ANNUAL REPORT
AND FINANCIAL
STATEMENTS 2022
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OUR PURPOSE IS TO INVEST RESPONSIBLY
IN SOCIAL AND PUBLIC INFRASTRUCTURE
THAT DELIVERS LONG-TERM BENEFITS FOR
ALL STAKEHOLDERS.
We aim to provide our investors with stable, long-term, inflation-
linked returns, based on growing dividends and the potential for
capital appreciation.
We expect to achieve this by investing in a diversified portfolio
of infrastructure assets and businesses which, through our
active management, meets societal and environmental needs
both now and into the future.
OVERVIEW
Strategic report
corporate governance
Financial StatementS
COMPANY FACTS
– London Stock Exchange trading code: INPP.L
– Member of the FTSE 250 and FTSE All-Share indices
– £2.9 billion market capitalisation at 31 December 2022
– 1,911 million shares in issue at 31 December 2022
– Eligible for ISA/PEPs and SIPPs
– Guernsey incorporated company
– International Public Partnerships Limited (the
‘Company’, ‘INPP’, the ‘Group’ (where including
consolidated entities)) shares are excluded from the
Financial Conduct Authority’s (‘FCA’s’) restrictions,
which apply to non-mainstream investment products,
and can be recommended by independent financial
advisers to their clients
– Registered company number: 45241
CONTENTS
COMPANY OVERVIEW
02 Full-Year Financial Highlights
03 Responsible Investment Highlights
04
Investment Case
STRATEGIC REPORT
06 Business Model – Delivering Long-term
Benefits
08 Objectives and Performance
10 Chair’s Letter
12 Top 10 Investments
14 Case Study – OFTO Portfolio
16 Operating Review
18 Current Pipeline
20 Market Environment in 2022 and
Future Opportunities
22 Operating Review
38 Responsible Investment
48 Continuous Risk Management
CORPORATE GOVERNANCE
61 Summary of Investment Policy
62 Board of Directors
64 Corporate Governance Report
73 Audit and Risk Committee Report
76 Directors’ Report
77 Directors’ Responsibilities Statement
FINANCIAL STATEMENTS
78
Independent Auditor’s Report to
the Members of International Public
Partnerships Limited
84 Consolidated Financial Statements
88 Notes to the Consolidated Financial
Statements
GLOSSARY
Certain words and terms used throughout this Annual Report and financial
statements are defined in the Glossary on pages 104 to 106. Where alternative
performance measures (‘APMs’) are used, these are identified by being marked
with an * and further information on the measure can be found in the Glossary.
107 Glossary
110 Key Contacts
111 Annex – SFDR periodic reporting
requirements (unaudited)
COVER IMAGES
Front cover: Durham Regional Courthouse, Ontario, Canada
Photo credit: WZMH Architects
Inside cover: Thames Tideway Tunnel, UK
Photo credit: Tideway
View our company website
www.internationalpublicpartnerships.com
International Public Partnerships Limited
Annual Report and financial statements 2022
01
FULL-YEAR
FINANCIAL HIGHLIGHTS
We aim to provide our investors with stable, long-term, inflation-linked
returns, based on growing dividends and the potential for capital
appreciation.
DIVIDENDS
7.74p
2022 full-year dividend per share1*
2023 full-year dividend target per share2* 8.13p
7.93p
2024 full-year dividend target per share2
c.2.5%
2022 dividend growth*
(2021: c.2.5%)
1.3X
Cash dividend cover3*
(2021: 1.1x)
NET ASSET VALUE (‘NAV’)4*
TOTAL SHAREHOLDER RETURN (‘TSR’)*
£3.0bn
NAV at 31 December 20224
(2021: £2.5bn)
159.1p
NAV per share at 31 December 20224
(2021: 148.2p)
222.6%
TSR since Initial Public Offering (‘IPO’)5
20.2%
Increase in NAV
(2021: 6.1%)
7.3%
Increase in NAV per share*
(2021: 0.7%)
7.5%
Annualised TSR since IPO5
PORTFOLIO ACTIVITY
REAL RETURNS
PROFIT
£191.6m
Cash investments made during 20226
(2021: £252.7m)
0.7%
Portfolio inflation-linked returns*
at 31 December 20227
(2021: 0.7%)
£326.8m
Profit before tax
(2021: £129.2m)
1 The forecast date for payment of the dividend relating to the six months to 31 December 2022 is 7 June 2023.
2 Future profit projection and dividends cannot be guaranteed. Projections are based on current estimates and may vary in future.
3 Cash dividend payments to investors are paid from net operating cash flow before capital activity* as detailed on pages 28 to 29.
4 The methodology used to determine the NAV is described in detail on pages 30 to 37.
5 Since inception in November 2006. Source: Bloomberg. Share price appreciation plus dividends assumed to be reinvested.
6 As at 31 December 2022, this includes cash investments made only. In addition, investment commitments of c.£120.4 million were made.
7
Calculated by running a ‘plus 1.0%’ inflation sensitivity for each investment and solving each investment’s discount rate to return the original valuation. The inflation-linked return is the
increase in the portfolio weighted average discount rate.
02
International Public Partnerships Limited
Annual Report and financial statements 2022
OVERVIEW
Strategic report
corporate governance
Financial StatementS
RESPONSIBLE
INVESTMENT HIGHLIGHTS
The Company supports the 2030 Agenda for Sustainable Development
adopted by the UN Member States in 2015.
Alignment with the UN Sustainable Development Goals (‘SDGs’)
is a key part of the Company’s approach to Environmental Social
and Governance (‘ESG’) integration and demonstrating the positive
environmental and social characteristics of its investments. Currently,
100% of our investments support at least one SDG and some of the
key contributions are demonstrated below:
SDG
POSITIVE ENVIRONMENTAL AND
SOCIAL CHARACTERISTICS
PORTFOLIO SDG ALIGNMENT
>173,000
Students attending schools developed and maintained
by the Company
15%
37,000,000m3
The three components of the London Tideway
Improvements will work conjunctively to reduce discharges
in a typical year by c.37 million cubic metres
14%
>2,700,000
Estimated equivalent number of homes powered
by renewable energy transmitted through offshore
transmission (‘OFTO’) investments
>154,000,000
Annual passenger journeys through sustainable
transport investments
23%
23%
For further information on the Company’s contribution to Responsible Investment, please see pages 38 to 47 and the Company’s Sustainability Report.
International Public Partnerships Limited
Annual Report and financial statements 2022
03
INVESTMENT CASE
01
PREDICTABLE, LONG-TERM,
INFLATION-LINKED CASH FLOWS
Continuing to deliver consistent financial
returns for investors through dividends and
capital growth.
– Resilient, inflation-linked cash flows
– Focus on growing predictable dividends
– Principally regulated or contracted
government-backed revenues
– Originate investments with stable, long-
term cash flows and potential growth
attributes, whilst maintaining a balanced
portfolio of assets
02
RESPONSIBLE APPROACH
TO INVESTMENT
The Company is committed to integrating
ESG considerations across the investment
lifecycle. In doing so, it aims to reduce risk,
drive value creation and provide benefits
for its stakeholders.
– Article 8 Financial Product, as
categorised under Sustainable Finance
Disclosure Regulation (‘SFDR’)
– Positive environmental and social
characteristics
– Alignment with UN-backed Principles for
Responsible Investment (‘PRI’), SDGs
and the Task Force on Climate-related
Financial Disclosures (‘TCFD’)
For more see pages 28 to 29
For more see pages 38 to 47
PROJECTED INVESTMENT RECEIPTS
PROJECTED INVESTMENT RECEIPTS
Investment Receipts (£ million)
450
400
350
300
250
200
150
100
50
0
2
0
2
3
2
0
2
4
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2
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2
8
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2
9
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3
0
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3
1
2
0
3
2
2
0
3
3
2
0
3
4
2
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3
5
2
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3
6
2
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3
7
2
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8
2
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9
2
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4
0
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4
1
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4
2
2
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4
3
2
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4
4
2
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4
5
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4
6
2
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4
7
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4
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1
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7
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9
2
1
5
0
Gold Coast Light Rail, Australia
Photo credit: TransLink, Department of Transport and Main Roads
This chart is not intended to provide any future profit forecast. Cash flows shown are
projections based on the current individual asset financial models and may vary in
future. Only investments committed as at 31 December 2022 are included.
04
International Public Partnerships Limited
Annual Report and financial statements 2022
OVERVIEW
Strategic report
corporate governance
Financial StatementS
03
DIVERSIFIED PORTFOLIO OF LOW-
RISK INFRASTRUCTURE ASSETS
The Company seeks to build a diversified
portfolio of investments with low exposure
to market demand risks.
– Investing in infrastructure assets
delivering essential public services
– Investments are diversified across
sectors and developed geographies
– Low correlation to other asset classes
– Active management of assets to
mitigate risks and create value for
all stakeholders
04
SPECIALIST INVESTMENT ADVISER
The Company has a long-standing
relationship with Amber Infrastructure
Limited (‘Amber’, the ‘Investment Adviser’).
Amber has sourced and managed the
Company’s assets since IPO in 20061.
– Amber is a specialist international
infrastructure investment manager and
one of the largest independent teams
in the sector with over 170 employees
internationally
– Amber adopts a full-service approach
and is a leading investment originator,
asset and fund manager with a
strong track record
– Local presence with personnel and
offices across the geographies in
which the Company invests
For more see pages 22 to 27
For more see pages 22 to 27
BOARD AND
COMMITTEES
FUND LEVEL REPORTING
AND BOARD SUPPORT
INVESTMENT
PORTFOLIO
REPRESENTATION AT
ASSET BOARD LEVEL
FINANCIAL AND ACTIVE
ASSET MANAGEMENT
East Anglia One OFTO, UK
STRONG AND SUSTAINABLE
STEWARDSHIP OF PORTFOLIO
1
The Company has a first right of refusal over qualifying infrastructure assets identified by Amber, and for US investments, by Amber’s long-term investor, US Group, Hunt Companies (‘Hunt’).
International Public Partnerships Limited
Annual Report and financial statements 2022
05
BUSINESS MODEL
DELIVERING LONG-TERM BENEFITS
OUR PURPOSE
WHAT WE DO
oUr pUrpoSe iS to
inveSt reSponSiBlY
in Social anD pUBlic
inFraStrUctUre tHat
DeliverS long-term
BeneFitS For all
StaKeHolDerS.
We aim to provide our
investors with stable, long-
term, inflation-linked returns,
based on growing dividends
and the potential for capital
appreciation.
We expect to achieve this
by investing in a diversified
portfolio of infrastructure
assets and businesses,
which, through our active
management, meets societal
and environmental needs
both now and into the future.
SoUrce
The Company operates a rigorous
framework of governance, incorporating
a streamlined screening, diligence
and execution process. This includes
substantive input from the Company’s
Investment Adviser and, as appropriate,
external advisers, with the Company’s
Board providing robust challenge
and scrutiny
inveSt
We seek new investments through our
extensive relationships, knowledge and
insights to:
– Enhance long-term, inflation-linked
cash flows*
– Provide opportunities to create
long-term value and enhance returns
– Ensure ESG is core to the
investment process
valUe-FocUSeD portFolio Development
– We seek a portfolio of investments with little to no exposure to market demand risks and for
which financial, macroeconomic, regulatory, ESG and country risks are well understood and
manageable
– The Investment Adviser has a strong investment team that originates attractive opportunities
in line with the Company’s investment strategy
– We continually monitor opportunities to enhance the Company’s existing investments
– The Company draws on the Investment Adviser’s award-winning sustainability programme,
‘Amber Horizons’, to inform areas for future investment
For more see pages 16 to 18
UNDERPINNED BY
eFFicient Financial management
reSponSiBle inveStment
continUoUS riSK management
View our company website
www.internationalpublicpartnerships.com
06
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
optimiSe
Using the Investment Adviser’s
highly experienced in-house asset
management team, we seek to
actively manage our investments
in order to optimise their financial,
operational and ESG performance
Deliver
Through our Investment Adviser’s
active approach to the asset
management of our investments, we
aim to ensure strong ongoing asset
performance to deliver target returns
and wider benefits for stakeholders
active aSSet management
– The Investment Adviser has an in-house asset management team dedicated to actively
managing our investments
– Where possible, the Investment Adviser will manage the day-to-day activities of our
investments internally, or will exercise our responsibilities through board representation at
asset level and engagement with management teams
– Through our Investment Adviser, we work with public sector clients, partners and service
providers to ensure investments are being managed both responsibly and efficiently to
create value for stakeholders by meeting or exceeding performance targets
– We focus on investment stewardship across the portfolio and recognise the broader
value created from our investments
For more see pages 22 to 27
– Efficient financial management of investment cash flows and working capital
– Maintaining cash covered dividends
– Ensuring cost-effective operations
For more see pages 28 to 29
– Integrated ESG considerations across the investment lifecycle
– Robust ESG objectives to build resilience and drive environmental and social progress
– Upholding high standards of business integrity and governance
For more see pages 38 to 47
– Robust risk analysis during investment origination ensures strong portfolio development
– Integrated risk management throughout the investment cycle to support strategic objectives
– Ongoing risk assessment and mitigation supports successful continuous asset performance
For more see pages 48 to 60
VALUE CREATION
inveStor retUrnS
Continuing to deliver consistent financial
returns for investors through dividend growth*
and inflation-linked returns from underlying
cash flows and providing opportunities for
potential capital appreciation
pUBlic Sector anD
otHer clientS
Providing responsible investment in
infrastructure to support the delivery of
essential public services and broader
societal objectives (e.g. supporting the path
to net zero). Our ability to deliver services
and maintain relationships with our clients
and other key stakeholders is vital for the
long-term prosperity of each investment
commUnitieS
Delivering sustainable social infrastructure
for the benefit of local communities. The
Company’s investments provide vital public
assets which strengthen communities, and
seek to provide additional benefits through
deploying investment in local economies,
job creation and by using investments to
help strengthen communities
SUpplierS anD tHeir
emploYeeS
The performance of our service providers,
supply chain and their employees is crucial
for the long-term success of our investments.
The Company promotes a progressive
approach to:
– Safe, healthy, inclusive workplaces
– Corporate social responsibility
– Opportunities for professional
development
– Staff engagement
International Public Partnerships Limited
Annual Report and financial statements 2022
07
OBJECTIVES AND PERFORMANCE
The value we provide to our investors and our wider stakeholders
is monitored using our strategic key performance indicators
(‘KPIs’). This is achieved by carefully monitoring our performance
against related strategic priorities.
INVESTOR RETURNS
STRATEGIC PRIORITIES
Delivering long-term,
inflation-linked returns
to investors
TARGET AN ANNUAL DIVIDEND INCREASE OF 2.5%
c.2.5%
Annual dividend increase achieved for 2022
(2021: c.2.5%)
TARGET A LONG-TERM TOTAL RETURN OF
AT LEAST 7.0% PER ANNUM
7.9% p.a.
IRR achieved since IPO1
(2021: 7.7%)
INFLATION-LINKED RETURNS ON A
PORTFOLIO BASIS
0.7%
Inflation-linked returns on a portfolio basis2
(2021: 0.7%)
1
2
3
4
5
6
Calculated by reference to the November 2006 IPO issue price of 100p and
reflecting NAV appreciation plus dividends paid.
Calculated by running a ‘plus 1.0%’ inflation sensitivity for each investment and
solving each investment’s discount rate to return the original valuation. The
inflation-linked return is the increase in the portfolio weighted average discount
rate. Please refer to pages 30 to 37 for further detail.
Measured by comparing forecast portfolio distributions against actual portfolio
distributions received. In the current year, actual portfolio distributions
exceeded forecast.
The Company’s Investment Adviser was awarded a 5-star rating in the UN-
backed PRI 2021 assessment. The PRI grading was updated to a numerical
system in 2021, with 5-stars being the highest awardable rating. In addition to
achieving a 5-star PRI rating, the Company’s Investment Adviser was awarded
“Best Corporate Sustainability Strategy 2021”. Please see page 41 for more
information.
Please refer to page 41 for additional ESG KPIs that are linked to the Company’s
approach to asset management.
Cash dividend payments to investors are paid from net operating cash flow before
capital activity.
08
International Public Partnerships Limited
Annual Report and financial statements 2022
valUe-FocUSeD portFolio
Development
Originate investments with stable,
long-term cash flows and potential
growth attributes, whilst maintaining
a balanced portfolio of assets
active aSSet management
Ensuring strong ongoing asset
performance
reSponSiBle inveStment
Management of material ESG factors
eFFicient Financial
management
Making efficient use of the Company’s
finances and working capital
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
NEW INVESTMENTS MEET AT LEAST THREE OF SIX ATTRIBUTES:
1. Stable, long-term returns
4. Investment secured through
2. Inflation-linked investor
cash flows
3. Early stage investor
preferential access
5. Other capital enhancement
attributes
6. Positive SDG contribution
100%
of the investments made in 2022
met at least three of the six attributes
(2021: 100%)
STRONG ONGOING ASSET PERFORMANCE AS DEMONSTRATED BY:
100%
Forecast portfolio distributions
received for 20223
(2021: 100%)
0.3%
Asset performance deductions
achieved against a target of <3%
during 2022
(2021: 0.1%)
99.8%
Asset availability achieved against
a target of >98% during 2022
(2021: 99.8%)
ROBUST INTEGRATION OF ESG
INTO INVESTMENT LIFECYCLE
POSITIVE SDG CONTRIBUTION FOR
NEW INVESTMENTS
5-stars
PRI rating4
(2021: A+)
100%
Percentage of new investments in the year that
positively support targets outlined by the SDGs5
(2021:100%)
CASH COVERED DIVIDENDS6*
COMPETITIVE ONGOING CHARGES
1.3x
Dividends fully cash covered* for 2022
(2021: 1.1x)
1.06%
Ongoing Charges Ratio for 2022
(2021: 1.18%)
International Public Partnerships Limited
Annual Report and financial statements 2022
09
CHAIR’S LETTER
Looking forward, the
Company remains confident
that its business model and
investment objectives will
continue to offer a
significant degree
of protection
for our investors.
MIKE GERRARD
CHAIR
CASH DIVIDEND COVER1
1.3x
PORTFOLIO INFLATION-LINKED
RETURNS2
0.7%
FINANCIAL AND OPERATIONAL
PERFORMANCE
Over the year to 31 December 2022, the
Company’s NAV per share4 increased by
10.9 pence to 159.1 pence (31 December
2021: 148.2 pence). This reflects an
increase in the fair value of the Company’s
investments over the year, driven by, among
other factors, the positive impact of the
portfolio’s inflation-linkage (0.7%)2.
I am pleased to also report that the
Company recorded a cash dividend cover
of 1.3x1, while delivering further dividend
growth. This level of dividend cover was
achieved in part again due to the high level
of inflation correlation within the portfolio,
with surplus cash having been reinvested
into attractive investment opportunities
during the year, or shortly after the year-end.
DEAR SHAREHOLDERS,
I am pleased to report that INPP has
continued to deliver strong operational and
financial performance, despite the current
ongoing international economic and political
uncertainties. The resilience of INPP’s
portfolio of essential infrastructure projects
and businesses is largely attributable
to the predictability of the underlying
investment cash flows, the high level of
inflation correlation, and the Company’s
active approach to asset management.
The Company’s achievements during the
year include:
– Successful completion of a significantly
oversubscribed £325 million capital
raising, the proceeds of which were fully
deployed to support recent investment
activity;
– Generating a total NAV return of
c.12.5%3; and
– Further developing the Company’s ESG
strategy, including through categorisation
as an Article 8 financial product (‘FP’) for
the purposes of SFDR.
1 Cash dividend payments to investors are paid from net operating cash flows before capital activity as detailed on pages 30 to 37.
2
Calculated by running a ‘plus 1.0%’ inflation sensitivity for each investment and solving each investment’s discount rate to return the original valuation. The inflation-linked return is the
increase in the portfolio weighted average discount rate. Please refer to pages 30 to 37 for further detail.
3 Reflects dividends paid in the year and increase in NAV on a per share basis.
4 The methodology used to determine the NAV is described in detail on pages 28 to 29.
5 Future profit projection and dividends cannot be guaranteed. Projections are based on current estimates and may vary in future.
10
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
As a result of the Company’s performance,
the Board has declared a dividend of 3.87
pence per share for the six months to 31
December 2022, in line with its stated
dividend target of 7.74 pence per share5
for the 2022 financial year. This represents
c.2.5% growth on the prior corresponding
year and is consistent with the c.2.5%
average annual dividend growth that
has been delivered since the Company’s
inception. The dividend will be paid on
7 June 2023.
tenth UK OFTO investment, which
increased the Company’s contribution to
net zero targets.
The investments made during the year were
funded from the proceeds of the successful
£325 million capital raise that took place in
April 2022. Demand for the capital raise,
which was significantly oversubscribed,
came from both new and existing investors,
and the Company thanks all those who
participated for their support.
The Board is also pleased to reaffirm its
dividend target for 2023 of 7.93 pence
per share and provide dividend guidance
of 8.13 pence per share for 20245. The
level of dividend growth has been carefully
considered by the Board, in particular owing
to the current levels of inflation; however,
the Board has decided to maintain the
existing dividend trajectory to provide
investors with consistently growing returns
while reinvesting the surplus cash in the
Company’s strong pipeline.
The Company’s investments continue
to perform well; and the Company’s
Investment Adviser, Amber, is fully engaged
with its public sector partners and key
suppliers to ensure that the projects and
businesses in which the Company invests
remain available and operational, to deliver
for the communities which they serve.
For those investments measured by both
availability and performance standards,
for the 12 months to 31 December 2022,
the availability of those assets was 99.8%
(31 December 2021: 99.8%).
INVESTMENT ACTIVITY
There was significant investment activity
during 2022, with the Company making
investments and investment commitments
totalling over £310 million across the
energy, wastewater, social infrastructure and
transport sectors.
The largest of these was the Company’s
c.£113 million commitment to
acquire a portfolio of five high-quality
infrastructure projects in New Zealand
– demonstrating the Company’s ability
to originate investment opportunities in
new geographies and further diversify
the portfolio. There were also follow-on
investments into the Tideway project in
London and the Family Housing for Service
Personnel (‘FHSP’) projects in the US, as
well as the completion of the Company’s
Further information on the Company’s
portfolio can be found on pages 16 to 18.
INVESTMENT STEWARDSHIP
As part of our commitment to ESG
objectives, the Company continues to
develop its non-financial disclosures in
line with emerging regulations and best
practices. As previously announced, the
Company categorised itself as an Article
8 FP during 2022, and the Company and
its Investment Adviser will continue to
monitor the emerging requirements of the
EU SFDR and EU Taxonomy Regulation.
In addition, the Company has enhanced
its approach to disclosing climate change
risks and opportunities in line with the
recommendations of the TCFD.
Further information is available within the
Responsible Investment section of this
Report and within the second edition of
our Sustainability Report which has been
released alongside this Annual Report.
CORPORATE GOVERNANCE
As previously reported, Claire Whittet retired
from the Board at the 2022 Annual General
Meeting (‘AGM’), and I and my fellow
Directors would like to thank her for nine
years of dedicated service to the Company
and her always wise counsel. Following
Stephanie Coxon’s appointment in January
2022, the Board’s gender balance split
remains as 57% female and 43% male.
The Board is actively engaged with the
Company’s portfolio companies and,
during 2022, visited three of the Company’s
investments, including Cadent and two in
Germany: BeNEX and the Offenbach Police
Headquarters.
Please see more information in relation to
Corporate Governance on pages 64 to 72.
CURRENT ENVIRONMENT AND
MARKET OUTLOOK
Along with its infrastructure sector peers
and the broader listed investment trust
world, the Company’s share price has
not been immune to market volatility, as
financial markets continue to adjust to
various political and economic headwinds.
The Board notes that this is one of only a
few occasions in the Company’s 16-year
history in which the Company’s shares have
traded at a discount to NAV and, whilst
we will continue to monitor the share price
and discount carefully, we remain confident
in the robustness and reliability of the
Company’s future cash flows.
We continue to work with our Investment
Adviser to ensure strong investment
stewardship and active risk mitigation.
The Company continues to see attractive
investment opportunities, with a strong
near-term pipeline of £230 million across the
energy, transport and social infrastructure
sectors. In order to support this pipeline,
the Company has, in principle, agreed
an increase in the committed size of its
Corporate Debt Facility (‘CDF’) to £350
million and an extension of the maturity date
to June 2025. Please see more information
on page 28.
Infrastructure investment and performance
remain high priorities for governments in the
countries INPP invests in, to help achieve
economic growth, improved productivity,
decarbonisation targets and resilience to the
effects of climate change.
The Company expects to continue to
invest in line with its investment objectives,
focusing on sustainable and attractive
investment opportunities that provide stable,
inflation-linked returns and that deliver long-
term benefits for all our stakeholders.
I and my fellow Directors thank you for your
continued support.
MIKE GERRARD
CHAIR
29 March 2023
View our company website
www.internationalpublicpartnerships.com
International Public Partnerships Limited
Annual Report and financial statements 2022
11
TOP 10 INVESTMENTS
The Company’s top 10 investments by fair value at 31 December 2022
are summarised below. A complete listing of the Company’s investments
is available on the Company’s website.
CADENT
Cadent owns four of the UK’s eight
regional gas distribution networks
(‘GDNs’) and in aggregate provides gas
to approximately 11 million homes and
businesses.
LOCATION
UK
TIDEWAY
Tideway is the trading name of the
company that was awarded the licence
to design, build, finance, commission
and maintain a new 25km ‘super sewer’
under the River Thames.
LOCATION
UK
DIABOLO
Diabolo Rail Link (‘Diabolo’) integrates
Brussels Airport with the national rail
network allowing passengers to access
high-speed trains, such as Amsterdam-
Brussels-Paris and NS International trains.
LOCATION
Belgium
LINCS OFTO
The project connects the 270MW Lincs
offshore wind farm, located 8km off the
east coast of England, to the National
Grid. The transmission assets comprise
the onshore and offshore substations and
connecting cables, c.125km in length.
LOCATION
UK
ANGEL TRAINS
Angel Trains is a rolling stock leasing
company which owns more than 4,000
vehicles. Angel Trains has invested over
£5 billion in rolling stock since it was
established in 1994.
LOCATION
UK
SECTOR
Gas distribution
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
14.5%
STATUS AT 31 DECEMBER 2022
Operational
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
15.5%
% HOLDING AT 31 DECEMBER 20221
7% Risk Capital
PRIMARY SDG SUPPORTED
SECTOR
Wastewater
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
13.5%
STATUS AT 31 DECEMBER 2022
Under construction
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
9.1%
% HOLDING AT 31 DECEMBER 20221
18% Risk Capital
PRIMARY SDG SUPPORTED
SECTOR
Transport
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
7.2%
STATUS AT 31 DECEMBER 2022
Operational
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
7.0%
% HOLDING AT 31 DECEMBER 20221
100% Risk Capital
PRIMARY SDG SUPPORTED
SECTOR
Energy transmission
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
6.3%
STATUS AT 31 DECEMBER 2022
Operational
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
6.9%
% HOLDING AT 31 DECEMBER 20221
100% Risk Capital
PRIMARY SDG SUPPORTED
SECTOR
Transport
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
6.0%
STATUS AT 31 DECEMBER 2022
Operational
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
7.1%
% HOLDING AT 31 DECEMBER 20221
10% Risk Capital
PRIMARY SDG SUPPORTED
View our company website
www.internationalpublicpartnerships.com
12
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
FHSP
Mezzanine debt investments underpinned
by security over seven operational
Public-Private Partnerships (‘P3’) projects,
comprising c.21,800 family housing units
for US service personnel.
LOCATION
US
EA1 OFTO
The project connects the 714MW East Anglia
One (‘EA1’) offshore wind farm, located
c.50km off the Suffolk coast, to the National
Grid. The transmission assets comprise
the onshore and offshore substations and
connecting cables, c.245km in length.
LOCATION
UK
ORMONDE OFTO
The project connects the 150MW Ormonde
offshore wind farm, located 10km off the
Cumbrian coast, to the National Grid. The
transmission assets comprise the onshore
and offshore substations and connecting
cables, c.44km in length.
LOCATION
UK
RELIANCE RAIL
Reliance Rail is responsible for financing,
designing, delivering and maintaining
78 next-generation, electrified, ‘Waratah’
train sets serving Sydney in New South
Wales, Australia.
LOCATION
Australia
BeNEX
BeNEX is both a rolling stock leasing
company as well as an investor in train
operating companies (‘TOCs’) which
currently provide c.43 million train km of
annual rail transport.
LOCATION
Germany
SECTOR
Other
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
4.1%
STATUS AT 31 DECEMBER 2022
Operational
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
2.5%
% HOLDING AT 31 DECEMBER 20221
100% Risk Capital
PRIMARY SDG SUPPORTED
SECTOR
Energy transmission
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
3.6%
STATUS AT 31 DECEMBER 2022
Operational
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
N/A
% HOLDING AT 31 DECEMBER 20221
100% Risk Capital
PRIMARY SDG SUPPORTED
SECTOR
Energy transmission
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
3.5%
STATUS AT 31 DECEMBER 2022
Operational
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
4.2%
% HOLDING AT 31 DECEMBER 20221
100% Risk Capital and
100% Senior Debt
PRIMARY SDG SUPPORTED
SECTOR
Transport
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
2.9%
STATUS AT 31 DECEMBER 2022
Operational
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
3.7%
% HOLDING AT 31 DECEMBER 20221
33% Risk Capital
PRIMARY SDG SUPPORTED
SECTOR
Transport
% INVESTMENT FAIR VALUE 31 DECEMBER 2022
2.4%
STATUS AT 31 DECEMBER 2022
Operational
% INVESTMENT FAIR VALUE 31 DECEMBER 2021
2.8%
% HOLDING AT 31 DECEMBER 20221
100% Risk Capital
PRIMARY SDG SUPPORTED
More detail on significant movements in the Company’s portfolio for the year to 31 December 2022 can be found on pages 16 to 17
of the Operating Review.
1 Risk Capital includes project level equity and/or subordinated shareholder debt.
International Public Partnerships Limited
Annual Report and financial statements 2022
13
CASE STUDY
OFTO PORTFOLIO
DIFFERENTIATION OF
THE OPERATING MODEL
Since its IPO in 2006, the Company has
recognised the importance of responsible
investment and has been guided by
this core principle in all of its activities.
Infrastructure investment is fundamentally
a long-term business that relies on
our investments being resilient. ESG
considerations play a key role within the
Company’s investment framework and we
draw on a wide range of tools, resources
and analysis when making investment
decisions. The Company recognises the
importance that environmental and social
factors can have on the performance of
the Company’s investments. These can
be wide ranging and include risks such as
impacts of climate change, environmental
regulation or political change. By identifying,
monitoring and mitigating relevant ESG
risks, we aim to manage the outcomes
and protect the Company’s return on
investments. Equally, ESG factors can also
create investment opportunities, which
the Company is actively exploring. For
example, the trend towards low-carbon
and renewable energy is driving significant
investment opportunities in the markets the
Company invests in.
Through its Investment Adviser, the
Company stays well informed of emerging
investment trends and actively positions
itself for future opportunities. The OFTO
regime in the UK is a good example of
how the Company proactively positioned
itself to be at the forefront of an emerging
investment opportunity and as a result was
one of the first investors in the sector.
UK OFFSHORE TRANSMISSION
– A ROBUST INVESTMENT WITH
STRONG ESG CREDENTIALS
The UK continues to drive investment
and innovation in the offshore wind
sector through ambitious targets and the
deployment of new technologies.
The UK is one of the world’s largest
markets for offshore wind, with more than
10GW of cumulative installed capacity
across 38 sites. There is a further 5GW in
pre-construction, and there are plans for
a further 11GW. Sector growth has been
encouraged by the UK’s target of 40GW of
offshore wind energy by 2030, as stated
in the Ten Point Plan for a Green Industrial
Revolution. This includes 1GW generated
by floating technologies. This ambition
was increased through the British Energy
Security Strategy (‘BESS’), published in
April 2022, which aims to achieve up to
50GW of offshore wind by 2030.
BEATRICE
WM ROUGH
LINCS
DUDGEON
EAST ANGLIA ONE
GUNFLEET SANDS
RAMPION
BARROW
ORMONDE
ROBIN RIGG
Since the time of the Company’s first
investment in 2011, it has become a market
leader with a combined total of over 65
years of operational performance and
a portfolio with the capacity to transmit
nearly 3.2 GW of renewable electricity –
equivalent to the electricity needs of an
estimated 2.7 million UK homes1. The
OFTO portfolio accounts for 23% of the
Company’s portfolio by investment fair
value. These investments are not only a
good financial opportunity for the Company,
but also contribute to the UK’s carbon
reduction targets and the SDGs: SDG 7
(Affordable and Clean Energy) and SDG 13
(Climate Action).
The Board regularly reviews the composition
of the portfolio, including the concentration
of OFTOs. The Board is comfortable
with the exposure and believes they
are attractive investments with strong
environmental benefits.
THE COMPANY REACHED FINANCIAL
CLOSE ON EA1 OFTO
In December 2022, the Company
successfully reached financial close for the
long-term operation of the transmission
link to the 714MW EA1 offshore wind
farm. Located 50km off the coast of
Suffolk in East Anglia. EA1 provides the
EA1 wind farm access to transmit clean
power to more than 600,000 UK homes by
transmitting electricity generated by 102
offshore wind turbines2.
The Company expects to reach financial
close on its eleventh OFTO in 2023, Moray
East OFTO.
PRIMARY SDGS SUPPORTED
1
2
https://www.scottishpowerrenewables.com/pages/east_anglia_one.aspx.
Data provided directly from wind farm owners. Figure may vary depending on actual wind generated and transmitted, which is naturally variable.
14
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
Key facts and performance:
FINANCIAL
CLIMATE
SOCIETY
c.£690m
Capital cost – EA1
c.£2.4bn
Capital cost of OFTO portfolio
Image: Dudgeon OFTO, UK
714MW
Clean energy generation
supported by EA11
3,171MW
Clean energy generation
supported by OFTO portfolio2
630,000
Estimated equivalent number
of homes capable of being powered
by EA11
2,740,000
Estimated equivalent number of
homes capable of being powered
by the OFTO portfolio2
International Public Partnerships Limited
Annual Report and financial statements 2022
15
OPERATING REVIEW
valUe-FocUSeD portFolio Development
New investments that meet the Company’s
Investment Policy are made after assessing
their risk and return profile relative to the
existing portfolio. In particular, we seek
investments to complement the existing
portfolio through enhancing long-term,
inflation-linked cash flows and/or to provide
the opportunity for capital growth. The Board
regularly reviews the overall composition of
the portfolio to ensure it continues to remain
aligned with the Company’s investment
objectives and ensure it is achieving a
broad balance of risk. In addition, all new
investments are required to have positive
SDG contribution.
