises the investment return from the Portfolio and income It is calculated as the total return of £8.0 million, as shown in the Income The calculation uses FRS 102 measures.
from any cash balances, net of management and operating and finance costs. It Statement, as a percentage of the opening NAV of £392.1 million which is
also includes foreign exchange movement and movement in the fair value of based on the net IPO Proceeds.
derivatives and taxes.
Net asset value per share A measure of the NAV per share in the Company. It is calculated as the NAV divided by the total number of shares in issue at The calculation uses FRS 102 measures and is set out in Note 18 to the
the balance sheet date. accounts.
Annual distribution This measure reflects the dividends distributed to shareholders in respect of The dividend is measured on a pence per share basis. The calculation uses FRS 102 measures.
each year.
Investment value and outstanding commitments A measure of the size of the investment portfolio including the value of It is calculated as the Portfolio asset value plus the amount of contracted The Portfolio asset value uses the FRS 102 measure Investments at fair value,
further contracted future investments committed by the Company. commitments. set out in Note 1. The value of future commitments is set out in Note 21 to
the accounts.
NAV Total Return
The Company is targeting a NAV Total Return per share of 8-10% p.a. following
full investment of the IPO proceeds.
Definition
Total return is how we measure the overall financial performance of the
Company.
Total return comprises the investment return from the Portfolio and income
from any cash balances, net of management and operating and finance costs. It
also includes foreign exchange movement and movement in the fair value of
derivatives and taxes.
Total return is measured against the opening NAV, net of the final dividend
for the previous year, and adjusted (on a time‑weighted average basis) to
take into account any equity issued in the year.
How has PINT performed?
Total return for the period to 31 December 2022 was 2.0%. Given the recent
acquisition of the investments, no significant portfolio gains have been
recognised in the period, but the Portfolio is well positioned to deliver on
PINT's return targets.
Annual distribution
The Company is targeting a 2p per share dividend in the first year, 4p per
share in the second year, followed by a progressive dividend policy
thereafter.
Definition
This measure reflects the dividends distributed to shareholders each year.
The Company's investment objective is to generate returns from Portfolio
income and capital returns (through value growth and realised capital
profits).
The dividend is measured on a pence per share basis, and is targeted to be
progressive.
How has PINT performed?
Second interim dividend of 1p per share declared for the period from
1 July 2022 to 31 December 2022, to be paid on 31 March 2023, which
together with the dividend of 1p per share paid in October 2022 totals 2p
per share for the period ended 31 December 2022. The Company intends to pay
dividends on a semi-annual basis in line with its progressive dividend policy.
Investment policy
The Company invests in a diversified portfolio of high-quality operational
infrastructure assets which provide essential physical structures, systems
and/or services to allow economies and communities to function effectively.
The Company invests in both yielding and growth infrastructure assets which
the Investment Manager believes offer strong downside protection and typically
offer strong inflation protection.
The Company invests globally, with a primary focus on developed OECD markets,
with the majority of its investments in Europe and North America. The
Company's portfolio is diversified across infrastructure sectors, which
includes (but is not limited to):
Digital Infrastructure
(including wireless towers, data centres, and fibre-optic networks)
Renewables & Energy Efficiency
(including smart infrastructure, wind, solar, and sustainable waste)
Power & Utilities
(including transmission and distribution networks, regulated utility companies
and efficient conventional power assets)
Transport & Logistics
(including ports, rail, roads, airports and logistics assets)
Social & Other Infrastructure
(including education, healthcare, government and community buildings)
In each case where the Investment Manager believes it can generate the most
attractive risk‑adjusted returns.
The Company focuses on gaining exposure to infrastructure assets via
co-investments alongside leading third-party private direct infrastructure
asset investment managers who are acting as general partner or manager of a
fund in which Pantheon, or any investment scheme, pooled investment vehicle or
portfolio fund managed by Pantheon, has invested or may invest ('Sponsors').
In doing so, the Company may invest on its own or alongside other
institutional clients of the Investment Manager. The Company may also invest
in other direct or single asset investment opportunities originated by the
Investment Manager or by other third-party asset sourcing partners. The
Company does not invest in private funds targeting a diversified portfolio of
infrastructure investments.
Investment restrictions
The Company invests and manages its assets with the objective of spreading
risk and, in doing so, is subject to the following investment restrictions,
which are measured at the time of investment:
· no single Portfolio Investment will represent more than 15% of
Gross Asset Value;
· no more than 20% of Gross Asset Value will be invested in
investments where the underlying infrastructure asset is located in a non-OECD
country; and
· no more than 30% of Gross Asset Value will be invested alongside
funds or accounts of any single Sponsor (other than Pantheon).
In addition, the Company does not invest in infrastructure assets whose
principal operations are in any of the following sectors (each a "Restricted
Sector"):
· coal (including coal-fired generation, transportation and mining);
· oil (including upstream, midstream and storage);
· upstream gas;
· nuclear energy; and
· mining.
The Company may invest in infrastructure assets whose principal operations are
not in a Restricted Sector but that nonetheless have some exposure to a
Restricted Sector (for example, a diversified freight rail transportation
asset that has some exposure to the coal sector), provided that: (i) no more
than 15% of any such infrastructure asset's total revenues are derived from
Restricted Sectors; (ii) no more than 5% of total revenues across the
Portfolio (measured on a look-through basis) will be derived.
Business model
Purpose
The Company aims to build a global Portfolio of investments with blended
risk/return profiles, and set targets across deal types, sectors and
geographies for diversification.
Our co-investment strategy differentiates us in the listed infrastructure
market.
What sets us apart
1 Deal selectivity:
Sponsor relationships drive strong deal flow, allowing for highly selective
investment process.
2 Diversification:
Access to investments across sourcing Sponsors, sectors and geographies.
3 Sponsor specialisation:
Ability for investors to choose deals alongside a Sponsor with a distinct edge
who may be best placed to create value.
4 Fee efficient:
Co-investments typically offered with no ongoing management fee/carried
interest.
Capturing secular growth
Digital Infrastructure
· Growth in mobile data traffic
· Growth in 5G connected devices
Renewables & Energy Efficiency
· Average cost reduction for solar/wind
· Increasing global installed wind/solar capacity
Power & Utilities
· US/Europe transitioning grid to renewables
· US coal power plant retirements
Transport & Logistics
· Increased global trade
· Higher e‑commerce penetration
How we create value
Investors
Shareholders
Investors in PINT can participate in a globally diversified portfolio of core
infrastructure assets alongside other leading private asset managers and
institutional investors.
PINT's business model creates value by allowing Pantheon, the Investment
Manager, to allocate capital and invest on its behalf alongside the Sponsors
that it believes have a distinct edge in a particular infrastructure sector.
Vehicle
PINT (public)
PINT has access to Pantheon's deal sourcing platform.
Since PINT is publicly listed, any retail or institutional investor is able to
benefit from any value it creates.
Other Pantheon Funds (private)
Pantheon provides a broad sourcing network with leading private asset
investment managers and has strong relationships with Sponsors it can leverage
on behalf of PINT.
Refer to the Investment Manager's report for more details.
Portfolio
Infrastructure assets
High‑quality infrastructure assets typically benefit from long‑term
contractual cash flows, positive correlation to inflation and exposure to
secular changes in society.
Value creation
8-10% p.a.
NAV Total Return per share
4p per share(1)
second year dividend, progressive thereafter
1. The Company is targeting a dividend of 4p per share in the year
ending 31 December 2023, and, thereafter, progressive.
Background to co-investments
There are broadly three routes to investing in private infrastructure assets:
Co-investments
Co-investments give investors the opportunity to invest alongside Sponsors in
specific portfolio companies. Allocating to co-investments can provide
incremental advantages to investors, including targeted deal selection and
fee-efficient exposure to transactions which are often offered on a no-fee and
no‑carry basis.
PINT's investment policy is to gain exposure to infrastructure assets via
co-investments. This can take the form of the following types of transaction:
· Co-bid: Partnering with a lead Sponsor to underwrite a deal prior
to final bid submission, requiring the need for a sophisticated investor who
can lead independent due diligence on an asset.
· Targeted syndication: Following the signing of a deal, a Sponsor
will offer a select group of investors a portion of the deal. This will
typically comprise fewer than five parties, who may have undertaken some early
due diligence on the transaction.
· General syndication: Following the signing of a deal, a Sponsor
will offer all of its existing fund investors the opportunity to gain exposure
to a transaction.
Primaries
Primaries involve a commitment to a newly launched limited life fund managed
by a Sponsor who will build a portfolio of private investments and seek to
exit improved businesses in the later years of the fund term at a profit.
Secondaries
Secondaries traditionally involve the purchase of an interest in an
established private fund or a portfolio of funds from an existing investor.
Sale process initiated Final bid submitted Deal signing
Co-bid Targeted syndication
General syndication
Advantages of investing in infrastructure via co-investments
Investing in co-investments can be an attractive way to gain access to private
infrastructure for several reasons, including:
Access:
There are fewer public market opportunities to access infrastructure assets,
as infrastructure companies tend to remain private for longer periods of time.
Therefore, investing through co-investments provides access to assets not
normally accessible by public market investors.
Enhanced economics:
The use of co-investments can reduce the overall expense ratio and
gross-to-net performance spread of a portfolio, as most deals are offered with
no ongoing management fee or carried interest.
Alignment:
The structure of co-investments provides significant alignment through the
incentivisation of both deal Sponsors, who typically provide the majority of
capital through their primary fund vehicles, and management who are typically
tied in under long-term incentive programmes.
Portfolio construction:
Pantheon is able to utilise co-investments to select individual assets to gain
exposure to, and tilt the Portfolio towards, sectors based on the Investment
Manager's view on relative value.
Diversification:
Co-investments are a critical part of portfolio construction in having the
ability to build a programme that is truly diversified across infrastructure
sectors, geographies, stages and Sponsor.
Exposure to nascent sectors:
Co-investments can provide access to nascent and emerging sectors that may
otherwise be underweight or not be available within primary or secondary
investment opportunities.
Sponsor Specialisation:
Co-investors have the ability to choose deals alongside a Sponsor with a
distinct edge who may be best placed to create value.
Pantheon's investment process
Sourcing and origination
In its role as investment manager to the Company, Pantheon is responsible for
the sourcing and execution of transactions on behalf of PINT.
The Investment Manager's sourcing leads to a wide array of investment
opportunities as Sponsors embrace new transaction models and co-investment
appetite from investors increases. Pantheon's primary relationships and
network of Sponsors allows it to be a preferred co-investor, screening a high
volume of proprietary transactions. Pantheon's ability to work with partners
to provide capital solutions in complex scenarios is expected to continue to
generate differentiated deal flow and allow it to acquire high-quality and
difficult-to-access assets for the Company's Portfolio and other Pantheon
clients.
Co-investment capital makes up a sizeable portion of the infrastructure
investment universe, and Pantheon continues to see strong deal flow, with
continued signs of growth. This is driven by Sponsors continuing to see the
wider franchise benefit in offering their trusted partners co-investment deal
flow, and in particular due to such Sponsors being constrained by fund
concentration limits. Such limits may restrict the volume of capital many
Sponsors can invest from their funds in larger transactions, potentially
restricting their access to many deals unless they have access to additional
co-investment capital.
