RNS Number : 6964U
BBGI Global Infrastructure S.A.
30 March 2023
30 March 2023
BBGI Global Infrastructure S.A.
(the "Company")
Annual Results for financial year ended 31 December 2022
The information contained within this Announcement is deemed by the Company to constitute inside information. Upon the publication of this Announcement via a Regulatory
Information Service this inside information is now considered to be in the public domain.
BBGI ANNUAL REPORT 2022
bb-gi.com
"Our purpose is to deliver social infrastructure for healthier, safer and
more connected societies, while creating sustainable value for all
stakeholders"
Our vision: We invest to serve and connect people.
Our values:
Trusted to deliver.
Dependable partner.
Investor with impact.
Present-focused, future-ready.
About BBGI
BBGI Global Infrastructure S.A. (BBGI, the 'Company', and together with its consolidated subsidiaries, the 'Group') is a global infrastructure investment company
helping to provide the responsible capital required to build and maintain critical social infrastructure
[i]
.
From hospitals to schools, to affordable housing and safer roads, we partner with the public sector to deliver social infrastructure that forms the building blocks of
local economies, while creating sustainable value for all stakeholders.
Financial Highlights[ii]
£1,069.2 million
149.9pps
9.1%
Investment Basis NAV
up 6.7% as at 31 December 2022
(31 December 2021 £1,001.6 million)
NAV per share
up 6.6% as at 31 December
2022
(31 December 2021: 140.7pps)
Annualised total NAV return
per share
FY 2021: 8.8%
0.5 per cent
High-quality inflation linkage
FY 2021: 0.4 per cent
7.48pps[iii]
2022 dividend declared per share
0.87%
Ongoing charges
1.47x
Cash dividend cover
(31 December 2021: 0.86%)
FY 2021: 1.31x
7.93pps
8.40pps
2023 target dividend
2024 target dividend
+6%
+6%
Portfolio Highlights
§ Strong operational performance of our globally diversified portfolio of 56 high-quality, 100 per cent availability-style infrastructure assets.
§ Contracted high-quality inflation linkage of 0.5 per cent[iv] resulting in a £76 million increase in NAV.
§ Robust portfolio performance has enabled an upward revision of previously announced dividend targets for 2023 and 2024.
§ Cash receipts ahead of expectations, with no material lockups or defaults.
§ Consistently high level of asset availability rate of 99.9 per cent maintained.
§ Net debt position on an Investment Basis of £26.3 million, with £57.5 million drawn under the revolving credit facility ('RCF').
§ Discount rate increased from 6.6 per cent to 6.9 per cent, reflecting an equity risk premium of c. 3.1 per cent.
§ Published Net Zero Plan for BBGI and for our Portfolio Companies.
§ Two new availability-style investments totalling £64 million.
§ Attractive pipeline of availability-style investments in Europe, North America, and Australia, maximising the benefits of strategic investment partnerships with
leading contractors.
§ Socially beneficial investment under SFDR's Article 8.
Portfolio at a Glance
The fundamentals
Based on portfolio value as at 31 December 2022.
Investment type
100 per cent availability-style[v] revenue stream.
Investment type
Availability-style revenue assets
Regulated assets
Demand-Based assets
Investment status
Low-risk operational portfolio.
Investment status
Operations
Construction
Geographical split
Geographically diversified in stable developed countries.
Geographic split
Canada
UK
Continental Europe
US
Australia
100%
-
-
100%
99.5%
0.5%
100%
35%
32%
12%
11%
10%
100%
Sector split
Well-diversified sector exposure with large allocation to lower-risk availability-style road and bridge investments.
Sector split
Transport
Healthcare
Blue light and modern correctional facilities
Education
Affordable housing
Clean energy
Other
53%
20%
12%
9%
3%
2%
1%
100%
Investment life
Long investment life with 49 per cent of portfolio by value with a duration of greater than or equal to 20 years; weighted average life of 20.2 years. Average portfolio debt maturity of 16.3 years.
Investment life
≥25 years
≥20 years and <25 years
≥10 years and <20 years
<10 years
Top-five investments
Well-diversified portfolio with no major single asset exposure.
Top-five investments
Ohio River Bridges (US)
Golden Ears Bridge (Canada)
Northern Territory Secure Facilities (Australia)
Victoria Correctional Facilities (Australia)
A1/A6 Motorway (Netherlands)
Next five largest investments
Remaining investments
Investment ownership
79 per cent of assets by value in the portfolio are 50 per cent owned or greater.
Investment ownership
100%
≥75% and <100%
≥50% and <75%
<50%
Country rating
All assets located in countries with ratings between AA and AAA[vi].
24%
25%
45%
6%
100%
11%
10%
5%
4%
4%
16%
50%
100%
45%
7%
27%
21%
100%
Country rating
AAA
AA+
AA
Projected portfolio cash flow
57%
11%
32%
100%
The Company's underlying assets generate a consistent and long-term stream of cash flows for the portfolio, extending up to 2051. These cash flows are
predictable, owing to the involvement of government or government-backed counterparties and the contractual nature of the agreements. Additionally, the index-
linked provisions offer an attractive inflation linkage of approximately 0.5 per cent, contributing £76 million to the Net Asset Value (NAV) during the year.
The investments made over the year to 31 December 2022 contributed positively to stable long-term cash flows. Based on current estimates, and if there were to be
no further acquisitions, the existing portfolio is forecasted to enter into the capital repayment phase in September 2040, after which cash inflows from the portfolio
would be paid to the Company's shareholders as capital and the portfolio valuation will reduce as assets reach the end of their concession term.
As at 31 December 2022, BBGI had a weighted average portfolio life of 20.2 years, a decrease of 0.1 years compared with 31 December 2021. By prioritising the
acquisition of assets with a long residual life, BBGI has been able to maintain a portfolio with a long weighted average life, which has only slightly decreased since
our IPO in 2011.
This illustrative chart is a target only, as at 31 December 2022, and is not a profit forecast. There can be no assurance this target will be met. The hypothetical target cash flows do not consider any
unforeseen costs, expenses or other factors that may affect the portfolio assets and therefore the impact on the cash flows to the Company. As such, the graph above should not in any way be construed as
forecasting the actual cash flows from the portfolio. There are minor cash flows extending beyond 2051 but for illustrative purposes, these are excluded from the chart above.
Chair's Statement
On behalf of the Supervisory Board, I am pleased to report a strong financial and operational performance for 2022. Despite a volatile geopolitical backdrop and
challenging macroeconomic environment, characterised by global increases in inflation and interest rates and general market uncertainty, our Company has
remained resilient throughout the year; we continued to generate predictable, high-quality inflation-linked income, increased dividends, and secure returns for our
shareholders.
Overview of strong financial and operational performance for 2022
We have continued to execute successfully on our low-risk investment strategy, which has resulted in an NAV per share increase of 6.6 per cent this year to 149.9
pence, cash flows ahead of expectations, a dividend per share of 7.48 pence and strong dividend cover of 1.47x.
This strong performance, coupled with the long-term predictable nature of the Company's cash flows and high-quality inflation linkage, gives us continued
confidence in our progressive dividend policy. As a result, we have revised our dividend targets for the years 2023 and 2024, increasing the growth rate from 2 per
cent to 6 per cent, ensuring our shareholders benefit from the increased value created by our high-quality, inflation-linked portfolio.
ESG is embedded in our DNA and I am proud of BBGI's role as a steward of critical social infrastructure. We help meet the essential needs of communities and make
a positive, long-term impact on society and the economy. Our purpose is to focus on delivering social infrastructure for healthier, safer, and more connected
societies, while creating sustainable value for all stakeholders. During 2022, we continued to further embed our ESG commitments as part of our sustainability
journey.
Further strengthening our robust approach to governance
As an internally-managed investment company, having robust controls is of key importance to securing the sound financial and operational performance of our
investments over the short and long term.
We continue to refine our rigorous approach to governance and, over the past year, have reviewed the annual plans for our Committees, to ensure they continue to
provide sufficient depth to our governance process and effectiveness.
With all of our Supervisory Board members being independent Non-Executive Directors, we continue to be compliant with all the AIC Corporate Governance
requirements on Board and Director independence and we operate a clear division of responsibilities between the Supervisory Board and the Management Board.
Effective engagement with our stakeholders is a major part of our long-term success and sustainability. As part of this both I, and the Chairs of each Committee of
the Supervisory Board, make ourselves available to speak to shareholders and to all stakeholders more generally throughout the year.
Further enhancing our Board and increasing diversity
In 2022, we welcomed Andrew Sykes and June Aitken as new Supervisory Board members. We have already benefitted from the fresh perspectives they bring to the
Board. Andrew Sykes has succeeded Howard Myles as Senior Independent Director and Chair of our Remuneration Committee. Both appointments have helped to
ensure that we have a diverse, well-balanced, and experienced Supervisory Board and Committees, which will continue to effectively serve our shareholders in
carrying out our duties of oversight of the Company and Management Board.
We are strongly supportive of the various initiatives and regulatory changes to encourage greater gender and ethnic equality in publicly listed corporate entities,
including the FTSE Women Leaders and Parker Reviews. We are proud that 60 per cent of our Supervisory Board members are female, and that we are one of the
few FTSE 350 companies to have both a female Supervisory Board Chair and a female Audit Committee Chair. As part of our ongoing commitment to foster,
cultivate and preserve a culture of diversity, equity and inclusion, we keep our policies on diversity, equity and inclusion under review.
Positive outlook
Despite the wider market volatility, we remain confident that our high-quality, resilient, and globally diversified portfolio will continue to deliver solid returns
notwithstanding increased economic headwinds and market uncertainty. Global mega-trends, such as urbanisation, combined with the increased need for private
sector funding of global infrastructure investment, are positive drivers for BBGI. The Management Board continues to use its specialist knowledge, industry
relationships and networks to source attractive investment opportunities for our pipeline. Our internal management structure helps to create the proper incentives
for the Management Board to focus on enhancing the value of our portfolio and growing BBGI in an accretive and disciplined manner - our priority is to create
sustainable value for all our stakeholders.
I would like to thank the entire BBGI team for their work in delivering another strong year for our shareholders - despite the challenging wider market backdrop - as
well as our clients, partners and service providers, who continue to support us in providing a critical role in our communities.
Sarah Whitney
Chair
29 March 2023
Co-CEOs' Statement
The Company performed strongly in 2022 and continued to deliver on our vision: to serve and connect people. We're proud of our consistently robust performance
since our IPO in 2011: our NAV per share has increased each year for the past 11 years and we remain confident that BBGI is well positioned to continue to deliver
sustainable attractive value for all stakeholders over the short and long term.
Global markets in 2022 have been challenging for investors and companies alike, yet this environment has highlighted the clear benefits of our low-risk and
defensive, availability-style investment strategy. The volatile and uncertain economic and geopolitical backdrop has resulted in significant global increases in
inflation, rising interest rates and potentially recessionary environments.
Yet through our consistent, disciplined approach to active asset management and prudent financial management, we have continued to deliver strong financial
results and robust portfolio performance throughout the year, with cash flows ahead of expectations and further dividend growth for our shareholders.
Our high-quality inflation linkage is forecast to deliver higher distributions over the short term. This has enabled us to increase our dividend targets for 2023 and
2024 to 7.93pps and 8.40pps respectively, representing a 6 per cent increase year on year. Furthermore, we are introducing a new dividend target for 2025 of
8.57pps.
Our priorities remain to preserve and enhance the value of our portfolio, acting as a steward of essential infrastructure for our public sector clients, with a strong
focus on delivering positive social impact and supporting communities and economic growth. ESG is integrated into our business model and executive
compensation is also linked to ESG performance.
Our globally diversified infrastructure portfolio includes education, healthcare, blue light (fire and police), affordable housing, modern correctional facilities, clean
energy and transport assets, which all generate secure government-backed cash flows with high-quality inflation linkage.
Highlights
Our globally diversified infrastructure portfolio of 56 assets performed strongly:
● Dividend of 7.48pps for the year 2022 (2021: 7.33pps).
● Revised dividend targets of 7.93pps for 2023 and 8.40pps for 2024, representing a 6% increase year on year, and a
new dividend target of 8.57pps for 2025: all are expected to be fully cash-covered.
● Strong cash dividend cover of 1.47x (2021: 1.31x).
● NAV per share increased 6.6 per cent to 149.9pps (2021: 140.7pps).
● Annualised total NAV return per share of 9.1 per cent.
● Ongoing charges of 0.87 per cent (2021: 0.86 per cent).
● High-quality inflation linkage of 0.5 per cent.
● Focus on delivering social impact - SFDR Article 8.
● High degree of climate resilience independently confirmed across the portfolio of assets.
We would like to thank our team once again for their hard work over the past year. Their dedication and approach are outstanding and remain a fundamental part
of our success.
Strong business model and resilient portfolio
Our robust and defensive business model exemplifies our prudent and low-risk approach to investing, generating long-term value for all our stakeholders. We offer
investors a long-term, contracted, stable and predictable revenue stream with high-quality inflation linkage, underpinned by highly rated, creditworthy public sector
counterparties.
We remain the only internally managed LSE-listed equity infrastructure investment company, which ensures that our interests are fully aligned with those of our
shareholders. We are led by creating shareholder value first and portfolio growth second. In 2022, we again maintained the lowest comparative ongoing charge of
0.87 per cent through our efficient and cost-effective structure[vii].
Our core criteria for our portfolio are availability-style assets; with government-backed counterparties; located in highly-rated investment-grade countries with
stable, well-developed operating environments; climate resilient; and high-quality inflation linkage.
'Availability-style' unlike 'demand-based' means that revenues are paid provided the asset is available for use. BBGI has no exposure to demand-based or regulated
investments. At the year-end, BBGI's investment portfolio was 99.5 per cent operational, with only one asset under construction.
We invest in countries with credit ratings between AA and AAA, in Australia, Canada, Germany, the Netherlands, Norway, the UK and the US. All have stable
operating environments, with independent and proven legal systems.
Value-driven active asset management
We focus on operational performance to drive efficiencies and generate portfolio optimisations and take a hands-on approach to preserving and enhancing the
value of our investments, delivering well-maintained infrastructure for communities and end-users, and stable attractive returns for shareholders. Throughout 2022,
we worked closely with our public sector clients to ensure the continued smooth functioning of essential social infrastructure. Building and maintaining strong client
relationships is an important part of our business, and our asset management team meets regularly with our public sector clients.
Our active asset management activities during 2022 included applying high-quality corporate governance frameworks, which helped enable us to maintain our
track record of no reported lock-ups or material defaults at any of our Portfolio Companies, and generating a consistently high asset availability rate of 99.9 per
cent.
Selective acquisition strategy
We pursue growth that is accretive to shareholder value, not just for growth's sake, and we have maintained a long-weighted, average portfolio life of over 20.2
years. We source transactions through our extensive industry relationships and networks and we finance investments using our existing cash resources and RCF.
During 2022, we successfully grew and further diversified our portfolio, while maintaining strategic discipline in our acquisition strategy and portfolio construction.
As with previous years, we assessed considerably more investments in 2022 than we pursued. We invested approximately £64.4 million in two availability-style
assets.
In February 2022, we completed our investment in the entity responsible for delivering the 132 MW John Hart Generating Station in Canada, which is a PPP
hydroelectric power station. We are not exposed to any power price risk. This renewable energy infrastructure has strong environmental credentials, helping to
provide clean energy to over 80,000 homes on Vancouver Island, British Columbia.
In September 2022, we acquired a 49 per cent equity interest in the A7 motorway between Bordesholm and Hamburg in Germany, which will help minimise any
increase in exhaust emissions from the higher traffic load by reducing congestion and traffic jams. We screened both investments for ESG factors, including their
alignment with our selected UN Sustainable Development Goals ('SDGs'), and climate-change resiliency.
We continue to evaluate acquisition opportunities according to our criteria, and take a selective and disciplined approach to evaluating potential investment
opportunities. Transaction volumes in 2022 were impacted as we entered a 'price discovery phase' between buyers and sellers. However, we are still seeing strong
demand from investors for long-term, stable and inflation-linked income, and there is an attractive pipeline of acquisition opportunities in our availability-style
sector. There is also potential to augment our portfolio with select opportunities in adjacent sectors with the same low-risk profile, such as investments in European
primary care. This sector is very similar to our Local Improvement Finance Trust ('LIFT') investments, where we already own over 30 primary care facilities in England.
Valuation - high-quality inflation linkage, discount rates and deposit rates
During 2022, inflation and interest rates have increased in all jurisdictions where BBGI invests. The rise in long-term interest rates had an impact on discount rates,
but it has become clear that not all asset classes perform identically in a rising interest rate environment.
Our equity cash flows are positively linked to inflation at approximately 0.5 per cent: if long‑term inflation is one per cent higher than our assumptions for all future
periods, returns will increase from 6.9 per cent to 7.4 per cent. In the reporting period, the effect of actual inflation and our updated short-term inflation forecast
resulted in a £76 million increase in the NAV.
We achieve this high-quality inflation linkage through contractual indexation mechanics in our project agreements with our public sector clients at each Portfolio
Company, and update the inflation adjustment at least annually. We pass on the indexation mechanism to our subcontractors - on whom we rely to support our
assets' operations - and this provides an inflation cost hedge to effectively manage our cost base.
The weighted average discount rate applied to our portfolio increased from 6.6 per cent to 6.9 per cent, reflecting an equity risk premium of c. 3.1 per cent over the
longer-term weighted average government bond yields. Actual and projected inflation rates also increased and, coupled with higher actual and forecasted deposit
rates for money held on deposit at Project Company level, have more than offset any negative effects on the NAV from rising discount rates. The sensitivity analysis
in the Valuation section of this Annual Report illustrates the effect of this combined movement on our NAV, in a scenario where we experience discount, inflation,
and deposit rate rises across our portfolio. Additionally, we have included a scenario of a two-percentage point higher inflation rate over the next three years,
compared to our forecast assumptions.
Prudent financial management
We ended the year with a net debt position of £26.3 million, with £57.5 million cash borrowings outstanding under our £230 million RCF. The RCF, which has the
possibility, under its accordion tranche, to be increased by a further £70 million, matures in May 2026. As a principle, we only draw on our RCF to finance new
acquisitions, giving our shareholders maximum certainty of securing our pipeline. We manage market liquidity risk by maintaining adequate cash and cash
equivalents for day-to-day and medium-to-long-term capital needs. Borrowings in underlying entities are non-recourse, and - with minor exceptions only -
borrowing costs are fixed and amortising over the period of our ownership of each respective asset, which leaves BBGI with minimal refinancing risk.
Risk management
Our approach to risk management remains unchanged and there has been no material movement in our risk profile over the past year. Our portfolio is not directly
impacted by the events in Ukraine or energy price rises.
In the current macroeconomic environment, a key risk for BBGI would be further interest rate increases and the associated impact on discount rate and NAV,
although this is expected, at least, to be partly offset by higher than forecasted deposit rates and inflation-linked income. For further information, please see the
sensitivity in the Valuation section and the Risk section.
While there is an elevated inflationary environment in all our jurisdictions, we mitigate this risk in our portfolio by seeking to match the indexation of revenues and
costs.
With approximately two-thirds of our portfolio outside the UK, BBGI is exposed to foreign-exchange volatility. We have a prudent hedging policy aimed at
mitigating foreign exchange risk and it has worked well to limit the NAV impact from movements against Sterling, the Group's reporting currency. We operate a
four-year portfolio distribution hedging policy, and a one-year rolling balance sheet hedging approach. We aim to limit the impact of foreign exchange volatility of
the NAV to 3 per cent, if all currencies move against Sterling by 10 per cent.
Environmental, Social and Governance ('ESG') progress
The landscape for responsible investment has shifted markedly since 2011 and, as stewards of important social infrastructure investments, we continue to evolve the
reporting and monitoring of our ESG performance, with ESG considerations fully integrated into our business model.
We align with the Sustainable Finance Disclosure Regulation ('SFDR') Article 8 product classification, promoting social characteristics. SFDR provides a framework for
transparency for companies that make a genuine contribution to sustainable outcomes.
We disclose information in line with the Task Force on Climate-Related Financial Disclosures ('TCFD') recommendations and the UN Global Compact ('UNGC'). We
also align with the UN SDGs as an integral part of our approach to ESG. We are committed to the UNGC's Ten Principles and are a signatory to the Net Zero Asset
Manager's Initiative. Our Portfolio Companies are also expected to contribute to the objectives of the Paris Agreement and we are in the process of compiling a
Greenhouse Gas ('GHG') inventory for all our Portfolio Companies, by mid-2023. This will be consistent with the GHG Protocol, and will include Scope 1, 2 and
material Scope 3 emissions.
Our published Net Zero Plan for BBGI and key goals at the corporate level and for our Portfolio Companies includes the following:
· Reduce our corporate GHG emissions by 50 per cent by 2030, embedded in our executive remuneration targets.
· Net zero corporate GHG emissions by 2040.
· Report Scope 1, 2 and material Scope 3 emissions at all of our Portfolio Companies from June 2023 onwards.
· 70 per cent of our Portfolio Companies by value to be 'net zero', 'aligned', or 'aligning'[viii], by 2030, embedded in our executive remuneration targets. This
means that by 2030, 70 per cent of our assets under management (portfolio companies by value) will have a long-term goal to be net zero by 2050 or
sooner.
Looking ahead
We are well placed to benefit from ongoing strong demand for public infrastructure. Government debt has escalated due to COVID-19 mitigation measures and
soaring energy prices in Europe, and the debt-to-GDP ratio and risk-free rates have risen in almost all our jurisdictions.
Against this backdrop, the scope for government-financed infrastructure investments is limited, and governments worldwide are expected to seek private financial
support to meet community demand to deliver essential infrastructure.
Our strong financial and operational performance over 2022 has reinforced the attractions of our asset class, particularly for investors looking for stable and
predictable cash flows, dividend growth, and assets with high-quality inflation linkage and low correlation to other asset classes.
We remain confident that our reputation as a specialist investor in low-risk global infrastructure, and our well-established relationships with key vendors, will allow
us to continue to source attractive and accretive investment opportunities.
In an uncertain world, we firmly believe in BBGI's ability to continue to deliver positive and sustainable value for all stakeholders over the short and longer term. We
sincerely thank our shareholders for their support over the past year and look forward to the future with confidence.
Duncan Ball Frank Schramm
Co-CEO Co-CEO
29 March 2023
On behalf of the Management Board
Our Investment Strategy
BBGI provides access to a globally diversified portfolio of infrastructure investments, which generate long-term and sustainable returns and serve a critical social
purpose in their local communities.
BBGI's portfolio is well-diversified across sectors in education, healthcare, blue light (fire and police), affordable housing, modern correctional facilities, clean energy
and transport infrastructure assets. Our business model is built on four strategic pillars: (i) low risk, (ii) globally diversified, (iii) strong ESG approach and (iv)
internally managed.
Low-risk
· Availability-style investment strategy.
· Secure, public sector-backed contracted revenues.
· Stable, predictable cash flows, with high-quality inflation linkage and progressive long-term dividend growth.
Globally diversified
· Focus on highly rated investment grade countries.
· Stable, well-developed operating environments.
· A global portfolio, serving society through supporting local communities.
Strong ESG approach
· ESG fully integrated into the business model.
· Focus on delivering positive social impact - SFDR Article 8
· Executive compensation linked to ESG performance.
[ix]
- and high degree of climate resilience.
Internally managed
· In-house management team focused on delivering shareholder value first, portfolio growth second.
· Management interests aligned with those of shareholders.
· Strong pricing discipline and portfolio management.
· Lowest comparative ongoing charges[x].
Consistent delivery of objectives
1 - Robust shareholder returns
2 - Low correlation to other asset classes
3 - Sustainable growth
Operating Model
We follow a proven operating model based on three principles: value-driven active asset management, prudent financial management and a selective acquisition
strategy to preserve and create value, achieve portfolio growth and ensure ESG considerations are embedded in our processes. These operational pillars are
fundamental to our success.
We ensure stable operational performance through an active asset management approach, where we actively seek to preserve value and, where possible, identify
and incorporate value enhancements over the lifetime of the assets under our ownership. Our approach aims to reduce costs to our public sector clients and asset
end-users, and to enhance the operational efficiency of each asset. It also allows us to generate a high level of asset availability, underpinning the social purpose of
our portfolio.
Our prudent financial management focuses on efficient cash and corporate cost management and implementing our foreign exchange hedging strategy. Our
portfolio's wide geographical diversification results in exposure to multiple currencies. We actively seek to manage geographical concentration and mitigate foreign
exchange risk.
We pursue a selective acquisition strategy, so our Management Board's focus remains within its area of expertise, and we uphold the strategic pillars defined by our
investment proposition. We actively seek acquisitions with long-term, predictable and inflation-protection characteristics that support the portfolio's contracted,
high-quality, inflation linkage of 0.5 per cent.
Value-driven active asset management
We pursue a standardised approach across our portfolio to preserve value, to derive operational and value enhancements, and to improve customer experience
including:
· Strong client relationships, by prioritising regular meetings to achieve high rates of client satisfaction.
· Focused asset management, to ensure distributions are on time, and on or above budget.
· Focused cost management and portfolio-wide cost-saving initiatives, to leverage economies of scale or outperform the base case, such as portfolio
insurance and standardised management contracts for Portfolio Companies, and lifecycle cost reviews.
· Comprehensive monitoring, to ensure we fulfil our contractual obligations.
· Detailed climate risk assessments and ESG KPI tracking tool, which includes over 100 KPIs and questions, and evaluates the governance and non-financial
performance of each of our investments.
· Maintaining high availability levels by proactively managing any issues, including site visits to all significant investments.
· Reviewing Portfolio Company debt facilities and investigating potential refinancing benefits.
· Measured exposure to construction risk to support NAV uplift by de-risking assets over the construction period.
Prudent financial management
We focus on cash performance at both the asset and portfolio level to drive efficiencies, including:
· Progressive future dividend growth, underpinned by high-quality inflation linkage and strong portfolio distributions.
· Low ongoing charges through our efficient and cost-effective internal management structure.
· Managing and mitigating foreign exchange risk through our hedging strategy: hedging forecast portfolio distributions, balance sheet hedging through
foreign exchange forward contracts, and borrowing in non-Sterling currencies.
· Euro-denominated running costs, which provide a natural hedge against Euro-denominated portfolio distributions.
· Efficient treasury management system for cash in the underlying Portfolio Companies to maximise interest income on deposits.
· Maintaining modest cash balances at the corporate level to limit cash drag, facilitated through access to the RCF.
Selective acquisition strategy and strategic investment partnership
We maintain strategic discipline in our acquisition strategy and portfolio composition to ensure we pursue growth that builds shareholder value, not just for
growth's sake, including:
· Broad industry relationships throughout multiple geographies.
· Pre-emption rights to acquire co-shareholders' interests.
· Visible pipeline through a North American strategic partnership.
· Global exposure to benefit from geographical diversification.
· Robust framework embedding ESG principles into investment due diligence.
· Revolving corporate debt facility to support transaction execution.
· Focus on the Management Board's core areas of expertise.
We continue to leverage strong relationships with leading construction companies to source potential pipeline investments, which support our low-risk and globally
diversified investment strategy.
Typically, these contractors have secured the mandate to design and build new assets but continue to look to divest financially after the construction period has
finished - thereafter often maintaining facility management contracts through a long-term partnership. BBGI is an attractive partner for several reasons:
· Our cost of capital is typically lower than construction companies, so involving BBGI can make the bid more competitive.
· We are a long-term investor with a publicly-listed status, which is attractive to government and government-backed counterparties.
· We are considered a reliable source of liquidity should a construction partner decide to sell.
· Having a financial partner is a prerequisite for some construction companies so they can avoid consolidating the Portfolio Company debt onto the balance
sheet of their parent company.
· We have extensive asset credentials and a strong track record, which can assist with the shortlisting process for new projects.
Portfolio Review
Portfolio summary
The Company's investments as at 31 December 2022 consisted of interests in 56 high-quality, availability-style social infrastructure assets, 99.5 per cent of which are
fully operational (by portfolio value). The portfolio has no exposure to demand-based or regulated investments, and is diversified across sectors in education,
healthcare, blue light (fire and police), affordable housing, modern correctional facilities, clean energy and transport infrastructure assets.
Located in the UK, North America, Australia and Continental Europe, all Portfolio Companies are in stable, well-developed and highly-rated investment grade
countries.
Portfolio breakdown*
For portfolio statistics, refer to the Portfolio at a Glance section of this Annual Report.
No.
Asset
A1/A6 Motorway
A7 Motorway
Aberdeen Western Peripheral Route
Avon & Somerset Police HQ
Ayrshire and Arran Hospital
Barking Dagenham & Havering (LIFT)
Bedford Schools
Belfast Metropolitan College
Country
Percentage
holding %
Netherlands
37.1
Germany
49
UK
UK
UK
UK
UK
UK
33.3
100
100
60
100
100
Burg Correctional Facility
Germany
90
Canada Line
Champlain Bridge
Clackmannanshire Schools
Cologne Schools
Coventry Schools
E18 Motorway
East Down Colleges
Canada
26.7
Canada
UK
25
100
Germany
50
UK
Norway
UK
100
100
100
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
No.
Asset
Frankfurt Schools
Fürst Wrede Military Base
Gloucester Royal Hospital
Golden Ears Bridge
Highway 104
John Hart Generating Station
Country
Germany
Germany
UK
Percentage
holding %
50
50
50
Canada
100
Canada
Canada
50
80
Kelowna and Vernon Hospital
Canada
100
Kent Schools
Kicking Horse Canyon
Lagan College
Lisburn College
Liverpool & Sefton Clinics (LIFT)
M1 Westlink
M80 Motorway
UK
Canada
UK
UK
UK
UK
UK
McGill University Health Centre
Canada
Mersey Care Hospital
Mersey Gateway Bridge
UK
UK
50
50
100
100
60
100
50
40
79.6
37.5
N18 Motorway
Netherlands
52
North Commuter Parkway
North East Stoney Trail
North London Estates Partnership (LIFT)
North West Fire and Rescue
North West Regional College
Northwest Anthony Henday Drive
Northern Territory Secure Facilities
Ohio River Bridges
Poplar Affordable Housing & Recreational Centres
Restigouche Hospital Centre
Rodenkirchen Schools
Royal Women's Hospital
Scottish Borders Schools
South East Stoney Trail
Stanton Territorial Hospital
Stoke & Staffs Rescue Service
Tor Bank School
Unna Administrative Centre
Victoria Correctional Facilities
Westland Town Hall
William R. Bennett Bridge
Women's College Hospital
Canada
Canada
UK
UK
UK
Canada
Australia
US
UK
Canada
Germany
Australia
UK
Canada
Canada
UK
UK
Germany
Australia
50
100
60
100
100
50
100
66.7
100
80
50
100
100
40
100
85
100
90
100
Netherlands
100
Canada
Canada
80
100
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
*In alphabetical order
Operating model in action
Preserving and enhancing value through active asset management
During 2022, the portfolio value increased by approximately £148 million[xi] from the rebased value, driven largely by the net effect of actual inflation and a change
in the short-term forecast for inflation and deposit rates forecast, the positive net effect of foreign exchange and the portfolio performance resulting from our
hands-on active asset management approach.
Our active value-driven approach to asset management and the robustness of our portfolio meant that the availability level of the Company's assets was recorded
at approximately 99.9 per cent and any deductions were either borne by third-party facility management companies and road operators, or were part of planned
expenditures.
There were no material lock-ups or default events reported during the year and we are very proud of this achievement.
High-quality inflation linkage
During the year, BBGI's strong financial and operational performance was partly due to inflation exceeding forecast assumptions in all regions where the Company
is active. The total inflation effect was £76 million, with shareholders benefitting from BBGI's high-quality cash flow correlation with inflation linkage at 0.5 per cent,
especially in a rising interest rate environment.
BBGI has a portfolio of 56 availability-style assets with government or government-backed counterparties, which have contractual income streams. The obligations
of these contracts are underpinned by Project Agreements, with each agreement being unique but generally following a standard approach. Project Agreements
typically include either partial or full indexation to an appropriate inflation factor to compensate for increasing costs over the life of the concession.
The Portfolio Companies enter into facilities management and operating subcontracts that mirror the inflation arrangements contained in the Project Agreement. In
the UK, Project Agreements tend to have a Retail Price Index ('RPI') adjustment factor, while other regions commonly use Consumer Price Index ('CPI') indexation.
However, some Project Agreements have bespoke inflation indexes that reflect expected operations and maintenance costs.
The extent of a Portfolio Company's linkage to inflation is determined by the portion of income and costs linked to inflation. In most cases, cash flows are positively
inflation-linked as the indexation of revenues is greater than the indexation of expenses.
The high-quality and defensive nature of the Company's inflation linkage are underpinned by:
Contractual increases: The adjustment for inflation is a contractual component of the 100 per cent availability-style cash flows for each Portfolio Company,
and is supported by creditworthy government or government-backed counterparties in AA to AAA-rated countries. The Company does not invest in
demand-based assets. Although such assets may seem to offer a strong theoretical inflation linkage (e.g. the ability to raise prices in response to an
increase in CPI), they are likely still subject to changes in elasticity of demand. Toll roads and student accommodation projects are examples of such assets,
which may have the potential to increase prices in response to an increase in CPI, but may be hindered by market demand from increasing revenue, while
costs may simultaneously rise.
Protection against rising costs: The Company transfers the indexation mechanism to its subcontractors, who are crucial in supporting the operations of our
assets. This arrangement serves as an inflation cost hedge, which helps the Company to efficiently control its cost base. Similarly, in most cases, the risk of
energy costs increases rests with the public sector client or has been passed down to the subcontractor.
Not dependent on regulatory review: The inflation adjustment is automatic and contractual and is not subject to regulatory review. Once the relevant
reference factor is published, the adjustment is mechanical.
Portfolio approach: The Company's inflation linkage comes from diverse Portfolio Companies in different countries.
Prudent financial management
Our assets performed well during the reporting period with cash receipts during the year ahead of business plan. This robust performance and the confidence in the
business model allowed the Company to achieve its dividend target of 7.48pps for 2022, increase our dividend targets of 7.93pps and 8.40pps for 2023 and 2024
respectively, as well as introduce a new dividend target of 8.57pps for 2025.
Cash receipts during the year allowed the Company to achieve a strong dividend cover of 1.47x. The predictable nature of our cash flows allows for high visibility for
future dividends, and therefore gives us the confidence to revise our dividend targets and extend our dividend guidance to 2025, with dividends expected to be
fully cash covered.
During the year, we continued to implement our hedging strategy, which seeks to hedge 100 per cent of projected non-Sterling and non-Euro portfolio
distributions over the next four years. Additionally, in November 2022, we executed balance sheet hedges to limit our NAV exposure to fluctuations in foreign
exchange rates.
The Company has efficient cash management in place which aims to avoid cash drag. This includes using the proven financing methodology of drawing on its RCF
before raising new equity to repay the temporary debt. The committed amount of the RCF is £230 million, which matures in May 2026. Furthermore, there is the
possibility to increase the quantum to £300 million by means of an accordion provision. This enables the Company to execute larger acquisitions in an efficient
manner and to be a trusted and repeat partner in its key markets.
With £57.5 million drawn under the RCF, the net debt position on an Investment Basis as at 31 December 2022 was £26.3 million.
Selective acquisition strategy
Successful acquisitions
During the year, we continued to pursue a selective acquisition strategy, investing approximately £64.4 million, including interests in two new projects both of which
earn availability-based revenue in return for providing essential public services. This disciplined approach demonstrates the Management Board's commitment to
avoiding style drift and evidences how BBGI's strong industry relationships and nimble operating model continue to realise a pipeline of acquisition opportunities,
with the Management Board having assessed many more potential opportunities than those acquired. Although the Company received invitations to bid on several
transactions over the year, the Management Board declined opportunities that were not accretive in terms of inflation linkage, yield or residual life.
The two new investments were:
· John Hart Generating Station Replacement Project (Canada): In February 2022, BBGI completed the acquisition of an investment in InPower BC General
Partnership, the entity responsible for delivering the John Hart Generating Station Replacement Project (John Hart Generating Station), an investment
delivered through the existing strategic partnership between the Company and SNC-Lavalin Group Inc. The PPP consists of the design, construction,
financing, maintenance and rehabilitation of a new three-turbine, 132 MW hydroelectric power generation station on the Campbell River, British Columbia,
including a three generating unit underground powerhouse, 2.1 kilometres of water passage tunnels and a water bypass system to protect downstream fish
habitat. The acquisition price was approximately £24 million.
Service commencement was achieved in 2019 and the concession runs until 2033. The asset is classified as availability-style under the investment policy of
the Company. The investment is not subject to demand or power price risk. Availability payments are received from the British Columbia Hydro & Power
Authority (rated AA/Aaa by DBRS Morningstar and Moody's respectively), a Crown corporation wholly-owned by the Government of British Columbia. The
station generates clean and reliable energy for over 80,000 homes.
· A7 Motorway (Germany): In September 2022, BBGI completed the acquisition of a 49 per cent interest in Via Solutions Nord GmbH & Co. KG, the project
company for the A7 motorway PPP near Hamburg in Germany. The asset is classified as availability-based under the investment policy of the Company and
aligns with BBGI's ESG principles.
The project consists of the design, construction, financing, operation, maintenance and rehabilitation of 65 kilometre widening of a section of the A7
motorway between Neumünster and Hamburg. The project includes 11 interchanges, six parking facilities and four rest areas, various civil engineering
structures and a 550-metre noise enclosure tunnel. Availability payments are received from Federal Republic of Germany, represented by the Free City of
Hamburg and the Federal State of Schleswig-Holstein, rated AAA/Aaa by S&P and Moody's respectively. Construction completion was achieved in
December 2019 and the concession runs until 2044.
The increased efficiency of the A7 motorway will help to minimise any increase in exhaust emissions from the higher traffic load by reducing congestion
and traffic jams and is expected to achieve a consistent traffic flow and uniform driving speeds. Environmental impact assessments (EIA) have been
performed. During the EIA procedure, all potentially affected Natura 2000 sites, habitats and species have been analysed, including habitats and species
placed beyond Natura 2000 sites.
Both projects acquired during the year add to the portfolio's diversification across multiple social infrastructure sectors where the demand for private sector
investment remains high.
Strategic investment partnerships
We continue to leverage strong relationships with leading construction companies to source a potential pipeline, which supports our low-risk and globally
diversified investment strategy.
Typically, contractors active in the sector have secured the mandate to design and build new assets but often look to divest financially after the construction period
has finished - thereafter often maintaining facility management contracts through a long-term partnership. There are several reasons why BBGI is an appealing
partner:
· We possess a substantial asset portfolio and a robust performance history.
· As a long-term investor with a publicly-listed status, we are an attractive option for government and government-backed counterparties.
· We are recognised as a trustworthy source of liquidity if a construction partner decides to sell in the future.
One notable relationship is the North American strategic partnership with SNC-Lavalin, which covers four availability-based assets. More details of the projects
covered by the pipeline agreement are provided in the Market Trends and Pipeline section of this Annual Report.
Avoiding style drift
As competition to acquire availability-style assets at attractive valuations remains robust, the Company's Management Board consciously works to avoid 'style drift'.
This refers to the practice of moving up the risk spectrum, particularly where pricing does not accurately reflect inherent risks, both to find investible assets and to
deliver the targeted returns to investors.
The Management Board has made the conscious decision to avoid investing in infrastructure transactions with a demand-based revenue stream, which are typically
highly correlated to Gross Domestic Product ('GDP') or subject to uncertainty due to regulatory review periods and political interventions.
We continue to pursue essential social infrastructure assets, which match our low-risk, globally diversified investment strategy and unwavering ESG principles. BBGI
has investments in LIFT assets, where BBGI typically owns the land and buildings, and availability payments are fully linked to RPI. We will continue to seek out
opportunities to expand and diversify our portfolio of essential social infrastructure by exploring investments with similar features of long-term and inflation-linked
revenues tied to public sector counterparties or related to the public sector, whether through long-term concessions or direct asset ownership.
Although this disciplined strategy may occasionally result in periods of slower portfolio growth, we are confident the benefits, such as dependable and consistent
income and returns with low volatility, justify its continued implementation. By adhering to our area of expertise, we offer a less complex business proposition,
which should result in fewer surprises, and a more predictable and stable return for our shareholders.
Supply chain monitoring
The Management Board continually reviews the potential concentration risk of operations and maintenance ('O&M') contractors that provide counterparty services
to the Company's assets. The table illustrates the level of O&M contractor exposure as a percentage of portfolio value
[xii]
at 31 December 2022.
O&M Contractors
Portfolio Company in-house
SNC-Lavalin O&M Inc
Capilano Highway Services
Cushman and Wakefield
Black & McDonald
Integral FM
Honeywell
Hochtief Solutions AG
Carmacks Maintenance Services
Graham AM
Intertoll Ltd.
BEAR Scotland
Guildmore Ltd.
Amey Community Ltd.
Galliford Try FM
Remaining investments
13%
10%
10%
6%
6%
5%
5%
4%
4%
3%
3%
3%
3%
3%
3%
19%
100%
The Management Board has not identified any significant risk exposure and remains comfortable with the current contractor allocation. The Company benefits from
a diverse contractor base and supply chain, with no concentrated exposure, and is supported by a strict supply chain monitoring policy. We regularly monitor the
performance of subcontractors and have risk mitigation measures in place to deal with any supply chain issues.
We are pleased to confirm that we have not recorded any material adverse supply chain issues during the year.
Construction defects
The Company routinely monitors the quality of its assets to identify any construction defects early on and, where necessary, to implement the appropriate
remediation measures.
The responsibility for, and the cost of remediation and related deductions falls to the relevant construction subcontractor on each asset, subject to statutory
limitation periods. This is a key component of the Company's effective counterparty risk management.
Latent defects risk was mitigated during the year with 60 per cent of portfolio value covered by either limitation or warranty periods and there were no material
defects reported on any of the Company's portfolio assets.
Latent defects limitations / Warranty period remaining
Expired
Within 1 year
1-2 years
2-5 years
5-10 years
10+ years
40%
8%
11%
20%
15%
6%
100%
Portfolio Snapshot - Top Five Assets
Our five largest assets
1) Ohio River Bridges:
· Type: Availability-style
· Status: Operational
· Equity holding (per cent) BBGI: 66.7 per cent
· Total investment volume: US$1.175 billion
· Financial close/operational: March 2013/December 2016
· Concession period: 35 years (post-construction) ending in 2051
The project includes a 760-metre cable-stay bridge; a 500-metre long twin vehicular tunnel and 2.25 kilometres of associated six-lane interstate highway, with more
than 21 bridges and multiple roundabout style interchanges. The asset greatly improves connectivity, public safety and economic growth, which benefits residents,
businesses and visitors in the Southern Indiana region, particularly for road-users travelling to and from the state of Kentucky.
In October 2021, a US$528 million green bond offering was completed to refinance its existing indebtedness. This transaction allowed the Portfolio Company to
optimise its financing costs over the remaining term of the contract thereby further strengthening its financing structure, while also benefiting the public sector
client through a reduction in future service payments. Recent environmental initiatives include installing solar panels on the O&M buildings, a commitment to
transitioning its fleet of vehicles to reduced-emission and electric-powered, pollinator habitats and other wildlife conservation initiatives, and an organisation-wide
recycling programme, to name a few.
2) Golden Ears Bridge:
· Type: Availability-style
· Status: Operational
· Equity holding (per cent) BBGI: 100 per cent
· Total investment volume (debt and equity): C$1.1 billion
· Financial close/operational: March 2006/June 2009
· Concession period: 32 years (post construction) ending in 2041
Golden Ears Bridge represented the largest private financing for a greenfield PPP in Canada at the time of its launch. The project involves the design, build,
financing, operation and maintenance of the Golden Ears Bridge in Vancouver, which is a 1-kilometre, six-lane road that spans the Fraser River and connects Maple
Ridge and Pitt Meadows to Langley and Surrey. The road opened in March 2009 and includes more than 3.5 kilometres of ramps, viaducts, minor bridges and
underpasses, and more than 13 kilometres of mainline roadway; a large part of which has been landscaped.
The project has brought close to C$1 billion in construction-related activity to the area, while commuters using the bridge now save up to 40 minutes per peak-
hour round-trip from Maple Ridge to Langley. In coordination with the asset operator, we have implemented an LED conversion for all project lighting, which has
delivered annual energy savings in excess of 380,000 kWh and has reduced carbon dioxide emissions at a rate of 273 metric tons per year.
3) Northern Territory Secure Facilities:
· Type: Availability-style
· Status: Operational
· Equity holding (per cent) BBGI: 100 per cent
· Total investment volume (debt and equity): A$620 million
· Financial close/operational: October 2011/November 2014
· Concession period: 30 years (post-construction) ending in 2044
Located near Darwin, Northern Territory (the 'Territory'), the project involves the design, build, financing, operation and maintenance of three separate centres
including: a 1,000-bed multi-classification male and female correctional centre, a 30-bed secure mental health and behavioural management centre (the first of its
kind in the Territory), and a 48-bed supported accommodation and programme centre for community-based offenders.
The latter is designed to support the Australian Government's goals of enhanced rehabilitation, education and reduced reoffending rates in the Territory.
The asset is one of the largest social infrastructure projects in the Territory and is the largest PPP ever procured to date. BBGI acquired its initial 50 per cent interest
in the asset while it was still in construction and subsequently acquired the remaining 50 per cent stake in July 2015.
4) Victoria Correctional Facilities
· Type: Availability-style
· Status: Operational
· Equity holding (per cent) BBGI: 100 per cent
· Total investment volume: A$244.5 million
· Financial close/operational: January 2004/March 2006
· Concession period: 25 years (post-construction) ending in 2031
Victoria Correctional Facilities is an availability-based PPP asset entailing the design, finance, construction and operation of two correctional facilities for the State of
Victoria, Australia (the 'State'). The first facility, Metropolitan Remand Centre, accommodates up to 1,000 male offenders and is located approximately 20 kilometres
from Melbourne city centre. The second, smaller facility is the Marngoneet Correctional Centre that houses up to 550 male offenders and is located approximately
65 kilometres from Melbourne city centre. The operational period is 25 years and runs until 2031.
A substantial augmentation was requested by the State to reinforce the facility and this completed in June 2018.
The Project is currently undertaking a material expansion of its accommodation (276 beds) and associated infrastructure across both facilities. The Portfolio
Company is managing the delivery of the works, which are expected to be complete by Q2 2024.
5) A1/A6 motorway
· Type: Availability-style
· Status: Operational
· Equity holding (per cent) BBGI: 37.14 per cent
· Total investment volume (debt and equity): €727.4 million
· Financial close/operational: February 2013/June 2017
· Concession period: 25 years (post-construction) ending in 2042
At the time of its launch, the A1/A6 Motorway project represented one of the largest greenfield PPP projects in the Netherlands and forms part of the wider
Schiphol - Amsterdam - Almere (SAA) corridor. The project is for the design, construction, financing, and maintenance of 18 kilometres of the A1 and A6 motorways
to the south of Amsterdam and involves re-routing and widening of the A1 (to 2 x 5 lanes and 2 reversible lanes), reconstruction of two major interchanges,
expansion of the A6 (to 4 x 2 lanes and 2 reversible lanes) and the construction of various new bridges, an aqueduct and the longest free span railway bridge in
Europe, as well as demolition of the old part of the A1.
The project forms part of a wider programme of five connected and adjacent projects, which together provide for significant extra road traffic capacity, reduced
journey times and improved accessibility of the north flank of the economical heart of the Netherlands around Amsterdam. As a result, the liveability of the area has
been improved significantly. In 2020, SAAone replaced all traditional street lighting, more than 2,000 fixtures in total with LED lighting, making the infrastructure
more maintenance-friendly, more sustainable and more reliable than traditional lighting. Moreover, it decreases the CO2-footprint of the project by at least 350
tons per year.
Market Trends and Pipeline
2023 and beyond
By many measures, 2022 was a difficult year, characterised by rising inflation worldwide, the end of lenient monetary policies, supply chain interruptions, and the
conflict in Ukraine. These occurrences led global markets towards a downward trend, and the associated challenges persist into 2023.
While this environment may discourage investor confidence, we remain optimistic about our resilient and defensive business model, low-risk investment strategy
and the markets in which we operate. As interest rates rise from historic lows, combined with inflation concerns and general uncertainty, the stability, inflation
linkage and resilience associated with availability-style social infrastructure investments have ensured that it remains an attractive asset class.
Competition for these availability-style assets varies between markets. Availability-style social infrastructure remains an appealing sector to many investors, however
it can be difficult for new entrants with big ambitions to deploy meaningful amounts of equity quickly since the typical transaction size is often smaller than other
infrastructure investment opportunities, and individual asset sales are more common than large portfolio transactions. With a well-established platform, specialist
skills, strong industry relationships and a reputation among sellers of transacting successfully, BBGI has been able to grow its portfolio from 19 assets at IPO to 56,
whilst maintaining pricing discipline, and expects to be able to continue to do so in 2023 and beyond, subject to market conditions.
Across BBGI's target markets, infrastructure under-investment remains a prevalent issue. Public finance budget constraints require the private sector's involvement
in providing the necessary funding and expertise to construct, maintain, and operate critical infrastructure assets. Many governments have ambitious plans to make
significant infrastructure commitments that will generate employment, rejuvenate communities, transition to a low-carbon economy, and act as a stimulus for
economic recovery. In the regions where we operate, there is a consistent baseline of new investment opportunities, and we anticipate this trend will continue.
At the same time, construction companies continue to consider the divestments of availability-based infrastructure investments they hold. This could be to recycle
capital into new opportunities after a project reached construction completion or in response to capital needs in other parts of their business due to economic
challenges. BBGI has well-established relationships with most major construction companies in the sector and this continues to be a good source of new
investments.
As a result of this trend, BBGI completed two transactions with construction companies and PPP developers in 2022 and we anticipate that there will be further
investment opportunities in 2023.
Our key markets offer a generally robust set of opportunities for availability-style transactions, which are likely to arise from various sources, including:
● A strategic partnership in North America with SNC-Lavalin, which has already led to the acquisition of six assets since 2017, along with a formal
pipeline agreement covering four additional assets with a value of c.C$200 million. In this arrangement, BBGI has the option but not the obligation
to transact.
● Ongoing bids for various secondary transactions, such as EU transportation and social opportunities.
● Soliciting off-market transactions through BBGI's extensive network of market participants in Australia, Europe, and North America.
● Acquisition of accretive equity interests from co-shareholders in existing assets.
● Participation in competitive sale processes, particularly to test pricing assumptions.
● Selective participation in primary investment opportunities and bids on new availability-style assets as part of public sector procurement
processes.
We will continue to source opportunities to further diversify and expand our essential social infrastructure portfolio by considering investment opportunities with
similar characteristics of low-risk, availability-style, long-term and inflation-linked revenues with public sector counterparties or a link to the public sector, whether
through long-dated concessions or direct ownership of assets, with a strong approach to ESG.
Canada
Canada remains one of the most productive PPP markets globally, and it is also one of the Company's most established and stable markets. Nearly 300 assets in
Canada have been procured under the PPP model, with a total value of over C$140 billion for assets currently in operation or under construction, including
hospitals, education, courthouses, and transport assets.