During the year, the Company invested
£191.6 million (2021: £252.7 million) and
made additional investment commitments
of £120.4 million. These opportunities were
sourced by the Investment Adviser, either
from the start of the project (e.g. early stage
developments); through increasing the
INVESTMENTS MADE DURING THE YEAR
Company’s interest in existing investments;
or accessing opportunities as a result
of the Company’s previous investments
and experience. These three origination
approaches are the Company’s preferred
routes to market, as they limit bidding in
the competitive secondary market. Details
of investment activity during 2022 are
provided below. Further details for each
of these transactions are provided on the
Company’s website.
PERFORMANCE AGAINST
STRATEGIC PRIORITY KPIs
100%
of investments made in 2022 met at
least three of the six attributes
(2021: 100%)
DESIRABLE KEY ATTRIBUTES
FOR THE PORTFOLIO INCLUDE:
1 Long-term, stable returns
2
3
4
5
Inflation-linked investor cash flows
Early stage investor (e.g. the
Company is an early stage investor in
a new opportunity developed by our
Investment Adviser)
Investment secured through
preferential access (e.g. sourced
through pre-emptive rights or through
the activities of our Investment Adviser)
Other capital enhancement
attributes (e.g. potential for additional
capital growth through ‘de-risking’
or the potential for residual/terminal
value growth)
6 Positive SDG contribution
UK PPP PORTFOLIO1
Location
Operational status
Operational
Investment
£1.5 million
DIABOLO
Location
Operational status
Operational
Investment
£4.8 million2
NDIF
Location
Operational status
Operational
Investment
£1.2 million
Investment date
June 2022
Key attributes
1
4
2
6
Primary SDG supported
Investment date
June 2022
Key attributes
6
3
2
Primary SDG supported
Investment date
Various
Key attributes
5
4
6
3
Primary SDG supported
In June 2022, the Company
acquired a further 9% investment
in Durham Building Schools for
the Future (‘BSF’), taking its
holding to 100%. At the same
time, the Company increased its
holdings in Nottingham BSF
Phases 1 and 2 by a further
8% taking its overall ownership
in each of the two schemes
to 90%. These BSF schemes
provide education facilities to
over 3,800 pupils.
During the year, a further c.£4.8
million (€5.5 million2) was drawn3.
Of the €24.0 million initially
committed, a total of €17.3
million has been drawn to date.
At the current time, no further
drawdowns are expected.
During 2022, an additional
£1.2 million was invested into
National Digital Infrastructure
Fund (‘NDIF’) as part of the
Company’s commitment to
digital infrastructure.
16
International Public Partnerships Limited
Annual Report and financial statements 2022
TIDEWAY
Location
Operational status
Under construction
Investment
£41.9 million
FHSP
Location
Operational status
Operational
Investment
£36.5 million2
EA1 OFTO
Location
Operational status
Operational
Investment
c.£105.7 million
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
Investment date
September 2022
Key attributes
1
2
3
4
Primary SDG supported
6
5
The Company increased its
holding in Tideway to c.18%,
deploying c.£42 million of
additional capital.
Tideway will provide several
significant environmental and
social benefits once operational.
Investment date
December 2022
Key attributes
1
4
6
Primary SDG supported
The Company invested
c.US$45 million into a follow-on
investment in FHSP, including
two additional interest-bearing
subordinated debt instruments
underpinned by security over
seven operational P3 FHSP
projects, comprising c.21,800
housing units located across the
US.
Investment date
December 2022
Key attributes
1
2
5
Primary SDG supported
3
6
INVESTMENT COMMITMENTS MADE DURING THE YEAR
GOLD COAST LIGHT RAIL – STAGE 3
Location
Investment date
March 2022
Operational status
In construction
Investment
£7.0 million2
NEW ZEALAND PORTFOLIO
Location
Operational status
Operational
Investment
£113.4 million2
Key attributes
1
2
3
4
Primary SDG supported
6
Investment date
December 2022
Key attributes
1
2
5
6
Primary SDG supported
INVESTMENT MADE POST-YEAR END
EALING BSF
Location
Operational status
Operational
Investment
£0.7 million
Investment date
March 2023
Key attributes
1
2
4
6
Primary SDG supported
The Company reached
financial close for the long-
term ownership and ongoing
operation of EA1 OFTO and
owns 100% of the equity and
subordinated debt.
The investment will further
increase the Company’s
contribution to a net zero carbon
economy.
The Company reached financial
close on Stage 3 of the Gold
Coast Light Rail project. The
follow-on investment arose
through the Company’s existing
30% interest in the project.
Please see more information on
page 27.
The Company agreed to acquire
a portfolio of five infrastructure
assets in New Zealand, including
three schools, a correctional
facility and a purpose-built
student accommodation facility
at the Auckland University of
Technology. The investments are
operational and delivering long-
term stable cash flows linked to
inflation.
Post-year end, in March 2023,
the Company acquired a further
20% investment in Ealing BSF,
increasing its holding to 100%.
This BSF scheme provides
education facilities to over
1,400 pupils.
1
2
3
As previously reported, the Company agreed to acquire a small portfolio of investments in December 2021, with Durham BSF and Nottingham BSF Phase 1 and 2 completing in June 2022
following the satisfaction of conditions included in the December 2021 agreement. These conditions related to the corporate restructuring of the investments, which had the impact of
reducing the investments’ defect risk prior to completion.
GBP translated value of investment.
The Company committed €24.0 million to Diabolo in December 2020 to protect Diabolo’s liquidity position and ensure compliance with its debt covenants. Please see more information on
page 24.
International Public Partnerships Limited
Annual Report and financial statements 2022
17
OPERATING REVIEW
valUe-FocUSeD portFolio Development CONTINUED
CURRENT PIPELINE
The Company’s performance does not depend upon additional investments to deliver current projected returns. Further investment
opportunities will be judged by their anticipated contribution to overall portfolio returns relative to risk. Selected commitments and future
opportunities that may be considered for investment in due course, as identified by the Investment Adviser, are outlined below.
Known/Committed Opportunities
Location
Estimated Investment1
Expected Investment Period
Investment Status
Moray East OFTO
c.£100 million
24 years
New Zealand Portfolio
c.£113 million
24 years
Flinders University Health and
Medical Research Building
c.£10 million
25 years
Gold Coast Light Rail – Stage 3
c.£7 million
5 years
Preferred bidder. Investment
expected in 2023
Investment commitment made.
Expected to be funded in
Q2 2023
Investment commitment made.
Expected to be funded in 2024
Investment commitment made.
Expected to be funded in 2026
1
Represents the current commitment or preferred bidder positions that meet the Company’s investment criteria. There is no certainty that potential opportunities will translate into actual
investments for the Company.
KEY AREAS OF FOCUS
The Company has a longer-term pipeline of investments and has identified over 30 opportunities across the UK, Europe,
North America and Australia. Future areas of investment may include:
SOCIAL
INFRASTRUCTURE
EXAMPLE INVESTMENTS
– Education
– Health
– Justice
– Other social
accommodation
REGULATED UTILITIES
EXAMPLE INVESTMENTS
– OFTOs
– Distribution and
transmission
TRANSPORT AND
MOBILITY
EXAMPLE INVESTMENTS
– Government-backed
transport including:
– Light rail
– Regional rail
Olga Primary School, Tower Hamlets, UK
Photo credit: Bob Wheeler Photography
Gold Coast Light Rail, Australia
Photo credit: TransLink, Department of
Transport and Main Roads
OTHER ESSENTIAL
INFRASTRUCTURE
EXAMPLE INVESTMENTS
– Digital connectivity
– Energy management
Ormonde OFTO, UK
Thames Tideway Tunnel, UK
Photo credit: Tideway
18
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
Image: BeNEX, Germany
Photo credit: ODEG
International Public Partnerships Limited
Annual Report and financial statements 2022
19
OPERATING REVIEW
MARKET ENVIRONMENT IN 2022
AND FUTURE OPPORTUNITIES
NORTH AMERICA
– As previously reported, the
Infrastructure Investment and Jobs
Act (‘IIJA’)1 passed into US law in
November 2021 and the Inflation
Reduction Act (‘IRA’)2 passed in
August 2022
– Stimulus bills including the IIJA and
the IRA totalling US$1,600 billion
provide for expansion of transport,
communications, energy, carbon and
resiliency infrastructure
– During the year, universities, healthcare
providers and other infrastructure
owners were seen turning to private
consortiums to lead the way in energy
transition efforts to address upcoming
carbon reduction commitments
– Government entities are exploring
alternative delivery of projects, including
P3, in ever increasing numbers
utilising new funding available from
Federal sources
– In Canada, social infrastructure
remained a tight market with only
limited opportunities for capital
deployment whilst aggressive energy
and decarbonisation targets led to an
increase in energy-related deals
– For the last five plus years, only a
small number of contractors, advisers
and investors have dominated the
Canadian market. New models of
procurement are however now being
embraced by the public sector in order
to improve competition
EUROPE (EXCLUDING UK)
– Infrastructure investment in Europe continues to be
supported by wider EU frameworks and initiatives
focusing on transitioning to net zero and supporting
economic recovery post-Covid-19
– The European Commission announced a number of
initiatives during 2022 under the Connecting Europe
Facility (‘CEF’), which aims to support investment
into infrastructure across Europe to promote growth
and job recovery
– CEF includes programmes for energy, transport
and digital; digital was the first programme that
was initiated and looks to support both public
and private investment in digital connectivity
infrastructure, and a further €5 billion was
announced for transport infrastructure projects in
September 2022
– In addition, the c.€800 billion Next Generation EU
Recovery Fund3 was set up to support economic
recovery post-Covid-19. The Fund aims to rebuild a
‘greener, more digital and more resilient Europe’ and
features a large green infrastructure component
– As a result of these initiatives the Company expects
to review a continuing pipeline of opportunities in
Western Europe
1 Bipartisan Infrastructure Law, The White House.
2 The Inflation Reduction Act, The White House.
3 Recovery and Resilience Facility, European Commission.
4 Transforming Infrastructure Performance: Roadmap to 2030, Infrastructure and Projects Authority, UK Government Sep 2021.
5 Levelling up the UK, Department for Levelling Up, Housing & Communities, UK Government Feb 2022.
6 Australian Infrastructure Budget Monitor 2022-23 (produced by Infrastructure Partnerships Australia).
20
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
AUSTRALIA AND NEW ZEALAND
– Overall, investment in Australian
infrastructure continues to be
underpinned by Australian State
and Federal Government sponsored
initiatives with particular focus on the
energy and transport sectors. Across
State Government budgets alone,
c.A$255 billion in general government
expenditure was allocated to
infrastructure over the next five years
– Victoria and New South Wales continue
to dominate the pipeline of committed
funding, accounting for c.70% of total
general government sector infrastructure
spending over four years6
– Investment opportunities continue to
be concentrated in these two states
across the energy and transport sectors,
including a number of forthcoming
Renewable Energy Zone transmission
projects in New South Wales
– States and Territories also continue
to sponsor smaller-scale greenfield
social infrastructure projects, primarily
across healthcare, housing and broader
civic sectors
– A New Zealand government general
election will be held in 2023 with the
result likely to dictate the procurement
model for future greenfield infrastructure
– The Company expects to see a
continued pipeline of opportunities in
Australia and New Zealand
International Public Partnerships Limited
Annual Report and financial statements 2022
21
UNITED KINGDOM
– During the course of 2022, the UK Infrastructure
Bank was established to support the UK in
reaching its net zero targets and bolster regional
and local economic growth through investment
in infrastructure. This new bank looks to partner
with local authorities and the private sector alike
to invest into sectors the Company targets,
including energy, water, waste, transport
and digital
– Whilst the current macroeconomic environment
continues to be volatile, the requirement for
infrastructure investment continues to be
recognised in line with the National Infrastructure
Strategy (‘NIS’) with the UK Government
committing to spend £600 billion over the
next five years4
– As part of the Autumn Statement, the UK
Government announced that the current
budgets for infrastructure would be protected for
the construction of key infrastructure and round
two of the Levelling Up Fund will invest at least
£1.7 billion in local projects across the UK5
– Overall, the UK Government continues to
recognise the importance of infrastructure
investment alongside private sector capital in
order to create jobs, boost economic recovery
and reach its net zero targets; and the Company
remains well positioned to take advantage of
this pipeline
OPERATING REVIEW
active aSSet management
OPERATIONAL PERFORMANCE
The Investment Adviser’s active approach to asset management has been fundamental to the Company’s performance since its IPO. Amber
has a dedicated team of over 45 asset managers with sector expertise and presence across the geographies in which INPP is invested.
The Investment Adviser’s asset management team is responsible for the oversight and optimisation of the Company’s investments, with
the key focus being to deliver long-term benefits for stakeholders by meeting or exceeding performance targets. The Investment Adviser’s
involvement varies depending on the nature of the investment; it either manages the day-to-day activities of the investment or exercises its
responsibilities through board representation and engagement with management teams.
The health and safety of clients, delivery partners, employees and members of the public
who use our assets is of the utmost importance to the Company. We accord the highest
priority to health and safety. The Company’s accident frequency rate for occupational
accidents that resulted in lost time during the year ending 31 December 2022 remained low
at 0.35 per 100,000 hours worked (31 December 2021: 0.35). Health and safety data is
reported and evaluated each quarter to highlight any trends or areas of focus and includes
hours worked, minor injuries, near misses, critical incidents and the number of lost time
injuries which occurred as a result of work activities1.
From a cash flow perspective, the portfolio performed well over the year with 100% of the
investment portfolio’s overall forecast distributions having been received (2021: 100%).
Further information on operational performance and key updates for the Company’s
PPP projects, regulated investments and operational businesses is set out on the
following pages.
0.35
Per 100,000 hours worked
(2021: 0.35)
PERFORMANCE AGAINST
STRATEGIC PRIORITY KPIs
100%
Forecast distributions received
(2021: 100%)
1
RIDDOR Dangerous Occurrence and Specified Injuries are recorded in accordance with Health and Safety Executive (‘HSE’) guidelines for the UK projects and for the overseas assets
reporting is in accordance with the applicable legislation.
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International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
PORTFOLIO OVERVIEW
SECTOR BREAKDOWN
GEOGRAPHIC SPLIT
138 investments in infrastructure projects
and businesses across a variety of sectors1
Investments are diversified by developed geographies
Energy Transmission 23%
Transport 19%
Education 15%
Gas Distribution 15%
Wastewater 14%
Health 4%
Digital 2%
Courts 2%
Other 6%
INVESTMENT TYPE
INVESTMENT OWNERSHIP
Investments across the capital structure
Preference to hold majority stakes
Risk Capital2 93%
Senior Debt 7%
UK 76%
Australia 7%
Belgium 7%
Germany 4%
US 4%
Canada 1%
Ireland <1%
Denmark <1%
100% 46%
50-100% 6%
<50% 48%
MODE OF ACQUISITION/INVESTMENT STATUS
INVESTMENT LIFE
Early stage investment gives first mover advantage
and maximises capital growth opportunities
Weighted average investment life of c.37 years5
Construction 14%
Operational 86%
Early Stage Investor3 67%
Later Stage Investor4 33%
<20 years 42%
20-30 years 24%
>30 years 34%
1 The majority of projects and businesses benefit from availability-based or regulated revenues.
2 Risk Capital includes project level equity and/or subordinated shareholder debt.
3 Early Stage Investor – investments developed or originated by the Investment Adviser or predecessor team in primary or early phase investments.
4 Later Stage Investor – investments acquired from a third-party investor in the secondary market.
5
Includes non-concession entities which have potentially a perpetual life but assumed to have finite lives for this illustration.
International Public Partnerships Limited
Annual Report and financial statements 2022
23
OPERATING REVIEW continUeD
active aSSet management CONTINUED
PPP PROJECTS
PORTFOLIO BREAKDOWN
PPP 38%
PERFORMANCE AGAINST
STRATEGIC PRIORITY KPIs
99.8%
Asset availability achieved against
a target of >98%
(2021: 99.8%)
0.3%
Asset performance deductions
achieved against a target of <3%
(2021: 0.1%)
The Company’s PPP portfolio (accounting
for 38% of the portfolio by investment
fair value) has continued to perform well
during the year. The Company, through its
Investment Adviser, has continued to meet
its key deliverables, including ensuring that
the facilities are available for their intended
use, ensuring that areas are safe and
secure, and that the performance standards
set out in the underlying agreements
are achieved.
– The level of availability and performance
deductions is a key indicator as to the
operational performance achieved.
Despite the fact that availability and
performance deductions are generally
passed on to a facilities management
provider under a long-term fixed price
contract, the Investment Adviser actively
manages the relevant subcontractors
to optimise the performance of the
Company’s PPP projects. During
the year, the overall availability of the
Company’s PPP assets was 99.8%
(31 December 2021: 99.8%) and there
were performance deductions of only
0.3% (31 December 2021: 0.1%), both
of which were ahead of targets and
demonstrate the high level of operational
performance achieved
– In addition, the Company’s public
sector clients commissioned over
1,100 contract variations during 2022,
resulting in £16.9 million of additional
project work being delivered on behalf
of the commissioning bodies. The
completed changes during the year
ranged from minor building fabric
alterations within education facilities,
social accommodation, and healthcare
premises to the delivery of substantial
facility upgrades and extensions
– A number of benchmarking exercises
were also performed and agreed for
the Company’s social accommodation
projects, which included reviewing
services delivered in order to assess value
for money for the public sector client
– In addition, in July 2022, minority interests
in four Lancashire BSF projects were
successfully divested with £8.5 million
being realised. The sales value aligned
with the carrying value of the investments
on the disposal date and demonstrated
the attractiveness of the Company’s
investment portfolio
– The hand back of the PPP assets to the
public sector clients is an increasingly
important area of focus as the Company’s
PPP portfolio matures and the assets
approach the end of their respective
concession term. Through its regular
asset management activities, Amber
actively monitors the asset condition,
maintenance and lifecycle replacement
works to ensure that the assets will meet
their hand back requirements. This should
ensure an efficient transfer to the relevant
public sector client
OTHER KEY UPDATES
DIABOLO
Diabolo is a rail infrastructure investment
which integrates Brussels Airport with
Belgium’s national rail network. The majority
of the revenues generated by Diabolo are
linked to passenger use of either the rail link
itself, or the wider Belgian rail network. As
previously reported, Diabolo was impacted
by the restrictions on international travel and
national lockdowns implemented in Belgium
as a result of the Covid-19 pandemic.
This led to the Company committing a further
€24.0 million to Diabolo in December 2020 to
protect Diabolo’s liquidity position and ensure
compliance with its debt covenants. To date,
€17.3 million has been drawn, with €5.5 million
being drawn in 2022. A further €6.7 million
remains available until December 2023, at
which point the commitment will be cancelled
unless there is a material deterioration in
passenger numbers. The Company does not
expect there to be any further drawdowns and
Diabolo made a distribution in January 2023.
Passenger numbers during H2 2022 were
c.85% of those observed during H2 2019
(pre-Covid-19) and the latest traffic forecast
report for Diabolo assumes a return to
pre-Covid-19 passenger numbers in 2024.
Discussions with Infrabel, the Belgian rail
network owner, over the implementation of a
passenger fare adjustment concluded during
December 2022 and it will be effective from
1 February 2023.
The outlook for Diabolo is positive, passenger
numbers continue to recover, and the scheme
continues to see high levels of operational
performance. Relationships with the Belgian
railway authorities and Diabolo’s lenders are
positive, and it has successfully utilised the
passenger fare adjustment mechanism which
should reduce the impact of a reduction in
passenger numbers.
24
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
is currently £4.4 billion, representing a 2%
increase since costs were last reported
(largely driven by inflation) but importantly,
the cost to Thames Water customers
remains well within the initial estimate
provided at the outset of the project.
Handover of operations to Thames Water
is expected to occur in 2025 following the
completion of the secondary lining and
system commissioning.
The amendments to Tideway’s licence
that were agreed with Ofwat in order to
mitigate the impact of both Covid-19
related cost overruns and the Financing
Cost Adjustment Mechanism came into
effect in March 2022. These amendments
provided greater certainty for the business
and have already been reflected within
the forecast cash flows. Following earlier
public consultations, in October 2022,
Ofwat amended the date within Tideway’s
licence from which delay penalties can be
applied. This change has no impact on the
forecast cash flows but rather maintains the
headroom within the schedule which would
otherwise have been eroded due to the
previously announced schedule impact
of Covid-19.
As previously reported, the Company
increased its shareholding in Tideway
to approximately 18% in September
2022. The investment opportunity arose
as a consequence of another existing
investor having to dispose of its stake
as an underlying investment fund was
approaching the end of its life. The
remainder of the exiting investor’s stake
was acquired by the other continuing
investors in Tideway.
REGULATED INVESTMENTS
PORTFOLIO BREAKDOWN
Regulated Investments 52%
The Company is currently invested in
Cadent, Tideway and a portfolio of 10
OFTOs (together accounting for 52% of
the portfolio by investment fair value),
all of which are regulated by statutory
independent economic regulators.
Whilst different in nature, the regulatory
frameworks used are ultimately designed
to, among other things, protect the
interests of consumers whilst ensuring that
the regulated companies can earn a fair
return on their capital. The Company owns
100% of each of its OFTO investments
and whilst the Company does not hold
majority positions in Cadent or Tideway, the
Company engages through its Investment
Adviser’s board director positions to ensure
effective risk management and drive the
financial, operational and ESG performance
of its investments.
OFTOS
The Company’s OFTO investments
are regulated by the Office of Gas and
Electricity Markets (‘Ofgem’) which grants
licences to transmit electricity generated by
offshore wind farms into the onshore grid.
The revenues generated are not linked to
electricity production or price, instead the
OFTO is paid a pre-agreed, availability-
based revenue stream for a fixed period of
time (typically 20-25 years).
The Ofgem consultation regarding
the potential regulatory developments
underpinning an extension of the OFTO
revenue stream is ongoing. As previously
reported, the Investment Adviser is
actively engaged with all relevant industry
stakeholders. All parties recognise that
the life extension of renewable energy
assets is required to meet the UK net zero
emissions targets. Ofgem expects to publish
summaries of its July 2022 consultation
in 2023. We will seek to keep investors
informed of material developments.
CADENT
Cadent is the UK’s largest gas distribution
network, serving 11 million homes and
businesses. Cadent is regulated by Ofgem
which has granted Cadent a licence to
distribute gas across certain regions within
the UK. Cadent continues to support the
UK Government in meeting its net zero
target. It has worked closely with the
Department for Energy Security and Net
Zero (‘DESNZ’)1 in supporting its Heat
and Buildings Strategy and Hydrogen
Strategy with a view to ensuring hydrogen
is an integral part of the energy mix from
2026 and is actively engaging with the
UK Government and regulators to build
awareness of the opportunities offered
by green gases in the journey towards
net zero. Please refer to Section 3 of the
Sustainability Report for further detail on the
activity Cadent is undertaking to support the
UK’s net zero targets.
Whilst Cadent is largely insulated from
changes in gas prices and the associated
energy price caps, aside from where the
changes can cause timing differences
in certain cash flows, the Company
continues to closely monitor the implications
of changes in gas prices and other
developments in the sector.
TIDEWAY
Tideway is regulated by Water Services
Regulation Authority (‘Ofwat’) which has
granted Tideway a licence to design,
build, finance, commission and maintain
a new 25km ‘super sewer’ under the
River Thames to create a healthier
environment for London by cleaning up
the city’s greatest natural asset. Tideway
reached a number of milestones over the
course of 2022, including reaching the
end of the primary tunnelling phase in
April 2022, and completing the majority
of the secondary lining by the end of the
year. Overall construction works were
approximately 85% complete at the end of
the year, with the focus now principally on
completion of the secondary lining as well
as the upcoming system commissioning
phase. The estimated cost of the project
1 Formerly part of the Department of Business, Energy and Industrial Strategy (‘BEIS’).
International Public Partnerships Limited
Annual Report and financial statements 2022
25
OPERATING REVIEW continUeD
active aSSet management CONTINUED
OPERATING BUSINESSES
PORTFOLIO BREAKDOWN
Operating Businesses 10%
The Company invests in a number of
operating businesses including Angel Trains,
BeNEX and digital infrastructure businesses
(together accounting for 10% of the portfolio
by investment fair value).
The Investment Adviser holds a board
position on each of its operating businesses
and uses these positions to ensure effective
risk management and drive the financial,
operational and ESG performance of
its investments.
COUNTERPARTY RISK
Counterparty risk exists to some extent
across all investments; however, the risk
is required to be more carefully monitored
when considered in relation to PPPs which
have a long-term fixed-price contract
with a facilities management provider.
The Company has a diverse exposure to
service providers across its portfolio and the
Investment Adviser’s asset management
team ensures counterparty risk is actively
managed and mitigated. There were several
acquisitions within the sector during the
year, impacting certain of INPP’s service
providers. None of these have had a
material impact on INPP’s counterparty risk.
ANGEL TRAINS
Angel Trains generates the majority of its
revenues from the contractual leasing of
its rolling stock to TOCs and therefore its
current revenues are largely unaffected
by passenger numbers. Unlike the
TOCs, Angel Trains is not involved in or
directly impacted by any of the disputes
underpinning the industrial action that
occurred during the year, but will continue
to monitor the situation and support TOCs
where possible.
During the year, Angel Trains successfully
acquired the Readypower Group – a
specialist rail and infrastructure services
provider that supplies specialised on and
off-track plant equipment as well as other
maintenance and operating services to the
UK rail sector. Readypower plays a crucial
role in the maintenance and modernisation
of the UK rail network and is supporting
various infrastructure improvement projects
across the UK. The acquisition is evidence
of Angel Trains’ wider commitment
to investing in and supporting the UK
rail industry.
INPP SERVICE PROVIDERS1
BENEX
BeNEX is an investor in both rolling stock
and TOCs serving the German Local
Public Passenger Transportation Market.
The TOCs in which BeNEX is invested
operate rail franchises across Germany
under contract with numerous German
federal states covering c.43 million train
km of passenger transport in total. Whilst
only a minority of BeNEX’s annual revenues
(currently less than 20%) are linked to
passenger numbers, BeNEX continued
to receive compensation from the federal
government and/or the relevant federal
states for the vast majority of revenues lost
during the year as a result of the continued
disruption caused by Covid-19. BeNEX
benefited from the federal government’s
introduction of the temporary German-wide
‘€9-ticket’ during the three summer months
of 2022, and passenger numbers during the
second half of 2022 had broadly returned to
pre-pandemic levels.
DIGITAL INFRASTRUCTURE
In September 2022, the Amber-managed
NDIF, in which INPP is invested, sold its
investment in NextGenAccess (‘NGA’) which
is a company that owns and operates
a network of ultra-fast wholesale fibre
broadband infrastructure across England
and actively monitor the remaining three
businesses in which the Company is
invested (via NDIF), Community Fibre,
Airband and toob.
Infrabel 7%
Downer & Spotless 6%
Hunt Military Communities 4%
Bouygues 3%
Mitie 3%
G4S 2%
OCS 2%
Amey 2%
FES 2%
Kier 1%
Honeywell 1%
Others 5%
Regulated Investments2 52%
Operating Businesses2 10%
1 Based on percentage of Investment at fair value as at 31 December 2022.
2 These investments operate with no significant exposure to any one service provider or delivery partner.
1. Based on percentage of Investments at Fair Value as at 31 December 2022.
2. These Risk Capital investments operate with no significant exposure to any one service provider or delivery partner.
26
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
PROJECTS UNDER CONSTRUCTION
The Company has a strong track record of delivering construction projects safely, on time, to budget and to a high-quality by understanding
the project environment and the potential risks that may occur. It works closely with the contractors, technical advisers and management
companies, where applicable, throughout the construction period in order to mitigate risk and ensure the assets can perform as expected
and create value for both investors and communities.
The Company had three projects under construction as at 31 December 2022:
TIDEWAY
Location
Construction completion date
20251
Defects completion date
2028
Status at 31 December 2022
Scheduled for completion in 20252
% of investments at fair value
13.5%
Overall, construction works were
approximately 85% complete at
the end of December 2022. The
tunnelling phase was completed
in April 2022, and the focus is now
principally on completion of the
secondary lining and the upcoming
system commissioning phase.
GOLD COAST LIGHT RAIL – STAGE 3
Location
Status at 31 December 2022
Scheduled for completion in 20263
Construction completion date
2026
Defects completion date
2027
% of investments at fair value
0.0%
The project extends the existing Gold
Coast Light Rail network a further
6.7km south from Broadbeach to
Burleigh Heads. It will include eight new
stations, five additional light rail trams,
new bus and light rail connections at
Burleigh and Miami, and upgrade of
existing depot and stabling facilities.
FLINDERS UNIVERSITY HEALTH AND MEDICAL RESEARCH BUILDING
Location
Status at 31 December 2022
On schedule
Construction completion date
2024
Defects completion date
N/A5
% of investments at fair value
0.0%4
The Flinders University Health and
Medical Research Building plans to be
a leading biomedical research facility
that co-locates research, clinical and
technological platforms to further the
University’s long-standing contributions
to the health, education and medical
sectors. Flinders University is a
public institution and the third largest
university in South Australia.
1 Scheduled handover date.
2 Handover remains scheduled for 2025. This is approximately one year later than the original schedule with the delay largely attributable to the impact of Covid-19.
3 Completion is now scheduled for 2026. This is approximately six months behind the original schedule due to delays in design development and the identification of contaminated areas.
4 The Company’s investment is only due to be made following construction completion. The valuation of the commitment is currently immaterial.
5 This is not applicable as the authority is assuming all risk associated with the construction work that is being undertaken.
International Public Partnerships Limited
Annual Report and financial statements 2022
27
OPERATING REVIEW continUeD
eFFicient Financial management
The Company aims to manage its finances efficiently in order to provide financial flexibility for pursing new investment opportunities, whilst
minimising levels of unutilised cash holdings. This is achieved through actively monitoring cash held and generated from operations,
ensuring cash covered dividends and managed levels of corporate costs, and is supported by appropriate hedging strategies and
prudent use of the Company’s CDF.
PERFORMANCE AGAINST
STRATEGIC PRIORITY KPIs
1.3x
Dividends fully cash covered
(2021: 1.1x)
1.06%
Ongoing Charges Ratio
(2021: 1.18%)
£326.8m
Profit before tax
(2021: £129.2m)
DIVIDENDS
– During the year, the Company achieved its objective to generate dividends paid to
investors through its operating cash flows
– Cash dividends paid in the year of £136.0 million (31 December 2021: £118.5 million)
– Cash dividends were 1.3 times (31 December 2021: 1.1 times) covered by the Company’s
net operating cash flows before capital activity*
– Cash receipts from investments were £205.9 million (31 December 2021: £167.9 million),
reflecting the continued good operational performance of the portfolio
– INPP expects the current higher levels of inflation to continue to contribute to an increase
in cash flows from investments. However, there is typically a delay before the impact
of changes in inflation is seen in the cash flows, owing to the timing of the indexation
mechanisms within the contracts held by the portfolio companies, as well as the
distribution schedules adopted by such portfolio companies
ONGOING CHARGES
– Corporate costs were effectively managed during the year and Ongoing Charges were
1.06% (31 December 2021: 1.18%), a decrease in part due to the increase in average
NAV over the year
– Corporate costs include management fees of £27.9 million for the year to 31 December
2022 (31 December 2021: £25.7 million)
OPERATIONAL PERFORMANCE
– IFRS profit before tax of £326.8 million was reported (31 December 2021: £129.2 million).
The increase in profit in the year is principally reflective of the unrealised fair value gain on
the portfolio in the year. More information on page 84
– The Company’s cash balance as at 31 December 2022 was £92.8 million, (31 December
2021: £56.1 million). The increase was underpinned by strong portfolio performance and
proceeds from capital raising
– £191.6 million of new capital was invested during the year (31 December 2021: £252.7
million). See more information in note 12 of the financial statements and on page 98
– Proceeds of capital raisings in the year net of issue costs were £320.2 million. Proceeds
were used in part to pay down the cash drawn balance on the Company’s CDF, with the
remaining amount deployed in the Company’s investment pipeline (see page 18)
– At 31 December 2022, the Company’s CDF was £29.3 million cash drawn (31 December
2021: £156.2 million), with £16.7 million drawn under letter of credit (31 December
2021: £9.3 million). Following the balance sheet date, the cash drawn balance of the
facility was repaid and at the date of this Report approximately £233 million of the facility
remains available
– Net financing costs paid were £2.9 million, (31 December 2021: £4.8 million) reflecting the
level of utilisation of the Company’s CDF during the year
– Since the year-end, the Company has, in principle, agreed an increase in the committed
size of its existing CDF from £250 million to £350 million with the existing banking group.
This increase is expected to be effective from April 2023 and would provide the Company
with the liquidity required to take advantage of additional investment opportunities as they
may arise. There would remain a flexible ‘accordion’ component which would, subject to
lender approval, allow for a further increase in the committed size of the facility to £400
million. The Company is also progressing the documentation required to amend the
maturity date of the CDF from March 2024 to June 2025. These two amendments are
expected to be finalised shortly. No other changes to the terms of the CDF are expected
28
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
SUMMARY OF CASH FLOWS
Summary of Consolidated Cash Flow
Opening cash balance
Cash from investments
Corporate costs (for ongoing charges ratio)
Net financing costs
Net operating cash flows before capital activity1
Cost of new investments
Investment transaction costs
Net movement of CDF
Proceeds of capital raisings (net of costs)
Dividends paid
Closing cash balance
Cash dividend cover
Year to
31 December
2022
Year to
31 December
2021
£ Million
£ Million
56.1
205.9
(30.2)
(2.9)
172.8
(191.6)
(1.8)
(126.9)
320.2
(136.0)
92.8
1.3x
44.3
167.9
(28.5)
(4.8)
134.6
(252.7)
(3.0)
117.8
133.6
(118.5)
56.1
1.1x
1
Net operating cash flows before capital activity as disclosed above of c.172.8 million (31 December 2021: c.£134.6 million) include net repayments from investments at fair value through
profit or loss of c.£34.0 million (31 December 2021: c.£53.4 million), and finance costs paid of c.£2.9 million (31 December 2021: c.£4.8 million) and exclude investment transaction costs of
c.£1.8 million (31 December 2021: c.£3.0 million) when compared to net cash inflows from operations of c.£138.6 million (31 December 2021: c.£83.3 million) as disclosed in the consolidated
cash flow statement on page 87 of the financial statements.