Screening
Screening is the first of three stages of the Pantheon investment due
diligence and approval process. This stage involves preliminary due diligence
of the opportunity, which will include:
· Assessing the deal fit to fund strategy
· Review potential returns profile
· Explore risk factors
· Determine manager track record
· Understand transaction dynamics and sponsor alignment
· Conduct fund/company overview
Reasons to decline
· Poor-quality assets
· Business/firm franchise issue
· Lack of coverage
· Overly competitive process
· Limited Pantheon edge
· Poor fit with portfolio strategy
· ESG considerations
Due diligence and underwriting
After Screening, due diligence will be undertaken as part of the Advanced
Notice stage, including:
· Review financial model and underlying assumptions
· Review internal and company databases
· Evaluate macro trends and sector themes/outlook and review
compatibility with assumptions
· Identify risks and mitigants
Reasons to decline
· Asset-related risk factors:
· High debt levels
· High purchase price
· Commodity price risk
· Concentration risk
· Quality of assets/Sponsors
· Lack of embedded value
· Pricing disconnect
If a deal is approved at Advanced Notice stage, it will proceed to the final
investment committee stage, Investment Thesis. Transactional and due diligence
work undertaken ahead of this includes:
· Benchmark performance
· Extensive asset due diligence
· Assess downside protection
· Finalise financial model
· Onsite manager visits
· ESG and climate change risk assessment
· Tax due diligence
· Conduct background checks/reference calls
· Complete "Investment Thesis" for submission to GIRAC
Reasons to decline
· Legal considerations
· Limited downside protection
· Inconclusive references
· Weak governance
For co‑investments, the Company is typically entering the acquisition at the
same time as the Sponsor which sets the valuation and enters at the same
amount, creating alignment with the Company. The Sponsor provides its
valuation assumptions for the target asset and the Investment Manager will
seek to verify them, and either underwrite the deal at the same return target
as the Sponsor, or take a more conservative view on some of the valuation
assumptions which may result in a lower underwritten return target. This
process involves the Investment Manager conducting its own independent review
of the valuation assumptions which includes, but is not limited to, the
following analysis as part of the Investment Thesis:
· review of all due diligence material available, including
technical, market, legal, financial and tax. Assumptions for the valuation are
driven from these third‑party independent consultant reports;
· consult with external market contacts to verify key assumptions;
· review financial model driving the valuation; and
· conduct downside and upside sensitivities to prepare a Pantheon
base case that can be underwritten and that meets relevant return
requirements.
The base case prepared during the underwriting process forms the basis of the
final Investment Thesis. The investment return targets can be attributed to
several key components of a target business, which may include:
· Existing business: returns from the profitability of the target's
existing assets/contracts.
· Organic growth: returns derived from initiatives to greater utilise
existing infrastructure, such as leasing further antennae capacity on an
existing tower installation or supplying other energy products to existing
clients of a district heating business.
· Growth capital: returns generated from additional profitability
arising from capital expenditure initiatives, taking the form of expanding
and/or upgrading existing or developing new infrastructure. Such initiatives
will depend on the target company's ability to source and execute on a
pipeline of growth opportunities.
· Capital structure: returns generated from optimising the target's
debt structure in tandem with its growth trajectory.
· M&A activity: returns generated from the increased scale and
efficiencies achieved through bolt-on acquisition activity.
· Operational efficiencies: increased returns generated from reduced
operating costs achievable through greater business scale.
· Multiple expansion: returns generated from delivering an exit at an
increased earnings multiple relative to the initial entry valuation. An
increased exit multiple would be in keeping with the expectations to both
increase the scale of the target as well as reducing the risk-profile over
time.
The expected holding period for each co-investment is between 5 to 7 years,
however this does not form the basis of any guaranteed exit timing or method
from the Sponsor. The final timing of a co-investment exit will be a function
of business performance and economic conditions, and accordingly this is
sensitised during the underwriting process to ensure any delays will not
materially compromise expected returns.
Several key financial metrics are used for analytical purposes, including
internal rate of return (IRR) and multiple on invested capital (MOIC). IRR is
the annual rate of growth that an investment is expected to generate over its
life, and MOIC measures investment returns by comparing the total realised
value of an investment at the exit date relative to the initial investment
amount. The illustrative bridge chart in the annual report demonstrates the
contributions to expected returns of certain assumptions in a typical private
market infrastructure co‑investment transaction.
Approval and execution
The final path approval of a deal includes:
· Presentation of final investment thesis
· Approval by GIRAC
· Allocation between Pantheon clients in line with Allocation policy
· Funding ringfenced pending completion
Once a deal has been approved, it will move in to legal closing
and execution, which involves:
· Optimising deal structure
· Review and negotiate agreements
· Finalise reporting requirements
· Negotiate preferential terms and rights
· Execute transfer and payments
· Implement hedging initiatives
The Company invests in infrastructure assets typically through a co-investment
programme.
Valuations
The Company invests in infrastructure assets typically through a co-investment
programme. In a typical co-investment the Company partakes in the investment
alongside a lead investor or a Sponsor. The Sponsor will typically set up a
co-investment vehicle, subject to annual statutory audits, that invests into
an underlying infrastructure investment and will issue a NAV and capital
accounts on a quarterly basis.
The Sponsor will usually own the majority of equity and have significant or
controlling influence in the asset. Accordingly Pantheon considers the Sponsor
to be the responsible party for preparing the valuation on behalf of the
co-investment vehicle, and may rely upon the valuations prepared by the
Sponsor that have been prepared in-line with the relevant accounting standards
and IPEV guidelines. In private market investing, the Sponsor is usually
considered to be the best party to determine the appropriate valuation due to
the following:
· intimate knowledge of the underlying infrastructure asset held in
the SPV and its business and the fundamental business environment in which it
operates;
· a comprehensive understanding of the underlying infrastructure
asset held in the SPV and its financials;
· knowledge of the market environment in which transactions
of comparable companies take place; and
· The Company's economic interest in an investment as
a co‑investor is aligned with that of the Sponsor.
In private market transactions, the purchase cost of the investment is an
indication of its initial fair value and is thereafter calibrated for
subsequent events and changes in valuation inputs. Infrastructure assets
often display particular characteristics allowing long-term financial
forecasts to be prepared, which tends to result in a higher prevalence of
Discounted Cash Flows (DCF) in the valuation. In such cases fair value is
estimated by deriving the present value of the expected cash flows generated
by the investment through the use of reasonable assumptions such as
appropriate discount rates to reflect the inherent risk of the assets forming
the investment.
Valuation governance
Pantheon operates a valuation committee, which is independent of the
investment and investor relations teams, and chaired by Pantheon's Chief Risk
Officer, which ensures that there are robust governance, oversight and process
frameworks in place, guaranteeing compliance with standards and consistent
application of policy.
The valuation committee review and challenges the valuations provided by the
Sponsors and reviews the accounting policies and valuations methodologies
applied. The valuation vommittee has responsibility for approving investment
valuations which determine the fair value of the Portfolio, with input from
the investment team who are responsible for managing the Portfolio.
Investment strategy
The Company seeks to generate attractive risk‑adjusted total returns for
shareholders over the long term, comprising both capital growth and a
progressive dividend. Through the acquisition of equity or equity‑related
investments, PINT offers a diversified portfolio of infrastructure assets
with a primary focus on developed OECD markets.
Diversification Global portfolio with exposure to regions, sectors and sourcing partners and
the ability to tilt the Portfolio over time to the best risk/return
opportunities.
Resilient cash flow assets Emphasis on direct infrastructure assets with substantial contracted cash
flows and conservative leverage creates a portfolio with downside protection.
Inflation protection Natural hedge against rising inflation with certain assets benefiting from
inflation protection.
Capturing long‑term growth Exposure to growth dynamics within infrastructure sub‑sectors including the
transition to a net zero carbon economy and the digitalisation of social and
economic activity.
Value‑creation opportunities Assets where added value can be created through operational optimisation,
incremental expansion of a platform or industry consolidation, utilising the
skill‑set and track record of Sponsors.
Strong ESG characteristics Robust asset and Sponsor ESG risk assessment through due diligence, ongoing
asset monitoring and exclusion of high‑risk ESG sectors from the strategy,
including coal, oil, gas (upstream), mining and nuclear.
Strategy in action
Diversification
National Broadband Ireland
In November 2022 PINT committed approximately €52.7 million in Asterion
Industrial Partners' interest in National Broadband Ireland (NBI), an Irish
fibre to the premises (FTTP) network developer and operator.
NBI was selected by the Irish Department for Environment, Climate and
Communications to support the country's National Broadband Plan, a programme
that seeks to connect every business, public and residential premises in the
country to high-speed broadband by 2027. NBI is responsible for passing and
connecting approximately 560,000 premises in rural areas stretching across 96%
of the land mass of Ireland, serving around 23% of the population and 69% of
the country's farms, making this the largest infrastructural project in rural
Ireland since rural electrification.
Deployment is split into 227 Development Areas with the rollout occurring in
all counties simultaneously. The Irish government is providing subsidies
alongside the capital committed by shareholders and revenue generated to
support the design, procurement, construction and maintenance of the network
under a 25-year project agreement. The project is expected to help bridge the
digital divide between rural and urban areas in Ireland.
The investment is in line with PINT's strategy of building a diversified
portfolio of infrastructure assets benefiting from structural growth drivers.
Investment in digital infrastructure is essential to ensure everyone benefits
from the deployment of high-speed networks. PINT has invested through Asterion
Industrial Partners, a leading European infrastructure investment manager
specialising in the telecoms, energy & utilities, and mobility sectors,
with fellow investor Granahan McCourt retaining its current interest in NBI.
"This transaction represents a high‑quality fibre asset alongside our
long-standing partner Asterion. NBI's commitment to providing high‑speed
broadband to underserved areas in Ireland makes it a compelling investment
proposition which has a positive impact on local communities."
Richard Sem
Partner at Pantheon, PINT's Investment Manager
Principal risks and uncertainties
Integrity, objectivity and accountability are embedded in the Company's
approach to risk management.
Patrick O'Donnell Bourke
Chair of the Audit and Risk Committee
The Company is exposed to a variety of risks and uncertainties and the Board
is ultimately responsible for the risk management of the Company. It seeks to
achieve an appropriate balance between mitigating risk and generating
long-term sustainable risk-adjusted returns for shareholders. Integrity,
objectivity and accountability are embedded in the Company's approach to risk
management. The Board exercises oversight of this framework, through its Audit
and Risk Committee, and has undertaken a robust assessment and review of the
principal risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity.
The Company is reliant on the risk management frameworks of the Investment
Manager and other key service providers, as well as on the risk management
operations of each Portfolio Company. The Board manages risks through reports
from the Investment Manager and other service providers and through regular
updates on the operational and financial performance of Portfolio Companies.
For each risk, and emerging risks, the likelihood and consequences are
identified, and the management controls and frequency of monitoring are
confirmed and reviewed during Audit and Risk Committee meetings. Please see
below a summary of the principal risks and their mitigation.
Risk management procedure
· Risk appetite
· Risk identification and assessment
· Monitoring and reporting
· Control and mitigation
Infrastructure asset risks
Risk Description of risk Mitigation
Market conditions · Macroeconomic or market volatility, as the result of the Russian · The Company targets a diversified infrastructure programme with
invasion of Ukraine and the recovery from Covid-19, presents a significant exhibited low to moderate correlation of exposures across sectors and
threat to the global economy, resulting in a combination of rising inflation, geographies; historically, infrastructure sub‑sectors have returns relative
interest rates and uncertain supply chains, which flows through to pricing, to one another.
Higher valuations and portfolio performance.
· Portfolio Companies could put in place inflation protection by
· Recession in Europe, the US or the UK could impact the growth seeking to include inflation adjustment mechanisms in their contracts.
prospects of one or more of the Portfolio Companies.