In 2022, ten PPP transactions worth US$4.62 billion reached financial close in Canada, down from twelve transactions worth US$5.11 billion in 2021. Ontario has the
largest pipeline of opportunities, as confirmed by its November 2022 market update, which emphasises its commitment to modernising public assets in the
province, such as hospitals, highways, public transit, children's treatment centres, and correctional facilities. Infrastructure Ontario's plans include 26 projects in pre-
procurement and 13 in active procurement, with a total estimated contract value of C$60 billion. The list also contains 16 government-announced projects in the
early stages of planning and defining the project's scope, timing, and delivery model.
Although other provinces have smaller programmes, they are still promising. With 16 assets in Canada, BBGI is well-positioned to take part in an appealing primary
pipeline or be a highly credible purchaser and manager of secondary assets when they become operational. We anticipate there will continue to be a diverse range
of availability-style social infrastructure investment opportunities for BBGI to consider in 2023 and 2024, as assets developed over the past few years become
operational and may come to market.
Additionally, the Company benefits from its North American strategic partnership with SNC-Lavalin, which covers four assets. We anticipate that the pipeline
agreement could result in additional investment opportunities of over C$200 million over the next few years, all of which will be evaluated on a case-by-case basis.
Formal pipeline assets
Asset
Confederation Line (Ottawa, ON)
Eglinton Crosstown LRT (Toronto, ON)
Highway 407 East Extension Phase I (ON)
Sector
Rail
Rail
Road
Estimated Asset
Capital Value1
Concession length after
construction completion
C$3.2 billion
30 years
C$9.1 billion
30 years
C$1.2 billion
30 years
Champlain Bridge (Montreal, QC)
Road & Bridge
C$3.2 billion
30 years
[1] Includes both debt and equity.
UK and Ireland
Private capital has been essential to the maintenance and development of the UK's existing infrastructure, as well as the financing of new greenfield projects. The
UK has one of the world's most established and attractive infrastructure markets for private investors, and the PFI market has grown significantly over the past few
decades.
PFI was a method used by the UK Government to finance public infrastructure projects such as schools, hospitals, and roads. Over 700 PFI projects were signed in
the UK between the early 1990s and the introduction of its successor, PF2, in 2012. However, PF2 was only used for a few projects before being discontinued in
2018, and the UK government is exploring alternative ways to finance public infrastructure projects.
This has meant that the greenfield infrastructure investment pipeline has been relatively subdued, although stronger in some areas (such as Wales) and sectors
(such as water projects). Although there will not be a UK-wide replacement for the PFI or PF2 model, Wales has recently closed several private finance projects
under its new Mutual Investment Model - including the widening of the A465 motorway and its 21st Century Schools programme. With Mutual Investment Model
projects, the Welsh Government takes up to a 20 per cent stake in the special purpose company, providing the Government with a greater stake in the project's
success and greater accountability. The UK Government is also developing new revenue support models and considering how existing models such as the
Regulated Asset Base model and Contracts for Difference can be applied in new areas. It remains open to new ideas from the market.
Despite the decline in greenfield PPP procurement, the UK Government remains committed to major infrastructure investment, particularly in health, education,
science, and defence, with plans to invest over £600 billion over the next five years. Private investment will also play a critical role in supporting the UK's net zero
2050 ambitions and in the green industrial revolution, with key sectors including energy transition, electric vehicle charging infrastructure, and fibre optic
broadband.
We remain optimistic that PFI and PF2 deal flow will be replaced by next generation transaction procurement models with similar attributes and risk and return
profiles to the traditional PFI procurement model.
The Company is committed to finding essential social infrastructure assets that fit our low-risk, availability-style, globally diversified investment strategy, and strong
approach to ESG. As existing investors in Local Improvement Finance Trust assets, BBGI has title to the land and building for the significant majority of these LIFT
assets and the availability payments are fully indexed with RPI.
We believe there may be interesting acquisition opportunities and pipeline for these types of primary care infrastructure assets in the UK and Ireland.
We continue to seek opportunities to expand our essential social infrastructure portfolio in the UK and Ireland, looking for investments with similar long-term and
inflation-linked revenue streams with public sector counterparties or a link to the public sector. This may include long-term concessions or direct ownership of
assets. We aim to diversify our portfolio while focusing on our low-risk and availability-based investment strategy, and ensuring our investments align with our
strong ESG approach.
US
Since 2015, the US PPP market has experienced steady growth with more than 125 greenfield PPP deals reaching financial close and a total deal value exceeding
US$60 billion. In 2022, the US PPP market hit a record with US$22 billion in projects reaching financial close. In 2021, the US ranked as the second-largest greenfield
PPP market globally by deal value, with 26 greenfield PPP transactions reaching financial close for a total value of US$6 billion.
Historically, US municipalities and states have been less receptive to PPPs as the US procurement system is less structured and lacks a centralised and unified body.
However, an increasing number of state legislatures are making PPPs more acceptable, and higher education institutions are turning to PPP agreements for a
broader range of projects.
With the passing of the US$1.2 trillion Infrastructure Investment and Jobs Act (IIJA) in November 2021, this could act as a catalyst for more PPP investment in the
US. The IIJA includes US$550 billion in new funding to rebuild roads and bridges, clean water infrastructure resilience, EV charging infrastructure, broadband, and
more. The IIJA also expands how states and localities may use Private Activity Bonds (PAB) to help finance projects involving private investment, such as carbon
capture and broadband access.
A recent study by White & Case and Acuris Studios[xiii] found that 86 per cent of public authorities interviewed agreed that PPPs were the preferred way to deliver
infrastructure projects. There is optimism that an attractive pipeline of infrastructure projects will emerge over time.
Continental Europe
While many European countries have slowed down their PPP programmes, others are pushing ahead. Overall, Continental European infrastructure markets remain
active with certain countries offering a pipeline of new assets as well as secondary opportunities. We believe these markets are likely to provide attractive
investment opportunities over the medium term.
Belgium
Though Belgium has had an active PPP pipeline, the number and value of closed projects has declined in recent years. Over the past two years, a large schools
package, Antwerp Prison and Ghent R4 all reached financial close. The relative infancy of the Belgian PPP market continues to hinder secondary activity, but we
anticipate increase activity following construction completion of some of the recent projects.
Germany
In Germany, the federal government has shown a positive attitude towards the use of PPPs and some projects are expected to come to the market in the short to
medium term.
With seven existing assets in Germany including our first road investment made in September 2022 in the A7 Motorway, strong credentials, and German language
skills among our senior executive and asset management teams, BBGI is well positioned to consider any upcoming opportunities.
Netherlands
Over the past decade, the Netherlands has established itself as a dependable market for social infrastructure investment, consistently delivering a sizeable stream of
deals that have attracted significant international developers and financiers.
Despite the absence of a centralised PPP authority or a comprehensive legislative framework for PPPs, the Central Government Real Estate Agency
(Rijksvastgoedbedrijf) has taken charge of all large PPP housing projects for the central government and its agencies. These projects include court buildings,
hospitals, correctional facilities, government offices, and museums. Decentralised authorities, such as provinces and municipalities, also manage PPP projects related
to social, healthcare, or public institution accommodation.
Rijkswaterstaat is responsible for major infrastructural PPP projects, such as motor highways, floodgates, and tunnels.
Since 2017, the Dutch PPP market has experienced a slowdown, with the Government completing its road PPP pipeline in June 2018, which was previously a crucial
source of greenfield investment. Nevertheless, in August 2021, Rijkswaterstaat revealed it had engaged a team of advisers, including Deloitte, EY, PwC, Rebel, and
Turner & Townsend, to provide financial and economic guidance for future PPP projects.
With Dutch language skills among our asset management team, and significant investments in the A1/A6 and N18 motorways in the Netherlands as well as a civic
facility in Westland, BBGI is well positioned in the Dutch secondary market for social infrastructure.
Australia
Over the last decade, Australia has been very active in the development of social infrastructure projects. Each state and territory have appointed a lead government
agency to implement PPP policies. Infrastructure Australia provides advice on Australia's infrastructure priorities.
Although the market dipped in 2020 due to COVID-19, it recovered quickly and 2021 and 2022 were both record years in terms of total transaction value - reflected
by the Australian Government's historic A$110 billion infrastructure commitment.
PPPs in Australia have been very active with the establishment of the National PPP Policy Framework in 2008. In 2021, closed PPP projects reached A$27 billion and
in 2022 a new record was set with more than A$37 billion in PPP projects closed. Since January 2015, over 30 greenfield PPP projects have closed.
The transport sector has traditionally dominated the nation's PPP market. Since 2015, more than 85 per cent of deal value from greenfield transactions has come
from the transport sector. Twelve greenfield social infrastructure deals have closed since 2015, with a value of A$7.5 billion.
Healthcare is the most active sub-sector at A$5.0 billion, including notable deals such as the A$1.8 billion Footscray Hospital Redevelopment in Victoria.
New South Wales and Victoria, the two biggest states, are each spending A$90 billion over four years on major projects. There may be some later investment
opportunities in Queensland connected to Brisbane winning the 2032 Summer Olympics. In addition to the aforementioned primary opportunities, we expect some
construction companies and investors may look to sell equity in projects once the construction is completed and the assets have been de-risked.
BBGI has three large operational assets in Australia and will continue to monitor the market for both primary and secondary opportunities.
Growth outlook
Over the last decade, BBGI has been able to grow its portfolio consistently, while maintaining price discipline and a selective and disciplined approach to evaluating
potential investment opportunities. We expect this trend to continue into 2023 and beyond. We expect our growth to come predominantly from secondary market
opportunities and in certain cases from primary bidding opportunities.
Operating and Financial Review
The Management Board is pleased to present the Operating and Financial Review for the year ended 31 December 2022.
Highlights and Key Performance Indicators
Refer to the Financial Highlights section for a summary of the Year in Numbers for 2022. Certain key performance indicators ('KPIs') for the past five years are
outlined below:
KPI
Target
Dec-18 Dec-19
Dec-
20
Dec-21
Dec-22
Commentary
Progressive long-term
dividend growth in
6.75
7.00
7.18
7.33
7.48
Achieved
Targets: 7.93pps for 2023, 8.40pps for 2024
and 8.57pps for 2025
Dividends (paid or
declared)
NAV per share
Annualised total
shareholder return
since IPO
Ongoing charge
pence per share
Positive NAV per share
growth
7% to 8% on IPO issue
price of £1 per share
Competitive cost
position
2.8%
2.0% 1.2%
2.1%
6.6%
Achieved
11.2% 11.3% 11.0% 10.4%
8.8%
Achieved
0.93% 0.88% 0.86% 0.86%
0.87%
Achieved
Cash dividend cover
>1.0x
1.50x
1.30x
1.27x
1.31x
1.47x
Achieved
Refinancing risk
(as a percentage of
portfolio)
Asset availability
Single asset
concentration risk
(as a percentage of
portfolio value)
Minimise refinancing
risk
> 98% asset
availability
To be less than 25% of
portfolio at time of
acquisition
Availability-style assets
(as a percentage of
portfolio)
Maximise availability-
based assets
7%
6%
7%
6%
5%
Achieved
Yes
Yes
Yes
Yes
Yes
Achieved
11%
10%
9%
11%
(GEB)
(GEB)
(GEB)
(ORB)
11%
(ORB)
Achieved
100% 100% 100% 100%
100%
Achieved
Asset Management
Cash performance
The Company's portfolio of 56 availability-style infrastructure investments continued to perform well during the year with cash flows ahead of forecast and the
underlying financial models.
Construction exposure
The Company's investment policy is to invest principally in assets that are operational and have completed construction. Accordingly, investment in construction
assets will be limited to 25 per cent of the portfolio value. The rationale for this approach is to be able to produce a stable dividend for our shareholders, while
gaining exposure to the potential NAV uplift that occurs when assets move from a successful construction stage to the operational stage. The Company has
demonstrated that it can manage such assets during the construction period and its successful transition into a stable operational asset.
The Management Board believes that the Company's ability to meet its dividend targets is not compromised by having some construction exposure.
As at 31 December 2022, approximately 99.5 per cent of the assets were operational with only one project, Highway 104 in Nova Scotia, Canada, under
construction, with completion expected in 2023.
Investment performance
Returns track record
The share price closed the year at 156.6pps, representing a 4.5 per cent premium to the NAV per share at the year-end.
The total NAV return per share since IPO to 31 December 2022 was 160.9 per cent or 9.1 per cent on an annualised basis. TSR since IPO to 31 December 2022 was
152.6 per cent or 8.8 per cent on an annualised basis and exceeds the 7 per cent to 8 per cent IRR target on IPO issue price of £1 per share.
We believe a key benefit of the portfolio is the high-quality cash flows derived from long-term availability-style government or government-backed contracts with
high-quality inflation linkages. As a result, portfolio performance has been largely uncorrelated to the many wider macroeconomic factors that may cause market
volatility in other sectors. Against the FTSE All-Share, the Company has shown a low ten-year correlation of 25.8 per cent and a beta of 0.24
[xiv]
.
Distribution policy
Distributions on ordinary shares are planned to be paid twice a year, normally in respect of the six months ended 30 June and the six months ended 31 December.
Dividends
In April 2022, the Company paid a second interim dividend of 3.665pps for the period 1 July 2021 to 31 December 2021. The 2022 interim dividend of 3.74pps for
the period 1 January to 30 June 2022 was paid on 20 October 2022. In February 2023, subsequent to the year-end, the Company declared a second interim dividend
of 3.74pps in respect of the six-month period ended 31 December 2022. This resulted in a total dividend of 7.48pps for the year ended 31 December 2022.
We are reaffirming our progressive dividend policy with revised target dividends of 7.93pps and 8.40pps for 2023 and 2024, respectively. We are also introducing a
new dividend target for 2025 of 8.57pps.
Proven progressive dividend policy
· Average annual dividend increases of 3.1 per cent from 2012 to 2022
· FY 2023 revised upwards to 7.93pps
[xv]
, a 6.0 per cent increase
· FY 2024 revised upwards to 8.40pps15 a 6.0 per cent increase
· FY 2025 new target dividend of 8.57pps15 a 2.0 per cent increase
Investor communications
The Company places great importance on communication with its shareholders and welcomes their views. We intend to remain at the forefront of disclosure and
transparency in our sector, and therefore the Management Board and, where required, the Supervisory Board regularly review the level and quality of the
information that the Company makes public.
The Company formally reports twice a year through its Annual and Interim Reports. Other Company information is provided through the Company's website and
through market announcements. At Shareholder General Meetings, each share is entitled to one vote, all votes validly cast at such meetings (including by proxy) are
counted, and the Company announces the results on the day of the relevant meeting.
The Management and Supervisory Boards are keen to develop and maintain positive relationships with the Company's shareholders. As part of this process,
immediately following release of the Annual and Interim Reports at the end of March and August each year, the Co-CEOs present the Company's results to market
analysts and subsequently conduct investor roadshows and offer shareholder meetings to discuss the results, explain the ongoing strategy of the Company, and
receive feedback.
Outside of these formal meetings, feedback from investors is received by the Management Board and the Corporate Brokers and, together with the feedback from
results meetings, is reported to the Supervisory Board. Throughout the year, the Co-CEOs have made themselves available to shareholders and key sector analysts,
for discussion of key issues and expectations around Company performance. The Co-CEOs intend to continue to be available to meet with shareholders periodically
to facilitate an open two-way communication on the development of the Company. Shareholders may contact members of both the Management and Supervisory
Boards at the registered office of the Company, the address for which can be found on the final page of the Annual Report or on the Company's website at
www.bb-gi.com.
While shareholder engagement is typically conducted by the Co-CEOs, the Chair of the Supervisory Board and Chairs of each committee, make themselves available
throughout the year to understand shareholder views on governance and performance.
In 2021 we undertook a comprehensive materiality assessment among our employees, shareholders, clients, partners and subcontractors to identify ten material
topics influencing our ESG strategy. These ten topics have informed key ESG commitments and KPIs that we are now tracking to ensure incremental progress in our
delivery of positive stakeholder outcomes. A progress update of each KPI is provided annually in our ESG report.
Given this level of engagement with shareholders and other stakeholders, the Management and Supervisory Boards consider that they meet the requirements of
AIC Code of Corporate Governance Principle 5D.
Share capital
The issued share capital of the Company is 713,331,077 ordinary shares of no-par value. All of the issued ordinary shares rank pari passu. During the year ended 31
December 2022, the Company issued 1,205,272 ordinary shares.
Voting rights
There are no special voting rights, restrictions or other rights attached to any of the ordinary shares. There are no restrictions on the voting rights attaching to
ordinary shares.
Discount management
The Management Board will actively monitor any discount to the NAV per share at which the ordinary shares may trade and will report to the Supervisory Board on
any such discount and to the extent appropriate propose actions to mitigate this.
Purchase of ordinary shares by the Company in the market
In order to assist in the narrowing of any discount to the NAV at which the ordinary shares may trade from time to time and/or to reduce discount volatility, the
Company may, subject to shareholder approval:
§ Make market purchases of up to 14.99 per cent annually of its issued ordinary shares.
§ Make tender offers for ordinary shares.
No shares have been bought back during the year ended 31 December 2022. The most recent authority to purchase ordinary shares, which may be held in treasury
or subsequently cancelled, was granted to the Company on 29 April 2022. This authority expires on the date of the next Annual General Meeting ('AGM') to be held
on 28 April 2023, at which point the Company will propose to renew its authority to buy back ordinary shares.
Continuation vote
The Company's Articles of Association ('Articles') require the Boards to offer a continuation vote to the Company's shareholders at every second AGM to allow the
Company to continue in its current form. On 30 April 2021, at the Company's AGM, the shareholders voted unanimously for the continuation of the Company. In
accordance with the Articles, a further continuation vote will be offered to shareholders at the AGM due to be held on 28 April 2023.
Valuation
The Management Board is responsible for carrying out the fair market valuation of the Company's investments, which it then presents to the Supervisory Board for
consideration as part of its approval of the Annual and Interim Reports. The valuation is undertaken on a six-monthly basis as at 30 June and 31 December each
year, and is reviewed by an independent third-party valuation expert.
The Company's investments are principally non-market traded investments with predictable long-term availability-style revenue; therefore, the valuation is
determined using the discounted cash flow methodology. The Company makes forecast assumptions for key macroeconomic factors that impact the cash flow
forecasts of investments such as inflation rates and deposit rates, and we adjust for any enacted changes in taxation rates during the reporting period. Our
assumptions are based on market data, publicly available economic forecasts, and long-term historical averages. In addition, we exercise judgement in assessing the
expected future cash flows from each investment based on the detailed financial models produced by each Portfolio Company, adjusting these financial models
where necessary to reflect the Company's assumptions as well as any specific cash flow assumptions. The Company's consolidated valuation is a sum-of-the-parts
valuation with no further adjustments made to reflect scale, scarcity or diversification of the overall portfolio.
The fair value of each investment is then derived from the application of an appropriate discount rate, alongside contracted foreign exchange rates or reporting
period-end foreign exchange rates, and withholding taxes (as applicable). The discount rate applied takes into consideration risks associated with the investment,
including the phase of the investment (construction, ramp-up or stable operation), investment-specific risks and opportunities, as well as country-specific factors.
The Company uses judgement in determining the appropriate discount rates. This judgement is based on the Company's knowledge of the market, considering
information obtained from its investment and bidding activities, benchmark analysis with comparable companies and sectors, discussions with advisers in the
relevant markets, and publicly available information. As government bond yields have increased significantly in 2022, there was limited transactional market data
available in the second half of 2022. BBGI has therefore complemented its market-based approach for this reporting period by using the capital asset pricing model
where government risk free rates plus an equity risk premium are used to calculate discount rates. This method is used as a reasonability check to our market-based
approach.
The valuation methodology remains unchanged from previous reporting periods.
A breakdown of the movements in the NAV is shown in the chart below.
NAV movement 31 December 2021 to 31 December 2022
The NAV at 31 December 2022 was £1,069.2 million (31 December 2021: £1,001.6 million), representing an increase of 6.7 per cent.
NAV movement 31 December 2021 to 31 December 2022
£ million
NAV at 31 December 2021
1,001.6
Deduct: other net assets at 31 December 2021i
Portfolio value at 31 December 2021
Acquisitionsii
Distributions from investmentsiii
Rebased opening portfolio value at 1 January 2022
Portfolio returniv
Change in market discount rate
Change in macroeconomic assumptions
Foreign exchange net movementv
Portfolio value at 31 December 2022
Other net liabilities at 31 December 2022i
NAV at 31 December 2022
(26.4)
975.2
64.4
(93.5)
946.1
81.5
(28.5)
60.7
37.1
1,097.0
(27.9)
1,069.2
i These figures represent the net assets of the Group after excluding the investments at fair value through profit or loss ('Investments at FVPL') and the net position on currency hedging instruments. Refer
to the Pro Forma Balance Sheet in the Financial Results section of this Annual Report for further breakdown.
ii Refer to the Portfolio Review section of this Annual Report for further details on acquisitions during the year.
iii While distributions from Investments at FVPL reduce the portfolio value, there is no impact on the Company's NAV as the effect of the reduction in the portfolio value is offset by the receipt of cash at the
consolidated Group level. Distributions in the above graph are shown net of withholding tax.
iv Portfolio Return comprises the unwinding of the discount rate, portfolio performance, the net effect of actual inflation, and updated operating assumptions to reflect current expectations.
v Includes the net asset from balance sheet hedging of £2.9 million. Under IFRS, this net asset is recorded separately as a derivative financial asset in the Consolidated Statement of Financial Position.
Key drivers for NAV change
The rebased opening portfolio value, after considering acquisitions in the reporting period of £64.4 million and cash distributions from investments of (£93.5)
million was £946.1 million.
Portfolio return comprises the unwinding of the discount rate, portfolio performance, the net effect of actual inflation, and updated operating assumptions:
During the year, the Company recognised an £81.5 million portfolio return, representing an 8.1 per cent increase in the NAV from the unwinding of discount rates,
the net effect of actual inflation and portfolio performance to reflect current expectations based on the Company's hands-on active asset management. As the
Company moves closer to forecasted investment distribution dates, the time value of those cash flows increases on a net present value basis and this effect is called
unwinding.
Change in macroeconomic assumptions:
During the year, the Company recognised an increase in the portfolio value of £60.7 million, or a 6.1 per cent increase in the NAV, resulting from changes in
macroeconomic assumptions. The main drivers were an increase in the short-term inflation and deposit rates of £75.1 million, which were partially offset by a
provision for additional taxes of c. £12.5 million, likely to be realised based on expected change in interest limitation rules.[xvi]
Short-term inflation is forecast to remain at an elevated level compared to long-term assumptions and as a result, we believe it appropriate to incorporate a two-
year short-term inflation forecast assumption in our operational jurisdictions.
In total, the combined effect of revised short-term inflation forecasts and the update of actual inflation (included in Portfolio Return, above) resulted in a £76.2
million, or a 7.6 per cent increase in NAV, and this demonstrates the contracted high-quality inflation linkage of our investment proposition. See also the Alternative
Performance Measures section for further details on our inflation linkage.
Short-term deposit rates have risen in conjunction with the increase in underlying benchmark rates and are expected to remain at elevated levels in most
jurisdictions. We also believe it appropriate to update some of our long-term deposit rate assumptions to reflect the current rate environment. The effect of revised
deposit rate assumptions resulted in a £15.8 million, or a 1.6 per cent increase in NAV.
Foreign exchange:
The forecasted distributions from investments are converted to Sterling at either the contracted foreign exchange rate, for 100 per cent of non-Sterling and non-
Euro denominated cash flows forecast to be received over the next four years on an annual rolling basis, or at the closing foreign exchange rate for the unhedged
future cash flows.
A significant proportion of the Company's underlying investments are denominated in currencies other than Sterling. The Company maintains its accounts, prepares
the valuation, and pays dividends in Sterling. Accordingly, fluctuations in exchange rates between Sterling and the relevant local currencies will affect the value of
the Company's underlying investments.
During the year ended 31 December 2022, the depreciation of Sterling (GBP) against the Canadian Dollar (CAD), Australian Dollar (AUD), the Euro (EUR), and the US
Dollar (USD), and the slight appreciation of Sterling against the Norwegian Krone (NOK) accounted for a net increase in the portfolio value of £37.1 million, which
includes the unrealised result from the Company's balance sheet hedging. Since IPO in December 2011, the net cumulative effect of foreign exchange movements
on the portfolio value, after considering the effect of balance sheet hedging, has been an increase of £11.9 million, or 1.1 per cent of the 31 December 2022 NAV.
The table below shows the closing exchange rates, which were used to convert unhedged future cash flows into the reporting currency at 31 December 2022.
GBP/
Valuation impact
FX rates as of
31 December 2022
FX rates as of
31 December 2021
FX rate
change
AUD
CAD
EUR
NOK
USD
Positive
Positive
Positive
Negative
Positive
1.7743
1.6386
1.1298
11.9150
1.2097
1.8607
1.7159
1.1912
4.64%
4.50%
5.15%
11.9114
(0.03%)
1.3512
10.47%
Although the closing rate is the required conversion rate to use for the unhedged future cash flows, it is not necessarily representative of future exchange rates as it
reflects a specific point in time.
The Group uses forward currency swaps to (i) hedge 100 per cent of forecasted cash flows over the next four years on an annual rolling basis and (ii) to implement
balance sheet hedging in order to limit the decrease in the NAV to approximately three per cent, for a ten per cent adverse movement in foreign exchange rates.
[xvii]
This is achieved by hedging a portion of the non-Sterling and non-Euro portfolio value.
The effect of the Company's hedging strategy can also be
expressed as a theoretical or implicit portfolio allocation to Sterling exposure. In other words, on an unhedged basis, the portfolio allocation to Sterling exposure at
31 December 2022 would need to be approximately 74 per cent to obtain the same NAV sensitivity to a ten per cent adverse change in foreign exchange rates, as
shown in the Foreign Exchange Sensitivity table below.
[xviii]
Macroeconomic events
The quality and predictability of portfolio cash flows has come into sharper focus given uncertainty in the markets generally and continued elevated inflation levels
in particular. Against this backdrop, the Company is well-positioned through its contracted high-quality inflation linkage, which is achieved through annually
updated contractual indexation in the Company's project agreements.
Additionally, there has been no material adverse effect on the portfolio valuation resulting from the war in Ukraine. This is primarily as a result of the Company
holding a low-risk, 100 per cent availability-style portfolio, coupled with strong stakeholder collaboration.
Discount rates
The market for availability-style transactions continued to be competitive with discount rates, based on our market observations, remaining largely stable during the
first half of 2022. During the second half of 2022, the number of availability-style transactions slowed materially in part due to the changing macroeconomic
environment. As transactional data is limited, the Company complemented its market-based approach for this reporting period by using the capital asset pricing
model where government risk free rates plus an equity risk premium are used to calculate discount rates. This analysis is used as a plausibility check for our market-
based approach. While there is no direct correlation between government bond yields and the risk premium on the one hand and market discount rates on the
other, the equity risk premium is a useful additional data point. As at 31 December 2022, the risk premium is 310 basis points over the weighted average
government bond yield of 380 basis points. The Company believes that a risk premium in the range of 250 to 350 basis points is appropriate for the low-risk
availability style assets in our portfolio. This is supported by an announcement of the German Network Agency, which calculated equity risk premium for regulated
gas and assets of around 3 per cent. As it is generally accepted that PPP/PFI assets have a lower risk profile than regulated assets, on this basis the risk premium for
PPP/PFI assets should be generally around the 3 per cent mark.
Going forward, the Company believes that investment demand in the availability-style social infrastructure providing long-term predictable inflation-linked
characteristics will remain strong.
Based on data from transactional activity, benchmark analysis with comparable companies and sectors, discussions with advisers in the relevant markets, publicly
available information gathered over the year and equity risk premium over government bond yields, we have increased the weighted average discount rate to 6.9
per cent (31 December 2021: 6.6 per cent). This methodology calculates the weighted average based on the value of each investment in proportion to the total
portfolio value, i.e. based on the net present value of their respective future cash flows.
Specific discount rates consider risks associated with the investment including the phase the investment is in, such as construction, ramp-up or stable operation,
investment-specific risks and opportunities, as well as country-specific factors. We apply a risk premium for investments in construction to reflect the higher-risk
inherent in the construction phase of any investment's lifecycle. Currently, the portfolio has one investment in construction, Highway 104, which represents
approximately 0.5 per cent of the overall portfolio value. Construction is expected to be completed in 2023. We have also applied a risk premium or discount to a
limited number of other investments to reflect the individual situations. For example, adjustments have been applied to acute hospitals in the UK, where a risk
premium of 50bps continues to be applied. The only UK acute hospital in the portfolio is Gloucester Royal Hospital, which represents less than one per cent of the
overall NAV. This risk premium reflects the continued situation in the UK where some public health clients are under cost pressure and are actively looking for cost
savings including deductions. To date, BBGI has not been affected.
Macroeconomic assumptions
Apart from the discount rates, we use the following assumptions ('Assumptions') for the cash flows:
31 December 2022
31 December 2021
Inflation
UK(i) RPI/CPIH
13.4% (actual) for 2022; 5.8% for 2023 then
2.75% (RPI) / 2.0% (CPIH)
2.75% / 2.00%
Canada
Australia
6.3% (actual) for 2022; 4.0% for 2023; 2.3%
for 2024 then 2.0%
2.00% / 2.35%
8.0% for 2022; 4.75% for 2023 3.25% for
2024 then 2.5%
2.50%
Germany/
Netherlands(ii)
8.4% for 2022; 6.3% for 2023; 3.4% for 2024
then 2.0%
2.00%
Norway(ii)
5.9% (actual) for 2022; 4.9% for 2023 then
2.25%
6.5% (actual) for 2022; 3.4% for 2023 then
2.5%
2.25%
2.50%
2.00% to 2024, then 1.50%
0.00% to 2023, then 1.00%
Canada
3.50% to 2024, then 1.75%
0.50% to 2023, then 1.50%
US
UK
Deposit
rates (p.a.)
Australia
3.25% to 2024, then 3.00%
0.25% to 2023, then 2.00%
Germany/
Netherlands
0.50% to 2024, then 1.0%
0.00% to 2023, then 0.50%
Norway
2.00% to 2024, then 2.00%
0.00% to 2023, then 2.00%
US
UK
3.75% to 2024, then 1.50%
0.00% to 2023, then 1.50%
19.00% until March 2023 then 25%
19.0% to Q1 2023, then 25.0%
Canada(iii)
23.00% / 26.50% / 27.00% / 29.00%
23.0% / 26.5% / 27.0% / 29.0%
Corporate
tax rates
(p.a.)
Australia
30.00%
30.0%
Germany(iv)
15.83% (incl. solidarity charge)
15.8% (incl. solidarity charge)
Netherlands
25.80%
Norway
22.00%
US
21.00%
25.8%
22.0%
21.0%
(i) On 25 November 2020, the UK Government announced the phasing out of RPI after 2030 to be replaced with CPIH; the Company's UK portfolio indexation factor changes from RPI to CPIH beginning on
1 January 2031.
(ii) CPI indexation only. Where investments are subject to a basket of indices, a projection for non-CPI indices is used.
(iii) Individual tax rates vary among Canadian Provinces: Alberta; Ontario, Quebec, Northwest Territory; Saskatchewan, British Columbia; New Brunswick.
(iv) Individual local trade tax rates are considered in addition to the tax rate above.
Sensitivities
Discount rate sensitivity
The weighted average discount rate applied to the Company's portfolio of investments is the single most important judgement and variable.
The following table shows the sensitivity of the NAV to a change in the discount rate.
Discount rate sensitivity(i)
Increase by 1% to c. 7.9%
Decrease by 1% to c. 5.9%
(i) Based on the weighted average rate of 6.9 per cent.
Change in NAV 31 December 2022
(£87.1) million, i.e. (8.1)%
£100.7 million, i.e. 9.4%
Inflation has increased in all jurisdictions across BBGI's geographies and interest rates have risen from historical lows. In the event long-term interest rates rise
substantially further, this is likely to affect discount rates, and as a result, negatively impact portfolio valuation.
Combined sensitivity: inflation, deposit rates and discount rates
It is reasonable to assume that if discount rates increase, then deposit rates and inflation would also be affected. To illustrate the effect of this combined movement
on the Company's NAV, a scenario was created assuming a one percentage point increase in the weighted average discount rate to 7.9 per cent, and a one
percentage point increase in both deposit and inflation above the macroeconomic assumptions.
Combined sensitivity: inflation, deposit rates and discount rates
Change in NAV 31 December 2022
Increase by 1%
Inflation sensitivity
(£22.8) million, i.e. (2.1)%
The Company's investments are contractually entitled to receive availability-style revenue streams from public sector clients, which are typically adjusted every year
for inflation. Facilities management subcontractors for accommodation investments and operating and maintenance subcontractors for transport investments have
similar indexation arrangements. The portfolio cash flows are positively linked with inflation (e.g. RPI, CPI, or a basket of indices).
This inflation linkage is achieved through contractual indexation mechanics in the various project agreements with the public sector clients at the Portfolio
Companies and the inflation adjustment updated at least annually.
Inflation sensitivity
The table below shows the sensitivity of the NAV to a change in inflation rates compared to the long-term assumptions in the table above:
Inflation sensitivity
Change in NAV 31 December 2022
Inflation +1%
Inflation −1%
Short-term inflation sensitivity
£51.5 million, i.e. 4.8%
(£45.5) million, i.e. (4.3)%
It is reasonable to assume that inflation could be elevated for the short-term before diminishing. To illustrate the effect of persistent higher short-term inflation on
the Company's NAV, three scenarios were created assuming inflation is two percentage points above our assumptions for the next one, three and five years.
Short-term inflation sensitivity
Change in NAV 31 December 2022
Inflation +2% for one year
Inflation +2% for three years
Inflation +2% for five years
Foreign exchange sensitivity
£12.0 million, i.e. 1.1%
£52.6 million, i.e. 4.9%
£65.6 million, i.e. 6.1%
As described above, a significant proportion of the Company's underlying investments are denominated in currencies other than Sterling.
The following table shows the sensitivity of the NAV to a change in foreign exchange rates:
Foreign exchange sensitivity(i)
Change in NAV 31 December 2022
Increase by 10%
Decrease by 10%
(£23.7) million, i.e. (2.2)%
£31.5 million, i.e. 2.9%
(i) Sensitivity in comparison to the spot foreign exchange rates at 31 December 2022 and considering the contractual and natural hedges in place, derived by applying a 10 per cent increase or decrease to
the Sterling/foreign currency rate.
Deposit rate sensitivity
Portfolio Companies typically have cash deposits that are required to be maintained as part of the senior debt funding requirements (e.g. six-month debt service
reserve accounts and maintenance reserve accounts). BBGI's proportionate interest in the total deposits held by the Portfolio Companies exceed £400 million. The
asset cash flows are positively correlated with the deposit rates.
The table below shows the sensitivity of the NAV to a percentage point change in long-term deposit rates compared to the long-term assumptions in the table
above:
Deposit rate sensitivity
Change in NAV 31 December 2022
Deposit rate +1%
Deposit rate −1%
Lifecycle costs sensitivity
£20.7 million, i.e. 1.9%
(£20.7) million, i.e. (1.9)%
Lifecycle costs are the cost of planned interventions or replacing material parts of an asset to maintain it over the concession term. They involve larger items that
are not covered by routine maintenance and, for roads, it will include items such as replacement of asphalt, rehabilitation of surfaces, or replacement of
electromechanical equipment. Lifecycle obligations are generally passed down to the facility maintenance provider, with the exception of transportation
investments, where these obligations are typically retained by the Portfolio Company.
Of the 56 investments in the portfolio at year-end, 20 investments retain the lifecycle obligations. The remaining 36 investments have this obligation passed down
to the subcontractor.
The table below shows the sensitivity of the NAV to a change in lifecycle costs:
Lifecycle costs sensitivity(i)
Change in NAV 31 December 2022
Increase by 10%
Decrease by 10%
(£26.0) million, i.e. (2.4)%
£23.5 million, i.e. 2.2%
(i) Sensitivity applied to the 20 investments in the portfolio that retain the lifecycle obligation i.e. the obligation is not passed down to the subcontractor.
Corporate tax rate sensitivity
The profits of each Portfolio Company are subject to corporation tax in the country where the Portfolio Company is located.
The table below shows the sensitivity of the NAV to a change in corporate tax rates compared to the assumptions in the table above:
Corporate tax rate sensitivity
Change in NAV 31 December 2022
Tax rate +1%
Tax rate −1%
Refinancing: senior debt rate sensitivity
(£11.2) million, i.e. (1.0)%
£11.0 million, i.e. 1.0%
Assumptions are used where a refinancing of senior debt is required for an investment during the remaining investment concession term. There is a risk that such
assumptions may not be achieved.
The table below shows the sensitivity of the NAV to a one percentage point increase to the forecasted debt rate.
Senior debt refinancing sensitivity
Change in NAV 31 December 2022
Debt rate +1%
(£9.1) million, i.e. (0.8)%
Gross Domestic Product sensitivity
Our portfolio is not sensitive to GDP.
The principal risks faced by the Group and the mitigants in place are outlined in the Risk section.
Key Portfolio Company and portfolio cash flow Assumptions underlying the NAV calculation include:
· Discount rates and the Assumptions, as set out above, continue to be applicable.
· The updated financial models used for the valuation accurately reflect the terms of all agreements relating to the Portfolio Companies and represent a fair
and reasonable estimation of future cash flows accruing to the Portfolio Companies.
· Cash flows from and to the Portfolio Companies are received and made at the times anticipated.
· Non-UK investments are valued in local currency and converted to Sterling at either the period-end spot foreign exchange rates or the contracted foreign
exchange rate.
· Where the operating costs of the Portfolio Companies are contractually fixed, such contracts are performed, and where such costs are not fixed, they
remain within the current forecasts in the valuation models.
· Where lifecycle costs/risks are borne by the Portfolio Companies, they remain in line with current forecasts in the valuation models.
· Contractual payments to the Portfolio Companies remain on track and contracts with public sector or public sector backed counterparties are not
terminated before their contractual expiry date.
· Any deductions or abatements during the operations period of Portfolio Companies are passed down to subcontractors under contractual arrangements or
are part of the planned (lifecycle) forecasts.
· Changes to the concession period for certain investments are realised.
· In cases where the Portfolio Companies have contracts which are in the construction phase, they are either completed on time or any delay costs are borne
by the construction contractors.
· Enacted tax or regulatory changes, or forecast changes with a high probability, on or prior to this reporting period-end with a future effect materially
impacting cash flow forecasts, are reflected in the financial models.
In forming the above assessments, BBGI uses its judgement and works with our Portfolio Company management teams, as well as using due diligence information
from, or working with, suitably qualified third parties such as technical, legal, tax and insurance advisers.
Financial Results
The Consolidated Financial Statements of the Group for the year ended 31 December 2022 are in the Financial Statements section of this Annual Report.
Basis of accounting
We have prepared the Group's Consolidated Financial Statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the
European Union ('EU'). In accordance with IFRS, the Company qualifies as an Investment Entity and, as such, does not consolidate its investments in subsidiaries that
qualify as investments at fair value through profit or loss. Certain subsidiaries that are not Investments at FVPL, but instead provide investment-related services or
activities that relate to the investment activities of the Group, are consolidated. As an Investment Entity, the Company recognises distributions from Investments at
FVPL as a reduction in their carrying value. These distributions reduce the estimated future cash flows which are used to determine the fair value of the Investments
at FVPL. The accounting principles applied are in line with those principles applied in the prior year reporting.
Income and costs
Pro forma Income Statement
Investment Basis
Income from Investments at FVPL
Other operating income
Operating income
Administrative expenses
Other operating expenses
Net finance result
Profit before tax
Tax expense - net
Profit for the year
Year ended
Year ended
31 Dec 22
31 Dec 21
£ million
£ million
137.6
0.1
137.7
(11.7)
(1.5)
(2.0)
122.5
(3.5)
119.0
73.6
0.7
74.3
(10.2)
(1.5)
(1.9)
60.7
(2.7)
58.0
Other comprehensive loss
(0.5)
(0.6)
Total comprehensive income
Basic earnings per share (pence)
118.5
16.7
57.4
8.47
During the year, the Group recognised income from Investments at FVPL of £137.6 million (31 December 2021: £73.6 million). This income from Investments at FVPL
is made up of a combination of the positive effect of inflation and deposit interest rate increases, the net effect of foreign exchange on the portfolio value, the
unwinding of discount and value enhancements. Further detail on the income generated by the Group's Investments at FVPL is provided in the Valuation section of
this Annual Report.
During the year, the Company recognised a net loss of £10.6 million on balance sheet hedging and £11.3 million on cash flow hedging (31 December 2021: £0.8
million net loss on balance sheet hedging and £1.0 million net loss on cash flow hedging). The net result of balance sheet and cash flow hedging is included in the
income from Investments at FVPL.
Administrative expenses include personnel expenses, legal and professional fees, and office and administration expenses. See further detail in the Group Level
Corporate Cost analysis below.
Profit for the year ended 31 December 2022 increased by 105.2 per cent to £119.0 million (31 December 2021: £58.0 million).
Group Level Corporate Cost Analysis
The table below is prepared on an accrual basis.
Corporate costs
Net finance result
Personnel expenses
Legal and professional fees
Office and administration
Acquisition-related costs
Taxes
Year ended
Year ended
31 Dec 22
31 Dec 21
£ million
£ million
2.0
7.9
2.6
1.2
0.6
3.5
2.0
6.9
2.5
0.8
1.5
2.7
Corporate costs
17.8
16.4
The net finance result for the year was £2.0 million (31 December 2021: £2.0 million) and reflects borrowing costs, commitment fees and other fees relating to the
Group's RCF. At 31 December 2022, the Group had £57.5 million of borrowings outstanding under the RCF.
Personnel expenses for the year were £7.9 million (31 December 2021: £6.9 million) with the increase driven largely by inflation adjustments to staff salaries and
movements in foreign exchange rates.
Acquisition-related costs incurred during the year amounted to £0.6 million (31 December 2021: £1.5 million), which include unsuccessful bid costs amounting to
less than £0.1 million (31 December 2021: £0.7 million).
Ongoing Charges
The Ongoing Charges ('OGC') percentage presented in the table below is prepared in accordance with the AIC recommended methodology, latest update published
in April 2022.
Ongoing Charges Information
Ongoing Charges (using AIC recommended methodology)
Year ended
31 Dec 22
£ million
0.87%
Year ended
31 Dec 21
£ million
0.86%
In accordance with the AIC recommended methodology, fees that are linked to investment performance could be viewed as analogous to performance fees paid by
externally managed investment companies and should therefore be excluded from the principal OGC calculation.
Fees directly linked to investment performance recorded in 2022 as a percentage of average NAV were 0.09 per cent (2021: 0.10 per cent). Combined, the aggregate
of Ongoing Charges plus investment performance fees was 0.96 per cent in the year (2021: 0.96 per cent).
For the year ended 31 December 2022, and in line with AIC recommendations, certain non-recurring costs were excluded from the Ongoing charges, most notably
acquisition-related advisory costs of £0.6 million, taxes of £3.5 million and the net finance result of £2.0 million.
The table below provides a reconciliation of Ongoing Charges and the Ongoing Charges Percentage to the administration expenses under IFRS.
Administration expenses to 31 December
Less: Non-recurring costs as per AIC guidelines
Non-recurring professional and external advisory costs
Personnel costs related to acquisition or non-recurring
Compensation linked to investment performance
Other non-recurring costs
Ongoing charges(i)
Divided by:
Year ended
31 Dec 22
£ million
(except %)
Year ended
31 Dec 21
£ million
(except %)
11.7
10.2
(0.6)
(0.8)
(1.0)
-
9.3
(0.2)
(0.9)
(1.0)
-
8.3
Average undiluted Investment Basis NAV for 2022 (average of 31
December 2022: £1,069.2 million and 30 June 2022: £1,068.7 million)
Ongoing Charges percentage(i)
1,069.0
0.87%
959.9
0.86%
(i) Figures reported are based on actual results rather than the rounded figures presented in this table.
Cash flows
The table below summarises the sources and uses of cash and cash equivalents for the Group.
Year ended
31 Dec 22
Year ended
31 Dec 21
Distributions from Investments at FVPL(i)
Net cash used in operating activities
Additional Investments at FVPL and other assets
Realised hedging loss on investing activities
Net cash flows from financing activities
Impact of foreign exchange gain/(loss) on cash and cash equivalents
Net cash inflow
£ million
£ million
96.3
(20.3)
(64.5)
(12.6)
3.8
1.5
4.2
75.1
(12.1)
(79.2)
(1.6)
24.3
(0.2)
6.3
(i) Distributions in the above table are shown gross of withholding tax. The associated withholding tax outflow is included in 'Net cash flows used in operating activities'.
The performance of the Group's portfolio of investments continued to be strong during the year, with gross distributions coming in ahead of business plan, up 28.2
per cent on a comparative basis.
Cash dividends paid during the year ended 31 December 2022 amounted to £51.7 million, an increase of £3.7 million on the previous year.
Refer to the Consolidated Statement of Cash Flows for further details on cash flows during the year ended 31 December 2022.
Cash dividend cover
For the year ended 31 December 2022, the Group achieved a cash dividend cover ratio of 1.47x (year ended 31 December 2021: 1.31x) calculated as follows:
Distributions from Investments at FVPL
Less: Net cash flows used in operating activities
Net distributions
Divided by: Cash dividends paid
Cash dividend cover (ratio)
31 Dec 2022
£ million
(except ratio)
31 Dec 2021
£ million
(except ratio)
96.3
(20.3)
76.0
51.7
1.47x
75.1
(12.1)
63.0
48.0
1.31x
The strong cash dividend coverage for the year was underpinned by BBGI's contracted, high-quality inflation-linked portfolio cash flows. Furthermore, the Company
received additional distributions during the year that were outside of the contracted cash flows, including the proceeds from the completion of an opportunistic
refinancing and a tax refund, which was not forecasted in the reporting period.
Pro Forma Balance Sheet
Investment Basis
(i)
Investment Basis
(i)
£ million
£ million
Investments at FVPL
Trade and other receivables
Other assets and liabilities
(net)
Net cash (debt)
Derivative financial asset (liability) - net
1,097.0
0.9
(2.4)
(26.3)
-
975.2
1.0
(2.4)
26.9
0.9
NAV attributable to ordinary shares
1,069.2
1,001.6
(i) Represents the value of the Group's total assets less the value of its total liabilities under the Investment Basis NAV. The Investment Basis NAV represents the residual interest of the shareholders in the
Group, after all the liabilities of the Group, if any, have been settled.
As at 31 December 2022, the Group has 56 availability-style Investments at FVPL (31 December 2021: 54), with cash and cash equivalents amounting to £31.2
million (£26.9 million as at 31 December 2021).
A reconciliation of net cash (debt) as compared to net borrowings is as follows:
Cash and cash equivalent
Loans and borrowings
Unamortised debt issue costs/RCF related fees
Outstanding loan drawdown
Net cash (debt)
31 Dec 22
31 Dec 21
£ million
£ million
31.2
(56.4)
(1.1)
(57.5)
26.9
(0.2)
0.2
-
(26.3)
26.9
Three-year comparative of Investment Basis NAV
31 Dec 22
31 Dec 21
31 Dec 20
NAV (millions)
NAV per share (pence)
1,069.2
149.9
1,001.6
140.7
916.0
137.8
The Investment Basis NAV increased by 6.7 per cent to £1,069.2 million at 31 December 2022 (31 December 2021: £1,001.6 million), and by 6.6 per cent on an
Investment Basis NAV per share basis. The Investment Basis NAV per share is calculated by dividing the Investment Basis NAV by the number of Company shares
issued and outstanding at the end of the reporting period. This information presents the residual claim of each shareholder to the net assets of the Group.
Alternative Performance Measures ('APM')
APM is understood as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or
specified under IFRS. The Group reports a selection of APM as summarised in the table below and as used throughout this Annual Report. The Management Board
believes that these APM provide additional information that may be useful to the users of this Annual Report.
The APM presented here should supplement the information presented in the Financial Statement section of this Annual Report. The APM used are not measures of
performance or liquidity under IFRS and should not be considered in isolation or as a substitute for measures of profit, or as an indicator of the Group's operating
performance or cash flows from operating activities, as determined in accordance with IFRS.
APM
Explanation
Annualised total NAV
return per share
Annualised Total
Shareholder Return
Since IPO
('Annualised TSR')
Asset availability
Cash dividend cover
ratio
Inflation linkage
Net cash (debt)
Ongoing charges
On a compounded annual growth rate basis. This
represents the steady state annual growth rate
based on the NAV per share at 31 December
2022 assuming dividends declared since IPO in
December 2011 have been reinvested.[xix]
On a compounded annual growth rate basis. This
represents the steady state annual growth rate
based on share price as at 31 December 2022,
assuming dividends declared since IPO in
December 2011 have been reinvested.
Investment performance can be assessed by
comparing this figure to the 7 per cent to 8 per
cent TSR target set at IPO.
Calculated as a percentage of actual availability
payments received, as a percentage of scheduled
availability fee payments. The Company targets a
rate in excess of 98 per cent. A high asset
availability rate can be viewed as a proxy to
strong underlying asset performance.
The cash dividend cover ratio is a multiple that
divides the total net cash generated in the period
(available for distribution to investors) by the
total cash dividends paid in the period based on
the cash flow from operating activities under
IFRS. A high cash dividend cover ratio reduces
the risk that the Group will not be able to
continue making fully covered dividend
payments.
Represents the contractual, index-linked
provisions, which adjust annually to provide a
positive and high-quality link to inflation. The
measure represents the increase in portfolio
returns if inflation is one percentage point higher
than our modelled assumptions for all future
periods. Under current assumptions, the expected
portfolio return would increase from 6.9 per cent
to 7.4 per cent for a one percentage point
increase to our inflation assumptions.
This amount, when considered in conjunction
with the available commitment under the Group's
RCF (unutilised RCF amount of £171.4 million as
at 31 December 2022), is an indicator of the
Group's ability to meet financial commitments, to
pay dividends, and to undertake acquisitions.
Represents the estimated reduction or drag on
shareholder returns as a result of recurring
operational expenses incurred in managing the
Group's consolidated entities, and provides an
indication of the level of recurring costs likely to
be incurred in managing the Group in the future.
31 December
2022
31 December
2021
9.1%
8.8%
8.8%
10.4%
99.9%
99.9%
1.47x
1.31x
0.5%
0.4%
£(26.3) million
£26.9 million
0.87%
0.86%
Target dividend
Represents the forward-looking target dividend
per share. These are targets only and are not a
profit forecast. There can be no assurance that
these targets will be met or that the Company
will make any distribution at all.
7.93 for 2023
8.40 for 2024
and 8.57 for
2025
7.48 for 2022 7.63
for 2023 and 7.78
for 2024
Ten-year beta
Calculated using the FTSE All-Share, ten-year
data representing the ten years preceding 31
December 2022. This performance measure
demonstrates the level of volatility of the
Company's shares in comparison to the wider
equity market.
0.24
0.18
Total Shareholder
Return since IPO
('TSR')
The TSR combines share price appreciation and
dividends paid since IPO in December 2011 to
represent the total return to the shareholder
expressed as a percentage. This is based on share
152.6%
171%
Weighted average
portfolio life
price at 31 December 2022 and after adding back
dividends paid or declared since IPO.
Represents the weighted average, by value, of the
remaining individual project concession lengths.
Calculated by reference to the existing portfolio
at 31 December 2022, assuming no future
portfolio additions.