CASH FLOWS ASSOCIATED WITH ONGOING CHARGES RATIO
Corporate Costs
Management fees
Audit fees
Directors’ fees
Other running costs
Corporate costs
Ongoing Charges Ratio
Annualised Ongoing Charges1
Average NAV2
Ongoing Charges
Year to
31 December
2022
£ Million
Year to
31 December
2021
£ Million
(27.9)
(0.6)
(0.5)
(1.2)
(30.2)
(25.7)
(1.0)
(0.4)
(1.4)
(28.5)
Year to
31 December
2022
£ Million
Year to
31 December
2021
£ Million
(30.2)
2,858.3
(28.5)
2,423.2
(1.06%)
(1.18%)
1 The Ongoing Charges ratio was prepared in accordance with the Association of Investment Companies’ (‘AIC’) recommended methodology, noting this excludes non-recurring costs.
2 Average of published NAVs for the relevant period.
International Public Partnerships Limited
Annual Report and financial statements 2022
29
OPERATING REVIEW continUeD
inveStor retUrnS
The Company aims to provide its investors with stable, long-term, inflation-linked returns, based on growing dividends and the potential for
capital appreciation. During the year, the Company achieved continued dividend growth of c.2.5% and a NAV return of c.12.5%1, reflecting
the continuing strong performance of the portfolio.
PORTFOLIO PERFORMANCE AND TSR*
The Company’s annualised TSR since the IPO to 31 December 2022 was 7.5%
(31 December 2021: 8.5%). The total return based on the NAV appreciation plus
dividends paid since the IPO to 31 December 2022 is 7.9% (31 December 2021: 7.7%)
on an annualised basis. The Company’s long-term target is 7.0%.
INFLATION-LINKAGE
In an environment where investors are focused on achieving long-term real rates of return
on their investments, inflation protection is an important consideration for the Company.
At 31 December 2022, the majority of assets in the portfolio had a significant degree of
inflation-linkage. In aggregate, the weighted average return of the portfolio (before fund-level
costs) would be expected to increase by 0.7% per annum in response to a 1.0% per annum
increase in all of the assumed inflation rates (31 December 2021: 0.7%).
DIVIDEND GROWTH
The Company targets predictable and growing dividends. The Company has delivered a
c.2.5% average annual dividend increase, since IPO. The Company forecasts to pay the
second dividend in respect of the 12 months to 31 December 2022, of 3.87 pence per
share, in June 2023. Once paid, this would bring the total dividends paid in respect of 2022
in line with the previously announced target of 7.74 pence per share (2021: 7.55 pence per
share). The Company is maintaining its previously announced dividend target of 7.93 pence
per share in respect of 2023 and provides new guidance of 8.13 pence per share for 2024.
PERFORMANCE AGAINST
STRATEGIC PRIORITY KPIs
7.9% p.a.
IRR achieved since IPO2
(31 December 2021: 7.7%)
0.7%
Inflation-linked returns on
a portfolio basis3
(31 December 2021: 0.7%)
C.2.5%
Annual dividend increase achieved
(31 December 2021: c.2.5%)
1 Reflects dividends paid in the year and increase in NAV on a per share basis.
2 Calculated by reference to the November 2006 IPO issue price of 100p and reflecting NAV appreciation plus dividends paid.
3
Calculated by running a ‘plus 1.0%’ inflation sensitivity for each investment and solving each investment’s discount rate to return the original valuation. The inflation-linked return is the
increase in the portfolio weighted average discount rate. Please refer to pages 30 to 37 for further detail.
30
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
INPP DIVIDEND GROWTH
Pence per share
9
8
7
6
5
4
5.55
5.70
5.85
6.00
5.25
5.40
6.15
6.30
6.45
6.65
6.82
7.55
7.74
7.93
8.13
7.18
7.36
7.00
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
Actual
Forecast
1. The HY2 2022 dividend of 3.87p per share will be declared immediately following the announcement of the 2022 Full Year Results and is expected to be paid in June 2023.
Note: The H2 2022 dividend for the six months to 31 December 2022 of 3.87 pence per share will be declared immediately following the announcement of the 2022 Full Year Results and is
expected to be paid in June 2023.
SHARE PRICE PERFORMANCE
The Company has historically exhibited relatively low levels of correlation with the market. The correlation with the FTSE All-Share index was
0.33 over the 12 months to 31 December 2022 (December 2021: 0.22).
SHARE PRICE PERFORMANCE
SHARE PRICE PERFORMANCE
(% change)
140
120
100
80
60
40
20
0
-20
-40
-60
D
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0
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A
p
r
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u
g
1
8
D
e
c
1
8
A
p
r
1
9
A
u
g
1
9
D
e
c
1
9
A
p
r
2
0
A
u
g
2
0
D
e
c
2
0
A
p
r
2
1
A
u
g
2
1
D
e
c
2
1
A
p
r
2
2
A
u
g
2
2
D
e
c
2
2
INPP
FTSE 250
FTSE All-share
INPP NAV
Source: Bloomberg
International Public Partnerships Limited
Annual Report and financial statements 2022
31
OPERATING REVIEW continUeD
inveStor retUrnS CONTINUED
VALUATIONS
NAV
During the year, the Company
raised additional equity totalling
£325.0 million (£320.2 million
net of issuance costs) by way of
a Placing, Open Offer, Offer for
Subscription and Intermediaries
Offer of Ordinary Share Capital.
NET ASSET VALUE MOVEMENTS
(£ million)
The negative impact of the
increase in government bond
yields was partially offset by
changes to the investment risk
premia designed to ensure that
the valuations continue to reflect
recent market-based evidence
of pricing for infrastructure
investments. The positive impact
of these adjustments on the NAV
was £496.5 million.
During the year, Sterling
weakened against the Australian
Dollar, Euro, US Dollar, Canadian
Dollar and the Danish Krone,
these being the foreign currencies
the Company was exposed to
during the year. Including the
change in the value of the forward
foreign exchange contracts, the
net positive impact on the NAV
was £33.2 million with the most
significant impact seen on the
Company’s Australian Dollar-
denominated investments.
Inflation assumptions across all
applicable geographies were
increased in the near-term as
inflation is assumed to remain
above the Company’s longer
term inflation assumptions for
a short period of time. Deposit
rate assumptions have also been
adjusted. Further details of these
changes can be seen on page
35 and in aggregate these had a
positive £169.3 million impact on
the NAV.
3300
3000
2700
2400
2100
1800
1500
320.2
(573.6)
496.5
(136.0)
33.2
169.3
2,528.8
201.4
3,039.8
NAV at
31 December
2021
Capital Raising
(post issue costs)
Change in
Government
Bond Yields
Change in
Investment
Risk Premia
Cash
Distributed
to INPP
Shareholders
(net of scrip)
Change in
Foreign
Exchange
Rates1
Change in
Macroeconomic
Assumptions
NAV
Return2
NAV at
31 December
2022
1. FX impact is net of hedging.
2. The NAV return represents amongst other things, (i) variances in both realised and forecast investment cash flows, (ii) the unwinding of the discount factor applied to those future
investment cash flows, and (iii) changes in the Company’s net assets.
The yields on the government
bonds used as part of the
valuation process increased
during the period, resulting in a
net £573.6 million decrease in
the NAV.
In line with forward guidance
provided previously, two cash
dividends of 3.77 pence and
3.87 pence per share were paid
to the Company’s shareholders
during the year, in relation to
the six-month periods to
31 December 2021 and 30 June
2022 respectively, totalling
£136.0 million (net of scrip).
Among other things, the NAV Return of
£201.4 million captures the impact of the
following:
– Unwinding of the discount rate;
– Return generated from the portfolio’s strong
inflation-linkage where actual inflation rates
were higher than the Company’s assumptions
for the period;
– Updated operating assumptions to reflect
current expectations of forecast cash flows;
– Actual distributions received above the
forecast amount due to active management
of the Company’s portfolio; and
– Changes in the Company’s working
capital position.
1 Foreign exchange rate impact is presented net of hedging.
2
The NAV return represents amongst other things, (i) variances in both realised and forecast investment cash flows, (ii) the unwinding of the discount factor applied to those future investment
cash flows, and (iii) changes in the Company’s net assets.
32
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
INVESTMENTS AT FAIR VALUE
An increase of £191.6 million
owing to new investments
made during the year.
The rebased investments at
fair value of £2,565.1 million
is presented to allow an
assessment of the Portfolio
Return assuming that the
investments and distributions
occurred at the start of the
relevant period.
The Portfolio Return of £252.9
million captures broadly the
same items as the NAV Return
(set out in detail on page 32)
with the principal exception
being the fund-level operating
costs and portfolio working
capital movements.
During the period, Sterling weakened
against the Australian Dollar, Euro, US
Dollar, Canadian Dollar and the Danish
Krone (these being the five foreign
currencies the Company is exposed
to). The positive impact on the
Investments at Fair Value was £37.8
million with the most significant impact
seen on the Company’s Australian
Dollar-denominated investments.
INVESTMENTS AT FAIR VALUE MOVEMENTS
(£ million)
3,000
2,900
2,800
2,700
191.6
(205.9)
252.9
(77.1)
169.3
37.8
2,948.0
2,600
2,579.4
2,565.1
2,500
2,400
2,300
Investments at
Fair Value at
31 December
2021
Investments
Investment
Distributions
Rebased
Investments
at Fair Value
Portfolio
Return1
Change in
Discount
Rates
Change in
Macroeconomic
Assumptions
Change in
Foreign
Exchange
Rates
Investments at
Fair Value at
31 December
2022
1. The Portfolio Return represents, amongst other things, (i) variances in both realised and forecast investment cash flows and (ii) the unwinding of the discount factor applied to those
future investment cash flows.
A decrease of £205.9 million due
to distributions paid out from the
portfolio during the period.
Increases in government bond
yields in the year, partially offset
by changes to investment risk
premia, resulted in a net increase
in portfolio discount rates. The
net negative impact of these
movements on the investments at
fair value is £77.1 million.
Inflation assumptions across all applicable
geographies were increased in the near-term
as inflation is assumed to remain above the
Company’s longer term inflation assumptions for
a short period of time. Deposit rate assumptions
have also been adjusted. Further details of
these changes can be seen on page 35 and in
aggregate these had a positive £169.3 million
impact on the investments at fair value.
1
The Portfolio Return represents, amongst other things, (i) variances in both realised and forecast investment cash flows and (ii) the unwinding of the discount factor applied to those
future investment cash flows.
International Public Partnerships Limited
Annual Report and financial statements 2022
33
OPERATING REVIEW continUeD
inveStor retUrnS CONTINUED
PROJECTED CASH FLOWS
The Company’s investments are generally expected to continue to exhibit predictable cash flows, owing to the principally contracted or
regulated nature of the underlying cash flows. As the Company has a high degree of visibility over the forecast cash flows of its current
investments, the chart below sets out the Company’s forecast investment receipts from its current portfolio before fund-level costs.
The majority of the forecast investment receipts are in the form of dividends or interest and principal payments from subordinated and
senior debt investments. The Company’s portfolio comprises both investments with finite lives (determined by concession or licence terms)
and perpetual investments that may be held for a much longer term. Over the term of investments with finite lives, the Company’s receipts
from these investments includes a return of capital as well as income, and the fair value of such investments is expected to reduce to zero
over time.
PROJECTED INVESTMENT RECEIPTS
(£ million)
450
400
350
300
250
200
150
100
50
0
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
3
0
2
0
3
1
2
0
3
2
2
0
3
3
2
0
3
4
2
0
3
5
2
0
3
6
2
0
3
7
2
0
3
8
2
0
3
9
2
0
4
0
2
0
4
1
2
0
4
2
2
0
4
3
2
0
4
4
2
0
4
5
2
0
4
6
2
0
4
7
2
0
4
8
2
0
4
9
2
0
5
0
2
1
4
7
2
1
4
8
2
1
4
9
2
1
5
0
34
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
MACROECONOMIC ASSUMPTIONS
The Company reviews the macroeconomic assumptions underlying its forecasts on a regular basis. Following a thorough market
assessment, it was resolved that certain adjustments should be made to the inflation rates and deposit rates used to value the Company’s
assets. Inflation assumptions across all applicable geographies were increased in the near-term as inflation is expected to remain above the
Company’s longer-term assumptions throughout the next 12 to 24 months. The foreign exchange rates were updated to reflect the spot
rates on the valuation date.
The key macroeconomic assumptions used as the basis for deriving the Company’s investment valuations are summarised below, with
further details provided in note 11 of the financial statements.
Macroeconomic assumptions
Inflation rates
Long-term deposit rates2
Foreign exchange rates
Tax rates3
UK
Australia
Europe
Canada
US1
UK
Australia
Europe
Canada
US1
GBP/AUD
GBP/DKK
GBP/EUR
GBP/CAD
GBP/USD
UK
Australia
Europe
Canada
US1
31 December 2022
31 December 2021
RPI: 8.00% until Dec 2023,
2.75% thereafter
CPIH: 7.00% until Dec 2023,
2.00% thereafter
5.25% until Dec 2023
3.00% until Dec 2024,
2.50% thereafter
5.00% until Dec 2023,
2.50% until Dec 2024,
2.00% thereafter
2.75% until Dec 2023,
2.00% thereafter
N/A
2.50%
2.75%
1.50%
2.50%
N/A
1.77
8.40
1.13
1.64
1.21
2.75% RPI
2.00% CPIH
2.50%
2.00%
2.00%
N/A
1.00%
2.00%
0.50%
1.50%
N/A
1.86
8.86
1.19
1.72
1.35
19.00%/25.00%4
30.00%
Various (12.50% – 32.28%)
Various (23.00% – 26.50%)
N/A
19.00%/25.00%4
30.00%
Various (12.50% – 32.28%)
Various (23.00% – 26.50%)
N/A
1 The Company’s US investment is in the form of subordinated debt and therefore not directly impacted by inflation, deposit and tax rate assumptions.
2 The portfolio valuation assumes actual current deposit rates are maintained until 31 December 2023 before adjusting to the long-term rates noted in the table above from 1 January 2024.
3 Tax rates reflect those substantively enacted as at the valuation date or those that could reasonably be expected to be substantively enacted shortly after the valuation date.
4 The UK Government announced a corporate tax rate of 25% applicable from 1 April 2023 at the Spring Budget 2021.
DISCOUNT RATES
The discount rate used to value each investment comprises the appropriate long-term government bond yield plus an investment-specific
risk premium which reflects the risks and opportunities associated with that particular investment and is designed to ensure that the resulting
valuation reflects prevailing market conditions.
The majority of the Company’s portfolio (93.2%) comprises Risk Capital investments, while the remaining portion (6.8%) comprises senior
debt investments. To provide investors with a greater level of transparency, the Company publishes both a Risk Capital weighted average
discount rate and a portfolio weighted average discount rate – the latter of which captures the discount rates of all investments including the
senior debt interests.
The weighted average discount rates are presented in the table overleaf.
International Public Partnerships Limited
Annual Report and financial statements 2022
35
OPERATING REVIEW continUeD
inveStor retUrnS CONTINUED
Weighted average government bond yield – portfolio
Weighted average investment premium – portfolio
Weighted average discount rate – portfolio
Weighted average discount rate – Risk Capital
31 December
2022
31 December
2021
3.13%
4.38%
7.51%
7.71%
0.96%
6.01%
6.97%
7.38%
Movement
+217bps
(163bps)
+54bps
+33bps
The Company is aware that there are differences in approach to the valuation of investments among similar listed infrastructure funds. In
the Company’s view, comparisons of discount rates between different listed infrastructure funds are only meaningful if there is a comparable
level of confidence in the quality of forecast cash flows (i.e. assumptions are homogenous); the risk and return characteristics of different
investment portfolios are understood; and allowance is made for differences in the quality of asset management employed to manage risk
and deliver returns. Any focus on average discount rates without an assessment of these and other factors would be incomplete and could
therefore lead to misleading conclusions.
VALUATION SENSITIVITIES
Sensitivity analysis is provided as an indication of the potential impact of these assumptions on the NAV per share on the unlikely basis that
the changes occur uniformly across the remaining life of the portfolio. The movement in each assumption could be higher or lower than
presented. Further, forecasting the impact of these assumptions on the NAV in isolation cannot be relied on as an accurate guide to the
future performance of the Company as many other factors and variables will combine to determine what actual future returns are available.
These sensitivities should therefore be used only for general guidance and not as an accurate prediction of outcomes. Further details can be
found in note 11.5 of the financial statements.
ESTIMATED IMPACT OF CHANGES IN KEY VARIABLES TO 31 DECEMBER 2022 BASED ON NAV OF 159.1 PENCE PER SHARE
Discount rates +/-1%
-14.2
Inflation +/-1%
-11.9
17.2
13.6
Foreign exchange +/-10%
-3.8
3.8
Deposit rates +/-1%
Tax rates +/-1%
Lifecycle +/-10%
-1.3
1.3
-0.7
0.6
-0.8
0.8
-18.0
-12.0
-6.0
0.0
6.0
12.0
18.0
+ Change
– Change
Pence per share
DISCOUNT RATES
The chart above indicates the sensitivity of the NAV per share to uniform changes to the discount rates applied to the forecast cash flows
from each individual investment.
36
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
INFLATION
The impact of inflation on the value of each investment depends
upon the extent to which the revenues and costs of that particular
investment are linked to an inflation index. On a portfolio basis, there
is a positive correlation to inflation with a 1.00% sustained increase
in the assumed inflation rates projected to generate a 0.7% increase
in returns (31 December 2021: 0.7%). The returns generated by
the Company’s non-UK investments are typically linked to the
relevant Consumer Price Index (‘CPI’) for that jurisdiction whilst the
Company’s UK investments are typically linked to variations of the
Retail Price Index (‘RPI’) or CPIH (CPI including owner occupied
housing costs).
In anticipation of the UK Government’s previously announced
intention to align the RPI to the CPIH from 2030 onwards, the
inflation assumption used for UK investments which are currently
linked to the RPI and do not benefit from protective contractual
agreements or regulatory precedents, was previously adjusted to
align with the Company’s CPIH assumption from 2030. For the
avoidance of doubt, the impact of this approach on the NAV is
negligible. Furthermore, the inflation sensitivities by geographical
region are provided in note 11.5 of the financial statements.
FOREIGN EXCHANGE
The Company has a geographically diverse portfolio and forecast
cash flows from investments are subject to foreign exchange rate
risk in relation to Australian Dollars, Canadian Dollars, Danish Krone,
Euros and US Dollars. The Company seeks to mitigate the impact of
foreign exchange rate changes on near-term cash flows by entering
into forward contracts, but the Company does not hedge exposure
to foreign exchange rate risk on long-term cash flows. The impact of
a 10% increase or decrease in these rates is provided
for illustration.
DEPOSIT RATES
The long-term weighted average deposit rate assumption across
the portfolio is 1.02% per annum. While operating cash balances
tend to be low given the structured nature of the investments,
project finance structures typically include reserve accounts to
mitigate certain costs and therefore variations to deposit rates may
impact valuations. The impact of a 1.00% increase or decrease in
these rates is provided for illustration.
TAX RATES
Post-tax investment cash inflows are impacted by tax rates
across all relevant jurisdictions. The impact of a 1.00% increase or
decrease in these rates is provided for illustration. Other potential
tax changes are not covered by this scenario.
LIFECYCLE SPEND
There is a process of renewal required to keep physical assets fit
for use and the proportion of total cost that represents this ‘lifecycle
spend’ will depend on the nature of the asset.
PPPs will typically need to ensure that the assets are kept at the
standard required of them under agreements with relevant public
sector counterparties. To enhance the certainty around cash
flows, the majority of the Company’s PPP investments, and all of
the Company’s OFTO investments, are currently structured such
that lifecycle cost risk is taken by a subcontractor for a fixed price
(isolating equity investors from such downside risk). As a result, the
impact of changes to the forecast lifecycle costs for the Company’s
PPP investments is relatively small.
The Company’s investments in rolling stock leasing or operating
businesses, or businesses providing digital infrastructure, are also
distinct from PPPs which have fixed revenue streams from which
they need to pay lifecycle costs. These businesses will still expect to
incur lifecycle costs but will typically aim to recover any changes in
lifecycle costs over time through the prices they charge
their end-users.
Tideway and Cadent are treated differently due to the protections
offered by the regulatory regimes under which they operate.
Regulated assets have their revenues determined for a known
regulatory period and each settlement includes revenue sufficient
to allow the owner to undertake the efficient lifecycle management
of its assets due in that regulatory period. It is common practice
to employ reputable subcontractors to undertake lifecycle work
under contracts which include incentive and penalty regimes aligned
with the businesses’ regulatory targets. This approach ensures
an alignment of interest and helps to mitigate the risk of increased
lifecycle costs falling on the equity investor. Accordingly, no lifecycle
sensitivity has been run in respect of the Company’s investments in
Tideway and Cadent.
The impact of a 10% increase or decrease in the lifecycle costs
incurred by the Company’s PPPs, OFTOs, rolling stock leasing or
operating businesses is provided for illustration.
By order of the Board
MIKE GERRARD
CHAIR
29 March 2023
JOHN LE POIDEVIN
DIRECTOR
29 March 2023
International Public Partnerships Limited
Annual Report and financial statements 2022
37
RESPONSIBLE INVESTMENT
reSponSiBle inveStment
JULIA BOND
CHAIR, ESG COMMITTEE
considers each of these areas, in addition to
EU Taxonomy criteria.
The Company has opted to disclose a
selection of data within this Annual Report
for reference, but would encourage
shareholders to review the Sustainability
Report for a summary of the following:
REGULATORY ALIGNMENT
AND DISCLOSURES
The Company recognises that regulations,
such as the SFDR, will affect many of
its shareholders and, during 2022, the
Company categorised itself as an Article
8 FP. Since this categorisation, the EU
Commission has finalised the Regulatory
Technical Standards (‘RTS’). As such, the
Company has now elected to disclose
additional sustainability indicators that its
shareholders require for their own
regulatory requirements.
CLIMATE CHANGE
During the year, the Company engaged Willis
Towers Watson (‘WTW’) and RMS to evolve its
approach to assessing physical and transition
climate-related risks and opportunities across
its portfolio. We have used the outcomes of
this exercise to enhance our TCFD disclosures,
which are referenced on pages 44 to 45 of
this Annual Report, but which are principally
included within our Sustainability Report.
NET ZERO
Also during the year, the Company
quantified its financed emissions (Scope 3
category 15), covering 97% of its portfolio,
as part of its SFDR and TCFD disclosures.
This 2022 baseline will allow the Company
to monitor its financed emissions and to
track progress made through Greenhouse
Gas (‘GHG’) reduction initiatives across
its investments.
The Company has also increased
cooperation with its public sector clients to
support them to identify pathways to reduce
emissions. In addition, the Company is
pleased to be supporting the Infrastructure
and Projects Authority (‘IPA’) to develop
a sector-wide approach to emissions
disclosure and net zero.
NEXT STEPS
As we progress this work, the interests of
all our stakeholders will remain at the core
of our decision making and our overall
approach to stewardship. We’d like to
thank Amber for their ongoing commitment
to sustainability and we look forward to
further engaging with investors on this
important topic.
JULIA BOND
CHAIR, ESG COMMITTEE
29 March 2023
MESSAGE FROM THE ESG
COMMITTEE CHAIR
It is positive to see the continued momentum of
integrating sustainability into the infrastructure
sector, and finance more broadly. This reflects
the Company’s view that a pragmatic and
forward-thinking approach to sustainability can
bring wider benefits to society and create long-
term value for investors.
Regulatory requirements and best
practice guidance with regards to ESG
have developed significantly in the last
few years and this has brought about a
more consistent and robust approach to
monitoring and reporting performance.
To reflect this, the Company has produced
the second edition of its Sustainability
Report, which has been published alongside
this Annual Report.
The Sustainability Report represents a step
forward in the Company’s performance, risk
monitoring and reporting, including SFDR
disclosures as an Article 8 aligned FP; its
climate risk approach in alignment with
the recommendations of the TCFD; and its
financed emissions metrics. This has been
underpinned by the Company’s enhanced
screening and due diligence process, which
38
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
APPROACH TO RESPONSIBLE INVESTMENT DISCLOSURES
The Company believes its investments have positive environmental and social characteristics, as per its categorisation as an Article 8 FP.
The following data has been collected to enable the Company to better assess and monitor its environmental and social impacts and
identify associated risks and opportunities. It is intended that this data will assist the Company’s shareholders to meet their own regulatory
requirements. For more detail on the Company’s approach to responsible investment, please refer to the second edition of the Company’s
Sustainability Report. Please refer to page 111 for the Company’s SFDR periodic report to meet its reporting requirements under Article 11
of the SFDR.
APPLICATION OF SUSTAINABILITY FRAMEWORKS
Part of the process for data selection involves using international sustainability frameworks and reporting standards as a guidance. There are
several frameworks with which the Company aligns partially (i.e. we use the framework as a starting point from which to develop accounting
practices) or fully (i.e. we fully comply with the framework requirements). These are summarised below.
PARTNERSHIP FOR CARBON
ACCOUNTING FINANCIALS
The Company’s financed
emissions have been
quantified in accordance with
the Partnership for Carbon
Accounting Financials
(‘PCAF’) Financed Emissions
Standard1, which aligns with
GHG disclosures set out in
the SFDR Principal Adverse
Impacts (‘PAIs’) as well as
the TCFD’s recommended
metrics for asset managers.
SDGS
SFDR
TCFD
The Company supports the
2030 Agenda for Sustainable
Development adopted by the
UN Member States in 2015.
Alignment with the SDGs is
a key part of the Company’s
approach to ESG integration
and it contributes towards
the SDGs in two main ways:
the positive environmental
and social characteristics
of its investments and its
approach to active asset
management. For more
information regarding the
Company’s Investment
Adviser’s work with the
SDGs, see Section 1 of
the Sustainability Report.
The SFDR requires financial
market participants (‘FMPs’)
that market a FP into an EU
state, to comply with the
disclosure of ESG related
information. As the Company
qualifies as an internally
managed Alternative
Investment Fund (‘AIF’)
pursuant to the Alternative
Investment Fund Managers
Directive, it is an FMP for
the purposes of SFDR.
By marketing itself to EU
countries, the Company is
deemed to be marketing an
FP, given that it is itself an
AIF. Therefore, INPP meets
the two-pronged test of the
SFDR. Please refer to the
Annex of this report for the
Company’s first periodic
disclosure.
The Company is aware of
the transitional and physical
impacts of climate change
on the resilience of our
business. As a closed ended
investment company, the
Company is not required to
comply with LR 9.8.6R(8)
and therefore is not required
to issue a statement of
compliance with TCFD.
However, the Company
has continued to voluntarily
report in line with TCFD,
with a summary included
on pages 44 to 45 and the
detailed reporting included
in the Sustainability Report.
By endorsing and aligning
its practices and having
anticipated reporting with the
TCFD recommendations, the
Company has crystallised
its understanding and
disclosure of climate-related
risks and opportunities.
The Company’s TCFD
implementation is integrated
in the Company’s strategy,
risk management,
governance practices,
and reporting.
OTHER ESG FRAMEWORKS
The Company will continue to monitor other developing ESG frameworks closely, such as the EU sustainability reporting standards drafted
by the European Financial Reporting Advisory Group (‘EFRAG’) as part of the Corporate Sustainability Reporting Directive (‘CSRD’) as well
as the UK’s Sustainability Disclosure Requirements (‘SDR’) which is currently in its consultation phase. The Company will also closely follow
the developments of the International Financial Reporting Standards Foundation’s International Sustainability Standards Board (‘ISSB’) in
their aim of establishing global sustainability disclosure standards as well as the Taskforce on Nature-related Financial Disclosures (‘TNFD’),
which is a developing framework for assessing nature-related risks. The Company aims to grow its use of ESG frameworks as they further
harmonise their work into a comprehensive, global platform for corporate sustainability reporting.
1 PCAF (2022). The Global GHG Accounting and Reporting Standard Part A: Financed Emissions. Second Edition.
International Public Partnerships Limited
Annual Report and financial statements 2022
39
RESPONSIBLE INVESTMENT
continUeD
reSponSiBle inveStment CONTINUED
CONTRIBUTION TO THE SUSTAINABLE DEVELOPMENT GOALS
The Company draws on the SDGs to demonstrate the positive environmental and social characteristics of its investments. This page
highlights the primary SDGs that are supported by the Company’s investments, alongside alignment of the full portfolio by fair value.
Please refer to Section 1 of the Sustainability Report for more information on the Company’s approach to SDG alignment.
>650,000
Patients treated in healthcare facilities
developed and managed by the Company
37,000,000m3
The three components of the London Tideway
Improvements will work conjunctively to
reduce discharges in a typical year by
c.37 million cubic metres
>12,500
Jobs supported across all investments
>173,000
Students attending schools developed
and managed by the Company
>2,700,000
Estimated equivalent number of homes
powered by renewable energy transmitted
through OFTO investments
>154,000,000
Annual passenger journeys through
sustainable transport investments
The chart below shows the alignment of the Company’s portfolio with the core SDGs described above, by investments at fair value
as at 31 December 2022.
3 Good Health and Well-Being 4%
4 Quality Education 15%
6 Clean Water & Sanitation 14%
7 Affordable & Clean Energy 23%
9
11 Sustainable Cities & Communities 23%
16 Peace, Justice and Strong Institutions 3%
Industry, Innovation and Infrastructure 18%
40
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
INPP ESG KPIS
The Company seeks to improve the sustainability performance of its investments. To help streamline ESG data for financial reporting and
monitor progress at the portfolio level, the Company tracks a set of KPIs1, which will be further developed over time.
The 2022 KPI results demonstrate the progress that the Company’s investments have made during the year to establish strong governance
processes and effectively managing environmental and social impacts. In 2021, the PRI Pilot Reporting Framework methodology introduced
a significant change to the grading system from an alphabetical (A+ to E) system to a numerical (1 to 5 stars) system. As such, the Company
adjusted the KPI to reflect the new scoring methodology and is pleased that Amber was awarded the highest rating of 5-stars in the 2021
assessment for both the Investment and Stewardship Policy and the Infrastructure modules.
Following the significant enhancement of its ESG data collection and reporting processes, to align with the reporting requirement of
SFDR and the TCFD, the Company now has a clearer picture of the ESG performance of its investments. This enhanced data set will be
considered when reviewing the suitability of the Company’s ESG KPIs in 2023.
KPI
Target
31 December 2022
31 December 2021
1. Contribution to Sustainable Development Goals.
Positive SDG contribution for new investments
2. Investment Adviser ESG Integration Performance.
Investment Adviser PRI score
3. Robust corporate governance.
Investments with appropriate policies and procedures concerning: Health and
Safety, Sustainability, Equality, Diversity and Inclusion, Modern Slavery and
Human Rights, Conflicts of interest, Anti-corruption and financial crime risk, Tax
and transparency
4. Environmental performance.
Investments with appropriate systems and processes in place to improve
environmental performance. Specific indicators include:
4.1 Investments with an environmental management system
4.2 Investments with initiatives to improve environmental performance
of material issues
5. Health and safety performance.
Investments with appropriate systems and processes in place to improve
health and safety performance. Specific indicators include:
5.1 Investments with health and safety management system
5.2 Investments with initiatives to improve health and safety performance
6. Greenhouse gas management.
Investments with appropriate systems and processes in place to support
management of energy efficiency and greenhouse gases. Specific indicators
include:
6.1 Investments monitoring Scope 1 and 2 emissions
6.2 Investments with initiatives to improve energy efficiency and
greenhouse gas performance
100%
100%
100%
5-stars/A+
5-stars
A+ (2020)
100%
100%
96%
100%
100%
100%
100%
100%
100%
98%
91%
100%
100%
100%
91%
95%
79%
97%
93%
94%
88%
1 KPIs apply to all investments where the Company has a majority equity investment, or a minority equity holding over £2 million.
International Public Partnerships Limited
Annual Report and financial statements 2022
41
RESPONSIBLE INVESTMENT
continUeD
reSponSiBle inveStment CONTINUED
FINANCED GHG EMISSIONS
APPROACH
As part of its focus on aligning investments with the objectives
of the Paris Agreement, the Company seeks to monitor GHG
emissions across its portfolio and support decarbonisation
initiatives, where possible.
The Company actively manages all investments, supported by
its Investment Adviser. The degree to which the Company can
influence its financed emissions varies according to investment type.
For PPP investments, some operating businesses and regulated
investments, the Investment Adviser’s asset management team
support at an operational level and aims to ensure that GHG
emissions are monitored.
Where the Company is a minority shareholder or for senior debt
investments, the Company typically has less influence over
operational activities, and in some cases may not have access to
GHG or activity data. However, GHG impacts, and data availability,
is incorporated at the screening and due diligence phase for every
new investment.
Quantifying the financed emissions of the investment portfolio
is important for the Company to help support investment-level
decarbonisation initiatives and to better understand its climate-
related transition risks.
The Company has self-assessed the data quality of its financed
emissions, in line with the PCAF approach, and has quantified a
weighted data quality score of 2.0 for its portfolio GHG emissions
(High Quality = 1 Low Quality = 5).
PORTFOLIO EMISSIONS
As described on the following page, the Company has applied
the PCAF guidance to calculate its total attributed GHG emissions
(the Company’s Scope 3 category 15 investment emissions).
This includes the Scope 1 and 2 emissions of each investment,
attributed to the Company based on its proportional share of the
equity and debt in each investment.
SUSTAINABLE FINANCE DISCLOSURE REGULATION
APPROACH
The Company satisfies the threshold criteria set out in the SFDR
and therefore has obligations under the SFDR. As part of these
requirements, the Company has categorised itself as an Article 8 FP
which promotes, among other characteristics, environmental and
social characteristics.
Through its investments in infrastructure that support a sustainable
society, the Company promotes environmental and social
characteristics but does not have sustainable investment as its
objective and does not invest in sustainable investments, as defined
under the SFDR.
The carbon footprint metric aligns with PCAF’s ‘economic
emission intensity’ and is the Company’s total attributed emissions
normalised by the total equity and debt the Company invests across
the portfolio.
For the GHG intensity of investments metric the Company has
applied the TCFD recommended approach for calculating a
Weighted Average Carbon Intensity (‘WACI’). This metric gives
an indication of the overall emissions intensity of the underlying
operations of INPP’s investments without any attribution calculations
and is a way of indicating a portfolio’s exposure to transitional
risks of climate change. Whilst the metric will fluctuate as the GHG
emissions of each investment decrease/increase it will also vary
year-on-year based on the investments’ revenue and is therefore
sensitive to economic factors.
INPP SCOPE 3 FINANCED
EMISSIONS INDICATOR
Scope
31 December
2022
Total Attributed GHG emissions
(tCO2e)
Carbon footprint
(tCO2e/£m invested)
GHG intensity of investments
(tCO2e/£m revenue)
Scope 1 of
investments
Scope 2 of
investments
Total
Total
Total
36,667
10,311
46,978
27
145
REDUCTION INITIATIVES
Whilst the Company’s level of control can vary significantly between
investment types, it seeks to encourage GHG emissions reduction
initiatives wherever possible. For examples of GHG reduction
initiatives implemented across the portfolio during 2022, please
refer to Section 3 of the Sustainability Report.