· Certain Portfolio assets already provide inflation protection via
· Rising inflation and interest rates may lead to higher financing contracted revenues linked to inflation.
costs for a Portfolio Company which could adversely impact its profits.
· Portfolio Companies could also put in place interest rate hedges.
· Discount rate pressures in light of the rising interest rate
environment.
Political and regulatory changes · Political actions and regulatory changes may adversely impact the · The Company predominantly targets investments in North America,
operating and revenue structure of Portfolio Companies. Europe and Australasia which have broadly stable legal, political and
regulatory regimes.
· Complexity of government regulatory standards may result in
Level litigation/disputes over interpretation and enforceability. · The Investment Manager conducts due diligence on the regulatory
risks of a prospective Portfolio Company to ensure protections in the
underlying contracts are in place.
Falls in demand · A fall in demand for the Portfolio Companies' services or products. · The Investment Manager conducts sensitivity analysis and demand
A Portfolio Company's revenue is exposed to market supply and demand forces. stress testing in its due diligence for assets.
Falls in demand that are below the levels used in underlying valuation
assumptions could lead to adverse financial performance of the · The investment strategy is to target assets that have the majority
Level Portfolio Company. of their cash flows protected through contractual structures, which limits
demand risk.
Investment strategy risks
Risk Description of risk Mitigation
Returns target · The Company may not meet its investment objective; this could · The Investment Manager adheres to the investment policy and
result in returns being materially lower than targeted and dissatisfied criteria when making investment decisions.
investors.
· The Board reviews the investment performance of the Company on a
Level quarterly basis to ensure adherence to the investment policy.
Investor sentiment · Investor sentiment could lead to the Company share price falling · Alternative forms of capital such as debt could be considered.
below its NAV, which if it persisted for a long time, would inhibit new equity
capital raises. An inability to raise new equity capital could be inhibitive · Opportunistic sale of targeted existing assets.
to scaling the Portfolio and disrupt liquidity levels.
Higher · The Company has the ability to buy back shares.
· The Investment Manager constantly targets new shareholders.
Lack of suitable investment opportunities · Unavailability of appropriate investments to acquire due to · The Board reviews investment guidelines and will make appropriate
unfavourable deal terms. recommendations to shareholders if it believes changes are needed.
· Re‑investment risk which could arise from delayed redeployment of · The Investment Manager seeks to continue actively sourcing
Level any proceeds from the sale of assets. appropriate investments by engaging with its Sponsors and negotiate
co‑investment rights when committing capital to the Sponsors' underlying
funds.
· The demand and need for infrastructure should ensure continuing
deal flow.
Liquidity management including level and cost of debt · Failure to manage the Company's liquidity position, including cash · Regular reporting of current and projected liquidity, under both
and credit facilities, could result in insufficient liquidity to pay dividends normal and stress conditions.
and operating expenses or to make new or support investments.
· Liquidity availability is assessed during the allocation of new
Level · Excessive cash balances, introducing cash drag on the Company's investment opportunities.
returns.
· The Board and Investment Manager review Company debt levels and
· High levels and cost of debt within the Company and/or the special covenants, on a quarterly basis, to ensure they stay within the leverage cap
purpose vehicles which invest in the Portfolio Companies could result in that has been established to limit exposure to debt-related risks.
covenant breaches and/or increased volatility in the Company's NAV.
· Debt levels within Portfolio Companies are reviewed by the
Investment Manager as part of due diligence.
Portfolio concentration risk Portfolio concentration risk in relation to exposure to individual assets, · The Board conducts quarterly reviews of the investment portfolio
operators, geographies and asset types. This could impact NAV and ultimately against the Company's investment policy and criteria.
affect the Company's targeted rate of return.
· Investment restrictions outlined in the investment policy are
Reducing designed to reduce portfolio concentration risk.
Operational risk
Risk Description of risk Mitigation
Investment Manager · An over‑reliance on the Investment Manager. A failure of the · The Board performs an ongoing review of the Investment Manager's
Investment Manager to retain or recruit appropriately qualified personnel may performance in addition to a formal annual review.
have a material adverse effect on the Company's overall performance.
· Pantheon continues to invest in its talent and regularly considers
Level succession planning.
Tax status and legislation · Failure to observe requirements to maintain investment trust tax · The Board, through the Company Secretary, ensures that the Company
status in the UK. meets the criteria to maintain the current investment trust status of the
Company.
· Failure to understand tax risks when investing or divesting could
Level lead to tax exposure or financial loss. · The Board has engaged a third party to provide taxation advice and
Pantheon's investment process incorporates the assessment of tax.
Third‑party providers · Poor performance by third‑party service providers could result in · The Board reviews and signs off contractual arrangements with all
inability to perform key functions (e.g. reporting, record keeping etc.) key service providers.
effectively. This could result in loss of Company information, errors in
published information or damage to its reputation. · The Board reviews the performance of key service providers
Level
annually.
Cyber security · Cyber security risk which could arise from reputational damage from · The Audit and Risk Committee reviews service providers' cyber
theft or loss of confidential data through cyber hacking. security arrangements, controls and business continuity processes to ensure
any data loss is mitigated and reputational damage is minimised.
Level
Other risks
Risk Description of risk Mitigation
Geopolitical turbulence · Geopolitical turbulence (e.g. Ukraine/Russia conflict): medium and · This risk is considered on an asset‑by‑asset basis.
long‑term impact of global economies, including energy prices and interest
rates, and individual companies to which the Company has exposure. · The Company also monitors the impact of geopolitical trends on the
overall Portfolio as well as on individual sectors and companies.
Higher
Climate change · Climate change causing physical and transition risks could impact · The Investment Manager conducts due diligence in relation to
the financial performance of the Portfolio. Physical risks arising from climate change matters before making investment decisions.
extreme weather events could impact the operations of a Portfolio Company. In
addition, transition risk in terms of policy, legal, technological, market and · The Company invests in assets with strong management teams that
Level reputation risks could negatively impact the operations of the assets. have a long track record of actively managing physical risks such as
maintenance schedules.
· The Company has in place an ESG policy, including taking account of
sector exclusions.
Viability statement
Pursuant to provision 31 of the UK Corporate Governance Code 2018, and the AIC
Code of Corporate Governance, the Board has assessed the viability of the
Company over a three‑year period from 31 December 2022. The Directors
consider that a three‑year period to December 2025 is appropriate for
assessing the Company's viability. There is greater predictability of the
Company's cash flows over that time period and increased uncertainty
surrounding economic, political and regulatory changes over the longer term.
The Company has a diverse Portfolio of infrastructure investments, expected to
produce good and reasonably predictable levels of income which cover the
costs, and expected to cover the Company's dividend target as the Portfolio
matures. The defensive nature of the Portfolio and of the essential services
that the businesses in which the Company invest provide to their customers are
being demonstrated in the current climate, with infrastructure assets
providing strong downside protection across market cycles given the regulated
and contracted nature of cash flows, which typically offer strong inflation
protection.
Against this background, in making their assessment, the Directors reviewed
the reports of the Investment Manager in relation to the resilience of the
Company, taking account of its current position, the principal risks facing it
in a downside scenario due to the geopolitical uncertainties as a result of
the Russia-Ukraine conflict, including disruption to the supply chain and
increases in the cost of living as a result of this conflict, inflationary
expectations, interest rate rises and, the impact of climate change on the
Company's portfolio. As discussed in Note 1 to the financial statements, the
effectiveness of any mitigating actions and the Company's risk appetite were
also considered as part of the various downside liquidity scenario modelling
carried out, after which the Directors came to their conclusion as to the
Company's viability over the three year period.
The Investment Manager considers the future cash requirements of the Company
before acquiring or funding Portfolio Companies. Furthermore, the Board
receives regular updates from the Investment Manager on the Company's cash and
debt position, which allows the Board to maintain its fiduciary responsibility
to the shareholders and, if required, limit funding for existing commitments.
The Board considered the Company's viability over the three year period based
on a working capital model prepared by the Investment Manager. The working
capital model forecasts key cash flow drivers such as capital deployment rate,
investment returns and operating expenses. In connection with the preparation
of the working capital model, capital raises, realisations and distribution
payments were assumed not to occur during the three‑year period, unless
already predetermined. The working capital model also considered other
scenarios including an increase in the cost of debt and restriction in debt
availability, and an inability for the Company to raise equity.
The results of stress testing showed that the Company would be able to
withstand the impact of various scenarios occurring over the three-year
period. The Directors also considered the Company's position with reference to
its investment trust structure, its business model, its business objectives,
the principal risks and uncertainties as detailed above and its present and
projected financial position. As part of the overall assessment, the Directors
took into account the Investment Manager's culture, which emphasises
collaboration and accountability, the Investment Manager's conservative
approach to balance sheet management, and its emphasis on investing with
underlying Sponsors that are focused on generating outperformance.
To support their statement, the Directors also took into account the nature of
the Company's business, including the available liquidity, the potential of
its portfolio of investments to generate future income and capital proceeds,
and the ability of the Directors to minimise the level of cash outflows, if
necessary. Based on the above assessment, the Directors have a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the three-year period to December 2025.
On behalf of the Board
Vagn Sørensen
Chair
1 March 2023
Board of Directors
Vagn Sørensen
Chair and Nomination Committee Chair
Appointed to the Board 4 October 2021
Mr Vagn Sørensen is an experienced non‑executive chair and director of
listed and private companies. After attending Aarhus Business School and
graduating with a MSc degree in Economics and Business Administration, Mr
Sørensen began his career at Scandinavian Airlines Systems in Sweden, rising
through numerous positions in a 17‑year career before becoming Deputy CEO
with special responsibility for Denmark. Between 2001 and 2006, Mr Sørensen
was President and Chief Executive Officer for Austrian Airlines Group in
Austria, a business with approximately €2.5 billion of turnover, 8,000
employees and listed on the Vienna Stock Exchange. Mr Sørensen also served as
Chair of the Association of European Airlines in 2004. Since 1999, Mr
Sørensen has been a Tier 1 senior industrial adviser to EQT, a private equity
sponsor, and has been a non‑executive director or Chair of a number of their
Portfolio Companies. Since 2008, Mr Sørensen has been a senior adviser to
Morgan Stanley Investment Bank.
Mr Sørensen is currently Chair of Air Canada (since 2017) and a
non‑executive director of CNH Industrial and Royal Caribbean Cruises.
Notable previous non‑executive appointments have included Chair of SSP Group
(2006 to February 2020), Chair of Scandic Hotels AB (2007‑2018), Chair of
TDC A/S (2006‑2017) and Chair of FLSmidth & Co (2009‑2022).
Patrick O'Donnell Bourke
Audit and Risk Committee Chair
Appointed to the Board 4 October 2021
Mr Patrick O'Donnell Bourke is an experienced board member with more than 25
years of experience in energy and infrastructure.
After graduating from Cambridge University, Mr O'Donnell Bourke started his
career at Peat Marwick, Chartered Accountants (now KPMG) and qualified as a
Chartered Accountant. After that he held a variety of investment banking
positions at Hill Samuel and Barclays de Zoete Wedd. In 1995, he joined
Powergen Plc, where he was responsible for mergers and acquisitions before
becoming Group Treasurer. In 2000, Mr O'Donnell Bourke joined Viridian Group
Plc as Group Finance Director and later became Chief Executive, appointed by
the private equity shareholder following take‑over in 2006. In 2011, he
joined John Laing Group, a specialist international investor in, and manager
of, greenfield infrastructure assets where he served, as CFO until his
retirement in 2019. While at John Laing, he was part of the team which
launched the John Laing Environmental Assets Fund on the London Stock Exchange
in 2014.