20.2
20.3
Reconciliation of Investment Basis to IFRS
Reconciliation of Consolidated Income Statement
31 December 2022
31 December 2021
Investment
Basis
Adjust
Consolidated
IFRS
Investment
Basis
Adjust
Consolidated
IFRS
£ million
£ million
£ million
£ million
£ million
£ million
Income from Investments at FVPL
137.6
21.9
Other operating income
0.1
-
Operating income
Administrative expenses
Other operating expenses
Net finance result
Net loss on balance sheet hedging
137.7
(11.7)
(1.5)
(2.0)
21.9
-
(11.3)(i)
-
-
(10.6)(i)
Profit before tax
Tax expense - net
122.5
(3.5)
Profit from continuing operations
119.0
-
-
-
-
159.5
0.1
159.6
(11.7)
(12.8)
(2.0)
(10.6)
122.5
(3.5)
119.0
75.4
0.8
76.2
(10.2)
(2.5)
(2.0)
(0.8)
60.6
60.7
(2.7)
75.4
58.0
-
-
-
-
-
-
-
-
-
-
75.4
0.8
76.2
(10.2)
(2.5)
(2.0)
(0.8)
60.6
60.7
(2.7)
75.4
58.0
(i)For further clarity, commencing the year ended 31 December 2022, the Income from Investments at FVPL now includes the net effect of the foreign exchange hedging contracts. In prior years,
the effect of the foreign exchange hedging contracts was presented separately under 'Other opera ng income/expenses' and under 'Net gain/(loss) on balance sheet hedging.
Reconciliation of Consolidated Statement of Financial Position
31 December 2022
31 December 2021
Investment
Basis
Adjust(i)
Consolidated
IFRS
Investment
Basis
Adjust
Consolidated
IFRS
£ million
£ million
£ million
£ million
£ million
£ million
Investments at FVPL
1,097.0
5.8
1,102.8
975.2
Trade and other receivables
Other net liabilities
Net cash (debt)
0.9
(2.4)
(26.3)
-
-
-
Derivative financial asset (liability)
-
(5.8)
0.9
(2.4)
(26.3)
(5.8)
1.0
(2.4)
26.9
0.9
NAV attributable to ordinary shares
1,069.2
-
1,069.2
1,001.6
-
-
-
-
(1.1)
(1.1)
975.2
1.0
(2.4)
26.9
(0.2)
1,000.5
(i)
Under IFRS, unrealised positions on foreign exchange hedging contracts are reported separately under derivative financial asset (liability).
Risk
We follow a risk-based approach to internal controls. Our risk management function facilitates the Management Board's duty to effectively govern and manage the
risks we face. Given the nature of our assets and our interaction with the capital markets, we do not operate in a risk-free environment. In an uncertain environment,
we take proactive action to address risks, and to achieve our business and investment objectives.
We identify, analyse, assess, report, and manage all material risks, and aim to identify risks we face as early as possible, so we can minimise their impact.
We classify risks into the following risk categories:
· Market risks
· Credit risks
· Counterparty risks
· Liquidity risks
· Operational risks
· Sustainability risks
We analyse all identified risks during the risk reporting process to understand the range of possible impacts on BBGI. By undertaking this risk review, we can
determine material risks to analyse and respond to, and risks that require no further attention. This gives the Management Board a universal interpretation of risk.
Our risk management function performs a risk assessment to determine the likelihood that a predefined event will occur and any subsequent impact; it also
estimates risk levels for a particular situation, compares these against benchmarks or standards, and determines an acceptable level of risk.
In the risk profile all identified risks are classified according to risk type, in line with the risk categories above. For material risks identified, BBGI's risk manager
advises on key risk indicators to include in the risk profile and suggests appropriate quantitative and qualitative limits to mitigate the potential impact of those risks,
which are discussed and approved by the Management Board before being formally included in the Risk Profile.
We have assessed inherent risk and have applied relevant mitigating factors to arrive at a remaining residual risk that the Management Board deems manageable or
acceptable.
This following table summarises our material risks, but is not an exhaustive list of all the potential risks BBGI faces. Previously reported risks in relation to COVID-19
and SONIA transition have been removed and others have been updated. There may be other unknown risks, or those regarded as less material, that could, in the
future, materially impact our performance, our assets, and our capital resources.
Risk description
Risk mitigation
MARKET RISKS
Volatility of
discount rates
Foreign exchange
Interest and
deposit rates
BBGI primarily uses a market-based valuation to determine a base
discount rate for steady-state, operational investments, and we use
our judgement in arriving at the appropriate discount rates. We may
apply adjustments to the base rate to reflect variances from the
average benchmark when we determine
investment-specific
characteristics and risk profile.
in
the second half of 2022. BBGI has
Government bond yields have increased significantly in 2022 coupled
with the fact that there was limited transactional market data
available
therefore
complemented its market-based approach by additionally using the
capital asset pricing model where risk free rates plus an equity risk
premium are used to calculate discount rates. This method is used as
a plausibility check for our market-based approach.
Our NAV is sensitivity-tested periodically for changes in discount
rates.
Inflation rates are positively linked to the NAV. An increase in
discount rates due to increased interest rates coincides currently with
significantly higher inflation rates. Higher actual and revised short-
term forecasted inflation rates offset, partially at least, increased
discount rates in our portfolio valuation calculation.
Interest rate increases also have a positive impact on interest earned
on cash deposits at our Portfolio Companies, which additionally
mitigates a portfolio value reduction arising from increased discount
rates.
in
increase
long-dated government bond yields will not
An
necessarily result in an equivalent increase in discount rates. Long-
dated government bond yields have largely trended downwards since
BBGI's IPO in 2011, but the market discount rate applied to secondary
transactions has not followed in lockstep.
We have provided a sensitivity analysis in the valuation section of this
report in relation to discount rates applied to our portfolio of
investments.
arrangements
distributions
Currency-hedging
denominated in Australian Dollar, Canadian Dollar, Norwegian Krone
and US Dollar are in place for a rolling period of four years to
mitigate some foreign exchange risk.
portfolio
for
In addition to cash flow hedging, we also hedge a portion of the non-
Sterling, non-Euro portfolio value, and aim to reduce NAV sensitivity
to approximately three per cent for a 10 per cent adverse foreign
exchange movement.
Euro-denominated fund running costs currently provide a natural
hedge against the Euro-denominated portfolio distributions.
Furthermore, the ability to draw on the RCF in the currency of the
underlying asset distributions provides an additional hedging
alternative.
BBGI has investments in five currencies other than Sterling, resulting
in some natural diversification among underlying currencies.
A sensitivity analysis is provided in the valuation section of this report
in relation to foreign exchange rates.
Our Portfolio Companies have sought to hedge substantially all their
floating rate interest liabilities against changes in underlying interest
rates with interest rate swaps.
At the Group level, we maintain deposits at low levels and only raise
capital when there is a clear strategy for deploying proceeds.
A sensitivity analysis is provided in the valuation section of this report
in relation to deposit rates and changes in the senior debt rate of the
Portfolio Companies.
to
We use a discounted cash flow
methodology
value our
portfolio of investments. Higher
discount
rates may have a
negative
impact on valuation
and the ultimate rate of return
realised by our investors, while
lower discount rates may have a
positive impact.
Our most important judgement
and variable is the discount rate
we apply to our portfolio of
Appropriate
investments.
discount
to
deriving a fair and reasonable
portfolio valuation.
rates are key
in market rates of
Changes
interest
particular,
(in
government bond yields) may
impact the discount rate used to
value our future projected cash
flows, and thus our valuation. In
the event
interest
rates rise substantially further,
this is likely to affect discount
rates.
long-term
A significant proportion of our
underlying investments - 68 per
cent of the portfolio value at 31
2022
December
are
denominated in currencies other
than Sterling.
-
financial
We maintain our
statements,
the
portfolio valuation, and pay
dividends in Sterling.
prepare
There is a risk that fluctuations
rates between
in exchange
Sterling and
local
relevant
currencies will adversely affect
the value of our underlying
investments, distributions and
the ultimate
return
rate of
realised by our investors.
Our performance may be
adversely affected by changes in
rates. BBGI has an
interest
exposure
rates
interest
through borrowings under the
the Portfolio
RCF, debt at
Company
cash
deposits.
level
and
to
some
Portfolio
have
Companies
The
cash
typically
reserves and deposits. From a
financial modelling perspective,
we assume that deposits can be
placed at a forecast rate, which
varies depending on country.
If deposit rates exceed or fall
below projections for short-term
and long-term rates, the effect
returns will
on
depend on
the amount of
deposits.
investment
We have observed inflationary
pressure
our
across
jurisdictions. Our valuation and
all
Inflation
A scenario of persistent high inflation across our jurisdictions presents
the risk of declining real returns to investors.
rate of
return
the ultimate
realised by our investors may be
adversely or positively affected
lower or higher
by
than
expected
inflation. Prolonged
periods of deflation could result
in defaults under Portfolio
Company loan arrangements.
The revenues and expenditure
of our Portfolio Companies
developed under availability-
style schemes are often partly or
wholly subject to indexation.
We typically mitigate inflation risk for our Portfolio Companies to
some extent by seeking to match the indexation of the revenues to
the indexation of the operational cost.
It is also important to note that BBGI's equity cash flows are positively
linked to inflation.
A sensitivity analysis is provided in the valuation section of this report
in relation to inflation rates of the Portfolio Companies.
However, the level of inflation linkage across the investments held
varies and is inconsistent. The consequences of higher or lower levels
of inflation than that assumed by the Company, will not be uniform
across our investments.
The
effect
From a
financial modelling
perspective, an assumption is
usually made that inflation will
increase at an assumed rate
(which may vary depending on
on
country).
investment returns, if inflation
exceeds or
the
projections for this rate, typically
depends on how each Portfolio
Company's costs are affected by
inflation, and any unitary charge
indexation provisions agreed
with
any
client
the
investment.
falls below
on
Changes to tax
legislation,
treaties, and rates
the
There is a continued risk that
enacted changes in tax law, tax
rates and global tax initiatives,
including
OECD's
recommendations in relation to
base erosion and profit shifting
or tax treaty eligibility, could
have an adverse effect on our
cash flows, and reduce investors'
returns.
Lifecycle or
operational cost
risk
During the life of an investment,
components of our assets (such
as asphalt or concrete for roads
and bridges; or roofs and air
handling plants for buildings)
are likely to need to be replaced
or
major
refurbishment.
undergo
a
of
replacement
There is a risk that the actual
or
cost
refurbishment of these lifecycle
obligations will be greater than
the forecasted cost, or that the
timing of the intervention may
be earlier than forecast.
There is also the general risk
that costs may be higher than
budgeted. This typically relates
to
and
management service contracts.
insurance
costs
Certain risks, such as changes to corporation tax rates (including due
to fiscal constraints), cannot be prevented or mitigated.
We value our Portfolio Companies based on enacted tax rates. Our
management team works closely with our global tax advisers, and is
briefed periodically on relevant tax developments.
We are monitoring the evolution of draft legislation for excessive
interest and financing expenses limitation ('EIFEL') rules in Canada
and similar developments in Australia, and any potential impact on
our investments.
The draft EIFEL rules aim to limit the deduction of 'interest and
financing expenses' to a fixed percentage of earnings before interest,
tax, depreciation, and amortisation for Canadian income tax purposes.
The private sector made significant submissions to the Department of
Finance on the proposed legislation.
Following a review of submissions and open consultations with the
private sector, the Department of Finance released a revised draft of
the legislation in November 2022. This revised draft provides for an
exemption for third-party debt financing on PPP type projects, similar
to the public benefit entity concept in the UK.
Additionally, in Australia, expected amendments to the existing thin
capitalisation rules in order limit interest deductions are likely to have
an adverse NAV impact.
Overall, these new rules are expected to result in a decrease in NAV of
c. GBP12.5 million, which has been reflected in the December 2022
valuation.
Generally, BBGI has a globally diversified portfolio of assets, thereby
reducing the tax concentration risk of any one country.
A sensitivity analysis in relation to tax rates of the Portfolio
Companies is provided in the valuation section of this report.
Of the 56 assets in the BBGI portfolio, 20 Portfolio Companies retain
the lifecycle obligations. The remaining 36 assets have this obligation
passed down to the subcontractor.
Each Portfolio Company forecasts, models, and provides for the
timing and costs of such replacements or refurbishments. This is
based on internal or external technical advice to assist in forecasting
of lifecycle timings, scope of work and costs.
As part of acquisition due diligence, we review budgeted costs and
assess their adequacy.
A sensitivity analysis is provided in the valuation section of this report
in relation to lifecycle costs.
The risk of insurance cost increases is partly mitigated by a
contractual premium risk-sharing mechanism with certain public
sector clients. For other Portfolio Companies, the risk is borne entirely
by the public sector client but for a limited number of Portfolio
Companies there is no mitigation available.
COUNTERPARTY RISKS
Failure of
subcontractor
performance or
credit risk
(construction
contractors,
facility managers,
operation, and
maintenance
contractors)
failure,
The risk of a subcontractor
poor
service
performance or subcontractor
insolvency, which is sufficiently
serious to cause a Portfolio
Company to terminate or to be
required by the client or lenders
to terminate a subcontract.
There may be a loss of revenue
during the time taken to find a
replacement subcontractor. The
replacement subcontractor may
also levy a surcharge to assume
the subcontract, or charge more
to provide the services.
For assets under construction (c. 0.5 per cent of the portfolio value),
there are several mitigants and steps we take to manage this risk:
· A construction joint venture with two or more counterparties is
typically jointly and severally liable: if one party fails, the other is
obligated to take over the obligations.
· We perform a contractor replacement analysis as part of our
initial investment due diligence. Most subcontractors of our
investments are well established, with several competing
providers. Therefore, we expect that a pool of potential
replacement supplier counterparties is available if a service
counterparty fails, although not necessarily at the same cost.
· Construction subcontractors are typically required by lenders to
provide a robust security package, often consisting of letters of
credit, parent company guarantees or performance bonding.
The latter two mitigants are also in place for investments once they
become operational. However, any liability of subcontractors is
typically capped at contractually agreed amounts.
Other mitigants during operations include:
· Periodic benchmarking of defined soft facility services on some
investments.
· A diversified group of subcontractors, with no substantial
concentration risk.
· Ongoing subcontractor monitoring for our investments, as well
as contingency plans as appropriate, to ensure we mitigate the
risk of counterparty failure.
LIQUIDITY RISKS
Access to capital
There is a risk that a disruption
to the equity markets could lead
to an
inability to raise new
capital. Such a disruption could
limit our ability to grow and our
ability to repay debt drawn
under our RCF.
To the extent that we do not
have cash
reserves pending
investment, we expect to bridge
finance
investments
using the RCF.
further
The need to issue new equity capital primarily relates to the
repayment of drawings under the RCF.
The Board and our Company's brokers regularly assess market
sentiment.
Our RCF expires in May 2026. The Management Board can seek to
refinance the RCF to extend its maturity and reduce the near-term
requirement to repay drawings, though we do not intend to be drawn
for substantial periods of time.
we
Although we have had an RCF
since July 2012 (subsequently
refinanced),
cannot
guarantee this will always be the
case, or that we will be able to
issue
the
further shares
market.
in
Premium
discount to NAV
or
The risk of share price volatility,
or trading at a discount to NAV,
leading to
lower returns to
shareholders.
OPERATIONAL RISKS
investment
Poor
due diligence
in
There is a risk that errors may be
made
assumptions,
the
calculations, or methodology
during
acquisition due
diligence process.
an
To assist BBGI in managing any share price premiums or discounts to
NAV, we can make annual market purchases of up to 14.99 per cent
of the ordinary shares in issue.
We offer a continuation vote to shareholders every two years; the
next will be proposed at our Annual General Meeting on 28 April
2023.
The Management Board meets regularly with shareholders and
receives regular briefings from our Company's brokers to manage
investor relations.
BBGI has developed a robust asset acquisition due diligence process.
Our typical due diligence includes model, legal, tax, technical, anti-
money laundering, ESG, sustainability and insurance reviews.
the
such
circumstances,
the
In
returns
figures and/or
generated by
the Portfolio
Company and the ultimate rate
of
realised by our
investors may be lower than
those estimated or projected.
return
Valuation
The most significant risk of
material misstatement
in our
financial statements is the fair
investment
valuation of
portfolio, the discount rates we
apply, and key assumptions
when valuing these investments.
the
Our portfolio valuation is prepared semi-annually by an experienced
internal team, overseen by our Management Board.
Furthermore, the valuation is reviewed by an independent, third-party
valuation expert, and is also reviewed and audited by the Company's
external auditor.
Construction
defects
Change in law or
regulation
Failing IT systems
or cyber-attacks
Voluntary
termination
All key assumptions used in the valuation process are in the valuation
report, some of which are subject to sensitivity testing.
However, sensitivity testing has its limitations: it cannot provide a
comprehensive assessment of every risk we face and should be
considered accordingly.
In general, Portfolio Companies can submit claims against
construction subcontractors for defects in the design, construction, or
commissioning of project assets. This 'right to claim' applies for a pre-
the completion of construction
determined period
('statutory
this may differ between
jurisdictions.
limitations period'), and
following
If disputes arise, an arbitration or court process may be used. Once
the statutory limitations period has ended, the remediation of
construction defects identified after this point typically fall to the
Portfolio Company itself, and thus become the risk of the Portfolio
Company. In addition, there may be other situations where the risk
would
lie with the Portfolio Company, for example where a
subcontractor becomes insolvent, and may no longer be able to fulfil
its obligations to correct these defects.
The Management Board seeks regular briefings from its legal and tax
advisers to stay abreast of impending or possible changes in law.
Change in law provisions are included in some contracts, thus
providing further mitigation.
BBGI has a globally diversified portfolio of assets, thereby reducing
the Group's exposure to changes in any single country.
BBGI has taken several measures to reduce the risk of a cyber-attack,
and we outline a few below.
We have outsourced the hosting of our IT platform to an industry
specialist. In doing so, we benefit from access to IT security experts,
with our platform monitored by an advanced IT security system. This
approach would be less cost-effective if our IT infrastructure was
maintained onsite.
Every year, we engage an external expert to carry out an intrusion test
on our IT platform to identify and patch any vulnerabilities.
We perform business continuity tests, carry out disaster recovery tests
every year, and our employees periodically undergo cyber security
training.
In a typical PPP structure, public sector clients have their own IT
systems. However, the majority of our Portfolio Companies do not
maintain their own IT systems. Instead, subcontractors of a Portfolio
facility
Company
maintenance
and
maintenance contractors for transport assets) will have their own IT
systems, which will likely house data relating to a project.
(such as management
service providers,
accommodation
contractors
assets,
for
In a typical PPP structure, such as those in BBGI's portfolio, risks are
passed down to subcontractors by the Portfolio Company.
However, any liability is capped to contractually agreed amounts,
including risks relating to design and construction, warranties for IT
systems (such as a warranty that the system will meet specifications
requiring it to meet robust security requirements), and the risk of a
cyber-attack interrupting the provision of services to a project.
The Management Board believes there are mitigants or deterrents to
the risk of voluntary termination of contracts:
· In cases where debt or bond facilities were agreed when interest
rates were higher than current levels interest rate swaps remain
largely 'out of the money' for our Portfolio Companies, and any
public body wishing to terminate a contract in the current interest
rate environment would also need to cover the cost of the swap
breakage fee.
· Our Portfolio Company equity investors would, depending on the
particular contractual provisions, also need to be compensated, as
well as the public sector being required to budget for the ongoing
provision of the service.
in
There is a risk that errors may be
made
assumptions,
the
calculations or methodology
used
in a periodic valuation
process.
or
Financial models, either for the
underlying
our
Group
Portfolio Companies, may also
contain errors, or
incorrect
inputs, resulting in inaccurate
projections of distributions.
These could adversely impact
individual
the valuation on
the overall
investments and
assessment of our
financial
position.
The risk of certain operational
costs in relation to construction
defects lies with the Portfolio
Company.
our
and
Different laws and regulations
apply in the countries where
BBGI
Portfolio
Companies are located. There is
a risk that changes in laws and
an
regulations may
adverse
the
effect
performance of the underlying
investment, which will
then
affect the cash flows derived
from the investments and/or the
valuation of the investments.
have
on
A breach of data security could
occur by accident or as a result
of an external cyber-attack. A
cyber-attack could affect our IT
systems or those of our Portfolio
Companies, causing theft, loss
of data, or damage to the
infrastructure's control systems
and equipment.
threat of
cyber-attack
The
means that businesses can no
longer afford to be reactive. A
cyber-attack could affect not
only BBGI's
reputation, but
could also have legal, financial,
and operational repercussions
for the Group.
There remains a risk that public
sector clients of our Portfolio
Companies choose to exercise
their
voluntarily
right
terminate the contracts.
to
When this happens, the public
sector is typically contractually
obliged to pay compensation on
termination to equity holders,
and other
debt providers,
parties. depending on
the
circumstances.
While provisions vary between
contracts, they generally ensure
that our investors are paid either
market value for their equity
interests, or a value to achieve
the originally projected IRR, and
in
the
these cases, where
compensation amount is less
SUSTAINABILITY
RISKS
Sustainability risk
than current valuation levels, we
would suffer a material loss.
Sustainability
risk has been
defined in Article 2(22) of the
Sustainable Financial Disclosure
Regulation as 'an environmental,
social or governance event or
condition that, if it occurs, could
cause an actual or potential
material negative impact on the
value of the investment'.
For example, climate change can
give
range of
to a
rise
sustainability risks.
risks
Financial
from climate
change can arise through two
primary channels:
chronic
(i) physical risk, from abrupt
and acute weather events,
or
longer-term
shifts in climate patterns,
each causing disruptions to
businesses and economic
activities (and the value of
investments in them); and
(ii) transition risk, from a shift
to low carbon and climate
resilient policies, laws and
technologies and changes
in societal attitudes. Failure
to acknowledge climate
change may also alienate
and
certain
reduce our
to
capital.
investors
access
We seek to integrate and appraise material sustainability risks into
our processes in several ways:
· Alongside traditional financial criteria, we systematically consider
whether - and to what extent - financially material sustainability
risks might meaningfully impact our investments.
· In 2021 and 2022, we undertook a formal portfolio climate risk
assessment to better understand the impact of climate risk on
BBGI. The findings demonstrate a high degree of climate resilience
across our asset portfolio, both today and under different climate
warming scenarios.
· Although climate change is projected to increase physical risk
impacts across our portfolio, many of our assets, due to the vital
services they provide, have been designed and constructed in
consideration of potential physical risk impacts, and are inherently
more resilient to climate change.
through
insurance coverage, pass-down
· We typically mitigate events arising from adverse climate
change
to
subcontractors and public sector client relief events.
However, in severe cases, adverse climate change events
could lead to early termination of concession agreements
and compensation payments, which are materially lower
than our valuation.
· Aligned with our SFDR Article 8 product classification, our
focused approach of investing in core social infrastructure
assets that serve society should mitigate sustainability risk
linked to a social event or condition
All sustainability risks can be
broken down into physical and
transition
risks, which could
both impact the performance of
an asset or of BBGI itself, and
have a material negative impact
on investment returns.
For example, infringements of
human rights could have a
significant
the
financial performance of an
investment.
impact on
Environment, Social and Governance
As the ESG Committee, we are pleased to report on the progress made by the Company and by our 56 Portfolio Companies. We approached 2022 mindful of the
ever-evolving nature of ESG frameworks and regulations, and the challenges of data collection. We take pride in the close engagement we have maintained with
each of our assets. We continue to focus our efforts to make improvements in key areas such as GHG emissions monitoring and reduction, climate-risk assessments,
health and safety standards, biodiversity and human rights. Our ESG strategy is underpinned by a culture of robust governance and stringent compliance,
promoting accountability and transparency, with a focus on delivering positive outcomes for all stakeholders.
Sustainability Highlights
Our purpose is to deliver social infrastructure for healthier, safer and more connected societies, while creating sustainable value for all stakeholders.
Our portfolio is focused on creating long-term positive impacts for society, by investing in infrastructure assets that provide citizens with access to essential
services, such as: health, education, security, clean energy, social housing, public services and safe transportation. The sustainable and resilient portfolio of 56 social
infrastructure investments that we manage is aligned with our SFDR Article 8 classification, where we promote social characteristics in combination with good
governance practices.
To support our SFDR-related social investment objective, each of our investments is aligned with at least one of six focused SDGs where we can make the greatest
contribution. By maintaining social infrastructure assets for our public sector clients, our portfolio aims to:
· Facilitate education, healthcare and well-being of local communities (SDG 3 and 4).
· Provide access to affordable housing (SDG 11).
· Support safe and accessible travel on roads and public transport (SDG 9 and 11).
· Facilitate access to public services, provide safety to local populations and promote the rule of law (SDG 16).
· Connecting communities through reliable transportation networks and support the transition to renewable energy sources (SDG 9).
· Remaining resilient and capable of sustaining potential damages caused by climate change (SDG 13).
While we are proud to provide well-maintained infrastructure that serves society, we recognise that building and operating physical assets such as schools, hospital,
roads and hydroelectric plants can harm the environment, impact surrounding biodiversity and are subject to climate hazards. As stewards of these assets, our
public sector clients entrust us with safeguarding them during our concession period. Our ESG approach systematically integrates: greenhouse gas emissions
monitoring, climate-risk assessment, and initiatives to restore natural ecosystems, so that our portfolio does not significantly harm other environmental objectives.
Duncan Ball Frank Schramm
Co-CEO Co-CEO
29 March 2023
On behalf of the ESG Committee
Strategic ESG integration
Social characteristics
in combination with
good governance
ESG monitoring
Climate resilient
portfolio
Net zero
External ratings
· ESG fully integrated in strategy and business model.
· Management remuneration tied to ESG targets within both STIP and LTIP awards.
· 100 per cent of staff received ESG training.
· Portfolio aligned with the social investment objective of our SFDR Article 8 product.
· 100 per cent of our investments align with at least one of SDGs 3, 4, 9, 11 or 16 and have
a 'do no significant harm' objective aligned to SDG 13.
· Social safeguards screening based on UN Global Compact Ten Principles.
· Continuous engagement with all Portfolio Companies and strong ESG oversight.
· All Portfolio Companies completed a 100+ questions proprietary ESG KPI survey.
· 75 per cent of our assets have a sustainability certification.
· Voluntary disclosures aligned with TCFD.
· Portfolio demonstrates a high degree of climate resilience.
· Climate risk scores shared with over 98 per cent of Portfolio Companies' boards and 80
per cent of clients.
· Net zero targets for our Corporate and Financed emissions.[xx]
· Certified as carbon neutral for Corporate Emissions Scope 1, 2 and 3.
· Financed emissions (Portfolio Companies) to be disclosed in June 2023.
· UN PRI signatory: 5/5 stars (Investment & Stewardship policy); UN PRI signatory: 4/5
stars (Direct Infrastructure).
· Sustainalytics ESG Risk Rating 2021: negligible (8.3).
· ISS Corporate ESG Rating 2022: Prime B- (Decile Rank: 1).
Contribution to Sustainable Development Goals
The SDGs inform our entire ESG and social impact management process. Specifically, our investment strategy seeks to create measurable impacts
facilitated by our investments and future acquisitions.
The SDGs are used to assess, measure and monitor that we keep investing beyond mere alignment and make a verifiable contribution to positive social and
environmental outcomes. We acknowledge that through our direct operations and investment portfolio we can also create negative impacts and we address some
of these impacts in the relevant sections of this report.
Our social infrastructure investment strategy is focused on six SDGs and creates real-world outcomes from the portfolio we invest in:
Sustainable
Development
Goals
Target 3
Good health and
well-being
Sustainability indicators
Impacts
41 healthcare
facilities
c. 600,000 m2
managed
26 fire
stations
c. 33,000 m2
managed
c. 4 million
patients
c. 800,000
Target 4
Quality
education
33 schools
and colleges
c. 430,000 m2
managed
c. 36,000
pupils
Target 9
Industry,
innovation and
infrastructure
19 roads and
bridges
c. 2,800
single-lane
kms operated
c. 290
million
vehicles
Create
positive
social
outcomes
One
hydroelectric
generation
station
132 MW
installed
c. 80,000
homes
Target 11
Sustainable
cities and
communities
One fully
electric public
transit line
c. 39 kms
c. 32 million
passengers
c. 17,000 m2 /
100 units
c. 200
people
Hospitals, mental-health clinics and primary
healthcare centres provide access to
healthcare delivery for c. four million
patients per year and over 2,400 beds.
Fire stations provide c. 800,000 people with
protection against fire-related injuries and
fatalities and mitigation of air, water and soil
pollution caused by fire incidents. Fire
stations also play a critical role as part of a
first responders' network, supporting local
populations.
Schools and colleges provide c. 36,000 pupils
with access to primary, secondary and adult
education in an effective learning
environment.
Roads and bridges provide local population
with reliable and resilient transport, and
reduce travel times for c. 290 million vehicles
a year.
The maintenance of road networks is
necessary and aims for a reliable and safe
access, reducing traffic congestion, and
decreasing greenhouse gas emissions by
reducing transit times. Maintaining road
elements, signalling, surfacing, and other
security measures is crucial for a safe journey.
Hydroelectric power station supports the
access to clean and reliable electricity for
over 80,000 homes, while providing flood
control and domestic water supply.
Urban rail transport is a safe and sustainable
means of public transport for c. 32 million
passengers per year, given the fully
autonomous nature of the transit system,
which is powered by electricity.
Residential housing units support the access
to affordable housing for c. 200 people per
year, complemented by sport and leisure
centres for the local community.
Three
affordable
residential
housing and
Two
community
centres
Four police
stations
Three modern
correctional
facilities
Two public
administration
buildings
100 per cent
of the
portfolio
Target 16 Peace,
justice and
strong
institutions
Target 13
Climate action
Do no
significant
harm
c. 16,000 m2
managed
c. 1.5
million
people
Police stations promote the rule of law and
provide safety for c. 1.5 million people per
year.
c. 190,000 m2
managed
c. 2,500
detainees
Modern correctional justice facilities promote
the rule of law and are a necessary link in the
functioning of judicial systems for c. 2,500
detainees a year.
37,000 m2
managed
56 assets
c. 500,000
people
Public administration buildings provide c.
500,000 people with access to public
services.
100 per cent of assets screened for resilience
and adaptative capacity to climate related
hazards and natural disasters.
Case study: Creating lasting positive impact through initiatives for local vulnerable and disadvantaged people and communities in or around our
Liverpool & Sefton Clinics
BBGI and its partners have worked together for several years to support initiatives that aim to create a positive impact on vulnerable and disadvantaged
communities in and around their Liverpool & Sefton Clinics. These clinics are part of the LIFT programme, established in 2001 by the UK Government, creating long-
term public-private sector partnerships that provide better healthcare and social care facilities for local communities.
To make their buildings an integral part of their communities, Liverpool & Sefton Clinics have in the past provided spaces for community groups and fundraising
activities. In recent years, the Portfolio Company established a foundation with a dedicated budget to support initiatives that benefit local communities and create a
lasting impact.
In 2022, BBGI proudly collaborated with Liverpool & Sefton Clinics to fund and provide space at the Kensington Health Centre for the 'Liverpool Through Our Lens'
photography programme, which enabled vulnerable and disadvantaged people to enjoy specially adapted photography lessons. The programme was delivered in
partnership with Community Integrated Care (CIC is one of UK's largest and most successful social care charities) and Liverpool's Open Eye Gallery, a recognised
expert on socially engaged photography. The participants of the programme were volunteers with some of the biggest health and social issues from CIC's Inclusive
Volunteering Programme, each supported by a carer/worker to ensure their individual needs were met.
The photography programme ran from October to early November 2022, coinciding with the World Gymnastics Championships held in Liverpool. This programme
enabled the volunteers to engage socially, access and explore their community, and learn new life skills and passions. The participants created stunning
photographs of the city that were displayed for a week at a professional gallery in the Fan Zone at the Championships, attended by approximately 50,000 people.
Participants also had the opportunity to see the games, meet gymnasts, manage the gallery display, and participate in a wider supplementary programme of
inclusive activities at the World Gymnastics Championships.
The photographs were also exhibited to approximately 5,000 people at the Rugby League World Cup and will be permanently displayed at the Kensington Health
Centre. The programme made a lasting positive impact on the lives of 30 people in need, giving them new skills and inspiring them to be more active and engaged.
The programme is an excellent example of how public-private partnerships can provide a positive impact on local communities, supporting individuals and
organisations in achieving their goals.
Ian Tayler, Director at BBGI said: "Based on the success of this amazing programme, it will progress further throughout 2023, building on the positive impact provided to this group of volunteers. We are also
continuing to explore how we can deliver similar community initiatives based out of our other health centres."
John Hughes, Director of Partnerships and Communities at CIC, commented: "Much more than learning how to use a camera, the project inspires independence, encouraging people to go out and visit
their city and share their photography experiences with the group and carrying this skill on for the rest of their lives."
Nuria Rovira Terradas, Assistant Creative Producer at Open Eye Gallery, said: "It's been great to see the volunteers grow in their confidence as they learn more skills and share their photographs and
experiences with other people. Every photograph tells a powerful story, but it's the stories behind the lens that have the greatest impact."
Stakeholder Engagement
As stewards of important social infrastructure investments, there are many stakeholders impacted by our actions: users of the infrastructure,
communities living in the vicinity of our assets, our staff, investors, public sector clients, subcontractors, the environment, and society at large. We take
this responsibility seriously.
Our stakeholders increasingly expect us to consider and act on a broad range of sustainability issues. We are guided by our values of good governance, and our
responsible mindset drives what we do both at the corporate level and Portfolio Companies' level. We expect all our staff and executives to always engage with our
stakeholders while keeping these guiding principles in mind.
We have summarised below BBGI's general engagement approach with its key stakeholders, representing the main groups that benefit, are influenced by, or
interact with our business activities. In addition, in 2021, we performed a comprehensive materiality assessment (AA10000 Stakeholder Engagement Standard) to
identify the most material sustainability issues that are priorities for our stakeholders and where the impact of our operations is most significant. As part of this
assessment, we engaged with key internal and external stakeholders. Our stakeholder engagement focused on our employees, investors, clients, partners and
subcontractors. The ten most material topics define our ESG framework, each tracked by a performance indicator and more information is provided in our 2022 ESG
report.
As a member of the AIC, BBGI acknowledges Provision 5 of the AIC Code's expectation for all members to comply with the continuing requirement under Section
172(1) CA2006 for boards to take stakeholder interests into account, and to report how they have done so when performing their duties. Details of how we adopt
the spirit of those provisions and consider our stakeholders are outlined below:
Who are the Company's key
stakeholders?
Why are these stakeholders
important?
Our people
Our people are the driving
force behind our purpose.
They are well positioned to
bring their expertise to our
clients,
subcontractors and
partners and deliver the results
expected by our investors.
are
actions
What
the
Company taking to build and
strong
maintain
its key
relationships with
stakeholders?
Our relatively flat hierarchy
allows our talented people to
be empowered to successfully
deliver our purpose. We
inclusive work
promote an
environment where all people
and
are
supported
their
potential.
equally
to achieve
treated
Our public sector clients
Satisfied public sector clients
are critical to our business
model.
social
We aim to build trust by
delivering well-maintained and
safe
infrastructure
facilities and services such that
our public sector clients are
satisfied.
with
Portfolio
Our
Companies
the
collaborate
subcontractors and strive to
develop mutually beneficial
long-term relationships.
Our subcontractors
Our long-term subcontractors
are critical to ensure that we
provide our public
sector
clients with operational and
available assets. We monitor
our subcontractors to ensure
their
that
business according to the high
standards of
and
ethics
integrity that we expect.
conduct
they
We maintain critical social
infrastructure
upon
which people rely on a daily
basis.
assets
Our communities and users
The positive experience of the
people who use our assets and
the communities who live near
to our assets are vital to
ensuring our success as a
global
responsible
infrastructure
investment
company.
the metrics
What are the types of engagement
and
by
management, to monitor and assess
relationships with stakeholders?
used
- Annual and mid-year assessments
-
Direct
Management Board
liaison with
the
- Regular meetings
- Well defined expectations and
targets, including ESG targets for
all executives
- Regular training
- Training metrics
- Whistleblower hotline
- Regular client meetings
- Service quality feedback
- Sharing results of our climate risk
monitoring
- Ongoing reporting
- Net Promoter Score survey
- Sub-contractor monitoring
- ESG onboarding
- Annual ESG KPI survey
- Ongoing ESG engagement topics
and joint initiatives
- Client satisfaction discussed at
Portfolio
and
corporate
Companies' level
- Partnership, sponsorship and
donations
-
Community engagement
initiatives
How has
stakeholder
this
impacted upon, and been taken
into consideration in the board
decision-making process?
- Feedback from the individual
regularly
the
assessments are
discussed
by
Management Board
- Adjusted our teleworking
policy in response, allowing
our people to better balance
their work and personal lives,
improving
their well-being
and job satisfaction.
- Meetings with our clients
drives our asset management
approach and feeds directly
into our decision-making
process; lessons learned from
one asset are adapted and
applied across the portfolio.
Examples include early
initiatives to implement LED
lighting and solar panels on
some of our assets, providing
a sound business case and
encouraging further adoption
on other assets.
-
- Enhancing our monitoring of
ESG practices across all
portfolio companies and their
supply chain through pre-
existing channels, such as the
ESG KPI survey.
- Additionally, the Company
led a series of webinars for
our subcontractors to assist
them
the process of
gathering GHG-related data.
That data will assist us in our
goal to deliver positive ESG
impacts.
in
-
- Supporting projects that
benefit
communities
the
living near to our assets.
In 2022, our Portfolio
Companies donated £150,000
to local charities, and offered
various
employees
volunteering.
Our investors
Our investors provide capital,
feedback on our business
model, and help shape our
future plans.
Our goal is to generate long-
term,
and
predictable,
inflation-linked returns for our
investors.
measure
We
progress against key KPIs.
-
Investor relations activities,
roadshows
including meetings,
senior
and discussions with
executives
- Close interactions and feedback
with our Corporate Brokers
- Annual General Meeting
- Annual Report
- ESG Report
- Website
- Please refer to the case study
on Liverpool and Sefton
Health Centres for one such
example.
- Focused engagement with
selected
ratings
ensure
providers
shareholders have accurate
and up-to-date insights into
BBGI's ESG credentials
ESG
to
- The Board continually keep
under review the returns we
offer to our investors, along
with our ability to continue to
deliver those returns. This
forms the basis of discussions
when determining dividends.
- The roadshows provide the
Co-CEOs with an opportunity
to speak directly with our
investors, including on the
topic of ESG,
to better
understand their expectations
of us.
Sustainable Finance Disclosure Regulation
The EU Sustainable Finance Disclosure Regulation ('SFDR') is a set of regulations that aim to increase transparency and standardisation of disclosures within financial
markets. SFDR aims to ensure that investors can make informed decisions and have a clear understanding of the sustainability characteristics of the financial
products in which they invest. We welcome this legislation because the financial sector can make an important contribution to a more sustainable economy.
BBGI promotes social characteristics. In accordance with its Article 8 SFDR classification, a minimum proportion of 75 per cent of our investments qualify as
sustainable investments with a social objective, while 100 per cent of our investments do not significantly harm any environmental or social objective and follow
good governance practices.
In 2022, BBGI updated its sustainability-related disclosures to comply with SFDR Level II requirements.
BBGI has disclosed how we consider the social characteristics of any potential acquisitions when making our investment decisions, as well as the extent to which
each asset is aligned with at least one of our six focused SDGs. We also have disclosed the methodology used to assess the social characteristics of our investments,
how they do no significant harm to any other environmental objective and promote good governance practices. This includes any indicators or metrics used, and
how they are integrated into investment decisions. In addition, we have provided more detailed information on how we engage with Portfolio Companies on
sustainability issues, and the extent of sustainability risk considerations influence our remuneration policies.
· The Pre-contractual disclosure for SFDR specifically address the Company's disclosure obligations under Article 8 of SFDR, supplemented by Commission
Delegated Regulation (EU) 2022/1288 of 6 April 2022 and Commission Delegated Regulation (EU) 2023/363 of 31 October 2022.
· The Entity level, sustainability risks and principal adverse impacts disclosure for SFDR specifically address the Company's disclosure obligations under Articles 3,
4, 5, 6, and 7 of SFDR.
· The Product level disclosure for the SFDR specifically address the Fund's disclosure obligations under Article 10 of SFDR, supplemented by Commission
Delegated Regulation (EU) 2022/1288 of 6 April 2022.
· The Periodic disclosure for SFDR specifically address the Company's disclosure obligations under Article 11 of SFDR, supplemented by Commission Delegated
Regulation (EU) 2022/1288 of 6 April 2022 and Commission Delegated Regulation (EU) 2023/363 of 31 October 2022. A copy of the Periodic disclosure is
available at:
www.bb-gi.com/esg/sustainability-related-disclosures/sfdr/periodic-disclosure/2022
For BBGI's SFDR disclosures, please visit the dedicated Sustainability-related disclosures page in the ESG section of our website; www.bb-
gi.com/esg/sustainability-related-disclosures/.
As of June 2023, there will be a requirement to disclose our consideration of principal adverse indicators through the disclosure of a Statement on principal adverse
impacts of investment decisions on sustainability factors, which we will make available on our website.
Pathway to net zero
We remain committed to achieving our net zero ambitions and supporting our portfolio companies in their transition to be net zero emissions by 2040.
During the year, we continued to explore net zero measurement frameworks and considered how to best apply them to BBGI's asset class. There is no one-size-fits-
all solution to the climate challenge, and the nature of each business dictates the specific goals and path taken. Our pathway to net zero will not be linear, but we
remain committed to reporting on the progress against our targets as we work towards the ambitions of the Paris Agreement.
Net zero targets
BBGI's corporate targets to reach net zero emissions by 2040 align to the Science Based Targets initiative ('SBTi') framework dedicated to Small and Medium
Enterprises ('SMEs'). As signatories to the Net Zero Asset Managers Initiative ('NZAM'), BBGI's targets to reach net zero emissions across our portfolio by 2050 or
sooner were set in line with the Paris Aligned Investment Initiative ('PAII') Net Zero Investment Framework ('NZIF') and the specific guidance for the Infrastructure
sector, following a 1.5°C reduction pathway.
While the guidance and tools to assess financed emissions and track progress towards net zero will evolve, we recognise our responsibility to ensure GHG emissions
are fully and adequately accounted for across our operations ('Corporate Emissions') and Portfolio Companies' emissions ('Financed Emissions'). Our targets were
validated and approved by the Institutional Investors Group on Climate Change (IIGCC) in March 2023.
Emissions profile
The most significant source of GHG emissions comes from our Financed Emissions. While our own Corporate Emissions have negligible impact compared with those
of our Portfolio Companies, we recognise our responsibility to ensure our own business operations are fully accounted for.
Engagement
To achieve the decarbonation of our portfolio, our greatest leverage is through engagement with our key stakeholders. The main driver for achieving Financed
Emissions reduction targets will come from the increasing alignment of Portfolio Companies with net zero pathways. BBGI rarely has operational control at its
Portfolio Companies, so the achievement of the targets and objectives ultimately relies on shared ambitions and collaboration with our public sector clients.
Remuneration tied to net zero targets
The Management Board has remuneration targets tied to GHG emission reduction pathways. Having our executive team consider climate change in their decision-
making process is an effective and transparent incentive for meeting long-term objectives. In 2022 additional remuneration targets for the Management Board were
introduced tied to targets related to our Portfolio Companies. 20 per cent of LTIP remuneration is now tied to ESG targets.
Climate solutions
Investing in climate solutions that provide tangible reductions in emissions, and which are mitigation solutions to climate change is another real opportunity to
achieve our targets. Our long-term and forward-looking approach to portfolio diversifications led us to invest in a renewable energy infrastructure asset in 2022.
Carbon neutrality and offsetting
BBGI has been carbon neutral since 2021 and will maintain its carbon neutrality going forward. Corporate emissions for 2019 and 2020, which were calculated in
2021, were retrospectively offset by planting trees and purchasing verified offsets. Our GHG emissions have been independently verified each year since our 2019
inventory. BBGI is a certified CO2 Assessed organisation.
Despite all our efforts to join the collective efforts to reduce GHG emissions, some emissions will remain unabatable. A successful approach to net zero is to actively
reduce our footprint where possible, and compensate unavoidable emissions with credible nature-based removal solutions, until technological solutions become
more viable. As a general principle, we do not use purchased offsets at the portfolio level to achieve our decarbonisation goals. We also do not offset emissions in
one part of our portfolio through accounting for avoided emissions in another part. When using offsets, it is only where there are no technologically or financially
viable alternatives to eliminate emissions.
BBGI's success in achieving its net zero pathway will continue to evolve, along with the progresses made by all other participants in the industry. We commit to
keeping our net zero targets a strategic priority, in order to support global decarbonisation goals, protect societies from uncertainties ahead and build a more
resilient economy.
Find out more in our ESG Report.
Biodiversity
As investors, we recognise that most negative impacts on biodiversity are locked in and mitigated when the project is built. Encouraging nature-based restoration
measures during expansion and operation phases can be effective.
Our assets are built in compliance with local regulations and various nature preservation measures are in place such as:
· Noise and pollution reduction measures.
· Designs to minimise impacts on local species' natural habitats.
· Wildlife crossing corridors.
During the concession period, we focus on promoting restoration efforts to improve degraded or removed ecosystems that act as natural carbon sinks and can
improve resilience to climate-related damages, such as:
· Habitats for indigenous species (i.e. bat boxes, insect hotels, beehives, wild bee hotels, fish ladders).
· Expansion of green spaces in urban areas (i.e. planting indigenous tree species, shrubs and flower meadows).
As part of our standard set of policies, we have also started to roll out a biodiversity policy across our portfolio since 2021, which 93 per cent of our Portfolio
Companies currently have implemented.
Case study: Supporting the growth in bee populations and improving biodiversity across our assets
BBGI is committed to increasing the creation of suitable new and improved nesting and feeding areas for bees at many of our assets, which are vital sources of
habitat and food for bee species. These initiatives help to grow bee and insect populations and increase biodiversity. We have good support from our public sector
clients for our initiatives.
BBGI has access to large extensions of land alongside its transport projects, which lend themselves perfectly to creating new bee habitats, and we have launched
such initiatives at some of our transport projects. Examples of such initiatives include the E18 motorway (Norway), Northwest Anthony Henday (Edmonton, Canada),
Northeast Stoney Trail (Calgary, Canada), and Golden Ears Bridge (Vancouver, Canada). Additionally, some of our social assets initiated the creation of bee hotels on
their roofs or surrounding areas, being Rodenkirchen schools (Cologne, Germany) and Liverpool & Sefton clinics (Liverpool area, UK). Altogether, these initiatives
have already created approximately 150 bee habitats, which are homes to c. 10 million bees.
A critical factor in the success of restoring bee numbers and habitats is the creation, improvement and growth of surrounding vegetation for them to feed. Across
our assets approximately 200 acres were set aside and planted with wildflowers and forage areas. Examples of such initiatives include: wild flowers field planted on
one of Rodenkirchern school's rooftops. At E18 the green areas around the road are mowed only once in late summer, resulting in increasing wildflowers and their
density. Along North East Stoney Trail and Northwest Anthony Henday we created approximately 80 hectares of ponds, drawing wildlife and vegetation back to the
area, allowing native vegetation and birds to flourish.
The 125 beehives at E18 produce on average six metric tonnes of wild flower honey, and 2022 was an exceptional year with approximately 11 metric tonnes
produced. BBGI works with a local beekeeper, who manages the hives. The honey is collected and packaged to meet local health standards, with donations made to
a local food bank in Luxembourg.
Trond Heia, Director E18 Portfolio Company, said: "We are proud to support the expansion of nesting and feeding areas for bees and insects. Based on the success
from these initiatives, we plan to share our learnings across BBGI and explore the feasibility of implementing similar programmes in other locations".
Climate-related risks
We remain committed to aligning our business with the TCFD recommendations, and over the past year, we have made progress in several areas related to climate
strategy, risk management, and metrics and targets. These initiatives include:
· Deepening our understanding of our portfolio's risk exposure through a deep dive analysis of 20 assets with the highest risk exposure or strategic
importance to us.
· Conducting a sensitivity analysis on each asset, integrating site-level mitigation already in place and engineering of our assets to refine modelled physical
risk severities and financial impacts.
· Quantifying the revised risk exposure to each asset and the portfolio as a whole.
· Starting a GHG inventory across all our Portfolio Companies, to assess BBGI's Financed Emissions, in line with the GHG Protocol.
· Producing a bespoke climate factsheet for each asset, providing a summary of the overview risk exposure and the key driving perils identified.
· Sharing climate factsheets with public sector clients with the objective of a collective action through influence and stewardship where necessary (e.g.
mitigation, risk transfer).
· Setting net zero targets in line with science-based targets to achieve global net zero emissions by 2050, or sooner.
· Expanding the use of metrics and targets, including those related to GHG emissions, into our Management Boards' remuneration targets.
· Publishing our Net Zero Plan, which focuses on reducing our carbon footprint in our Corporate and Financed Emissions.
· Formalising our internal ESG due diligence process to identify and evaluate material climate risks and opportunities for all new acquisitions.
TCFD Disclosures
As the Company is considered an investment trust it does not fall in the scope of the Financial Conduct Authority's ('FCA') requirement for commercial companies
with a premium listing to make TCFD disclosures. Notwithstanding this exemption, the Management Board recognises the importance of the TCFD and its related
disclosures and has, as a result, taken the voluntary decision to report against the TCFD recommendations.
In the following section we report the progress we have made across each of TCFD's four pillars: Governance; Strategy; Risk Management; and Metrics and Targets.
We have made material improvements towards assessing our climate-related risks and opportunities, embedding stronger climate governance and risk
management and developing a robust awareness of risk metrics and targets we can use to monitor and track progress.
We are pleased to present our third voluntary disclosure against all 11 of the recommended TCFD disclosures
Governance
TCFD Recommendation
Progress to date
1 Describe the Board's
oversight of climate-
related risks and
opportunities.
2 Describe management's
role in assessing and
managing climate-related
risks and opportunities.
Our Supervisory Board and Management Board recognise the importance of climate-related risks and
opportunities. The Management Board has established an executive-led ESG Committee as a sub-
committee, comprising the Co-CEOs, the CFO, the ESG/Sustainability Director and the Corporate
Secretary to govern all climate and ESG-related activities. The Management Board considers climate-
related issues when setting strategy, considering new investment opportunities, approving annual
budgets, monitoring performance metrics and targets and approving climate change-related disclosures.
The Supervisory Board's constituted Remuneration Committee designs reward structures for our
Management Board to foster long-term value-creation and reinforce the organisation's ability to achieve
its climate change goals and targets. In 2022, the Remuneration Committee added additional ESG
targets to the LTIP award which, since 2021, has contained objectives related to reducing GHG emissions.
More details on our remuneration policy are provided in the Remuneration Report section of our
Annual Report.
The ESG Committee meets at least quarterly, in relation to environmental matters and reviews both the
climate-related risks facing the Company and its GHG emissions reductions targets. The Risk Manager
and the Management Board ensure that any risks/opportunities can be addressed through the Company
strategy, risk management procedure and responsible investment approach.
Our ESG Committee is led by our dedicated ESG Director, and, together with the Management Board,
maintains our ongoing commitment to manage the dual impacts of both physical risk events on our
assets and the transition towards becoming a low-carbon business.
The Management Board's roles covers the following areas:
- The investment decisions incorporate ESG and climate-related risks and opportunities
assessments during the due diligence phase for new acquisitions. All existing and all new
investment opportunities are screened for climate risks and ESG factors.