This categorisation was communicated in the Company’s
prospectus, published in April 20221. In addition, the Company has
also published a website disclosure in accordance with the Level 1
requirements of the SFDR regulation2.
SUSTAINABILITY INDICATORS
During the year, the Company enhanced the criteria it uses to
ensure that it meets the environmental and social characteristics it
promotes. The Company has begun tracking additional sustainability
indicators of its investments. These disclosures cover the majority
of the Company’s investment portfolio and align with the definitions
of the 14 core indicators listed in Annex 1 of the Delegated
Regulation (EU) 2022/1288 (the ‘Delegated Act’), consisting of
nine environmental disclosures and five social indicators.
1 https://www.internationalpublicpartnerships.com/news-media/press-releases/2021/placing-open-offer-and-offer-for-subscription-and-publication-of-prospectus-and-circular.
2 https://www.internationalpublicpartnerships.com/media/2629/amber-sfdr-website-disclosures.pdf.
42
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
EU TAXONOMY
The Company is not part of the EU Taxonomy regulation. Equally, investee companies fall outside of EU Taxonomy regulation, either
by location or threshold. Under its current Article 8 categorisation, the Company does not consider EU Taxonomy alignment. However,
we recognise the potential benefit Taxonomy disclosures could provide to the Company’s investors. As such, the Company is working
towards developing disclosures that will support Taxonomy alignment in 2023. For more information, please refer to Section 4 of the
Sustainability Report.
Sustainability indicators for our investments covering the year are displayed in a quantitative form below. For more information, please refer to
Section 4 of the Sustainability Report.
Sustainability indicator Metric
Investment
GHG emissions
Scope 1 GHG emissions
Scope 2 GHG emissions
Total GHG emissions
Carbon Footprint
GHG intensity of investee companies
Share of investments in companies active in the fossil fuel sector
Share of non-renewable energy consumption and non-renewable energy production of
investee companies from non-renewable energy sources compared to renewable energy
sources, expressed as a percentage of total energy sources impact climate sector
Energy consumption intensity per high impact climate sector: Electricity, gas, steam and
air conditioning supply
Energy consumption intensity per high impact climate sector: Transportation and storage
Biodiversity
Share of investments in investee companies with sites/operations located in or
near to biodiversity-sensitive areas where activities of those investee companies
negatively affect those areas
tCO2e
tCO2e
tCO2e
tCO2e/£m invested
tCO2e/£m revenue
%
%
GWh/£m
GWh/£m
%
Unit
31 December
20221
36,667
10,311
46,978
27
145
15
97
0.63
0.22
0
0
Water
Waste
Tonnes of emissions to water generated by investee companies per million GBP
invested, expressed as a weighted average
Tonnes/£m
Tonnes of hazardous waste and radioactive waste generated by investee companies
per million GBP invested, expressed as a weighted average
Tonnes/£m
0.03
Social and
employee
matters
Share of investments in investee companies that have been involved in violations
of the UN Global Compact (‘UNGC’) principles or Organisation for Economic Co-
operation and Development (‘OECD’) Guidelines for Multinational Enterprises
Share of investments in investee companies without policies to monitor compliance
with the UNGC principles or OECD Guidelines for Multinational Enterprises or
grievance /complaints handling mechanisms to address violations of the UNGC
principles or OECD Guidelines for Multinational Enterprises
Average unadjusted gender pay gap of investee companies
Average ratio of female to male board members in investee companies, expressed
as a percentage of all board members
Share of investments in investee companies involved in the manufacture or selling of
controversial weapons
%
%
%
%
%
0
0
19
17
0
1
Sustainability indicators cover over 97% of the portfolio. Where the Company is missing data, it will work with co-investors to obtain data over time, with a preference to avoid
estimating impacts.
International Public Partnerships Limited
Annual Report and financial statements 2022
43
RESPONSIBLE INVESTMENT
continUeD
reSponSiBle inveStment CONTINUED
TCFD
Recommended disclosure
Summary
Governance
a) Describe the Board’s
oversight of climate-related
risks and opportunities.
b) Describe management’s
role in assessing and
managing climate-related
risks and opportunities.
Strategy
a) Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium and
long-term.
The Board sets the strategy for the Company and makes decisions on changes to
the portfolio (including approval of acquisitions, disposals and valuations). Through
Board committees and the advice of external independent advisers, it manages
the governance and risks of the Company. The Board has overall responsibility
for ESG considerations and ensuring they are integrated into the Company’s
investment strategy, including in relation to climate change. This is achieved through
the Company’s Audit and Risk Committee, Investment Committee, Management
Engagement Committee and ESG Committee.
The Company’s Investment Adviser is responsible for implementing the Company’s
ESG policies into its activities on a day-to-day basis. This includes the integration
of ESG considerations through investment origination and management of the
Company's Investments. The Board and the Investment Manager meet on a quarterly
basis, during which they review the risks facing the Company, including risks related
to climate change. Sustainability considerations, including climate change, are also
included as regular topics for discussion at the Company’s annual strategy meetings.
Section
Sustainability
Report
Sections 2 and 4
Sustainability
Report
Sections 2 and 4
The Company’s investments are exposed to physical and transitional climate change
risks. However, the Company has a high degree of protection due to the contracted
or regulated nature of its investments.
Sustainability
Report
Sections 3 and 4
Flood, tropical cyclone, extreme wind and heat are the most important hazards for
the Company’s existing portfolio. Other hazards could affect particular assets, but
do not pose a widespread risk. Equally, the changes arising from a transition to a
low-carbon economy have the potential to be wide-ranging, including changes to
laws and regulations, adapting to decarbonisation of heat, increased electrification
of transportation and other systems previously dependent on fossil fuels, and
decarbonisation of construction.
A transition to a low-carbon economy will continue to present infrastructure
investment opportunities that will be required if governments around the world are
to meet their legally binding commitments. As such the Company is well placed to
benefit from the transition to net zero as well as manage risks associated with it.
b) Describe the impact of
climate-related risks and
opportunities on the
organisation’s businesses,
strategy and financial
planning.
c) Describe the resilience of
the organisation’s strategy,
taking into consideration
different climate-related
scenarios, including a
2°C or lower scenario.
A large portion of the Company’s investments are availability type assets where the
cash flows are based on making the assets available in a pre-agreed manner. The
cash flows from such investments are largely insulated from changes to the physical
risks of climate change and the net zero transition.
Sustainability
Report
Sections 3 and 4
The portfolio-level findings of the climate change impact assessment, including
scenario analysis, demonstrate that the Company’s strategy is resilient to both
physical and transition risks associated with climate change. The Company believes
it is well placed to benefit from the transition to net zero, as infrastructure will play a
leading role in decarbonising the global economy.
Sustainability
Report
Sections 3 and 4
44
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
Recommended disclosure
Summary
Risk
a) Describe the organisation’s
processes for identifying
and assessing climate-
related risks.
The Board recognises the importance of identifying and actively monitoring the
risk facing the business. The Company considers climate risk in line with its risk
management framework for identifying, evaluating and managing significant risks
faced by the Company.
b) Describe the organisation’s
processes for managing
climate-related risks.
A robust assessment of principal and emerging risks facing the Company is
performed. Each identified risk is assessed in terms of probability of occurrence,
potential impact on financial performance and any movements in the relative
significance of each risk between periods. The assessments build on the wealth of
knowledge acquired by the Company and Investment Adviser through both bidding
and asset management phases, with risk assessments carried out to quantify and
assess risks. The Company has developed a series of risk management actions to
reduce financial risks across the portfolio.
Section
Sustainability
Report
Sections 3 and 4
Sustainability
Report
Sections 3 and 4
c) Describe how processes
for identifying, assessing
and managing climate-
related risks are integrated
into the organisation’s
overall risk management.
Metrics
a) Disclose the metrics used
by the organisation to
assess climate-related risks
and opportunities in line
with its strategy and risk
management process.
The Company’s approach to risk management is implemented through the following
risk control processes: Risk Identification, Risk Assessment, Mitigation Plan, Risk
Monitoring, Reporting and Reassessment.
Sustainability
Report
Sections 3 and 4
The Company takes a holistic view to determining climate risks and opportunities at
the investment level. Whilst the Company is supportive of monitoring and reporting
emissions data, it also recognises that they do not always directly correlate with
financial risks to the Company. However, the quantification of the financed emissions
of the investment portfolio is important for the Company to help support its public
sector clients with investment-level decarbonisation initiatives. In 2023, the Company
will consider which metrics will best support its approach to monitoring climate risks
and opportunities.
Sustainability
Report
Sections 3 and 4
b) Disclose Scope 1, Scope 2
and, if appropriate, Scope
3 GHG emissions, and the
related risks.
Due to the nature of its business, the Company itself has no Scope 1 or Scope 2
GHG emissions. As part of its focus on aligning investments with the objectives of the
Paris Agreement, the Company seeks to monitor its Scope 3 investment emissions
(financed emissions) across its portfolio and support decarbonisation initiatives
where possible.
Sustainability
Report
Sections 3 and 4
c) Describe the targets used
by the organisation to
manage climate-related
risks and opportunities
and performance against
targets.
Through the investments that it makes, the Company is helping to support the shift
to net zero in the markets where it invests. This includes infrastructure that directly
enables net zero, such as the Company’s offshore wind electricity transmission assets
in the UK, or our passenger rail investments that provide low-carbon transport.
Sustainability
Report
Sections 3 and 4
The Company will continue to consider its approach to net zero at the portfolio level
but recognises the limited control it has over many investments and the importance of
collaboration with its public sector clients to achieve emissions reductions. Over the
course of 2023, the Company will be reviewing its KPIs in relation to climate change
risks and opportunities.
International Public Partnerships Limited
Annual Report and financial statements 2022
45
RESPONSIBLE INVESTMENT
continUeD
reSponSiBle inveStment CONTINUED
VALUE CREATION – HOW WE ENGAGE
The Company takes a proactive approach to identifying and engaging with key
stakeholders to ensure there is clear two-way communication that can be used
to support the mutual success of the Company and its stakeholders.
Good governance is the cornerstone of these relationships, and the Company
is focused on leading with high standards of business conduct. It achieves this
through a combination of board engagement and oversight and leveraging the
Investment Adviser’s expertise and networks. The Company believes robust
stakeholder engagement is a critically important component to delivering its
purpose over the long term and is considered at a strategic level by the Board,
and ensuring all shareholders are treated fairly. The Board has promoted the
success of the Company having regard to the requirements of Section 172 of
the UK Companies Act 2006, as outlined opposite.
46
International Public Partnerships Limited
Annual Report and financial statements 2022
inveStorS
Consistent and growing returns
We aim to provide our investors with stable,
long-term, inflation-linked returns, based on
growing dividends and the potential for capital
appreciation. Through engagement with all our
investors, we aim to inform them of our strategic
objectives and to ensure that the Company
understands all views on topical issues.
This approach is intended to maximise investor
buy-in to current objectives and performance
whilst also helping shape the Company’s
future plans.
The key mechanisms for the Company’s
engagement with investors include:
– Regular and timely updates on performance,
including through the annual and half-yearly
reporting cycle. This includes institutional and
retail-focused webinars
– The Company’s AGM
– Periodic Investor Days
– One-to-one meetings or calls with the
Board’s Chair and other Directors
– One-to-one meetings or calls with
representatives from the Company’s
Investment Adviser
– Other Group engagement with representatives
from the Company’s Investment Adviser
– The Company’s website
– An annual video providing an overview of
the Company
Over the year, the Company has increased
engagement with investors around its approach to
ESG. The Company has held several one-to-one
meetings to increase its understanding of investor
requirements as a result of regulations such as
TCFD, EU Taxonomy and EU SFDR. The output
of these meetings has directly influenced the
enhanced disclosures included within this Report
and the second edition of the Sustainability Report.
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
pUBlic Sector
& otHer StaKeHolDerS
A trusted partner
We aim to provide the public sector
and other customers with a highly
reliable, robust service through our
investments. Our ability to deliver
contracted services and maintain
strong relationships with our clients
through our Investment Adviser is
vital for the long-term success of the
business. Through close engagement
with our clients, we aim to meet high
levels of satisfaction and quickly
respond to any potential issues and
emerging challenges.
The key mechanisms for engagement
with our clients include:
– Regular meetings (where possible in
person and/or virtually) between the
Investment Adviser and public sector
clients including local authorities and
regulators
commUnitieS
Strengthening communities
We strive to make our investments an
integral part of the communities they
serve. Engaged communities can play
an important role in successful delivery
of new assets and their long-term
operations. As part of our approach
to active asset management, the
Investment Adviser ensures critical
services are delivered with a focus
on the end-user, ensuring that the
community is at the heart of all that
we do. This approach is intended
to help our communities thrive and
create robust environments for our
investments to flourish.
The key mechanisms for community
engagement include:
– Active asset management providing
facilities for community use
– Local Education Partnership
– Active asset management, which
agreements
provides monitoring of the facilities
management arrangements on
compliance with maintenance
obligations
– Asset managers directly engaging
with the client on a day-to day basis
The Company’s Investment Adviser
has been proactively engaging with
the Company’s public sector clients
to provide them with options on how
to work towards net zero solutions.
Amber is part of a working group
with the IPA in the UK, focused on
developing a programme for net zero in
the social infrastructure sector.
– Supporting community initiatives
During the course of 2022,
through its Investment Adviser, the
Company worked with the specialist
agent Collecteco to support local
communities through the donation
of fixtures, fittings and equipment
no longer suitable for use in social
infrastructure investments. Collecteco
partners with companies across the
UK to generate social value, net zero
and circular economy benefits by
donating furniture to not-for-profit
good causes.
KeY
SUpplierS
An engaged supply chain
Our ambition is to work with a high-
quality, sustainable supply chain with
a focus on long-term value for our
stakeholders. The performance of our
service providers, their employees,
and investment supply chain is
crucial for the long-term success of
our business. The Company takes a
progressive approach to engaging with
key suppliers. A key component of this
is ensuring our Investment Adviser is
proactively maintaining an engaged
supply chain for our investments.
Examples of mechanisms for
engagement with key suppliers include:
– Annual Management Engagement
Committee review
– Ad-hoc engagement
– Quarterly Board meetings and
reporting
– Investment Adviser managing
investment supply chain
For example, during the year, the
Company has been working with the
Facilities Management Companies
within its supply chain to ensure they
meet the Governance requirements set
by the Company. Please refer to page
39 for more information.
International Public Partnerships Limited
Annual Report and financial statements 2022
47
CONTINUOUS RISK MANAGEMENT
continUoUS riSK management
The Board is ultimately responsible for risk management. Oversight of the risk framework and management process is delegated
to the Audit and Risk Committee. The risk framework has been designed to mitigate the risk of failure to meet business objectives.
No system of control can provide absolute assurance against the incidence of risk, misstatement or loss. Regard is given to the
materiality of relevant risks in designing systems of risk management and internal control.
BOARD
– Audit and Risk Committee
– Management Engagement Committee
– Investment Committee
– Nomination and Remuneration Committee
– Environmental, Social and Governance Committee
RISK CONTROL LEVELS
– Service provider’s internal
PRINCIPAL ADVISERS
– Investment Adviser and
controls
– Independent controls and
process reviews
– External audit
Asset Manager
– Company Secretary
– Fund Administrator
– Legal Adviser
– Corporate Broker
– Corporate Bankers
RISK MANAGEMENT
RISK FRAMEWORK AND MANAGEMENT PROCESS
The Company has in place a risk management framework. The Board recognises the importance of identifying and actively monitoring the
risks facing the business. The framework involves an ongoing process for identifying, evaluating and managing significant risks faced by
the Company. While responsibility for risk management ultimately rests with the Board, the aim is for the risk management framework to be
embedded as part of the everyday operations and culture of the Company and its key advisers.
The risk framework is applied holistically across the Company and, to the extent possible, to the underlying investment portfolio as illustrated
in the Business Model on pages 6 to 7. The framework has been in place for the year under review and up to the date of approval of these
annual financial statements.
Direct communication between the Company and its Investment Adviser’s in-house asset management team is a key element in the effective
management of risks within the investment portfolio.
The Board continues to monitor the need for an internal audit function but believes the controls and assurance processes applied at the key
service providers, alongside the external controls process reviews performed annually, provide robust and sufficient assurance.
48
International Public Partnerships Limited
Annual Report and financial statements 2022
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
The risk framework is implemented through the following risk control processes:
RISK IDENTIFICATION
– The Board, Audit and Risk Committee and the
Risk Sub-Committee identify risks with additional
input from the Company’s Investment Adviser and
the Administrator
– Key risks are identified at the investment approval
stage, where the investment papers include an
assessment of key risks as well as potential
mitigations. This reflects work performed at the
due diligence phase, incorporating input where
relevant from specialist advisors appointed to
support the investment process
– The Board receives detailed quarterly asset
management reports highlighting performance
and potential risk issues on an investment-by-
investment basis
– The Audit and Risk Committee has an open
dialogue with its advisers to assist with
assessment of significant risks, if any, that
might arise between reporting periods
RISK ASSESSMENT
– Each identified risk is assessed in terms of
probability of occurrence, potential impact on
financial performance and any movements in the
relative significance of each risk between periods
– A robust assessment of principal and emerging
risks facing the Company is performed. The
assessments build on the wealth of knowledge
acquired by the Company and Investment Adviser
through both bidding and asset management
phases, with risk assessments carried out to
quantify and assess risks
– Where risks might impact viability, these are
assessed further and the Viability Statement on
page 58 contains more information of this review
RISK MONITORING, REPORTING
AND REASSESSMENT
– Risks are monitored and risk mitigation plans are
reassessed by the Audit and Risk Committee,
where applicable, with input from any relevant
key service providers, and reported to the
Board on a quarterly basis
– Annual external controls and process reviews
help ensure the robustness of control processes
– No significant failings or weaknesses were
identified in the review of controls during the year
MITIGATION PLAN
– For newly identified risks or existing risks with
increased likelihood or impact, the Audit and
Risk Committee provides oversight in terms of
developing an action plan to mitigate the risk
and where relevant, enhanced monitoring and
reporting is put in place
International Public Partnerships Limited
Annual Report and financial statements 2022
49
CONTINUOUS RISK MANAGEMENT continUeD
continUoUS riSK management CONTINUED
DEVELOPMENTS IN THE YEAR IN RELATION TO
PRINCIPAL AND EMERGING RISKS
UK REGULATORY REGIME ANNOUNCEMENTS
The Company is currently invested in Cadent, Tideway and
ten OFTOs, all of which are regulated by statutory independent
economic regulators with different frameworks. These frameworks
are designed to, amongst other things, protect the interests of
consumers whilst ensuring that regulated companies can earn a
reasonable return on their capital. Investments in regulated assets
are considered long-term and therefore, investors typically look
beyond any individual regulatory cycle. However, changes in the
regulatory regimes have the potential to impact the returns of these
regulated assets.
Cadent is regulated by Ofgem, which has granted Cadent a licence
to distribute gas across certain regions within the UK. Cadent’s
licence provides it with five-yearly regulatory price reviews. The next
price control period is expected to run from April 2026 to March
2031. In 2023, Ofgem is expected to launch its consultation which
will set out its initial proposals on the framework that will be used
to determine the revenues that UK gas network companies will be
able to earn in the next price control period. Ofgem is not ultimately
expected to finalise the revenue determinations until the months
prior to the start of the next price control period in April 2026.
Tideway is regulated by Ofwat, which has granted Tideway a licence
to design, build, finance, commission and maintain a new 25km
‘super sewer’ under the River Thames. Tideway’s licence provides
it with no price control review until 2030, after which, it will follow
the current five-yearly price control process to which water and
wastewater companies are currently subject. The amendments
to Tideway’s licence that were agreed with Ofwat in order to
mitigate the impact of both Covid-19 related cost overruns and the
Financing Cost Adjustment Mechanism came into effect in March
2022. Following earlier public consultations, in October 2022,
Ofwat amended the date within Tideway’s licence from which delay
penalties can be applied. This change has no impact on the forecast
cash flows but rather maintains the headroom within the schedule
which would otherwise have been eroded due to the previously
announced impact as a result of Covid-19.
Ofwat continues to progress its ‘PR24’ review which will be used
to determine the revenues that UK water companies will be able to
earn in the price control period running from April 2025 to March
2030. Tideway’s licence provides it with no price control review
until 2030 and therefore Ofwat’s PR24 review has no direct impact
on Tideway.
The Company’s OFTO investments are regulated by Ofgem, which
has granted those OFTOs a licence to transmit electricity generated
by an offshore wind farm into the onshore grid. The licence provides
for an availability-based revenue stream at a predetermined rate
for a fixed period of time (typically 20-25 years). Please see more
information on page 25.
COST OF LIVING CRISIS
Household incomes are being squeezed as a result of the recent
heightened levels of inflation. The Bank of England’s response to
curb inflation has been to raise the base rate of interest which is
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adding to the financial pressures on UK households. The disruption
in the market is leading to large scale industrial action across many
sectors of the UK economy including rail, healthcare and education
as workers seek improved pay and working conditions. The volatility
seen in global financial markets is likely to continue as markets
respond to a quickly changing economic environment and 2023 is
likely to see further industrial action and disruption.
The Company continues to monitor counterparty risk for any issues
affecting its service providers in light of challenges faced by these
businesses as a result of the current economic environment. The
Investment Adviser, building on the experience gained following
the liquidation of Carillion Plc and the administration of Interserve
Plc, is well placed to respond to any issues arising from its service
providers and has contingency plans in place to allow for a smooth
transition of contracts to an alternative service provider if required.
Please see further information on page 54.
INTEREST RATES
Recent increases in interest rates and government bond yields
could impact the Company in a variety of ways including, discount
rates applied to forecast cash flows, deposit rates affecting the
amount of interest earned from cash held; and/or the cost of any
new or replacement debt that needs to be procured.
Historically, discount rates have not moved in lockstep with
government bond yields and demand for infrastructure assets
remains strong. Increased cash flows resulting from higher inflation
expectations, foreign exchange gains derived from the weakening
of Sterling, and greater interest earned from cash balances may
also play a mitigating role in any potential future discount rate
valuation movements.
Due to the fixing or hedging of the vast majority of debt in the
portfolio, increases in the cost of debt have a limited impact
on current debt costs. Investments which do not have a pre-
determined concession term or licence period may contain an
element of refinancing exposure. Revenues for regulated assets
are frequently adjusted by the regulator to compensate for changes
in the market cost of debt, and other businesses which operate
in industries with high barriers to entry would typically expect
to be able to pass on a majority of changes in their cost base
to counterparties.
COVID-19
The Covid-19 pandemic continued to impact businesses across
the world during the year. However, the Company is reassured
by the operational performance of its portfolio to date. The
overwhelming majority of revenue comes from availability-based
payments or regulated cash flows that generally provide a range of
protections against adverse scenarios. Short-term impacts have
been witnessed in certain assets with demand-based risk, although
operational performance of these assets has remained strong.
The Company continues to monitor and where possible take action
to avoid or mitigate any such impacts on its portfolio. Whilst the
full long-term consequences of the pandemic are not yet known,
the Company believes that its business model continues to offer a
significant degree of protection to shareholders.
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
CLIMATE CHANGE
Climate change is a key focus for the ESG Committee, ensuring
that the Company continues to evolve its approach to considering
both the risks and opportunities it presents. Climate change would
most likely manifest itself through impact on physical assets (risk 4)
and changes in climate-related regulation (risk 9). Climate change
is therefore considered both as a current and emerging risk. During
the year, the Company commissioned a third-party to support it in
enhancing its assessment of climate change risks. Please see more
information from page 38 in this Report and Sections 3 and 4 of the
Sustainability Report.
WAR IN UKRAINE
The Company continues to actively monitor the war in Ukraine to
ensure that the portfolio of investments is protected, to the extent
it can be, from the direct and indirect impacts of the war. The
Company does not hold any investments in the impacted region
and we are not aware of any material direct implications for the
Company or its portfolio.
FURTHER INFORMATION
A description of broader risk factors relevant to investors is
disclosed in the latest Company prospectus available on the
website www.internationalpublicpartnerships.com.
RISKS ASSESSMENT
AGGREGATE RISK ASSESSMENT
The Company’s identified risks have been mapped to the five different risk categories: political, portfolio operations, macroeconomic,
regulation and compliance, and central operations.
RISK ASSESSMENT
Aggregate risk assessment
Political
Portfolio operations
Macroeconomic
Regulation & compliance
Central operations
Lower
Medium
Higher
ASSESSED RISK POSITION
The chart summarises the overall residual level of risk facing the Company, presenting a combined assessment which incorporates the
potential impact arising from not only the Company’s principal risks, but from all of the Company’s other identified risks:
– Political risk incorporates risks arising from government policy and actions;
– Portfolio operations risk incorporates risks arising from asset operations and ongoing investment performance, including regulatory risk
impacting at asset level;
– Macroeconomic risk incorporates risks arising in the wider economy, including inflation and interest rates;
– Regulation and compliance risk incorporates risks arising from new laws and regulations applicable to the Company and its assets; and
– Central operations risk incorporates risks arising from the management of the portfolio.
The relative impact assessed to be arising from each risk has been combined to present a holistic position, giving stakeholders a more
complete picture of the Company’s residual risk position. Those risks of the Company which are assessed to be the principal risks are
separately identified, and further discussed overleaf.
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PRINCIPAL RISKS
This section provides a summary of the Board’s assessment of the Company’s principal risks. This is not intended to highlight all the
potential risks to the business. There may be other risks that are currently unknown or regarded as less material, which could turn out to
materially impact the performance of the Company, its assets, capital resources and reputation. Where the Company has applied mitigation
processes, it is unlikely that the techniques applied will fully mitigate the risk.
POLITICAL
1. POLITICAL POLICY
DESCRIPTION
MITIGATION
The businesses in which the Company invests
are subject to potential changes in policy and
legal requirements. All investments have a public
sector infrastructure service aspect and are
exposed to political scrutiny and the potential for
adverse public sector or political criticism.
Most of the Company’s existing investments benefit from long-term service
and asset availability-based pricing contracts or regulatory frameworks and the
countries in which the Company operates do not tend to have a tradition of
penal retrospective legislation. Governments tend to be long-term supporters
of infrastructure and similar investment and recognise the risk of deterring future
investment in the event that penal or disproportionate steps are taken in respect of
existing contractual engagements.
Change in political policy
Political policy and public financing decisions may
adversely impact either existing investments, or
the Company’s ability to source new investments
at attractive prices or at all. This may impact the
Company’s reputation.
Adverse changes to policies may directly or
indirectly result from reputational developments
seen across the wider sector.
Termination of contracts
Contracts between public sector bodies and the
Company’s investment entities may contain rights
for the public sector to terminate contracts in
specific situations. While the contracts typically
provide for some compensation in such cases,
this may be less than required to sustain the
Company’s valuation. There have been instances
of contracts being voluntarily terminated in the
UK (although not affecting the Company).
Nationalisation
Longer-term political policy pressures arising as a
consequence of Brexit in the UK or the Covid-19
pandemic more globally remain uncertain, so the
possible risk of nationalisation can be seen to
remain over the medium-term.
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Current global policy practice continues to support the use of private sector capital
to finance public infrastructure, despite challenge from some political parties,
particularly in the UK, around the role of the private sector in the provision of
such services.
The Company seeks to maintain strong and positive relationships with its public
sector clients and external stakeholders where possible.
The Company engages with its public sector clients in developing cost-saving
initiatives and seeks to act as a ‘good partner’ including a focus on the ESG
aspects of its investments. None of the Company’s investments have been
identified, by any government audit or public sector report, as poor value for
money or not in the public interest.
The Investment Adviser is a signatory to the Code of Conduct for Operational
PFI/PPP contracts in the UK. The Code sets out the basis on which public and
private sector partners agree to work together to make savings in operational
PPP contracts.
Compensation on termination clauses within such contracts serve to partially
mitigate the risk of voluntary termination. Furthermore, in the current financial
climate where voluntary termination leads to a requirement to pay compensation,
such compensation is likely, in many cases, to represent an unattractive
immediate call on the public finances for the public sector.
The Company believes significant compensation would be required in order to
enact this policy legitimately within existing contractual arrangements. Therefore,
given the state of public finances, we maintain the view that the Company is
defensively positioned in this regard.
overview
STRATEGIC REPORT
corporate governance
Financial StatementS
The following key is used in the table below
to highlight the Board’s view on movement of
risk exposures during the period:
Risk exposure has increased in the period
Risk exposure has reduced in the period
No significant change in risk exposure since last reporting period
PORTFOLIO OPERATIONS
2. ASSET PERFORMANCE
DESCRIPTION
MITIGATION
Construction
For the Company’s assets under construction, there is an
element of construction risk that takes the form of cost overruns
or delays which could impact on investment returns. The
construction industry continues to see implications resulting from
the Covid-19 pandemic, which contain potential consequential
impacts on the Company.
Operational performance
Assets in the portfolio have revenues which are based on the
availability of the asset, as well as revenues not solely dependent
on availability but with linkage to other factors including demand
risk or being subject to regulatory frameworks.
The entitlement of the Company’s PPP and OFTO investments
to receive revenues is generally dependent on underlying
physical assets remaining available for use and continuing to
meet certain performance standards. Failure to maintain assets
available for use or operating in accordance with pre-determined
performance standards may result in a reduction in the income
that the Company has projected to receive.
A number of investments in the portfolio are subject to
regulatory regimes which are designed by the regulators to,
among other things, protect the interests of consumers whilst
ensuring that regulated companies are able to earn a reasonable
return on their capital. Changes in the regulatory regimes have
the potential to impact the returns of the Company’s two
regulated assets.
A number of investments in the portfolio assume residual
values which are expected to be received from the assets on
completion of the project contract or at the end of the expected
investment holding period. Amounts which are realised may be
different from current assumptions.
Cyber Security
Cyber security continues to be an issue of focus for the
Company with growing levels of sophistication seen in the
use of cyber attacks targeting businesses. The Company and
the assets in its portfolio can be impacted by cyber security
in a number of ways including asset operational performance,
financial loss, or reputational impact.
Performance-Related Termination
In serious cases where the terms of the underlying contract
with the public sector are breached due to default or force
majeure then that contract can usually be terminated without
compensation. Failure to receive the amount of revenue
projected or termination of a contract will have a consequential
impact on the Company’s cash flow and value.
Contractual mechanisms allow for significant pass-down of
construction cost overrun and delay risk to subcontractors and/
or consumers, subject to credit risk (see below). The Company’s
investment in Tideway benefits from a government support
mechanism which ultimately backstops investors’ downside
risk in the event of a major construction cost overrun. Tideway
construction works were approximately 85% complete as at
31 December 2022.
The Board reviews the performance of each investment on a
quarterly basis and historically has seen consistently high levels of
asset availability.
For regulated assets, the regulatory regimes under which the assets
operate provide a level of protection of cash flows for these assets.
Contractual mechanisms and underlying regulatory frameworks also
allow for significant pass-down of unavailability and performance
risk to subcontractors in many cases, subject to credit risk
(see below).
In addition, investments in regulated assets are considered very
long-term by the Company, beyond any individual regulatory
cycle. This long-term view of such assets takes into account the
robustness of yield as well as the potential for increases in the
regulated asset base over time.
The Company, through its Investment Adviser, has sight of detailed
business continuity plans of its counterparties designed to manage
services in adverse circumstances. In addition, the Company has
the ability to pass down certain costs to the service providers and
can potentially rely on business interruption cover where available.
Residual value assumptions are based on prevailing market
expectations and where possible recent market evidence. The
nature of the Company’s assets should provide some mitigation to
the risk of a reduction in demand for the assets at the end of the
expected investment holding period.
Layers of control exist across the portfolio designed to mitigate
cyber security risk as far as possible for the Company and its
assets. This includes dedicated controls and processes at fund, as
well as, operational asset levels. The ways in which cyber security
is further supported through the portfolio includes management
focus at asset level, use of specialist external IT service providers
and external controls reviews, for example.
In the event of significant and continuing unavailability across
the Company’s portfolio, the Company is able to terminate the
Investment Advisory Agreement. This serves to reinforce alignment
of interest between the Company and the Investment Adviser.
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PORTFOLIO OPERATIONS continUeD
3. COUNTERPARTY RISK
DESCRIPTION
MITIGATION
The Company’s investments are dependent on the performance
of a series of counterparties to contracts including public
sector bodies, consortium partners, construction contractors,
facilities management and maintenance contractors, asset
and investment managers (including the Investment Adviser),
banks and lending institutions and others. Failure by one or
more of these counterparties to perform their obligations fully
or as anticipated could adversely affect the performance of
affected investments. There may be disruption or delay to the
services provided to investments, or replacement counterparties
(where they can be obtained) may only be obtained at a greater
cost. This could negatively impact the Company’s cash flows
and valuation.
The Company has a broad range of suppliers and believes that
supplier counterparty risk is diversified across its investments.
All contracts include the provision of a security package from
counterparties to mitigate the impact of supplier failure. Generally
payments are made in arrears to service providers giving the
Company some protection against failures in performance.
The credit quality of supplier counterparties is reviewed as
part of the Company’s due diligence at the time of making its
investments and for key suppliers on a regular basis.
Most of the services provided to the Company’s investments
are reasonably well established with a number of competing
providers. Therefore, there are expectations that there will be
a pool of potential replacement supplier counterparties in the
event that a service counterparty fails, albeit not necessarily at
the same cost.
The Company closely monitors the risk of adverse developments
occurring in relation to its significant counterparties, and
develops contingency plans as appropriate to ensure risk of
counterparty failure is minimised.
Where borrowings exist in respect of the Company’s
investments, interest rates are generally fixed through the use of
interest rate swaps. The Company is therefore exposed to credit
deterioration of the counterparties of these swaps.
The credit risk of such swap counterparties is considered at the
time of entering into these arrangements and is regularly reviewed.
The Company aims to use reputed financial institutions with good
credit ratings.
4. PHYSICAL ASSET RISK
DESCRIPTION
MITIGATION
The Company indirectly invests in physical assets used by the
public and thus is exposed to possible risks, both reputational
and legal, in the event of damage or destruction to such assets
and their users, including loss of life, personal injury and property
damage. While the assets the Company invests in benefit from
insurance policies, these may not be effective in all cases.
The Company’s investments benefit from regular risk reviews and
external insurance advice which is intended to ensure that those
assets continue to benefit from insurance cover that is standard
for such assets. Health and safety data is monitored across the
portfolio to highlight any areas of focus and ensure appropriate
safety measures are in place.
Climate change
Investments may be subject to extreme weather and changes in
precipitation and temperature, all of which may result in physical
damage to assets.
During the year, the Company commissioned a third-party to
work alongside its Investment Adviser to assess alignment with
the recommendations of TCFD. The Company has continued to
update its investment processes, further strengthening climate
considerations within investment screening and diligence,
ensuring these are considered from the earliest point in the
investment cycle.