Mr O'Donnell Bourke currently serves as Chair of Ecofin US Renewables
Infrastructure Trust Plc and as Chair of the Audit Committee of Harworth Group
Plc (a leading UK regenerator of land and property for development and
investment). Mr O'Donnell Bourke was previously Chair of the Audit and Risk
Committee at Calisen Plc (an owner and operator of smart meters in the UK) and
Chair of the Audit Committee at Affinity Water.
Anne Baldock
Remuneration Committee Chair and Senior Independent Director
Appointed to the Board 4 October 2021
Ms Anne Baldock is an experienced board member and lawyer with over 30 years'
experience in the infrastructure sector.
Ms Baldock graduated in law from the London School of Economics and was a
qualified Solicitor in England and Wales from 1984 to 2012. Ms Baldock was a
Partner at Allen & Overy LLP between 1990 and 2012, during which time she
was Managing Partner, Projects Group London (1995‑2007), non‑executive
member of the firm's Global/Main Strategic Board (2000‑2006) and Global Head
of Projects, Energy and Infrastructure (2007‑2012). Notable transactions
included the Second Severn Crossing, Eurostar, the securitisation of a major
UK water utility and several major PPP projects in the UK and abroad.
Ms Baldock's current roles include Senior Independent Director for the
Restoration and Renewal Delivery Authority Limited (the delivery body created
by parliament to deal with the restoration of the Houses of Parliament),
Senior Independent Director and Chair of Audit and Risk Committee for East
West Railways Limited (the Government‑owned company constructing the new
Oxford to Cambridge railway) and non‑executive director of Electricity North
West Limited. Amongst previous roles, Ms Baldock was non‑executive director
of Thames Tideway Tunnel, non‑executive director of Hydrogen Group
(AIM‑listed) and Trustee of Cancer Research UK.
Andrea Finegan
Management Engagement Committee Chair
Appointed to the Board 4 October 2021
Ms Andrea Finegan is an experienced infrastructure asset management
professional with over 30 years of sector experience.
After graduating from Loughborough University, Ms Finegan held investment
banking roles at Deutsche Bank and Barclays Capital, before joining Hyder
Investments as Head of the Deal Closing Team. Between 1999 and 2007, Ms
Finegan worked at Innisfree Limited, the investment manager of an £8 billion
infrastructure asset portfolio, latterly as Board Director and Head of Asset
Management. Ms Finegan was subsequently Chief Operating Officer, ING
Infrastructure Funds and Fund Consultant to Climate Change Capital.
In 2012, Ms Finegan joined Greencoat Capital LLP for the set up and launch of
Greencoat UK Wind Plc, the renewable infrastructure investment trust, in 2013,
then became Chief Operating Officer until 2018, a position that included
structuring and launching another renewable energy infrastructure fund listed
on the London Stock Exchange and Euronext Dublin (Greencoat Renewables Plc)
and a number of private markets solar energy funds.
Ms Finegan is currently Chair of the Valuation Committee of Schroders
Greencoat LLP, a role she has held since 2015, and independent consultant to
the board of Sequoia Economic Infrastructure Income Fund Limited, working
closely with the ESG & Stakeholder Committee and the Risk Committee.
Extracts from the Directors' report
Share capital
The rights attaching to the Company's shares are set out in the Company's
Articles of Association. Further details can be found in Note 16 of the
financial statements.
As at 31 December 2022 and as at the date of this report, the Company had
shares in issue as shown in the table overleaf, all of which were listed on
the official list maintained by the FCA and admitted to trading on the London
Stock Exchange. No shares were held in treasury at the year end.
There are no restrictions on the free transferability of the Shares, subject
to compliance with applicable securities laws and provisions in the Articles
entitling the Board to decline to register certain transfers in a limited
number of circumstances, such as where the transfer might cause the Company to
be subject to or operate in accordance with ERISA and other US laws.
The powers given to the Directors are contained within the Company's articles,
are subject to relevant legislation and, in certain circumstances (including
in relation to the issuing or buying back by the Company of its shares), are
subject to the authority being given to the Directors by shareholders.
Prior to the Company's listing on 13 October 2021, the Directors were
authorised in accordance with the Articles to allot up to a maximum of two
billion Ordinary and/or C Shares and to disapply pre-emption rights in respect
of those Ordinary and/or C shares, such authority to expire on 13 October
2024. To date, no Shares have been allotted under this authority.
An authority to repurchase up to 14.99% of the Company's issued share capital
to be held in treasury or for cancellation was also granted to the Directors
on 12 October 2021, however this will expire at the conclusion of the 2023 AGM
when a resolution for its renewal will be proposed, as explained in the
separate 2023 AGM Notice. To date, no Shares have been repurchased by the
Company under this existing authority.
Number of shares Voting rights attached Number of shares held
Share capital and voting rights in issue to shares in treasury
At Initial Public Offering
Ordinary Shares
of 0.01p each 400,000,000 400,000,000 -
Subscription Shares
of 0.01p each 80,000,000 80,000,000 -
At 31 December 2022
Ordinary Shares
at 0.01p each 480,000,000 480,000,000 -
Going concern
The Company's business activities, together with the factors likely to affect
its future development, performance and position, including its financial
position, are set out in the strategic report and Investment Manager's report.
The Directors have made an assessment of going concern, taking into account
both the Company's financial position at the balance sheet date and the
expected performance of the Company, using the information available up to the
date of issue of the financial statements.
Total available financing as at 31 December 2022 stood at £245.4 million,
comprising £182.9 million in available cash balances and £62.5 million
through the Company's RCF, which matures in December 2025. The Company
maintains a policy to hold liquidity sufficient to cover all future operating
and financial commitments due in the next twelve months. This includes all
forecast operating costs, dividend payments, foreign exchange hedge
settlements due (based on mark-to-market valuations), and all unfunded
investment commitments which could be called during the period as detailed in
the Cash and liquidity management section on page 19.
The Directors considered downside liquidity modelling scenarios with varying
degrees of decline in investment valuations and key drivers such as deployment
rate, investment returns and operating expenses. In connection with the
preparation of the model, capital raises, realisations and distribution
payments were assumed not to occur during the assessment period. In the event
of a downside scenario, the Company can take steps to limit or mitigate the
impact on the balance sheet, including drawing on its RCF, which includes the
provision of additional liquidity for working capital.
After due consideration of the activities of the Company, its assets,
liabilities, commitments and financial resources, the Directors concluded that
the Company has adequate resources to continue in operation for at least
twelve months from the approval of the financial statements as at 31 December
2022. For this reason, they consider it appropriate to continue to adopt the
going concern basis in preparing the financial statements.
Directors' responsibility statement
The Directors are responsible for preparing the annual report and the
financial statements in accordance with applicable laws and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with applicable law and UK Accounting Standards
(United Kingdom Generally Accepted Accounting Practice). Under company law the
Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Company as
at the end of each financial year and of the profit or loss of the Company for
that period.
In preparing these financial statements, the Directors are required to:
· present a true and fair view of the financial position, financial
performance and cash flows of the Company;
· select suitable accounting policies in accordance with FRS 102 and
then apply them consistently;
· present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable information;
· make judgements and estimates that are reasonable and prudent;
· state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
· prepare the financial statements on a going concern basis unless it
is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also responsible for preparing the strategic report, the
Directors' report, the Directors' remuneration report, the Corporate
Governance Statement and the report of the Audit and Risk Committee in
accordance with the Companies Act 2006 and applicable regulations, including
the requirements of the Listing Rules and the Disclosure Guidance and
Transparency Rules. The Directors have delegated responsibility to the
Investment Manager for the maintenance and integrity of the Company's
corporate and financial information included on the Company's website
(www.pantheoninfrastructure.com). Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Each of the Directors, whose names are listed above, confirms that to the best
of his or her knowledge:
· the financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Company; and
· the strategic report contained in the annual report and financial
statements includes a fair review of the development and performance of the
business and the position of the Company, together with a description of the
principal risks and uncertainties that it faces.
The UK Corporate Governance Code requires Directors to ensure that the annual
report and financial statements are fair, balanced and understandable. In
order to reach a conclusion on this matter, the Board has requested that the
Audit and Risk Committee advises on whether it considers that the annual
report and financial statements fulfil these requirements. The process by
which the Audit and Risk Committee has reached these conclusions is set out in
its report on pages 92 to 94 of the annual report. As a result, the Board has
concluded that the annual report and financial statements for the period ended
31 December 2022, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
Signed on behalf of the Board by
Vagn Sørensen
Chair
1 March 2023
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's
statutory accounts for the period ended 31 December 2022 but is derived from
those accounts. Statutory accounts for the period ended December 2022 will be
delivered to the Registrar of Companies in due course. The Auditors have
reported on those accounts; their report was (i) unqualified, (ii) did not
include a reference to any matters to which the Auditors drew attention by way
of emphasis without qualifying their report and (iii) did not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006. The text of
the Auditors' report can be found in the Company's full Annual Report and
financial statements at www.pantheoninfrastructure.com.
Income statement
For the period from 9 September 2021 to 31 December 2022
9 September 2021 to 31 December 2022
Revenue Capital Total
Note £'000 £'000 £'000
Gain on investments at fair value through profit or loss(1) 10 - 19,592 19,592
Losses on derivative financial instruments at fair value through profit or 13 - (8,520) (8,520)
loss
Foreign exchange gains on cash and cash equivalents - 5 5
Investment management fees 2 (3,194) - (3,194)
Other expenses 3 (1,360) (555) (1,915)
(Loss)/profit before financing and taxation (4,554) 10,522 5,968
Finance income 5 2,096 - 2,096
Interest payable and similar expenses 6 (36) - (36)
(Loss)/profit before taxation (2,494) 10,522 8,028
Taxation recovered/(paid) 7 - - -
(Loss)/profit for the period, being total comprehensive income for the period (2,494) 10,522 8,028
Earnings per share - basic and diluted 8 (0.58p) 2.45p 1.87p
1. Includes foreign exchange movements on investments.
The Company does not have any income or expense that is not included in the
return for the period, therefore the return for the period is also the total
comprehensive income for the period. The supplementary revenue and capital
columns are prepared under guidance published in the Statement of Recommended
Practice (SORP) issued by the Association of Investment Companies (AIC). The
total column of the statement represents the Company's statement of total
comprehensive income prepared in accordance with FRS 102.
All revenue and capital items in the above statement relate to continuing
operations.
The Notes below form part of these financial statements.
Statement of changes in equity
For the period from 9 September 2021 to 31 December 2022
Capital
Share Share redemption Capital Revenue
capital premium reserve(1) reserve(1) reserve(1) Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Balance at 9 September 2021 - - - - - -
Share issue costs - (9,267) - - - (9,267)
Ordinary Shares issued 16 4,800 395,200 - - - 400,000
Subscription shares issued (subsequently converted to Ordinary Shares) 16 - 80,800 - - - 80,800
Cancellation of share premium - (387,284) 387,284 - - -
Interim dividend paid 9 - - (4,800) - - (4,800)
Profit/(loss) for the period - - - 10,522 (2,494) 8,028
Closing equity shareholders' funds 4,800 79,449 382,484 10,522 (2,494) 474,761
1. The capital redemption reserve, capital reserve and revenue reserve
are all the Company's distributable reserves. The capital redemption reserve
has arisen from the cancellation of the Company's share premium account and is
a distributable reserve.