- The Risk Management Function assesses the firm's exposures across all risks compared with its
stated risk appetite, including the long-term consequences of climate change along our asset's
concession periods.
- Corporate governance obligations and oversight responsibilities in relation to climate-related risks
and the review of the Company's approach to disclosures, including those relating to climate
change.
- The Compliance Function undertakes an internal compliance monitoring programme, including our
policies relating to sustainability including climate change.
Full responsibilities of our ESG Committee are outlined in our ESG Committee Terms of Reference:
www.bb-gi.com/esg/policies.
Strategy
TCFD Recommendation
Progress to date
3 Describe the climate-
related risks and
opportunities the
organisation has
identified over the short,
medium and long term.
4 Describe the impact of
climate-related risks and
opportunities on the
organisation's businesses,
strategy and financial
planning.
Physical risk insights
Overall, scenario analysis has highlighted that the majority of BBGI's portfolio is very resilient to
climate hazards both today and under future climate warming scenarios.
- Out of 56 assets modelled, only two have a high risk under a 'high emissions' scenario by 2050. The
potential exposure identified from flood risk, coastal inundation and extreme winds only extends to
one specific building within the two asset and the theoretical impact on the NAV is not considered
material. For both assets, we note that our concession period terminates between 2035 and 2050,
and thus we do not expect them to have material impacts on our wider portfolio.
- Under a 'Paris-Aligned' scenario there are no assets with a high-risk exposure across the same
timeline.
- All 20 of BBGI's top 20 assets have a low or very low risk exposure today and in 2050 under 'Paris-
Aligned' and 'High emissions' scenarios once existing resilience and mitigation measures are
considered.
- The risk profile of BBGI's portfolio remains constant for 52 assets over the next 30 years; the climate
risk profile of BBGI's portfolio remains relatively constant for most assets, particularly when
overlaying our concession periods, which do not extend beyond 2051 for any asset.
- Beyond 2051, the period when our concessions end and assets revert to public sector clients,
climate risk is projected to increase for 17 assets, most notably under a 'high emissions' scenario.
While BBGI will not have a financial interest in the assets during this future period, it may create
opportunities for BBGI to propose and invest in climate mitigation and adaptation measures.
- Under a 'Paris-Aligned' scenario BBGI may take advantage of opportunities arising from energy
transition investment plans from the public sector, during planned retrofit interventions or for
additional investments.
Our assessment considered climate impacts over short (1-5 years), medium (5-10 years) and long-term
(10+ years) time horizons up until 2050, covering the maximum investment life duration of our current
portfolio. We note that modelling currently only considers present-day government-funded defence
infrastructure in place. When local mitigation measures are also considered, the exposure of our assets
to climate change may reduce further.
Transition risk insights
We recognise the effects transition risks have on our business. BBGI are working to understand the
impact transition risks will have on the portfolio, particularly where rapid, unexpected changes in
legislation or government policy occur.
In the table below, we outline the potential impacts of policy, technology, reputational and market risks
across the infrastructure sector.
Transition risk
category
Policy and legal risk
Legislation enacted
by national and local
governments to
price and penalise
GHG emissions.
Technology risk
Disruptive
technology changes
in key sectors of the
economy
responding to
changing energy
needs.
Reputational risk
Investor and client
sentiment influenced
by Company's
actions to manage
climate change risk.
Market risk
Market disruption,
changes in client
preferences, cost of
capital and valuation
changes as investors
prioritise returns
from low-carbon
companies.
Industry trends
Mitigating actions
We anticipate that, as
society attempts to reduce
global warming, the cost of
carbon taxation will
increase and potentially
impact businesses. Carbon
pricing and exposure to
litigation may also increase
globally, encouraging
businesses to reduce their
own GHG emissions.
Technology risks may arise
across infrastructure assets
where changes and
adaptations to new, low-
carbon materials and
technologies arise.
Globally, there is increasing
focus on businesses to
minimise their carbon
footprint. Reputational risk
may arise where companies
do not take sufficient action
to decarbonise or integrate
sustainability across their
operations.
Transitioning into a low-
carbon society has
potential implications on
client and investor appetite
and demand.
We are actively seeking ways to reduce our
carbon footprint in order to align with our net
zero targets. Our main focus is on reducing
Corporate and Financed Emissions, and our
Net Zero Plan provides more details on this:
https://www.bb-gi.com/media/2226/bbgi-net
zero-plan-dec-2022-final.pdf.
To achieve our goals, we are exploring the use
of more sustainable and environmentally
friendly materials in our assets. This includes
low-carbon alternatives for road surfaces,
electric vehicles charging infrastructure, and
energy-efficient or motion sensor equipment.
Additionally, we are investigating the
possibility of energy purchase contracts
prioritising renewable sources of energy.
We have set a target of achieving net zero by
2050 or sooner. To achieve this, we are also
working with our public sector clients.
In order to comply with investor priorities and
ESG and sustainability regulations, we report
in line with SFDR Level II requirements, make
voluntary TCFD disclosures, and monitor
future ESG and sustainability regulations and
reporting requirements to maintain our
compliance.
We are committed to ensuring our investment strategy, financial planning and decision-making accounts
for climate-related risks and opportunities, ensuring we work with our clients to consider appropriate
risk mitigation, adaptation and resilience measures where necessary.
In 2021-2022 we engaged with a climate modelling specialist firm, leveraging their expertise in climate
risk, to conduct a detailed climate change impact assessment for our entire portfolio to identify and
assess climate-related risks and opportunities across various climate scenarios. The results of this in-
depth exercise continue to inform our long-term strategy and has set the foundation.
During the same period, we also commissioned an independent carbon footprint assessments and
verification of our Corporate Scope 1, 2 and 3 GHG emissions.
The results of the quantitative climate change assessment have fed into our Company's strategy in a
number of ways. It informs us on the type of climate risk each of our assets is exposed to, the magnitude
of that risk (from low risk to high risk, if any) and the corresponding reinstatement value (i.e. the
potential cost of damage from physical climate risks).
There is currently no climate-related cost forecasted in our financial models but this may change in
relation increased insurance premiums; however, there is a degree of contractual protection from
increased insurance costs.
The screening of physical climate-related risks is systematically embedded for each asset in the due
diligence and monitoring phases of our investment cycle.
The results of the deep dive assessments materialised in a bespoke factsheet which we have started to
share with our public sector clients and across the Portfolio Companies' boards, helping to raise
awareness and drive our engagement initiatives on mitigation measures where physical risks may
materialise.
Our Net Zero Plan lays the foundation of how BBGI intends to transition to a low-carbon business as we
leverage the outcomes of the quantitative climate-change assessment to set our targets and objectives,
as well as inform future acquisition screening and strategic portfolio construction.
Our Net Zero Plan can be found here: https://www.bb-gi.com/media/2226/bbgi-net zero-plan-
dec-2022-final.pdf
5 Describe the resilience of
the organisation's
strategy, taking into
consideration different
climate-related scenarios,
including a 2°C or lower
scenario.
Portfolio-level findings from the quantitative climate change assessment confirm a high-degree of
resilience to climate change impacts under the various scenarios tested.
The climate modelling demonstrates that our investment strategies focus our investments into
infrastructure assets which are built to the latest engineering standards and which, due to the long-term
nature of these assets, consider the long-term effects of climate change when they are built. In our
capacity as an investor we are developing our resilience by transitioning to net zero through a mix of
portfolio decarbonisation, engagement with key stakeholders and an ESG integrated investment
approach. A transition to a lower carbon economy may also presents a number of opportunities for
client-supported change orders and new investment, should the business case support it.
Risk Management
TCFD Recommendation
Progress to date
6 Describe the
organisation's processes
for identifying and
assessing climate-related
risks.
7 Describe the
organisation's processes
for managing climate-
related risks.
8 Describe how processes
for identifying, assessing,
and managing climate-
related risks are
integrated into the
organisation's overall risk
management.
Metrics and Targets
The Company's approach to internal controls is risk based. All material risks are identified, analysed,
assessed, reported and managed. Since outlining our goal to better improve our understanding of
climate-related risks and opportunities we have chosen to focus on two areas: 1) embedding climate due
diligence into our on boarding process for new acquisitions, and 2) better quantifying our corporate
GHG emissions footprint to support identification of future risks as well as opportunities for engagement
arising as we develop our decarbonisation strategy.
In accordance with our commitment to executing due diligence on new acquisitions, within six months
of an asset integrating into our portfolio we perform a systematic screening for various risks and
identification of climate-related risks is carried out through physical risk due diligence. A summary of the
risk exposure is provided under a 'Paris-Aligned' scenario and a 'High emissions' scenario from today
and then in decadal time steps until 2100. The output from the screening is a bespoke climate factsheet.
To ensure our portfolio remains resilient to climate risk, we continue to embed these insights into our
investment screening process, ensuring physical climate risk impacts are assessed for all new
investments.
Climate risks identified through our climate risk modelling are managed by our Risk Manager and the
Management Board with work continuing to ensure climate risk considerations are formally embedded
within risk management procedures.
Recognising that climate risk cuts across both our value-driven asset management approach and the
essential infrastructure we provide to our clients, work is ongoing to ensure climate risks, where
identified, will be shared with public sector clients with the objective of a collective action through
influence and stewardship where necessary (e.g. mitigation, risk transfer). It should be noted that BBGI
rarely has operational control at its Portfolio Companies, so achieving the targets and objectives is highly
dependent on successfully influencing stakeholders (typically our public sector clients) into taking action.
We have systematically reviewed all existing investments for physical climate change exposure against
eight climate perils5 through quantitative scenario-analysis.
- In Q1 2022, we conducted further work on 20 assets performing deep dives. For each asset, a
bespoke climate factsheet was produced, providing a summary of the risk exposure.
- In Q4 2022, we extended our systematic review for physical climate change exposure to also include
our two new acquisitions. We expect to continue this due diligence process for all new acquisitions.
By voluntarily applying the TCFD regulatory framework, BBGI is gradually reinforcing numerous aspects
of sustainability: risk and opportunities identification, management of climate-risk exposure and
disclosure of relevant metrics and targets.
Climate-related risks have been integrated into our risk management procedures.
Where material climate risks are identified, these are escalated where necessary to the Management
Board, ensuring risks can then be appropriately assessed, managed and monitored per our risk
management procedure.
To ensure our portfolio remains resilient to climate risk, we will embed our findings into our investment
screening process which ensures physical climate risk impacts are assessed for all new investments.
TCFD Recommendation
Progress to date
9 Disclose the metrics used
by the organisation to
assess climate-related
risks and opportunities in
line with its strategy and
risk management process.
Through scenario analysis conducted in 2021 and 2022, we continue to embed enhanced physical risk
metrics across our risk management processes and climate-related risks and opportunities in line with
our strategy.
- We have quantified both physical severity risk scores and potential projected financial impacts from
2020 to 2100 for every asset under each warming scenario assessed.
- For each time horizon and for each warming scenario, each asset is scored with a climate risk score,
on a scale from very low to very high.
- For the 20 assets which have undergone a deep-dive assessment, we conducted a further sensitivity
analysis that considers all existing resilience measures and the engineering of our assets in the
climate risk score.
We recognise the importance of continually improving both our climate scenario analysis methodology
and the metrics we use to track and monitor exposures across our portfolio. We will review and update
our results and key metrics as necessary to ensure we maintain an up-to-date picture of climate risk
across our investments and future acquisitions.
More information about our climate modelling methodology can be found in the 'Climate-related
risks' section of our ESG report.
BBGI is required to comply with SFDR. As of June 2023, BBGI will disclose the following climate-related
metrics in line with SFDR Level II requirements, as part of its Principal Adverse Impact Statement:
- GHG emissions;
- Carbon footprint;
- GHG intensity of portfolio companies;
- Exposure to companies active in the fossil fuel sector;
- Share of non-renewable energy consumption and production;
- Energy consumption as per high impact climate sector; and
- Breakdown of energy consumption by type of non-renewable sources of energy.
More information about our SFDR disclosures can be found here:
https://www.bb-gi.com/esg/sustainability-related-disclosures/
10 Disclose Scope 1, Scope
2, and, if appropriate,
Scope 3 GHG emissions,
and the related risks
Corporate Emissions
- BBGI's total market-based Corporate Emissions are 242.53 tCO₂e (location-based are 240.80 tCO2e).
- The most significant emission source is flights accounting for 67 per cent of the total market-based
Corporate Emissions.
- Total market-based Corporate Emissions have decreased by 13.7 per cent against the baseline year
(2019), largely due to the reduction in flights.
Scope
Activity
Scope 1
Scope 1 Sub Total
Gas
Scope 2
Electricity (location-based)
Electricity (market-based)
Scope 2 Sub Total (location-based)
Scope 2 Sub Total (market-based)
Scope 3
Flights
Well-to-tank
Employee commuting
Computing
Personal vehicles for business purposes
Home-working
Taxi travel
Waste
Hire cars
Electricity transmission & distribution
Paper
Rail travel
Water (and wastewater)
Bus travel
Scope 3 Sub Total
Location-based total tonnes of CO2e
Market-based total tonnes of CO2e
Financed Emissions
2022
Tonnes CO2e
9.90
9.90
5.24
6.98
5.24
6.98
162.37
28.12
13.00
11.98
4.86
2.08
1.23
0.73
0.56
0.43
0.18
0.07
0.04
0.02
225.65
240.80
242.53
11 Describe the targets used
by the organisation to
manage climate-related
risks and opportunities
and performance against
targets.
- In 2022, we worked in direct collaboration with our Portfolio Companies and subcontractors to feed
our proprietary ESG KPI survey with the necessary data inventory, to adequately calculate a GHG
inventory across all our investments.
- As of June 2023, we will be disclosing annually our Portfolio Companies' Scope 1, 2 and where
relevant material Scope 3 emissions (Financed Emissions) in line with the GHG Protocol operational
control approach.
- The disclosures will be part of our Principal Adverse Impact Statement disclosure, in line with SFDR
Level II requirements.
Climate-risk targets:
In 2022, we performed deep dives on our assets with the greatest risk exposure and those that are
strategically important investments for BBGI. For 20 of our assets, a bespoke climate factsheet was
produced, which we continue to utilise when engaging with clients. To date we have shared the climate
factsheet or the climate risk score in the following circumstances:
- Portfolio Company's boards: 100 per cent of projects
- Public sector clients: 84 per cent of projects
- Formal meeting with client to discuss conclusions of climate modelling and potential joint 'next
steps' - 14 per cent of projects
Net zero targets:
Corporate emissions (Scope 1, 2 and 3): BBGI commits to reduce absolute Scope 1, 2 and 3 GHG
emissions 50 per cent by 2030 from a 2019 baseline and to reach net zero by 2040.
BBGI has aligned its approach with the SBTi guidance for Private Equity Sector and the SBTi guidance for
SMEs, BBGI has not taken the steps to have its targets officially approved as there are no applicable
industry standards for infrastructure investment at this time. However, BBGI has used the SBTi target
setting tool to model its targets in line with SBTi approved criteria and methods.
Financed Emissions (Portfolio Companies' Scopes 1, 2 and material Scope 3) We aim for 70 per cent
of our Financed Emissions to be 'net zero', 'aligned', or 'aligning' to net zero by 2030. This means that by
2030, 70 per cent of AUM (portfolio companies by value) will have a long-term goal to be net zero by
2050 or sooner. We have a goal to have 100 per cent of our Financed Emissions to be 'net zero' or
'aligned', by 2040.
BBGI has set its targets in line with the Paris Aligned Investment Initiative Net Zero Investment
Framework and the specific guidance for the Infrastructure sector.
Read more on our net zero targets in our ESG Report.
Note on TCFD disclosures
The purpose of climate scenario analysis is to support an understanding of potential future risk outcomes rather than 'predict' absolute future impacts. Current modelling takes into
account individual asset archetypes. Archetypes are used to assess the vulnerability of different asset components to physical risk and building-specific characteristics (e.g. a hospital's
typical building materials, number of storeys, type of construction) and embeds present-day government-funded defence infrastructure in place; local/site-specific mitigations have
not been included within the model due to limited data availability. With this in mind, we recognise that scenario analysis is a gradual process to be improved iteratively as models
themselves improve and our own asset portfolio requires it. The methodology outlined in this Report has been structured to offer both quantitative and qualitative perspectives on
future physical risk outcomes and enables us to repeat our analysis as necessary.
We note that while internally we have granular, component-based outputs to support decision making and inform risk management processes, for the purposes of simplifying our
reporting here, we have aggregated our risk scoring to the asset level. Asset-level physical risk scores are calculated using a weighted representation of total risk which reflects both
each individual component risk severity and its rebuild value.
Both physical and transition risk are key considerations for BBGI. We also note that many of our investments are relatively new and benefit from having climate change considerations
incorporated into the design and construction of the infrastructure. Many of the financial consequences resulting from climate-related perils have been mitigated by having insurance
in place.
The results presented in this Report are based on best-available data and judgements of subject-matter experts both internally and externally, where required. Climate scenario
models may differ in meaningful ways from traditional macroeconomic scenarios; they are neither forecasts nor predictions and should be used for "insights, not numbers".
Corporate Governance
Relevant Application of European Union and Luxembourg Law
BBGI is regulated by the CSSF under Part II of the amended Luxembourg law of 17 December 2010 on undertakings for collective investments, and is subject to the
Luxembourg amended law of 12 July 2013 on Alternative Investment Fund Managers ('AIFM Law') that implemented the EU Alternative Investment Fund Managers
Directive ('AIFMD') into national legislation.
AIFM
There have been no material changes during the year in respect of Art. 20 Para. 2(d) of the AIFM Law that warrant further disclosure to our shareholders.
Material risk takers
There has been no change in our material risk takers, who are the members of the Management Board, in accordance with Luxembourg's AIFM law of 12 July 2013.
Governance at a glance
Compliance statement
As an internally managed investment company, effective internal controls secure the sound financial and operational performance of our investments.
BBGI is a member of the Association of Investment Companies ('AIC') and reports against the AIC Code of Corporate Governance (the 'AIC Code').
We have considered the Principles and Provisions of the AIC Code, which addresses the Principles and Provisions set out in the UK Corporate Governance Code
2018 (the 'UK Code'), and sets out additional Provisions on issues that are of specific relevance to BBGI as an investment company. BBGI considers that reporting
against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council, provides relevant information to our
shareholders.
For the most part, we have complied with the Principles and Provisions of the AIC Code and where we do not, we have provided an explanation. We have outlined
below the specific Provisions where we do not comply, with a section reference for an accompanying explanation:
· AIC Provision 17 (in relation to establishing separate Management Engagement Committee): See Committees of the Supervisory Board.
· AIC Provision 23 (All directors should be subject to annual re-election by the shareholders): See Management Board - General section.
Biographies of Directors
Supervisory Board
Sarah Whitney
Chair, Supervisory Board and Nomination Committee
Sarah Whitney has a 35-year career advising on strategy, corporate finance, real estate, and economic matters. Her executive roles include Corporate Finance
Partner at PwC; she set up and led the Government & Infrastructure Team at CB Richard Ellis; and before that was Head of Consulting & Research at DTZ Holdings
plc (now Cushman & Wakefield).
For over 20 years, Ms Whitney's career has focused on providing consultancy services to national and local governments, investors, and real estate companies on
real estate, economic growth, infrastructure, and investment. In her early career, she was an investment banker advising major corporates on M&A transactions.
Ms Whitney became Chair of the Supervisory Board on 31 July 2020. She is also Chair of the Nomination Committee.
Ms Whitney has a BSc in Economics & Politics from the University of Bristol and is a Fellow of the Institute of Chartered Accountants of England and Wales.
Ms Whitney serves as a non-executive director at JPMorgan Global Growth & Income plc (where she also serves as Chair of the Audit Committee), Tritax EuroBox plc
(where she also serves as Senior Independent Director) and Bellway plc, (where she also serves as Senior Independent Director). She is a Member of the Council of
University College London.
Andrew Sykes
Chair, Remuneration Committee and Senior Independent Director
Andrew Sykes has a wealth of financial services and non-executive experience and spent 26 years of his executive career at Schroders plc. He was Chair of SVG
Capital plc from 2012 until 2017, serving on the Board from 2010. He was also Chair of Smith & Williamson from 2013 to 2020.
He is an experienced director of UK-listed companies with deep knowledge of the financial services sector and of Corporate Governance requirements.
Mr Sykes holds a Master's degree in Modern Languages from Oxford University.
Mr Sykes is currently a non-executive director and Senior Independent Director of Intermediate Capital Group plc.
Mr Sykes additionally serves as the Deputy Chair of the Governing Body of Winchester College.
Mr Sykes was appointed by shareholders at the Company's 2022 AGM as a Non-Executive Director, and became Senior Independent Director and Chair of the
Remuneration Committee on 29 April 2022.
Jutta af Rosenborg
Chair, Audit Committee
Jutta af Rosenborg has extensive experience in management and strategy from her background as an Executive and from senior operational roles.
Ms af Rosenborg served as Chief Financial Officer, Executive Vice President of Finance and IT, and Member of the Board of Management at ALK-Abelló A/S until
2010. Before this, Ms af Rosenborg worked at Chr. Hansen Holding A/S as Vice President of Group Accounting from 2000 to 2003. From 1978 to 1992, she worked
at Deloitte, Denmark, serving international clients.
Ms af Rosenborg became a Non-Executive Director on 1 July 2018 and Chair of the Audit Committee on 31 August 2018.
Ms af Rosenborg holds an MSc in Business Economics and Auditing from Copenhagen Business School and qualified as a state-authorised public accountant in
1992.
Ms af Rosenborg is an experienced non-executive director of listed companies and serves currently on three other listed companies; RIT Capital Partners plc, Nilfisk
Holding A/S and JP Morgan European Growth & Income plc.
Chris Waples
Independent Director
Chris Waples CDir FloD has 35 years' global experience of managing the acquisition, construction, and divestment of infrastructure projects. Mr Waples has an
extensive track record of asset management in progressive high-profile companies, including 12 years with the John Laing Group plc where he was Executive
Director Asset Management, leading the international public-private partnership asset portfolio across Europe, North America, and Asia Pacific regions.
Mr Waples was a member of the executive team that oversaw the successful £1 billion market capitalisation IPO of the John Laing Group plc in February 2015. He
was also Chair of the Investment Committee, Chair of the Investment Portfolio Committee and Trustee of the John Laing Charitable Trust. He previously served as
Managing Director of Amey plc for public and private sector clients, leading to its acquisition by Groupo Ferrovial. Before this, he held senior positions with Scottish
Power plc and Blue Circle plc.
Mr Waples is a Fellow and Chartered Director of the Institute of Directors and holds a Postgraduate degree in Management Studies and Agricultural Engineering
LICG.
Mr Waples became a Non-Executive Director at BBGI on 1 May 2021.
Mr Waples does not hold any non-executive director positions at any other listed company.
June Aitken
Independent Director
June Aitken has over 30 years of experience in global equity markets as an institutional stockbroker. She has held numerous senior roles at HSBC Bank plc, London,
including as Global Head of Emerging Market Equity Distribution and Head of Strategy Management. Previously, Ms Aitken was a Managing Director at UBS (AG),
Head of Global Equity Product, and Global Head of Asian Equities. Ms Aitken was a founding partner and investor of Osmosis Investment Management LLP, a
specialist investment manager focused on environmental and responsible investment mandates for pension funds and endowments globally.
Ms Aitken has been involved in establishing fund structures in multiple jurisdictions and has previously served on a number of financial services and fund boards.
Ms Aitken holds a degree in Politics, Philosophy and Economics from Oxford University, is a member of the Chartered Banker Institute and acts as a mentor to
female entrepreneurs.
Ms Aitken was appointed by shareholders at BBGI's 2022 AGM as a Non-Executive Director from 29 April 2022.
Ms Aitken is a non-executive director at CC Japan Income & Growth Trust plc, JPMorgan Asia Growth and Income plc, Greengage Global Holding and Schroder
Income Growth Fund plc. She is Chair of PEAL Capital Partners UK Limited.
Management Board
Duncan Ball
Co-CEO and member of the Management Board
Duncan Ball has been Co-CEO of BBGI since its inception. He was actively involved in its IPO in 2011 and BBGI's subsequent growth from 19 assets to 56 assets at
the end of the reporting period.
Mr Ball has worked in the infrastructure sector, investment banking and advisory business for over 30 years. As Co-CEO of BBGI, he is responsible for BBGI's overall
strategy and management. He is one of three members of the Management Board and sits on the Group's Investment and ESG Committees. He also is a
shareholder representative and holds directorships in key investments of BBGI.
Frank Schramm
Co-CEO and member of the Management Board
Frank Schramm has been Co-CEO of BBGI since its inception. He was actively involved in its IPO in 2011 and BBGI's subsequent growth from 19 assets to 56 assets
at the end of the reporting period.
Mr Schramm has worked in the infrastructure sector, investment banking and advisory business for over 25 years. As Co-CEO of BBGI, he is responsible for BBGI's
overall strategy and management. He is one of three members of the Management Board and sits on the Group's Investment and ESG Committees. He is also a
shareholder representative and holds directorships in key investments of BBGI.
Michael Denny
CFO and member of the Management Board
Michael Denny has over 20 years' experience in corporate finance, with a focus on the infrastructure and real estate sectors.
He joined BBGI in early 2012, shortly after its IPO. As CFO of the Group, he is primarily responsible for all corporate financial matters including financial reporting,
UK listing requirements, taxation, foreign exchange hedging and regulatory compliance. Mr Denny is a member of the Management Board and sits on the Group's
Investment and ESG Committees.
Board leadership and purpose
Our governance structure
BBGI is internally managed and operates with a two-tier governance structure, comprising a Management Board and a Supervisory Board. The respective
responsibilities of each Board are outlined below.
Management Board
The Management Board is responsible for managing BBGI and its representation vis-à-vis third parties (e.g. entry into agreements on BBGI's behalf). Its principal
responsibilities lie in all our operational management activities, including the discretionary investment management of our investments, and setting and
implementing the Group's overall strategy. The Management Board is ultimately responsible for implementing risk management, monitoring operational risks and
measures related to risks.
In carrying out the function of investment manager via the Management Board, we do not engage an external investment manager to provide investment
management services. Accordingly, as Executive Directors, none of the Management Board sit on the Supervisory Board, nor on its formally constituted Committees.
The Management Board is also responsible for BBGI's overall administration, including preparing our semi-annual valuations; statutory financial statements;
management accounts and our business plan, which defines our active approach to asset management. Given its investment manager role, the Management Board
is the primary interface for our investor relations and engages with the Supervisory Board on our shareholders' behalf.
Supervisory Board
The duties of the Supervisory Board are:
(a) to appoint and, where relevant, dismiss members of the Management Board;
(b) to supervise the Company's management by the Management Board, without being authorised to interfere with the management; and
(c) to exercise its powers attributed by our Articles, including:
●
●
●
●
●
●
Supervising and monitoring the appointment of our service providers and those of our subsidiaries.
Reviewing remuneration and compensation levels and structure, and other benefits and entitlements of
our Management Board officers and BBGI employees.
Considering any prospective issues, purchases, or redemptions of shares proposed by the Management
Board.
Reviewing and monitoring compliance with our corporate governance framework and financial reporting
procedures.
Reviewing and (if thought fit) approving interim and annual financial statements.
Providing general supervisory oversight to the Management Board and Group operations.
The Supervisory Board consists of independent Non-Executive Directors and the Chair, who was considered independent at the time of her appointment. The
directors on the Management and Supervisory Boards are accountable under the Listing Rules, as the Listing Rules do not distinguish between different types of
directors.
While BBGI's shares are listed on the Official List of the UK Listing Authority, the Supervisory Board and the Management Board act as one in approving any circular
or corporate action where the Listing Rules require the recommendation of the board of a publicly-listed company (or where recommendation is customarily given).
Any responsibility applied to directors under the Listing Rules applies to all our directors.
Stakeholder engagement
Effective engagement with our stakeholders is a key part of realising our vision and purpose. While BBGI is a non-domiciled publicly-listed entity on the UK London
Stock Exchange, to which the UK Companies Act 2006 (the 'CA2006') has limited application, we recognise the value added by all our stakeholders. BBGI
acknowledges the continuing requirement under Section 172(1) CA2006 for boards of UK large or publicly-listed companies to take stakeholder interests into
account, and to report how they have done so when performing their duties. Furthermore, as a member of the AIC, we recognise the stated intention of the AIC
Code that the matters set out in Section 172 are reported on by all companies, irrespective of domicile, provided this does not conflict with local company law.
Under AIC Code Provision 3, the Co-CEOs of the Management Board regularly engage with our major shareholders to understand their views on significant matters.
The Chairs of the Supervisory Board and its delegated Committees are also always available to engage at our shareholders' request.
Details of how we adopt the spirit of those provisions, consider our stakeholders, and our commitment to generating positive and sustainable outcomes for all our
stakeholders are outlined in the ESG section of this Annual Report.
General Meetings
2022
The AGM was held on 29 April 2022. There were no other shareholder meetings held during the year.
2023
BBGI's next AGM will be held on Friday 28 April 2023. The Notice of Meeting, proposed Resolutions and Explanatory Notes, and the associated Proxy Form, will be
circulated to shareholders in accordance with the regulatory deadlines, and available on our website.
Substantial shareholdings
As at 31 December 2022, BBGI had 713,331,077 shares in issue. Pursuant to DTR5 of the FCA's Disclosure Guidance and Transparency Rules, we had received notice
of substantial interests (five per cent or more) in the total voting rights of BBGI as follows, in compliance with DTR 7.2.6R:
Name
M&G plc
Schroders plc
Held
% of total share
capital1
59,502,903
9.42%
56,304,964
8.48%
Newton Investment Management Limited
39,947,825
8.46%
Investec Wealth & Investment Limited
31,569,569
5.01%
Evelyn Partners
28,885,124
5.00%
1
The percentage of voting rights detailed in the table above was calculated at the time of the relevant disclosure made in accordance with Rule 5 of the Disclosure Guidance and Transparency Rules, and
the shareholders' percentage interests in BBGI may have changed since that date.
Board members and other interests
The Management Board members are also BBGI Management HoldCo S.à r.l. managers. Mr Ball and Mr Schramm both hold service contracts and Mr Denny holds a
management contract in respect of BBGI Management HoldCo S.à r.l. No other Group member held service or management contracts during 2022. Notice periods
to and from the Company of 12 months apply for each Management Board member. No loan has been granted to, nor any guarantee provided for the benefit of,
any director by the Company.
Ms Whitney, Mr Sykes, Ms af Rosenborg, Mr Waples and Ms Aitken are all considered independent Board members, as they:
(i) Have not been employees of BBGI.
(ii) Have not had material business relationships with BBGI.
(iii) Have not received performance-based remuneration from BBGI.
(iv) Do not have family ties with any of BBGIs advisers, directors, or senior employees.
(v) Do not hold cross-directorships or have links with other directors through involvement on other companies.
(vi) Do not represent a significant shareholder.
(vii) Have not served on the Board for more than nine years.
Details of Directors' holdings in BBGI's shares are disclosed in the Remuneration Report.
Internal controls
The Management Board has established an ongoing process and system of robust internal controls to help BBGI manage risks. We have processes to manage risk,
oversee the internal control framework, and determine the nature and extent of principal risks we are willing to take to achieve our long-term strategic objectives.
As well as ongoing monitoring, we review these policies and procedures at least annually.
We recognise that effective control systems can only seek to manage and mitigate the risks of failure to achieve business objectives. They cannot eliminate them. By
their very nature, these procedures are unable to provide absolute assurance against material misstatement or loss.
During 2022, our Compliance and Risk functions reviewed, assessed, and reinforced our robust governance and risk controls frameworks. With the general removal
of COVID-19 restrictions, many of our colleagues have resumed undertaking delegates and due diligence process monitoring through in-person meetings and on-
site attendance at delegates' offices.
· The Supervisory Board monitors our investment performance against our stated objectives and reviews our activities on a quarterly basis, to ensure that
our Management Board is adhering to our investment policy and guidelines, including clearly defined investment criteria, return targets, risk profile and
compliance framework. During these meetings, the Management Board reports KPIs on operating performance, cash projections, investment valuations and
corporate governance matters.
· The Head of Compliance and Risk presents our Interim and Annual Risk Report and quarterly Compliance Reports separately to the Management Board
and Supervisory Board, or to the Audit Committee, with all directors of both Boards present.
· The ESG Committee oversees the management of material ESG activities, including climate-related issues, and reports to the Management Board on any
recommendations and proposed actions following each Committee meeting. The ESG Committee meets at least quarterly, and membership comprises the
Co-CEOs, the CFO, the Director ESG/Sustainability, and the Company Secretary. Through the ESG Committee, the Management Board remains informed
about the dual risks to BBGI of transitioning to a low-carbon economy (with associated increased regulation) and the risk of financial, operational, and
direct, physical impacts of climate change on our portfolio assets.
We perform Internal Audit reviews as part of our triennial audit plan, as agreed by the Management Board and Audit Committee and communicated to the CSSF.
The nature, timing, and extent of our internal audit procedures are determined by assessing the risk related to specific activities, and the complexity and
sophistication of our operations and systems, including how we control information processing. The Internal Audit Summary Report is presented to the Audit
Committee in March each year and then submitted to the CSSF.
Division of Responsibilities
Supervisory Board
General
The Supervisory Board has five Non-Executive Directors, all of whom are independent. All Supervisory Board members are elected for a period ending at the
Company's AGM in April each year, when they are required to retire, in accordance with the Articles. The members can offer themselves for re-election by
shareholders. However, re-appointment is not automatic.
The Supervisory Board meets at least four times a year and between these formal meetings, the Management Board and the Company's corporate brokers have
regular contact. Where necessary, both Supervisory and Management Board members have access to independent professional advice at BBGI's expense. It
considers items laid out in the Notices and Agendas of meetings, which are formally circulated to its members before each meeting as part of the Board papers. At
each meeting, members must advise of any potential or actual conflicts of interest before discussion.
It also meets at least quarterly to review investment performance and associated matters, compliance and risk profile, the performance of key service providers,
investment and financial controls, marketing and investor relations, general administration, peer group information, industry issues and other matters relevant to
fulfil its oversight remit.
The Supervisory Board has formally established Audit, Remuneration and Nomination Committees. Further details are below and in each Committee Report.
Management Board
General
The Management Board comprises three members, each contractually engaged by BBGI Management HoldCo S.à r.l., a direct consolidated 100 per cent-held BBGI
subsidiary. As a result, no member is deemed independent under AIC Code Provision 10. However, the Management Board's functions are overseen by the
Supervisory Board, which meets the independence criteria set out in Provision 10.
While our two-tier structure is not explicitly covered by the AIC Code, our independent Supervisory Board ensures we are compliant with AIC Code Provision 10.
The Company's Articles require the re-election of the Management Board's members every year by the Supervisory Board, and not by shareholders. This does not
meet the requirements of AIC Code Provision 23, which requires that directors are subject to election by shareholders. However, as the Management Board carries
out the role of investment manager, the Supervisory Board deems it appropriate that it elects the members of the Management Board. The Articles also require that
the members of the Supervisory Board are subject to annual election by shareholders, who may also dismiss any member. We consider this procedure satisfies the
requirements of AIC Code Provision 23.
Performance evaluation and re-appointment
As stated above, the Management Board carries out the functions of BBGI's investment manager. Management Board Directors are appointed by the Supervisory
Board for a year, and these appointments are then renewed. Mr Ball and Mr Schramm were both appointed on 5 October 2011 for BBGI's IPO, with Mr Denny
appointed to the Management Board on 30 April 2013.
Delegated functions
We are required to have dedicated Risk Management, Compliance, and Internal Audit functions under AIFM Law; and each function must be functionally and
hierarchically separate from our operating unit functions. Accordingly, we have appointed Grant Thornton Vectis as Internal Auditor, for the year ended 31
December 2022.
Our Head of Risk and Compliance is authorised by the regulator to perform the risk management and compliance functions, and reports to our Management Board
and Supervisory Board, or one of its formally constituted Committees, as well as reporting to respective Designated Board Members, who retain responsibility for
overseeing the performance of the respective functions.
Our Management Board has overall responsibility for the correct and effective operation of the delegated functions.
Other key delegates and providers:
Central Administrative Agent, Depositary, Paying Agent, Registrar
and Transfer Agent:
RBC Investor Services Bank S.A ('RBC')
Depository (UK):
Link Market Services Trustees (Nominees) Limited ('Link')
Central Securities Depository:
LuxCSD S.A. ('Lux CSD')
Principal Agent:
Banque Internationale à Luxembourg S.A. ('BIL')
Information Technology:
G.I.T.S. PSF
Our shares trade on the main market of the London Stock Exchange. In this context, Link is our depository, receiving agent and UK transfer agent. During 2022, and
in accordance with the Dematerialisation Law, our remaining shares issued in registered form were converted into dematerialised form.
LuxCSD acts as the Company's EEA-based CSD. BIL acts as the required intermediary between the Company and LuxCSD. Both LuxCSD and BIL are classified as
delegates and are subject to the appropriate level of delegate oversight in accordance with our delegate oversight framework.
BBGI is registered under the UK's National Private Placement Regime ('NPPR'), allowing us to continue to market our shares in the UK.
Board attendance
As at 31 December 2022
Name
Function
Independence Age
Original
appointment
Next renewal
date
Attendance at Meetings (total meetings held in the year)
Supervisory Board
Supervisory
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
(5)
(5)
(4)
(5)
Sarah
Whitney(i)
Andrew
Sykes(ii)
Jutta af
Rosenborg(iii)
Chris Waples
June
Aitken(iv)
Chair of
Supervisory
Board and
Nomination
Committee
Senior
Independent
Director and
Chair of the
Remuneration
Committee
Chair of Audit
Committee
Director of the
Supervisory
Board
Director of the
Supervisory
Board
Howard
Myles (v)
Senior
Independent
Director
Independent
59
01-May-19
28-Apr-23
5/5
3/3
4/4
5/5
Independent
65
29-Apr-22
28-Apr-23
3/3
2/2
2/2
3/3
Independent
64
01-Jul-18
28-Apr-23
5/5
Independent
64
01-May-21
28-Apr-23
5/5
5/5
5/5
4/4
4/4
4/5
5/5
Independent
63
29-Apr-22
28-Apr-23
3/3
2/2
2/2
2/2
Independent
73
03-Oct-11
n/a
3/3
3/3
2/2
2/2
(i)
Ms Whitney stepped down from her membership of the Audit Committee on 29 April 2022, having attended all prior Committee
meetings. Ms Whitney continues to be invited to attend the Audit Committee meetings as an observer.
(ii)
Mr Sykes was appointed with effect from 29 April 2022, and attended all meetings held following his appointment.
(iii)
Ms af Rosenborg was unable to attend one meeting of the Remuneration Committee due to a prior engagement.
(iv)
Ms Aitken was appointed with effect from 29 April 2022, and attended all meetings held following her appointment.
(v)
Mr Myles retired from the Supervisory Board and all Committee roles on 29 April 2022, having attended all meetings held prior to his retirement.
Name
Function
Independence
Age
Original
appointment
Next renewal
date
Attendance at
Meetings
Management Board
Duncan Ball
Frank Schramm
Michael Denny
Member of the
Management Board
Member of the
Management Board
Member of the
Management Board
Management Board
(20)
Non-independent
Non-independent
57
54
05-Oct-11
05-Oct-23
05-Oct-11
05-Oct-23
Non-independent
45
30-Apr-13
30-Apr-23
20/20
20/20
20/20
These tables set out the expiry dates of the current terms of the Directors' appointments, and Committee meeting attendance. All appointments may be renewed in
accordance with the provisions of the Company's Articles.
Audit Committee
In accordance with provision 29 of the AIC Code and the Disclosure Guidance and Transparency Rules ('DTR') rule 7.1, the Company has a formally constituted Audit
Committee, to which the Supervisory Board has delegated responsibility for the general oversight and monitoring of the Company's compliance with various
financial and regulatory controls, in accordance with AIC Code and Disclosure and Transparency Rules requirements.
The Audit Committee operated throughout 2022 in accordance with the AIC Code and within clearly defined terms of reference, which are regularly reviewed,
including all matters indicated by DTR 7.1 and the AIC Code.
The Audit Committee reports its findings to the Supervisory Board, identifying matters where it recommends action or improvement. If there is a conflict between
the provisions of the AIC Code and the provisions of the law on the Audit Profession, we comply with the provisions of the law on the Audit Profession, and disclose
any conflict.
As External Auditor, PWC attends specific Audit Committee meetings to consider BBGI's Annual and Interim Financial Statements, where PWC presents the
conclusions of its work, and whenever the Audit Committee considers necessary.
The Audit Committee meets at least three times per year, and whenever the Audit Committee Chair may require. Any member of the Audit Committee, or the
External Auditor may request additional meetings. Other Directors and third parties may be invited by the Audit Committee to attend meetings when appropriate.
Sarah Whitney, as the Chair of the Supervisory Board is not a member of the Committee but is invited to attend each of its scheduled meetings.
Remuneration Committee
In accordance with AIC Code provision 37, the Company has a formally constituted Remuneration Committee, to which the Supervisory Board has delegated its
responsibilities for establishing the general principles of the policy for Directors' remuneration and for setting remuneration for the Management Board, as well as
supervising the general remuneration structure and levels for other employees.
After reviewing the levels and structure of the remuneration, compensation and other benefits and entitlements of BBGI's Management Board, the Remuneration
Committee reports its findings and any recommendations to the Supervisory Board.
The Remuneration Committee meets at least twice a year, and whenever the Remuneration Committee Chair may require. Additional meetings may be requested by
any member of the Remuneration Committee, if necessary. Other Directors and third parties may be invited by the Remuneration Committee to attend meetings as
and when appropriate.
Nomination Committee
In accordance with AIC Code provision 22, the Company has a formally constituted Nomination Committee, to which the Supervisory Board has delegated its
responsibilities for appointing the members of the Management Board and the appointment of any further Supervisory Board members.
The Nomination Committee meets to consider the renewal of the appointments of the Management Board members (renewable annually for one year), the
appointment of new Supervisory Board members, to review the succession plans for both the Management and Supervisory Boards, and oversight of the annual
performance evaluation of the Supervisory Board and its formally constituted Committees.
In recruiting new directors, the Nominations Committee actively seeks greater diversity by gender, ethnicity, nationality, and other criteria, and is committed to
selecting members based on merit, who possess relevant and complementary skills to help BBGI maximise stakeholder value.
The Nomination Committee meets at least two times a year, and at other times as the Nomination Committee Chair requires, in accordance with its Terms of
Reference. If necessary, Nomination Committee members can request additional meetings. Other Directors and third parties may be invited by the Nomination
Committee to attend meetings when appropriate.
The Chair does not chair any Committee meeting where her succession is discussed, in accordance with AIC Code provision 22.
Further details on the roles of each Committee and their activities during 2022 are set out in the individual Committee reports which form part of this Annual
Report. The respective Committee Chairs attend each Company AGM where they are available to respond to any shareholder queries on their Committee's activities.
Management Engagement Committee
Oversight of delegates and key service providers is highly regulated by the Luxembourg CSSF, including formal reporting structures, regular oversight visits and
compliance monitoring plans, in accordance with the Company's Oversight of Delegated Activities framework. Given the Management Board's primary involvement
in the process, the internal management of the Company, and the size of the Supervisory Board, the Supervisory Board conducts the functions of a management
engagement committee, with Ms Whitney as Chair. As a result, we consider it unnecessary to have a separate management engagement committee, as prescribed
under AIC Code Provision 17, as there is no material benefit to BBGI and our shareholders.
In its role as Management Engagement Committee, the Supervisory Board met four times in 2022 to consider, together with the Management Board, the
performance, effectiveness and appropriateness of the ongoing appointments of our third-party service providers under Principle H of the AIC Code. During these
meetings, the Management Board provided feedback and key findings from any onsite meetings with third-party service providers, as part of our programme of
oversight of delegates and key service providers.
Composition, Succession and Evaluation
We believe all Supervisory Board members have an appropriate combination of skills, experience, and knowledge to fulfil their obligations. They also have a breadth
and diversity of experience relevant to BBGI, and we believe any future changes to the composition of the Supervisory Board can be managed without undue
disruption to the Company. We are unaware of any circumstances that are likely to impair, or could appear to impair, the independence of any of the Supervisory
Board members.
Board composition, tenure, and diversity
The Nomination Committee and the Management Board regularly review BBGI's succession plans, but ultimate decision making rests with the Supervisory Board. As
part of our structured succession plan, Non-Executive Directors are expected to retire on a staggered basis. Since IPO, we have recruited new Non-Executive
Directors to retain and enhance our Board's knowledge and experience. At the conclusion of our 2022 Annual General Meeting, Mr Howard Myles retired as a
member of the Supervisory Board and each of the Committees, including his role as Senior Independent Director and Chair of the Remuneration Committee. He
had served as an independent Non-Executive Director since our IPO. He was replaced by Andrew Sykes, who was appointed Non-Executive Director at the same
AGM. Mr Sykes also took on the roles of Senior Independent Director and Chair of the Remuneration Committee. At our 2022 AGM, our shareholders appointed Ms
June Aitken as an Independent Non-Executive Director. Both Ms Aitken and Mr Sykes are members of each of our Committees.
Our Management and Supervisory Boards take the gender and ethnic diversity of their composition into full consideration. We fully acknowledge the goals of FTSE
Women Leaders (formerly the Hampton-Alexander Review on Women on Boards) and the Parker Review on Ethnic Diversity on Boards. Female representation on
our Supervisory Board at the reporting date stood at 60 per cent, exceeding the FTSE Women Leaders target of at least 40 per cent representation of women on the
Boards of FTSE 350 companies. We also meet the target set by the Parker Review for FTSE 250 companies to have at least one director from a minority ethnic group
on the Board by 2024.
We are one of the few FTSE 350 companies with both a female Chair and Audit Committee Chair. As part of our commitment to the FTSE Women Leaders and the
Parker Review's goals, the Nomination Committee also regularly reviews our policies on diversity, equity and inclusion.
Our gender composition goals include our Management Board, and their direct reports. As at 31 December 2022, our 26 colleagues included 17 different
nationalities. Given our relatively low employee turnover and the small number employed across the Group, the Management and Supervisory Boards are mindful
of the naturally limited opportunities to promote greater diversity of gender and ethnicity to senior roles within BBGI, but we still take all reasonable and practical
steps to evolve diversity throughout the Group.
Further details on Board composition, tenure, and diversity are given in the Nomination Committee Report.
Re-election of Supervisory Board members
In accordance with the Articles, Supervisory Board members are elected for a period ending each AGM, when they are eligible for reappointment. All members of
the Supervisory Board will offer themselves for re-election at our forthcoming AGM in 2023 and, as a result of the successful performance evaluation, the
Supervisory Board recommends the re-election of each of its members.
Re-election of Management Board members
The Supervisory Board evaluates the performance of the Management Board and its Directors annually to ensure they operate effectively and efficiently, and that
the appointment of the individual Directors is in the best interests of BBGI and its shareholders. Satisfied with the evaluations carried out in 2022, the Supervisory
Board resolved to renew Mr Denny's appointment for a further year with effect from 30 April 2022, and those of Mr Ball and Mr Schramm for a further year with
effect from 5 October 2022.
Administration
Incorporation and administration
The ordinary shares were created in accordance with Luxembourg law and conform to the regulations made thereunder, have all necessary statutory and other
consents, and are duly authorised according to, and operate in conformity with, the Articles.
Articles of Association
The Articles were originally approved and formalised before a Luxembourg notary public on 24 November 2011. The Articles are filed with the Luxembourg Registre
de Commerce et des Sociétés and are published in the Mémorial. The Articles may be amended in accordance with the rules set out in article 32 of the Articles.
A copy of the current Articles, which were most recently amended by shareholder approval on 30 November 2020, is available for inspection on our website. Refer
to www.bb-gi.com/investors/policies/articles-of-association/.
Nomination Committee Report
Annual statement from Nomination Committee Chair
I am pleased to present the Nomination Committee (the 'Committee') report for the financial year ended 31 December 2022 on behalf of the Supervisory
Board.
Responsibilities
The Committee and its Chair are appointed by the Supervisory Board. Membership is confined to Independent Non-Executive Directors. Each of the five
Independent Non-Executive Directors is a Committee Member. The Nomination Committee's responsibilities include reviewing:
· The renewal of the appointments of the Management Board members (appointments are renewable annually for one year only).
· The composition of the Supervisory Board and the appointment of new Supervisory Board members (subject to annual shareholder approval).
· Succession planning for the Management and Supervisory Boards.
· The annual performance evaluation of the Supervisory Board and its formally constituted Committees.
Key activities during the year
During the year, the Committee met four times, with all members present.
Supervisory Board composition, tenure and diversity
As was reported in last year's Annual Report, in accordance with our succession plans, Howard Myles retired as a Non-Executive Director of the Supervisory Board
and his respective Committee appointments at the 2022 AGM, with Andrew Sykes appointed to serve as his replacement on the Supervisory Board. Mr Sykes also
succeeds Mr Myles as Senior Independent Director, Chair of the Remuneration Committee and as a member of the Audit and Nomination Committees.
Ms June Aitken was also appointed at the 2022 AGM, as an additional member of the Supervisory Board, and additionally serves as a member of the Audit,
Nomination and Remuneration Committees. We are grateful for the support received from shareholders in favour of their appointments, which we believe
complement existing Board members and provide us with a well-balanced and experienced Supervisory Board and Committees, allowing us to effectively serve our
shareholders in carrying out our duties of oversight of the Company and Management Board.
We strongly support initiatives and regulatory changes to encourage gender and ethnic equality within publicly-listed corporate entities, including the FTSE Women
Leaders and Parker Reviews. We believe the Supervisory Board's effectiveness is greatly enhanced by our diversity, and are proud of having 60 per cent female
representation, as well as being one of the few FTSE 350 companies with both a female Chair of the Supervisory Board and a female Audit Committee Chair. During
the year we also achieved the Parker Review target for FTSE 250 companies to have at least one director from an ethnic minority background on the board, two
years ahead of the 2024 deadline. Notwithstanding any regulatory requirements, we remain committed to ensuring that the members of our Board and Committees
bring a varied range of skills and expertise to the benefit of the Company's stakeholders and we have achieved this whilst also meeting these additional
expectations of diversity.
Succession planning
During the year, the Committee reviewed its former policy on the Appointment and Tenure of the Supervisory Board Chair. Following a reassessment of the Board's
position on succession planning, we decided to revise the existing policy and extend its application to all members of the Supervisory Board all members. The
Committee recognises that the AIC does not explicitly preclude a director from serving more than nine years, but states that serving over nine years is one of
several factors that could lead to a director losing independent thinking. Separately, the Committee members recognise market sentiment towards excessive
periods of tenure beyond nine years - the stated limit in the FCA's Corporate Governance Code. Our Supervisory Board Tenure policy limits the tenure of its
members and the Chair to nine years from their first appointment to the Board, although we will allow an extension of the Chair in exceptional circumstances to
facilitate an effective succession plan and the development of a diverse Board.
The Committee reviewed the composition and membership of the Management Board, the Supervisory Board, and their formally constituted Committees. The
Committee has determined that, with the addition of Mr Sykes and Ms Aitken, further appointments are not necessary.