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overview
STRATEGIC REPORT
corporate governance
Financial StatementS
PORTFOLIO OPERATIONS continUeD
5. CONTRACT RISK
DESCRIPTION
The performance of the Company’s investments is dependent
on the complex set of contractual arrangements specific to each
investment continuing to operate as intended. The Company
is exposed to the risk that such contracts do not operate as
intended, are incomplete, contain unanticipated liabilities, are
subject to interpretation contrary to its expectations or otherwise
fail to provide the protection or recourse anticipated.
MACROECONOMIC
6. INFLATION
DESCRIPTION
Inflation may be higher or lower than expected. The net cash
flows from the Company’s investment portfolio are positively
correlated to inflation. Should actual inflation turn out to be
higher or lower than the rates assumed by the Company at
the relevant valuation date, this would be expected to impact
positively or negatively, respectively, on the Company’s projected
cash flows.
The level of inflation-linkage across the investments held by
the Company varies and is not consistent. The consequences
of higher or lower levels of inflation than that assumed by the
Company will not be uniform across its portfolio.
The Company is also exposed to the risk of changes to the
manner in which inflation is calculated by the relevant authorities.
MITIGATION
Such contracts have been entered into, usually only after
extensive negotiations and with the benefit of external legal
advice. A legal review of contract documentation is undertaken
as part of the Company’s due diligence at the time of making
new investments.
The Company benchmarks its inflation forecasts to credible
independent sources
MITIGATION
The Company uses a long-term view of inflation within its
forecasts, benchmarked where possible to independent analysis.
It also provides sensitivities to investors indicating the projected
impact on the Company’s NAV of alternative inflation scenarios,
offering investors an ability to anticipate the likely effects
alternative inflation scenarios may have on their investment.
The Company monitors the effect of inflation on its portfolio
through its biannual valuation process.
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MACROECONOMIC continUeD
7. FOREIGN EXCHANGE MOVEMENTS
DESCRIPTION
MITIGATION
A portion of the Company’s investment portfolio has cash flows
which are denominated in currencies other than Sterling, but
the Company borrows corporate level debt, reports its NAV
and pays dividends in Sterling. Changes in the rates of foreign
currency exchange are outside the Company’s control and may
impact positively or negatively on cash flows and valuation.
The Company uses forward foreign exchange contracts to
mitigate the risk of short-term volatility in foreign exchange rates
on the Sterling value of cash flows from overseas investments.
These may not be fully effective and rely on the strength of the
counterparties to those contracts to be enforceable.
The Company monitors the effect of foreign exchange on its
portfolio through its biannual valuation process and reports this
to investors. The Company also provides sensitivities to investors
indicating the projected impact on the NAV of a limited number
of alternative foreign exchange scenarios, offering investors the
ability to anticipate the likely effects of some foreign exchange
scenarios on their investment. The Company continues to be
mindful of the potential for exchange rate volatility in light of
international economic and political change. The Company notes
that a devaluation of Sterling against the relevant currencies would
typically have a positive impact on the NAV. The opposite would
be true for an increase in the value of Sterling.
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overview
STRATEGIC REPORT
corporate governance
Financial StatementS
MACROECONOMIC continUeD
8. INTEREST RATES
DESCRIPTION
The Company is monitoring the potential impacts of increased
inflation on interest rates.
MITIGATION
Changes in market rates of interest can affect the Company in a variety of different ways:
Valuation discount rate
Changes in market rates of interest (particularly government
bond yields) may directly impact the discount rate used to
value the Company’s future projected cash flows and thus its
valuation. Higher discount rates will have a negative impact on
valuation while lower rates will have a positive impact.
Corporate Debt Facility
Floating rate interest is charged on the CDF, so higher than
anticipated interest rates will increase the cost of this facility.
Underlying portfolio considerations
Portfolio entities typically choose or can be required to hold
various cash balances. The Company assumes that it will
earn interest on such deposits over the long-term. Changes in
interest rates may mean that the actual interest receivable by
the Company is different to that projected.
Certain assets within the portfolio contain refinancing
assumptions. Increases in lending rates available to these
projects would have the potential to increase their cost
of financing and therefore impact the overall returns from
these assets.
In determining the discount rates used to value its investments,
the Company generally uses nominal government bond yields to
which specific investment risk premia are added to determine the
overall discount rates. The investment risk premia may provide
a buffer against rising bond yields assuming market demand
for investment is sustained. Higher interest rates can often be
precipitated by higher inflation expectations, and therefore any
inflation-linkage (discussed above) may partly mitigate the effect
of interest rate changes.
In the event that the interest rate increases, the Company has
the option of repaying its CDF at any time with minimal notice,
providing sufficient funds are available. The CDF remains
available to March 2024. The facility is £400 million in size
(including a £150 million uncommitted ‘accordion’) compared to
a current investment portfolio valuation of c.£2.9 billion.
As presented in the sensitivity analysis, variations in cash deposit
rates have little impact on the Company’s NAV. The Company
monitors the effect of historical and projected interest rates on its
portfolio through its biannual valuation process and reports this to
investors. The risk of adverse movements in debt interest rates for
unhedged debt within regulated entities is limited through protections
provided by the regulatory regime; however, the Company may
potentially be exposed to interest rate risk on debt outside of the
regulatory structure.
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REGULATION AND COMPLIANCE
9. LAW AND REGULATION
DESCRIPTION
MITIGATION
Change in law or regulation
Changes in law or regulation may increase costs of operating
and maintaining facilities or impose other costs or obligations
that indirectly adversely affect the Company’s cash flow from its
investments and/or valuation of them.
Transition to net zero
In 2019, the UK Government committed to the net zero target
as recommended by the Climate Change Committee. Reaching
net zero GHG emissions requires extensive changes across
the economy. Major infrastructure decisions need to be made
in the near future. These changes are unprecedented in their
overall scale and therefore may impact the use case of a variety
of infrastructure including altering the way infrastructure is
operated and utilised.
Some investments maintain a reserve or contingency designed
to meet a change in law costs and/or have a mechanism to allow
some change in law costs (typically building maintenance related)
to be passed back to the public sector. The possibility remains for
there to be changes in law or regulation (including, for example, in
relation to climate change) that have the potential to impact costs or
obligations of the Company or portfolio projects, which may not be
fully capable of mitigation. The Company closely monitors changes
in laws and regulations to ensure that the Company remains
compliant with its obligations and minimises cost exposures
wherever possible.
A large portion of the Company’s investments are availability type
assets where the cash flows are based on making the asset available
in a pre-agreed manner. The cash flows from such investments are
largely insulated from the impacts of the transition to net zero.
The changes arising from a transition to a low-carbon economy
have the potential to be wide-ranging, including adapting to
decarbonisation of heat, increased electrification of transportation
and other systems previously dependent on fossil fuels, and
decarbonisation of construction. It is expected infrastructure will
continue to play a key role in the transition to a low-carbon economy.
The Company believes the portfolio to be well placed for the transition
to net zero.
10. TAX
DESCRIPTION
Change in tax rates
Rates of tax, both in the UK and overseas jurisdictions in which
the Company operates, may increase in the future if government
policy were to change.
Change in tax legislation
Changes in tax legislation across the multiple jurisdictions
in which the Company has investments can reduce returns,
impacting on the Company’s future cash flow returns and hence
valuation (calculated on a discounted cash flow basis).
MITIGATION
The Company typically incorporates tax rates changes within its
forecast cash flows once substantively enacted, or where there is
a reasonable expectation of substantial enactment shortly after the
valuation date and continuously monitors for changes in tax rates.
The Company takes a cautious approach to tax planning. The
Board monitors changes in tax legislation and takes advice as
appropriate from external, independent, qualified advisers. While the
Board and the Company’s Investment Adviser seek to minimise the
impact of adverse changes in tax requirements, its ability to do so is
naturally limited.
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STRATEGIC REPORT
corporate governance
Financial StatementS
CENTRAL OPERATIONS
11. FINANCIAL FORECASTS
DESCRIPTION
MITIGATION
The Company’s projections depend on the use of financial
models to calculate its future projected investment returns.
There may be errors in any of these financial models, including
calculation, input, logic, and output errors. Once corrected, such
errors may lead to a revision in projected cash flows and thus
impact valuation.
The financial forecasts of certain operating infrastructure
businesses can have more variability than contracted
concessions, given the wider range of variables that apply and
are therefore inherently more difficult to forecast accurately.
Sensitivities
The Company publishes information relating to its portfolio
including projections of how portfolio performance and valuation
might be impacted by changes in various factors e.g. interest
rates, inflation rates, deposit rates, etc. The sensitivity analysis
and projections are not forecasts and actual performance
is likely to differ (possibly significantly) from that projection
as in practice the impact of changes to such factors will be
unlikely to apply evenly across the portfolio or in isolation from
other factors.
The financial models used to generate financial forecasts are
generally subject to model audit by external professional
service firms, which is a process designed to identify errors.
The comparison of past actual performance of investments
against past projected performance also gives confidence
in financial models where actual performance has closely
matched projected performance. However, there can be
no assurance that forecasts will be realised, particularly in
relation to operational infrastructure businesses where more
variables apply.
Investments in regulated businesses are considered very long-
term, beyond the much shorter regulatory cycles. Valuations of
such businesses should take into account robustness of yield
and potential for increases in regulated asset base over time.
Financial models are managed by a dedicated team with a
background in financial modelling and experience of managing
models in a manner that seeks to minimise the risk of error.
Sensitivities are produced for the information of relevant
stakeholders and are accompanied by disclaimers and guidance
explaining that limited reliance can be placed upon them.
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VIABILITY STATEMENT
In accordance with provision 31 of the 2018 revision of the UK Code
of Corporate Governance, we have considered the Company’s
viability as summarised below. Due to the long-term and/or
contractual nature of our investments, we have a significant level
of confidence over the endurance and longevity of our business;
however, it is difficult to assess the regulatory, tax and political
environment on a long-term basis. Whilst we consider the valuation
of investment cash flows for the purposes of the NAV over a
considerably longer period than five years, we view five years as an
appropriate timeframe for assessing the Company’s viability given
these inherent uncertainties.
The viability assessment process is embedded within the
Company’s annual risk review cycle and involves the following:
The viability assessment is approved by the Board. Following the
assessment, the Board has a reasonable expectation that the
Company will be able to continue in operation and meet all of
its liabilities as they fall due up to March 2028. This assessment
is based on the following assumptions which are not within the
Company’s control:
– No significant changes to government policy, tax, laws and
regulations affecting the Company or its investments other than
the impacts already factored into future cash flows as part of the
31 December 2022 NAV valuation; and
– Continued availability of sufficient capital and market liquidity to
allow for refinancing/repayment of any short-term recourse debt
facility obligations as they become due, including in relation to the
Company’s debt facility which remains available to March 2024.
1 An Audit and Risk Committee review and assessment of the risks
facing the Company. A summary of the review process is detailed
on pages 73 to 75;
MIKE GERRARD
CHAIR
29 March 2023
JOHN LE POIDEVIN
DIRECTOR
29 March 2023
2 Identification of those principal risks that are deemed more likely
to occur and have a potential impact on the Company’s viability
over the viability period. This exercise has included consideration
of: a persistent low inflation rate environment (noting that a
high-rate environment would typically be positive for the
Company’s investment cash flows given the linkage of revenues
to inflation across many investments); large currency fluctuations
impacting on receipts from overseas investments; and the impact
of the loss of income from investments (whether due to key
subcontractor default, or other reason for underperformance).
We note that a number of risks identified during the risk review
process in step one above may have implications for the
Company’s valuation but may be considered insignificant from
a five-year viability perspective;
3 Quantification analysis of the potential impact of those principal
risks occurring in isolation and under plausible combined
sensitivity scenarios over the viability period;
4 Assessment of potential mitigation strategies to mitigate the
potential impact of principal risks over the viability period.
This exercise has considered the potential to liquidate
investments and/or refinance investments if necessary.
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Strategic report
CORPORATE GOVERNANCE
Financial StatementS
CORPORATE GOVERNANCE
SUMMARY OF INVESTMENT POLICY
OVERVIEW
The Company invests in public or social infrastructure assets and
related businesses located in the UK, Australia, Europe, North
America and other parts of the world where the risk profile meets
the Company’s risk and return requirements.
INVESTMENT RESTRICTIONS
The Company’s Investment Policy restricts it from making any
investment of more than 20% of the total assets in any one
investment in order to limit the risk of any one investment to the
overall portfolio.
The Company has a long-term view and invests in operational
and construction phase assets for the life of the asset or
concession, or under a licence issued by a regulator, unless
there is a strategic rationale for earlier realisation. The Company
seeks to enhance the capital value and the income derived
from its investments to optimise returns for its investors. The
Investment Policy is summarised below and available in full at
www.internationalpublicpartnerships.com.
INVESTMENT PARAMETERS
Maintaining the performance of the existing portfolio is the
Company’s key focus. However, it will also seek attractive
opportunities to expand its portfolio, including:
– Investments with characteristics similar to the existing portfolio;
– Investments in other assets or concessions or regulated
businesses having a public or social infrastructure character
with either availability, property rental or user paid payment
mechanisms or appropriate regulatory frameworks;
– Investments in infrastructure assets or concessions characterised
by high barriers to entry and expected to generate an attractive
total rate of return over the life of the investment;
– Divestments where an investment is no longer aligned with the
Company’s investment objectives or where circumstances offer
an opportunity to enhance the value of the portfolio.
PORTFOLIO COMPOSITION
The Company will, over the long-term, maintain a spread of
investments both geographically and across industry sectors in
order to achieve a broad balance of risk in the Company’s portfolio.
The Company does not currently expect to invest to any material
extent in infrastructure projects located in non-OECD countries in
the foreseeable future.
Asset allocation will depend on the maturity of the local
infrastructure investment market, wider market conditions and the
judgement of the Investment Adviser and the Board on the suitability
of the investment from a risk and return perspective. The Asset
Management section on pages 22 to 27 has details of the current
composition of the investment portfolio.
As a London Stock Exchange listed company, the Company is also
subject to certain restrictions pursuant to the UKLA Listing Rules.
MANAGING CONFLICTS OF INTEREST
Further investments will continue to be sourced by the Investment
Adviser, Amber Fund Management Limited. Some of these
investments will have been originated and developed by, and
in certain cases may be acquired from, members of the Amber
Infrastructure Group.
The Company has established detailed procedures to deal with
conflicts of interest that may arise and manage conduct in respect
of any such acquisition. The Corporate Governance Report sets out
more details on the conflicts management process.
FINANCIAL MANAGEMENT
The Company may also make prudent use of leverage to enhance
returns to investors, to finance the acquisition of investments in the
short-term and to satisfy working capital requirements.
Under the Company’s Articles, outstanding borrowings at the
Company level, including any financial guarantees to support
subscription obligations in relation to investments, are limited to
50% of the Gross Asset Value (‘GAV’) of the Company’s investments
and cash balances. The Company has the ability to borrow in
aggregate up to 66% of such GAV on a short-term basis (i.e. less
than 365 days) if considered appropriate. Details of the Company’s
CDF can be found on page 28.
CHANGES TO INVESTMENT POLICY
Material changes to the Investment Policy summarised in this
section may only be made by ordinary resolution of the shareholders
in accordance with the UK Listing Rules.
International Public Partnerships Limited
Annual Report and financial statements 2022
61
BOARD OF DIRECTORS
The table below details all Directors of the Company at the date of this Report
MIKE GERRARD
Board Chair
JULIA BOND
Chair, ESG Committee
STEPHANIE COXON
Chair, Nomination and
Remuneration Committee
SALLY-ANN DAVID
Chair, Risk Sub-Committee
DATE OF APPOINTMENT:
4 September 2018
DATE OF APPOINTMENT:
1 September 2017
DATE OF APPOINTMENT:
1 January 2022
DATE OF APPOINTMENT:
10 January 2020
BACKGROUND AND EXPERIENCE
A resident in the UK, Mike has
over 30 years of financial and
management experience in
global infrastructure investment.
He has held a number of senior
positions, including as an
assistant director of Morgan
Grenfell plc, a director of HM
Treasury Taskforce, deputy CEO
and later CEO of Partnerships
UK plc and, later, a managing
director of Thames Water
Utilities Limited.
Mike has a breadth of
experience across a range
of economic and social
infrastructure sectors and has
been involved in some of the
largest infrastructure projects
in the UK. He is a Fellow of the
Institution of Civil Engineers.
LISTED COMPANY AND OTHER
RELEVANT DIRECTORSHIPS
Mike holds no other listed
company positions but holds
several non-executive positions
within boards and committees
that oversee the development
and delivery of infrastructure
investments in the UK
and Europe.
BACKGROUND AND EXPERIENCE
A resident in the UK, Julia has
over 25 years’ experience of
capital markets in the financial
sector and held senior positions
within Credit Suisse, including
Head of One Bank Delivery
and Global Head of Sovereign
Wealth funds activity.
BACKGROUND AND EXPERIENCE
A resident of Guernsey,
Stephanie is a Fellow of
the Institute of Chartered
Accountants in England and
Wales and is a non-executive
director on several London
listed companies.
Prior to becoming a non-
executive director, Stephanie
led the investment trust capital
markets team at PwC for the
UK and Channel Islands. During
her time at PwC, Stephanie
specialised in advising FTSE
250 and premium London-listed
companies on accounting,
corporate governance,
risk management and
strategic matters.
BACKGROUND AND EXPERIENCE
A resident of Guernsey,
Sally-Ann has over 35 years
of experience in infrastructure
projects in the energy sector,
including international
offshore transmission systems
and the challenges of the
energy transition.
Having held senior positions
within the power utility arena,
Sally-Ann is currently the
Chief Operating Officer of
Guernsey Electricity Ltd. She
is a Chartered Engineer and
Chartered Director.
LISTED COMPANY AND OTHER
RELEVANT DIRECTORSHIPS
– European Assets Trust (‘EAT’)
– Foreign, Commonwealth &
LISTED COMPANY AND OTHER
RELEVANT DIRECTORSHIPS
– PPHE Hotel Group Limited
– JLEN Environmental Assets
LISTED COMPANY AND OTHER
RELEVANT DIRECTORSHIPS
– Guernsey Electricity Ltd
– Channel Islands Electricity
Development Office (‘FCDO’)
Group Limited
Grid
– Strategic Command (MoD)
– Apax Global Alpha Limited
– Board member of The
Association of Investment
Companies
– European Marine Energy
Centre Ltd
Sally-Ann is also a director of
a health-related charity.
All of the independent directors are members of all Committees with the exception of Mike Gerrard, who is not a member of the Audit and Risk Committee. Giles Frost is a non-independent director.
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CORPORATE GOVERNANCE
Financial StatementS
COMMITTEE MEMBERSHIP KEY:
Audit and Risk Committee
ESG Committee
Investment Committee
Management Engagement Committee
Nomination & Remuneration Committee
Risk Sub-Committee
MERIEL LENFESTEY
Chair, Management Engagement
Committee
JOHN LE POIDEVIN
Chair, Audit and Risk Committee,
Senior Independent Director from
May 2022
GILES FROST
CLAIRE WHITTET
Senior Independent Director
until May 2022
DATE OF APPOINTMENT:
10 January 2020
DATE OF APPOINTMENT:
1 January 2016
DATE OF APPOINTMENT:
2 August 2006
BACKGROUND AND EXPERIENCE
A resident of Guernsey, Meriel
has 28 years of multi-sector
business experience.
BACKGROUND AND EXPERIENCE
A resident of Guernsey, John
has over 30 years of business
experience.
With a background in human-
centred design for technology,
she brings a strategic end-
user focus and a broad set of
experiences encompassing
many sectors and scales of
organisation ranging from her
own start-ups through global
corporations and governmental
programmes.
John is a Fellow of the Institute
of Chartered Accountants
in England and Wales and a
former partner of BDO LLP,
where he held a number of
leadership roles, including Head
of Consumer Markets, where he
developed an extensive breadth
of experience and knowledge
across the real estate, leisure
and retail sectors in the UK
and overseas.
John is a non-executive director
on several plc boards and chairs
a number of audit committees.
BACKGROUND AND EXPERIENCE
A resident in the UK, Giles is a
founder of Amber Infrastructure
and has worked in the
infrastructure investments sector
for over 20 years.
Giles is chair and a director
of Amber Infrastructure
Group Holdings Limited, the
ultimate holding company of
the Investment Adviser to the
Company and various of its
subsidiaries.
LISTED COMPANY AND OTHER
RELEVANT DIRECTORSHIPS
– Bluefield Solar Income
Fund Limited
– Ikigai Ventures Limited
– Boku, Inc.
Meriel also sits on another
commercial board; Jersey
Telecom, and is a committee
member for the Guernsey
Institute of Directors
LISTED COMPANY AND OTHER
RELEVANT DIRECTORSHIPS
– BH Macro Limited
– TwentyFour Income
Fund Limited
– Super Group (‘SGHC’)
Limited
LISTED COMPANY AND OTHER
RELEVANT DIRECTORSHIPS
Giles is also a director of a
number of the Company’s
subsidiary and investment
holding entities and of other
entities in which the Company
has an investment. He does
not receive directors’ fees
from these roles.
DATE OF APPOINTMENT:
2 August 2006
DATE OF RETIREMENT:
25 May 2022
BACKGROUND AND EXPERIENCE
A resident of Guernsey, Claire
has over 40 years’ experience in
the banking industry with Bank
of Scotland, Bank of Bermuda,
and Rothschild and Co Bank
International, where she was
latterly managing director and
co-head until May 2016 when
she became a non-executive
director. She is also a non-
executive director of a number
of listed and private equity
investment companies, none of
which is a trading company.
Claire is a member of the
Chartered Institute of Bankers
in Scotland, the Chartered
Insurance Institute and the
Institute of Directors and is a
Chartered Banker, and holds the
Institute of Directors Diploma in
Company Direction.
LISTED COMPANY AND OTHER
RELEVANT DIRECTORSHIPS
– BH Macro Limited
– Eurocastle Investment Ltd
– Riverstone Energy Ltd
– TwentyFour Select Monthly
Income Fund Ltd
– Third Point Offshore
Investors Ltd
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CORPORATE GOVERNANCE REPORT
MIKE GERRARD
CHAIR
INTRODUCTION
The Board of Directors are committed to high standards of
corporate governance and has put in place a framework for
corporate governance which it believes is appropriate for an
investment company that is a constituent of the FTSE 250 and
FTSE All-Share indices.
The Board is responsible to shareholders for the overall direction
and oversight of the Company, for agreeing its strategy, monitoring
its financial performance, and setting and monitoring its
risk appetite.
This section describes how the Company is governed. It explains
how the Board is organised and operates, including the roles and
composition of each of its Committees, and provides details on its
Board members and how they are remunerated. As an investment
company, the Company has no employees and relies on the advice
and expertise of its key suppliers, notably its Investment Adviser,
Amber Fund Management Limited (‘Amber’). This section therefore
also explains the nature of the Company’s relationship with the
Investment Adviser, and how this is managed, including the
remuneration of the Investment Adviser.
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CORPORATE GOVERNANCE
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COMPLIANCE WITH CORPORATE GOVERNANCE CODES
AND REGULATIONS
The Company has a Premium Listing on the London Stock
Exchange and is required to confirm its compliance with (or explain
departures from) the UK Corporate Governance Code (the ‘UK
Code’). The Company is a member of the Association of Investment
Companies (the ‘AIC’) and has put in place arrangements to
comply with the AIC Code which, in accordance with the AIC
Code, enables it to comply with the UK Code in areas that are of
specific relevance to investment companies. The Guernsey Financial
Services Commission (the ‘GFSC’) has confirmed that companies
that report against the UK Code or AIC Code are deemed to meet
the Guernsey Code of Corporate Governance.
The AIC Code is available from the AIC website (www.theaic.co.uk).
The UK Code is available from the FRC website (www.frc.co.uk).
As an investment company, most of the Company’s day-to-day
responsibilities are delegated to third parties. The Company does
not have any executive directors. The UK Code’s two separate
principles of setting out the responsibilities of the chief executive
and disclosing the remuneration of executive directors (Principles
G and Q of the UK Code) are therefore not applicable.
For the purposes of the AIC Code, Giles Frost is not treated
as being an independent director, due to his relationship with
the Company’s Investment Adviser. In accordance with the AIC
Code, all other non-executive directors were independent of the
Company’s Investment Adviser on appointment to the Board and
continue to remain so.
BOARD TENURE AND RE-ELECTION
Directors do not have service contracts. Directors are appointed
under letters of appointment, copies of which are available at the
registered office of the Company. All directors offer themselves for
re-election on an annual basis. The Board considers its composition
and succession planning on an ongoing basis.
In accordance with the AIC Code, when and if any director has been
in office (or on re-election would at the end of that term of office
have been in office) for more than nine years, the Company will
consider further whether there is a risk that such a director might
reasonably be deemed to have lost independence through such
long service.
Stephanie Coxon joined the Board on 1 January 2022 and was
elected by shareholders at the 2022 AGM. Claire Whittet retired
from the Board following the conclusion of the 2022 AGM.
Although the Company is registered in Guernsey, in accordance
with the guidance set out in the AIC code, this Annual Report
contains a description of how the Directors have considered matters
set out in Section 172 of the UK Companies Act 2006 in relation
to stakeholder engagement and the success of the Company. See
pages 46 to 47 for more information.
DIRECTORS’ DUTIES AND RESPONSIBILITIES
The Directors have adopted a set of Reserved Powers,
which establish the key purpose of the Board and detail its
major duties and is available on the Company’s website,
www.internationalpublicpartnerships.com.
During the year, the Company was subject to the UK Packaged
Retail and Insurance-based Investment Product (‘PRIIPs’)
Regime (‘the Regulation’). In accordance with the requirements
of the Regulation, the Company published and updated its
three-page Key Information Document (‘KID’) on 8 September
2022. The KID is available on the Company’s website, www.
internationalpublicpartnerships.com/investors, and will be updated
following the publication of the Company’s financial results, in
accordance with the amendments required by the Regulation and
thereafter at least every 12 months.
BOARD AND COMMITTEES
The Board sets the strategy for the Company and makes decisions
on changes to the portfolio (including approval of acquisitions,
disposals and valuations). Through Committees, and the use of
external independent advisers, it manages risk and governance of
the Company. The Board has a majority of independent directors –
currently six of the seven directors are independent.
BOARD OF DIRECTORS
The Board of Directors currently consists of seven non-executive
directors, whose biographies, on pages 62 to 63, demonstrate a
breadth of investment and business experience.
The Board is chaired by Mike Gerrard, who was considered to
be independent upon appointment and remains independent
throughout his term of service for the purposes of the AIC Code.
These reserved powers of the Board have been adopted by the
Directors to demonstrate clearly the importance with which the
Board takes its fiduciary responsibilities and as an ongoing means
of measuring and monitoring the effectiveness of its actions.
The Board monitors the Company’s share price and NAV and
regularly considers ways in which shareholder value may be
enhanced. These may include implementing marketing and
investor relations activities, appropriate management of share price
premium/discount and the relative positioning and performance
of the Company to its competitors. The Board is also responsible
for safeguarding the assets of the Company and for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Individual directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns
them in the furtherance of their duties. The Company maintains
appropriate Directors’ and Officers’ liability insurance in respect
of legal action against its directors on an ongoing basis and the
Company has maintained appropriate cover throughout the year.
All new directors receive introductory support and education about
the infrastructure sector, and the Company, from the Investment
Adviser upon joining the Board and, in consultation with the Board
Chair, all directors are entitled to receive other relevant ongoing
training as necessary.
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CORPORATE GOVERNANCE REPORT continUeD
Director
Mike Gerrard
Julia Bond
Stephanie Coxon1
Sally-Ann David
Meriel Lenfestey
John Le Poidevin
Giles Frost2
Claire Whittet3
2022 Fees
£
2021 Fees
£
98,600
60,619
55,356
55,825
55,356
71,655
53,500
23,956
87,600
50,400
-
48,400
46,400
59,800
46,400
50,400
1 Stephanie Coxon was appointed to the Board on 1 January 2022.
2
The emoluments for Giles Frost are paid to his employer Amber Infrastructure Limited, a
related company of the Company’s Investment Adviser.
3 Claire Whittet resigned from the Board on 25 May 2022.
Giles Frost is also a director of a number of other companies
in which the Company directly or indirectly has an investment,
although he does not control or receive remuneration in relation to
these entities.
In addition to the director fees above, John Le Poidevin served as
a director to four Luxembourg subsidiary entities of International
Public Partnerships and was entitled to fees of £3,000 per entity
for the year ended 31 December 2022. The Nomination and
Remuneration Committee recommended an increase to £3,150 per
entity for 2023.
DIRECTORS’ INTERESTS
Directors, who held office at 31 December 2022, had the following
interests in the shares of the Company:
Director
Mike Gerrard
Julia Bond
Stephanie Coxon2
Sally-Ann David
Meriel Lenfestey
John Le Poidevin
Giles Frost3
Claire Whittet4
31 December
2022
Number of
Ordinary
Shares1
31 December
2021
Number of
Ordinary
Shares1
243,447
106,542
10,000
30,303
25,142
327,898
971,676
114,102
159,181
72,444
–
30,303
9,979
160,653
971,676
76,248
1 All shares are beneficially held.
2 Stephanie Coxon was appointed to the Board on 1 January 2022.
3 Holds some shares through a personal investment company.
4
Holds shares through a Retirement Annuity Trust Scheme jointly with Claire Whittet’s
spouse. Resigned from the Board on 25 May 2022.
There have been no changes to the holdings of existing directors
between 31 December 2022 and the date of this Report.
BOARD DIVERSITY
The Board is committed to maintaining the appropriate balance
of skills, gender, knowledge and experience among its members
to ensure strong leadership of the Company. When appointing
Board members, its priority will always be based on merit, but
will be influenced by the strong desire to ensure Board diversity
amongst its Board members. The Board currently has four female
directors, making the gender balance 57% female and 43% male.
Currently, the Management Engagement Committee Chair, the ESG
Committee Chair, the Nomination and Remuneration Committee
Chair and the Risk-Sub Committee Chair positions are all held by
female directors. Prior to Claire Whittet’s retirement in May 2022,
she held the role of SID. In addition, post-year end, the Company
was listed as one of the FTSE 250’s ‘Top 10 Best Performers’ for
gender diversity in the FTSE Women Leaders review 2022 and
thirteenth in the ‘FTSE 350’s Investment Trust Rankings 2022
Women on Boards only’. The Board has concluded that it is of an
appropriate size relative to the assets of the Company, with good
diversity of skills, gender and experience. However, we are aware of
the need to add further diversity to the Board and will consider this
in our succession planning in the coming years.
BOARD REMUNERATION
The Nomination and Remuneration Committee considers matters
relating to the Directors’ remuneration, taking into account
benchmark information (including fees paid to directors of
comparable companies). All fees payable to the Directors should
also reflect the time spent by the Directors on the Company’s affairs
and the responsibilities borne by the Directors and be sufficient to
attract, retain and motivate Directors of a quality required to run the
Company successfully.
The Nomination and Remuneration Committee proposes and the
Board has, subject to investors’ approval, agreed to implement an
inflationary uplift of 5% to remuneration with effect from 1 January
2023, as outlined in the table below. Whilst this increase is lower
than current inflation rates, it is to maintain Directors’ fees at a
competitive level, in line with peers and to avoid a large increase
in future years.
Position
2023
Fee P.A.
£
2022
Fee P.A.
£
Board Chair
Audit and Risk Committee Chair
Director (Independent and Non-Independent)
Senior Independent Director1
3,800
Risk Sub-Committee Chair1
3,250
Management Engagement Committee Chair1
3,250
Nomination and Remuneration Committee Chair1 3,250
ESG Committee Chair1
5,350
101,400 96,600
73,000 69,500
56,200 53,500
3,600
3,100
3,100
3,100
5,100
1 These are additional fees payable to directors chairing a committee.
There are no long-term incentive schemes provided by the
Company and no performance fees, or bonuses paid to directors.
Any changes to directors’ aggregate remuneration are considered
at the AGM of the Company.
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CORPORATE GOVERNANCE
Financial StatementS
COMMITTEES OF THE BOARD
The Board has established five Committees consisting of the independent non-executive directors. The responsibilities of these Committees
are described below. Terms of reference for each committee have been approved by the Board and are available on the Company’s website
(www.internationalpublicpartnerships.com). In addition to the Chair of the Board, a Senior Independent Director is appointed as an alternative
point of contact for shareholders and leads on matters where it is not appropriate for the Chair to do so.
BOARD
Responsibilities
– Statutory obligations and public disclosure
– Sets overall strategy for investments
– Strategic matters and financial reporting
AUDIT AND RISK COMMITTEE
Delegated responsibilities
– Monitor the integrity of financial statements
– Review the effectiveness and internal control policies and
procedures over financial reporting and identification,
assessment and reporting of risk
– Review the effectiveness of the Company’s risk
management framework, including in relation to the
Investment Policy and the risk management procedures of
the Investment Manager and other third-party providers
– Review the Company’s financial and accounting policies
– Advise the Board on appointment of the external auditor
and responsible for oversight and remuneration of the
external auditor
– Board composition and accountability to shareholders
– Risk assessment and management including reporting
compliance, monitoring, governance and control
– Responsible for financial statements
MANAGEMENT ENGAGEMENT COMMITTEE
Delegated responsibilities
– Review on a regular basis the performance of the
Investment Adviser and the Company’s other advisers
and major service suppliers to ensure that performance
is satisfactory and in accordance with the terms and
conditions of the respective appointments
– Review the terms of the Investment Advisory Agreement
and recommend any changes considered necessary
– Ensure there are no conflicts of interest between
service partners
INVESTMENT COMMITTEE
Delegated responsibilities
– Review investment and divestment proposals, including
ensuring that proposals are properly prepared and that the
approval process has been followed
NOMINATION AND REMUNERATION COMMITTEE
Delegated responsibilities
– Undertake annual Board performance evaluation
– Review remuneration of the Board and its Committees
– Review, and change as necessary, structure, size and
– Ensure proposals are compliant with the Company’s
composition of the Board
Investment Policy and strategy
– Ensure that proposals do not breach Articles of
– Identify and appoint suitable Board candidates as
vacancies arise and ensure succession planning is in place
Incorporation, Prospectus or other constitutional documents
– Articulate the roles of the Chair and Non-Executive
– Determine whether proposals are appropriate for
investment or divestment and then, assuming the
opportunity is approved, authorise the Investment Adviser
to enact the transaction
Directors
– Conduct induction training for new Board members
ENVIRONMENTAL, SOCIAL AND GOVERNANCE COMMITTEE
Delegated responsibilities
– Review the Company’s ESG policies, principles
– Challenge the implementation of ESG policies through
and standards
– Provide strategic advice to the Board on ESG-related
matters and policies
the investment and divestment approval process
– Provide a forum in which the Board and Investment
Adviser can discuss and share ideas in relation to
evolving ESG-related initiatives
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CORPORATE GOVERNANCE REPORT continUeD
AUDIT AND RISK COMMITTEE
The Audit and Risk Committee is comprised of the full Board, with
the exception of Mike Gerrard as Board Chair and Giles Frost as
the Non-Independent Director. However, Mike Gerrard and Giles
Frost routinely attend meetings of the Audit and Risk Committee
as observers.