The Notes below form part of these financial statements.
Balance sheet
As at 31 December 2022
31 December
2022
Note £'000
Non-current assets
Investments at fair value 10 301,382
Debtors 11 740
Current assets
Debtors 11 959
Cash and cash equivalents 12 182,937
183,896
Creditors: Amounts falling due within one year
Other creditors 14 (2,737)
(2,737)
Net current assets 181,159
Total assets less current liabilities 483,281
Creditors: Amounts falling due after one year
Derivatives-financial instruments 13 (8,520)
Net assets 474,761
Capital and reserves
Called-up share capital 16 4,800
Share premium 17 79,449
Capital redemption reserve 17 382,484
Capital reserve 17 10,522
Revenue reserve 17 (2,494)
Total equity shareholders' funds 474,761
NAV per Ordinary Share 18 98.9p
The financial statements were approved by the Board of Pantheon Infrastructure
Plc on 1 March 2023 and were authorised for issue by:
Vagn Sørensen
Chair
Company Number: 13611678
The Notes below form part of these financial statements.
Cash flow statement
For the period from 9 September 2021 to 31 December 2022
9 September
2021 to
31 December
2022
£'000
Cash flow from operating activities
Investment management fees paid (1,994)
Operating fees paid (1,581)
Other cash payments (110)
Net cash outflow from operating activities (3,685)
Cash flow from investing activities
Purchase of investments (281,790)
Net cash outflow from investing activities (281,790)
Cash flow from financing activities
Share issue proceeds 480,800
Share issue costs (9,267)
Dividends paid (4,800)
Bank charges (1)
Finance income 1,675
Net cash inflow from financing activities 468,407
Increase in cash in the period 182,932
Cash and cash equivalents at the beginning of the period -
Foreign exchange gains on cash and cash equivalents 5
Cash and cash equivalents at the end of the period 182,937
The Notes below form part of these financial statements.
Notes to the financial statements
1. Accounting policies
Pantheon Infrastructure Plc (the 'Company') is a listed closed-ended
investment company incorporated in England and Wales on 9 September 2021,
with registered "company number" 13611678. The Company began trading on
15 November 2021 when the Company's shares were admitted to trading on the
London Stock Exchange. The registered office of the Company is Link Company
Matters Limited, 6th Floor, 65 Gresham Street, London, EC2V 7NQ.
A. Basis of preparation
The Company's financial statements have been prepared in compliance with FRS
102 as it applies to the financial statements of the Company for the period
from 9 September 2021 to 31 December 2022. They have also been prepared on
the assumption that approval as an investment trust will continue to be
granted. The Company's audited financial statements are presented in GBP and
all values are rounded to the nearest thousand pounds (£'000) except when
indicated otherwise.
The financial statements have been prepared in accordance with the SORP for
the financial statements of investment trust companies and venture capital
trusts issued by the AIC in July 2022.
The financial statements comprise the results of the Company only. The Company
has control over a number of subsidiaries, further details of which are given
in Note 20. Where the Company owns a subsidiary that is held as part of the
investment portfolio and its value to the Company is through the fair value
rather than as the medium through which the Group carries out business, the
Company excludes it from consolidation. The subsidiaries have not been
consolidated in the financial statements under FRS 102. These subsidiaries are
included at fair value within investments in accordance with 9.9C(a) of FRS
102.
These are the Company's first annual financial statements, for the period
9 September 2021 to 31 December 2022. Consequently, there are no
comparatives for a previous period.
B. Going concern
The financial statements have been prepared on the going concern basis and
under the historical cost basis of accounting, modified to include the
revaluation of certain assets at fair value.
The Directors have made an assessment of going concern, taking into account
the Company's current performance and financial position as at
31 December 2022.
In addition, the Directors have assessed the outlook, which considers the
ongoing geopolitical uncertainties as a result of the Russia-Ukraine conflict
including disruption to global supply chains and increases in the cost of
living as a result of this conflict, persistent inflation, interest rate rises
and the impact of climate change on the Company's Portfolio using the
information available up to the date of issue of the financial statements.
In reaching this conclusion, the Board considered budgeted and projected
results of the business, including projected cash flows, various downside
modelling scenarios and the risks that could impact the Company's liquidity.
Having performed their assessment, the Directors considered it appropriate to
prepare the financial statements of the Company on a going concern basis.
The Company has sufficient financial resources and liquidity, is well placed
to manage business risks in the current economic environment, and can continue
operations for a period of at least twelve months from the date of issue of
these financial statements.
C. Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business, being investment in infrastructure to generate
investment returns while preserving capital. The financial information used
by the Directors and Investment Manager to allocate resources and manage the
Company presents the business as a single segment comprising a
homogeneous portfolio.
D. Investments
The nature of the Company's underlying assets comprises unlisted investments,
the majority of which are held through its subsidiary, Pantheon Infrastructure
Holdings LP (PIH LP), with one held directly. While the Company operates a
robust and consistent valuation process, there is significant estimation
uncertainty in the underlying asset valuations which are estimated at a point
in time. Accordingly, while relevant information relating to but received
after the measurement date is considered, the Directors will only consider an
adjustment to the financial statements if it were to have a significant impact
and is indicative of conditions present at the measurement date.
The Company has fully adopted sections 11 and 12 of FRS 102. All investments
held by the Company are classified as 'fair value through profit or loss'.
The Company's business is investing in infrastructure assets with a view to
profiting from their total return in the form of interest, dividends or
increases in fair value. The investments are recognised at fair value on
initial recognition represented by the cost of acquisition and the Company
manages and evaluates the performance of its investments on a fair value
basis.
Upon initial recognition investments held by the Company are classified 'at
fair value through profit or loss'. All gains and losses are allocated to the
capital column within the Income Statement as 'Gains on investments held at
fair value through profit or loss'. When a purchase or sale is made under a
contract, the terms of which require delivery within the time frame of the
relevant market, the investments concerned are recognised or derecognised on
the trade date. Subsequent to initial recognition, investments are valued at
fair value through profit or loss. The fair values for the Company's
investments are established by the Directors after discussion with the
Investment Manager using valuation techniques in accordance with the
International Private Equity and Venture Capital (IPEV) guidelines. Valuations
are based on the net asset value of those funds ascertained from periodic
valuations provided by the Sponsors of the investments and recorded up to the
measurement date. Such valuations are necessarily dependent upon the
reasonableness of the valuations by the Sponsor of the underlying assets. In
the absence of contrary information the values are assumed to be reliable.
These valuations are reviewed periodically for reasonableness and recorded up
to the measurement date. The Sponsor is usually the best placed party to
determine the appropriate valuation. The annual and quarterly reports received
from the Sponsors are reviewed by the Investment Manager to ensure consistency
and appropriateness of approach to reported valuations.
The basis of valuation for infrastructure assets provided by the Sponsors
depends on the nature of the underlying assets and will typically involve a
fair value approach in line with recognised accounting standards and industry
best practice guidelines such as IPEV. Infrastructure assets often display
particular characteristics which will affect the valuation approach tending to
result in a higher prevalence of discounted cash flows in the valuation, where
the fair value is estimated by deriving the present value of the expected cash
flows generated by the investment through the use of reasonable assumptions
such as appropriate discount rate(s) to reflect the inherent risk of the
asset(s) forming the investment.
The discounted cash flow basis requires assumptions to be made regarding
future cash flows, terminal value and the discount rate to be applied to these
cash flows. There is also consideration given to the impact of wider
megatrends such as the transition to a lower-carbon economy and climate
change.
The fair value will generally reflect the latest valuations available from the
Sponsor which may not coincide with the Company's reporting date. In such
cases the Investment Manager performs a roll forward from the latest available
valuation to the relevant reporting date. The roll forward process takes
consideration of the following factors:
i. transactions and foreign-exchange movements in the intervening
period; and
ii. adjustments for expected performance of the investment in the
intervening period.
This may also include, but is not limited to, in consultation with the
Sponsor, changes in multiples/discount rates, asset fundamentals (for instance
operating performance) and the macroeconomic environment.
On an annual basis the Investment Manager receives the annual audited
financial statements from the Sponsors of the asset. The Investment Manager
utilises the audited accounts to gain comfort that the underlying
infrastructure asset is fair valued in line with recognised accounting
standards and audited by a recognised auditor. This is in addition to the
analysis performed by the Investment Manager to determine the reasonableness
of the valuation and that it is appropriate to the investment and performance
thereof.
If the Sponsor does not provide audited financial statements, to the extent
that the Board of the Company or the Investment Manager deem it appropriate,
and it is possible to do in conjunction with the Sponsor, the valuation of the
underlying infrastructure asset is independently verified. The scope of this
verification is determined on a case-by-case basis and, dependent on the
asset, could include an independent valuation report from a valuation provider
engaged by the Investment Manager. The Investment Manager then analyses the
independent valuation report to determine the reasonableness of the valuation
and that it is appropriate to the investment and performance thereof before
presenting to the Investment Manager's Valuation Committee and the Board for
approval.
E. Financial instruments
The Company makes investments and has commitments in currencies other than
GBP, its reporting currency, and accordingly, a significant proportion of its
investments and cash balances are in currencies other than GBP. The Company
uses forward foreign currency exchange contracts to hedge foreign exchange
risks associated with its underlying investment activities. The contracts
entered into by the Company are denominated in the currency of the geographic
area in which the Company has significant exposure against its
reporting currency.
Forward foreign currency exchange contracts are initially recognised and
subsequently measured at fair value, the amount for which an asset, liability
or equity instrument could be exchanged or settled between knowledgeable,
willing parties in an arm's length transaction. Premiums payable under such
arrangements are initially capitalised on the Balance Sheet.
The Company uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure fair
value, maximising the use of relevant observable inputs and minimising the use
of unobservable inputs significant to the fair value measurement as a whole.
The Company has elected not to apply hedge accounting and therefore changes
in the fair value of forward foreign currency exchange contracts are
recognised within the capital column of the Income Statement in the period in
which they occur.
F. Income
Distributions receivable are recognised on the ex-dividend date. Where no
ex-dividend date is quoted, distributions are recognised when the Company's
right to receive payment is established. UK distributions are shown net of
tax credits and foreign dividends are gross of the appropriate rate of
withholding tax, with any withholding tax suffered being accounted for
separately.
Other income is accounted for on an accruals basis.
Gains or losses resulting from the movement in fair value of the Company's
investments held at fair value through profit or loss are recognised in the
Income Statement at each valuation point.
G. Expenses
All expenses are accounted for on an accruals basis. Expenses, including
investment management fees, are charged through the revenue account, except
expenses which are incidental to the acquisition or disposal of an investment.
These are treated as capital costs, separately identified, and charged to
the capital account of the Income Statement.
H. Finance income
Finance income comprises interest received on funds invested into deposit
accounts. Finance income is accounted for on an accruals basis.
I. Finance costs
Finance costs consist of interest and other costs that the Company incurs in
connection with bank and other borrowings. Finance costs also include the
amortisation charge of arrangement or other costs associated with the set-up
of borrowings; these are amortised over the period of the loan. All other
finance costs are expensed in the period in which they occur.
J. Taxation
Corporation tax is recognised in profit or loss except to the extent that it
relates to items recognised directly in equity, in which case it is
recognised in equity.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The amount of deferred tax that is provided is
based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantially
enacted at the period end date.
Deferred tax is not provided on capital gains and losses arising on the
revaluation or disposal of investments because the Company meets (and intends
to continue for the foreseeable future to meet) the conditions for approval as
an investment trust company, pursuant to sections 1158 and 1159 of the CTA.