Every year, we consider and formally discuss the issue of succession, both at the directorship levels and below, reporting into the Management Board. We consider
existing skills and experience, potential future departures, and key person risks, as well as supporting and nurturing talent within the Company. Where necessary,
the Committee will engage external recruitment consultants to assist with identifying suitable candidates. The Management Board is tasked with the general
recruitment of colleagues, including all senior positions below Board-level, and it regularly keeps the Committee and Supervisory Board appraised of existing and
potential future human resourcing requirements.
The process of appointing any new Directors is led by the Nomination Committee. Our approach is to make appointments across all levels based on the merit, and
the strengths, skills and experience that individual candidates bring to the composition and balance of the Management and Supervisory Boards, or Company.
Annual Committee planning and member development
During the year, the Committee formalised annual commitments and activities into an annual committee plan. This ensures individual Committee members
regularly consider all material matters, and that the Committee allocates sufficient time to discuss any matters at respective meetings.
The Committee also re-evaluated the induction process for new Non-Executive Directors, referring to positive feedback on the process from Mr Sykes and Ms
Aitken. We have enhanced the NED induction plan by expanding on the content covered during meetings and presentations for new directors.
We maintain an internal register of training undertaken by all colleagues and Directors. Members of the Supervisory Board are required to provide evidence of
relevant training undertaken in the year and are additionally encouraged to take part in staff-wide training, such as cyber-security and Anti-Money Laundering
('AML') and Counter-Terrorism Financing ('CTF'), if they have not done similar training externally. The Committee also reviews training undertaken to determine the
ongoing commitment and suitability of each Supervisory Board member as an independent Non-Executive Director of the Company. I am pleased to say that each
Supervisory Board member has undertaken training to remain up-to-date with the latest regulatory and operational developments relevant to BBGI's business.
Annual performance evaluation
Progress made against the actions identified by the 2021 performance evaluation of the Board's effectiveness is detailed below:
Area of focus
Actions taken
Greater ESG expertise required on
the Supervisory Board
The Supervisory Board was enlarged by one member, and a search
undertaken for an appropriately skilled individual, resulting in the
appointment of June Aitken
Individual board member training undertaken where appropriate
Committee work planning
All Committees now have annual workplans in place setting out the
year's business.
During the year, the Supervisory Board conducted its own annual evaluation, as well as that of its Chair and each of the Committees, and considered the term and
independence of each member. Having undertaken an external evaluation in 2020, the 2022 evaluation was conducted internally. It consisted of a detailed
questionnaire covering the Supervisory Board and its Chair, and its three Committees: the Audit Committee, the Nomination Committee, and the Remuneration
Committee. All members of the Supervisory Board formally considered and discussed the conclusions from each evaluation.
The 2022 evaluation concluded that the Supervisory Board and its Committees comprise an appropriate balance of experience, skills and knowledge to enable them
to discharge their responsibilities properly, and the Board has operated effectively throughout the year. The new Board and Committee structure and the annual
work programmes introduced last year are functioning well, and the two newly appointed directors benefited from the improved induction programme. Some
minor changes to the management of the Board's business will be implemented to improve the effective working of the Board. In the changing macroeconomic
environment, the evaluation process recognised the need to keep the Company's strategy and risk management processes in focus.
As the Senior Independent Director, Mr Sykes evaluated my performance as Chair of the Supervisory Board, in accordance with provision 14 of the AIC Code, and he
concluded that I continue to perform my role effectively.
I have also evaluated the performance of each Supervisory Board member, and concluded that each member performed their duties effectively throughout the
reporting period, and has sufficient capacity to carry out their duties properly, with no single member over-boarded by other directorships.
Renewal of Executive Director mandates
The Supervisory Board reviewed the performance of each Management Board member. Each member is considered to have performed their duties effectively, and
has been reappointed for another year.
The Committee reviewed the plans for all senior positions for succession planning. These plans are regularly updated by the Management Board and reviewed by
the Nomination Committee at least annually.
The year ahead
The Committee will meet regularly in 2023 to assess capacity within the organisation, key man risk and the continuous development of appropriate succession
plans, which continue to be key focus areas for the Management and Supervisory Boards. The Committee will strive to achieve the best results for all
stakeholders in 2023, including the selection process for engaging an independent third party to facilitate the external performance evaluation process in
2023, in accordance with AIC Code provision 26, and in actioning the outcomes of the 2022 evaluation.
Approval
This Report was approved by the Board on 29 March 2023 and signed on its behalf by:
Sarah Whitney
Nomination Committee Chair
Audit Committee Report
Annual statement from Audit Committee Chair
I am pleased to present the Audit Committee (the 'Committee') report for the financial year ended 31 December 2022 on behalf of the Supervisory Board.
Terms of Reference
The Committee functioned throughout 2022 according to its defined Terms of Reference, which are prepared in accordance with the Disclosure and Transparency
Rule 7.1 and the AIC Code, which are reviewed at each formal meeting scheduled by the Committee and are available to view on the Company's website. Any
amendments recommended on the Terms of Reference are referred to the Supervisory Board for approval. The roles and responsibilities of the Committee, as set
out in its Terms of Reference, are reviewed at least annually, and consider relevant regulatory changes and recommended best practice. There were no material
amendments to the Terms of Reference during 2022.
Committee membership
The Committee and its Chair are appointed by the Supervisory Board. The Committee currently consists of four Independent Non-Executive Directors, all of whom
sit on the Supervisory Board, and membership is at all times confined to Independent Non-Executive Directors. Ms June Aitken and Mr Andrew Sykes were
appointed as Committee members from 29 April 2022, with Mr Howard Myles and Ms Sarah Whitney stepping down from the Committee on the same day. Ms
Whitney remains a Non-Executive Director. As Chair of the Supervisory Board, she is invited to attend each Committee meeting as an observer. The biographies of
each Committee member are in the Corporate Governance section of this Annual Report. The Supervisory Board considers that at least one Committee member has
recent and relevant financial experience for the Committee to discharge its functions effectively.
Responsibilities
The key responsibilities of the Committee include:
· Advising the Supervisory Board on whether the Group's annual and interim reports and financial statements, taken as a whole, are fair, balanced, and
understandable and provide the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
· Monitoring the integrity of the financial statements of the Group and any formal announcements relating to the Group's financial performance, satisfy
themselves that the financial statements are compliant with relevant accounting standards and that any significant financial reporting issues and
judgements raised by the External Auditors are appropriately considered.
· Reviewing the semi-annual valuations of BBGI's investment portfolio.
· Reviewing the effectiveness of the Group's internal financial controls and risk monitoring including consistency of accounting policies and practices on
a year-to-year basis, the Group's internal control and risk management systems, including reviewing the Internal Auditors' Annual Regulatory Report.
· Reviewing and monitoring the effectiveness of the Group's Internal Audit function, including the appointment and removal of the third-party service
provider of Internal Audit and review and approve the tri-annual internal audit plan.
· Formally reporting and making recommendations to the Supervisory Board for resolutions to be put to shareholders at the AGM, to approve the
appointment, re-appointment, and removal of the External Auditor, and keep under review their associated remuneration and terms of engagement.
· Reviewing and monitoring the External Auditor's independence and objectivity and the effectiveness of the audit process, taking into consideration
relevant UK and Luxembourg professional and regulatory requirements.
· Ensuring implementation of a policy on non-audit services, considering relevant guidance and legislation regarding the provision of non-audit services
by the external audit firm.
· Reviewing the adequacy and security of the Group's arrangements for its employees and stakeholders to raise concerns, in confidence via BBGI's
whistleblower hotline, about possible wrongdoing in financial reporting, fraud, bribery and other matters.
These responsibilities form the basis of the Committee's annual work plan. The Committee is authorised to seek any information it requires from the Management
Board, and external parties and to investigate issues or concerns as it deems appropriate. The Committee may also obtain independent professional advice at the
Company's expense, in order to perform its duties. No independent advice was required in 2022.
The External Auditor is invited to attend Committee meetings where we consider the Annual and Interim Reports, and they meet the Committee or some of its
members, without representatives of the Management Board being present. The Committee has direct access to PwC as our External Auditor, and to members of
the Management Board, and reports its findings and recommendations to the Supervisory Board.
Key activities during the year
At these meetings, the Committee considered, inter alia:
· The Committee's Terms of Reference.
· The Committee's annual plan.
· The Semi-Annual Valuation Reports with respect to our investment portfolio, including assumptions used, sensitivity scenarios, External Auditor and
third-party independent valuation specialist observations.
· Management's proposals for the interim dividends, including any benchmarking conducted against market peers.
· Our 2021 Annual Report, 2022 Interim Report and the appropriateness and consistency of our accounting policies.
· The relevance of changes to IFRS reporting standards.
· The change in External Auditor, including PwC's terms of appointment and remuneration, and overseeing their independence, particularly the provision
of non-audit services and legacy services pre-dating its appointment as External Auditor.
· The effectiveness of the audit and recommendation to the Supervisory Board for approval of the External Auditor's plan for the financial year and the
key business risks relevant to the audit.
· The External Auditor's reports to the Committee.
· Discussions with management on our existing tax structure and tax risks.
· The introduction of more comprehensive climate-related disclosures.
· Our overall Risk Profile and Key Risk Indicators, and the effectiveness of our risk monitoring.
· An annual review of the Charters and Policies relevant to the Committee.
· The effectiveness of our Internal Auditor, the Internal Auditor's Annual Regulatory Report for 2021 and scope of review for the 2020-2022 triennial
internal audit plan.
· The Russian invasion of Ukraine and the potential macroeconomic consequences, in particular the impact on interest rates and inflation.
· Following the revocation of most of the health measures in relation to COVID-19 in March 2022, a reflection on the overall non-financial impact of the
pandemic, and in particular the effectiveness of our business continuity plan throughout.
· The effectiveness of an externally conducted cyber-security risk assessment for BBGI and a review of controls in place and adaptations made to
mitigate the global escalation in cyber-attacks.
· Initial expectations around the impact and relevance of the UK BEIS Audit and corporate governance reforms, considering our size and UK listing.
· The Committee, with the presence of all Supervisory Board members, received quarterly presentations from the Head of Compliance and Risk on the
work undertaken by the Compliance function, including;
o Discussions around our AML/CFT controls and new reporting requirements from the Luxembourg regulator, which required support from
outgoing External Auditor.
o A look through exercise on the beneficial ownership of our share capital in response to the significant level of sanctions imposed by regulators
on Russia and Russian-related interests.
o Whistleblowing arrangements.
o Periodic updates on the conclusion of the process to dematerialise our share register.
Valuation of investments
During the year, the Committee discussed a range of topics with the Management Board, the External Auditor, and the Internal Auditor. Consistent with prior
reporting periods, the Committee concluded that the most significant risk of material misstatement in our financial statements relates to the fair valuation of our
underlying investments.
Twice a year, the Management Board carries out a valuation of the underlying investments, including NAV sensitivity analyses, which are reviewed by an
independent third-party valuation expert.
Management Board members were available during the Committee review process to respond to challenges and to provide detailed explanations of the rationale
used for the valuation of investments and the assumptions, judgements and methodology applied.
The Committee invited the External Auditor to present and discuss the results of its audit and review procedures. The External Auditor, including its valuation
specialist, has reviewed and reported on the adequacy of the valuation of the underlying investments, paying particular attention to the discount rates applied, the
macroeconomic backdrop and the key assumptions used in deriving the fair valuation of the investments.
The External Auditor briefed the Committee on the outcome of its controls testing and the audit procedures performed. This risk of material misstatement is
carefully considered when the Committee reviews the Annual and Interim Financial Statements.
Following this valuation process and ensuing reviews, the Committee concluded that the valuation process of our investments for 2022 had been carried out
appropriately, and the value of investments was reasonable.
External Auditor independence and effectiveness
In assessing the ongoing independence of the External Auditor, the Committee:
· Reviewed the External Auditor's report outlining the extent of non-audit services provided by them and related parties to the Company and its
subsidiaries.
· Received confirmation from the External Auditor as to its compliance with ethical requirements regarding independence and the application of
appropriate safeguards, along with the arrangements in place to identify, manage and disclose conflicts of interest and that it has remained
independent of the Group in accordance with Regulation (EU) No 537/2014.
· Considered existing engagements with the External Auditor having been entered into prior to their appointment as External Auditor, along with
associated changes in personnel to maintain independence.
In assessing the ongoing effectiveness of the External Auditor, the Committee considered;
· The External Auditor's fulfilment of the agreed audit plan and variations.
· Reports highlighting the major issues that arose during the audit.
· Feedback from the Management Board evaluating the performance of the audit team.
· The Financial Reporting Councils ('FRC's) Annual Report on audit quality inspections.
The Committee is satisfied PwC has acted in accordance with its terms of engagement and that the audit process carried out by the External Auditor remains
independent, objective, and effective.
Non-audit services
The Committee considered the level of non-audit services provided by the External Auditor. To the extent that non-audit services are not prohibited, the Committee
will continue to review and, where appropriate, approve non-audit service engagements performed by the External Auditor on controlled subsidiaries.
As a general principle, we will not use the External Auditor for non-audit services, unless there is a valid and specific justification.
For the financial year ended 31 December 2022, the External Auditor provided us with limited non-audit services related to ESMA Annex IV reporting. This arose as
the result of a legacy engagement pre-dating PwC's appointment as the External Auditor. Fees for this service in 2022 amounted to c. £5,000. We have since
performed the production of this reporting in-house. There were no other non-audit related fees paid to PwC during the year ended 31 December 2022.
Internal controls and risk management
The Committee review the effectiveness of the Group's internal financial control systems.
The Committee considers the three lines of defence model to assess the effectiveness of the internal control systems. The first line of defence, management
controls, is monitored on an ongoing basis by the compliance and risk management functions, which make up the second line of defence. The third line of
defence is the internal audit function.
· Risk management: The Committee members attended the presentation of the Annual Risk Report and the Semi-Annual Risk Report presented by BBGI's
Risk Manager. Committee members had the opportunity to challenge the Risk Manager and members of the Management Board, enabling an appropriate
level of direct oversight. Additionally, the Committee reviews regular risk profile updates and related key risk indicators during the year, prepared by the
Risk Manager.
· Compliance: The Committee members received and considered the quarterly compliance reports prepared by BBGI's Head of Compliance, describing the
work performed by the compliance function, and covering all compliance topics, including, but not limited to, AML/CTF, delegate oversight, conflicts of
interest, training, regulatory watch, data protection, fraud, cyber-security, implementation and update of policies, ESG and personal transactions. The
Management Board members and other representatives were available to respond to the Committee members' queries and requests for further
clarification. The Head of Compliance additionally presented the Annual Compliance Report for the Financial Year ended 31 December 2021, required to be
submitted to the CSSF. This report was presented at a Committee meeting where all directors, including the Supervisory Board Chair, were in attendance.
· Internal audit: As described in the responsibilities section above, the Committee undertook a review of the Internal Auditor's effectiveness, the 2021
Internal Auditor's Annual Regulatory Report and the 2020-2022 triennial internal audit plan. As part of this process, the Committee received a presentation
from the Internal Auditor, which covered their specific approach to engagement, a detailed outline of their scope of work, the audit objectives and their
conclusions resulting from the 2021 engagement.
Members of the Committee are presented with the information required to monitor the effectiveness of all three functions. For 2022, the Committee concluded that
Risk Management, Compliance, and Internal Audit had performed effectively with adequate processes in place.
Annual Committee planning
During the year, the Committee formalised its activities into an Annual Committee Plan. Individual Committee members deliberate all material matters requiring the
Committee's regular consideration, and we allocate sufficient time to these issues when they are discussed at meetings.
The adoption of the formalised Annual Committee Plan facilitates the Committee's ability to regularly undertake further analysis of topics of current relevance or
material interest to Committee members or the Company's stakeholders.
Cyber-security risk assessment
With two new members, and a new External Auditor, the Committee has benefitted from fresh perspectives on the effectiveness of existing controls for cyber-
security. The Management Board has a considerable understanding of risks within and outside the business, and has effective controls in place and a Business
Continuity Plan to address cyber-threat risks, including additional measures implemented during the reporting period. As a result, the Committee considers a robust
control environment is in place, and the Management Board, through the support of external cyber-security experts, are well informed of potential cyber-threats
and are taking appropriate action to mitigate those risks to the extent possible.
Tax
The Committee recognise the relevance of local and global tax initiatives to the Group, with an increasing trend for greater transparency around tax policies and
reporting requirements. Mitigation of our tax-related risks, and the adoption of any active policies on tax management sits with the Management Board. In 2023, as
part of its annual plan, the Committee will continue to receive updates from the Management Board on the topic of taxation as it impacts upon the Group.
Going concern and viability statements
Having regard to our assets and liabilities (refer to the Consolidated Statement of Financial Position for more detail), the Committee considered the Viability and
Management Board Responsibilities Statements, and processes and assumptions underlying the statements, considering:
· BBGI's investment policy and investment pipeline.
· The long-term and contractual nature of BBGI's investments.
· Investment reviews.
· BBGI's risk profile and key risk indicators (including principal risks and uncertainties) and mitigating actions put in place.
· Relevant financial and economic information and long-term assumptions.
· Scenario testing.
· Annual and semi-annual valuations of the investments.
· Whether the Management Board has diligently carried out its responsibilities in:
o selecting suitable accounting policies and applying them consistently.
o making judgements and estimates that are reasonable and prudent.
o stating whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial
statements.
o preparing the financial statements on a going concern basis, unless it is inappropriate to presume that the Group will continue in business.
o maintaining proper accounting records that disclose with reasonable accuracy the Group's financial position and enable it to ensure the financial
statements comply with all relevant regulations.
o safeguarding the Group's assets and taking reasonable steps for the prevention and detection of fraud and other irregularities.
Having considered all the above, and discussions held with the Management Board, the Committee is satisfied the Viability Statement and the Management Board
Responsibilities Statement are prepared on an appropriate and reasonable basis.
Regulatory environment
The Committee was kept informed of regulatory changes throughout 2022, including changes in scope or interpretation by the regulator, and potential future
developments. This monitoring and update process is facilitated by our Regulatory Watch, maintained by our Compliance Function and included in the regular
compliance reporting to Committee members by the Head of Compliance and Risk and the Designated Management Board Member for Compliance.
Focus for 2023
In addition to monitoring the integrity of our financial disclosures, the effectiveness of the internal and external audit functions, and our response to material
regulatory changes, a key focus for the Committee during 2023 will be the continued oversight of PwC's engagement as External Auditor.
Additionally, as part of its implemented annual plan, the Committee will undertake further analysis of relevant topics, being ESG and tax strategy in 2023.
Notwithstanding the official lifting of health measures and restrictions in response to COVID-19 in March 2022, and our proven robust business model, we will
continue to monitor closely the effectiveness of our business continuity plan and controls to mitigate potential risks.
The Committee will also continue to evaluate the impact of political, tax and regulatory developments in relevant geographies, in particular developments in the UK
around audit and corporate governance reforms, and developments relating to ESG both in the UK and Europe.
Together with all Committee members, I am available at the AGM to respond to any shareholder questions regarding the Audit Committee's activities.
Approval
This report was approved by the Board on 29 March 2023 and signed on its behalf by:
Jutta af Rosenborg
Committee Chair
Remuneration Committee Report
Annual Statement from Remuneration Committee Chair
I am pleased to present the Remuneration Committee (the 'Committee') report for the financial year ended 31 December 2022 on behalf of the Supervisory
Board.
Composition of the Committee
The Committee consists of a minimum of three members. The Supervisory Board appoints Committee members and the Chair (who cannot be the Supervisory
Board Chair) and membership is confined to independent non-executive directors.
On 29 April 2022, I was appointed as Chair of the Committee when Howard Myles retired from the Board. June Aitken was also appointed as a member of the
Committee. Each of our five Independent Non-Executive Directors is also a Committee member. Refer to our biographies are in the Biographies section of this
Annual Report.
Key activities during the year
The Committee met five times during the year.
Responsibilities
The Committee is responsible for establishing the general principles and terms of the Remuneration Policy for our Directors and employees, and for setting the
remuneration of the Management Board and Supervisory Board, in accordance with the Principles and Provisions of the Code, and the terms of the Remuneration
Policy.
This Remuneration Report has been prepared in compliance with reporting obligations outlined in the relevant Luxembourg legislation. To provide greater
transparency to shareholders and employees alike, we have again voluntarily disclosed additional remuneration detail beyond our legal reporting obligations.
We continue to comply with the provisions of the AIC Code on remuneration.
Performance in 2022
Despite the challenging economic environment, BBGI's portfolio continued to perform well with no reported lock-ups in Portfolio Companies, a strong
increase in NAV per share and robust dividend cover. Rising inflation, particularly in the second half of the year, has highlighted the importance of high-quality
inflation linkage in the portfolio. Preserving and enhancing the value of the portfolio was a key management focus.
BBGI's proven investment strategy and the management team's proactive management of low-risk, inflation linked, availability-based assets supported a 6.7
per cent increase in NAV to £1,069.2 million and a 6.6 per cent increase in NAV per share in 2022. We met our full-year dividend target of 7.48pps, an increase
of 2 per cent compared to the prior year, with strong coverage of 1.47x.
Both the Management Board and the Supervisory Board believe that sound ESG practices are integral to building a resilient business and creating long-term value
for our investors and other stakeholders. Investing sustainably and responsibly in social infrastructure is central to BBGI's business model. Most of our employees
have ESG-related targets, and the Management Board's remuneration framework includes both LTIP and STIP metrics related to ESG.
Further progress on ESG was made during the year, including establishing the framework to achieve our strategic ESG objectives. The year saw some notable
milestones such as completion of the portfolio level climate risk assessment, our designation as an Article 8 Company under SFDR for reporting on the criteria for a
socially beneficial investment, the development of BBGI's Net Zero Plan, and the publication of the Company's first ESG report in March 2022.
Key decisions during the year
The Committee commissioned an independent review of BBGI's overall remuneration framework in 2020/21 and we continued to work within this framework
in 2022.
The Committee's work in 2022 included the following key decisions:
• Approval of the annual Remuneration Committee cycle.
• Approving Management Board salary increases, taking account of the inflationary environment and the framework and approach to pay increases for
BBGI employees.
• Assessing performance against the 2021 STIP targets and approving the outcome.
• Formalising the assessment of the 2018 LTIP outcome.
• Setting ESG metrics for the 2021 LTIP award and considering the inclusion of additional ESG metrics in the 2022 LTIP award.[xxi]
• Reviewing and approving an increase to Supervisory Board fees.
• Reviewing and updating the Company's Remuneration Policy.
We will carry out an independent review of the Management Board's remuneration in 2023.
Detailed decisions of the Committee
Salary increases
The Committee reviewed Management Board salaries with effect from 1 May 2022, considering salary levels relative to the market, and the level of pay
increases for BBGI employees. It also considered the impact of the volatile and inflationary macroeconomic environment on all our employees. Management
Board members were awarded a salary increase of 5 per cent for 2022, which is below the average increase we awarded to our employees.
Annual bonus (FY2022) outcome
For the financial year ended 31 December 2022, the Co-CEOs and CFO were each eligible for a maximum bonus of 150 per cent of base salary as at 31
December 2022. The Committee assessed the award of this annual bonus against a range of stretching financial and strategic KPIs (see further in this report)
The Management Board delivered excellent performance and progress against targets, with the annual bonus outcomes at 100 per cent of the maximum
opportunity for the 2022 financial year. One-third of the earned bonus will be used to purchase shares, to be held for three years.
LTIP outcome (2019 award)
In December 2019, LTIP awards were granted to the Co-CEOs and CFO. These equated to an award value of 150 per cent of salary for the Co-CEOs, and EUR
100,000 for the CFO, and were based on stretching TSR and NAV growth targets. The 2019 awards will be released following the publication of the Company's
2022 audited accounts, vesting at 43.1 per cent and 50 per cent of the maximum for the Co-CEOs and CFO respectively. These reflect performance against
targets for the three-year period to 31 December 2022.
No discretion was exercised in determining the annual bonus and incentive outcomes described above.
Supervisory Board remuneration
As Supervisory Board fees had not been changed since 2017, they were reviewed in 2022. Following this review, the Chair's base fee was increased to £80,000, and
the Non-Executive Director base fee to £55,000, with effect from 1 October 2022. Further details are provided later in this report.
Andrew Sykes
Remuneration Committee Chair
29 March 2023
Remuneration at a glance
Key remuneration principles
BBGI's remuneration framework is based on the following key principles:
The objectives of the Company's Remuneration Policy are to:
· Attract and retain highly qualified executives and employees with a history of proven success.
· Align the interests of BBGI's Management Board and employees with shareholders' interests, executing
our investment policy and fulfilling our investment objectives.
· Support strategy and promote our long-term sustainable success.
· Establish performance goals that, if met, are accretive to long-term shareholder value.
· Link compensation to performance goals and provide meaningful rewards for achieving these goals.
This incorporates both financial and non-financial performance indicators, including key ESG goals and
health and safety factors.
In considering Management Board remuneration during 2022, the Committee acknowledged the principles
of transparency, clarity, simplicity, risk management, proportionality and alignment to culture.
Risk and conduct
BBGI's Remuneration Policy encourages sound and efficient management of risks and does not encourage
excessive risk-taking. The Remuneration Policy is consistent with sound and effective risk management
through:
· Implementing a sound governance structure for establishing goals and for communicating
performance goals to colleagues to ensure transparency.
· Including financial and non-financial objectives in performance and result assessments.
· Ensuring an appropriate mix of fixed and variable compensation to discourage inappropriate risk-
taking.
Ex-post risk adjustment mechanisms, in the form of market standard malus and clawback arrangements, are
in place for the Management Board, who are all identified as material risk takers, in accordance with
Luxembourg's AIFM law of 12 July 2013.
In evaluating the components of variable remuneration, we consider long-term performance, and current
and future risks associated with it, and the lifetime of the assets under management.
During the year, the Committee reviewed the remuneration policy and its implementation, and concluded
that the relevant remuneration processes and procedures were implemented in accordance with the policy.
Furthermore, the Committee concluded that the remuneration policy remains consistent with and promotes
sound and effective risk management, and does not encourage risk-taking, which is inconsistent with the
risk profile of BBGI.
Management Board remuneration framework summary
Element
Base salary
Base salaries effective from 1 May 2022:
Co-CEOs: C$ 902,839 and € 596,035
[xxii]
CFO: € 381,754
Pension and
benefits
Co-CEOs and CFO: 15 per cent of salary (cash allowance).
The Co-CEOs receive a monthly car allowance.
Co-CEOs and CFO: performance measures established entitling beneficiaries to 50 per cent of salary at
threshold performance, 75 per cent of salary at target and 150 per cent at maximum.
Annual bonus
(STIP)
One-third of bonus is used to purchase shares to be held for three years.
STIP is based on a balance of strategic, financial, operational, compliance and ESG, metrics, with robust
quantitative and qualitative performance requirements set for threshold, target, and maximum
performance.
Long-Term
Incentive Plan
(LTIP)
Shareholding
requirements
Co-CEOs: performance measures established entitling beneficiaries to 50 per cent of salary at threshold
performance, 100 per cent of salary at target and 200 per cent at maximum.
CFO: threshold: 50 per cent of salary, target: 75 per cent of salary, maximum: 150 per cent of salary.
Performance is measured over three years. For the 2022 LTIP awards, 80 per cent of the award is subject
to stretching NAV Total Return targets; 10 per cent is subject to reducing corporate GHG emissions and
10 per cent subject to progress in the implementation of net zero targets related to BBGI's Portfolio
Companies.
All Management Board members are required to build and maintain a minimum holding of BBGI shares
with a value of 200 per cent of salary
[xxiii]
.
Post-employment shareholding requirements: Management Board members are required to hold 100
per cent of salary in shares for two years after leaving BBGI.
Below we have set out total remuneration for each Management Board member for the year ending 31 December 2022
[xxiv]
.
Single figure table - Management Board
Duncan Ball
Frank Schramm
Michael Denny
In Sterling
(Co-CEO)
(Co-CEO)
(CFO)
2022
2021
2022
2021
2022
2021
Salary
553,435
495,275
500,097
484,872
320,307
310,555
Benefits
Annual bonus
Pension
LTIP1
Other
Total fixed
Total variable
15,594
13,956
14,032
13,605
-
-
843,542
728,093
762,245
712,799
488,210
456,540
84,354
74,804
76,225
73,233
48,821
46,905
239,942
490,259
240,822
522,452
40,134
95,170
-
-
-
-
-
-
653,384
584,035
590,354
571,709
369,128
357,460
1,083,484
1,218,352
1,003,067
1,235,252
528,343
551,710
Total remuneration
1,736,868
1,802,387
1,593,421
1,806,961
897,471
909,170
1 The 2019 LTIP vests by reference to performance in the three-year period to 31 December 2022. The associated shares will be released to the Management Board members following the publication of
BBGI's 2022 audited accounts.
The figures in the table above are derived from the following:
(a)
Base salary
Salary earned over the year, shown in the reporting currency of the Group (Sterling). Both Mr Denny
and Mr Schramm receive all cash entitlements in Euro. Mr Ball receives all cash entitlements in
Canadian Dollars. The Sterling amounts are converted using the average exchange rate for the
respective financial year. For the year ended 31 December 2022, the relevant average exchange rates
were £1 = C$1.6054 and £1 = €1.1729.
(b)
Benefits
The taxable value (gross) of benefits received in the year. These are principally car allowance.
(c)
Annual bonus
(STIP)
The value of the bonus earned in respect of the financial year: one-third will be paid in shares and held
for three years. Below we describe achievements against the performance measures for the latest
financial year.
(d)
Pension
The pension figure represents the cash value of any pension contributions, including any cash
payments in lieu of pension contributions made in the year.
(e)
Long-term
incentives
The value of LTIP shares vesting, calculated by the estimated number of shares that vest in respect of
the 2019 LTIP award multiplied by the average share price over the last quarter of the year ended 31
December 2022 (£1.58).
Additional disclosures for the single figure table
Management Board members receive an annual base salary, payable monthly in arrears. The Committee reviewed Management Board salaries from 1 May 2022,
considering salary levels relative to the market and pay increases for BBGI employees generally. Executive Directors were awarded an increase of 5.0 per cent, which
is below the average increase awarded to our employees.
Base salary
Base salary at 31 December
2022
Base salary at 31 December
2021
Duncan Ball
Frank Schramm
£551k
£528k
£501k
£477k
Michael Denny
£338k
£305k
Both Mr Denny and Mr Schramm receive salaries in Euro (€381,754 and €596,035 respectively from 1 May 2022). Mr Ball receives his salary in Canadian Dollars
(C$902,839 from 1 May 2022). The figures in the table above are reported in Sterling, the Group's reporting currency, and therefore, on a comparative basis, reflect
not only the base salary increase of 5.0 per cent, but also the impact of exchange rate movements.
The combined annual base salary received by the members of the Management Board during the year ended 31 December 2022 was £1,373,839 (2021:
£1,290,702).
Taxable benefits and pension-related benefits
The Co-CEOs received a car allowance amounting to a total amount of £29,627 (2021: £27,561) for 2022. The Co-CEOs and the CFO also received an annual
cash payment for pension, retirement, or similar benefits, equating to 15 per cent of their annualised base salary as at 31 December 2022.
BBGI has less than 30 employees across six different countries and individual pension arrangements across the team vary by location. In Luxembourg, where
most of our colleagues are located, normal pension contributions are made up of: 8 per cent of salary from the employer, 8 per cent of salary from the state
and 8 per cent from the employee.
STIP - annual bonus for year ended 31 December 2022
The following table summarises the STIP performance metrics and achievements in respect of the financial year ended 31 December 2022. The maximum STIP
opportunity for the Co-CEOs and the CFO is 150 per cent of base salary. The Remuneration Committee is responsible for determining both whether the
relevant financial and non-financial performance objectives have been satisfied and the level of award under the STIP for the relevant year. The Management
Board delivered excellent performance and progress against the targets set at the start of the year and as a result achieved the maximum outturn. No payment
under the STIP is made if performance is below the threshold criteria.
Assessment and performance criteria and weighting
Assessment and performance achievement
Performance
measure
Key financial
targets - dividends
Key financial
targets - NAV per
share
Operational
financial targets -
ongoing charge, cash
management and
budgetary controls
Threshold
performance
(33% vesting
equating to 50%
of base salary)
· A dividend of 7.48pps was declared for 2022, representing dividend growth of
Maximum performance
(100% vesting equating to 150% of
base salary)
Target
performance (50%
vesting equating to
75% of base salary)
Weighting
Outturn
(% of
maximum)
2 per cent.
· For 2022, distributions from Portfolio Companies exceeded forecasts, with
NAV increasing by 6.7 per cent to £1,069.2 million and NAV per share
increasing by 6.6 per cent to 149.9 pence.
15%
100%
· BBGI maintained the lowest comparative ongoing charge in its sector at 0.87
per cent, through efficient and cost-effective internal management.
· Cash management was consistently effective, maintaining appropriate cash
balances, ensuring robust dividend cover while also limiting potential cash
drag.
· Expenses were well controlled, with an outturn below budget in line with
maximum performance.
10%
100%
Disciplined growth
The Committee assessed the value and quality of projects considered and acquired
during the year, in line with the Company's strategy to grow and diversify our
portfolio while maintaining strategic discipline. The Committee considered BBGI's
performance was strong in:
· Investment of approximately £64 million during 2022, including two new
projects in Canada and Germany, which all earn availability-based revenue in
return for providing essential public services.
· All new investments screened for factors, including climate-change resiliency
and alignment with six UN Sustainable Development Goals.
· Appropriate discipline in rejecting certain opportunities, which did not meet
BBG's strict acquisition criteria, thereby further reinforcing the alignment of
interest between the Company's management and shareholders.
Portfolio
management
The Committee considered management performance against key metrics including
portfolio controls; organisational effectiveness; and project risk management. The
Committee considered that performance continued to be very strong in the
following key areas:
Compliance and
regulation
ESG
· High levels of asset availability at 99.9 per cent.
· No material lockups or defaults.
· 100 per cent availability-based revenue stream.
The Committee considered management's compliance with AIFMD and other
regulatory requirements during the year. Achievements include the following:
· Strong risk management with high-quality reporting of regulatory risks.
· Effective oversight of key delegates.
· Full and continued compliance with AIFMD.
· Strong regulatory performance relating to FATCA, IFRS, CSSF and UKLA.
· Proactive planning for potential future regulatory challenges.
The Committee considered the significant progress against the Company's ESG
objectives during the reporting period, including the following achievements:
· Strong ratings from UN PRI on our Transparency Report.
· Completed a climate risk assessment deep dive for all assets. The
findings from which demonstrate that the portfolio is very resilient to
climate hazards.
· BBGI's Net Zero Plan published.
· Full compliance with the Sustainable Finance Disclosure Regulation.
· Voluntary compliance with TCFD disclosure requirements.
25%
100%
25%
100%
10%
100%
15%
100%
Overall bonus out-turn (% of maximum)
100%
For 2022, awards of 150 per cent of base salary were achieved by the Co-CEOs and CFO. One-third of the earned bonus will be settled in shares, with the net
number of shares after settling the associated tax liability to be held for a period of three years. The remaining STIP awards will be paid in cash after the release of
the annual results for financial year ended 31 December 2022. During the year ended 31 December 2022, the total amount accrued in respect of the 2022 STIP
amounted to £2,093,997 (2021: £1,897,433). Cash payments under the STIP are made in Canadian Dollars and Euros.
LTIP - awards granted with effect during the financial year
LTIP awards of 200 per cent of base salary were granted to the Co-CEOs in February 2023 with effect from December 2022. The CFO's maximum LTIP award is set at
150 per cent of base salary. All awards granted are within the approved limits under the current LTIP Plan.
For awards issued in February 2023, 80 per cent of the performance target will be subject to stretching Net Asset Value ('NAV') Total Return targets. NAV Total
Return reflects both capital returns generated and dividends returned to shareholders.
20 per cent of the award will be linked to key climate-related environmental metrics, comprising (i) 10 per cent linked to a reduction in corporate GHG emissions
(Scopes 1, 2 & 3) (against a 2019 baseline) and (ii) 10 per cent linked to progress in the implementation of net zero targets related to BBGI Portfolio Companies
(Financed Emissions) by value, in accordance with published targets related to BBGI's commitments as a signatory of the Net Zero Asset Managers Initiative.
Performance metric
Threshold performance
Target performance
Maximum performance
NAV growth per share + dividends paid
(expressed as a percentage of opening NAV)
(80% of weighting)
ESG - percentage of corporate GHG emissions
(Scope 1, 2 & 3)
(10% weighting)
ESG - the implementation of net zero plans
across BBGI assets (by value)
(10% weighting)
15%
17%
22%
GHG emissions as a percentage of 2019 baseline (at 31 December 2025)
73%
70%
67%
The percentage of asset by value meeting the criteria for 'net zero', 'aligned' or 'aligning'
23%
26%
30%
For the Co-CEOs, 25 per cent and 50 per cent of the maximum award vests for threshold and target performance respectively. The award vests in full for maximum
performance.
For the CFO, 33 per cent and 50 per cent of the maximum award vests for threshold and target performance respectively. The award vests in full for maximum
performance.
A key feature of these awards is that they will be settled entirely in BBGI shares and not cash. All LTIP awards settled by shares, fall under the scope of IFRS 2 'Share-
Based Payments' and its specific reporting requirements. We continue to engage Ernst & Young to value our LTIP awards falling under the scope of IFRS 2. Refer to
Note 20 of the Consolidated Financial Statements for further details on share-based payments.
In line with previous years, no expense was accrued for the LTIP awards granted with effect in December 2022.
During the year ended 31 December 2022, we settled our 2018 award obligation by issuing the respective share entitlement to each Management Board member.
In total, we issued and allotted 346,203 shares by way of settlement, which equated to the net entitlement after taxes.
As at the date of this Report, there are no amounts set aside, needing to be set aside or accrued by the Company to provide pension, retirement, or similar benefits
to any Management Board members.
Total basic and variable remuneration for the financial year
The total basic remuneration paid to all employees (including Management Board) during 2022 was £3.37 million (2021: £3.15 million). The total amount
accrued for cash-settled variable remuneration at 31 December 2022 was £1.97 million. The total variable remuneration paid in cash in 2022 relating to the
2021 financial year was £1.79 million (2021: £1.75 million).
Restricted share plan
We operate a restricted share plan for most employees (excluding the Management Board members) with ordinary BBGI shares awarded, subject to a three-
year vesting period. During 2022, we recorded an expense of £0.2 million (2021: £0.1 million) for these restricted share awards. The primary vesting condition
is continued employment at BBGI.
Payments made to former Directors and payments for loss of office during the year
In 2022, we made no payments for loss of office and no payments to any former Management Board member.
Single total figure table - Supervisory Board
The Supervisory Board members are our Independent Non-Executive Directors and they are paid a fixed quarterly fee in GBP. The Remuneration Committee
consider the Non-Executive Directors' fees annually within the approved maximum aggregate remuneration cap, as approved by the Company's shareholders. No
member of the Supervisory Board is entitled to vote on his or her own individual remuneration. Supervisory Board members are not entitled to any other fees,
pension payments, incentive plans, performance-related payments, or any other form of compensation; except for reasonable out-of-pocket expenses and ex gratia
fees, which were considered for an exceptional or substantial increase in the members' workload.
Single total figure of remuneration - Supervisory Board
During the year ended 31 December 2022, the Supervisory Board received fees totalling £259,190 (2021: £220,000). The table below outlines the fees paid in
Sterling to each of the Supervisory Board members.
Base fee
Senior Non-
Executive Director
Committee Chair
Other - additional
fees1
Total
June Aitken2
32,788 -
-
-
-
-
Howard Myles3
14,835
45,000
1,648 5,000
1,648
5,000
Jutta af Rosenborg
47,500
45,000
-
Andrew Sykes4
32,788 -
3,365
Chris Waples
47,500
30,000
-
Sarah Whitney
68,750
65,000
-
5,000
5,000
3,365 -
-
-
-
-
-
-
-
-
Total
244,162
185,000
5,014
5,000
10,014
10,000
-
-
-
-
-
-
-
-
32,788 -
5,000
18,132
60,000
5,000
52,500
55,000
-
39,519 -
5,000
47,500
35,000
5,000
68,750
70,000
20,000
259,190
220,000
1 In addition to the standard fees, each of the sitting Directors was entitled to an additional fee in 2021 in relation to an equity issue.
2
June Aitken was appointed to the Supervisory Board with effect from 29 April 2022.
3
4
Howard Myles retired from the Supervisory Board with effect from 29 April 2022.
Andrew Sykes was appointed to the Supervisory Board with effect from 29 April 2022. Mr Sykes replaced Mr Myles as Senior Non-Executive Director and as Chair of the Remuneration Committee.
Supervisory Board fees
Details of Supervisory Board fees are below.
Chair
80,000
65,000
Non-Executive Director
55,000
45,000
Senior Independent Director1
Committee Chair1
1
5,000
5,000
5,000
5,000
These additional fees are paid to the Senior Independent Director, Remuneration Committee Chair and the Audit Committee Chair.
Supervisory Board fees were unchanged since 2017. During the year the members of the Remuneration Committee, except for Sarah Whitney who abstained in
accordance with Company's Remuneration Policy, approved an increase in the Supervisory Board Chair fee from £65,000 to £80,000 per annum. Furthermore, the
Supervisory Board Chair, after consultation with the Co-CEOs, approved an increase in the base fee of the Non-Executive Directors from £45,000 to £55,000 per
annum. All fee increases were with effect from 1 October 2022. Under this revised fee arrangement ex gratia fees will no longer be paid to the Non-Executive
Directors for the additional work associated with equity capital raises.
The fees paid to the Supervisory Board are subject to a shareholder approved maximum aggregate remuneration cap of £400,000.
Share interests and statement of Directors' shareholdings
Total share interests as at 31 December 2022
The Directors' interests and those of their connected persons in BBGI's ordinary shares as at 31 December 2022 are below.
Shares owned by Directors:
Duncan Ball
Michael Denny
Frank Schramm
June Aitken1
Howard Myles2
870,983
635,660
504,004
412,415
829,184
600,000
31,000
-
n/a
-
Jutta af Rosenborg
-
-
Andrew Sykes1
Chris Waples
Sarah Whitney
40,000
-
17,321
17,321
39,000
39,000
1 Appointed with effect 29 April 2022.
2 Retired from the Supervisory Board with effect 29 April 2022.
Awards under share plans:
At 31
December
2021(1)
Granted in
(2)
the year
Vested in the
year
Lapsed or
forfeited in
the year
At 31 December
2022
Award
Management
Board
Duncan Ball
Frank Schramm
LTIP
LTIP
1,866,080
1,891,648
697,693
662,556
(281,567)
(300,057)
(87,578)
(93,328)
2,194,628
2,160,819
LTIP
Michael Denny
(1) Reflects maximum potential number of shares under all the awards granted, including the 2018 award settled in May 2022.
(2) This LTIP award was announced in February 2023 with effect in December 2022.
(54,657)
658,142
318,270
(3,001)
918,774
Shareholding guidelines:
The Committee has adopted a shareholding guideline for the Management Board, which requires a shareholding equivalent to 200 per cent of salary. The
respective Management Board members achievement of this guideline at 31 December 2022 is summarised below:
Management Board
Duncan Ball
Frank Schramm
Shares counting towards the
guideline at 31 December 2022
Required shareholding
to achieve(1)
Percentage of
shareholding
requirement achieved
870,983
829,184
576,190
576,190
151.2%
143.9%
Michael Denny
(1) Two times the revised base salary with effect from 1 May 2020 divided by the Company share price on date revised terms were agreed. The minimum holding requirement is fixed for a period of three
years and will be reset in 2023.
504,004
375,000
134.4%
Post-employment shareholding requirements: Management Board members are required to hold shares to the value of 100 per cent of salary for a period of
two years after leaving the Company.
Other information
Advisers
Deloitte LLP is engaged to provide independent advice to the Committee as required. Deloitte is a member of the Remuneration Consultants Group and voluntarily
operates under the Code of Conduct in relation to executive remuneration consulting in the UK. Deloitte LLP's fees for providing remuneration advice to the
Committee were £13.1k for 2022. The Committee regularly assesses if Deloitte's appointment remains appropriate or should be put out to tender, while considering
the Remuneration Consultants' Group Code of Conduct.
Consideration by the Directors of matters relating to Directors' remuneration
Committee responsibilities and composition
BBGI's Remuneration Committee comprises five members: Andrew Sykes, Sarah Whitney, Jutta af Rosenborg, June Aitken and Chris Waples. Andrew Sykes was
appointed as Remuneration Committee Chair in April 2022, succeeding Howard Myles, who retired as a Supervisory Board member at the conclusion of the 2022
AGM. The Terms of Reference for the Remuneration Committee are available here www.bb-gi.com/investors/policies/remuneration-committee-terms-of-reference/
The Committee is responsible for establishing the general principles of the policy for Directors' and staff remuneration and for setting the remuneration for the
Management Board and for the Supervisory Board. In doing so, the Committee is responsible for ensuring that the remuneration of the Management supports the
delivery of BBGI's strategic and operational goals without encouraging undesirable risk-taking behaviour. This is achieved through the Committee overseeing and
approving all aspects of Management Board remuneration, including development of the remuneration policy, and monitoring pay arrangements for the wider
workforce.
There were five scheduled Committee meetings plus further ad-hoc meetings during the year. During the year, all members of the Committee were and remain
independent, and represent a broad range of backgrounds and experience to provide balance and diversity.
The following parties may attend Committee meetings by invitation during the year in relation to its consideration of matters relating to Directors' remuneration:
Co-CEOs, CFO, Company Secretary and Deloitte LLP. No Management Board member is involved in deciding their own remuneration outcome and no attendee is
present when their own remuneration is being discussed.
Remuneration and AIFM law
In 2013, the European Securities and Markets Authority ('ESMA') published its final guidelines on sound remuneration policies under the AIFMD. These guidelines
indicate that remuneration disclosures may be made on a 'proportional' basis and acknowledge that the application of proportionality may lead exceptionally to the
'disapplication' of some requirements, provided this is reconcilable with the risk profile, risk appetite and strategy of the AIFM and the AIFs it manages.
According to the guidelines, the different risk profiles, and characteristics among AIFMs justify a proportionate implementation of the remuneration principles and,
where a company chooses to disapply requirements, it must be able to explain the rationale to a competent authority. No such requirements were disapplied by the
Company during or for 2022.
Employee remuneration
BBGI provides development opportunities for employees to build their careers and enhance their skills. We encourage and embrace employee diversity,
equality and inclusion. We support and invest in individuals to achieve their potential across the business.
Our remuneration components combine to ensure an appropriate and balanced remuneration package that reflects our business units, the job grade and
professional activity, as well as market practice.
Statement of implementation of Directors' Remuneration Policy for the financial year commencing 1 January 2023
Base salary
Management Board salaries were reviewed with effect from 1 May 2022 and are as follows:
Duncan Ball
Frank Schramm
Co-CEO
Co-CEO
Michael Denny
CFO
£551k
£528k
£338k
The next expected review will be in May 2023. As previously noted, both Mr Denny and Mr Schramm receive salaries in Euro (€381,754 and €596,035 respectively
from 1 May 2022). Mr Ball receives his salary in Canadian Dollars (C$902,839 from 1 May 2022).
Annual bonus (STIP)
The maximum bonus opportunity for 2023 will remain at 150 per cent of salary for the Co-CEOs and the CFO. The target opportunity will be 50 per cent of
maximum. One-third of any bonus earned will be used to buy BBGI shares, to be held for a period of three years.
Payment of the annual bonus is subject to stretching financial and strategic targets, which are commercially sensitive and therefore remain confidential. However,
the Committee will disclose an overview of the bonus performance measures and out-turns in the 2023 Directors' Remuneration Report.
LTIP
The Committee intends to recommend the grant of ongoing annual maximum LTIP awards of 200 per cent of salary to the Co-CEOs and 150 per cent of salary to
the CFO, subject to stretching NAV Total Return and climate-related ESG targets.
Approval
This Report was approved by the Board on 29 March 2023 and signed on its behalf by:
Andrew Sykes
Chair of the Remuneration Committee
Viability
Viability statement
As part of their ongoing process of monitoring risk, and as required by the AIC Code Principle N and Provision 36, the Management Board have considered BBGI's
viability and prospects for the next five years.
While the average remaining life of the portfolio of assets is 20.2 years, we continue to consider that five years is an appropriate and acceptable length of time to
consider the risks of BBGI continuing in existence. In making this judgement, the Management Board consider detailed information provided at Board meetings,
including:
· BBGI's investment policy and the investment pipeline.
· The long-term and contractual nature of BBGI's investments.
· Investment reviews.
· BBGI's risk profile and key risk indicators (including the principal risks and uncertainties).
· Relevant financial and economic information and long-term economic assumptions.
· Scenario testing.
· Annual and semi-annual valuations.
This judgement forms part of BBGI's overall annual risk review process. All principal risks and uncertainties, detailed descriptions of the areas and factors of the risks,
and the processes by which the Management Board monitors, reviews, and assesses them, are in the Risk section of this Annual Report.
We have a robust risk and internal controls framework to reduce the likelihood and impact of poor decision making, risk-taking above agreed levels, and human
error.
Our Management Board regularly reviews and assesses the principal risks we face, including those that could threaten our business model, strategy, solvency,
liquidity, and future performance. All risks we identify are assessed based on:
· Probability or likelihood of occurrence.
· Impact.
· Mitigation measures.
They are then scored and ranked in accordance with remaining residual risk and monitored on an ongoing basis by the Management Board.
In addition to the risk management and the mitigation measures in place, a valuation of each individual asset is carried out every six months at each of our financial
half-year and year-ends (30 June and 31 December). Such valuations are based on long-term discounted future cash flows; themselves predominantly based on
long-term contracts and other assumptions. Together, these form a key part of the overall viability assessment. Once complete, an independent third-party valuer
reviews each portfolio valuation, which is also subject to audit and review by our External Auditor, and internal challenge by our Audit Committee.
A key part of the viability assessment is analysing how our NAV could be impacted in stressed macroeconomic scenarios. This provides further insight into how
BBGI could perform if affected by variables and events outside the control of our Management Board and our risk management framework. A more detailed
description of the valuations, assumptions and stress-testing applied is in the Valuation section of the Strategic Report.
Following the assessment, the Management Board has a reasonable expectation that BBGI will be able to continue in operation and meet all its liabilities as they fall
due, up to March 2028. This assessment is subject to the following conditions: that the availability of sufficient capital and market liquidity continues to allow for the
refinancing/repayment of any short-term recourse RCF obligations that may be due; and that BBGI's investments are not materially affected by changes to
government policy, laws, regulations, or other risks that we do not consider material or probable.
BBGI is also subject to a biennial shareholder continuation vote, and the next is scheduled to take place at the AGM on 28 April 2023.
Management Board Responsibilities Statement
The Management Board of the Company is responsible for ensuring proper preparation of BBGI's Annual and Interim Reports and financial statements for each
financial period, in accordance with applicable laws and regulations, which require it to:
· Give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as of and at the end of the financial period, in
accordance with International Financial Reporting Standards as adopted by the European Union and the Listing Rules.
· Give a true and fair view of the development and performance of the business and the position of the Group.
· Give a true and fair description of the principal risks and uncertainties the Group may encounter and put in place an appropriate control framework
designed to meet the Group's particular needs and the risks to which it is exposed.
In addition, the Management Board is responsible for ensuring that BBGI complies with applicable company law and other UK or Luxembourg applicable laws and
regulations.
In preparing these financial statements, the Management Board is responsible for:
· Selecting suitable accounting policies and applying them consistently.
· Making judgements and estimates that are reasonable and prudent.