John Le Poidevin is the current Chair of the Audit and Risk
Committee and Sally-Ann David is the current Chair of the
Risk Sub-Committee.
The duties of the Audit and Risk Committee in discharging its
responsibilities are outlined in the Audit and Risk Committee Report
on page 73 to 75.
In respect of its risk management function, the Audit and Risk
Committee, through the separately convened Risk Sub-Committee,
is also responsible for reviewing the Company’s risk management
function and framework, in relation to the Investment Policy of the
Company, including the acquisition and disposal of assets, the
valuation of assets and ensuring that the risk management function
of the Investment Adviser, Administrator and other third-party
service providers are adequate and to seek assurance of the same.
The Audit and Risk Committee formally reviews the Company’s
overall approach to risk management on an annual basis and its
risk register on at least a quarterly basis. Topics considered during
the year can be found in the Audit and Risk Committee Report on
pages 73 to 75. The Committee is satisfied that the key risks that
could impact the Company and its investments were effectively
mitigated and reported upon and were broadly in line with those
of the Company’s relevant industry peers.
INVESTMENT COMMITTEE
The Investment Committee is comprised of the full Board, with the
exception of Giles Frost as the Non-Independent Director, and is
chaired by Mike Gerrard, as Chair of the Company.
The Committee considers proposals relating to the acquisition
and disposal of investments and, if thought fit, approves those
proposals. Details of the transactions completed during the year
are outlined on pages 16 and 17 of this Annual Report.
MANAGEMENT ENGAGEMENT COMMITTEE
The Management Engagement Committee is comprised of the full
Board, with the exception of Giles Frost as the Non-Independent
Director; it is chaired by Meriel Lenfestey who succeeded Claire
Whittet as Chair of the Management Engagement Committee
following her retirement from the Board after the conclusion of the
2022 AGM. The duties of the Management Engagement Committee
in discharging its responsibilities are outlined in the diagram on
page 67.
The Management Engagement Committee carries out its review
of the Company’s advisers through consideration of objective
and subjective criteria and through a review of the terms and
conditions of the advisers’ appointments, with the aim of evaluating
performance, identifying any weaknesses and ensuring value for
money for the Company’s shareholders.
During the year, the Management Engagement Committee formally
reviewed the performance of the Investment Adviser and other key
service providers to the Company and no material weaknesses were
identified. Overall, the Committee confirmed its satisfaction with the
services and advice received.
NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee is comprised of the
full Board, with the exception of Giles Frost as the Non-Independent
Director; it is chaired by Stephanie Coxon who succeeded Julia
Bond with effect from 25 May 2022.
The Committee is formally charged by the Board to consider the
structure, size, remuneration, skills and composition of the Board.
This includes its diversity and inclusion development in line with the
Company’s responsible investment objective and management of
material ESG factors, ensuring diversity is strongly reflected at Board
level as outlined on page 66. It also oversees the appointment and
reappointment of directors, taking into account the expertise and
diversity of the candidates and their independence (see page 67 for
more detail on the Committee).
In accordance with the UK Corporate Governance Code required
for listed companies of the premium segment of the London
Stock Exchange, the Company undertakes an externally facilitated
evaluation every three years. The last review was undertaken in
2020 and the Nomination and Remuneration Committee have
commenced preparations ahead of the 2023 externally facilitated
evaluation process. In 2022, the Nomination and Remuneration
Committee has undertook an internal evaluation of the performance
of the Board and Chair. Each Director was asked to provide written
feedback regarding the performance of the Board as a whole and
the Chair set against a range of best practice corporate governance
criteria. A report of this feedback was considered by the Nomination
and Remuneration Committee. No material issues were identified by
the Directors regarding the performance of the Board and Chair.
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Financial StatementS
ESG COMMITTEE
The ESG Committee is comprised of the full Board and is chaired by Julia Bond. The Company’s ESG Committee provides a forum for
discussion, support and challenge with respect to ESG matters, including the adoption of policies by the Company in relation to both
investments and divestments, as well as Amber’s asset management activities and reporting policies.
The ESG Committee meets at least twice a year and supports the Board in managing the Company’s ESG performance. Please refer to the
Company’s Sustainability Report for more information on the ESG Committee and workstreams that have been delivered during the year.
BOARD AND COMMITTEE MEETING ATTENDANCE
The full Board meets at least four times per year and in addition there is regular additional contact between the Board, the Investment
Adviser, the Administrator and the Company Secretary. The agenda and supporting papers are distributed in advance of quarterly Board and
Committee meetings to allow time for appropriate review and to facilitate full discussion at the meetings.
The table below lists Directors’ attendance at Board and Committee meetings during the year. In addition, during the year, three ad-hoc
Board meetings and six Board Committee meetings1 took place to finalise matters that had been approved in principle at full meetings of the
Board. Furthermore, two ad-hoc Investment Committee meetings were held during the year in accordance with the terms of the Committee
to consider investment recommendations prepared by the Investment Adviser.
Directors
Maximum number
Mike Gerrard2
Julia Bond
Stephanie Coxon3
Sally-Ann David
Meriel Lenfestey
John Le Poidevin
Giles Frost4
Claire Whittet5
Quarterly
Board
Audit and Risk
Committee
ESG
Committee
Management
Engagement
Committee
Nomination and
Remuneration
Committee
4
4
4
4
4
4
4
4
2
5
N/A
5
5
5
5
5
N/A
2
4
4
4
4
4
4
4
4
2
1
1
1
1
1
1
1
N/A
0
3
3
3
3
3
3
3
N/A
1
1
2
3
4
5
Board Committee meetings are formed of any two or more members of the Board and do not require full attendance. All members of the Board are appraised of the matters to be discussed
at the Committee meeting and have the opportunity to raise questions to the Board Chair, Investment Adviser or other advisers, as required.
Mike Gerrard is not a member of the Audit and Risk Committee but attended these meetings as an observer.
Stephanie Coxon was appointed to the Board on 1 January 2022.
Giles Frost is not a member of the Audit and Risk Committee, Management Engagement Committee, Nomination and Remuneration Committee or the Investment Committee. While Giles
Frost attended the majority of ad-hoc Board and Committee meetings, as these meetings considered recommendations from the Investment Adviser, his presence does not count towards
the quorum so has been excluded from this tally.
Claire Whittet retired from the Board on 25 May 2022 and therefore did not attend any Board or Committee meetings during the remainder of 2022.
The Board has reviewed the composition, structure and diversity of the Board, succession planning, the independence of the Directors
and whether each of the Directors has sufficient time available to discharge their duties effectively. The Board confirms that it believes it
has an appropriate mix of skills and backgrounds, that a majority of directors should be considered as independent in accordance with the
provisions of the AIC Code and that all Directors have the time available to discharge their duties effectively.
Notwithstanding that a number of the independent directors sit on the boards of other listed companies, the Board noted that these
individuals are exclusively non-executive directors and that listed investment companies generally require less day-to-day responsibility and
time commitment than trading companies. Furthermore, the Board noted that attendance at all Board and Committee meetings during the
year was high by all Directors and that each Director has always shown the time commitment necessary to fully and effectively discharge
their duties as a director.
Accordingly, the Board recommends that shareholders vote in favour of the re-election of all Directors at the forthcoming AGM. Please refer
to pages 65 to 66 outlining the Board’s approach to diversity and re-election.
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CORPORATE GOVERNANCE REPORT continUeD
RELATIONSHIP WITH ADMINISTRATOR AND
COMPANY SECRETARY
Ocorian Administration (Guernsey) Limited (‘Ocorian’) acts as
Administrator and Company Secretary and is responsible to the
Board under the terms of the Administration Agreement. Noting
that final responsibility lies with the Board, the Administrator ensures
compliance with Guernsey Company Law, London Stock Exchange
listing requirements, the regulatory requirements of the Guernsey
Financial Services Commission, anti-money laundering regulations,
corporate governance best practice and observation of the Reserved
Powers of the Board and in this respect the Board receives detailed
quarterly reports. The Directors have access to the advice and
services of the Company Secretary, who is responsible to the Board
for ensuring that Board procedures are followed and that it adheres to
applicable legislation, rules and regulations as referred to above.
RELATIONSHIP WITH THE INVESTMENT ADVISER
The Directors are responsible for the overall management and
direction of the affairs of the Company. Under the Investment
Advisory Agreement (‘IAA’), Amber Fund Management Limited (a
member of the Amber Infrastructure Group Holdings Limited group
of companies) acts as Investment Adviser to the Company to review
and monitor current investments and to advise the Company in
relation to strategic management of the investment portfolio.
CONTRACTUAL ARRANGEMENTS AND FEES
The IAA allows for the provision of investment advisory and certain
other financial services to the Board. In return, the Investment
Adviser receives fees based on the GAV and composition of the
investment portfolio as well as a contribution to expenses. The
annual base fees are detailed in note 17 to the financial statements
and calculated at the following rates:
– 1.2% for that part of the portfolio that bears construction risk (i.e.
the asset has not fully completed all construction stages including
any relevant defects period and achieved certification by the
relevant counterparty and senior lender);
– For fully operational assets:
– 1.2% for the first £750 million of the GAV of the portfolio;
– 1.0% for that part of the portfolio that exceeds £750 million in
GAV but is less than £1.5 billion;
– 0.9% for that part of the portfolio that exceeds £1.5 billion in
GAV but is less than £2.75 billion;
– 0.8% per annum where GAV value exceeds £2.75 billion.
In addition, the GAV excludes uncommitted cash from capital raisings.
The Company has a long-standing relationship with the Investment
Adviser and the Board believes that the continuation of this
relationship, on a long-term basis, is in the Company’s best interest.
The current IAA was renegotiated in 2013 and has a 10-year fixed
term with a five-year notice period. The Board considers that,
given the long-term nature of the Company’s investments, its
responsibility for the detailed day-to-day delivery of management
services and relationships with public sector clients, it is important
that it benefits from the continuity of service provided by a long-term
advisory partner. To ensure that shareholder interests are protected,
termination provisions have been put in place to ensure that, in
the event of poor investment performance, the Company has the
flexibility to remove the Investment Adviser.
The Investment Adviser is also entitled to receive an asset
origination fee of 1.5% of the value of new investments acquired
by the Company. It should be noted that, generally, the Investment
Adviser bears the risk of abortive transaction origination costs.
Cash receipts from capital raisings and tap issuances are not
included in the GAV for the purposes of the calculation of base fees
until such receipts are invested for the first time.
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CORPORATE GOVERNANCE
Financial StatementS
The acquisition of all assets, including those from any associate of
the Investment Adviser is considered and approved in advance by
the Investment Committee. In considering any such acquisition, the
Investment Committee will, as it deems necessary, review and ask
questions of the Buyside Committee of the Investment Adviser and
the Group’s other advisers and the acquisition will be approved by
the Committee on the basis of this advice. The purpose of these
procedures is to ensure that the terms upon which any investment
is acquired from a member of the Amber group is on an arm’s
length basis.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Board is responsible for overall risk management with
delegation provided to the Audit and Risk Committee. The system
of risk management and internal control has been designed to
manage, rather than eliminate, the risk of failure to meet the
business objectives. Regard is given to the materiality of relevant
risks and therefore the system of internal control cannot provide
absolute assurance against material misstatement or loss.
This process, which covers the Company and its consolidated
subsidiaries and therefore the consolidated Group taken as a
whole, is outlined in further detail in the Risk Report found on
pages 48 to 60.
INVESTMENT APPROVAL PROCESS
As outlined above, the Investment Committee, comprised of
independent directors of the Company, make decisions with
respect to new investments or divestments after reviewing
recommendations made by the Company’s Investment Adviser.
The Investment Adviser has a detailed set of procedures and
approval processes in relation to the recommendation it makes
to the Board.
It is expected that further investments will be sourced by the
Investment Adviser. It is likely that some of these investments will
have been originated and developed by, and in certain cases may
be acquired from, other members of the Investment Adviser’s
group. Where that is the case, the conflicts management process
summarised below is followed.
MANAGING CONFLICTS OF INTEREST
The Company has established detailed procedures to deal with
conflicts of interest that may arise on investments acquired from
the Investment Adviser’s group and manage conduct in respect
of any such acquisitions. The Company’s Board has a majority
of independent members and a Chair who is independent of
the Investment Adviser. Each Director is required to inform the
Board of any potential or actual conflicts of interest prior to
Board discussions.
The potential conflicts of interest that may arise include when an
Amber entity is an existing investor in the target entity while an
associated company, AFML, acts on the ‘buyside’ as Investment
Adviser to the Company. The Investment Advisory Agreement
contains procedures with the intention of ensuring that the terms
on which the vendors of such assets dispose of their assets
are fair and reasonable to the vendors; and on the ‘buyside’
the Company as Investment Adviser must be satisfied as to the
appropriateness of the terms for and the price of the acquisition.
For more detail on the features of this procedure please refer
to the Company’s latest prospectus available on the website:
www.internationalpublicpartnerships.com.
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CORPORATE GOVERNANCE REPORT continUeD
RELATIONS WITH SHAREHOLDERS
The Board places great importance on communication with
shareholders and encourages shareholders to share their views.
It has responsibility for communication with the investor base and
is directly involved in major communications and announcements.
The Board receives regular reports on the views of shareholders,
and the Board Chair and other Directors, including the Senior
Independent Director, are happy to make themselves available to
meet shareholders as required.
During the year, the Company’s Results Presentations and day-to-
day investor relations activities were mostly held online although
post-Covid-19 there have been an increasing number of face-to-
face meetings. During 2022, the Investment Adviser and members
of the Board held formal meetings with over 200 shareholders in
addition to more informal interactions. In addition, the Company
held its inaugural Investor Meet Company webinar to reach its retail
shareholders. The Company also maintained an active programme
of sell-side engagement and the Board is also informed on a regular
basis of all relevant market commentary on the Company by the
Investment Adviser, Administrator and the Company’s Broker.
The AGM of the Company provides an opportunity for shareholders
to meet and discuss issues with the Directors and with the
Investment Adviser of the Company. It is the Board’s policy to
publish the results of the voting at the AGM via the Regulatory News
Service (‘RNS’) at the completion of the meeting.
To promote a clear understanding of the Company, its objectives
and financial results, the Board aims to ensure that information
relating to the Company is disclosed in a timely manner. The
Company’s website (www.internationalpublicpartnerships.com)
enables investors to easily find publicly disclosed documents
including Annual Reports and RNS announcements, together with
additional background information on its assets and corporate
practice. Investors can register to receive notifications (via email)
of RNS announcements that the Company issues. The Board
encourages investors to utilise this useful online resource.
Any shareholder issues of concern, including on corporate
governance or strategy, can be addressed in writing to the
Company at its registered office address (see Key Contacts).
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CORPORATE GOVERNANCE
Financial StatementS
AUDIT AND RISK COMMITTEE REPORT
JOHN LE POIDEVIN
CHAIR, AUDIT & RISK COMMITTEE
The Audit and Risk Committee (the ‘Committee’ for the purposes
of this section of the Annual Report) is an essential part of the
Company’s governance framework. The Board has delegated
oversight of the Company’s financial reporting, internal controls,
compliance and external audit to the Committee. The terms of
reference for the Committee, together with details of the standard
business considered by the Committee, have been approved
by the Board and are available on the Company’s website
(www.internationalpublicpartnerships.com).
The Committee is chaired by John Le Poidevin. An overview of the
Committee’s work during the year and details of how the Committee
has discharged its duties are set out below.
COMMITTEE MEETINGS
The Committee meetings during the year were attended by the
Investment Adviser and Administrator by invitation. A representative
of the Company’s external auditor also attended those meetings
where the annual audit cycle, the Annual Report and financial
statements and the half-yearly financial report were considered.
The Audit and Risk Committee is comprised of the full Board,
with the exception of Mike Gerrard as Board Chair and Giles Frost
as the Non-Independent Director. All Committee members are
considered to be appropriately experienced to fulfil their role, having
significant, recent and relevant financial experience in line with the
UK Corporate Governance Code. Biographies of the Committee
members can be found on pages 62 to 63.
COMMITTEE AGENDA
The Committee’s agenda during the year included:
– Review of the Company’s risk profile, specific risks and mitigation
practices, including a focus on emerging risks;
– Review of the effectiveness of the Company’s systems of
internal control;
– Review of the regulatory environment within which the
Company operates;
– Review of the Annual Report and financial statements and
half-yearly financial report and matters raised by the Investment
Adviser and the external auditors (including significant financial
reporting judgements and estimates therein);
– Review of the appropriateness of the Company’s
accounting policies;
– Consideration and challenging of the draft valuation of the
Company’s investments prepared by the Investment Adviser and
recommendations made to the Board on the appropriateness of
the portfolio valuation;
– Review of the effectiveness, objectivity and independence
of the external auditors, and the terms of engagement, cost
effectiveness and the scope of the audit;
– Overseeing transition of the Company’s auditor;
– Approving the external auditor’s plan for the current year end; and
– Review of the policy on the provision of non-audit services by the
external auditor.
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AUDIT AND RISK COMMITTEE REPORT continUeD
KEY ACTIVITIES CONSIDERED DURING THE YEAR
The Committee undertook the following activities in discharging its
responsibilities during the year:
The Committee concluded that a consistent valuation methodology
has been applied throughout the year and any forecast assumptions
applied were appropriate.
Revenue recognition
The Committee has considered the risk of inappropriate accounting
recognition of revenue to be a relatively low risk given the nature of
the Company’s activities.
Internal controls over financial reporting
The Committee satisfied itself that the system of internal control
and compliance over financial reporting was effective, through
consideration of regular reports from the Investment Adviser, the
Administrator and external third-party advisers.
The Committee also considered the adequacy of resources,
qualifications and experience of staff in the finance function and
had direct access to and independent discussions with the external
auditor throughout the year.
Fair, balanced and understandable
The Committee seeks to establish arrangements to ensure fair,
balanced and understandable reporting. The Committee engaged
in extensive dialogue with the Investment Adviser throughout the
year and considered the interim and annual financial statements as
well as quarterly updates and reports prepared by the Investment
Adviser. Following review of the Company’s 2022 Annual Report
and financial statements, the Committee advised the Board that,
in its opinion, the Annual Report and financial statements, taken
as a whole, is fair, balanced and understandable and provides the
information necessary to assess the Company’s performance,
operating model and strategy.
EXTERNAL AUDITOR
The Committee recommended to the Board the scope and terms
of engagement of the external auditor. The Committee considered
auditor objectivity and independence, audit tenure, audit tendering
and auditor effectiveness, as detailed below.
Objectivity and independence
In assessing the objectivity of the auditor, the Committee considered
the terms under which the external auditor may be appointed to
perform non-audit services, mindful of the ethical standards for
auditors and auditor independence.
Under the Company’s policy for non-audit services, there is a list of
permitted services for which the external auditor may be engaged,
where the Committee considers that the provision of such services
would not necessarily impact its independence. Potential services
to be provided by the external auditor with an expected value of up
to £50,000, and which are permitted by the policy, must be pre-
approved by the Chair of the Committee; any services above this
value require pre-approval by the full Audit and Risk Committee.
FINANCIAL REPORTING
The Committee reviewed the Company’s Annual Report and
financial statements, the half-yearly financial report and interim
quarterly updates prior to approval by the Board and advised the
Board with respect to meeting the Company’s financial reporting
obligations. The Committee reviewed the Company’s accounting
policies and practices, including approval of critical accounting
policies; consideration of the appropriateness of significant
judgements and estimates; and advising the Board as to its views
on whether the Annual Report and financial statements, taken as a
whole, was fair, balanced and understandable.
The Committee considered the most significant accounting
judgement exercised in preparing the consolidated financial
statements to be the basis for determining the fair value of the
Company’s investments, as detailed below.
Fair Value of Investments
The Company’s investments are typically in unlisted securities,
including shares and debt, hence market prices for such
investments are not typically readily available. Instead, the Company
uses a discounted cash flow methodology and benchmarks the
valuation inputs to market comparables in order to derive the
Directors’ valuation of investments.
Valuations are prepared by the Investment Adviser and the
methodology requires a series of judgements to be made, as
explained in note 11 to the financial statements. The valuation
process and methodology were discussed with the Investment
Adviser regularly during the year. Key areas of focus subject
to challenge were also discussed with the auditor as part of
the year-end audit planning and interim review processes. The
Committee challenged the Investment Adviser on the year end
fair value of investments as part of its consideration of the audited
financial statements.
During the year, the Committee reviewed the Investment Adviser’s
quarterly valuation reports, reports on the performance of the
underlying assets and the Investment Adviser’s assessment of
macroeconomic assumptions. Minor changes were made in the
year to the approach taken around inflation assumptions in the
valuation process, further detailed in the investor returns section
on pages 30 to 37.
The Investment Adviser confirmed that, other than these changes,
the valuation methodology has been applied consistently with prior
years. The Committee also reviewed and challenged the valuation
assumptions (reasonableness of underlying cash flows, discount
rates, interest rates, foreign exchange rates, inflation rates and
tax rates).
The Committee scrutinised the quality and findings of the external
auditor in relation to their audit of the valuations, including its
assessment of the Investment Adviser’s underlying cash flow
projections and assumptions; macroeconomic assumptions; and
discount rate methodology and output. The auditor confirmed no
material adjustments were proposed.
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CORPORATE GOVERNANCE
Financial StatementS
Viability assessment
The Committee carried out a robust assessment of the principal
and emerging risks facing the Company with a view to identify risks
which may impact the Company’s viability. Detailed stress tests,
including an impact assessment on the Company’s forecasted
cash flows, showed significant resilience in the Company’s ability
to remain viable. The results of the risk assessment process are
detailed in the Viability Statement on page 60.
External controls review
During the year an independent external review of the Company’s
controls framework in relation to bank payments, supplier
procurement and systems security was performed. The review
concluded that the controls in place are appropriate and meet
expectations in helping to counter the changing nature of risks in
these areas.
Climate change
The Committee continued to strengthen the Company’s approach
to managing climate change risk. During the year, continued
improvements were made to embed climate change further in the
reporting and risk management process. Further details can be
found in the Responsible Investment section from page 38, and in
the review of principal and emerging risks, from page 52.
REGULATORY AND TAX ENVIRONMENT
The Committee received regular reports from the Administrator and
Investment Adviser on regulation and regulatory developments. The
Company continues to maintain compliance with the requirements
of the Common Reporting Standard, the Retail distribution of
unregulated collective investment schemes (regulation which the
Company remains excluded from), the UK Criminal Finance Act
2017, AIFMD, The Foreign Account Tax Compliance Act (‘FATCA’),
and UK Packaged Retail and Insurance-based Investment Products
(EU Exit) Regulations 2019 as amended (‘UK PRIIPs’).
FOCUS FOR 2023
The Company will continue to focus on the impacts arising from the
current economic environment, keep focus on regular and routine
matters, as well as continuing to monitor any political, tax and
regulatory developments in its applicable geographies.
JOHN LE POIDEVIN
CHAIR, AUDIT AND RISK COMMITTEE
29 March 2023
Non-audit fees represented 22% of total audit fees during the year
under review, relating only to the half-yearly review and capital raise
conducted in the year. PwC undertook its standard independence
and objectivity procedures in relation to non-audit engagements and
confirmed compliance with these to the Committee. Further details
on the amounts of non-audit fees paid to the auditor are set out in
note 7 to the financial statements. These were reported to us and
were not considered to be a significant risk impacting the objectivity
and independence of PwC as external auditor.
Review of auditor effectiveness
The Committee performs an annual review of the objectivity, quality
and effectiveness of the audit, with consideration where appropriate
given to FRC Audit Quality Inspection Reports and FRC Practice
Aid guidance. The Committee conducted an in-depth review in
2022 of the auditor’s performance, focusing in particular on any
enhancements and efficiencies in process arising from the prior year,
PwC’s first as the Company’s external auditor, and the Committee
was satisfied in this regard. This was facilitated through discussions
with the external auditor, the completion of a questionnaire by
relevant stakeholders (including members of the Committee and
senior members of the Investment Adviser’s finance team), review
and challenge of the audit plan for consistency with the Company’s
financial statement risks, and review of the audit findings report.
In accordance with the relevant Corporate Governance Code
principles, the Committee will continue to review the effectiveness of
the external auditor in line with best practice.
During the year there was a review undertaken by the FRC
over PwC ‘s audit of the financial statements for the year ended
31 December 2021. There were no key findings raised by the
FRC team.
Review of auditor’s remuneration
The Committee carried out a review of the proposed audit fees
for 2022. The audit fee for the Group (including unconsolidated
subsidiaries) increased on the prior year as a result of inflation,
scope changes and new audit regulation ISA 315 (Revised).
The Committee considers that the audit fees for the current year
are in line with market and therefore represent good value for
money for the Company’s shareholders.
Audit tendering and tenure
The Committee annually considers the reappointment of the external
auditor, including rotation of the audit partner. The external auditor is
required to rotate the audit partner responsible for the Group audit
every five years and the year to 31 December 2022 was the second
year for John Luff, the current lead audit partner. The committee
remain actively engaged in endeavouring to ensure an appropriate
level of continuity of the team.
RISK MANAGEMENT
During the year, the Committee continued to ensure that the
Company’s risk management framework and processes remained
effective in managing the Company’s risks. Areas of note for the
year are discussed below. A review of significant developments
relating to the Company’s risks arising in the year can be found in
the Risk Management section of this Report, starting on page 48.
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DIRECTORS’ REPORT
INTRODUCTION
The Directors present their Annual Report on the performance of the
Company and Group for the year ended 31 December 2022.
PRINCIPAL ACTIVITY
The Company is a limited liability, Guernsey-incorporated and
domiciled, authorised closed-ended investment company under
Companies (Guernsey) Law, 2008. The Company’s shares have a
premium listing on the Official List of the UK Listing Authority and
are traded on the main market of the London Stock Exchange.
The Chair’s Letter and Strategic Report contain a review of the
business during the year. A Corporate Governance Report is
provided on pages 64 to 72.
DIRECTORS’ INDEMNITIES
The Company has made qualifying third-party indemnity provisions
for the benefit of its Directors, which were made during the year and
remain in force at the date of this Report.
SUBSTANTIAL SHAREHOLDINGS
As at 31 December 2022, the Company had been notified, in
accordance with Chapter 5 of the Disclosure and Transparency
Rules, of the following interests in 5% or more of the Company’s
Ordinary Shares to which voting rights are attached:
NAME OF HOLDER
% ISSUED CAPITAL
NO. OF
ORDINARY SHARES DATE NOTIFIED
Investec Wealth
& Investment
13.39
255,668,619
6 May 2022
There have been no additional notices between 31 December 2022
and the date of this Report.
DIRECTORS’ AUTHORITY TO BUY BACK SHARES
AND TREASURY SHARES
The Company did not purchase any shares for treasury or
cancellation during the year.
The current authority of the Company to make market purchases of
up to 14.99% of the issued Ordinary Share Capital expires on
30 May 2023. The Company will seek to renew such authority
at the AGM to take place on 31 May 2023. Any buy back of
Ordinary Shares will be made subject to Guernsey law and within
any guidelines established from time-to-time by the Board and
the making and timing of any buy backs will be at the absolute
discretion of the Board.
Purchases of Ordinary Shares will only be made through the
market at prices below the prevailing NAV of the Ordinary Shares
(as last calculated) where the Directors believe such purchases will
enhance shareholder value. Such purchases will also only be made
in accordance with the Listing Rules of the UK Listing Authority,
which provide that the price to be paid must not be more than 5%
above the average of the middle market quotations for the Ordinary
Shares for the five business days before the shares are purchased
(unless previously advised to shareholders). No such shares were
bought back by the Company during the prior year. Up to 10% of
the Company’s shares may be held as treasury shares.
GOING CONCERN
The Company and Group’s business activities, together with
the factors likely to affect the Company’s future development,
performance and position, are set out in the Strategic Report on
pages 6 to 60. The financial position, cash flows, liquidity position
and borrowing of the Company and Group are described in the
financial statements from page 84.
The Directors have considered significant areas of possible financial
risk, and comprehensive financial forecasts have been prepared and
submitted to the Board for review. The Directors have, based on the
information contained in these forecasts and the assessment of the
committed banking facilities in place, formed a judgement, at the
time of approving the financial statements, that the Company (and
consolidated subsidiaries) have adequate resources to continue in
operational existence for the 15-month going concern assessment
review period, and at least 12 months from the approvals of these
financial statements.
After consideration, the Directors are satisfied that it is appropriate
to adopt the going concern basis in preparing the financial
statements.
DIRECTOR DECLARATION
Each person who is a Director at the date of approval of this Annual
Report confirms that:
– So far as the Director is aware, there is no relevant audit
information of which the Company’s external auditor is unaware.
– Each Director has taken all the steps that he/she ought to have
taken as a Director in order to make himself/herself aware of any
relevant audit information and to establish that the Company’s
auditor is aware of that information. This confirmation is given
and should be interpreted in accordance with the provisions of
Section 249 of the Companies (Guernsey) Law, 2008.
MIKE GERRARD
CHAIR
29 March 2023
JOHN LE POIDEVIN
DIRECTOR
29 March 2023
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CORPORATE GOVERNANCE
Financial StatementS
DIRECTORS’ RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing financial statements
for each year which give a true and fair view, in accordance
with applicable Guernsey law and UK adopted international
accounting standards, of the state of affairs of the Company and its
consolidated subsidiaries (the ‘Group’) and of the profit or loss of
the Group for that year. In preparing those financial statements, the
Directors are required to:
– Select suitable accounting policies and then apply them
RESPONSIBILITY STATEMENT OF THE DIRECTORS
IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Directors each confirm to the best of their knowledge that:
– The consolidated financial statements, prepared in accordance
with UK adopted international accounting standards, give a true
and fair view of the assets, liabilities, financial position and net
return of the Group; and
– The Annual Report and financial statements includes a fair review
of the development and performance of the business and the
position of the Group, together with a description of the principal
risks and uncertainties faced.
DIRECTORS’ STATEMENT UNDER THE UK CORPORATE
GOVERNANCE CODE
The Board, as advised by the Audit and Risk Committee, has
considered the Annual Report and financial statements and, taken
as a whole, consider it to be fair, balanced and understandable and
that it provides the information necessary for shareholders to assess
the Company’s performance, business model and strategy.
By order of the Board.
MIKE GERRARD
CHAIR
29 March 2023
JOHN LE POIDEVIN
DIRECTOR
29 March 2023
consistently;
– Make judgements and estimates that are reasonable;
– State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
– Prepare the financial statements on a going concern basis unless
it is inappropriate to presume that the Group will continue in
business.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting
records, which disclose with reasonable accuracy at any time,
the financial position of the Group and enable them to ensure that
the financial statements comply with the Companies (Guernsey)
Law, 2008. They are also responsible for safeguarding the assets
of the Group and hence for taking reasonable steps for the
prevention and detection of fraud, error and non-compliance
with law and regulations.
The maintenance and integrity of the Company’s website is the
responsibility of the Directors; the work carried out by the auditor
does not involve considerations of these matters and, accordingly,
the auditor accepts no responsibility for any change that may
have occurred to the financial statements since they were initially
presented on the website. Legislation in Guernsey governing the
preparation and dissemination of the financial statements may
differ from legislation in other jurisdictions.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
OUR OPINION
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of International Public
Partnerships Limited (the “Company”) and its subsidiaries (together “the Group”) as at 31 December 2022, and of their consolidated financial
performance and their consolidated cash flows for the year then ended in accordance with UK-adopted international accounting standards
and have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.
WHAT WE HAVE AUDITED
The Group’s consolidated financial statements comprise:
– the consolidated balance sheet as at 31 December 2022;
– the consolidated statement of comprehensive income for the year then ended;
– the consolidated statement of changes in equity for the year then ended;
– the consolidated cash flow statement for the year then ended; and
– the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
INDEPENDENCE
We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements of the Group, as required by the Crown Dependencies’ Audit Rules and Guidance. We have fulfilled our other ethical
responsibilities in accordance with these requirements.
OUR AUDIT APPROACH
OVERVIEW
Audit scope
– The Company is a closed-ended investment company, incorporated in Guernsey, whose ordinary shares are admitted to trading with a
premium listing on the Main Market of the London Stock Exchange;
– The Group comprises both consolidated and unconsolidated entities. As disclosed under note 1 to the consolidated financial statements,
the Company meets the definition of an ‘investment entity’ in accordance with IFRS 10 ‘Consolidated Financial Statements’ and therefore
accounts for its subsidiaries, with the exception of certain subsidiaries that are not themselves investment entities, at fair value through
profit or loss under IFRS 9 ‘Financial Instruments’. The Company only consolidates those subsidiaries that are not themselves investment
entities and whose main purpose is to provide services relating to the Company’s investment activities;
– We conducted our audit of the consolidated financial statements in Guernsey principally, using the consolidated financial information
and supporting documentation provided by Amber Fund Management Limited (“Amber”) and Ocorian Administration (Guernsey) Limited
(“Ocorian”); both of whom the board of directors have delegated the provision of certain functions to; and
– We tailored the scope of our audit, and structured our audit team to incorporate support from our PwC valuation experts, taking into
account the nature and industry sector of the assets held within the investment portfolio; the involvement of third parties referred to above
and the accounting processes and controls.
Key audit matters
– Risk of fraud in revenue recognition
– Fair value measurement of investments at fair value through profit or loss
Materiality
– Overall Group materiality: £75.99 million (2021: £63.2 million) based on 2.5% of equity attributable to equity holders of the parent (i.e. net
asset value).
– Performance materiality: £56.9 million (2021: £47.4 million).
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CORPORATE GOVERNANCE
Financial StatementS
THE SCOPE OF OUR AUDIT
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial
statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also
addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence
of bias that represented a risk of material misstatement due to fraud.
KEY AUDIT MATTERS
Key audit matters are those matters that, in the auditor’s professional judgement, were of most significance in the audit of the consolidated
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) identified by the auditor, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Risk of fraud in
revenue recognition
Interest income of £93.8
million and dividend
income of £64.8 million,
as reflected in the
consolidated statement
of comprehensive income
and note 4, are measured
in accordance with the
stated accounting policies.
We considered the risk
that management may
seek to manipulate
revenue in order to report
the desired level of return
to investors, to be a
significant audit risk, and
accordingly this has been
reported as a key audit
matter.