Deferred tax assets are only recognised if it is considered more likely than
not that there will be suitable profits from which the future reversal of
timing differences can be deducted.
K. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with
banks and other short-term highly liquid investments with original maturities
of three months or less at the date of placement, free of any encumbrances,
which are readily convertible into known amounts of cash and subject to
insignificant risk of changes in value.
L. Debtors
Trade and other debtors are initially recognised at transaction value.
Subsequent measurement is at the initially recognised value less any cash
payments from the debtor, and less provision or write off for doubtful debts.
A provision is made where there is objective evidence that the Company will
not be able to recover balances in full. Any adjustment is recognised in
profit or loss as an impairment gain or loss.
M. Creditors
Trade and other creditors are initially recognised at fair value and
subsequently held at amortised cost.
N. Interest-bearing loans and liabilities
All bank borrowings are initially recognised at transaction value net of
attributable transaction costs. After initial recognition, all bank
borrowings are measured at amortised cost using the effective
interest method.
O. Dividends payable to shareholders
Equity dividends are recognised when they become legally payable.
Interim equity dividends are recognised when paid. Final equity dividends
are recognised when approved by shareholders at an Annual General Meeting.
P. Share premium
The share premium account represents the accumulated premium paid for shares
issued above their nominal value less issue expenses. This is a reserve
forming part of the non-distributable reserves. The following items are taken
to this reserve:
· costs associated with the issue of equity; and
· premium on the issue of shares.
Q. Capital redemption reserve
The capital redemption reserve represents cancelled share premium less
dividends paid from this reserve. This is a distributable reserve.
This reserve also includes the cost of acquiring the Company's Ordinary
Shares if the Company is in a position to buy back shares.
R. Capital reserve
The following are accounted for in this reserve:
· gains and losses on the realisation of investments;
· unrealised gains and losses on investments;
· gains and losses on foreign exchange forward contracts;
· realised foreign exchange differences of a capital nature; and
· expenses, together with related taxation effect, charged to this
reserve in accordance with the above policies.
S. Revenue reserve
The revenue reserve represents the surplus of accumulated profits from the
revenue column of the Income Statement and is distributable.
T. Foreign exchange
The functional and presentational currency of the Company is GBP because it is
the primary currency in the economic environment in which the Company operates
and, as a UK listed company, GBP is also its capital raising currency.
Transactions denominated in foreign currencies are recorded in the local
currency at actual foreign exchange rates as at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies at the
period end are reported at the rates of foreign exchange prevailing at the
period end. Any gain or loss arising from a change in exchange rates
subsequent to the date of the transaction is included as a foreign exchange
gain or loss in the revenue or capital column of the Income Statement
depending on whether the gain or loss is of a capital or revenue nature.
For non-monetary assets these are recognised as fair value adjustments.
U. Significant judgements, estimates and assumptions
The preparation of financial statements requires the Company and Investment
Manager to make judgements, estimates and assumptions that affect the reported
amounts of investments at fair value at the financial reporting date and the
reported fair value movements during the reporting period. However,
uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of the investments
at fair value in future years. Details of how the fair values of
infrastructure assets are estimated and any associated judgements applied are
provided in section (D) of this note and also within the 'market price risk'
section in Note 23.
2. Investment management fees
Period ended 31 December 2022
Revenue Capital Total
£'000 £'000 £'000
Investment management fees 3,194 - 3,194
3,194 - 3,194
The Investment Manager is entitled to a quarterly management fee as at an
annual rate of:
· 1.0% of the part of the Company's Net Asset Value up to and
including £750 million and
· 0.9% of the part of such Net Asset Value in excess of
£750 million.
· As at 31 December 2022, £1,199,679 was owed for investment
management fees.
The Investment Manager does not charge a performance fee.
3. Other expenses
Period ended 31 December 2022
Revenue Capital Total
£'000 £'000 £'000
Secretarial and accountancy services 201 - 201
Depositary services 74 - 74
Fees payable to the Company's Auditor for audit-related assurance services
- Initial accounts 25 - 25
- Annual financial statements 135 - 135
Fees payable to the Company's Auditor for non-audit-related assurance 35 - 35
service(1)
Directors' remuneration (see Note 4) 220 - 220
Employer's National Insurance (see Note 4) 24 - 24
Legal and professional fees 186 534 720
Other fees 460 21 481
1,360 555 1,915
1. The non-audit fees payable to the Auditor relate to the review
performed by EY of the Company's Half-Yearly Report for the period ended 30
June 2022. In addition, the Company paid EY £70,000 for acting as the
Reporting Accountant in respect of the Company's IPO and the C share issue
proposed for September 2022, which did not proceed due to market conditions.
This fee has been included within the share issue costs charged to share
premium.
4. Directors' remuneration
Period ended
31 December
2022
£'000
Directors' fees 220
Employer's National Insurance 24
Total remuneration 244
As at 31 December 2022, there were no outstanding liabilities in relation to
Directors' fees and Employer's National Insurance. A breakdown is provided in
the Directors' remuneration report in the annual report.
5. Finance income
Period ended
31 December
2022
£'000
Finance income 73
Bank Interest 2,023
Total 2,096
6. Interest payable and similar expenses
Period ended
31 December
2022
£'000
Commitment fees payable on borrowings 22
Amortisation of loan arrangement fee 13
Bank interest expense 1
36
7. Taxation
Tax charge
The tax credit/(charge) for the period differs from the standard rate of
corporation tax in the UK (19%). The differences are explained below:
Period ended 31 December 2022
Revenue Capital Total
£'000 £'000 £'000
(Loss)/profit before tax (2,494) 10,522 8,028
Tax at UK corporation tax rate of 19% (474) 1,999 1,525
Non-taxable investment, derivative and foreign exchange gains - (1,999) 1,999
Carry forward management expenses 474 - 474
- - -
Factors that may affect future tax charges
The Company is an investment trust and is therefore not subject to tax on
capital gains. Deferred tax is not provided on capital gains and losses
arising on the revaluation or disposal of investments because the Company
meets (and intends to meet for the foreseeable future) the conditions for
approval as an investment trust company. No deferred tax asset has been
recognised in respect of excess management expenses and expenses in excess of
taxable income as they will only be recoverable to the extent that there is
sufficient future taxable revenue.
As at 31 December 2022, the Company had no unprovided deferred tax
liabilities.
As at 31 December 2022, excess management expenses are £3.05 million as at
31 December 2022.
The UK Government has announced that it intends to increase the main rate of
corporation tax from 19% to 25% from April 2023. As the Company is an
investment trust it is not anticipated that the change in the corporation tax
rate will impact the Company.
8. Earnings per share
Earnings per share ('EPS') are calculated by dividing profit for the period
attributable to ordinary equity holders of the Company by the weighted average
number of Ordinary Shares in issue since IPO. As there are no dilutive
instruments outstanding, basic and diluted earnings per share are
shown below:
Revenue Capital Total
Earnings from 9 September 2021 to 31 December 2022 (£'000) (2,494) 10,522 8,028
Weighted average Ordinary Shares (number) - - 428,272,575
Basic earnings per share (0.58)p 2.45p 1.87p
Diluted earnings per share (0.58)p 2.45p 1.87p
There were no meaningful shareholders or corporate activity between
incorporation of the Company on 9 September 2021 and 16 November 2021, the
IPO date, and therefore this period has not been included for the purpose
of calculating the weighted average number of shares.
9. Dividends paid
Period ended
31 December
2022
£'000
Interim dividends paid during the period 4,800
4,800
On 22 September 2022 the Company announced its first interim dividend of 1p
per Ordinary Share for the period ended 30 June 2022. The dividend was paid on
28 October 2022 and was marked as ex-dividend on 6 October 2022.
10. Investments
31 December
2022
£'000
Cost brought forward -
Opening unrealised appreciation on investments held
- Unlisted investments -
Valuation of investments brought forward -
Movement in period:
Acquisitions at cost 281,790
Appreciation on investments held 19,592
Valuation of investments at period end 301,382
Cost at period end 281,790
Closing unrealised appreciation on investments held
- Unlisted investments 19,592
Valuation of investments at period end 301,382
11. Debtors
31 December
2022
£'000
Other debtors - non-current(1) 740
Other debtors - current 486
Prepayments and accrued income 473
1,699
1. Relates to the RCF arrangement fees which are to be released to the
Income Statement until the loan maturity date of 18 December 2025.
12. Cash and cash equivalents
31 December
2022
£'000
Cash 26,670
Cash equivalents 156,267
182,937
Cash equivalents of £156,267,000 were held in a money market fund at
31 December 2022.
13. Derivative financial instruments
31 December
2022
£'000
Financial Liabilities: derivatives at fair value 8,520
8,520
The Company uses forward foreign currency exchange contracts to minimise the
effect of fluctuations in the investment portfolio from movements in
exchange rates.
The fair value of these contracts is recorded in the Balance Sheet. No
contracts are designated as hedging instruments and consequently all changes
in fair value are taken through profit or loss.
As at 31 December 2022, the notional amount of the forward foreign currency
exchange contracts held by the Company was £278.9 million.
14. Other creditors
31 December
2022
£'000
Investment management fees payable 1,200
Other creditors and accruals 1,537
2,737
15. Interest-bearing loans and borrowings
31 December
2022
£'000
Interest-bearing loans and borrowings -
Loan arrangement fee incurred in the period 1,100
Amortised loan arrangement fee for the period (13)
Loan arrangement fee carried forward 1,087
Total credit facility payable -
The Company entered into a £62.5 million revolving credit facility ('RCF')
with Lloyds Bank Corporate Markets in December 2022. The RCF remained
undrawn as at 31 December 2022.
The RCF is denominated in GBP, with the option to be utilised in other major
currencies. The rate of interest will be the relevant currency benchmark plus
an initial margin of 2.85% per annum. A commitment fee of 1.00% per annum
is payable on undrawn amounts, and the tenor of the RCF is three years. The
facility is secured against the assets held in the Company's subsidiary,
Pantheon Infrastructure Holdings LP.
Borrowing costs associated with the RCF are shown as interest payable and
similar expenses in Note 6 to these financial statements.
16. Called-up share capital
31 December 2022
Allotted, called up and fully paid: Shares £'000
Ordinary Shares of £0.01
Opening balance - -
Ordinary Shares issued in the period 400,000,000 4,000
Conversion of subscription shares to Ordinary Shares in the period 80,000,000 800
Closing balance 480,000,000 4,800
Total called-up share capital 480,000,000 4,800
On 11 November 2021, the Company raised gross proceeds of £400.0 million
through the issue of 400 million Ordinary Shares at IPO for an issue price of
100p per Ordinary Share. Each holder of Ordinary Shares is entitled, on a
show of hands, to one vote and, on a poll, to one vote for each Ordinary
Share held.
Subscription Shares were issued to subscribers as part of the Company's IPO on
the basis of one Subscription Share for every five Ordinary Shares subscribed
for. Each Subscription Share conferred the right (but not the obligation) to
subscribe for one Ordinary Share on exercise of the rights attaching to the
Subscription Shares. The subscription price per Ordinary Share payable on the
exercise of the subscription rights was 101p, exercisable on either
30 June 2022, 29 July 2022 or 31 August 2022.
The Company announced on 5 July 2022 that 36,509,658 Subscription Shares had
been converted into 36,509,658 Ordinary Shares which were admitted to trading
on the Main Market of London Stock Exchange plc on 13 July 2022.