· Stating whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial
statements.
· Preparing the financial statements on a going concern basis, unless it is inappropriate to presume that the Group will continue in business.
· Maintaining proper accounting records that disclose with reasonable accuracy the Groups financial position and enable it to ensure that the financial
statements comply with all relevant regulations.
· Safeguarding the assets of the Group and taking reasonable steps for the prevention and detection of fraud and other irregularities.
Management Board Responsibilities Statement
We confirm that to the best of our knowledge:
· The financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and Group included in the consolidation.
· The Chair's Statement and the Report of the Management Board ('Strategic Report') include a fair review of the development and performance of the
business and the position of the Company and Group included in the consolidation, together with a description of the principal risks and uncertainties that
it faces.
Luxembourg, 29 March 2023
Duncan Ball
Co-CEO
Frank Schramm
Co-CEO
Michael Denny
CFO
AUDIT REPORT
To the Shareholders of
BBGI Global Infrastructure S.A.
Our opinion
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of
BBGI Global Infrastructure S.A. (the "Company") and its subsidiaries (the "Group") as at 31 December 2022, and of its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
What we have audited
The Group's consolidated financial statements comprise:
● the consolidated statement of financial position as at 31 December 2022;
● the consolidated income statement for the year then ended;
● the consolidated statement of other comprehensive income for the year then ended;
● the consolidated statement of changes in equity for the year then ended;
● the consolidated statement of cash flows for the year then ended; and
● the notes to the consolidated financial statements, which include a summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession (Law of 23 July 2016) and with International Standards
on Auditing (ISAs) as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier" (CSSF). Our responsibilities under the
Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are further described in the "Responsibilities of the "Réviseur d'entreprises
agréé" for the audit of the consolidated financial statements" section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants, including International
Independence Standards, issued by the International Ethics Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the
CSSF together with the ethical requirements that are relevant to our audit of the consolidated financial statements. We have fulfilled our other ethical
responsibilities under those ethical requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Investments at fair value through
profit or loss
the
consolidated
Refer
to
(Note 3,
financial statements
significant
of
summary
accounting policies; Note 9,
Investments at FVPL).
Investments at fair value through
profit or loss, GBP 1.1 billion, is
the most significant balance on
the consolidated statement of
financial position. It consisted of
social
availability-style
investments
infrastructure
through
private
public
partnership and/or public finance
initiatives or similar procurement
models
("investments")
generating long-term predictable
cash flows.
relies
using
requires
determined
cash
It
The valuation of the investments
the
is
flow
discounted
methodology.
on
significant unobservable inputs
significant
and
judgments
the
Management Board. A small
these assumptions
change
could
in a significant
impact on the fair value of the
investments. As a consequence,
there is an inherent risk that the
fair value of these investments
may not be appropriate.
in
result
from
Taking this into account, coupled
with
the
the magnitude of
amounts involved, we consider
this area as a key audit matter.
In assessing the valuation of investments at fair value
through profit or loss, we performed the procedures
outlined below:
We assessed that the investments valuation policy was
the applicable accounting
in compliance with
framework.
the design and
We understood and evaluated
implementation of key controls,
including relevant
information technology systems and controls, in place
around the valuation of investments at fair value
through profit or loss.
We tested key controls performed in the valuation
process of investments in relation to the financial data
included in the valuation models, the "look back"
comparison of the forecast vs actual cash flows for the
previous financial year, as well as other investment
model review controls.
The key controls on which we placed reliance for the
purposes of our audit were appropriately designed and
implemented and were operating effectively.
In addition, we obtained substantive audit evidence
over the valuation of investments at fair value through
profit or loss as follows:
- We inquired into the qualification of the
Management Board and its internal valuation
team and concluded that they have sufficient
experience and expertise.
- We obtained the overall fair value reconciliation
of opening
fair value and
to closing
corroborated significant fair value movements
the
during
thereby assessing
the
reasonableness and completeness of
movement in fair value for the year.
the year,
that
- With the support of our own valuation experts,
the Group's valuation
we
assessed
methodology was
the
International Private Equity and Venture Capital
Valuation Guidelines and market practice based
on our knowledge of the investments held by
the Group and experience of the industry in
which the Group operates.
in compliance with
- For a sample of assets selected via risk and
value-based targeted sampling, we assessed
that the key macroeconomic assumptions such
as inflation, deposit rates, corporate tax rates,
base discount rate setting were appropriate
and/or within acceptable ranges based on
market search. We also checked that the
selected asset specific discount rates were
within acceptable ranges.
- We obtained and read the valuation report
prepared by Management's external valuation
expert which confirmed that the portfolio value
the Management Board was
prepared by
appropriate.
- Finally, for the entire portfolio, we obtained
external confirmation over the existence and
percentage of ownership of the investments
held by the Group.
Other information
The Management Board is responsible for the other information. The other information comprises the information stated in the annual report but
does not include the consolidated financial statements and our audit report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing
so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Management Board and those charged with governance for the consolidated financial statements
The Management Board is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs
as adopted by the European Union, and for such internal control as the Management Board determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Management Board is responsible for assessing the Group's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board
of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Responsibilities of the "Réviseur d'entreprises agréé" for the audit of the consolidated financial statements
The objectives of our audit are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Law of 23 July 2016 and
with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
● identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control;
● obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Group's internal control;
● evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the
Management Board;
● conclude on the appropriateness of the Management Board's use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as
a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our audit report to the related disclosures
in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our audit report. However, future events or conditions may cause the Group to cease to continue as a going
concern;
● evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
● obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the Group to express
an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
and communicate to them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the
consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our audit report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits
of such communication.
Report on other legal and regulatory requirements
The annual report is consistent with the consolidated financial statements and has been prepared in accordance with applicable legal requirements.
We have been appointed as "réviseur d'entreprises agréé" by the General Meeting of the Shareholders on 28 March 2022 and the duration of our
uninterrupted engagement, including previous renewals and reappointments, is one year.
PricewaterhouseCoopers,Société coopérative
Represented by
Luxembourg, 29 March 2023
Emanuela Sardi
Consolidated Income Statement
For the year ended 31 December 2022
In thousands of Sterling
Note
2022
2021
Income from investments at fair value through profit or loss
Other operating income
Operating income
Administrative expenses
Other operating expenses
Operating expenses
Results from operating activities
Net finance result
Net loss on balance sheet hedging
Profit before tax
Tax expense - net
Profit for the year
Earnings per share
Basic earnings per share (pence)
Diluted earnings per share (pence)
9
6
7
8
18
11
14
14
159,545
83
159,628
(11,756)
(12,781)
(24,537)
135,091
(2,005)
(10,572)
122,514
(3,472)
75,443
734
76,177
(10,234)
(2,492)
(12,726)
63,451
(1,974)
(782)
60,695
(2,698)
119,042
57,997
16.70
16.68
8.47
8.46
The accompanying notes form an integral part of the consolidated financial statements.
Consolidated Statement of Other Comprehensive Income
For the year ended 31 December 2022
In thousands of Sterling
Profit for the year
Other comprehensive loss for the year that may be reclassified to
profit or loss in subsequent periods (net of tax)
Exchange difference on translation of foreign operations
Total comprehensive income for the year
Note
2022
2021
119,402
57,997
13
(450)
(595)
118,592
57,402
The accompanying notes form an integral part of the consolidated financial statements.
Consolidated Statement of Financial Position
as at 31 December 2022
In thousands of Sterling
Assets
Property and equipment
Investments at fair value through profit or loss
Deferred tax assets
Other non-current assets
Non-current assets
Trade and other receivables
Other current assets
Derivative financial assets
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Additional paid-in capital
Translation and other capital reserves
Retained earnings
Equity attributable to the owners of the Company
Liabilities
Loans and borrowings
Derivative financial liabilities
Non-current liabilities
Loans and borrowings
Trade and other payables
Derivative financial liabilities
Tax liabilities
Current liabilities
Total liabilities
Total equity and liabilities
Net asset value attributable to the owners of the Company
Net asset value per ordinary share (pence)
Note
2022
2021
9,18
11
15
20
12
18
10
123
1,102,844
153
275
1,103,395
909
994
2,885
31,157
68
975,225
-
1,417
976,710
1,024
761
907
26,862
35,945
1,139,340
29,554
1,006,264
13
21
13
15
18
15
16
18
11
13
13
850,007
2,502
14,371
202,298
847,858
1,833
(8,809)
159,661
1,069,178
1,000,543
56,390
5,687
62,077
230
3,242
3,006
1,607
8,085
70,162
-
429
429
246
2,956
717
1,373
5,292
5,721
1,139,340
1,006,264
1,069,178
1,000,543
149.89
140.50
The accompanying notes form an integral part of the consolidated financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
In thousands of Sterling
Notes
Additional
paid-in
capital
Share
capital
Translation
and other
capital
reserve
Retained
earnings
Total
equity
As at 1 January 2021
770,942
1,517
(378)
143,759
915,840
Total comprehensive income for
the year ended 31 December 2021
Profit for the year
Exchange difference on translation of
foreign operation
Total comprehensive income for year
Transactions with the owners of the
Company, recognised directly in equity
Issuance of shares from placing of
ordinary shares - net of issue cost
Scrip dividends
Cash dividends
Equity settlement of share-based
compensation
Share-based payment
-
-
-
13
13
13
13,21
21
73,893
1,978
-
1,045
-
-
-
-
-
-
-
(1,045)
1,361
-
57,997
57,997
(8,431)
(8,431)
7,836
65,833
(595)
57,402
-
-
-
-
-
-
73,893
(1,978)
-
(47,953)
(47,953)
-
-
-
1,361
Balance as at 31 December 2021
847,858
1,833
(8,809)
159,661
1,000,543
The accompanying notes form an integral part of the consolidated financial statements.
In thousands of Sterling
Balance as at 1 January 2022
Total comprehensive income for
the year ended 31 December 2022
Profit for the year
Exchange difference on translation of
foreign operation
Total comprehensive income for year
Transactions with the owners of the
Company, recognised directly in equity
Scrip dividends
Cash dividends
Equity settlement of share-based
compensation
Share-based payment
Share issuance costs
13
13
13,21
21
13
Additional
Translation
and other
Notes
Share
capital
paid-in
capital
capital
reserve
Retained
earnings
Total
equity
847,858
1,833
(8,809)
159,661
1,000,543
-
-
-
1,092
-
1,084
-
(27)
-
-
-
-
-
(1,068)
1,737
-
-
119,042
119,042
23,180
(23,630)
(450)
23,180
95,412
118,592
-
-
-
-
-
(1,092)
(51,683)
-
(51,683)
-
-
-
16
1,737
(27)
Balance as at 31 December 2022
850,007
2,502
14,371
202,298
1,069,178
The accompanying notes form an integral part of the consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
In thousands of Sterling
Notes
2022
2021
Operating activities
Profit for the year
Adjustments for:
Depreciation expense
Net finance results
Income from investments at fair value through profit or loss
Loss on derivative financial instruments - net
Foreign currency exchange loss (gain) - net
Share-based compensation
Tax expense - net
Working capital adjustments:
Trade and other receivables
Other assets
Trade and other payables
Cash used in operating activities
Interest paid and other borrowing costs
Interest received
Realised gain(loss) on derivative financial instruments - net
Taxes paid
119,042
57,997
34
2,005
(159,545)
21,899
840
1,737
3,472
23
1,974
(75,443)
1,797
(448)
1,361
2,698
(506)
(508)
92
691
1,045
214
(11,438)
(1,870)
172
(3,779)
(3,391)
(8,091)
(1,356)
-
3
(2,667)
6
8
9
18
7
21
11
18
Net cash flows used in operating activities
Investing activities
Acquisition of/additional investments at fair value through profit or loss
Distributions received from investments at fair value through profit or loss
Realised loss on derivative financial instruments - net
Acquisition of property and equipment
Net cash flows from/(used in) investing activities
Financing activities
Issuance of share capital through placing (net of issuance cost)
Dividends paid
Repayment of loans and borrowings
Proceeds from the issuance of loans and borrowings
Debt and equity instrument issue cost
Net cash flows from financing activities
Net increase in cash and cash equivalents
Impact of foreign exchange on cash and cash equivalents
Cash and cash equivalents at 1 January
9
9
18
13
13
15
15
(20,306)
(12,111)
(64,407)
96,333
(12,550)
(89)
(79,163)
75,055
(1,543)
(33)
19,287
(5,684)
-
(51,683)
(17,000)
72,512
(26)
73,893
(47,953)
(67,000)
67,000
(1,608)
3,803
24,332
2,784
1,511
26,862
6,537
(207)
20,532
Cash and cash equivalents at 31 December
10
31,157
26,862
The accompanying notes form an integral part of the consolidated financial statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
1. Corporate information
BBGI Global Infrastructure S.A.,('BBGI', or the 'Company' or, together with its consolidated subsidiaries, the 'Group') is an investment company incorporated in
Luxembourg in the form of a public limited liability company (société anonyme) with variable share capital (société d'investissement à capital variable, or 'SICAV') and
regulated by the Commission de Surveillance du Secteur Financier ('CSSF') under Part II of the amended Luxembourg law of 17 December 2010 on undertakings for
collective investments with an indefinite life. The Company qualifies as an alternative investment fund within the meaning of Article 1 (39) of the amended law of 12
July 2013 on alternative investment fund managers ('2013 Law') implementing Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011
on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 and is
authorised as an internal alternative investment fund manager in accordance with Chapter 2 of the 2013 Law. The Company was admitted to the official list of the
UK Listing Authority (premium listing, closed-ended investment company) and to trading on the main market of the London Stock Exchange on 21 December 2011.
As of 1 January 2021, the main market of the London Stock Exchange is not considered as an EU regulated market (as defined by the MiFID II). As a result, Directive
2004/109/EC of the European Parliament and of the Council of 15 December 2004, on the harmonisation of transparency requirements in relation to information
about issuers whose securities are admitted to trading on a regulated market, and amending Directive 2001/34/EC (the Transparency Directive) as implemented in
the Luxembourg law by the act dated 11 January 2008 on transparency requirements for issuers (the Transparency Act 2008), among other texts, do not apply to the
Company.
The Company's registered office is EBBC, 6E, route de Trèves, L-2633 Senningerberg, Luxembourg and is registered with the Registre du Commerce et des Sociétes
of Luxembourg under the number B 163879.
The Company is a closed-ended investment company that invests, through its subsidiaries, principally in a diversified portfolio of Public Private Partnership
('PPP')/Private Finance Initiative ('PFI') infrastructure or similar style assets ('PPP/PFI portfolio'). At 31 December 2022, the Group has one investment that is under
construction (31 December 2021: one).
As at 31 December 2022, the Group employed 25 staff (31 December 2021: 25 staff).
Reporting period
The Company's reporting period runs from 1 January to 31 December each year. The Company's consolidated income statement, consolidated statement of other
comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity and consolidated statement of cash flows include
comparative figures as at 31 December 2021.
The amounts presented as 'non-current' in the consolidated statement of financial position are those expected to be recovered or settled after more than one year.
The amounts presented as 'current' are those expected to be recovered or settled within one year.
These consolidated financial statements were approved by the Management Board on 29 March 2023.
2. Basis of preparation
Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the
European Union ('EU').
The Group follows, to the fullest extent possible, the provisions of the Standard of Recommended Practices issued by the Association of Investment Companies ('AIC
SORP'). If a provision of the AIC SORP is in direct conflict with IFRS as adopted by the EU, the standards of the latter shall prevail.
The consolidated financial statements have been prepared using the going concern principle, under the historical cost basis, except for investments at fair value
through profit or loss ('Investments at FVPL') and derivative financial instruments that have been measured at fair value.
Changes in accounting policy
New and amended standards applicable to the Group are as follows:
Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37
The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to
provide goods or services including both incremental costs and an allocation of costs directly related to contract activities. General and administrative costs that do
not relate directly to a contract are excluded unless they are explicitly chargeable to the counterparty under the contract.
The Group had not identified any existing contract as onerous or loss-making so these amendments had no significant impact on the consolidated financial
statements of the Group.
IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the
terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either
the borrower or lender on the other's behalf. There is no similar amendment proposed for IAS 39 Financial Instruments: Recognition and Measurement.
These amendments had no significant impact on the consolidated financial statements of the Group as there were no modifications of the Group's financial
instruments during the period.
Functional and presentation currency
These consolidated financial statements are presented in Sterling, the Company's functional currency. All amounts presented in tables throughout the report have
been rounded to the nearest thousand, unless otherwise stated.
The Company as an Investment Entity
The Management Board has assessed that the Company is an Investment Entity in accordance with the provisions of IFRS 10. The Company meets the following
criteria to qualify as an Investment Entity:
a) Obtains funds from one or more investors for the purpose of providing those investors with investment management services - The Group is internally managed
with management focused solely on managing those funds received from its shareholders in order to maximise investment income/returns.
b) Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both - The investment
objectives of the Company are to:
- Provide investors with secure and highly predictable long-term cash flows whilst actively managing the investment portfolio with the intention of maximising
return over the long-term.
- Target an annual dividend payment with the aim to increase this distribution progressively over the longer-term.
- Target an IRR which is to be achieved over the longer-term via active management and to enhance the value of existing investments.
The above-mentioned objectives support the fact that the main business purpose of the Company is to seek to maximise investment income for the benefit of
its shareholders.
c) Measures and evaluates performance of substantially all of its investments on a fair value basis - The investment policy of the Company is to invest in equity,
subordinated debt or similar interests issued in respect of infrastructure assets that have been developed predominantly under the PPP/PFI portfolio
procurement models. Each of these assets is valued at fair value. The valuation is carried out on a six-monthly basis as at 30 June and 31 December each year.
Based on the Management Board's assessment, the Company also meets the typical characteristics of an Investment Entity as follows:
a) it has more than one investment - as at 31 December 2022, the Company has 56 investments;
b) it has more than one investor - the Company is listed on the London Stock Exchange with its shares held by a broad pool of investors;
c) it has investors that are not related parties of the entity - other than those shares held by the Supervisory Board and Management Board Directors, and certain
other employees, all remaining shares in issue (more than 99 per cent) are held by non-related parties of the Company; and
d) it has ownership interests in the form of equity or similar interests - ownership in the Company is through equity interest.
3. Summary of significant accounting policies
a) Basis of consolidation
Subsidiaries
Subsidiaries are investees controlled by the Company (directly or indirectly). The Company controls an investee if it is exposed to, or has rights to, variable returns
from its involvement with the investee and has the ability to affect those returns through its power over the investee.
The Company is an Investment Entity and measures investments in certain subsidiaries at fair value through profit or loss. In determining whether the Company
meets the definition of an Investment Entity, the management considered the Group structure as a whole (see also Note 2).
The Company, which qualifies as an Investment Entity and is required to value certain subsidiaries at fair value, has holds, directly or indirectly, subsidiaries which
provide services that support the Company's investment activities. These subsidiaries are consolidated on a line-by-line basis (see Note 19).
The shares in some of these consolidated subsidiaries have been pledged as a security under the Company's multi-currency Revolving Credit Facility ('RCF') (see
note 15 for the RCF terms). As such, the financial covenants of the RCF includes the financial position and net results of the consolidated subsidiaries. Furthermore,
the assets and liabilities of the consolidated subsidiaries used in the preparation of these consolidated financial statements, closely approximates its fair value due
either to: (i) the short-term nature of their assets and liabilities or; (ii) their underlying investments of these consolidated subsidiaries are already measured at fair
value through profit and loss.
Transactions eliminated on consolidation (consolidated subsidiaries)
Intra-group receivables, liabilities, revenue and expenses are eliminated in their entirety when preparing the consolidated financial statements. Gains that arise from
intra-group transactions and that are unrealised from the standpoint of the Group, at the date of the consolidated statement of financial position, are eliminated in
their entirety. Unrealised losses on intra-group transactions are also eliminated in the same way as unrealised gains, to the extent that the loss does not correspond
to an impairment loss.
b) Foreign currency transactions
Transactions in foreign currencies are translated into Sterling at the exchange rate at the dates of the transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are translated into Sterling at the exchange rate on that date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into Sterling at the exchange rate on the date
that the fair value was determined. Foreign currency differences arising on translation are recognised in the consolidated income statement as a gain or loss on
currency translation.
c) Foreign currency translations
The assets and liabilities of foreign operations are translated to Sterling at the exchange rates on the reporting date. The income and expenses of foreign operations
are translated to Sterling at the average exchange rates during the year, if such does not significantly deviate from the exchange rates at the date on which the
transaction is entered into. If significant deviations arise, then the exchange rate at the date of the transaction is used.
Foreign currency differences are recognised in the consolidated statement of other comprehensive income, and presented in 'translation and other capital reserve'
in equity, except for exchange differences from intra-Group monetary items which are reflected in the consolidated income statement. However, as the Company
qualifies as an investment entity under IFRS 10 and records its investments in subsidiaries as investment at FVPL, 'translation reserve' movements during the
reporting period relating to investments are classified as 'Income from investments at fair value through profit or loss' (income from Investments at FVPL). If the
foreign operation is a non-wholly owned consolidated subsidiary, then the relevant portion of the translations difference is allocated to the non-controlling interest.
When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to
that foreign operation is reclassified to consolidated income statement as part of the gain or loss on disposal. When the Group disposes of only part of its interest in
a consolidated subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-
controlling interests.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency
gains and losses arising from such an item are considered to form part of a net investment in the foreign operation and are recognised in other comprehensive
income, and presented in the translation and other capital reserve in equity.
d) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified at initial recognition at either: (i) amortised cost; (ii) fair value through other comprehensive income - debt instruments; (iii) fair value
through other comprehensive income - equity instruments; or (iv) fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for
managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical
expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model
determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. The Group's financial assets classified and
measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows which represents
solely payments of principal and interests.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to
offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
At the date of the consolidated statement of financial position, except for Investments at FVPL and derivative financial assets, all non-derivative financial assets of
the Group have been classified as financial assets at amortised cost.
Investments at FVPL
The Company is an Investment Entity and therefore values its investment in subsidiaries at fair value through profit or loss, except where the subsidiary provides
investment related services or activities. The fair value of an investment in subsidiary includes the fair value of the equity, loans and interest receivable and any other
amounts which are included in the discounted estimated cash flow (which is used to compute the fair value) from such subsidiary. The Company subsequently
measures its investment in certain subsidiaries at fair value in accordance with IFRS 13, with changes in fair value recognised in consolidated income statement in
the period of change. The fair value estimation of investments in subsidiaries is described in Note 18.
Financial assets at amortised cost (debt instruments)
The Group classifies its financial assets at amortised cost only if both of the following criteria are met:
- the asset is held within a business model whose objective is to collect the contractual cash flows, and
- the contractual terms give rise to cash flows that are solely payments of principal and interest.
Financial assets at amortised cost are subsequently measured using the effective interest rate ('EIR') method and are subject to impairment. Gains and losses are
recognised in the consolidated income statement when the asset is derecognised, modified or impaired.
The Group recognises an allowance for expected credit losses ('ECLs') for all debt instruments not held at fair value through profit or loss. ECLs are based on the
difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an
approximation of the original EIR.
The Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each reporting date.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised when:
- The rights to receive cash flows from the asset have expired; or
- The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material
delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b)
the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Non-derivative financial liabilities
The Company classifies non-derivative financial liabilities as liabilities at amortised cost. Such financial liabilities are recognised initially at fair value less any direct
attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the EIR method.
The Company derecognises a financial liability (or part of a financial liability) from the consolidated statement of financial position when, and only when, it is
extinguished or when the obligation specified in the contract or agreement is discharged or cancelled or has expired. The difference between the carrying amount
of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is considered in the consolidated income statement.
e) Fair value measurement
The Group accounts for its investments in Portfolio Companies as Investments at FVPL. The valuation is determined using the discounted cash flow methodology.
The cash flows forecasted to be received by the Company or its consolidated subsidiaries, generated by each of the underlying assets, and adjusted as appropriate
to reflect the risk and opportunities, have been discounted using asset-specific discount rates. The valuation methodology is unchanged from previous reporting
periods.
The fair value of other financial assets and liabilities, other than current assets and liabilities, is determined by discounting future cash flows at an appropriate
discount rate and with reference to recent market transactions, where appropriate. Further information on assumptions and estimation uncertainties are disclosed in
Note 18.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs in the valuation methodology, as follows:
§ Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
§ Level 2: inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
§ Level 3: inputs for the asset or liability that are not based on observable market data ('unobservable inputs').
If the inputs to measure fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its
entirety at the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of fair value hierarchy at the end of the reporting period in which the change has occurred.
f) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to a liability. The unwinding of such discount is recognised as a finance
cost.
g) Cash and cash equivalents
Cash and cash equivalents comprise of cash balances and term deposits with maturities of three months or less from the date when the deposits were made and
that are subject to an insignificant risk of change in their fair value, and are used by the Group in the management of its short-term commitments.
h) Share capital
Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares, or which are associated with the establishment of the Company,
that would otherwise have been avoided are recognised as a deduction from equity, net of any tax effects.
i) Segment reporting
Segment results that are reported to the Management Board include items directly attributable to segments as well as those that can be allocated on a reasonable
basis.
j) Employee benefits and share-based payment arrangements
Short-term and other long-term employee benefits are expensed as the related services are provided. A liability is recognised for the amount expected to be paid,
and discounted at present value if necessary, if the Group has present legal or constructive obligation to pay this amount as a result of a past service provided by
the employee and the obligation can be estimated reliably.
For share-based payment arrangements, the grant-date fair value of the equity settled share-based payment arrangement is recognised as an expense, with a
corresponding increase in additional paid in capital over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect related
service and non-market performance conditions. The market condition related to the award is measured at the date of grant and there is no adjustment of
expense/income to the consolidated income statement for differences between expected and actual outcomes.
k) Finance income and finance costs
Interest income and expenses are recognised in the consolidated income statement using the EIR method.
The EIR is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial instrument (or, where
appropriate, a shorter period) to the carrying amount of the financial instrument. When calculating the EIR rate, the Group estimates future cash flows considering
all contractual terms of the financial instrument, but not future credit losses.
Interest received or receivable and interest paid or payable are recognised in the consolidated income statement as finance income and finance costs, respectively.
l) Leases
Under IFRS 16, upon lease commencement, a lessee recognises a right-of-use asset and a lease liability. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred
and an estimate of costs to dismantle and remove any improvements made to office premises.
m) Tax
i) Subcription tax
According to the Luxembourg regulations regarding SICAV companies, the Company itself, as an undertaking for collective investment, is exempt from paying
income and/or capital gains taxes in Luxembourg. It is, however, liable to annual subscription tax of 0.05 per cent on its consolidated net asset value ('NAV'),
payable quarterly and assessed on the last day of each quarter.
ii) Income tax
Income tax on the consolidated subsidiaries' profits for the year comprises current and deferred tax. Current and deferred tax is recognised in the consolidated
income statement except to the extent that it relates to a business combination, or items recognised directly in equity or in the consolidated statement of other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous periods.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is not recognised for:
§ Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting
nor taxable profit or loss;
§ Temporary differences related to investments in subsidiaries to the extent that the Company is able to control the timing of the reversal of the temporary
difference and it is probable that they will not reverse in the foreseeable future; and
§ Taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same
tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and
liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits
will be available against which they can be utilised. Deferred tax assets are reviewed each reporting date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
n) Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:
§ Expected to be realised or intended to be sold or consumed in the normal operating cycle
§ Held primarily for the purpose of trading
§ Expected to be realised within 12 months after the reporting period or
§ Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period
All other assets are classified as non-current.
A liability is current when:
§ It is expected to be settled in the normal operating cycle
§ It is held primarily for the purpose of trading
§ It is due to be settled within 12 months after the reporting period; or
§ There is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
The Group classifies all other liabilities as non-current.
4. Significant accounting judgements, estimates and assumptions
The preparation of consolidated financial statements in conformity with IFRS requires the Management Board to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are
revised and in any future periods affected.
In the process of applying the Group's accounting policies, the Management Board has made the following judgements that would have the most significant effect
on the amounts recognised in the consolidated financial statements.
4.1 Assessment as an investment entity
Refer to Note 2 for the discussion on this topic.
4.2 Fair value determination
Refer to Note 3 d) for the discussion on this topic.
4.3 Share-based payments
Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and
conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share
option or appreciation right, volatility and dividend yield and making assumptions about them.
For the measurement of the fair value of equity-settled transactions for the Long-Term Incentive Plan ('LTIP'), the Group uses a Monte Carlo simulation model for
the market-based performance condition element of the awards. Non-market based performance conditions are not taken into account in the valuation of the unit
fair value per share of the LTIP. Instead, the number of shares is adjusted at each reporting date to take into account the actual level of non-market based
performance condition.
For the measurement of the fair value of equity-settled transactions for the Deferred Short-Term Incentive Plan ('Deferred STIP'), the Group recognises a portion of
the annual estimated bonus of the Management Board. The assumptions and models used for estimating fair value for share-based payment transactions are
disclosed in Note 20.
4.4 Going concern basis of accounting
The Group's portfolio is more than 99 per cent operational and relies on availability-style revenues. At the time of producing these consolidated financial
statements, there was no evidence to suggest of material disruption to the operations of the Group and financial performance is not expected to be materially
affected.
The Management Board has satisfied itself that the Group has adequate resources to continue in operational existence for at least 12 months from the date of
approval of the consolidated financial statements. After due consideration, the Management Board believes it is appropriate to adopt the going concern basis of
accounting in preparing the consolidated financial statements.
5. Segment reporting
IFRS 8 - Operating Segments adopts a 'through the eyes of the management' approach to an entity's reporting of information relating to its operating segments,
and also requires an entity to report financial and descriptive information about its reportable segments.
Based on a review of information provided to the Management Board (determined to be the chief operating decision makers or CODM), the Group has identified
five reportable segments based on the geographical concentration risk. The main factor used to identify the Group's reportable segments is the geographical
location of the asset. The Management Board has concluded that the Group's reportable segments are:
(1) UK; (2) North America; (3) Australia; (4) Continental Europe; and (5) Holding Activities. These reportable segments are the basis on which the Group reports
information to the Management Board
Segment information is presented below:
For the year ended 31 December 2022
In thousands of Sterling
Income from investments at FVPL (note 9)
Administrative expenses
Other operating expenses - net
UK
66,910
-
-
North
America
72,902
-
-
Australia
10,707
-
-
Continental
Europe
9,026
-
-
Holding
Activities
-
(11,756)
(12,698)
Total
Group
159,545
(11,756)
(12,698)
Results from operating activities
66,910
72,902
10,707
9,026
(24,454)
135,091
Net finance result
Net loss on balance sheet hedging
Tax expense - net
-
-
-
-
-
-
-
-
-
-
-
-
Profit or loss for the year
For the year ended 31 December 2021
In thousands of Sterling
Income from investments at FVPL (note 9)
Administration expenses
Other operating expenses - net
66,910
UK
4,718
-
-
72,902
North
America
65,061
-
-
10,707
Australia
1,509
-
-
9,026
Continental
Europe
4,155
-
-
(2,005)
(10,572)
(3,472)
(40,503)
Holding
Activities
-
(10,234)
(1,758)
(2,005)
(10,572)
(3,472)
119,042
Total
Group
75,443
(10,234)
(1,758)
Results from operating activities
4,718
65,061
1,509
4,155
(11,992)
63,451
Net finance result
Net loss on balance sheet hedging
Tax expense - net
-
-
-
-
-
-
-
-
-
-
-
-
(1,974)
(782)
(2,698)
(1,974)
(782)
(2,698)
Profit or loss for the year
4,718
65,061
1,509
4,155
(17,446)
57,997
Statement of financial position per segment information as at 31 December 2022 and 2021 are presented below:
As at 31 December 2022
In thousands of Sterling
Assets
Property and equipment
Investments at FVPL
Other non-current assets
Current assets
North
Continental
Holding
UK
America Australia
Europe Activities
Total
Group
-
-
-
354,002
-
-
504,408
-
-
112,414
-
-
-
132,020
-
-
123
123
- 1,102,844
428
35,945
428
35,945
Total assets
354,002
504,408
112,414
132,020
36,496 1,139,340
Liabilities
Non-current
Current
Total liabilities
as at 31 December 2021
In thousands of Sterling
Assets
Property and equipment
Investments at FVPL
Other non-current assets
Current assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62,077
8,085
62,077
8,085
70,162
70,162
North
Continental
Holding
UK
America Australia
Europe Activities
-
319,324
-
-
-
-
456,690
-
-
110,242
-
-
-
88,969
-
-
68
-
1,417
29,554
Total
Group
68
975,225
1,417
29,554
Total assets
319,324
456,690
110,242
88,969
31,039
1,006,264
Liabilities
Non-current
Current
Total liabilities
-
-
-
-
-
-
-
-
-
-
-
-
429
5,292
5,721
429
5,292
5,721
The Holding Activities of the Group include the activities which are not specifically related to a particular asset or region, but to those companies which provide
services to the Group. The total current assets classified under Holding Activities mainly represent cash and cash equivalents.
Transactions between reportable segments are conducted at arm's length and are accounted for in a similar way to the basis of accounting used for third parties.
The accounting methods used for all the segments are similar and comparable with those of the Company.
The Group maintains a well-diversified portfolio with no major single asset exposure.
6. Administrative expenses
In thousands of Sterling
Personnel expenses
Short-term benefits
Share-based compensation expenses
Supervisory Board fees
Legal and professional fees
Office and other expenses
Depreciation expense
Year ended
31
December
2022
Year ended
31
December
2021
5,919
1,737
260
7,916
2,630
1,176
34
5,334
1,361
220
6,915
2,496
800
23
11,756
10,234
Short-term benefits relate to the Management Board and staff, and include basic salaries, Short-Term Incentive Plan ('STIP'), staff bonus, social security contributions
and other related expenses.
The Group has engaged certain third parties to provide legal, depositary, custodian, audit, tax and other services. The expenses incurred in relation to such services
are treated as legal and professional fees. Depositary and custodian related charges during the year amounted to £383,000 (2021: £459,000).
During the year, the Company and its consolidated subsidiaries obtained the following services from the external auditors.
Year ended
Year ended
In thousands of Sterling
Group auditor remuneration:
Statutory audit fees
Audit-related fees
Non-audit-related fees
Audit and audit-related fees from non-Group auditor
31
December
2022
31
December
2021
238
56
5
299
65
364
177
65
-
242
33
275
Audit-related fees includes the fees in respect to the interim review of the Group's consolidated interim financial statements and other permitted audit-related
services.
7. Other operating expenses
In thousands of Sterling
Loss on derivative financial instruments at FVPL - net (Note 18)
Foreign currency exchange loss - net
Acquisition-related (including unsuccessful bid costs)
8. Net finance results
In thousands of Sterling
Finance costs on loans and borrowings (Note 15)
Other finance costs
Interest income on bank deposits
9. Investments at FVPL
In thousands of Sterling
Balance at 1 January
Acquisitions of/additions in Investments at FVPL
Income from investments at FVPL(i)
Distributions received from Investments at FVPL
Balance at 31 December
(i) This account reflects the unrealised gain on valuation of investments.
Year ended
31 December
2022
Year ended
31 December
2021
11,326
840
615
12,781
1,015
-
1,477
2,492
Year ended
31 December
2022
(2,177)
-
172
Year ended
31 December
2021
(1,905)
(69)
-
(2,005)
(1,974)
31 December
2022
31 December
2021
975,225
64,407
159,545
(96,333)
1,102,844
895,674
79,163
75,443
(75,055)
975,225
Income from investments at FVPL include the impact of foreign exchange gains or losses for the year ended 31 December 2022 amounted to a net gain of £34.2
million (year ended 31 December 2021: net loss of £3.2 million). Refer to Note 18 of the consolidated financial statements for further information on Investments at
FVPL.
Distributions from Investments at FVPL are received after either: (a) financial models have been tested for compliance with certain ratios; or (b) financial models have
been submitted to the external lenders of the Portfolio Companies; or (c) approvals of the external lenders on the financial models have been obtained.
As at 31 December 2022 and 2021, loan and interest receivable amounts from unconsolidated subsidiaries is embedded within Investments at FVPL.
The valuation of Investments at FVPL considers all future cash flows related to each individual underlying asset.
Interest income, dividend income, asset-related management fee income and other income, recorded under the accrual's basis or when the right to receive the
payment is established at the level of the consolidated subsidiaries for the year ended 31 December 2022, amounted to £80,434,000 (31 December 2021:
£67,046,000). The associated future cash flows deriving from these items are considered when fair valuing the investments.
During the year, the Group made the following acquisitions:
John Hart Generating Station Replacement Project (Canada): In February 2022, BBGI completed the acquisition of an investment in InPower BC General
Partnership, the entity responsible for delivering the John Hart Generating Station Replacement Project ('John Hart Generating Station'), an investment delivered
through the existing strategic partnership between the Company and SNC-Lavalin Group Inc. The PPP consists of the design, construction, financing, maintenance
and rehabilitation of a new three-turbine, 132-MW hydroelectric power generation station on the Campbell River, British Columbia, including a three generating
unit underground powerhouse, 2.1 kilometres of water passage tunnels and a water bypass system to protect downstream fish habitat. The acquisition price was
approximately £24 million.
Service commencement was achieved in 2019 and the concession runs until 2033. The asset is classified as availability-style under the investment policy of the
Company. The investment is not subject to demand or power price risk. Availability payments are received from the British Columbia Hydro & Power Authority
(rated AA/Aaa by DBRS Morningstar and Moody's respectively) a Crown corporation wholly owned by the Government of British Columbia. The station generates
clean and reliable energy for over 80,000 homes.
A7 German motorway (Germany): In September 2022, BBGI completed the acquisition of a 49 per cent interest in Via Solutions Nord GmbH & Co. KG, the project
company for the A7 motorway PPP near Hamburg in Germany. The asset is classified as availability-based under the investment policy of the Company and aligns
with BBGI's ESG principles.
The project consists of the design, construction, financing, operation, maintenance and rehabilitation, of 65 km widening of a section of the A7 motorway between
Neumünster and Hamburg. The project includes 11 interchanges, six parking facilities and four rest areas, various civil engineering structures and a 550-meter noise
enclosure tunnel. Availability payments are received from Federal Republic of Germany, represented by the Free City of Hamburg and the Federal State of
Schleswig-Holstein, rated AAA/Aaa by S&P and Moody's respectively. Construction completion was achieved in December 2019 and the concession runs until 2044.
The increased efficiency of the A7 motorway seeks to minimise any increase in exhaust emissions from the higher traffic load by reducing congestion and traffic
jams and is expected to achieve a consistent traffic flow and uniform driving speeds. Environmental impact assessments (EIA) have been performed. During the EIA
procedure, all potentially affected Natura 2000 sites, habitats and species have been analysed, including habitats and species placed beyond Natura 2000 sites.
Details of various asset investments in the Group's portfolio and their respective acquisition dates are as follows:
Company
RW Health Partnership Holdings Pty
Limited*
Victorian Correctional Infrastructure
Partnership Pty Limited
Asset
Royal Women's Hospital
Country of
Incorporation
Australia
Ownership
Year
Interest Acquired
2012
100%
Victoria Correctional Facilities
Australia
100%
2012
Northern Territory Secure
Facilities
Australia
100% 2014 and
2015
BBPI Sentinel Holdings Pty Limited*,
BBGI Sentinel Holdings 2 Pty
Limited*, Sentinel Financing
Holdings Pty Limited*
Golden Crossing Holdings Inc.*
Trans-Park Highway Holding Inc.*
NorthwestConnect Holdings Inc.*
BBGI KVH Holdings Inc.*, BBGI KVH
Holdings 2 Inc. *
WCP Holdings Inc.*
Stoney Trail Group Holdings Inc.*
BBGI NCP Holdings Inc.*
SNC-Lavalin Infrastructure Partners
LP*
BBGI Stanton Holdings Inc.*
Golden Ears Bridge
Kicking Horse Canyon
Northwest Anthony Henday
Drive
Kelowna and Vernon Hospital
Women's College Hospital
Northeast Stoney Trail
North Commuter Parkway
William R. Bennet Bridge
Southeast Stoney Trail
Canada Line
Restigouche Hospital Centre
McGill University Health Centre
John Hart Generating Station
Stanton Territorial Hospital
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
BBGI 104 GP Inc.
BBGI Champlain Holding Inc.*
Kreishaus Unna Holding GmbH*
Highway 104
Champlain Bridge
Unna Administrative Centre
Canada
Canada
Germany
PJB Beteiligungs-GmbH*
Hochtief PPP 1 Holding GmbH &
Co.KG*
BBGI PPP Investment S. à r.l.
Noaber18 Holding B.V.*
Burg Correctional Facility
Cologne Schools
Rodenkirchen Schools
Frankfurt Schools
Fürst Wrede Military Base
A7 Motorway
N18 Motorway
Germany
Germany
Germany
Germany
Germany
Luxembourg
Netherlands
De Groene SchakelHolding B.V. *
Westland Town Hall
Netherlands
SAAone Holding B.V*
A1/A6 Motorway
Netherlands
Agder OPS Vegselskap AS
E18 Motorway
Folera TH Holdings Limited
Kent Education Partnership
(Holdings) Limited*
Healthcare Providers (Gloucester)
Limited*
Highway Management M80 Topco
Limited*
Bedford Education Partnership
Holdings Limited*
Lisburn Education Partnership
Holdings (Limited)*
Clackmannanshire Schools Education
Partnership (Holdings) Limited*
Primaria (Barking Dagenham &
Havering) Limited*
East Down Education Partnership
(Holdings) Limited*
Scottish Borders Education
Partnership (Holdings) Limited*
Coventry Education Partnership
Holdings Limited*
Fire Support (SSFR) Holdings
Limited*
GB Consortium 1 Limited*
Mersey Care Development Company
1 Limited*
MG Bridge Investments Limited*
Tor Bank School Education
Partnership (Holdings) Limited*
Lagan College Education Partnership
(Holdings) Limited*
Highway Management (City) Holding
Limited*
Blue Light Partnership (ASP)
Holdings Limited*
Northwin Limited
Northwin (Intermediate) (Belfast)
Limited*
Fire and Rescue NW Holdings
Limited
Woodland View Holdings Co Limited
Aberdeen Roads Holdings Limited
BBGI East End Holdings Inc.*
*and its subsidiary companies.
Poplar Affordable Housing &
Recreational Centres
Kent Schools
Gloucester Royal Hospital
M80 Motorway
Bedford Schools
Lisburn College
Clackmannanshire Schools
Barking Dagenham & Havering
Clinics (LIFT)
East Down Colleges
Scottish Borders Schools
Coventry Schools
Stoke & Staffs Rescue Service
North London Estates
Partnership (LIFT)
Liverpool & Sefton Clinics (LIFT)
Mersey Care Hospital
Mersey Gateway Bridge
Tor Bank School
Lagan College
M1 Westlink
Avon and Somerset Police
HQ
North West Regional College
Belfast Metropolitan College
North West Fire and Rescue
Ayrshire and Arran Hospital
Aberdeen Western Peripheral
Route
Ohio River Bridges
Norway
Jersey
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
US
100% 2012 and
2013
2012
2012
50%
50%
100% 2013 and
2020
2013
2013
2015
2017
2017
2017
2017
2018
100%
100%
50%
80%
40%
26.7%
80%
40%
80%
2022
100% 2018 and
2020
2020
50%
25%
2020
90% 2012 and
2020
2012
2014
90%
50%
49%
52%
2022
2018,
2019 and
2020
100% 2018 and
2019
37.1% 2018 and
2019
100% 2013 and
2014
2021
100%
50%
50%
50%
100%
100%
100%
60%
2012
2012
2012
2012
2012
2012
2012
100% 2012 and
2018
2012
100%
100%
85%
2012
2012
60% (both)
2012,
2014
and 2018
79.6% 2013 and
2014
37.5%
100%
100%
100%
100%
100%
100%
100%
100%
33.3%
2014
2013
2014
2014
2014,
2015 and
2016
2015
2016
2021
2021
2021
66.7% 2014 and
2019
10. Cash and cash equivalents
Cash and cash equivalents relate to bank deposits amounting to £31,157,000 (31 December 2021: £26,862,000).
11. Taxes
In thousands of Sterling
Current tax:
Income tax and other taxes
Year ended
31 December
2022
Year ended
31 December
2021
3,705
2,470
Subscription tax
Deferred tax:
Relating to origination and reversal of temporary differences
515
4,220
459
2,929
(748)
(231)
3,472
2,698
The Company, as an undertaking for collective investment, is exempt from corporate income tax in Luxembourg and instead pays an annual subscription tax of 0.05
per cent on the value of its total net assets. Moreover, the Company as a SICAV is not subject to taxes on capital gains or income. All other consolidated
subsidiaries are subject to taxation at the applicable rate in their respective jurisdictions.
Reconciliation of tax expense and the accounting profit multiplied by the Company's effective corporate tax rate for the year is as follows:
In thousands of Sterling
Profit before tax
Income tax using the Luxembourg domestic tax rate of 24.94%
Subscription tax during the year
Reconciling difference mainly due to fair valuation of
assets, net of gain/loss on derivatives (unrealised)
Tax charge for the year
Year ended
31 December
2022
Year ended
31 December
2021
122,514
30,555
515
60,695
15,137
459
(27,598)
(12,898)
3,472
2,698
A significant portion of the profit before tax results from fair valuation of Investments at FVPL. The net income of the unconsolidated subsidiaries is taxed in their
respective jurisdictions.
As a consequence of the adoption of IFRS 10, the Company is classified as an Investment Entity (see Note 2), meaning the tax expenses of the unconsolidated
subsidiaries are not included within these consolidated financial statements. Therefore, the consolidated tax expense and tax assets/liabilities, if any, do not include
those of the Portfolio Companies. The tax liabilities of the Portfolio Companies are embedded in the fair value calculation of Investments at FVPL.
The Group recognise a deferred tax asset during the year amounting to £153,000 (31 December 2021: £nil). Furthermore, the Group has additional tax losses carried
forward amounting to £18,032,000 (2021: £7,229,000) for which no deferred tax asset was recognised.
Tax liability as at 31 December 2022 amounted to £1,607,000 (31 December 2021: £1,373,000).
12. Other current assets
In thousands of Sterling
Prepaid taxes
Prepaid expenses
Others
13. Capital and reserves
Share capital
Changes in the Company´s share capital are as follows:
In thousands of Sterling
Share capital as at 1 January
Issuance of ordinary shares through placing
Share capital issued through scrip dividends
Equity settlement of share-based compensation (Note 20)
Shares issuance costs
31 December
2022
31 December
2021
537
227
230
994
587
11
163
761
31 December
2022
31 December
2021
847,858
-
1,092
1,084
(27)
850,007
770,942
75,000
1,978
1,045
(1,107)
847,858
The changes in the number of ordinary shares of no-par value issued by the Company are as follows:
In thousands of shares
In issue at beginning of the year
Shares issued through placing of ordinary shares
Shares issued through scrip dividends
Shares issued as share based compensation - neti
i - Being the net share entitlement after adjustments to settle taxes
31 December
2022
31 December
2021
712,126
-
649
556
713,331
664,691
45,181
1,155
1,099
712,126
Gross number of ordinary shares entitlement, before the settlement of taxes, as share based compensation amounted to the following:
In thousands of shares
LTIP
STIP
31
December
2022
31
December
2021
636
367
1,003
353
746
1,099
All of the ordinary shares issued rank pari passu. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to
one vote per share at general meetings of the Company.
The Company meets the minimum share capital requirement as imposed under the applicable Luxembourg regulation.
Translation and other capital reserve
Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency translation reserve in equity except for exchange
differences from intragroup monetary items which are reflected in the consolidated income statement. The translation reserve amounting to a credit balance of
£14,153,000 (31 December 2021: debit balance of £9,028,000) comprises foreign currency differences arising from the translation of the financial statements of
foreign operations. The remaining balance of Other capital reserve relates to statutory amounts required to be allocated to this reserve account and which may not
be distributed.
Dividends
The dividends declared and paid by the Company during the year ended 31 December 2022 are as follows:
In thousands of Sterling except as otherwise stated
2021 2nd interim dividend of 3.665 pence per qualifying ordinary share - for the period
1 July 2021 to 31 December 2021
2022 1st interim dividend of 3.740 pence per qualifying ordinary share - for the period
1 January 2022 to 30 June 2022
Total dividends declared and paid during the year
31 December
2022
26,099
26,676
52,775
The 31 December 2021 2nd interim dividend was paid in April 2022. The value of the scrip election was £964,000, with the remaining amount of £25,135,000 paid in
cash to those investors that did not elect for the scrip.
The 30 June 2022 1st interim dividend was paid in October 2022. The value of the scrip election was £127,000 with the remaining amount of £26,548,000 paid in
cash to those investors that elected for a cash dividend.
The dividends declared and paid by the Company during the year ended 31 December 2021 are as follows:
In thousands of Sterling except as otherwise stated
2020 2nd interim dividend of 3.590 pence per qualifying ordinary share - for the period
1 July 2020 to 31 December 2020
2021 1st interim dividend of 3.665 pence per qualifying ordinary share - for the period
1 January 2021 to 30 June 2021
Total dividends declared and paid during the year
31 December
2021
23,863
26,068
49,931
The 31 December 2020 2nd interim dividend was paid in April 2021. The value of the scrip election was £514,000, with the remaining amount of £23,349,000 paid in
cash to those investors that did not elect for the scrip.
The 30 June 2021 1st interim dividend was paid in October 2021. The value of the scrip election was £1,464,000 with the remaining amount of £24,604,000 paid in
cash to those investors that elected for a cash dividend.
Net Asset Value ('NAV')
The consolidated NAV and NAV per share as at 31 December 2022, 31 December 2021 and 31 December 2020 were as follows:
In thousands of Sterling/pence
2022
2021
2020
NAV attributable to the owners of the Company
1,069,178
1,000,543
915,840
NAV per ordinary share (pence)
149.89
140.50
137.78
14. Earnings per share
a) Basic earnings per share
The basic earnings per share is calculated by dividing the profit for the year by the weighted average number of ordinary shares outstanding.
In thousands of Sterling / in thousands of shares
Profit for the year
Weighted average number of ordinary shares in issue
Basic earnings per share (in pence)
Year ended
31 December
2022
Year ended
31 December
2021
119,042
712,917
16.70
57,997
684,569
8.47
The weighted average number of ordinary shares outstanding for the purpose of calculating the basic earnings per share is computed as follows:
In thousands of shares
Shares outstanding as at 1 January
Effect of shares issued on placing of ordinary shares
Effect of scrip dividends issued
Shares issued as share based compensation
Weighted average - outstanding shares
Year ended
31 December
2022
712,126
-
443
348
Year ended
31 December
2021
664,691
18,825
366
687
712,917
684,569
b) Diluted earnings per share
The diluted earnings per share is calculated by dividing the profit for the year by the weighted average number of ordinary shares outstanding, after adjusting for
the effects of all potential dilutive ordinary shares. There were no items of the consolidated income statement accounts which have a dilutive effect on the profit for
the year.
The weighted average number of potential diluted ordinary shares for the purpose of calculating the diluted earnings per share is computed as follows:
In thousands of shares
Weighted average number of ordinary shares for basic earnings per share
Effect of potential dilution from share-based payment
Weighted average - outstanding shares
Year ended
31 December
2022
Year ended
31 December
2021
712,917
852
713,769
684,569
985
685,554
The price of the Company's shares for the purpose of calculating the potential dilutive effect of award letters (see Note 21) was based on the average market price
for the year ended 2022 and 2021, during which period the awards were outstanding.