We assessed the accounting policies in relation to the recognition of interest and dividend income for
compliance with the financial reporting framework and checked that revenue has been recognised in
accordance with the stated accounting policies.
We understood and evaluated the internal control environment in place at the Group around the recognition
of interest and dividend income.
We performed the following substantive audit procedures to test revenue and check for any indication of
fraudulent manipulation:
– On a sample basis, we agreed dividend income recognised to the relevant supporting documentation,
including dividend notices or board approvals, and traced the cash receipts to the bank statements. For
any dividends received from UK companies within our sample, we inspected evidence of consideration by
the boards of those underlying companies as to whether sufficient distributable reserves were available in
order to pay valid dividends;
– On a sample basis, we recalculated interest income based on the contractual agreements in place and
traced the cash receipts through to the bank statements for the interest payments that had been received,
and checked any unreceived interest was appropriately accrued for at year end;
– Furthermore, we considered whether the interest and dividends in our sample testing described above
had been recorded in the correct financial year. Given the nature of interest income and it being more
easily corroborated from a cut off perspective as the interest periods are clearly defined and the interest
attributable to each period easily recalculated based on the supporting contracts, we obtained further
evidence over the cut off of dividend income in the correct financial year through our audit work performed
over investment valuation, specifically in relation to our ‘lookback’ testing in which we compared the actual
vs forecast cash flows and investigated variances exceeding an established threshold; and
– We included specific consideration of any unusual journals impacting revenue within our journals testing as
well as consideration of post year end journals to check for indications of cut off concerns.
We have not identified any matters to report to those charged with governance in relation to the risk of fraud
in revenue recognition.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED continUeD
Key audit matter
How our audit addressed the key audit matter
Fair value
measurement of
investments at fair
value through profit
or loss
The investment portfolio,
valued at £2.9 billion at
year end as reflected in
the consolidated balance
sheet and note 11,
comprises investments in
infrastructure companies
which largely generate
long-term predictable
cash flows.
The valuation of the
Group’s investment
portfolio involves
complexity and subjective
management judgements
and estimates. The
magnitude of the amounts
involved means that there
is the potential for material
misstatement.
Since the driver of the
Group’s net asset value
is the valuation of the
investment portfolio,
this is the area of focus
for stakeholders and a
significant audit risk area,
and accordingly this has
been reported as a key
audit matter.
We assessed the investment valuation accounting policy for compliance with the accounting framework
and best practice, and we checked that the investment valuations are measured in accordance with the
stated policy.
We understood and evaluated the Group’s processes, internal controls and methodology applied in
determining the fair value of the investment portfolio in tailoring our audit approach.
We tested the key controls by inspecting evidence of appropriate review and approval of the significant
assumptions impacting the valuation models (including macroeconomic assumptions and discount rates),
as well as the quarterly performance and actual vs forecast distribution variance analysis and certain
investment model review controls.
We performed the following substantive procedures:
– We assessed the appropriateness of the key assumptions (i.e. macro-economic assumptions, discount
rates, terminal value assumptions) which impact the entire investment portfolio, with the support of our
valuation experts as described below.
– We obtained the overall fair value reconciliation of opening to closing fair value from management and
corroborated significant fair value movements during the year, thereby assessing the reasonableness and
completeness of the movement in fair value for the year.
– We stratified the portfolio based on the nature of the underlying assets and performed a ‘look back’
comparison of the forecast vs actual cash flows for the current financial year for each stratification
category. This testing, in addition to our sample tests and assessment of management’s macroeconomic
assumptions with the support of our PwC valuation experts, was further supplemented with a risk-based
assessment performed to identify, and investigate, investments deemed to be at a higher risk of suffering
an adverse valuation impact as a result of Covid-19 and climate change related risk exposure.
– We performed detailed testing over a sample of models and significant inputs for the selected sample,
which was selected via risk and value-based targeted sampling comprising 64% of the investment portfolio
by value. This testing entailed challenging key inputs in the models and obtaining appropriate supporting
documentation and evidence.
– With the support of our PwC valuation experts, we corroborated and challenged the significant
assumptions made by management in valuing the risk-based selected sample of assets, as well as
performed a sensitivity analysis of significant subjective assumptions and checked the reasonableness
of the overall valuation of these assets with reference to comparable market transactions and our
experts’ market knowledge. With further support from our PwC valuation experts, we considered
the reasonableness of the overall portfolio valuation with reference to our industry understanding and
assessment of the fair value analysis prepared by Amber on behalf of, and subject to the review and
approval of, the Directors.
– Further substantive tests performed over the risk and value-based sample of investments included:
– Back testing comparison of the forecast vs actual cash flows for the current financial year earned on
each individual asset in the sample; and
– Utilisation of a software tool to test the model integrity for each individual asset selected in our sample.
– In addition to the controls testing and substantive testing performed over the entire portfolio, as detailed
above, we performed a risk-based year on year variance analysis to identify, and investigate, any unusual
movements within the remaining 36% of the portfolio.
– Finally, for a sample of investments, to test ownership and existence we obtained third-party evidence of
investment holdings and checked whether the details obtained corroborated or contradicted the records
held by the Group and those used for investment valuation purposes.
We have not identified any matters to report to those charged with governance in relation to the fair value
measurement of Investments at fair value through profit or loss.
HOW WE TAILORED THE AUDIT SCOPE
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the consolidated financial
statements as a whole, taking into account the structure of the Group, the accounting processes and controls, the industry in which the
Group operates, and we considered the risk of climate change and the potential impact thereof on our audit approach.
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CORPORATE GOVERNANCE
Financial StatementS
We have considered whether the consolidated subsidiary entities included within the Group comprise separate components for the purpose
of our audit scope. However, having taken account of the Group’s financial reporting systems and the related controls in place at Ocorian
and Amber, and based on our professional judgement, we have tailored our audit scope to account for the Group’s consolidated financial
statements as a single component.
MATERIALITY
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate
on the consolidated financial statements as a whole.
Based on our professional judgement, we determined materiality for the consolidated financial statements as a whole as follows:
Overall Group materiality
£75.99 million (2021: £63.2 million)
How we determined
2.5% of the equity attributable to equity holders of the parent (i.e. net asset value)
Rationale for benchmark applied
We believe that net assets is the most appropriate benchmark because this is the key metric of
interest to investors. It is also a generally accepted measure used for companies in this industry.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to £56.9 million (2021: £47.4 million) for the Group
financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above £3.8 million
(2021: £3.2 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
REPORTING ON OTHER INFORMATION
The other information comprises all the information included in the Annual Report and Financial Statements (the “Annual Report”) but does
not include the consolidated financial statements and our auditor’s report thereon. The directors are responsible for the other information,
which includes reporting based on the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
RESPONSIBILITIES FOR THE CONSOLIDATED FINANCIAL STATEMENTS AND THE AUDIT
RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the consolidated
financial statements that give a true and fair view in accordance with UK-adopted international accounting standards, the requirements
of Guernsey law and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED continUeD
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to
target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a
conclusion about the population from which the sample is selected.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit.
We also:
– Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
– Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
– Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the directors.
– Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern over a period of at least twelve months from the date of approval of the consolidated financial statements.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
– Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
– Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
USE OF THIS REPORT
This Report, including the opinions, has been prepared for and only for the members as a body in accordance with Section 262 of The
Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this Report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
COMPANY LAW EXCEPTION REPORTING
Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:
– we have not received all the information and explanations we require for our audit;
– proper accounting records have not been kept; or
– the consolidated financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
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CORPORATE GOVERNANCE
Financial StatementS
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified
for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the
Reporting on other information section of this Report.
The Company has reported compliance against the 2019 AIC Code of Corporate Governance (the “Code”) which has been endorsed by the
UK Financial Reporting Council as being consistent with the UK Corporate Governance Code for the purposes of meeting the Company’s
obligations, as an investment Company, under the Listing Rules of the FCA.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement, included within the Strategic Report and Corporate Governance section is materially consistent with the consolidated financial
statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:
– The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
– The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
– The directors’ statement in the consolidated financial statements about whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of any material uncertainties to the Group’s ability to continue to do so over a
period of at least twelve months from the date of approval of the consolidated financial statements;
– The directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate; and
– The directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and
meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and
only consisted of making inquiries and considering the directors’ process supporting their statements; checking that the statements are
in alignment with the relevant provisions of the Code; and considering whether the statement is consistent with the consolidated financial
statements and our knowledge and understanding of the Group and its environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the consolidated financial statements and our knowledge obtained during the audit:
– The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s position, performance, business model and strategy;
– The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
– The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Company’s compliance
with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by
the auditors.
OTHER MATTER
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these consolidated
financial statements will form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial
Conduct Authority in accordance with the ESEF Regulatory Technical Standard (“ESEF RTS”). This auditor’s report provides no assurance
over whether the annual financial report will be prepared using the single electronic format specified in the ESEF RTS.
JOHN LUFF
FOR AND ON BEHALF OF PRICEWATERHOUSECOOPERS CI LLP
Chartered Accountants and Recognised Auditor
Guernsey, Channel Islands
29 March 2023
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83
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2022
Interest income
Dividend income
Net change in investments at fair value through profit or loss
Total investment income
Other operating (expense) / income
Total income
Management costs
Administrative costs
Transaction costs
Directors’ fees
Total expenses
Profit before finance costs and tax
Finance costs
Profit before tax
Tax credit
Profit for the year
Earnings per share
From continuing operations
Basic and diluted (pence)
Notes
4
4
4
5
17
6, 17
8
9
Year ended
31 December 2022
£’000s
Year ended
31 December 2021
£’000s
93,817
64,845
210,906
369,568
(3,978)
365,590
(29,421)
(2,415)
(2,891)
(479)
(35,206)
330,384
(3,556)
326,828
69
326,897
81,930
45,247
34,626
161,803
3,560
165,363
(26,173)
(2,281)
(3,896)
(393)
(32,743)
132,620
(3,453)
129,167
44
129,211
10
17.75
7.78
All results are from continuing operations in the year.
All income is attributable to the equity holders of the parent. There are no non-controlling interests within the Consolidated Group.
There are no other Comprehensive Income items in the current year (2021: nil). The profit for the year represents the Total Comprehensive
Income for the year.
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FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2022
Balance at 1 January 2022
Profit for the year and total
comprehensive income
Issue of ordinary shares
Issue costs applied to new shares
Dividends in the year
Balance at 31 December 2022
Share capital and
share premium
£’000s
Notes
Other distributable
reserve £’000s
1,908,849
182,481
Retained earnings
£’000s
437,470
Total
£’000s
2,528,800
–
327,273
(4,846)
–
15
15
15
–
–
–
–
2,231,276
182,481
326,897
326,897
–
–
(138,285)
626,082
327,273
(4,846)
(138,285)
3,039,839
YEAR ENDED 31 DECEMBER 2021
Balance at 1 January 2021
Profit for the year and total
comprehensive income
Issue of ordinary shares
Issue costs applied to new shares
Dividends in the year
Balance at 31 December 2021
Notes
15
15
15
Share capital and
share premium
£’000s
1,769,582
Other distributable reserve
£’000s
182,481
Retained earnings
£’000s
432,373
–
140,629
(1,362)
–
–
–
–
–
1,908,849
182,481
129,211
–
–
(124,114)
437,470
Total
£’000s
2,384,436
129,211
140,629
(1,362)
(124,114)
2,528,800
International Public Partnerships Limited
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Annual Report and financial statements 2022
85
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2022
Non-current assets
Investments at fair value through profit or loss
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments
Total current assets
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Total current liabilities
Non-current liabilities
Bank loans
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital and share premium
Other distributable reserve
Retained earnings
Equity attributable to equity holders of the parent
Net assets per share (pence per share)
The financial statements were approved by the Board of Directors on 29 March 2023.
They were signed on its behalf by:
MIKE GERRARD
CHAIR
29 March 2023
JOHN LE POIDEVIN
DIRECTOR
29 March 2023
Notes
11
11, 13
11
11
11, 14
8, 11
8, 11
15
15
15
16
31 December 2022
£’000s
31 December 2021
£’000s
2,947,959
2,947,959
2,579,434
2,579,434
44,096
92,829
–
136,925
3,084,884
13,919
1,826
15,745
29,300
29,300
45,045
57,378
56,090
2,713
116,181
2,695,615
10,597
–
10,597
156,218
156,218
166,815
3,039,839
2,528,800
2,231,276
182,481
626,082
3,039,839
1,908,849
182,481
437,470
2,528,800
159.1
148.2
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corporate governance
FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2022
Profit before tax in the Consolidated Statement of Comprehensive Income1
Adjusted for:
Gain on investments at fair value through profit or loss
Finance costs2
Fair value movement on derivative financial instruments
Working capital adjustments
Decrease / (increase) in receivables
Increase in payables
Income tax paid3
Net cash inflow from operations4
Investing activities
Acquisition of investments at fair value through profit or loss
Net repayments from investments at fair value through profit or loss
Net cash outflow from investing activities
Financing activities
Proceeds from issue of shares net of issue costs
Dividends paid
Finance costs paid2
Loan drawdowns2
Loan repayments2
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effects of changes in foreign currency on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
4
8
5, 11
12
15
Year ended
31 December 2022
£’000s
Year ended
31 December 2021
£’000s
326,828
(210,906)
3,556
4,539
11,326
3,321
(95)
138,569
(191,604)
33,985
(157,619)
320,154
(136,012)
(2,849)
29,300
(156,218)
54,375
35,325
56,090
1,414
92,829
129,167
(34,626)
3,453
(2,445)
(13,431)
1,282
(105)
83,295
(252,725)
53,350
(199,375)
133,638
(118,485)
(4,825)
178,215
(60,397)
128,146
12,066
44,263
(239)
56,090
Includes interest received of £87.2 million (December 2021: £70.0 million) and dividends received of £64.8 million (December 2021: £45.2 million).
1
2 These cash flows represent the changes in liabilities arising from financing liabilities during the year in accordance with IAS 7, 44A-E.
3
4 Net cash flows from operations above are reconciled to net operating cash flows before capital activity* as shown in the Strategic Report on pages 28 to 29.
Includes cash flows received from unconsolidated subsidiary entities in respect of surrender of tax losses.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. BASIS OF PREPARATION
International Public Partnerships Limited is a closed-ended authorised investment company incorporated in Guernsey under the Companies
(Guernsey) Law, 2008. The address of the registered office is given on the inside back cover. The nature of the Group’s (‘Parent and
consolidated subsidiary entities’) operations and its principal activities are set out on pages 6 to 7.
These financial statements are presented in pounds sterling as this is the currency of the primary economic environment in which the
Group operates and represents the functional currency of the Parent and all values are rounded to the nearest (£’000), except where
otherwise indicated.
BASIS OF PREPARATION
These financial statements have been prepared in accordance with UK-adopted International Accounting Standards (‘IFRS’), applicable legal
and regulatory requirements of Guernsey, and the Listing Rules of the UK Listing Authority. These financial statements follow the historical
cost basis, except for financial assets held at fair value through profit or loss and derivatives that have been measured at fair value. The
principal accounting policies adopted are set out in relevant notes to the financial statements.
The Directors have determined that International Public Partnerships Limited is an investment entity as defined by IFRS 10 on the basis that
the Company:
a)
b)
c)
Obtains funds from one or more investor(s) for the purpose of providing those investor(s) with investment management services;
Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or
both; and
Measures and evaluates the performance of substantially all of its investments on a fair value basis.
Accordingly, these financial statements consolidate only those subsidiaries that provide services relevant to its investment activities, such as
management services, strategic advice and financial support to its investees, and that are not themselves investment entities. Subsidiaries
that do not provide investment-related services are required to be measured at fair value through profit or loss in accordance with IFRS 9
Financial Instruments.
GOING CONCERN
The Directors have reviewed cash flow forecasts prepared by management. Based on those forecasts, consideration of the Group’s
operating costs and obligations as well as capital commitments, and an assessment of the Group’s committed banking facilities, it has
been considered appropriate to prepare these consolidated financial statements of the Group on a going concern basis. In arriving at their
conclusion that the Group has adequate financial resources, the Directors were mindful that the Group had unrestricted cash of £92.8
million as at 31 December 2022. The Company continues to fully cover operating costs and distributions from underlying cash flows from
investments. The Company has access to a corporate debt facility of £250 million on a fully committed basis, and a flexible ‘accordion’
component which, subject to lender consent, allows for a future extension by an additional £150 million. At the date of this report,
approximately £233 million of the fully committed portion remains available. A £20 million portion of the facility is available to be utilised for
working capital purposes. The facility is forecast to continue in full compliance with the associated banking covenants. The facility is available
for investment in new and existing assets until March 2024.
ACCOUNTING POLICIES
The same accounting policies, presentation and methods of computation are followed in this set of financial statements as applied in the
previous financial year. The new and revised IFRS and interpretations becoming effective in the period have had no material impact on the
accounting policies of the Group. Note 20 sets out a comprehensive listing of all new standards applicable from 1 January 2022.
2. CRITICAL JUDGEMENTS AND ESTIMATES
INVESTMENT ENTITY
In the judgement of the Directors, International Public Partnerships Limited has been accounted for as an investment entity as defined by
IFRS 10, further details of which are given in note 1, Basis of preparation.
FAIR VALUATION OF INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Fair values are a critical estimate and are determined using the income approach which discounts the expected cash flows at a rate
appropriate to the risk profile of each investment. In determining the discount rate, relevant long-term government bond yields, specific
investment risks and evidence of recent transactions are considered. Details of the valuation process and key sensitivities are provided in
note 11.
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FINANCIAL STATEMENTS
3. SEGMENTAL REPORTING
Based on a review of information provided to the chief operating decision makers of the Group (determined to be the Board), the Group has
identified four reportable segments based on the geographical risk associated with the jurisdictions in which it operates. The factors used to
identify the Group’s reportable segments are centered on the risk-free rates and the maturity of the infrastructure sector within each region.
Further, foreign exchange and political risk is identified, as these also determine where resources are allocated. The four reportable segments
are UK, Europe (excl. UK), North America and Australia.
Segmental results
Dividend and interest income
Fair value gain / (loss) on investments
Total investment income
Reporting segment profit1
Segmental financial position
Investments at fair value
Current assets
Total assets
Total liabilities
Net assets
Segmental results
Dividend and interest income
Fair value gain / (loss) on investments
Total investment income
Reporting segment profit1
Segmental financial position
Investments at fair value
Current assets
Total assets
Total liabilities
Net assets
Year ended 31 December 2022
UK
£’000s
Europe (Excl. UK)
£’000s
North America
£’000s
Australia
£’000s
Total
£’000s
117,621
151,080
268,701
230,025
2,226,964
136,925
2,363,889
(45,045)
2,318,844
9,974
38,360
48,334
47,263
347,620
–
347,620
–
347,620
9,228
24,558
33,786
32,185
166,023
–
166,023
–
166,023
21,839
(3,092)
18,747
17,424
207,352
–
207,352
–
207,352
158,662
210,906
369,568
326,897
2,947,959
136,925
3,084,884
(45,045)
3,039,839
Year ended 31 December 2021
UK
£’000s
Europe (Excl. UK)
£’000s
North America
£’000s
Australia
£’000s
Total
£’000s
99,428
28,840
128,268
92,142
1,947,001
116,181
2,063,182
(166,815)
1,896,367
8,487
(2,839)
5,648
7,803
313,241
–
313,241
–
313,241
7,111
1,979
9,090
8,868
105,931
–
105,931
–
105,931
12,151
6,646
18,797
20,398
213,261
–
213,261
–
213,261
127,177
34,626
161,803
129,211
2,579,434
116,181
2,695,615
(166,815)
2,528,800
1 Reporting segment results are stated net of operational costs including management fees.
Revenue from investments which individually represent more than 10% of the Group’s interest and dividend income approximates £15.9
million (2021: £15.4 million).
INVESTMENT INCOME
4.
ACCOUNTING POLICY
Interest income
Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be
measured reliably. Interest income is accrued on a time-apportioned basis and is recognised gross of withholding tax, if any.
Dividend income
Dividend income is recognised gross of withholding tax on the date the Company’s right to receive the dividend income is established.
Net change in Investments at fair value through profit or loss
Net change in investments at fair value through profit or loss includes all realised and unrealised fair value changes (including foreign
exchange movements) other than interest and dividend income recognised separately.
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89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 continUeD
4.
INVESTMENT INCOME CONTINUED
Interest income
Interest on investments at fair value through profit or loss
Interest on financial assets at amortised cost
Total interest income
Dividend income
Net change in Investments at fair value through profit or loss
Total investment income
Year ended
31 December 2022
£’000s
Year ended
31 December 2021
£’000s
93,655
162
93,817
64,845
210,906
369,568
81,930
–
81,930
45,247
34,626
161,803
Dividend and interest income includes transactions with unconsolidated subsidiary entities. Changes in investments at fair value through
profit or loss are also recognised in relation to the Group’s investments in unconsolidated subsidiaries.
5. OTHER OPERATING (EXPENSE) / INCOME
Fair value movement on foreign exchange contracts
Other gains on foreign exchange movements
Other income
Total other operating (expense) / income
6. TRANSACTION COSTS
Investment advisory costs
Total transaction costs
Details of total transaction costs paid to the Investment Adviser are provided in note 17.
7. AUDITOR’S REMUNERATION
Fees payable to the Group’s auditor (PWC CI LLP) for the audit of the Group’s financial
statements
Fees payable to the Group’s auditor and their associates (PWC LLP, UK)
for other services to the Group
– The audit of the Group’s consolidated subsidiaries
– The audit of the Group’s unconsolidated subsidiaries
Total audit fees
Other fees
–
– Reporting Account fees
Interim review
Total non-audit fees
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Year ended
31 December 2022
£’000s
Year ended
31 December 2021
£’000s
(4,539)
545
16
(3,978)
2,445
1,089
26
3,560
Year ended
31 December 2022
£’000s
Year ended
31 December 2021
£’000s
2,891
2,891
3,896
3,896
Year ended
31 December 2022
£’000s
Year ended
31 December 2021
£’000s
587
18
209
814
77
106
183
542
11
20
573
73
–
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FINANCIAL STATEMENTS
8. FINANCE COSTS AND BANK LOANS
ACCOUNTING POLICY
Interest bearing loans and overdrafts are initially recorded as the proceeds received net of any directly attributable issue costs. Subsequent
measurement is at amortised cost, with borrowing costs recognised in the Consolidated Statement of Comprehensive Income in the year in
which they are incurred, using the effective interest rate method. Arrangement fees are amortised over the term of the corporate debt facility.
Finance costs for the year were £3.6 million (December 2021: £3.5 million). The Group has a corporate debt facility with £250 million
available on a fully committed basis, with a flexible ‘accordion’ component which will, subject to lender approval, allow for a future extension
by an additional £150 million. The interest rate margin on the corporate debt facility in the year was 170 basis points over SONIA. The facility
matures in March 2024 with no repayments due ahead of maturity, and is secured over the assets of the Group. The banking group for the
facility consists of National Australia Bank, the Royal Bank of Scotland International, Sumitomo Mitsui Banking Corporation and Barclays
Bank. The drawdowns in the year were in the form of cash drawdowns used to partially fund investments. As at December 2022 the facility
was £29.3 million cash drawn (December 2021: £156.2 cash drawn), with £16.7 million drawn as letter of credit (December 2021: £9.3
million drawn under letter of credit). The uncommitted balance of the facility which was not cash drawn or notionally drawn via letters of
credit, was c.£204.0 million (December 2021: £84.5 million).
9. TAX
ACCOUNTING POLICY
Current tax is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of
Comprehensive Income as it excludes items of income or expense that are taxable or deductible in past or future years and it further
excludes items that are never taxable or deductible. The Group’s asset/liability for current tax is calculated using tax rates that have been
enacted or substantively enacted at the balance sheet date. The current tax charge/credit in the Consolidated Statement of Comprehensive
Income is recognised net of receivables recognised for losses surrendered to unconsolidated subsidiary entities.
Under the current system of taxation in Guernsey, the Company itself is exempt from paying taxes on income, profits or capital gains.
Dividend income and interest income received by the Group may be subject to withholding tax imposed in the country of origin of such income.
Current tax:
UK corporation tax – prior year
Other overseas tax – current year
Other overseas tax – prior year
Tax credit for the year
Reconciliation of effective tax rate:
Profit before tax
Exempt tax status in Guernsey
Application of overseas tax rates
Tax credit for the year
Year ended
31 December 2022
£’000s
Year ended
31 December 2021
£’000s
–
(69)
–
(69)
(2)
(44)
2
(44)
Year ended
31 December 2022
£’000s
Year ended
31 December 2021
£’000s
326,828
–
(69)
(69)
129,167
–
(44)
(44)
The income tax credit above does not represent the full tax position of the entire Group as the investment returns received by the Company
are net of tax payable at the underlying investee entity level. As a consequence of the adoption of IFRS 10 investment entity consolidation
exception, underlying investee entity tax is not consolidated within these financial statements. To provide an indication of the tax paid across
the wider portfolio, total forecasted corporation tax payable by the Group’s underlying investments is in excess of £1 billion (December 2021:
£1 billion) over their full concession lives.
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91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 continUeD
10. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based on the following data:
Earnings for the purposes of basic and diluted earnings per share being net profit attributable
to equity holders of the parent
Weighted average number of Ordinary Shares for the purposes of basic and diluted earnings
per share
Basic and diluted (pence)
Year ended
31 December 2022
£’000s
Year ended
31 December 2021
£’000s
326,897
Number
129,211
Number
1,841,400,896
1,660,869,679
17.75
7.78
The denominator for the purposes of calculating both basic and diluted earnings per share is the same as the Group has not issued any
share options or other instruments that would cause dilution.
11. FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the instrument expire or the asset is transferred,
and the transfer qualifies for derecognition in accordance with IFRS 9 Financial Instruments. Financial liabilities are derecognised when the
obligation is discharged, cancelled or expired. Specific financial asset and liability accounting policies are provided below.
11.1 FINANCIAL ASSETS
Investments at fair value through profit and loss
Financial assets at amortised cost
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments at fair value through profit or loss
Foreign exchange contracts
Total financial assets
31 December 2022
£’000s
31 December 2021
£’000s
2,947,959
2,579,434
44,096
92,829
–
3,084,884
57,378
56,090
2,713
2,695,615
ACCOUNTING POLICY
The Group classifies its financial assets as at fair value through profit or loss or as financial assets at amortised cost. The classification
depends on the purpose for which the financial assets were acquired, with investments in unconsolidated subsidiaries (other than those
providing investment-related services) being at fair value through profit or loss as required by IFRS 10.
Investments at fair value through profit or loss
Investments in underlying unconsolidated subsidiaries and other non-controlled investments are held in a portfolio, the business model of
which is to manage them on a fair value basis. The Group’s policy is to fair value both the equity and debt investments in underlying assets
together. All transaction costs relating to the acquisition of new investments are recognised directly in profit or loss. Subsequent to initial
recognition, equity and debt investments are measured at fair value with changes in fair value recognised within total investment income in
the Consolidated Statement of Comprehensive Income.
Trade and other receivables
Trade and other receivables that meet the contracted cash flow test as solely payments of principal and interest and which are held in a
business model to receive these contractual cash flows are classified as trade and other receivables. Financial assets with maturities less
than 12 months are included in current assets, financial assets with maturities greater than 12 months after the balance sheet date are
classified as non-current assets.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments with an original
maturity of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes
in value.
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FINANCIAL STATEMENTS
Derivative financial instruments
Derivatives are classified as financial assets and liabilities at fair value through profit or loss, held for trading. Derivatives are recognised
initially, and are subsequently remeasured, at fair value. Derivatives are shown as assets when their fair value is positive or as liabilities when
their fair value is negative. Fair value movements on derivative financial instruments held for trading are recognised in the Consolidated
Statement of Comprehensive Income.
Impairment of financial assets
Financial assets, other than those classified at fair value through profit or loss, being trade and other receivables. The Group adopts a
simplified approach to calculate any expected credit losses.
11.2 FINANCIAL LIABILITIES
Financial liabilities at amortised cost
Trade and other payables
Bank loans
Derivative financial instruments at fair value through profit or loss
Foreign exchange contracts
Total financial liabilities
31 December 2022
£’000s
31 December 2021
£’000s
13,919
29,300
1,826
45,045
10,597
156,218
–
166,815
ACCOUNTING POLICY
Financial liabilities
Financial liabilities, other than those specifically accounted for under a separate policy, are measured at amortised cost and stated based on
the amounts which are considered to be payable in respect of goods or services received up to the financial reporting date. The accounting
policy for bank loans is included earlier in note 8.
The carrying value of financial assets and liabilities held at amortised cost is considered to approximate their fair value.
11.3 FINANCIAL RISK MANAGEMENT
The Group’s objective in managing risk is the protection of stakeholder value. Risk is inherent in the Group’s activities and is managed
through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. The Group is exposed to
market risk (which includes currency risk, interest rate risk and inflation risk), credit risk and liquidity risk arising from the financial instruments
it holds. The Board of Directors is ultimately responsible for the overall risk management of the Group, with delegation of oversight and
activities (including identifying and controlling risks) provided to the Audit and Risk Committee and the Group’s Investment Adviser. The
Group’s risk management framework and approach is set out within the Strategic Report (pages 48 to 60). The Board takes into account
market, credit and liquidity risks in forming the Group’s risk management strategy.
MARKET RISK
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as
changes in inflation, foreign exchange rates and interest rates.
Inflation risk
The majority of the Group’s cash flows from underlying investments are linked to inflation indices. Changes in inflation rates can have a
positive or negative impact on the Group’s cash flows from investments. The long-term inflation assumptions applied in the Group’s valuation
of investments at fair value through profit or loss are disclosed in the fair value hierarchy section in note 11.4.
The Group’s portfolio of investments has been developed in anticipation of continued inflation at or above the levels used in the Group’s
valuation assumptions. Where inflation is at levels below the assumed levels for a sustained period of time, investment performance may be
impaired. The level of inflation-linkage* across the investments held by the Group varies and is not consistent.
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93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 continUeD
11. FINANCIAL INSTRUMENTS CONTINUED
11.3 FINANCIAL RISK MANAGEMENT CONTINUED
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows from underlying investments therefore
impacting the value of investments at fair value through profit or loss. The Group has limited exposure to interest rate risk as the underlying
borrowings within the unconsolidated investee entities are either hedged through interest rate swap arrangements via an economic hedge,
are fixed rate loans or the risk of adverse movement in interest rates is limited through protections provided by the regulatory regime. For
example, it is generally a requirement under a PFI/PPP concession that any borrowings are matched to the life of the concession. Hedging
activities are aligned with the period of the loan, which also mirrors the concession period and are highly effective. Nevertheless, refinancing
risk exists in a number of such investments. The Group’s corporate debt facility is unhedged on the basis it is utilised as an investment
bridging facility and therefore drawn for a relatively short period of time. Therefore, the Group is not significantly exposed to cash flow risk
due to changes in interest rates over its variable rate borrowings. Interest income on bank deposits held within underlying investments is
included within the fair value of investments.
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currencies and therefore is exposed to exchange rate fluctuations.
Currency risk arises in financial instruments that are denominated in a foreign currency other than the functional currency in which they are
measured. The Group uses forward foreign exchange contracts to mitigate the risk of short-term volatility in foreign exchange on significant
investment returns from overseas investments via an economic hedge. The Group does not hedge its exposure to foreign exchange in
relation to foreign currency denominated investment balances. The carrying amounts of the Group’s foreign currency denominated monetary
financial instruments at the reporting date are set out in the table below.
Cash
Euro
Canadian Dollar
Australian Dollar
US Dollar
Current receivables
Euro receivables
US Dollar receivables
Investments at fair value through profit or loss
Euro
Danish Krone
Canadian Dollar
Australian Dollar
US Dollar
Total
31 December 2022
£’000s
31 December 2021
£’000s
8,416
1,014
15,222
100
24,752
17
724
741
335,682
11,938
43,240
207,352
122,783
720,995
746,488
875
250
6,220
1,603
8,948
712
–
712
299,262
13,979
39,439
213,261
66,492
632,433
642,093
Sensitivity analysis showing the impact of variations of the above risks on the fair value of investments is shown in note 11.5.
CREDIT RISK
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group
has adopted a policy of dealing with creditworthy counterparties and reviewing this on a regular basis at the underlying entity level. The
majority of underlying investments are in public-private partnerships and similar concessions (which are entered into with government, quasi
government, other public, equivalent low risk bodies), or in regulated businesses that inherently exhibit low levels of credit risk. The maximum
exposure of credit risk over financial assets as a result of counterparty default is the carrying value of those financial assets in the balance
sheet. In addition, the underlying investee entities contract with third-party construction and facilities managements contractors. The Group
seeks to mitigate this risk through using a diverse range of sub-contractors and through at least quarterly review of the credit position of
major contractors.
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FINANCIAL STATEMENTS
LIQUIDITY RISK
Liquidity risk is defined as the risk that the Group would encounter difficulty in meeting obligations as and when they fall due associated with
financial liabilities that are settled by delivering cash or another financial asset. The Group invests in relatively illiquid investments (mainly non-
listed equity and loans). As a closed-ended investment vehicle there are no automatic capital redemption rights. The Group manages liquidity
risk by maintaining adequate cash reserves, banking facilities and reserve borrowing facilities and by continuously monitoring forecast and
actual cash flows. Cash flow forecasts assume full availability of underlying infrastructure to the relevant public sector body or end-user.
Failure to maintain assets available for use or operating in accordance with pre-determined performance standards or licence conditions may
lead to a reduction (wholly or partially) in the investment income that the Group has projected to receive. The Directors review the underlying
performance of each investment on a quarterly basis, allowing asset performance to be monitored. The terms of public-private partnership
contractual mechanisms also allow for significant pass-down of unavailability and performance risk to sub-contractors. Regulated asset
regimes allow for the pass through of efficiently incurred costs to the purchaser. The Group’s financial liabilities comprise trade and other
payables, payable within 12 months of the year end, derivative financial instruments, and bank loans, repayable in March 2024 as disclosed
under note 8.
11.4 FAIR VALUE HIERARCHY
All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 — Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities;
Level 2 — Valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly or indirectly
observable);
Level 3 — Valuation techniques (for which the lowest level input that is significant to the fair value measurement is unobservable).
During the year, there were no transfers between Level 2 and Level 3 categories.
Level 1:
The Group has no financial instruments classified as Level 1.
Level 2:
This category includes derivative financial instruments such as interest rate swaps, RPI swaps and currency forward contracts. As at
31 December 2022, the Group’s only derivative financial instruments were currency forward contracts amounting to a liability of £1.8 million
(December 2021: asset of £2.7 million).
Financial instruments classified as Level 2 have been valued using models whose inputs are observable in an active market (spot exchange
rates, yield curves, interest rate curves). Valuations based on observable inputs include financial instruments such as swaps and forward
contracts which are valued using market standard pricing techniques where all the inputs to the market standard pricing models are observable.