The Company announced on 3 August 2022 that 13,188,554 Subscription Shares
had been converted into 13,188,554 Ordinary Shares which were admitted to
trading on the Main Market of London Stock Exchange plc on 11 August 2022.
The Company announced on 2 September 2022 that 24,117,160 Subscription
Shares had been converted into 24,117,160 Ordinary Shares. In addition,
the Final Subscription Trustee exercised the Subscription Rights attaching to
the 6,184,628 outstanding Subscription Shares on the same terms. Therefore,
in aggregate, 30,301,788 new Ordinary Shares were admitted to trading on the
Main Market of London Stock Exchange plc on 9 September 2022. There remain
no Subscription Shares in issue and the Subscription Share line was cancelled
on 9 September 2022.
17. Reserves
Capital
Share redemption Capital Revenue
premium reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000
Opening balance - - - - -
Ordinary Shares issued 395,200 - - - 395,200
Subscription shares issued (subsequently converted to Ordinary Shares) 80,800 - - - 80,800
Share issue costs (9,267) - - - (9,267)
Cancellation of share premium (387,284) 387,284 - - -
Losses on derivative financial instruments at fair value through profit or - - (8,520) - (8,520)
loss
Gain on investments at fair value through profit or loss - - 19,592 - 19,592
Foreign exchange gains on cash and cash equivalents - - 5 - 5
Legal and professional expenses charged to capital - - (534) - (534)
Other fees - - (21) - (21)
Profit/(loss) for the period - - - (2,494) (2,494)
Interim dividend paid - (4,800) - - (4,800)
Closing balance 79,449 382,484 10,522 (2,494) 469,961
On 17 June 2022, the Company announced that the share premium account had been
cancelled in accordance with the provisions of the Companies Act 2006 in order
to create a distributable reserve, the capital redemption reserve, that is
capable of being applied in any manner in which the Company's profits
available for distribution are lawfully able to be applied.
The Company is able to distribute realised gains from the capital reserve. As
at 31 December 2022 there were £nil reserves available for distribution from
this reserve.
18. Net asset value per share
NAV per share is calculated by dividing net assets in the Balance Sheet
attributable to ordinary equity holders of the Company by the number of
Ordinary Shares outstanding at the end of the period. As there are no
dilutive instruments outstanding, both basic and diluted NAV per share are
shown below:
31 December
2022
Net assets attributable (£'000) 474,761
Ordinary Shares 480,000,000
NAV per Ordinary Share 98.9p
19. Reconciliation of loss before financing costs and taxation to net cash
flows from operating activities
9 September
2021 to
31 December
2022
£'000
Profit before financing costs and taxation 5,968
Gains on investments (19,592)
Foreign exchange gains on cash and non-portfolio assets (5)
Increase in debtors (182)
Increase in creditors 1,606
Losses on derivative financial instruments at fair value through profit or 8,520
loss
Net cash flows from operating activities (3,685)
20. Subsidiaries
The Company has formed two wholly owned subsidiaries. The Company has
ownership and control over these two entities and as such they have been
deemed to be subsidiaries by the Board.
i. PIH LP was incorporated on 5 November 2021 with a registered
address in the State of Delaware, National Registered Agents, Inc., 209 Orange
Street, Wilmington, Delaware, 19801, USA and is wholly owned by the Company.
The Company holds an investment in PIH LP. In accordance with FRS 102, the
Company has not consolidated the subsidiary on the grounds it does not carry
out business through the subsidiary and that it is held exclusively with a
view to subsequent resale. It is therefore considered part of an
investment portfolio.
Several of the investments in the Portfolio are held through PIH LP and are
valued based on the fair value of the investments held in those entities.
The Company holds a 99.9% investment in PIH LP, with the remaining holding
held by Pantheon Infrastructure Holdings GP LLC (PIH GP).
ii. PIH GP was incorporated on 5 November 2021 with a registered address
in the State of Delaware, National Registered Agents, Inc., 209 Orange Street,
Wilmington, Delaware, 19801, USA and is wholly owned by the Company.
The Company has not consolidated PIH GP as it is immaterial. This treatment
is supported by the Companies Act 2006, section 405 (2), whereby a subsidiary
undertaking may be excluded from consolidation if its inclusion is not
material for the purpose of giving a true and fair view.
21. Contingencies, guarantees and financial commitments
At 31 December 2022, there were capital commitments outstanding of
£57.9 million in respect of investments in infrastructure assets.
The Company expects 100% of the capital commitments outstanding to be called
within the next twelve months. These commitments will be funded using the
Company's cash resources.
22. Fair value
Fair value hierarchy
Financial assets are carried in the Balance Sheet at their fair value or
approximation of fair value. The fair value is the amount at which the asset
could be sold in an orderly transaction between market participants, at the
measurement date, other than a forced liquidation sale.
The Company measures fair values using the following fair value hierarchy that
reflects the significance of the inputs used in making the measurements.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant assets as follows:
Level 1: Quoted (unadjusted) market prices in active markets 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.
For assets and liabilities that are recognised in the financial statements on
a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by reassessing categorisation at the end of
each reporting period.
Financial assets and liabilities at fair value through profit or loss
at 31 December 2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments - - 301,382 301,382
Derivative financial instruments - (8,520) - (8,520)
- (8,520) 301,382 292,862
The fair value of these investments and Derivatives - financial instruments is
recorded in the Balance Sheet as at the period end.
There have been no transfers between Level 1 and Level 2 during the period,
nor have there been any transfers between Level 2 and Level 3 during
the period.
The carrying amount of all assets and liabilities, detailed within the Balance
Sheet, is considered to be the same as their fair value.
The majority of the assets held within Level 3 are valued on a discounted cash
flow basis, hence, the valuations are sensitive to the discount rate assumed
in the valuation of each asset. Other significant unobservable inputs include
the inflation rate assumption and the interest rates assumption used to
project the future cash flows and the forecast cash flows themselves.
Increasing the discount rate used in the valuation of each asset by 0.5% would
reduce the value of the Portfolio by £10.5 million. Decreasing the discount
rate used in the valuation of each asset by 0.5% would increase the value of
the Portfolio by £11.2 million. The WADR of the Portfolio at
31 December 2022 is 14.2%.
The majority of assets held within Level 3 have revenues that are linked,
partially linked or in some way correlated to inflation. The impact of
increasing the inflation rate assumption by 0.5% would increase the value of
the Portfolio by £3.7 million. Decreasing the inflation rate assumption used
in the valuation of each asset by 0.5% would decrease the value of the
Portfolio by £2.6 million.
The valuations are sensitive to changes in interest rates. These comprise a
wide range of interest rates from short-term deposit rates to longer-term
borrowing rates across a broad range of debt products. Increasing the cost of
borrowing assumption for each asset by 0.5% would reduce the value of the
Portfolio by £5.9 million. Decreasing the interest rate assumption
borrowings used in the valuation of each asset by 0.5% would increase the
value of the Portfolio by £6.0 million. This calculation does not take
account of any offsetting factors which may be expected to prevail if interest
rates changed, including the impact of inflation discussed above.
23. Analysis of financial assets and liabilities
The primary investment objective of the Company is to seek to maximise
long-term capital growth for its shareholders by investing in equity or
equity-related investments in a diversified portfolio of infrastructure
assets. Investments are not restricted to a single market and are made when
opportunities arise and on an international basis.
The Company's financial instruments comprise infrastructure investments
and derivatives.
The principal risks the Company faces in its Portfolio management
activities are:
· liquidity risk;
· interest rate risk;
· credit risk;
· market price risk; and
· foreign exchange risk.
The Investment Manager monitors the financial risks affecting the Company on a
regular basis and the Directors regularly receive financial information, which
is used to identify and monitor risk.
In accordance with FRS 102, an analysis of financial assets and liabilities,
which identifies the risk to the Company of holding such items, is given
below.
Liquidity risk
Due to the nature of the Company's investment policy, the largest proportion
of the Portfolio is invested in infrastructure assets through the Company's
subsidiary, which are generally less readily marketable than listed equities.
The Directors believe that the Company, as a closed-end fund with no fixed
wind-up date, is ideally suited to making long-term investments in instruments
with limited marketability. The investments are monitored by the Board on a
regular basis.
As a result, the Company may not be able to quickly liquidate its investments
at an amount close to their fair value in order to meet its liquidity
requirements, including the need to meet outstanding undrawn commitments.
The Company manages its liquid investments to ensure sufficient cash is
available to meet contractual commitments and also seeks to have cash
available to meet other short-term financial needs.
As at 31 December 2022, liquidity risk was considered low given the cash and
cash equivalents available to the Company.
31 December
2022
£'000
Cash and cash equivalents 182,937
Other creditors (2,737)
As at 31 December 2022, the capital commitments outstanding totalled £57.9
million, therefore liquid resources available after commitments were £184.8
million.
Interest rate risk
Interest rate movements may affect the level of income receivable on cash
deposits and interest payable on variable rate borrowings. Cash deposits
generally comprise overnight call or short-term money market deposits and earn
interest at floating rates based on prevailing bank base rates. Increases in
interest rates may also ultimately impact the discount rates used to
value investments.
Interest rate movements may affect the interest rate paid on financial
liabilities. Interest on the RCF is payable at variable rates determined
subject to drawdown. As at 31 December 2022, the RCF had not been drawn
down.
Changes in interest rates may have an impact on consolidated earnings over the
longer term. The table below provides indicative sensitivity data.
31 December 2022 £'000
Increase in interest Decrease in interest
Effect on profit before tax rates by 1% rates by 1%
Increase/(decrease) 2,422 (1,205)
Credit risk
Credit risk is the risk that a counterparty will cause a financial loss to the
Company by failing to discharge its obligations to the Company when they fall
due. Cash deposits are placed with approved counterparties, all of whom have
a credit rating of A- or above.
At the period end, the Company's financial assets exposed to credit risk
amounted to the following:
31 December
2022
£'000
Cash and cash equivalents 182,937
Market price risk
The fair value of future cash flows of an investment held by the Company may
fluctuate. This market risk may comprise: foreign exchange risk, and/or fair
value risk. The Board of Directors reviews and agrees policies for managing
these risks. The Investment Manager assesses the exposure to market risk when
making each investment decision, and monitors the overall level of market risk
across the Company's investments on an ongoing basis.
The nature of the Company's investments means that they are valued by the
Directors after due consideration of the most recent available information.
If the Portfolio fell by 20% from its 31 December 2022 valuation, with all
other variables held constant, this would have led to a reduction of
£64.5 million in the return before taxation. An increase of 20% would
increase the return before taxation by £53.9 million.
Foreign exchange risk
Since it is the Company's policy to invest in a diverse portfolio of
investments based in a number of countries, the Company is exposed to the risk
of movement in foreign exchange rates. The Company enters into forward foreign
currency exchange contracts to hedge the foreign exchange risks associated
with its investment portfolio. The contracts entered into by the Company are
denominated in the currency of the geographic areas in which the Company has
significant exposure against its reporting currency.
The contracts are measured at fair value and are recorded in the balance
sheet as Derivatives - financial instruments. The Company has not elected to
apply hedge accounting therefore the fair value changes are taken to the
capital reserve.