15. Loans and borrowings
In 2021, the Group secured an amendment and restatement to the RCF with ING Bank, KFW IPEX Bank, DZ Bank, Frankfurt Am Main and SMBC Bank EU AG for a
total commitment of £230 million. The tenor of the RCF is five years (maturing in May 2026). The borrowing margin is 165 bps over the reference bank rate. Under
the RCF, the Group retains the possibility to consider larger transactions by virtue of having structured a further £70 million incremental accordion tranche, for
which no commitment fees will be paid.
Outstanding borrowings under the RCF as at 31 December 2022 amounted to £57.5 million (31 December 2021: nil). As at 31 December 2022, the Group has
utilised £1.3 million (31 December 2021: £1.2 million) of the £230 million RCF, which was being used to cover letters of credit.
The interest and other related fees payables under the RCF as at 31 December 2022 amounted to £230,000 (31 December 2021: £246,000).
The RCF unamortised debt issuance cost amounted to £1,094,000 as at 31 December 2022 (2021: £1,417,000). The unamortised debt issuance cost is presented as
part of 'Loans and borrowings' in the Consolidated Statement of Financial Position (2021: as part of 'Other non-current assets').
The total finance cost incurred under the RCF for the year ended 31 December 2022 amounted to £2,171,000 (31 December 2021: £1,927,000) which includes
amortisation of debt issuance costs of £549,000 (31 December 2021: £549,000).
Changes in liabilities arising from financing activities
In thousands of Sterling
Loans and borrowings_non-current
In thousands of Sterling
Loans and borrowings_non-current
1 January
2022
-
1 January
2021
-
Proceeds Repayment
(17,000)
72,512
exchange Others
(1,094)
1,972
Foreign
Proceeds Repayment
(67,000)
67,000
exchange Others
-
-
Foreign
31 December
2022
56,390
31 December
2021
-
Pledges and collaterals
As of 31 December 2022, and 31 December 2021, the Group has provided a pledge over shares issued by consolidated subsidiaries, pledge over receivables
between consolidated subsidiaries and a pledge over the bank accounts of the consolidated subsidiaries.
Based on the provisions of the RCF, where there is a continuing event of default, the lender, among other things, will have the right to cancel all commitments and
declare all or part of utilisations to be due and payable, including all related outstanding amounts, and exercise or direct the security agent to exercise any or all of
its rights, remedies, powers or discretions under the RCF.
The Group operated comfortably within covenant limits of the RCF during the year.
16. Trade and other payables
Trade and other payables are non-interest bearing and are usually settled within six months.
17. Financial risk review and management
The Group has exposure to the following risks from financial instruments:
- Credit risk
- Liquidity risk
- Market risk
This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing
risk and the Group's management of capital. This note also presents the result of the review performed by management on the above-mentioned risk areas.
Risk management framework
The Management Board has overall responsibility for the establishment and control of the Group's risk management framework.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group,
resulting in:
1) impairment or reduction in the amounts recoverable from receivables and other current and non-current assets; and
2) non-recoverability, in part or in whole, of cash and cash equivalents deposited with banks.
Exposures to credit risks
The Group is exposed to credit risks on the following items in the consolidated statement of financial position:
In thousands of Sterling
Derivative financial assets
Trade and other receivables
Cash and cash equivalents
31 December
2022
2,885
909
31,157
31 December
2021
907
1,024
26,862
34,951
28,793
The maximum exposure to credit risk on receivables that are neither overdue nor impaired as of 31 December 2022, amounts to £909,000 (2021: £1,024,000).
As of 31 December 2022, the Group is also exposed to credit risk on the loan receivable, interest and other receivable components of Investments at FVPL (loans
provided to Portfolio Companies) totalling to £282,378,000 (2021: £262,822,000).
Cash and cash equivalents and foreign currency forwards
The cash and cash equivalents and foreign currency forward contracts (recorded either as 'derivative financial assets' or 'derivative financial liabilities') are
maintained with reputable banks with ratings that are acceptable based on the established internal policy of the Group. Based on the assessment of the
Management Board, there are no significant credit risks related to the cash and cash equivalents and foreign currency forward contracts maintained. The main
counterparty banks of the Group have S&P/Moody's credit rating of A+/A1 and AA-/AA1.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or
another financial asset.
The Group's policy over liquidity risk is that it will seek to have sufficient liquidity to meet its liabilities and obligations when they fall due.
The Group manages liquidity risk by maintaining adequate cash and cash equivalents and access to borrowing facilities to finance day-to-day operations and
medium to long-term capital needs. The Group also regularly monitors the forecast and actual cash requirements and matches the maturity profiles of the Group's
financial assets and financial liabilities.
The following are the undiscounted contractual maturities of the financial liabilities of the Group, including estimated interest payments:
31 December 2022
In thousands of Sterling
Loans and borrowings (Note 15)
Trade and other payables
Net derivative liability
31 December 2021
In thousands of Sterling
Loans and borrowings (Note 15)
Trade and other payables
Carrying
amount
56,620
3,242
5,808
65,670
Carrying
amount
246
2,956
3,202
Contractual cash flows
Within
1 year
Total
1-5
years
65,112
3,242
5,808
19,907
3,242
121
45,205
-
5,687
74,897
8,503
66,394
Contractual cash flows
Total
5,801
2,956
8,757
Within
1 year
1,326
2,956
1-5
years
4,475
-
4,282
4,475
The Group needs to maintain certain financial covenants under the RCF. Non-compliance with such covenants may trigger an event of default (see Note 15). At 31
December 2022 and 2021, the Group was not in breach of any of the covenants under the RCF.
The Company has the possibility of raising capital through the issuance of shares in order to finance further acquisitions or to repay debt.
All external financial liabilities of the Group have maturities of less than one year except for loans and borrowings, which have a maturity of more than one year. The
Group has sufficient cash and cash equivalents and sufficient funding sources to pay and/or refinance currently maturing obligations.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group's income or the value of its
holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the returns.
Currency risk
The Group buys derivative financial instruments, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within
certain internal guidelines. The Group, via its hedge counterparty, reports all trades under these hedging instruments, for European Market Infrastructure
Regulations purposes, to an EU branch of the derivative repository.
The Group is exposed to currency risk as a result of its underlying Investments at FVPL and cash and cash equivalents being denominated in currencies other than
Sterling. The currencies in which these items are primarily denominated are Australian dollars (A$), Canadian dollars (C$), Euros (€), Norwegian kroner (NOK) and US
dollars (US$).
The Group actively seeks to manage geographical concentration and mitigate foreign exchange risk by balance sheet hedging through foreign exchange forward
contracts, hedging of forecast portfolio distributions and borrowing in non-Sterling currencies. Furthermore, Euro-denominated running costs provide a natural
hedge against the Euro-denominated portfolio distributions.
In respect of other monetary assets and liabilities denominated in currencies other than Sterling, the Group's policy is to ensure that its net exposure is kept at an
acceptable level. The Company accepts that risk from foreign exchange exposure is an inherent aspect of holding an international portfolio of investments.
However, the Management Board believes that, in addition to the hedging program in place, this risk is further mitigated by having exposure to a number of
different currencies including the Australian dollar, Canadian dollar, US dollar, Euro and Norwegian krone, all of which can provide diversification benefits. The
Management Board spends considerable time reviewing its hedging strategy and believes it remains both appropriate and cost effective to continue with its four-
year rolling hedge policy.
The summary of the quantitative data about the Group's exposure to foreign currency risk are as follows:
31 December 2022
In thousands of Sterling
Financial assets measured at fair value
Investments at FVPL
Financial assets measured at amortised cost
Cash and cash equivalents
Trade and other receivables
Financial liabilities measured at amortised cost
Trade and other payables
31 December 2021
In thousands of Sterling
Financial assets measured at fair value
Investments at FVPL
Financial assets measured at amortised cost
Cash and cash equivalents
Trade and other receivables
Financial liabilities measured at amortised cost
Trade payables and other payables
A$
C$
€
NOK
US$
112,414
386,678
106,655
25,365
117,730
18
148
10,117
467
579
76
166
10,584
655
17
688
877
3
-
3
-
101
201
302
80
A$
C$
€
NOK
US$
110,242
347,921
64,199
24,770
108,769
15
484
499
13,615
241
13,856
736
1
737
(10)
(1,224)
(1,367)
2
-
2
-
160
103
263
(29)
The significant exchange rates applied during the year ended 31 December 2022 and 31 December 2021 are as follows:
A$ 1
C$ 1
€ 1
NOK 1
US$ 1
A$ 1
C$ 1
€ 1
NOK 1
US$ 1
31 December 2022
Average £
0.562
0.623
0.853
0.084
0.811
Spot rate £
0.564
0.610
0.885
0.084
0.827
31 December 2021
Average £
Spot rate £
0.546
0.580
0.860
0.085
0.727
0.537
0.583
0.840
0.084
0.740
The sensitivity of the NAV to a 10 per cent positive and adverse movement in foreign exchange rates is disclosed in Note 18 to the consolidated financial
statements. This scenario assumes that all other macroeconomic assumptions remain constant.
Interest rate risk
Except for the loans and other receivables from Portfolio Companies which are included as part of Investments at FVPL, the Group does not account for other fixed-
rate financial assets and liabilities at fair value through profit or loss. For the years ended 31 December 2022 and 2021, the main variable interest rate exposure of
the Group is on the interest rates applied to the Group's cash and cash equivalents, including deposit rates used in valuing the Investments at FVPL and the loans
and borrowings of the Group (see Note 15). A change in the deposit rates used in valuing Investments at FVPL would have an impact on the value of such and a
corresponding impact on the Group's NAV. Refer to Note 18 for a sensitivity analysis of the impact of a change on deposit rates on the Group's NAV.
Investment risk
The valuation of Investments at FVPL depends on the ability of the Group to realise cash distributions from Portfolio Companies. The distributions to be received
from the Portfolio Companies are dependent on cash received by a particular Portfolio Company under the service concession agreements. The service concession
agreements are predominantly granted to the Portfolio Companies by a variety of public sector clients including, but not limited to, central government
departments and local, provincial and state government and corporations set up by the public sector.
The Group predominantly makes investments in countries where the Management Board consider that asset structures are reliable, where (to the extent applicable)
public sector counterparties carry what the Management Board consider to be an appropriate credit risk, or alternatively where insurance or guarantees are
available for the sovereign credit risk, where financial markets are relatively mature and where a reliable judicial system exists to facilitate the enforcement of rights
and obligations under the contracts.
The Management Board continuously monitors the ability of a particular Portfolio Company to make distributions to the Group. During the year, there have been no
material concerns raised in relation to current and future distributions to be received from any of the Portfolio Companies.
Capital risk management
The Company's objective when managing capital is to ensure the Group's ability to continue as a going concern in order to provide returns to shareholders and
benefits for further stakeholders and to maintain an optimal capital structure. The Company, at a Group level, views the share capital (see Note 13) and the RCF (see
Note 15) as capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders, return capital to shareholders, avail itself
of additional debt financing, pay down debt or issue new shares.
The Group regularly reviews compliance with Luxembourg regulations regarding restrictions on minimum capital. During the year, the Group complied with all
externally imposed capital requirements and made no changes in its approach to capital management.
Derivative financial assets and liabilities for which hedge accounting is not applied
The Group has entered into foreign currency forwards to fix the foreign exchange rates on certain investment distributions that are expected to be received ('cash
flow hedges') and on a portion of the non-Sterling and non-Euro denominated portfolio value ('balance sheet hedges'). The derivative financial instruments
(asset/liability) in the consolidated statement of financial position represent the fair value of foreign currency forwards which were not designated as hedges. The
movements in their fair value are directly charged/credited in the consolidated income statement within other operating expenses and net gain(loss) on balance
sheet hedging.
Derivative financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position as the Group has a legally
enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis. Cash flows from the settlement of cash flow hedges and
balance sheet hedges are presented as part of the net cash flows in operating and investing activities, respectively.
18. Fair value measurements and sensitivity analysis
The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated statement of financial position are presented below.
This does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable
approximation of fair value (i.e. cash and cash equivalents; trade and other receivables; trade payables, accruals and other payables, loans and borrowings).
The table below analyses financial instruments carried at fair value, by valuation method.
31 December 2022
In thousands of Sterling
Financial assets measured at fair value
Investments at FVPL
Derivative financial assets
Financial liabilities measured at fair value
Derivative financial liabilities
31 December 2021
In thousands of Sterling
Financial assets measured at fair value
Investments at FVPL
Derivative financial assets
Financial liabilities measured at fair value
Derivative financial liabilities
Level 1
Level 2
Level 3
Total
Fair value
-
-
-
-
1,102,844
1,102,844
2,885
(8,693)
-
-
2,885
(8,693)
Fair value
Level 1
Level 2
Level 3
Total
-
-
-
- 975,225
907
(1,146)
-
-
975,225
907
(1,146)
Refer to table presented in Note 9 for the reconciliation of the movements in the fair value measurements in level 3 of the fair value hierarchy for Investments at
FVPL. There were no transfers between any levels during the year.
Investments at FVPL
The Management Board is responsible for carrying out the fair market valuation of the Company's investments, which it then presents to the Supervisory Board. The
portfolio valuation is carried out on a six-monthly basis as at 30 June and 31 December each year. The portfolio valuation is reviewed by an independent third-party
professional.
The valuation is determined using the discounted cash flow methodology. The cash flow forecasts, generated by each of the underlying assets, are received by the
Company or its subsidiaries, adjusted as appropriate to reflect risks and opportunities, and discounted using asset-specific discount rates. The portfolio valuation
methodology remains unchanged from previous reporting periods.
Key Portfolio Company and portfolio cash flow assumptions underlying NAV calculation include:
- Discount rates and the Assumptions, as set out below, continue to be applicable.
- The updated financial models used for the valuation accurately reflect the terms of all agreements relating to the Portfolio Companies and represent a fair and
reasonable estimation of future cash flows accruing to the Portfolio Companies.
- Cash flows from and to the Portfolio Companies are received and made at the times anticipated.
- Non-UK investments are valued in local currency and converted to Sterling at either the period-end spot foreign exchange rates or the contracted foreign
exchange rate.
- Where the operating costs of the Portfolio Companies are contractually fixed, such contracts are performed, and where such costs are not fixed, they remain
within the current forecasts in the valuation models.
- Where lifecycle costs/risks are borne by the Portfolio Companies, they remain in line with the current forecasts in the valuation models.
- Contractual payments to the Portfolio Companies remain on track and contracts with public sector or public sector backed counterparties are not terminated
before their contractual expiry date.
- Any deductions or abatements during the operations period of Portfolio Companies are passed down to subcontractors under contractual arrangements or are
part of the planned (lifecycle) forecasts.
- Changes to the concession period for certain investments are realised.
- In cases where the Portfolio Companies have contracts which are in the construction phase, they are either completed on time or any delay costs are borne by
the construction contractors.
- Enacted tax or regulatory changes, or forecast changes with a high probability, on or prior to this reporting period-end with a future effect materially impacting
cash flow forecasts, are reflected in the financial models.
In forming the above assessments, BBGI uses its judgement and works with our Portfolio Company management teams, as well as using due diligence information
from, or working with, suitably qualified third parties such as technical, legal, tax and insurance advisers.
Macroeconomic assumptions
31 December 2022
31 December 2021
Inflation
UK(i) RPI/CPIH
13.4% (actual) for 2022; 5.8% for
2023 then 2.75% (RPI) / 2.0% (CPIH)
2.75% / 2.00%
Canada
Australia
6.3% (actual) for 2022; 4.0% for
2023; 2.3% for 2024 then 2.0%
2.00% / 2.35%
8.0% for 2022; 4.75% for 2023
3.25% for 2024 then 2.5%
2.50%
Germany/
Netherlands(ii)
8.4% for 2022; 6.3% for 2023; 3.4%
for 2024 then 2.0%
2.00%
Norway(ii)
5.9% (actual) for 2022; 4.9% for
2023 then 2.25%
6.5% (actual) for 2022; 3.4% for
2023 then 2.5%
2.25%
2.50%
2.00% to 2024, then 1.50%
0.00% to 2023, then 1.00%
US
UK
Deposit rates
(p.a.)
Canada
3.50% to 2024, then 1.75%
0.50% to 2023, then 1.50%
Australia
3.25% to 2024, then 3.00%
0.25% to 2023, then 2.00%
Germany/
Netherlands
0.50% to 2024, then 1.0%
0.00% to 2023, then 0.50%
Norway
2.00% to 2024, then 2.00%
0.00% to 2023, then 2.00%
US
UK
Corporate tax
rates (p.a.)
3.75% to 2024, then 1.50%
0.00% to 2023, then 1.50%
19.00% until March 2023 then 25% 19.0% to Q1 2023, then 25.0%
Canada(iii)
23.00% / 26.50% / 27.00% / 29.00% 23.0% / 26.5% / 27.0% / 29.0%
Australia
30.00%
30.0%
Germany(iv)
15.83% (incl. solidarity charge)
15.8% (incl. solidarity charge)
Netherlands
25.80%
Norway
22.00%
US
21.00%
25.8%
22.0%
21.0%
(i) On 25 November 2020, the UK Government announced the phasing out of RPI after 2030 to be replaced with CPIH; the Company's UK portfolio indexation factor changes from RPI to CPIH beginning on
1 January 2031.
(ii) CPI indexation only. Where investments are subject to a basket of indices, a projection for non-CPI indices is used.
(iii) Individual tax rates vary among Canadian Provinces: Alberta; Ontario, Quebec, Northwest Territory; Saskatchewan, British Columbia; New Brunswick.
(iv) Individual local trade tax rates are considered in addition to the tax rate above.
Based on data from transactional activity, benchmark analysis with comparable companies and sectors, discussions with advisers in the relevant markets, publicly
available information gathered over the year and equity risk premium over government bond yields, we have increased the weighted average discount rate to 6.9
per cent (31 December 2021: 6.6 per cent). This methodology calculates the weighted average based on the value of each investment in proportion to the total
portfolio value i.e. based on the net present value of their respective future cash flows. Furthermore, the Group, with the advice of external experts, has considered
the impact of climate change on the value of the investments at FVPL and has concluded that no valuation adjustment was required.
Discount rate sensitivity
The weighted average discount rate applied to the Company's portfolio of investments is the single most important judgement and variable.
The following table shows the sensitivity of the NAV to a change in the discount rate:
Effects in thousands of Sterling
+1% to 7.9% in 2022
(i)
-1% to 5.9% in 2022
(i)
Equity
Profit or loss
Equity
Profit or loss
31 December 2022
(87,101)
(87,101)
100,702
100,702
31 December 2021
(i)Based on the weighted average discount rate of 6.9 per cent (31 December 2021: 6.6 per cent).
Inflation has increased in all jurisdictions across BBGI's geographies and interest rates have risen from historical lows. In the event long-term interest rates rise
substantially further, this is likely to effect on discount rates, and as a result negatively impact portfolio valuation.
(78,057)
(78,057)
89,908
89,908
Combined sensitivity: inflation, deposit rates and discount rates
It is reasonable to assume that if discount rates increase, then deposit rates and inflation would also be affected. To illustrate the effect of this combined movement
on the Company's NAV, a scenario was created assuming a one percentage point increase in the weighted average discount rate to 7.9 per cent, and a one
percentage point increase in both deposit and inflation above the macroeconomic assumptions.
In thousands of Sterling
31 December 2022
+1%
Equity
Profit or loss
(22,796)
(22,796)
31 December 2021
(23,127)
(23,127)
Inflation sensitivity
The Company's investments are contractually entitled to receive availability-style revenue streams from public sector clients, which are typically adjusted every year
for inflation. Facilities management subcontractors for accommodation investments and operating and maintenance subcontractors for transport investments have
similar indexation arrangements. The portfolio cash flows are positively linked with inflation (e.g. RPI, CPI, or a basket of indices).
This inflation-linkage is achieved through contractual indexation mechanics in the various project agreements with the public sector clients at the portfolio
companies and the inflation adjustment updated at least annually.
The table below shows the sensitivity of the NAV to a change in inflation rates compared to the long-term assumptions in the table above:
+1%
-1%
Effects in thousands of Sterling
Equity
Profit or loss
Equity
Profit or loss
31 December 2022
31 December 2021
51,508
39,499
51,508
(45,524)
(45,524)
39,499
(32,622)
(32,622)
Short-term inflation sensitivity
It is reasonable to assume that inflation could be elevated for the short-term before diminishing. To illustrate the effect of persistent higher short-term inflation on
the Company's NAV, three scenarios were created assuming inflation is two percentage points above our assumptions for the next one, three and five years.
In thousands of Sterling
Inflation +2% for one year
Inflation +2% for three years
Inflation +2% for five years
+2%
Equity
Profit or loss
12,008
52,619
65,624
12,008
52,619
65,624
Foreign exchange sensitivity
As described above, a significant proportion of the Group's underlying investments are denominated in currencies other than Sterling.
The following table shows the sensitivity of the NAV, by applying a change to foreign exchange rates:
Effects in thousands of Sterling
Increase by 10% (i)
Equity
Profit or loss
Decrease by 10%
(i)
Equity
Profit or loss
31 December 2022
(23,665)
(23,665)
31,488
31,488
31 December 2021
(i) Sensitivity in comparison to the spot foreign exchange rates at 31 December 2022 and considering the contractual and natural hedges in place, derived by applying a 10 per cent increase or decrease to the
Sterling/foreign currency rate.
(28,372)
(28,372)
31,140
31,140
Deposit rate sensitivity
Portfolio Companies typically have cash deposits that are required to be maintained as part of the senior debt funding requirements (e.g. six-month debt service
reserve accounts and maintenance reserve accounts). The total deposits held by the Portfolio Companies exceed £400 million. The asset cash flows are positively
correlated with the deposit rates.
The table below shows the sensitivity of the NAV to a percentage-point change in long-term deposit rates compared to the long-term assumptions in the table
above:
Effects in thousands of Sterling
Equity
Profit or loss
Equity
Profit or loss
+1%
-1%
31 December 2022
31 December 2021
20,659
17,260
20,659
(20,635)
(20,635)
17,260
(17,151)
(17,151)
Lifecycle costs sensitivity
Lifecycle costs are the cost of planned interventions or replacing material parts of an asset to maintain it over the concession term. They involve larger items that
are not covered by routine maintenance and, for roads, it will include items such as replacement of asphalt, rehabilitation of surfaces, or replacement of
electromechanical equipment. Lifecycle obligations are generally passed down to the facility maintenance provider, with the exception of transportation
investments, where these obligations are typically retained by the Portfolio Company.
Of the Group's 56 Investments at FVPL, 20 Investments at FVPL retain the lifecycle obligations. The remaining 36 investments have this obligation passed down to
the subcontractor.
The table below shows the sensitivity of the NAV to a change in lifecycle costs:
Effects in thousands of Sterling
Increase by 10%(i)
Equity
Profit or loss
Decrease by 10%(i)
Equity
Profit or loss
31 December 2022
(25,956)
(25,956)
23,459
23,459
31 December 2021
(i) Sensitivity applied to the 20 investments in the portfolio that retain the lifecycle obligation i.e. the obligation is not passed down to the subcontractor.
(19,003)
(19,003)
19,580
19,580
Corporate tax rate sensitivity
The profits of each Portfolio Company are subject to corporation tax in the country where the Portfolio Company is located.
The table below shows the sensitivity of the NAV to a change in corporate tax rates compared to the assumptions in the table above
In thousands of Sterling
31 December 2022
31 December 2021
+1% in 2022
-1% in 2021
Equity
Profit or loss
Equity
Profit or loss
(11,150)
(11,150)
11,011
(8,760)
(8,760)
8,739
11,011
8,739
Refinancing: senior debt rate sensitivity
Assumptions are used where a refinancing of senior debt financing is required for an investment during the remaining investment concession term. There is a risk
that such assumptions may not be achieved.
The table below shows the sensitivity of the NAV to a +100bps adjustment to the forecasted debt rate.
In thousands of Sterling
2022
2021
Margin +1%
Equity
Profit or loss
(9,051)
(6,321)
(9,051)
(6,321)
Derivative financial instruments
The fair value of derivative financial instruments ('foreign exchange forwards') is calculated by the difference between the contractual forward rate and the estimated
forward exchange rates at the maturity of the forward contract. The foreign exchange forwards are fair valued periodically by the counterparty bank. The fair value
of derivative financial instruments as of 31 December 2022 amounted to a net liability of £5,808,000 (31 December 2021: £239,000 - net liability). The counterparty
bank has an S&P/Moody's long-term credit rating of A+/A1.
During the year, the Group recognised the following net losses on derivatives financial instruments at FVPL:
In thousands of Sterling
Realised
Unrealised
Year ended
Year ended
31 December 31 December
2021
1,541
256
2022
16,330
5,569
19. Subsidiaries
During the year ended 31 December 2022, the Company had the following consolidated subsidiaries ('Holding Companies' if referred to individually) which are
included in the consolidated financial statements:
Company
Country of
Incorporation
Effective
Ownership
Interest
Year
Acquired/
Established
21,899
1,797
BBGI Global Infrastructure S.A.
BBGI Management HoldCo S.à r. l. ('MHC')
BBGI Inv, S.à r. l.
BBGI Investments S.C.A.
BBGI Holding Limited
BBGI (NI) Limited
BBGI (NI) 2 Limited
BBGI CanHoldco Inc.
BBGI Guernsey Holding Limited
BBGI Ireland Limited
BBGI US Holding, Inc.(i)
(i) Dissolved during the year
Luxembourg Ultimate Parent
100%
Luxembourg
100%
Luxembourg
100%
Luxembourg
100%
UK
100%
UK
100%
UK
100%
Canada
100%
Guernsey
100%
Ireland
100%
US
2011
2011
2012
2012
2012
2013
2015
2013
2013
2017
2021
The Company's subsidiaries which are not consolidated, by virtue of the Company being an Investment Entity, and are accounted for as Investments at FVPL, are as
follows:
Company
RW Health Partnership Holdings Pty
Limited
RWH Health Partnership Pty Limited
RWH Finance Pty Limited
Victorian Correctional Infrastructure
Partnership Pty Limited
BBPI Sentinel Holdings Pty Limited
BBPI Sentinel Holding Trust
BBPI Sentinel Pty Limited
BBPI Member Trust
Sentinel Partnership Pty Limited
Sentinel UJV
Sentinel Financing Holdings Pty
Limited
Sentinel Financing Pty Limited
Sentinel Finance Holding Trust
Sentinel Finance Trust
BBGI Sentinel Holdings 2 Pty Limited
BBGI Sentinel Holding Trust 2
BBGI Sentinel 2 Pty Limited
BBGI Sentinel Trust 2
BBGI Champlain Holding Inc.
BBGI SSLG Partner Inc.
Golden Crossing Holdings Inc.
Asset Name
Royal Women's Hospital
Royal Women's Hospital
Royal Women's Hospital
Victoria Correctional
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Northern Territory Secure
Facilities
Champlain Bridge
Champlain Bridge
Golden Ears Bridge
Golden Crossing Finance Inc.
Golden Ears Bridge
Golden Crossing Inc.
Global Infrastructure Limited
Partnership
Golden Crossing General Partnership
Golden Ears Bridge
Golden Ears Bridge
Golden Ears Bridge
BBGI KVH Holdings Inc.
BBGI KVH Inc.
BBGI KVH Holdings 2 Inc.
BBGI KVH 2 Inc.
Infusion Health KVH General
Partnership
BBGI 104 GP Inc.
WCP Holdings Inc.
WCP Inc.
WCP Investments Inc.
Women's College Partnership
Stoney Trail Group Holdings Inc.
Stoney Trail LP Inc.
Stoney Trail Investments Inc.
Kelowna and Vernon
Hospitals
Kelowna and Vernon
Hospitals
Kelowna and Vernon
Hospitals
Kelowna and Vernon
Hospitals
Kelowna and Vernon
Hospitals
Highway 104
Women's College Hospital
Women's College Hospital
Women's College Hospital
Women's College Hospital
Northeast Stoney Trail
Northeast Stoney Trail
Northeast Stoney Trail
Country of
Incorporation
Australia
Effective
Ownership
100%
Date
Acquired
Controlled
2012
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2012
2012
2012
2014
2014
2014
2014
2014 and
2015
2014 and
2015
2014 and
2015
2014 and
2015
2014 and
2015
2014 and
2015
2015
2015
2015
2015
2020
2020
2012 and
2013
2012 and
2013
2012 and
2013
2012 and
2013
2012 and
2013
2013
2013
2020
2020
2013 and
2020
2020
2013
2013
2013
2013
2013
2013
2013
Canada
Northeast Stoney Trail
Stoney Trail Inc.
Canada
Stoney Trail Global Limited Partnership Northeast Stoney Trail
Canada
Northeast Stoney Trail
Stoney Trail General Partnership
North Commuter Parkway
BBGI NCP Holdings Inc.
Canada
Stanton Territorial Hospital Canada
BBGI Stanton Holdings Inc.
BBGI Stanton Partner 1 Inc.
Stanton Territorial Hospital Canada
BBGI Stanton Partner 2 Inc.
Boreal Health Partnership
Stanton Territorial Hospital Canada
Stanton Territorial Hospital Canada
PJB Beteiligungs-GmbH
Projektgesellschaft Justizvollzug Burg
GmbH & Co. KG
PJB Management-GmbH
Kreishaus Unna Holding GmbH
Projekt- und Betriebsgesellschaft
Kreishaus Unna mbH
BBGI PPP Investment S.à r.l.
De Groene Schakel Holding B.V.
Burg Correctional Facility
Burg Correctional Facility
Germany
Germany
Germany
Burg Correctional Facility
Unna Administrative Center Germany
Unna Administrative Center Germany
A7 Motorway
Westland Town Hall
Luxembourg
Netherlands
De Groene Schakel B.V.
Westland Town Hall
Netherlands
Noaber18 Holding B.V.
Noaber18 B.V.
N18 Motorway
N18 Motorway
Netherlands
Netherlands
Agder OPS Vegselskap AS
E18 Motorway
Norway
Bedford Education Partnership
Holdings Limited
Bedford Education Partnership Limited
Lisburn Education Partnership
(Holdings) Limited
Lisburn Education Partnership Limited
Clackmannanshire Schools Education
Partnership (Holdings) Limited
Clackmannanshire Schools Education
Partnership Limited
Primaria (Barking & Havering) Limited
Barking Dagenham Havering
Community Ventures Limited
Barking & Havering LIFT (Midco)
Limited
Barking & Havering LIFT Company
(No.1) Limited
Scottish Borders Education Partnership
(Holdings) Limited
Scottish Borders Education Partnership
Limited
Coventry Education Partnership
Holdings Limited
Coventry Education Partnership
Limited
Fire Support (SSFR) Holdings Limited
Fire Support (SSFR) Limited
Highway Management M80 Topco
Limited
Tor Bank School Education Partnership
(Holdings) Limited
Tor Bank School Education Partnership
Limited
Mersey Care Development Company 1
Limited
MG Bridge Investments Limited
Lagan College Education Partnership
(Holdings) Limited
Lagan College Education Partnership
Limited
Highway Management (City) Holding
Limited
GB Consortium 1 Limited
East Down Education Partnership
(Holdings) Limited
East Down Education Partnership
Limited
Highway Management (City) Finance
Plc
Highway Management (City) Limited
Blue Light Partnership (ASP) NewCo
Limitedi
Blue Light Partnership (ASP) Holdings
Limited
Blue Light Partnership (ASP) NewCo 2i
Limited
GT ASP Limited i
Blue Light Partnership (ASP) Limited
Northwin Limited
Northwin (Intermediate) (Belfast)
Limited
Northwin (Belfast) Limited
Folera TH Holdings Limited
Folera Limited
Woodland View Holdings Co Limited
Bedford Schools
Bedford Schools
Lisburn College
UK
UK
UK
UK
Lisburn College
Clackmannanshire Schools UK
Clackmannanshire Schools UK
Barking, Dagenham &
Havering Clinics (LIFT)
Barking, Dagenham &
Havering Clinics (LIFT)
Barking, Dagenham &
Havering Clinics (LIFT)
Barking, Dagenham &
Havering Clinics (LIFT)
Scottish Borders Schools
Scottish Borders Schools
Coventry Schools
Coventry Schools
Stoke & Staffs Rescue
Service
Stoke & Staffs Rescue
Service
M80 Motorway
Tor Bank School
Tor Bank School
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Mersey Care Hospital (LIFT) UK
Mersey Gateway Bridge
Lagan College
Lagan College
M1 Westlink
North London Estates
Partnership (LIFT) and
Liverpool and Sefton Clinics
(LIFT)
East Down Colleges
East Down Colleges
M1 Westlink
M1 Westlink
Avon and Somerset Police
HQ
Avon and Somerset Police
HQ
Avon and Somerset Police
HQ
Avon and Somerset Police
HQ
Avon and Somerset Police
HQ
North West Regional
College
Belfast Metropolitan
College
Belfast Metropolitan
College
Poplar Affordable Housing
& Recreational Centres
Poplar Affordable Housing
& Recreational Centres
Ayrshire and Arran
Hospital
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Jersey
Jersey
UK
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
2013
2013
2013
2015
2018 and
2020
2018 and
2020
2020
2018 and
2020
2012
2012
100%
100%
100%
100%
90%
2012
2012 and
2020
2012 and
2020
2018
2018 and
2019
2018 and
2019
52% 2018, 2019
and 2020
52% 2018, 2019
and 2020
2013 and
2014
2012
100%
100%
100%
100%
100%
100%
100%
100%
100%
60%
60%
60%
100%
100%
100%
100%
85%
85%
100%
100%
100%
100%
100%
100%
100%
100%
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2013
2013
2013 and
2014
2014
2014
2014
2014
100% 2012, 2014
and 2018
100%
100%
100%
2012 and
2018
2012 and
2018
2014
100%
100%
2014
2014 and
2016
100% 2014, 2015
and 2016
2015
100%
100%
2015
100% 2014, 2015
and 2016
2015
100%
100%
100%
100%
100%
100%
2016
2016
2021
2021
2021
Woodland View Intermediate Co
Limited
Woodland View Project Co Limited
Fire and Rescue NW Holdings Limited
Fire and Rescue NW Intermediate
Limited
Fire and Rescue NW Limited
BBGI East End Holdings Inc.
i in the process of liquidation
Ayrshire and Arran
Hospital
Ayrshire and Arran
Hospital
North West Fire and
Rescue
North West Fire and
Rescue
North West Fire and
Rescue
Ohio River Bridges
UK
UK
UK
UK
UK
US
20. Related parties and key contracts
All transactions with related parties were undertaken on an arm's length basis.
100%
99%
100%
100%
100%
100%
2021
2021
2021
2021
2021
2014
Supervisory Board fees
The members of the Supervisory Board of the Company were entitled to total fees of £260,000 for the year ended 31 December 2022 (2021: £220,000).
Directors' shareholding in the Company
In thousands of shares
Management Board
Duncan Ball
Frank Schramm
Michael Denny
Supervisory Board
Andrew Sykes
Sarah Whitney
June Aitken
Christopher Waples
31
December
2022
31
December
2021
871
829
504
40
39
31
17
636
600
412
-
39
-
17
2,331
1,704
Remuneration of the Management Board
The Management Board members are entitled to a fixed remuneration under their contracts and are also entitled to participate in a short-term incentive plan and a
long-term incentive plan. Compensation under their contracts is reviewed annually by the Remuneration Committee.
The total short-term and other long-term benefits recorded in the consolidated income statement for the Management Board, as the key management personnel,
are as follows:
In thousands of Sterling
Short-term benefits
Share-based payments
Year ended
31
December
2022
2,944
1,536
Year ended
31
December
2021
2,769
1,224
4,480
3,993
Trade and other receivables
As at 31 December 2022, trade and other receivables include short-term receivables from non-consolidated subsidiaries amounting to £909,000 (2021: £1,024,000).
21. Share-based compensation
Each of the members of the Management Board received award letters ('2021 Award', '2020 Award', and '2019 Award', respectively and referred collectively as 'Awards')
under the Group's long-term incentive plan. These Awards are to be settled by MHC in the Company's own shares. The Awards vest by reference to a combination of
performance measures linked to the Company's Total Shareholder Return ('TSR condition'), increase in the Company's Investment Basis NAV per share ('NAV condition')
and decrease in Corporate Greenhouse Gas Emissions ('GHG') over the Return Periods.
2019 Award
For 2019 awards, 50 per cent of the performance target will be subject to stretching NAV Total Return and 50 per cent to the Total Shareholder Return ('TSR') targets,
over a three-year period.
2020 Award
For 2020 awards, 100 per cent of the performance target will be subject to stretching NAV Total Return targets over a three-year period.
Performance metric
NAV Total return
(100% weighting)
Threshold performance
Dividend of 7.18p per
annum
to 2023, and NAV per share
maintained from 31
December
2020 to 31 December 2023.
Target performance
Dividend growth of 2% per
annum
to 2023; and 1% per annum
NAV per share growth to 31
December 2023.
Maximum performance
Dividend growth of 2% per
annum
to 2023; and 2% per annum
NAV
per share growth to 31
December
2023.
2021 Award
For 2021 awards, 90 per cent of the performance target will be subject to stretching NAV Total Return targets over a three-year period.
10 per cent. of the award will be linked to a reduction in corporate GHG emissions (Scope 1, 2 & 3) (against a 2019 baseline), a key climate related ESG metric linked to
BBGI's Net Zero Plan.
Performance metric
NAV Total return
(90% weighting)
Threshold performance
Dividend of 7.33p per
annum to 2024, and NAV
per share maintained from
31 December 2021 to 31
December 2024.
Target performance
Dividend growth of 2% per
annum to 2024; and 1% per
annum NAV per share growth
to 31 December 2024.
Maximum performance
Dividend growth of 2% per
annum to 2024; and 2% per
annum NAV per share
growth to 31 December
2024.
ESG - % Corporate GHG
emissions
(Scope 1, 2 & 3)
(10% weighting)
GHG emissions as % of 2019 baseline (at 31 December 2024)
77%
75%
72%
The fair value of the equity instruments awarded to the Management Board was determined using the following key parameters:
Share price at grant date
Maturity
Annual target dividend (2024)
Annual target dividend (2023)
Annual target dividend (2022)
Annual target dividend (2020)
Annual target dividends (2021 to 2022)
Volatility
Risk free rate
2021 Award
£ 1.760
3 years
£0.0771
£0.0755
£0.0741
-
£0.0733
n/a
Between 0.38% and
0.68%
2020 Award
£ 1.700
3 years
-
£0.0733
-
-
£0.0733
n/a
Between -0.11% and
-0.05%
2019 Award
£ 1.675
3 years
-
-
-
£0.0718
£0.0733
11%
Between 0.53% and
0.60%
The expected volatility under the 2019 awards reflects the assumption that the historical volatility over a period similar to the life of the plan is indicative of future
trends, which may not necessarily be the actual outcome.
The Group has issued restricted share awards to selected employees. The restricted share award entitles the employee to a right to receive shares in the Company upon
meeting a service condition.
The fair value of the awards and amounts recognised as additional paid in capital in the Group's consolidated statement of financial position are as follows:
In thousands of Sterling
2021 Award
2020 Award
2019 Award
2018 Award
Deferred STIP
Staff Award Plan
31
December
2022
31
December
2021
354
691
445
-
708
304
-
345
297
472
616
103
Amount recognised in additional paid-in capital
2,502
1,833
During the year ended 31 December 2022, the 2018 Award vested, resulting in a gross entitlement before tax, of 636,281. A portion of the 2018 Award was settled in
cash in order to realise sufficient funds to settle resulting tax liabilities arising from the vesting, with only the net number of shares being issued to each individual. The
total accrued amount under the 2018 Award as at 31 December 2021 was £472,000. This amount was transferred from Additional paid in capital to Share capital at the
settlement date plus an adjustment of £28,000 for the non-market based performance condition.
The share-based compensation expenses amount recognised as part of 'administrative expenses' in the Group's consolidated income statement are as follows:
In thousands of Sterling
2021 Award
2020 Award
2019 Award
2018 Award
2017 Award
Deferred STIP
Staff Award Plan
Year ended
Year ended
31 December 31 December
2021
2022
354
345
148
(28)
-
718
200
-
345
148
157
25
607
79
Amount recognised in administrative expenses
1,737
1,361
Deferred STIP
One-third of any bonus earned under the STIP is being deferred into shares for three year holding period. The deferral component of the STIP differs from the
Company's share-based compensation in that there are no further vesting conditions on this earned bonus.
The Deferred STIP is valued at one-third of the anticipated outcome of the annual bonus for the Management Board. The total value of the Deferred STIP as at 31
December 2022 was £708,000 (31 December 2021: £616,000).
22. Commitments and contingencies
The Group has engaged, in the ordinary course of business, the services of certain entities to provide legal, custodian, audit, tax and other services to the Company.
The expenses incurred in relation to such are treated as legal and professional fees under the administrative expenses grouping in the consolidated income
statement.
As at 31 December 2022, the Group had utilised £1.3 million (31 December 2021: £1.2 million) of the £230 million RCF to cover letters of credit. Refer to Note 15 for
further details on the RCF.
The BBGI Luxembourg office is leased under a cancellable operating lease agreement. The expenses incurred in relation to such lease are recognised as office and
other expenses under administrative expenses (see Note 6).
23. Service Concession Agreements
As at 31 December 2022, the Group has a portfolio of 56 assets (see Note 9), with a weighted average portfolio life of 20.2 years. The Group has a diverse asset mix
from which the service concession receivables are derived. All assets are availability-style. The rights of both the concession provider and concession operator are
stated within the specific asset agreement.
The following table summarises the main information about the Group's outstanding service concession agreements, which are all classified as availability-style
social infrastructure:
Asset Name
Kicking Horse
Canyon
%
Equity
Owned
50%
Golden Ears Bridge
100%
Northwest Anthony
Henday Drive
50%
Period of Concession
(Operational Phase)
Short Description of Concession Arrangement
Phase
Start Date
End Date
Design, build, finance and operate a 26-km
stretch of the Trans-Canada Highway, a vital
gateway to British Columbia
.
Design, build, finance and operate the Golden
Ears Bridge that spans the Fraser River and
connects Maple Ridge and Pitt Meadows to
Langley and Surrey, near Vancouver, British
Columbia.
Partly design, build, finance and operate a major
transport infrastructure asset in Canada, a ring
road through Edmonton, capital of the province
of Alberta.
Operational
September
2007
October
2030
Operational
June 2009
June 2041
Operational
November
2011
October
2041
M80 Motorway
50%
Design, build, finance and operate 18 km of dual
two/three lane motorway with associated slip
Operational
July 2011
September
2041
E18 Motorway
100%
roads and infrastructure from Stepps in North
Lanarkshire to Haggs in Falkirk (Scotland).
Design, build, finance, operate and maintain a 38
km dual carriageway in Norway, including 75
bridges and structures and 75 km of secondary
roads, carving through a rugged and beautiful
landscape between Grimstad and Kristiansand.
Operational
August 2009
August
2034
Northeast Stoney
Trail
100%
Design, build, finance, operate and maintain a 21
km section of highway, forming part of a larger
ring road developed in Calgary, Alberta, Canada.
Operational
November
2009
October
2039
Ohio River Bridges
67%
Mersey Gateway
Bridge
38%
M1 Westlink
100%
North Commuter
Parkway
50%
Canada Line
27%
Southeast Stoney
Trail
William R. Bennett
Bridge
40%
80%
A1/A6 Motorway
37%
N18 Motorway
52%
Highway 104
50%
Champlain Bridge
25%
Design, build, finance, operate and maintain East
End Bridge asset which includes a cable-stay
bridge, a tunnel and the connecting highway with
a total length of 8 miles crossing the Ohio river in
the greater Louisville-Southern Indiana region.
Design, build, finance, operate and maintain a
new circa 1-km long six-lane toll cable-stay
bridge (three towers) over the Mersey river to
relieve the congested and ageing Silver Jubilee
Bridge and upgrading works for 9.5 km of
existing roads and associated structures.
Design, build, finance, operate and maintain with
significant amount of construction work
completed in 2009 to upgrade key sections of
approx. 60 km of motorway through Belfast and
its vicinity, including O&M of the complete
motorway.
Design, build, finance, operate and maintain two
new arterial roadways and a new river crossing
located in the north area of Saskatoon,
Saskatchewan, Canada, and design, construct,
finance, operate and maintain a replacement river
crossing located in Saskatoon's downtown core.
Design, build, finance, operate and maintain a
19km rapid transit line connecting the cities of
Vancouver and Richmond with Vancouver
International Airport in British Columbia, Canada.
Operational
December
2016
December
2051
Operational
October 2017
March
2044
Operational
February 2006
October
2036
Operational
October 2018
September
2048
Operational
August 2009
July 2040
Design, build, finance, operate and maintain a
25km section of highway, forming part of a larger
ring road developed in Calgary, Alberta, Canada.
Operational
November
2013
September
2043
Design, build, finance, operate and maintain a
1.1km long floating bridge in Kelowna, British
Columbia, Canada.
Design, build finance operate and maintain the
enlargement of the A1/A6 in the Netherlands,
which involves the reconstruction and widening of
this 2x5 lanes motorway plus 2 reversible direction
lanes. The asset involves some 90 engineering
structures.
Design, build, finance operate and maintain the
extension of the N18 motorway between
Varsseveld and Enschede in the eastern part of the
Netherlands. It comprises of 15 km of existing and
27km of a new 2x2-lane motorway with more than
30 ecological passages, aiming at a reduction in
traffic in certain villages and safety improvement.
Design, build, finance, operate and maintain PPP
following completion of construction. The project
consists of the construction of a four-lane divided
highway corridor beginning at the end of the
existing divided highway east of New Glasgow
near Exit 27 at Sutherlands River and running for a
distance of approximately 38km to the existing
divided highway just west of the Addington Fork
Interchange (Exit 31) at Antigonish.
Design,
operation,
construction,
maintenance and rehabilitation of a new bridge
spanning the St. Lawrence River between Montreal
and Brossard, Quebec.
financing,
Operational May 2008
June 2035
Operational
July 2017
June 2042
Operational
April 2018
April 2043
Construction May 2020
August
2043
Operational
December
2020
October
2049
Victoria
Correctional
Facilities
100%
Design, build, finance, operate, and maintain for a
period of 25 years, two new correctional facilities
for the State of Victoria, Australia (MCC and MRC).
Operational March 2006
May 2031
(MRC)/February
2006 (MCC)
Burg Correctional
Facility
90%
Design, build, finance, operate, and maintain for a
concession period of 25 years, a new correctional
facility for the state of Saxony-Anhalt, Germany.
Operational May 2009
April 2034
Avon and Somerset
Police HQ
Northern Territory
Secure Facilities
100%
100%
Bedford Schools
100%
Coventry Schools
100%
Kent Schools
50%
Scottish Borders
Schools
Clackmannanshire
Schools
100%
100%
East Down Colleges
100%
Design, build, finance, operate and maintain four
new build police and custody facilities in the Avon
and Somerset region (UK).
Design, build, finance, operate and maintain a new
correctional facility, located near Darwin, including
three separate centres of the 1,048 bed multi-
classification men's and women's correctional
centre and 24-bed Complex Behaviour Unit.
Design, build, finance, operate and maintain the
redevelopment of two secondary schools in the
County of Bedfordshire.
Design, build, finance, operate and maintain one
new school and community facilities for the
Coventry City Council.
Design, build, finance, operate and maintain the
redevelopment, which included the construction of
new build elements for each academy as well as
extensive reconfiguration and refurbishment of six
academies.
Design, build, finance, operate and maintain three
new secondary schools
for Scottish Borders Council.
Design, build, finance, operate and maintain the
redevelopment of three secondary schools in
Clackmannanshire, Scotland.
Design, build, finance, operate and maintain the
three East Down Colleges campuses in Northern
Ireland
Operational
July 2014/July
2015
March
2039
Operational
November
2014
June 2044
Operational
June 2006
Operational
Operational
In stages from
March 2006 to
June 2009
June 2007
December
2035
December
2034
September
2035
Operational
July 2009
November
2038
Operational
Operational
In stages from
January to May
2009
June 2009
March
2039
May 2036
In 7 tranches
starting April
2005 and
ending
February 2013
In 4 tranches
starting
February 2006
and ending
June 2013
In 3 tranches
starting
October 2005
and ending
October 2008
January
2026
August
2027
August
2042
February
2034
In 7
tranches
starting
April 2033
and
ending
February
2043
In 4
tranches
starting
October
2030 and
ending
June 2043
In 3
tranches
starting
September
2030 and
ending
September
2033
June 2033
December
2044
August
2042
May 2043
October
2044
September
2044
October
2048
October
2036
Lisburn College
Tor Bank School
100%
100%
Lagan College
100%
Cologne Schools
Rodenkirchen
Schools
Frankfurt Schools
North West
Regional College
Belfast
Metropolitan
College
Westland Town Hall
50%
50%
50%
100%
100%
100%
Gloucester Royal
Hospital
Liverpool and
Sefton Clinics (LIFT)
50%
60%
Design, build, finance, operate and maintain
Lisburn College in Northern Ireland.
Design, build, finance, operate and maintain a new
school for pupils with special education needs in
Northern Ireland.
Design, build, finance operate and maintain the
redevelopment of Lagan College in Northern
Ireland.
Design, build, finance operate and maintain the
redevelopment of five schools in Cologne.
Design, build, finance operate and maintain a
school for approx. 1200 pupils in Cologne.
Design, build, finance operate and maintain the
redevelopment of four schools in Frankfurt.
Design, build, finance, operate and maintain the
North West Regional College educational campus
in Northern Ireland
Design, build, finance, operate and maintain the
Belfast Metropolitan educational campus
in
Northern Ireland
Design, build, finance, operate and maintain
Westland Town Hall, a PPP accommodation asset
consisting of a new approximately 11,000m2 town
hall for the Dutch Municipality of Westland.
Design, build, finance, operate and maintain a
hospital scheme in Gloucester, UK.
Design, build, finance, operate and maintain the
primary healthcare facilities
in Liverpool and
Sefton, UK.
Operational
April 2010
May 2036
Operational
October 2012
October
2037
Operational
October 2013
June 2038
Operational
April 2005
Operational
Operational
November
2007
August 2007
December
2029
November
2034
July 2029
Operational
February 2001
Operational
September
2002
Operational
August 2017
Operational
April 2005
Operational
North London
Estates Partnership
(LIFT)
60%
Design, build, finance, operate and maintain the
primary healthcare facilities of the Barnet, Enfield
and Haringey LIFT programme, UK.
Operational
Barking Dagenham
& Havering (LIFT)
60%
Design, build, finance, operate and maintain 10
facilities/clinics in East London, UK with asset
construction completions between 2005 and 2009.
Operational
Royal Women's
Hospital
Mersey Care
Hospital (part of
Liverpool Sefton
Clinics (LIFT) above)
Kelowna and
Vernon Hospital
100%
80%
100%
Design, build, finance, operate and maintain a new
nine-storey Royal Women's Hospital in Melbourne.
Design, build, finance, operate and maintain a new
mental health in-patient facility on the former
Walton hospital site in Liverpool, UK.
Operational
June 2008
Operational
December
2014
Design, build, finance, operate and maintain a
new Patient Care Tower, a new University of
British Columbia Okanagan Clinical Academic
Campus and car park at Kelowna General
Hospital, and a new Patient Care Tower at Vernon
Jubilee Hospital.
Operational
January 2012
Women's College
Hospital
100%
Design, build, finance, operate and maintain the
new Women's College Hospital
in Toronto,
Ontario, Canada.
Restigouche
Hospital Centre
McGill University
Health Centre
80%
40%
Stanton Territorial
Hospital
100%
Stoke & Staffs
Rescue Service
Unna
Administrative
Centre
Fürst Wrede Military
Base
Poplar Affordable
Housing &
Recreational
Centres
Aberdeen Western
Peripheral Route
85%
90%
50%
100%
33%
Ayrshire and Arran
Hospital
100%
North West Fire and
Rescue
100%
John Hart
Generating Station
80.0%
A7 Motorway
49.0%
Design, build, finance, operate and maintain the
new Psychiatric Care Centre in Restigouche, New
Brunswick, Canada.
Design, build, finance, operate and maintain the
new McGill University Health Centre, Montreal,
Canada.
Design, build, finance, operate and maintain the
new Stanton Territorial Hospital, Yellowknife,
Northwest Territories, Canada.
Design, build, finance, operate and maintain 10
new community fire stations in Stoke-on-Trent
and Staffordshire, UK.
Design, build, finance, operate and maintain the
administration building of the Unna District in
Rhine-Westphalia, Germany.
Design, build, finance, operate and maintain the
refurbishment and new construction of a 32
hectare army barracks in Munich, Germany.
Design,
maintenance and
buildings.
financing, operation,
rehabilitation of separate
construction,
Design, construction, financing, operations and
maintenance of 12 km of the existing roadway
(upgraded) and 47 km of new dual carriageway
including two significant river crossings.
Design, construction, financing and maintenance
of a 206-bed acute mental health facility and
community hospital in Irvine, North Ayrshire,
Scotland.
Design, construction, financing, maintenance and
rehabilitation of 16 new community fire stations
in the North West of England.
Design, construction, financing, maintenance and
rehabilitation of a new three-turbine, 132-MW
hydroelectric power generation station on the
Campbell River, British Columbia, including a 3
generating unit underground powerhouse, 2.1
kilometers of water passage tunnels and a water
fish
bypass system
habitat.
to protect downstream
financing,
construction,
Expansions and upgrades to certain critical
sections of the A7 motorway and consists of the
design,
operation,
maintenance and
rehabilitation of 65 km
widening from four to six lanes of a section of the
and
A7 motorway between Bordesholm
Hamburg. The project includes 11 interchanges,
six parking facilities, four rest areas, 79 civil
engineering structures, c. 100,000 m2 noise
Operational May
2013
1),
(Phase
September
2015 (Phase 2),
March 2016
(final
completion).
June 2015
Operational
Operational
October 2014
Operational
Operational
December
2018
November
2011
Operational
July 2006
July 2031
Operational March 2008
March
2028
Operational
October 2015
July 2051
Operational May 2018
Operational March 2016
November
2047
March
2041
Operational
June 2013
July 2038
Operational
June 2019
October
2033
Operational
December
2019
August
2044
barriers and a c. 550-metre noise enclosure
tunnel.
24. Standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2023 and earlier application is permitted;
however, the Group has not early adopted any of the forthcoming new or amended standards in preparing these financial statements. The Group intends to adopt
these new and amended standards, if applicable, when they become effective. The adoption of the below news standards are not expected to have a significant
impact on the Group's financial statements.
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies
The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their
'significant' accounting policies with a requirement to disclose their 'material' accounting policies and adding guidance on how entities apply the concept of
materiality in making decisions about accounting policy disclosures.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
The amendments specify the requirements for classifying liabilities as current or non-current and clarify:
§ What is meant by a right to defer settlement
§ That a right to defer must exist at the end of the reporting period
§ That classification is unaffected by the likelihood that an entity will exercise its deferral right
§ That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms
of a liability not impact its classification
The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and must
be applied retrospectively.
Definition of Accounting Estimates - Amendments to IAS 8
The amendments introduce a definition of 'accounting estimates' and clarify the distinction between changes in accounting estimates and changes in accounting
policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
The amendments specify the requirements for classifying liabilities as current or non-current and clarify:
§ What is meant by a right to defer settlement
§ That a right to defer must exist at the end of the reporting period
§ That classification is unaffected by the likelihood that an entity will exercise its deferral right
§ That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms
of a liability not impact its classification
The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and must
be applied retrospectively.
25. Events after the end of the reporting period
Dividend declaration
In February 2023, the Company declared a 2nd interim dividend of 3.74 pence per share with scrip alternative for qualifying shareholders for the period 1 July - 31
December 2022. The dividend is expected to be paid in April 2023.
Grant of Share Awards under LTIP
In February 2023, each of the members of the Management Board received an award letter ('2022 Award'). The maximum number of shares that could be issued under
this award was determined by using the average closing price of the Company's share price during December 2022, as ascertained from the Official List, which was
156.46 pence per share. Subject to the achievement of the performance conditions, the awards will vest after 31 December 2025.
AUDIT REPORT
To the Shareholders
BBGI Global Infrastructure S.A.
Our opinion
In our opinion, the accompanying financial statements give a true and fair view of the financial position of BBGI Global Infrastructure S.A. (the
"Company") as at 31 December 2022, and of its financial performance and its cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
What we have audited
The Company's financial statements comprise:
● the statement of financial position as at 31 December 2022;
● the statement of comprehensive income for the year then ended;
● the statement of changes in equity for the year then ended;
● the statement of cash flows for the year then ended; and
● the notes to the financial statements, which include a summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession (Law of 23 July 2016) and with International Standards
on Auditing (ISAs) as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier" (CSSF). Our responsibilities under the
Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are further described in the "Responsibilities of the "Réviseur d'entreprises
agréé" for the audit of the financial statements" section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants, including International
Independence Standards, issued by the International Ethics Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the
CSSF together with the ethical requirements that are relevant to our audit of the financial statements. We have fulfilled our other ethical
responsibilities under those ethical requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Impairment of
in
subsidiary and loans receivable
from subsidiary:
Investment
In assessing the impairment of investment in subsidiary
and loans receivable from subsidiary, we performed the
procedures outlined below.
Refer to the financial statements
(Note 3.e), impairment testing for
loans and
investments and
receivables
subsidiary;
from
Note 13 and Note 14).
Investment
in subsidiary and
loan receivables from subsidiary
are measured at cost
less
accumulated impairment losses.
Their carrying amounts are GBP
243 million and GBP 354 million,
respectively, and they are the
most significant balances on the
statement of financial position.
the
determination
The impairment assessment of
the investment in the subsidiary
and
of
expected credit loss (ECL) for
loans receivable from subsidiary
is linked to the fair value of the
investments which
underlying
are mainly made of social
investments
infrastructure
through
private
public
partnership and/or public finance
initiatives or similar procurement
("investments")
models
generating long-term predictable
cash flows.
We assessed that the accounting policy in relation with
the impairment of the investment in subsidiary and
loans receivable from subsidiary was in compliance
with the applicable accounting framework.
We understood and evaluated
the design and
implementation of key controls in place around the
impairment of the investment in subsidiary and loans
receivable from subsidiary.
obtained
the management's
impairment
We
assessment of the investment in subsidiary and loans
receivable from subsidiary and performed an overall
assessment to challenge the criteria and inputs used in
the impairment analysis, as well as the assumptions
and models used to calculate the ECL;
In addition, considering that the impairment of the
investment in subsidiary and loans receivable from
subsidiary is linked to the fair value of the underlying
investments, we obtained substantive audit evidence
over the valuation of the underlying investments as
follows:
- We tested key controls performed in the
valuation process of investments in relation to
the financial data included in the valuation
models, the "look back" comparison of the
forecast vs actual cash flows for the previous
financial year, as well as other investment
model review controls.
relies
using
requires
determined
cash
It
The valuation of the nvestments
the
is
flow
discounted
methodology.
on
significant unobservable inputs
significant
and
judgments
the
Management Board. A small
these assumptions
change
could
in a significant
impact on the fair value of the
investments. As a consequence,
there is an inherent risk that the
fair value of these investments
may not be appropriate.
in
result
from
Taking this into account, coupled
with
the
the magnitude of
amounts involved, we consider
this area as a key audit matter.
-
We
inquired
the qualification of
into
Management Board and its internal valuation
team and concluded that they have sufficient
experience and expertise.
- We obtained the overall fair value reconciliation
of opening to closing fair value of the underlying
investments and corroborated significant fair
value movements during the year, thereby
assessing
and
completeness of the movement for the year.
reasonableness
the
that
- With the support of our own valuation experts,
the Group's valuation
we
assessed
methodology was
the
International Private Equity and Venture Capital
Valuation Guidelines and market practice based
on our knowledge of the investments held by
the Group and experience of the industry in
which the Group operates.
in compliance with
of
targeted
sampling
- For a sample of assets selected via risk and
value-based
the
investments by value, we assessed that the key
macroeconomic assumptions such as inflation,
deposit rates, corporate tax rates, base discount
rate setting were appropriate and/or within
acceptable ranges based on market search. We
also checked that the selected asset specific
discount rates were within acceptable ranges.
- We obtained and read the valuation report
prepared by Management's external valuation
experts which confirmed that the portfolio value
prepared by
the Management Board was
appropriate.
- Finally, for the entire portfolio, we obtained
external confirmation over the existence and
percentage of ownership of the investments
held by the Group.
Other information
The Management Board is responsible for the other information. The other information comprises the information stated in the annual report but
does not include the financial statements and our audit report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Management Board and those charged with governance for the financial statements
The Management Board is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs as adopted by
the European Union, and for such internal control as the Management Board determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Management Board is responsible for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either
intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Responsibilities of the "Réviseur d'entreprises agréé" for the audit of the financial statements
The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by
the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
● identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control;
● obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company's internal control;
● evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the
Management Board;
● conclude on the appropriateness of the Management Board's use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our audit report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our audit report. However, future events or conditions may cause the Company to cease to continue as a
going concern;
● evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
and communicate to them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the
financial statements of the current period and are therefore the key audit matters. We describe these matters in our audit report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits
of such communication.
Report on other legal and regulatory requirements
The annual report is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
We have been appointed as "réviseur d'entreprises agréé" by the General Meeting of the Shareholders on 28 March 2022 and the duration of our
uninterrupted engagement, including previous renewals and reappointments, is one year.
PricewaterhouseCoopers, Société coopérative
Represented by
Emanuela Sardi
Luxembourg, 29 March 2023
Company Statement of Comprehensive Income
for the year ended 31 December 2022
In thousands of Sterling
Administrative expenses
Other operating expenses
Other operating income
Results from operating activities
Net finance result
Loss before tax
Tax expense
Loss for the year
Other comprehensive income for the year
Total comprehensive loss for the year
Notes
2022
2021
5
6
7
8
9
(11,617)
(22,748)
4,883
(29,482)
21,496
(7,986)
(515)
(9,498)
(12,611)
-
(22,109)
20,118
(1,991)
(459)
(8,501)
(2,450)
-
-
(8,501)
(2,450)
The accompanying notes form an integral part of the Company's financial statements
Company Statement of Financial Posi on
as at 31 December 2022
In thousands of Sterling
Assets
Property and equipment
Loans receivable from subsidiary
Investment in subsidiary
Non-current assets
Loans receivable from subsidiary
Interest and other receivables from subsidiary
Other current assets
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Retained earnings
Equity attributable to the owners of the Company
Liabilities
Trade and other payables
Advances from subsidiary
Tax liabilities
Current liabilities
Total liabilities
Total equity and liabilities
Notes
2022
2021
13
14
13
13
10
11
13
9
73
243,212
354,233
7
243,638
350,453
597,518
594,098
37,663
11,164
733
18,738
68,298
91,968
8,760
325
11,311
112,364
665,816
706,462
852,391
(222,400)
629,991
850,355
(161,124)
689,231
1,200
34,496
129
35,825
35,825
1,125
15,990
116
17,231
17,231
665,816
706,462
Net asset value attributable to the owners of the Company
Net asset value per ordinary share (pence)
11
11
629,991
88.32
689,231
96.78
The accompanying notes form an integral part of the Company's financial statements.
Company Statement of Changes in Equity
For the year ended 31 December 2022
In thousands of Sterling
Notes
Balance at 1 January 2021
Total comprehensive loss for the year
Transactions with the owners of the Company
recognised directly in equity
Issuance of shares from placing of ordinary shares net of
issue cost
Cash dividends
Scrip dividends
Shares issued on behalf of a subsidiary
Balance at 31 December 2021
Total comprehensive loss for the year
Transactions with the owners of the Company,
recognised directly in
recognised directly in equity
Cash dividends
Scrip dividends
Shares issued on behalf of a subsidiary
Share issuance costs
11
11
11
11
11
11
11
11
Share
Retained
Total
Capital
772,640
772,640
Earnings
(108,743)
(108,743)
-
(2,450)
Equity
663,897
663,897
(2,450)
73,893
-
1,978
1,844
-
(47,953)
(1,978)
-
73,893
(47,953)
-
1,844
850,355
(161,124)
689,231
-
-
(8,501)
(8,501)
(51,683)
(51,683)
1,092
(1,092)
971
(27)
-
-
-
971
(27)
B l
t 31 D
b 2022
852 391
(222 400)
629 991
Balance at 31 December 2022
852,391
(222,400)
629,991
The accompanying notes form an integral part of the Company's financial statements.
Company Statement of Cash Flows
For the year ended 31 December 2022
In thousands of Sterling
Operating activities
Loss for the year
Adjustments for:
Net finance result
Foreign currency exchange loss (gain) - net
Tax expense
Depreciation
Working capital adjustments:
Advances/other receivables from subsidiary
Other current assets
Trade and other payables
Cash from/(used in) operating activities
Interest received
Taxes paid
Net cash flows from/(used in) operating activities
Investing activities
Loan repayment from subsidiary
Loans provided to subsidiary
Investment in subsidiary
Interest received
Acquisition of property and equipment
Net cash flows from/(used in) investing activities
Financing activities
Proceeds from the issuance of ordinary shares
Equity instruments issue costs
Dividends paid
Net cash flows from/(used) in financing activities
Net increase in cash and cash equivalents
Impact of foreign exchange on cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Notes
2022
2021
(8,501)
(2,450)
8
6,7
9
14
11
11
11
10
10
(21,496)
(4,883)
515
3
19,475
(407)
53
(15,241)
24
(502)
(15,719)
59,557
-
(3,780)
19,134
(69)
74,842
-
(27)
(51,683)
(51,710)
7,413
14
11,311
(20,118)
5,063
459
-
30,279
(69)
(119)
13,045
-
(445)
12,600
29,449
(57,971)
(17,405)
12,925
-
(33,002)
75,000
(1,107)
(47,953)
25,940
5,538
137
5,636
18,738
11,311
The accompanying notes form an integral part of the Company's financial statements
Notes to the Company Financial Statements
For the year ended 31 December 2022
1. Corporate information
BBGI Global Infrastructure S.A., ('BBGI', or the 'Company') is an investment company incorporated in Luxembourg in the form of a public limited liability
company (société anonyme) with variable share capital (société d'investissement à capital variable, or 'SICAV') and regulated by the Commission de
Surveillance du Secteur Financier ('CSSF') under Part II of the amended Luxembourg law of 17 December 2010 on undertakings for collective investments
with an indefinite life. The Company qualifies as an alternative investment fund within the meaning of Article 1 (39) of the amended law of 12 July 2013 on
alternative investment fund managers ('2013 Law') implementing Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on
Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010
and is authorised as an internal alternative investment fund manager in accordance with Chapter 2 of the 2013 Law. The Company was admitted to the
official list of the UK Listing Authority (premium listing, closed-ended investment fund) and to trading on the main market of the London Stock Exchange on
21 December 2011.
As of 1 January 2021, the main market of the London Stock Exchange is not considered as an EU regulated market (as defined by the MiFID II). As a result,
Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation
to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (the Transparency
Directive) as implemented in the Luxembourg law by the act dated 11 January 2008 on transparency requirements for issuers (the Transparency Act 2008),
among other texts, does not apply to the Company.
The Company's registered office is EBBC, 6E, route de Treves, L-2633 Senningerberg, Luxembourg and is registered with the Registre du Commerce of
Luxembourg under the number B 163 879
The Company is a closed-ended investment company that invests, through its subsidiaries, principally in a diversified portfolio of operational Public-Private
Partnership ('PPP')/Private Finance Initiative ('PFI') infrastructure or similar style assets ('PPP/PFI portfolio'). At 31 December 2022, the Company has one
indirectly held investment that is under construction (31 December 2021: one).
The Company had no employees as of 31 December 2022 and 2021, respectively.
Reporting period
The Company´s reporting period runs from 1 January to 31 December each year. The Company´s statement of comprehensive income, statement of
financial position, statement of changes in equity and statement of cash flows include comparative figures as at 31 December 2021.
The amounts presented as 'non-current' in the Company´s statement of financial position are those expected to be recovered or settled after more than one
year. The amounts presented as 'current' are expected to be recovered settled within one year. These financial statements were approved by the
Management Board on 29 March 2023.
2. Basis of preparation
Statement of compliance
The separate financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by
the European Union ('EU'). Please refer to Note 3 d) for the accounting policy with respect to the investment in subsidiary.
The Company also prepares consolidated financial statements in accordance with IFRS as adopted by the EU.
The Company follows, to the fullest extent possible, the provisions of the Standard of Recommended Practices issued by the Association of Investment
Companies ('AIC SORP'). If the provisions of the AIC SORP are in direct conflict with IFRS as adopted by the EU, the standards of the latter shall prevail.
The separate financial statements have been prepared using the going concern principle under the historical cost basis.
Functional and presentation currency
These financial statements are presented in Sterling, the Company's functional currency. All amounts presented in tables throughout the report have been
rounded to the nearest thousand, unless otherwise stated.
Changes in accounting policy
New and amended standards applicable to the Company is as follows:
Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37
The amendments specify that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a
contract to provide goods or services including both incremental costs and an allocation of costs directly related to contract activities. General and
administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract.
These amendments have no significant impact on the Company financial statements.
IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different
from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or
received by either the borrower or lender on the other's behalf. There is no similar amendment proposed for IAS 39 Financial Instruments: Recognition and
Measurement.
These amendments had no significant impact on the Company financial statements as there were no modifications of the Company's financial instruments
during the period.
3. Summary of significant accounting policies
a) Foreign currency transactions
Transactions in foreign currencies are translated into Sterling at the exchange rate on the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are translated into Sterling at the exchange rate on that date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into Sterling at the exchange rate on the
date that the fair value was determined. Foreign currency differences arising on translation are recognised in the statement of comprehensive income as a
gain or loss on currency translation.
b) Foreign currency translations
The assets and liabilities of foreign operations are translated to Sterling at the exchange rates on the reporting date. The income and expenses of foreign
operations are translated to Sterling at the average exchange rates during the year, if such does not significantly deviate from the exchange rates at the date
on which the transaction is entered into. If significant deviations arise, then the exchange rate at the date of the transaction is used.
c) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified at initial recognition at either: (i) amortised cost; (ii) fair value through other comprehensive income - debt instruments; (iii) fair
value through other comprehensive income - equity instruments; or (iv) fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Company's business
model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has
applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs.
The Company's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. The Company's financial assets
classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash
flows which represents solely payments of principal and interests.
In general, the Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to
receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any
interest in such transferred financial assets that is created or retained by the Company is recognised as a separate financial asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal
right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
At the date of the statement of financial position, all financial assets of the Company have been classified as financial assets at amortised cost. Financial
assets of the Company consist of investment in subsidiary, loan receivables from subsidiary, interest and other receivables from subsidiary and cash and
cash equivalents.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognised when:
- The rights to receive cash flows from the asset have expired; or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a 'pass-through' arrangement; and either (a) the Company has transferred substantially all the risks
and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are
recognised in the statement of comprehensive income when the asset is derecognised, modified or impaired.
Financial liabilities
The Company classifies financial liabilities at amortised cost. Such financial liabilities are recognised initially at fair value less any direct attributable
transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the EIR method.
The Company derecognises a financial liability (or part of a financial liability) from the statement of financial position when, and only when, it is extinguished
or when the obligation specified in the contract or agreement is discharged or cancelled or has expired. The difference between the carrying amount of a
financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is considered in the statement of comprehensive income.
d) Investments in subsidiary
The investment in subsidiary is held at cost less any impairment.
e) Impairment testing for investments and loans and receivables from subsidiary
The investment in subsidiary and loan receivables from subsidiary are measured at cost less accumulated impairment losses. The impairment losses are
based on expected credit loss ('ECL') on such receivables. The loans and receivables of the Company from its subsidiary are directly linked to the PPP/PFI
portfolio financed by this subsidiary either through loans and/or equity investments. The ECL, if any, of the Company from its loans and receivables from
subsidiary has a direct link with the fair value of the Company´s PPP/PFI portfolio. The Company performs a fair valuation of the underlying PPP/PFI
portfolio every six months and considers any ECL on the loans and receivables, among others based on the results of the valuation. The fair valuation of the
underlying PPP/PFI portfolio is done by calculating the net present value of the cash flows from these assets, based on internally generated models. The net
present value of each asset is determined using future cash flows, applying certain macroeconomic assumptions for the cash flows which include indexation
rates, deposit interest rates, corporate tax rates and foreign currency exchange rates. The cash flows are discounted at the applicable discount rate for
companies involved in service concession assets. A material change in the macroeconomic assumptions and discount rates used for such valuation could
have a significant impact on the net present value of the future cash flows. The determined fair value will be considered as the recoverable amount to be
compared to the carrying amount of investment in subsidiary to determine possible impairment. Excess of the carrying amount of the investment in
subsidiary over the recoverable amount is recognised as an impairment loss. As of 31 December 2022, the Company identified no ECL to be recorded on its
loans and receivables from subsidiary (2021: nil) nor any impairment on its investment in subsidiary.
f) Provisions
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to a liability. The unwinding of such
discount is recognised as a finance cost.
g) Cash and cash equivalents
Cash and cash equivalents comprise of cash balances and term deposits with maturities of three months or less from the date when the deposits were made
and that are subject to an insignificant risk of change in their fair value, and are used by the Company in the management of its short-term commitments.
h) Share capital
Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares, or which are associated with the establishment of the
Company, that would otherwise have been avoided are recognised as a deduction from equity, net of any tax effects.
i) Finance income and finance costs
Interest income and expenses are recognised in the statement of comprehensive income using the EIR method.
The EIR is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial instrument (or, where
appropriate, a shorter period) to the carrying amount of the financial instrument. When calculating the EIR, the Company estimates future cash flows
considering all contractual terms of the financial instrument, but not future credit losses.
Interest received or receivable and interest paid or payable are recognised in the statement of comprehensive income as finance income and finance costs,
respectively.
j) Tax
According to the Luxembourg regulations regarding SICAV companies, the Company itself, as an undertaking for collective investment, is exempt from
paying income and/or capital gains taxes in Luxembourg. It is, however, liable to annual subscription tax of 0.05 per cent on its consolidated net asset value
('NAV') payable quarterly and assessed on the last day of each quarter.
k) Current versus non-current classification
The Company presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:
§ Expected to be realised or intended to be sold or consumed in the normal operating cycle
§ Held primarily for the purpose of trading
§ Expected to be realised within 12 months after the reporting period or
§ Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period
All other assets are classified as non-current.
A liability is current when:
§ It is expected to be settled in the normal operating cycle
§ It is held primarily for the purpose of trading
§ It is due to be settled within 12 months after the reporting period or
§ There is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its
classification.
The Company classifies all other liabilities as non-current.
4. Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires the Management Board to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
In the process of applying the Company´s accounting policies, the Management Board has made the following judgements that would have the most
significant effect on the amounts recognised in the Company's financial statements.
4.1 Impairment testing for investments
Refer to Note 2 for the discussion of this topic.
4.2 Going concern basis of accounting
The Management Board has examined significant areas of possible financial risk including cash and cash requirements. It has not identified any material
uncertainties which would cast significant doubt on the Company's ability to continue as a going concern for a period of 12 months from the end of this
reporting period. The Management Board has satisfied itself that the Company has adequate resources to continue in operational existence for the
foreseeable future. After due consideration, the Management Board believes it is appropriate to adopt the going concern basis of accounting in preparing
the financial statements.
5. Administrative expenses
In thousands of Sterling
Support agreement fees (Note 13)
Legal and professional fees
Supervisory Board fees and expenses
Others
Year ended
31
December
2022
Year ended
31
December
2021
8,914
2,207
275
221
11,617
6,982
2,090
225
201
9,498
Included in the legal and professional fees expensed during the year are those amounts charged by the Company's external auditor which include audit fees
of £201,000 (2021: £157,000) and audit related fees of £73,000 (2021: £64,000). Non-audit related fees charged by the Company's external auditors during
the year amounted to £5,000 (2021: nil). Also included in the legal and professional fees are depositary and custodian related charges which amounted to
£383,000 (2021: £460,000).
6. Other operating expenses
In thousands of Sterling
Foreign exchange indemnity agreement expense (Note 13)
Foreign currency exchange loss - net
Acquisition-related (including unsuccessful bid costs)
7. Other operating income
Year ended
31
December
2022
Year ended
31
December
2021
22,326
-
422
22,748
6,965
5,063
583
12,611
Year ended
31
December
Year ended
31
December
In thousands of Sterling
Foreign currency exchange gain - net
2022
4,883
2021
-
The net foreign currency exchange gains are mainly attributable to the unrealised gains on the translation of foreign currency denominated loans receivable
from the Company's subsidiary.
8. Net finance result
In thousands of Sterling
Finance income from multi-currency facility (Note 13)
Interest income from deposits
Other finance costs
Year ended
31
December
2022
Year ended
31
December
2021
21,474
24
(2)
21,496
20,149
-
(31)
20,118
9. Taxes
As at 31 December 2022, tax payable with respect to subscription tax amounted to £129,000 (2021: £116,000).
A reconciliation of the tax expense and the tax at applicable tax rate is as follows:
In thousands of Sterling
Loss before tax
Income tax using the Luxembourg domestic tax rate of 24.94%
Effect of tax-exempt deductions/(income)
Subscription tax expense
Tax charge for the year
Year ended
31
December
2022
Year ended
31
December
2021
(7,986)
(1,991)
(1,991)
1,991
515
515
(497)
497
459
459
The Company, as an undertaking for collective investment, pays an annual subscription tax of 0.05 per cent on its consolidated NAV. For the year ended 31
December 2022, the Company incurred a subscription tax charge of £515,000 (2021: £459,000).
10. Cash and cash equivalents
Cash and cash equivalents relate to bank deposits amounting to £18,738,000 (2021: £11,311,000).
11. Share capital
Changes in the Company´s share capital are as follows:
In thousands of Sterling
Share capital as at 1 January
Issuance of ordinary shares through placing
Share capital issued through scrip dividends
Shares issued as share based compensation
Shares issuance cost
31
December
2022
31
December
2021
850,355
-
1,092
971
(27)
772,640
75,000
1,978
1,844
(1,107)
852,391
850,355
BBGI Management HoldCo S.à r.l. ('MHC'), a wholly owned direct subsidiary of the Company, provides share-based compensation to senior executives
whereby issues a certain number of shares of the Company to entitled executives calculated based on the conditions of the Long-Term Incentive Plan
('LTIP') rules and the respective LTIP Award letters. During the year, the Company issued 346,203 shares, in connection with the 2018 LTIP award at 174.3
pence per share for a total amount of £604,000 (2021: £1,844,000). The amount of £604,000 was recorded as an advance made by the Company to MHC
during the year (2021: £618,000).
Deferred STIP
MHC introduced a bonus deferral with one-third of any bonus earned under the STIP is being deferred into shares of the Company for three year holding
period. The deferral component of the STIP differs from the Company's share-based compensation as there are no further vesting conditions on this earned
bonus. The amount of £366,000 was recorded as an advance made by the Company to MHC during the year (2021: £618,000).
The changes in the number of ordinary shares of no-par value issued by the Company are as follows:
In thousands of shares
In issue at beginning of the year
Shares issued through placing of ordinary shares
Shares issued through scrip dividends
Shares issued as share based compensation
31
December
2022
31
December
2021
712,126
-
649
556
664,691
45,181
1,155
1,099
713,331
712,126
All of the ordinary shares issued rank pari passu. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are
entitled to one vote per share at general meetings of the Company.
The Company meets the minimum share capital requirement as imposed under the applicable Luxembourg regulation.
Dividends
The dividends declared and paid by the Company during the year ended 31 December 2022 are as follows:
In thousands of Sterling except as otherwise stated
2021 2nd interim dividend of 3.665 pence per qualifying ordinary share - for the period
1 July 2021 to 31 December 2021
2022 1st interim dividend of 3.740 pence per qualifying ordinary share- for the period
31
December
2022
26,099
1 January 2022 to 30 June 2022
Total dividends declared and paid during the year
26,676
52,775
The 31 December 2021 2nd interim dividend was paid in April 2022. The value of the scrip election was £964,000, with the remaining amount of £25,135,000
paid in cash to those investors that did not elect for the scrip.
The 30 June 2022 1st interim dividend was paid in October 2022. The value of the scrip election was £127,000 with the remaining amount of £26,548,000
paid in cash to those investors that elected for a cash dividend.
The dividends declared and paid by the Company during the year ended 31 December 2021 are as follows:
In thousands of Sterling except as otherwise stated
2020 2nd interim dividend of 3.590 pence per qualifying ordinary share - for the period
1 July 2020 to 31 December 2020
2021 1st interim dividend of 3.665 pence per qualifying ordinary share- for the period
1 January 2021 to 30 June 2021
Total dividends declared and paid during the year
31
December
2021
23,863
26,068
49,931
The 31 December 2020 2nd interim dividend was paid in April 2021. The value of the scrip election was £514,000, with the remaining amount of £23,349,000
paid in cash to those investors that did not elect for the scrip.
The 30 June 2021 1st interim dividend was paid in October 2021. The value of the scrip election was £1,464,000 with the remaining amount of £24,604,000
paid in cash to those investors that elected for a cash dividend.
Net asset value ('NAV')
The Company NAV and NAV per share as of 31 December 2022, 31 December 2021 and 31 December 2020 were as follows:
In thousands of Sterling/pence
2022
2021
2020
NAV attributable to the owners of the Company
629,991
689,231
663,897
NAV per ordinary share (pence)
88.32
96.78
99.88
12. Financial risk and capital risk management
The Company has exposure to the following risks from financial instruments:
- Credit risk
- Liquidity risk
- Market risk
This note presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes for measuring
and managing risk and the Company's management of capital. This note also presents the result of the review performed by management on the above-
mentioned risk areas.
Risk management framework
The Management Board has overall responsibility for the establishment and control of the Company's risk management framework.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the
Company, resulting in:
1) impairment or reduction in the amounts recoverable from receivables and other current and non-current assets; and
2) non-recoverability, in part or in whole, of cash and cash equivalents deposited with banks.
A significant part of receivables of the Company are receivables from a subsidiary. This subsidiary has the ability to pay based on the projected cash flows to
be received by such subsidiary from their respective investments.
Exposures to credit risks
The Company is exposed to credit risks on the following items in the Company's statement of financial position:
In thousands of Sterling
Loans and other receivable to subsidiary (including accrued interest)
Cash and cash equivalents
31
December
2022
31
December
2021
292,039
18,738
344,366
11,311
310,777
355,677
The maximum exposure to credit risk on receivables that are neither overdue nor impaired as of 31 December 2022, amounts to £292,039,000 (2021:
£344,366,000).
Recoverable amounts of receivables and other current and non-current assets
The Company establishes when necessary an allowance for impairment, based on ECL specific to the asset. Currently there are no recorded allowances for
impairment. All the Company's receivables are recoverable and no significant amounts are considered as overdue, impaired or subject to ECL.
Cash and cash equivalents
The cash and cash equivalents are maintained with reputable banks with ratings that are acceptable based on the established internal policy of the
Company. Based on the assessment of the Management Board, there are no significant credit risks related to the cash and cash equivalents. The main
counterparty banks of the Company have S&P/Moody's credit rating between A+/Aa3 and AA-/Aa2.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset.
The Company's policy over liquidity risk is that it will seek to have sufficient liquidity to meet its liabilities and obligations when they fall due.
The Company manages liquidity risk by maintaining adequate cash and cash equivalents and access to borrowing facilities to finance day-to-day operations
and medium to long-term capital needs. The Company also regularly monitors the forecast and actual cash requirements and matches the maturity profiles
of the Company's financial assets and financial liabilities.
The Company has the possibility to raise capital through the issuance of shares in order to finance further acquisitions.
The following are the undiscounted contractual maturities of the financial liabilities of the Company:
31 December 2022
In thousands of Sterling
Trade and other payables
Advances from subsidiary
31 December 2021
In thousands of Sterling
Trade and other payables
Advances from subsidiary
Carrying
amount
1,200
34,496
35,696
Carrying
amount
1,125
15,990
17,115
Contractual cash flows
Within
1 year
Total
1-5
years
1,200
34,496
1,200
34,496
35,696
35,696
-
-
-
Contractual cash flows
Total
1,125
15,990
Within
1 year
1,125
15,990
17,115
17,115
1-5
years
-
-
-
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Company's income or the
value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the returns.
Currency Risk
The Company is exposed to currency risk as a result of its cash and cash equivalents being denominated in currencies other than Sterling. The currencies in
which these items are primarily denominated are Australian Dollar (A$), Canadian Dollar (C$), Euro (€), Norwegian Krone (NOK) and US Dollar (US$).
In respect of other monetary assets and liabilities denominated in currencies other than Sterling, the Company's policy is to ensure that its net exposure is
kept at an acceptable level. The management believes that there is no significant concentration of currency risk in the Company.
The summary of the quantitative data about the Company's exposure to foreign currency risk provided to the management is as follows:
31 December 2022
In thousands of Sterling
Cash and cash equivalents
Trade and other payables
31 December 2021
In thousands of Sterling
Cash and cash equivalents
Trade and other payables
A$
13
-
13
A$
12
-
12
C$
7
-
7
C$
8
-
8
€
277
(745)
(468)
€
331
(641)
(310)
NOK
2
-
US$
1
-
2
1
NOK
2
-
US$
1
-
2
1
The Company has loans and receivables from MHC denominated in foreign currency but the Company is not exposed to fluctuations in foreign exchange
rates in relation to these receivables due to the foreign exchange indemnity agreement entered into between the Company and MHC (see Note 13).
The significant exchange rates applied during the year ended 31 December 2022 and 31 December 2021 are as follows:
A$ 1
C$ 1
€ 1
NOK 1
US$ 1
A$ 1
C$ 1
€ 1
NOK 1
US$ 1
31 December 2022
Average £
Spot rate £
0.562
0.623
0.853
0.084
0.811
0.564
0.610
0.885
0.084
0.827
31 December 2021
Average
£
Spot rate £
0.546
0.580
0.860
0.085
0.727
0.537
0.583
0.840
0.084
0.740
The impact of a strengthening or weakening of Sterling against the A$, C$, NOK and U$, as applicable, by 10 per cent at 31 December 2022 and 31
December 2021 would not have a significant impact on the Company's statement of comprehensive income and net equity. This assumes that all other
variables, in particular, interest rates, remain constant and ignores any impact of forecast revenues, hedging instruments and other related costs.
Fair values versus carrying amounts
The below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
- Level 2: inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The carrying amounts of cash and cash equivalents, receivables and payables approximates their fair value due to their short-term nature with maturity of
one year or less, or on demand.
The fair value of loans and other receivables from subsidiary and investment in subsidiary, with a total carrying value of £635,108,000 (2021: £681,167,000),
amounts to £1,104,000 (2021: £976,249,000). The fair value of these loans receivable and investment in subsidiary is determined by discounting the future
cash flows to be received from such assets using applicable market rates (Level 3).
Capital risk management
The Company's objective when managing capital is to ensure the Company's ability to continue as a going concern in order to provide returns to
shareholders and benefits for further stakeholders and to maintain an optimal capital structure. The Company views the share capital (see Note 11) as
capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders, return capital to shareholders,
avail of additional debt financing, pay down debt, or issue new shares.
The Company regularly reviews compliance with Luxembourg regulations regarding restrictions on minimum capital. During the year, the Company
complied with all externally imposed capital requirements and made no changes in its approach to capital management.
The portfolio continued its strong performance over the reporting period with no material adverse effect on valuation. This strong performance is primarily
as a result of the Company holding a low-risk, 100 per cent availability-style underlying portfolio, coupled with strong stakeholder collaboration during the
reporting period.
13. Related parties and key contracts
Supervisory Board fees
During the year 31 December 2022, the aggregate remuneration paid to the Supervisory Board was £260,000 (2021: £220,000).
Loans and receivables from subsidiary - multicurrency facility agreement
On 1 January 2017, the Company as a lender and MHC as a borrower, entered into a multicurrency credit facility agreement ('MCF'). Pursuant to this
agreement the Company has and will continue to make available an interest-bearing loan to MHC for the purposes of funding its initial and subsequent
acquisitions of interests in PPP/PFI portfolio. The maximum amount that can be withdrawn from the MCF is £680,000,000. The Company engages a third-
party transfer pricing specialist to determine the reasonable ranges of interest rates to be applied on borrowings under the MCF.
Movements in the MCF during the year are as follows:
In thousands of Sterling
1 January
Additions
Capitalisation of interest under MCF
Principal payments received
Foreign exchange movements
31
December
2022
31
December
2021
243,638
-
94
(5,253)
4,733
217,182
36,398
83
(5,060)
(4,965)
243,212
243,638
During the year, the finance income from the MCF amounted to £21,474,000 (2021: £20,149,000).
Loans receivable from subsidiary - interest free loan agreements
The Company has entered into various interest free loan agreements ('IFL') with MHC, an indirect 100 per cent owned subsidiary. These IFLs have a term of
one year with the possibility to extend and to introduce an arm's length interest rate. The details of the interest free loans receivable from MHC is as follows:
In thousands of Sterling
IFL receivable from MHC
Interest and other receivables from subsidiary
The details of the interest and other receivables from subsidiary are as follows:
In thousands of Sterling
Interest receivable from MCF
31
December
2022
31
December
2021
37,663
91,968
31
December
2022
31
December
2021
11,164
8,760
Foreign exchange indemnity agreement
The Company and MHC have entered into a foreign exchange indemnity agreement (Indemnity Agreement) whereby the Company will indemnify MHC for
any net losses incurred by MHC in relation to foreign exchange movements, including losses incurred on foreign exchange forward contracts. The
agreement also stipulates that where MHC makes a net gain on foreign transactions, then it shall pay an equivalent amount to the Company. As at 31
December 2022, the Company recorded an Indemnity Agreement expense amounting to £22,326,000 (2021: £6,965,000).
Support agreement with MHC
The Company and MHC have entered into a support agreement (Support Agreement) whereby MHC provides support and assistance to the Company with
respect to the day-to-day operations. As at 31 December 2022, the Company recorded Support Agreement expenses amounting to £8,914,000 (2021:
£6,982,000).
Advances from subsidiary
This account is non-interest bearing and relates to remaining liabilities arising from the foreign exchange indemnity agreement, support agreement and
other unsettled advances received from MHC that is usually settled in the next 12 months. Advances from subsidiary as at 31 December 2022 amounted to
£34,496,000 (2021: £15,990,000).
14. Investment in subsidiary
The Company's total equity investment in MHC amounted to £354,233,000 as of 31 December 2022 (2021: £350,453,000). The movements in the Company's
investment in MHC are as follows:
In thousands of Sterling
1 January
Additional investment through capital contribution
31
December
2022
31
December
2021
350,453
3,780
333,048
17,405
354,233
350,453
The Company's investments in PPP/PFI portfolio, were made and will continue to be made through MHC.
15. Commitments and contingencies
The Company is an obligor under the Group's Revolving Credit Facility ('RCF'), and as a result has pledged all its current and future financial assets and
shares in its investments in subsidiary.
Based on the provisions of the RCF, where there is a continuing event of default by MHC as borrower, the lenders will, among other things, have the right to
cancel all commitments and declare all or part of utilisations to be due and payable, including all related outstanding amounts, and exercise or direct the
security agent to exercise any or all of its rights, remedies, powers or discretions under the RCF. There was £57,484,000 outstanding principal from the RCF
as at the 31 December 2022.
16. Standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2023 and earlier application is
permitted; however, the Company has not early adopted any of the forthcoming new or amended standards in preparing these financial statements. The
Company intends to adopt these new and amended standards, if applicable, when they become effective. The adoption of the below new standards is not
expected to have a significant impact on the Company's financial statements.
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies
The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their
'significant' accounting policies with a requirement to disclose their 'material' accounting policies and adding guidance on how entities apply the concept of
materiality in making decisions about accounting policy disclosures.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
The amendments specify the requirements for classifying liabilities as current or non-current and clarify:
§ What is meant by a right to defer settlement
§ That a right to defer must exist at the end of the reporting period
§ That classification is unaffected by the likelihood that an entity will exercise its deferral right
§ That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms
of a liability not impact its classification
Definition of Accounting Estimates - Amendments to IAS 8
The amendments introduce a definition of 'accounting estimates' and clarify the distinction between changes in accounting estimates and changes in
accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates.
17. Events after the reporting period.
Dividend declaration
In February 2023, the Company declared a 2nd interim dividend of 3.74 pence per share with scrip alternative for qualifying shareholders for the period 1
July - 31 December 2022. The dividend is expected to be paid in April 2023.
Board Members, Agents and Advisers
Supervisory Board
· Sarah Whitney (Chair)
Management Board
· Duncan Ball
· Howard Myles (retired on 29 April 2022)
· Michael Denny
· Jutta af Rosenborg
· Christopher Waples
· Andrew Sykes (appointed as of 29 April 2022)
· June Aitken (appointed as of 29 April 2022)
Registered Office
EBBC, 6E route de Trèves
L-2633 Senningerberg
Grand Duchy of Luxembourg
Central Administrative Agent, Luxembourg Registrar
and Transfer Agent, Depositary and Principal Paying
Agent
RBC Investor Services Bank S.A.
14 Porte de France
L-4360 Esch-sur-Alzette
Grand Duchy of Luxembourg
Depository
Link Market Services Trustees Limited
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
United Kingdom
· Frank Schramm
Receiving Agent and UK Transfer Agent
Link Market Services Trustees Limited
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
United Kingdom
Communications Adviser
H/Advisors Maitland
3 Pancras Square
London N1C 4AG
United Kingdom
Auditors
PricewaterhouseCoopers, Société cooperative
2 rue Gerhard Mercator
B.P. 1443
L-1014 Luxembourg
Grand Duchy of Luxembourg
Corporate Brokers
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
United Kingdom
EEA based Centralised Securities Depository
LuxCSD
42 Avenue John F. Kennedy
L-1855 Luxembourg
Grand Duchy of Luxembourg
Corporate Brokers
Winterflood Securities Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
Luxembourg CSD Principal Agent
Banque Internationale à Luxembourg
69 route d'Esch
Office PLM 018A
L-2953 Luxembourg
Grand Duchy of Luxembourg
Registre de Commerce et des Sociétés Luxembourg B163879
Listing
Chapter 15 premium listing, closed-ended investment company
Trading Main Market
ISIN
LU0686550053
SEDOL
B6QWXM4
Ticker
BBGI
Indices
FTSE 250, FTSE 350, FTSE 350 High Yield and FTSE All-Share
Glossary
Abbreviation / Term
Definition
AIC
AGM
AIC Code
AIC SORP
AIF
The UK Association of Investment Companies, the trade association for closed-ended
investment companies in the UK
Annual General Meeting of the Company's shareholders
The 2019 AIC Code of Corporate Governance
Standard of Recommended Practices issued by the AIC
Alternative Investment Fund
AIFM Law / 2013 Law
The Luxembourg amended law of 12 July 2013 on Alternative Investment Fund
Managers
AIFMD
APM
EU Alternative Investment Fund Managers Directive
Alternative Performance Measures
Availability-style
Availability-style, unlike 'demand-based' means that revenues are paid provided the
asset is available for use
BBGI / Company
BBGI Global Infrastructure S.A.
Carbon neutral
Circular 18/698
a state where the residual GHG emissions have been balanced out by financing
activities that remove atmospheric CO2 ('offsets')
CSSF circular 18/698, published 23 August 2018, concerning Authorisation and
organisation of investment fund managers incorporated under Luxembourg law;
Specific provisions on the fight against money laundering and terrorist financing
applicable to investment fund managers and entities carrying out the activity of
registrar agent
Corporate Emissions
GHG emissions that pertain to our business activities
CSSF
CPI
DTR
ECL
EIR
ESG
ESMA
FCA
Commission de Surveillance du Secteur Financier, the public institution that supervises
the professionals and products of the Luxembourg financial sector, including the
Company
Consumer Price Index
The UK Disclosure Guidance and Transparency Rules
Expected Credit Losses
Effective Interest Rate
Environmental, Social and Governance
European Securities and Markets Authority
the UK Financial Conduct Authority
Financed Emissions
GHG emissions from our investments
FRC
Financial Reporting Council, the UK's regulator of auditors, accountants and actuaries,
and responsible for setting the UK's Corporate Governance and Stewardship Codes
FRC Code
The UK Corporate Governance Code 2018
GDP
GHG
Group
IFRS
Gross Domestic Product
Greenhouse Gas
The Company and its subsidiaries
International Financial Reporting Standards as adopted by the European Union
Investments at FVPL
Investments at fair value through profit or loss
IPO
KPI
LIBOR
LIFT
LTIP
Initial Public Offering
Key Performance Indicator
London Interbank Offered Rate
The UK's Local Improvement Finance Trust
Long-Term Incentive Plan
Management Board
The Executive Directors of the Company
NAV
NED
NPPR
NZAM
O&M
Offsets
Net Asset Value
Independent Non-Executive Director, a member of the Supervisory Board
The UK's National Private Placement Regime
The Net Zero Asset Managers Initiative
Operation and Maintenance
Removing CO2 from the atmosphere, by financing projects which are either creating
natural carbon dioxide sinks or technology that captures carbon dioxide from the air.
The long-term removals must be measurable, verifiable, permanent and additional.
Offsets cannot be done in isolation to combat climate change, they must be supported
by science-based targets and GHG reduction pathways
OGC
Ongoing Charges
Pathways
Net zero pathways show how much and how quickly companies need to reduce their
GHG emissions to reach their science-based GHG reduction targets
PFI
PPP
PwC
RCF
RPI
Private Finance Initiative
Public Private Partnership
PricewaterhouseCoopers société cooperative, the Company's External Auditor
Revolving Credit Facility for up to £230 million, with the possibility of increasing the
quantum to £300 million by means of an accordion provision, and matures in May 2026
Retail Price Index
Science-based targets
Targets adopted by companies to reduce GHG emissions are considered 'science-based'
if they follow a pathway that is consistent with the latest climate science and keeping
warming to below 1.5°C
SDG, SDGs
The UN Sustainable Development Goals
SFDR
SONIA
STIP
Sustainable Finance Disclosure Regulation
Sterling Overnight Index Average
Short-Term Incentive Plan
Supervisory Board
The independent Non-Executive Directors of the Company
TCFD
TSR
UNGC
Task Force on Climate-Related Financial Disclosures
Total Shareholder Return
UN Global Compact
Cautionary Statement
Certain sections of this Annual Report, including, but not limited to, the Chair's Statement and the Strategic Report of the Management Board, have been
prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. This
additional information should not be relied on by any other party or for any other purpose.
These sections may include statements that are, or may be deemed to be, 'forward-looking statements'. These forward-looking statements can be identified
using forward-looking terminology, including the terms: 'believes', 'estimates', 'anticipates', 'forecasts', 'projects', 'expects', 'intends', 'may', 'will' or 'should'
or, in each case, their negative or other variations or comparable terminology.
These forward-looking statements include matters that are not historical facts. They appear throughout this document and include statements regarding
the intentions, beliefs or current expectations of the Management and Supervisory Boards concerning, among other things, the investment objectives and
investment policy, financing strategies, investment performance, results of operations, financial condition, liquidity, prospects and distribution policy of the
Group, and the markets in which it invests.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not
occur in the future. Forward-looking statements are not a guarantee of future performance. The Group's actual investment performance, results of
operations, financial condition, liquidity, distribution policy and the development of its financing strategies may differ materially from the impression
created by the forward-looking statements contained in this document.
Subject to their legal and regulatory obligations, the Management and Supervisory Boards expressly disclaim any obligations to update or revise any
forward-looking statement contained herein to reflect any change in expectations with regard thereto or any change in events, conditions, or circumstances
on which any statement is based.
In addition, these sections may include target figures and guidance for future financial periods. Any such figures are targets only and are not forecasts.
This report has been prepared for the Group, and therefore gives greater emphasis to those matters that are significant to BBGI Global Infrastructure S.A.
and its subsidiaries when viewed as a whole.
[i] Social infrastructure refers to public infrastructure assets and services and includes education, healthcare, blue light (fire and police), affordable housing, modern correctional facilities, clean energy and transport
infrastructure assets. In exchange for the provision of these assets and services, BBGI receives a revenue stream that is paid directly by the public sector.
[ii] Refer to the Alternative Performance Measures section of this Annual Report for further details.
[iii] Pence per share (pps).
[iv] Inflation linkage of 0.5 per cent means that if inflation is one percentage point higher than our modelled assumptions for all future periods then our portfolio returns will increase from 6.9 per cent to 7.4 per cent.
[v] Availability-style means revenues are paid provided the assets are available for use, so our portfolio has no exposure to demand-based or regulated investments.
[vi] Source: Standard & Poor's credit ratings.
[vii] In comparison to the latest publicly available information for all closed-ended, LSE-listed equity infrastructure investment companies.
[viii] Paris Aligned Investment Initiative Net Zero Investment Framework specific guidance for the Infrastructure sector https://www.iigcc.org/download/iigcc-paii-infrastructure-consultation/?
wpdmdl=5961&refresh=63f715ed3f4cc1677137389
[ix] SFDR disclosure requirements. The Company is designated as an Article 8 Fund under SFDR and will report on criteria for a socially beneficial investment.
[x]
In comparison to the latest publicly available information for all closed-ended, LSE-listed equity infrastructure investment companies.
[xi] After adjusting for the balance sheet hedge position of £2.9 million.
[xii]
For the purpose of this illustration, when a project has more than one FM contractor and/or O&M contractor, the exposure is allocated equally among the contractors.
[xiii] Source: https://www.whitecase.com/insight-our-thinking/looking-ahead-future-us-infrastructure
[xiv] The FTSE All-Share, ten-year data represents the ten years preceding 31 December 2022.
[xv] These are targets only and are not a profit forecast. There can be no assurance that these targets will be met or that the Company will make any distribution at all.
[xvi] See the Risk Section for further details.
[xvii] Based on the portfolio composition on the date the balance sheet hedge contracts are entered into.
[xviii] The Company assumes an equal and offsetting amount between running costs and Euros received into the future.
[xix] Calculated using the Morningstar methodology.
[xx] 2022 market-based Corporate Emissions: -13.7% reduction compared to 2019.
[xxi] The 2022 LTIP award was granted in February 2023 with effect December 2022. The vesting period under these awards is from December 2022 to December 2025.
[xxii] The Co-CEOs, Duncan Ball and Frank Schramm, are paid in Canadian Dollars and Euro, respectively. The CFO is paid in Euro.
[xxiii] This minimum holding is calculated based on the Director's salary at 1 May 2020 and is fixed for three years.
[xxiv] The detail provided in the table above goes significantly beyond that required to be disclosed under the relevant Luxembourg law.
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