The table below sets out the Company's foreign exchange exposure:
GBP EUR(1) USD(1) Total
Foreign exchange risk £'000 £'000 £'000 £'000
At 31 December 2022
Cash and cash equivalents 181,987 828 122 182,937
Investments held at fair value through profit or loss - 217,282 84,100 301,382
Other debtors 1,699 - - 1,699
Other payables (2,737) - - (2,737)
Derivatives - financial liabilities (8,520) - - (8,520)
1. These values are expressed in GBP.
If there had been an increase/(decrease) in the GBP/USD exchange rate of 10%
it would have the effect of (decreasing)/increasing equity shareholders' funds
by £(6.8) million/£8.3 million which includes the impact of the foreign
currency exchange contracts to partially offset the movement in value. The
calculations are based on the financial assets and liabilities and the foreign
exchange rate as at 31 December 2022 of 1.2029 GBP/USD.
If there had been an increase/(decrease) in the GBP/EUR exchange rate of 10%
it would have the effect of (decreasing)/increasing equity shareholders' funds
by £3.1 million/£(3.7) million which includes the impact of the foreign
currency exchange contracts to partially offset the movement in value. The
calculations are based on the financial assets and liabilities and the foreign
exchange rate as at 31 December 2022 of 1.1271 GBP/EUR.
Managing capital
The Company's equity comprises Ordinary Shares as described in Note 17.
Capital is managed so as to maximise the return to shareholders while
maintaining a capital base that allows the Company to operate effectively in
the marketplace and sustain future development of the business.
The Company considers its capital to comprise called-up share capital and
reserves. As at 31 December 2022, the Company had entered into an RCF to
increase the Company's liquidity. Details of available borrowings at the
period end can be found earlier in this note.
The Company's assets and borrowing levels and the Company's capital
requirements are reviewed regularly by the Board of Directors.
24. Transactions with the Investment Manager and related parties
The amounts payable to the Investment Manager, together with the details of
the Investment Management Agreement, and outstanding amounts are disclosed in
Note 2. The existence of an independent Board of Directors demonstrates that
the Company is free to pursue its own financial and operating policies and
therefore, under the AIC SORP, the Investment Manager is not considered to be
a related party.
The Company's related parties are its Directors and the fees paid to the
Company's Board are disclosed in Note 4 alongside the outstanding amounts
payable as at 31 December 2022. There are no other identifiable related
parties at the period end.
25. Subsequent events
Commitments
In the period to 31 December 2022, the Company committed to £344.8 million
across ten investments. At 31 December the Company had undrawn commitments of
£57.6 million outstanding.
On 31 January 2023 the Company completed an investment in GD Towers,
a leading digital infrastructure company, committing £43.4 million.
AIFMD disclosures
The Company is an Alternative Investment Fund (AIF) for the purposes of the
Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (AIFMD),
and the Investment Manager was appointed as its Alternative Investment Fund
Manager (AIFM) for the purposes of the AIFMD. The Investment Manager is a
'full scope' AIFM for the purposes of the AIFMD. The AIFMD requires certain
disclosures to be made in the annual report of the Company. Many of these
disclosures are already required by the Listing Rules and/or UK Accounting
Standards, and these continue to be presented in other sections of the annual
report, principally the strategic report, the Investment Manager's report and
the financial statements. This section completes the disclosures required by
the AIFMD.
Assets subject to special arrangements
The Company holds no assets subject to special arrangements arising from their
illiquid nature.
Remuneration disclosure
The total number of staff of the Investment Manager as at 31 December 2022,
including staff remunerated by affiliates of the Investment Manager, was
approximately 465, of whom 22 were senior management or other members of
staff whose actions have a material impact on the risk profile of the Company
('identified staff'). The total remuneration paid by the Investment Manager
and its affiliates to staff of the Investment Manager in respect of the period
ended 31 December 2022 attributable to work relating to the Company was as
follows:
12 months to 31 December 2022
£'000 Fixed Variable Total
Senior management 70 96 166
Staff 190 143 333
Total staff 260 238 499
Identified staff 44 61 105
No carried interest was paid in respect of the Company during the period.
The above disclosures reflect only that element of the individuals'
remuneration which is attributable to the activities of the Investment Manager
relating to the Company. It is not possible to attribute remuneration paid to
individual staff directly to income received from any fund and hence the above
figures represent a notional approximation only calculated by reference to the
assets under management of the Company as a proportion of the total assets
under management of the Pantheon Group.
In determining the remuneration paid to its staff, the Investment Manager
takes into account a number of factors including the performance of the
Company, the Investment Manager and each individual member of staff.
These factors are considered over a multi-year framework and include whether
staff have met the Investment Manager's compliance standards. In addition,
the Investment Manager seeks to ensure that its remuneration policies and
practices align financial incentives for staff with the risks undertaken and
results achieved by investors, for example by ensuring that a proportion of
the variable income received by identified staff is deferred for a period of
at least three years.
Full details of the Pantheon Group's remuneration policies and practices for
staff (which includes the Investment Manager's staff) can be found at
http://pantheonms.wpenginepowered.com/wp-content/uploads/2021/10/Pillar-3-disclosure-Pantheon-2020.pdf.
The AIFMD requires the Investment Manager of the Company to set leverage
limits for the Company. For the purposes of the AIFMD, leverage is any
method by which the Company's exposure is increased, whether through the
borrowing of cash or by the use of derivatives or by any other means.
The AIFMD requires leverage to be expressed as a ratio between the Company's
exposure and its NAV and prescribes two methodologies, the gross method and
the commitment method (as set out in Commission Delegated Regulation
No. 231/2013), for calculating such exposure.
The following leverage limits have been set for the Company:
i. the maximum leverage of the Company calculated in accordance with
the gross method (under Article 7 of Commission Delegated Regulation
No.231/2013 is 450%; and
ii. the maximum leverage of the Company calculated in accordance with
the commitment method (under Article 8 of the AIFMD Regulation) is 450%.
Using the methodologies prescribed under the AIFMD, the Company's leverage as
at 31 December 2022 is shown below:
Commitment
Gross method method
Leverage ratio 121% 160%
There have been no changes to the maximum level of leverage which the
Investment Manager may employ on behalf of the Company during the period to
31 December 2022. There are no collateral or asset reuse arrangements in
place as at the period end.
Risk profile and risk management
The principal risks to which the Company is exposed and the approach to
managing those risks are set out in the strategic report and also in Note 23
to the financial statements The investment restrictions which seek to mitigate
some of those principal risks in relation to the Company's investment
activities are set out in the investment policy and under 'Board
responsibilities and relationship with the Investment Manager' in the
Statement on Corporate Governance. Additionally, the individual counterparty
exposure limit for deposits with each of the Company's bank counterparties has
been set at c.£135 million or the equivalent in foreign currencies. The
Investment Manager's risk management system incorporates regular review of the
principal risks facing the Company and the investment restrictions applicable
to the Company. The Investment Manager has established appropriate internal
control processes to mitigate the risks, including those described in the
'Mitigation' column in the 'Risk management and principal risks' section of
the strategic report. These investment restrictions were not exceeded in the
period to 31 December 2022.
Article 23(1) disclosures to investors
The AIFMD requires certain information to be made available to investors in
the Company before they invest and requires that material changes to this
information be disclosed in the annual report of the Company. The information
required to be disclosed is contained in the document 'Information for
Investors', which is available on the Company's website at
www.pantheoninfrastructure.com. There have been no material changes to this
information requiring disclosure.
Glossary
AIC
The Association of Investment Companies.
AIC Code
The AIC Code of Corporate Governance.
Approved investment trust company
An approved investment trust company is a corporate UK tax resident which
fulfils particular UK tax requirements and rules which include that for the
company to undertake portfolio investment activity it must aim to spread
investment risk. In addition, the company's shares must be listed on an
approved stock exchange. The 'approved' status for an investment trust must be
authorised by the UK tax authorities and its key benefit is that a portion of
the profits of the company, principally its capital profits, are not taxable
in the UK.
AUM
Assets Under Management are the total market value of investments held under
management by an individual or institution. When referring to Pantheon's AUM,
this figure includes assets managed on a fully discretionary basis.
Carried interest
Portion of realised investment gains payable to a Sponsor as a profit share.
Cloud
Cloud computing is the on-demand availability of computer system resources,
especially data storage (cloud storage) and computing power, without direct
active management by the user.
Co-investment
Direct shareholding in a company by invitation alongside a Sponsor.
Commitment
The amount of capital that the Company agrees to contribute to an investment
when and as called by the Sponsor.
Company
Pantheon Infrastructure Plc or 'PINT'.
Exit
Realisation of an investment, usually through trade sale, sale by public
offering (including IPO), or sale to a financial buyer.
Funds under management
Funds under management includes both assets under management and assets under
advisory (assets managed on a non-discretionary basis and or advisory basis).
GIRAC
Global Infrastructure and Real Assets Committee
Initial public offering (IPO)
The first offering by a company of its own shares to the public on a regulated
stock exchange.
Internet of things
This term describes the network of physical objects (things) that are embedded
with technologies such as sensors or software for the purpose of connecting
and exchanging data with other devices and systems via the internet.
Investment Manager
Pantheon Ventures (UK) LLP.
Investment thesis
Pantheon's final stage of approval for infrastructure co-investments
IRR
Internal Rate of Return is the annual rate of growth that an investment is
expected to generate over its life
Latency
The delay before a transfer of data begins following an instruction for its
transfer.
Market capitalisation
Share price multiplied by the number of shares outstanding.
Multiple of invested capital (MOIC or cost multiple)
A common measure of private equity performance, MOIC is calculated by dividing
the fund's cumulative distributions and residual value by the
paid-in capital.
Net asset value (NAV)
Amount by which the value of assets of a company exceeds its liabilities.
Portfolio or operating company
A company that PINT invests in. These portfolio or operating companies in turn
own and operate infrastructure assets.
Portfolio investment return
Total movement in the valuation of the underlying assets comprising the
Portfolio, expressed as a percentage of opening portfolio value. Foreign
exchange effects and other expenses are excluded from the calculation.
Primaries
Commitments made to private equity funds at the time such funds are formed.
Private equity
Privately negotiated investments typically made in non-public companies.
Secondaries
Purchase of existing private equity fund or company interests and commitments
from an investor seeking liquidity in such funds or companies.
Share price premium (discount)
Occurs when a company's share price is higher (lower) than the NAV per share.
Sponsor or general partner
The entity managing a private equity fund that has been established as a
limited partnership, also commonly referred to as the Sponsor.
Total return
This is expressed as a percentage. The denominator is the opening NAV, net of
the final dividend for the previous year, and adjusted (on a time weighted
average basis) to take into account any equity capital raised or capital
returned in the year. The numerator is total NAV growth and dividends paid.
Total shareholder return
Return based on interim dividends paid plus Share Price movement in the
period, divided by the opening share price
WADR
Weighted average discount rate based on each investment's relative proportion
of Portfolio valuation
Directors and advisers
Directors
Vagn Sørensen
Anne Baldock
Andrea Finegan
Patrick O'Donnell Bourke
Investment Manager
Pantheon Ventures (UK) LLP
Authorised and regulated by the FCA
10 Finsbury Square
4th Floor
London
EC2A 1AF
Email: pint@pantheon.com
PINT website: www.pantheoninfrastructure.com
Pantheon website: www.pantheon.com
Secretary and registered office
Link Company Matters Limited
6th Floor, 65 Gresham Street
London
EC2V 7NQ
Telephone: +44 (0)333 300 1950
Auditor
Ernst & Young LLP
25 Churchill Place
London
E14 5EY
Broker
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
Depositary
BNP Paribas Trust Corporation UK Limited
10 Harewood Avenue
London
NW16 6AA
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Solicitors
Hogan Lovells International LLP
Atlantic House
Holborn Viaduct
London
EC1A 2FG
ends
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