Level 3:
This category consists of investments in equity and loan instruments in underlying unconsolidated subsidiary entities and other non-
controlled investments which are classified at fair value through profit or loss. At 31 December 2022, the fair value of financial instruments
classified within Level 3 totalled £2,948.0 million (December 2021: £2,579.4 million).
Financial instruments are classified within Level 3 if their valuation incorporates significant inputs that are not based on observable market
data (unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or
if there is compelling external evidence demonstrating an executable exit price.
Valuation process
Valuations are the responsibility of the Board of Directors. The valuation of unlisted equity and debt investments is performed on a quarterly1
basis by the Investment Adviser. The valuation is reviewed by the senior members of the Investment Adviser, and reviewed and approved by
the Board.
Valuation methodology
The valuation methodologies used are primarily based on discounting the underlying investee entities’ future projected net cash flows
at appropriate discount rates. Valuations are also reviewed against recent market transactions for similar assets in comparable markets
observed by the Group or Investment Adviser and adjusted where appropriate.
Cash flow forecasts for the full-term of each underlying investment are generated by detailed investment specific financial models. These
models forecast the dividend, shareholder loan interest payments, capital repayments and senior debt repayments (where applicable) expected
from the underlying investments. The cash flows included in the forecasts used to determine fair value are typically fixed under contracts,
however there are certain variable cash flows which are based on management’s estimations (see also pages 28 to 29 of the strategic report).
The significant unobservable inputs and assumptions used in projecting the Group’s net future cash flows are shown overleaf.
1
Indicative valuations are calculated in respect of each at 31 March and 30 September.
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95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 continUeD
11. FINANCIAL INSTRUMENTS CONTINUED
11.4 FAIR VALUE HIERARCHY CONTINUED
Inflation rates
UK
RPI: 8.00% until Dec 2023, 2.75% thereafter
2.75% RPI / 2.00% CPIH
31 December 2022
£’000s
31 December 2021
£’000s
Long-term deposit
rates2
Foreign exchange
rates
Tax rates3
Australia
Europe (excl. UK)
Canada
US1
UK
Australia
Europe (excl. UK)
Canada
US1
GBP/AUD
GBP/DKK
GBP/EUR
GBP/CAD
GBP/USD
UK
Australia
Europe (excl. UK)
Canada
US1
CPIH: 7.00% until Dec 2023, 2.00% thereafter
5.25% until Dec 2023 3.00% until Dec 2024,
2.50% thereafter
5.00% until Dec 2023, 2.50% until Dec 2024,
2.00% thereafter
2.75% until Dec 2023, 2.00% thereafter
N/A
2.50%
2.75%
1.50%
2.50%
N/A
1.77
8.40
1.13
1.64
1.21
2.50%
2.00%
2.00%
N/A
1.00%
2.00%
0.50%
1.50%
N/A
1.86
8.86
1.19
1.72
1.35
19.00% / 25.00%
30.00%
Various (12.50%-32.28%)
Various (23.00%-26.50%)
N/A
19.00% / 25.00%
30.00%
Various (12.50%-32.28%)
Various (23.00%-26.50%)
N/A
1 The Company’s US investment is in the form of subordinated debt and therefore not directly impacted by inflation, deposit and tax rate assumptions.
2 The portfolio valuation assumes actual current deposit rates are maintained until 31 December 2023 before adjusting to the long-term rates noted in the table above from 1 January 2024.
3 Tax rates reflect those substantively enacted as at the valuation date or those that could reasonably be expected to be substantively enacted shortly after the valuation date.
Discount rates
The discount rate used in the valuation of each investment is the aggregate of the following:
– Yield on a government bond with a remaining term equivalent to (or as close as possible to) the investment being valued, issued by the
national government for the location of the relevant investment (‘government bond yield’);
– A premium to reflect the inherent greater risk in investing in infrastructure assets over government bonds;
– A further premium to reflect the state of maturity of the asset with a larger premium applied to immature assets and/or assets in
construction and/or to reflect any current asset specific or operational issues. Typically, this risk premium will reduce over the life of any
asset as an asset matures, its operating performance becomes more established, and the risks associated with its future cash flows
decrease. However, the rate may increase in relation to investments with unknown residual values at the end of the relevant concession life
as that date nears;
– A further adjustment reflective of market-based transaction valuation evidence for similar assets. Such adjustment is considered to
implicitly include the market’s assessment of the risk posed by climate factors to that particular investment.
Over the year, the weighted average government bond yield increased by 217bps. The weighted average investment premium decreased,
reflecting observable market-based evidence.
Valuation assumptions
31 December 2022
31 December 2021
Weighted Average Government Bond Yield
Weighted Average Investment Risk Premium
Weighted Average Discount Rate
3.13%
4.38%
7.51%
0.96%
6.01%
6.97%
Movement
+217bps
(163bps)
+54bps
Weighted Average Discount Rate on Risk Capital1
7.71%
7.38%
+33bps
1 Weighted average discount rate on Risk Capital only (equity and subordinated debt).
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FINANCIAL STATEMENTS
Reconciliation of Level 3 fair value measurements of financial assets
Balance at 1 January
Additional investments during the year
Net repayments during the year
Net change in Investments at fair value through profit or loss
Balance at 31 December
31 December 2022
£’000s
31 December 2021
£’000s
2,579,434
191,604
(33,985)
210,906
2,947,959
2,345,433
252,725
(53,350)
34,626
2,579,434
11.5 SENSITIVITY ANALYSIS
The valuation requires management to make certain assumptions in relation to unobservable inputs to the model. There are no straight
forward inter-relationships between the unobservable inputs. A sensitivity analysis for reasonably possible alternative assumptions is
provided below:
Significant assumptions
31 December 2022
Discount rate
Inflation rate (overall)
UK (CPI/RPI)
Europe
North America
Australia
FX rate
Tax rate
Deposit rate
Significant assumptions
31 December 2021
Discount rate
Inflation rate (overall)
UK (CPI/RPI)
Europe
North America
Australia
FX rate
Tax rate
Deposit rate
Weighted average
rate in base case
valuations
7.51%
2.35%
2.00%/2.75%
2.00%
2.00%
2.50%
Sensitivity
factor
+1.00%
+1.00%
+1.00%
+1.00%
+1.00%
+1.00%
N/A
+10.00%
25.39%
1.02%
+1.00%
+1.00%
Change in fair value
of investment
£’000s
Sensitivity
factor
Change in fair value
of investment
£’000s
(271,841)
260,036
211,400
39,054
821
8,761
72,128
(14,101)
24,235
-1.00%
-1.00%
-1.00%
-1.00%
-1.00%
-1.00%
-10.00%
-1.00%
-1.00%
328,070
(227,357)
(183,950)
(33,901)
(764)
(8,742)
(72,132)
12,358
(24,100)
Sensitivity
factor
Change in fair value
of investment
£’000s
Sensitivity
factor
Change in fair value
of investment
£’000s
Weighted average
rate in base case
valuations
6.97%
2.37%
2.00%/2.75%
2.00%
2.00%
2.50%
+1.00%
+1.00%
+1.00%
+1.00%
+1.00%
+1.00%
N/A
+10.00%
25.47%
1.04%
+1.00%
+1.00%
(245,454)
231,029
179,431
40,393
738
10,451
63,273
(13,757)
24,626
-1.00%
-1.00%
-1.00%
-1.00%
-1.00%
-1.00%
-10.00%
-1.00%
-1.00%
295,025
(197,787)
(151,850)
(35,843)
(1,218)
(8,875)
(63,279)
13,541
(13,723)
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97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 continUeD
INVESTMENT ACTIVITY
12.
2022
Date of investment
Description
April – June 2022
June 2022
June – July 2022
September 2022
December 2022
December 2022
The Group made further investments into the National Digital
Infrastructure Fund, UK
The Group made follow on investments into a portfolio of Building
Schools for the Future assets, UK
The Group made a follow-on investment into the Diabolo Rail Link
project, Belgium
The Group made a follow-on investment into Tideway, UK
The Group made a follow-on investment into FHSP, US
The Group made an investment in the East Anglia 1 offshore
transmission project, UK
Total capital spend on investments during the year
Consideration
£’000s
% Ownership
post investment
1,205
1,455
4,753
41,943
36,507
105,741
191,604
45.0%
Various
100.0%
17.9%
100.0%
100.0%
During the year minority interests in four Lancashire Building Schools for Future (‘BSF’) projects were disposed from a portfolio subsidiary,
being sold for £8.5 million aligning with the carrying value of the assets at the disposal date.
2021
Date of investment
Description
April 2021
June 2021
July 2021
September 2021
November 2021
November 2021
December 2021
December 2021
December 2021
The Group made an investment into toob, utilising part of its
commitment to invest in digital infrastructure, UK
The Group made an investment into the Offenbach police
centre, Germany
The Group made an investment in the Beatrice offshore transmission
project, UK
The Group made an investment to acquire an additional interest in
Angel Trains, UK
The Group made an investment in the Rampion offshore transmission
project, UK
The Group made an investment to acquire interests in a port-folio of
Building Schools for the Future and UK PPP projects, UK
The Group made an investment to acquire an interest in a portfolio of
Danish PPP projects, Denmark
The Group made an investment to acquire interests in a small portfolio
UK PPP projects, UK
The Group made a follow on investment into the Diabolo Rail Link
Project, Belgium
Total capital spend on investments during the year
13. TRADE AND OTHER RECEIVABLES
Accrued interest receivable
Other debtors
Total trade and other receivables
% Ownership
post investment
46.1%
45%
100%
10%
100%
Various
66.7%
Various
100%
Consideration
£’000s
14,270
8,073
49,751
97,496
35,400
29,074
14,045
3,053
1,563
252,725
31 December 2022
£’000s
31 December 2021
£’000s
40,327
3,769
44,096
52,657
4,721
57,378
Other debtors included £1.3 million (December 2021: £1.2 million) of receivables from unconsolidated subsidiary entities for surrender of
Group tax losses.
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FINANCIAL STATEMENTS
14. TRADE AND OTHER PAYABLES
Accrued management fee
Other creditors and accruals
Total trade and other payables
15. SHARE CAPITAL AND RESERVES
Share capital
Authorised and in issue at 1 January
Issued for cash
Issued as a scrip dividend alternative
Authorised and in issue at 31 December – fully paid
Share capital
Balance at 1 January
Issued for cash (excluding issue costs)
Issued as a scrip dividend alternative
Total share capital issued in the year
Costs on issue of Ordinary Shares
Balance at 31 December
31 December 2022
£’000s
31 December 2021
£’000s
9,798
4,121
13,919
8,308
2,289
10,597
31 December 2022
shares
’000s
31 December 2021
shares
’000s
1,706,104
203,762
1,377
1,911,243
1,620,953
81,818
3,333
1,706,104
31 December 2022
£’000s
31 December 2021
£’000s
1,908,849
1,769,582
325,000
2,273
327,273
(4,846)
135,000
5,629
140,629
(1,362)
2,231,276
1,908,849
At present, the Company has one class of Ordinary Shares with a par value of 0.01 pence which carry no right to fixed income.
On 4 May 2022, the Group raised an additional £325 million of equity through a Placing, Open Offer and Offer for Subscription of
203,761,755 Ordinary shares at an issue price per share of 159.5 pence.
On 13 June 2022, 1,377,796 new Ordinary fully paid shares were issued as a scrip dividend alternative in lieu of cash for the interim dividend
in respect of the six months ended 31 December 2021.
Other distributable reserve
Balance at 1 January
Movement in the year
Balance at 31 December
31 December 2022
£’000s
31 December 2021
£’000s
182,481
–
182,481
182,481
–
182,481
On 19 January 2007, the Company applied to the Royal Court of Guernsey, following the initial placing of shares, to reduce its share
premium account. This was in order to provide a distributable reserve to enable the Company to repurchase its shares if and when the Board
of Directors consider it beneficial to do so. Following court approval, the distributable reserve account was created.
Retained earnings
Balance at 1 January
Net profit for the year
Dividends paid1
Balance at 31 December
1 Includes scrip element of £2.3 million in 2022 (December 2021: £5.6 million).
31 December 2022
£’000s
31 December 2021
£’000s
437,470
326,897
(138,285)
626,082
432,373
129,211
(124,114)
437,470
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99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 continUeD
15. SHARE CAPITAL AND RESERVES CONTINUED
DIVIDENDS
The Board is satisfied that, in every respect, the solvency test as required by the Companies (Guernsey) Law, 2008, was satisfied for the
proposed dividend and the dividend paid in respect of the year ended 31 December 2022.
The Board has approved interim dividends as follows:
Amounts recognised as distributions to equity holders for the year ended 31 December
Declared and proposed
Interim dividend for the period 1 January to 30 June 2022 was 3.87 pence per share
(2021: 3.78 pence per share)
Interim dividend for the period 1 July to 31 December 2022 was 3.87 pence per share2
(2021: 3.77 pence per share)
31 December 2022
£’000s
31 December 2021
£’000s
138,2851
73,965
73,965
124,114
64,463
64,320
1 Includes the 2021 interim dividend for the period 1 July to 31 December 2021.
2 The dividend for the period 1 July to 31 December 2022 was approved by the Board on 29 March 2023 and therefore has not been included as a liability in the balance sheet for the year
ended 31 December 2022.
CAPITAL RISK MANAGEMENT
The Group seeks to efficiently manage its financial resources to ensure that it is able to continue as a going concern while providing
improved returns to shareholders through the management of the debt and equity balances. The capital structure consists of the Group’s
corporate debt facility and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.
The Group aims to deliver its objective by investing available cash and using leverage whilst maintaining sufficient liquidity to meet ongoing
expenses and dividend payments. The Group’s investment policy is set out in the Corporate Governance Report on page 61.
The Group’s Investment Adviser reviews the capital structure on a semi-annual basis. As part of this review, the Investment Adviser considers
the cost of capital and the associated risks.
16. NET ASSETS PER SHARE
Net assets attributable to equity holders of the parent
Number of shares
Ordinary Shares outstanding at the end of the year
Net assets per share (pence per share)
31 December 2022
£’000s
31 December 2021
£’000s
3,039,839
2,528,800
Number
Number
1,911,243,132
1,706,103,581
159.1
148.2
17. RELATED PARTY TRANSACTIONS
Details of the Company’s significant consolidated and unconsolidated subsidiaries are included in note 20.
During the year, Group companies entered into certain transactions with related parties that are not members of the Group but are related
parties by reason of being in the same group as Amber Infrastructure Group Holdings Limited, which is the ultimate holding company of the
Investment Adviser, Amber Fund Management Limited (‘AFML’).
Under the Investment Advisory Agreement (‘IAA’), AFML was appointed to provide investment advisory services to the Group including
advising the Group as to the strategic management of its portfolio of investments.
AFML and International Public Partnerships GP Limited are subsidiary companies of Amber Infrastructure Group Holdings Limited (‘Amber
Group’), in which Giles Frost is a Director and also a substantial shareholder.
Giles Frost is also a Director of International Public Partnerships Limited (the ‘Company’); International Public Partnerships Lux 1 Sarl; (a
wholly owned subsidiary of the Group); and certain other companies in which the Group indirectly has an investment. The transactions with
the Amber Group are considered related party transactions under IAS 24 ‘Related Party Disclosures’.
The Director’s fees of £53,500 (2021: £48,500) for Giles Frost’s directorship of the Company are paid to his employer, Amber Infrastructure
Limited (a member of the Amber Group).
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FINANCIAL STATEMENTS
The amounts of the transactions in the year that were related party transactions are set out in the table below:
Related party expense in the Income Statement
Amounts owing to related parties in the Balance Sheet
For the year ended
31 December 2022
£’000s
For the year ended
31 December 2021
£’000s
At 31 December 2022
£’000s
At 31 December 2021
£’000s
International Public Partnerships GP Limited1
Amber Fund Management Limited2
Total
29,421
2,891
32,312
26,173
3,896
30,069
9,798
2,134
11,932
8,308
247
8,555
1 Represents amounts paid to related parties for investment advisory fees.
2 Represents amounts paid to related parties to acquire or make investments or advisory fees associated with investments which are subsequently recorded in the balance sheet.
INVESTMENT ADVISORY ARRANGEMENTS
Investment advisory fees payable during the year are calculated as follows:
For existing construction assets:
– 1.2% per annum of gross asset value of investments bearing construction risk.
For existing fully operational assets:
– 1.2% per annum of the gross asset value (‘GAV’) excluding uncommitted cash from capital raisings up to £750 million;
– 1.0% per annum where GAV (excluding uncommitted cash from capital raisings) is between £750 million and £1.5 billion;
– 0.9% per annum where GAV (excluding uncommitted cash from capital raisings) is between £1.5 billion and £2.75 billion;
– 0.8% per annum where GAV (excluding uncommitted cash from capital raisings) value exceeds £2.75 billion.
Asset origination fees in connection with new acquisitions are charged at a rate of 1.5% of the value of new acquisitions.
The IAA can be terminated where less than 95% of the Group’s assets are available for use for certain periods and the Investment Adviser
fails to implement a remediation plan agreed with the Group. The IAA may also be terminated by either party giving to the other five years
notice of termination, expiring at any time after 10 years from the date of the IAA.
As at 31 December 2022, the Amber Group held 8,002,379 (December 2021: 8,002,379) shares in the Company. The shares held by the
Investment Adviser in the Company helps further strengthen the alignment of interests between the two parties.
During the year the Company acquired an additional c.£37 million interest in Family Housing for Service Personnel (‘FHSP’) from Hunt
Companies Inc., an affiliate of the Company’s investment adviser Amber. In accordance with the Company’s procedures for related-party
transactions, the Company sought an independent valuation.
TRANSACTIONS WITH DIRECTORS
Shares acquired by Directors in the year are disclosed below:
Mike Gerrard
Julia Bond
Stephanie Coxon
Sally Ann David
Meriel Lenfestey
John Le Poidevin
Giles Frost
Claire Whittet (retired May 2022)
Total purchased
Number of New Ordinary Shares
Year ended
31 December 2022
Year ended
31 December 2021
84,266
34,098
10,000
–
15,163
167,245
–
37,854
348,626
–
24,072
–
30,303
–
30,303
27,567
1,654
113,899
Remuneration paid to the Non-Executive Directors is disclosed on page 66. Directors received dividends on total shares held as disclosed
on page 66, in accordance with the approved dividends detailed under note 15.
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Annual Report and financial statements 2022
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101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 continUeD
18. CONTINGENT LIABILITIES AND COMMITMENTS
As at 31 December 2022 the Group has committed funding of up to c.£145.6 million (December 2021: c.£ 44.7 million), which includes
committed investment amounts as noted in the Strategic Report on page 17, and a deferred commitment of c.£12.5 million for BeNEX
(December 2021: £14.5 million) which is due to be settled from future returns generated by BeNEX.
There were no other contingent liabilities at the date of this report.
19. EVENTS AFTER BALANCE SHEET
Since the year-end, the Company has, in principle, agreed an increase in the committed size of its existing CDF from £250 million to £350
million with the existing banking group. This increase is expected to be effective from April 2023 and would provide the Company with
the liquidity required to take advantage of additional investment opportunities as they may arise. There would remain a flexible ‘accordion’
component which would, subject to lender approval, allow for a further increase in the committed size of the facility to £400 million. The
Company is also progressing the documentation required to amend the maturity date of the CDF from March 2024 to June 2025. These two
amendments are expected to be finalised shortly. No other changes to the terms of the CDF are expected.
In March 2023 the Group made a further 20% investment in Ealing BSF for £0.7 million.
20. OTHER MANDATORY DISCLOSURES
NEW STANDARDS THAT THE GROUP HAS APPLIED FROM 1 JANUARY 2022
Standards and amendments to standards applicable to the Group that became effective during the year are listed below. These have no
material impact on the reported performance or financial statements of the Group.
– Annual improvements to IFRS Standards 2018-2020 (1 January 2022); and
– Amendments to IFRS 3 Reference to the Conceptual Framework (1 January 2022).
STANDARDS ISSUED BUT NOT YET EFFECTIVE
Standards applicable to the Group which are issued but not yet effective up to the date of issuance of the Group’s financial statements are
listed below. This listing is of standards and interpretations issued, which the Group reasonably expects to be applicable at a future date.
The Group intends to adopt these standards when they become effective, however does not currently anticipate the standards to have
a significant impact on the Group’s financial statements. Current assumptions regarding the impact of future standards will remain under
consideration in light of interpretation notes as and when they are issued.
– Disclosure of Accounting policies (Amendments to IAS 1 and IFRS Practice statement 2) (1 January 2023);
– Definition of Accounting Estimates (Amendments to IAS 8) (1 January 2023); and
– Amendments to IAS 1 Classification of Liabilities as Current or Non-current (1 January 2023).
UNCONSOLIDATED SUBSIDIARIES
A list of the significant investments in unconsolidated subsidiaries, including the name, country of incorporation as at 31 December 2022 and
proportion of ownership is shown below:
Name
Abingdon Limited Partnership
Aggregator PLC
Access Justice Durham Limited
AKS Betriebs GmbH & Co. KG
Arden Partnership (Derby) Limited
Arden Partnership (Lincolnshire) Limited
Arden Partnership (Leicester) Limited
BBPP Alberta Schools Limited
Blackburn with Darwen Phase 1 Limited
Blackburn with Darwen Phase 2 Limited
BPSL No. 2 Limited Partnership
Building Schools for the Future Investments LLP
Calderdale Schools Partnership
CHP Unit Trust
Derby City BSF Limited
Derbyshire Courts Limited Partnership
Derbyshire Schools
Derbyshire Schools Phase Two Partnership
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Place of incorporation
(or registration) and
operation
Proportion of ownership
interest %
UK
UK
Canada
Germany
UK
UK
UK
Canada
UK
UK
UK
UK
UK
Australia
UK
UK
UK
UK
100
100
100
98
50
50
50
100
100
100
100
100
100
100
90
100
100
100
overview
Strategic report
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FINANCIAL STATEMENTS
Name
Essex Schools Limited
Future Ealing Phase 1 Limited
4 Futures Phase 1 Limited
4 Futures Phase 2 Limited
Hertfordshire Schools Building Partnership Phase 1 Limited
H&W Courts Limited Partnership
INPP Infrastructure Germany GmbH & Co. KG
Inspire Partnership Limited Partnership
IPP CCC Limited Partnership
Inspiredspaces Durham (Project Co 1) Limited
Kent PFI (Project Co 1) Limited
Inspiredspaces Nottingham (Project Co 1) Limited
Inspiredspaces Nottingham (Project Co 2) Limited
Inspiredspaces STaG (Project Co 1) Limited
Inspiredspaces STaG (Project Co 2) Limited
Inspiredspaces Wolverhampton (Project Co 1) Limited
Inspiredspaces Wolverhampton (Project Co 2) Limited
Transform Islington (Phase 1) Limited
Transform Islington (Phase 2) Limited
IPP (Moray Schools) Holdings Limited
LCV Project Trust
Lewisham Schools for the Future SPV Limited
Lewisham Schools for the Future SPV 2 Limited
Lewisham Schools for the Future SPV 3 Limited
Lewisham Schools for the Future SPV 3 Limited
Maesteg School Partnership
Norfolk Limited Partnership
Northampton Schools Limited Partnership
Northern Diabolo N.V.
Oldham BSF Limited
OPP Hobro Tinglysningsret A/S
OPP Ørstedskolen A/S
OPP Vildbjerg Skole A/S
OPP Randers P-Hus A/A
PSBP Midlands Limited
Pinnacle Healthcare (OAHS) Trust
Plot B Partnership
St Thomas More School Partnership
PPP Solutions (Long Bay) Partnership
PPP Solutions (Showgrounds) Trust
Strathclyde Limited Partnership
TH Schools Limited Partnership
TC Robin Rigg OFTO Limited
TC Barrow OFTO Limited
TC Gunfleet Sands OFTO Limited
TC Ormonde OFTO Limited
TC Lincs OFTO Limited
TC Westermost Rough OFTO Limited
TC Dudgeon OFTO PLC
TC Beatrice OFTO Limited
TC Rampion OFTO Limited
TC East Anglia OFTO Limited
Place of incorporation
(or registration) and
operation
Proportion of ownership
interest %
UK
UK
UK
UK
UK
UK
Germany
UK
Ireland
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Australia
UK
UK
UK
UK
UK
UK
UK
Belgium
UK
Denmark
Denmark
Denmark
Denmark
UK
Australia
UK
UK
Australia
Australia
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
100
80
90
90
100
100
100
100
100
100
58
90
90
90.1
90.1
100
100
90
90
100
100
90
90
90
81
100
100
100
100
99
66.7
66.7
66.7
66.7
92.5
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
The entities listed above in aggregate represent 55.0% (December 2021: 58.2%) of investments at fair value through profit or loss. The
remaining fair value is driven from joint ventures, associate interests and minority stakes held by the Group.
International Public Partnerships Limited
International Public Partnerships Limited
Annual Report and financial statements 2022
Annual Report and financial statements 2022
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 continUeD
20. OTHER MANDATORY DISCLOSURES CONTINUED
CONSOLIDATED SUBSIDIARIES
The subsidiary undertakings of the Company, all of which have been included in these consolidated financial statements are as follows:
Name
International Public Partnerships Limited Partnership
International Public Partnerships Lux 1 Sarl
International Public Partnerships Lux 2 Sarl
IPP Bond Limited
IPP Holdings 1 Limited
IPP Investments UK Limited
IPP Investments Limited Partnership
Place of incorporation
(or registration) and
operation
Proportion of ownership
interest %
UK
Luxembourg
Luxembourg
UK
UK
UK
UK
100
100
100
100
100
100
100
INVESTMENTS
21.
The Group holds 138 investments across energy transmission, education, transport, health, courts, wastewater, police, military housing and
other sectors. The table overleaf sets out the Group’s investments that are recorded at fair value through profit or loss.
Investment Name
UK
UK PPP Assets
Calderdale Schools
Derbyshire Schools Phase Two
Northamptonshire Schools
Derbyshire Courts
Derbyshire Schools Phase One
North Wales Police HQ
St Thomas More Schools
Tower Hamlets Schools
Norfolk Police HQ
Strathclyde Police Training Centre
Hereford & Worcester Courts
Abingdon Police Station
Bootle Government Offices
Maesteg Schools
Moray Schools
Liverpool Library
Three Shires – Derbyshire
Three Shires – Leicestershire
Three Shires – Lincolnshire
Townlands Hospital
Priority Schools Building Aggregator Programme
Batch 1 – Schools in North East England
Batch 2 – Schools in Hertfordshire,
Luton and Reading
Batch 3 – Schools in North West of England
Batch 4 – Schools in the Midlands Region
Batch 5 – Schools in Yorkshire
OFTOs
Robin Rigg OFTO
Gunfleet Sands OFTO
Barrow OFTO
Ormonde OFTO
Lincs OFTO
Westermost Rough OFTO
Dudgeon OFTO
Beatrice OFTO
Rampion OFTO
East Anglia OFTO
104
International Public Partnerships Limited
Annual Report and financial statements 2022
Country
Status at
31 December 2022
Per cent. Risk Capital
Owned by the Group1
Investment end
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.02
100.02
100.0
100.0
100.0
100.0
100.0
50.0
50.0
50.0
100.0
April 2030
February 2032
December 2037
August 2028
April 2029
December 2028
April 2028
August 2027
December 2036
September 2026
September 2025
April 2030
December 2022
July 2033
February 2042
November 2037
October 2037
June 2037
May 3028
November 2041
0.02
August 2040
0.02
0.02
92.52
0.02
100.02
100.02
100.02
100.02
100.0
100.0
100.0
100.0
100.0
100.0
November 2040
August 2041
December 2041
September 2041
March 2031
July 2031
March 2030
July 2032
November 2034
February 2036
November 2038
April 2045
November 2041
December 2044
overview
Strategic report
corporate governance
FINANCIAL STATEMENTS
Investment Name
Building Schools for the Future Portfolio
Minority Shareholdings in 17
Building Schools for the Future Projects
Blackburn with Darwen Phase One
Blackburn with Darwen Phase Two
Derby City
Durham Schools
Ealing Schools Phase One
Essex Phase Two
Hertfordshire Schools Phase One
Islington Phase One
Islington Phase Two
Lewisham Phase 1
Lewisham Phase 2
Lewisham Phase 3
Lewisham Phase 4
Oldham Schools
Tameside Schools One
Tameside Schools Two
Nottingham Schools One
Nottingham Schools Two
South Tyneside and Gateshead Schools One
South Tyneside and Gateshead Schools Two
Southwark Phase One
Southwark Phase Two
Wolverhampton Schools Phase One
Wolverhampton Schools Phase Two
Kent Schools
NHS LIFT Portfolio
Beckenham Hospital
Garland Road Health Centre
Alexandra Avenue Primary Care Centre, Monks Park
Health Centre (two projects)
Gem Centre Bentley Bridge, Phoenix Centre
(two projects)
Sudbury Health Centre
Mt Vernon
Lakeside
Fishponds Primary Care Centre, Hampton House
Health Centre (two projects)
Shirehampton Primary Care Centre, Whitchurch
Primary Care Centre (two projects)
Blackbird Leys Health Centre, East Oxford Care
Centre (two projects)
Brierley Hill
Ridge Hill Learning Disabilities Centre, Stourbridge
Health & Social Care Centre (two projects)
Harrow NRC (three projects)
Goscote Palliative Care Centre
South Bristol Community Hospital
East London LIFT Project One (four projects)
East London LIFT Project Two (three projects)
East London LIFT Project Three
(Newby Place)
East London LIFT Project Four (two projects)
Eltham Community Hospital
Country
Status at
31 December 2022
Per cent. Risk Capital
Owned by the Group1
Investment end
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Various
100.0
100.0
90.0
100.0
80.0
100.0
100.0
90.0
90.0
90.0
90.0
90.0
81.0
99.0
46.0
46.0
90.0
90.0
90.1
90.1
90.0
90.0
100.0
100.0
58.0
49.8
49.8
49.8
49.8
49.8
49.8
49.8
33.4
33.4
33.4
34.3
34.3
49.8
49.8
33.4
30.0
30.0
30.0
30.0
49.8
Various
September 2036
September 2039
August 2037
January 2036
March 2038
December 2036
August 2037
August 2034
March 2039
December 2034
August 2037
August 2037
March 2038
August 2037
August 2036
August 2037
August 2034
August 2038
October 2034
September 2036
January 2036
December 2036
September 2037
August 2040
August 2035
December 2033
December 2031
June 2031
December 2030
November 2032
December 2033
November 2032
January 2031
May 2032
May 2031
April 2035
October 2031
June 2034
November 2035
February 2042
October 2030
April 2033
May 2037
August 2036
January 2040
1 Risk Capital includes project level equity and/or subordinated shareholder debt.
2
Investment contains senior or mezzanine debt in addition to any Risk Capital ownership shown.
International Public Partnerships Limited
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Annual Report and financial statements 2022
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105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022 continUeD
Investment Name
Other UK
Angel Trains
Tideway
Cadent
National Digital Infrastructure Fund
Australia
Royal Melbourne Showgrounds
Long Bay Forensic & Prisons Hospital Project
Reliance Rail
Royal Children’s Hospital
Orange Hospital
NSW Schools
Gold Coast Rapid Transport
Victoria Schools Two
Flinders University
North America
Alberta Schools
Durham Courts
FHSP
Europe (ex UK)
Diabolo Rail Link
Dublin Courts
BeNEX
Federal German Ministry of Education and Research
Headquarters
Pforzheim Schools
Offenbach Police Centre
Hobro Court
Randers Hospital Parking Facility
Ørsted School
Vildbjerg School
Country
Status at
31 December 2022
Per cent. Risk Capital
Owned by the Group1
Investment end
UK
UK
UK
UK
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Canada
US
Belgium
Ireland
Germany
Germany
Germany
Germany
Denmark
Denmark
Denmark
Denmark
Operational
Construction
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Construction
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Operational
Construction
Operational
Operational
Operational
Operational
10.0
17.9
7.25
45.0
100.0
100.0
33.0
100.0
100.0
25.0
30.0
100.0
100.0
December 2058
March 2150
June 2069
July 2027
August 2031
July 2034
February 2044
December 2036
December 2035
December 2035
May 2029
December 2042
March 2049
100.0
100.0
100.02
June 2040
November 2039
October 2052
100.0
100.0
100.0
June 2047
February 2035
December 2049
98.0
98.0
45.0
66.7
66.7
66.7
66.7
July 2041
September 2039
June 2050
December 2027
April 2041
June 2038
December 2036
1 Risk Capital includes project level equity and/or subordinated shareholder debt.
2
Investment contains senior or mezzanine debt in addition to any Risk Capital ownership shown.
106
International Public Partnerships Limited
Annual Report and financial statements 2022
GLOSSARY
INCLUDING ALTERNATIVE PERFORMANCE MEASURES
AGM
The Company’s Annual General Meeting
AIC
Association of Investment Companies
CMA
Competition and Markets Authority
CSR
Corporate Social Responsibility
AFML
Amber Fund Management Limited, a member of the Amber Group
CPI
Consumer Price Index
AMBER/AMBER INFRASTRUCTURE
The Company’s Investment Adviser (Amber Fund Management
Limited and its corporate group)
AMBER GROUP
Amber Infrastructure Group Holdings Limited and its subsidiaries
CPIH
CPI (including owner occupied housing costs)
CSRD
Corporate Sustainability Reporting Directive
APMS
In accordance with ESMA Guidelines on Alternative Performance
Measures (‘APMs’) the Board has considered what APMs are
included in the Annual Report and financial statements which
require further clarification. An APM is defined as a financial measure
of historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework. APMs included in the
Annual Report and financial statements are identified as non-GAAP
measures and are defined within this glossary
ARC
The Company’s Audit and Risk Committee
ASCE
American Society of Civil Engineers
AVERAGE NAV
Average of published NAVs for the relevant periods
BEPS
Base Erosion and Profit Shifting
BESS
British Energy Security Strategy
BSF
Building schools for future projects
CASH DIVIDEND COVER
Non-GAAP measure. Cash dividend payments to investors covered
by the Net operating cash flow before capital activity. This measure
shows the sustainability of the cash dividend payments made by the
Company. Net operating cash flows before capital activity include
net repayments from investments at fair value through profit and loss
and finance costs paid and exclude investment transaction costs
when compared to net cash inflows from operations as disclosed in
the statutory cash flow statement in the financial statements
CDF
The Company’s corporate debt facility
CEF
Connecting Europe Facility
DIVIDEND GROWTH
Non-GAAP measure. Represents the growth in dividend per share
paid to shareholders compared to the prior year. This measure
provides information on the Company’s dividend performance.
Dividends paid and number of issued shares can be found disclosed
in the financial statements and notes to the financial statements
DIVIDEND PER SHARE
Non-GAAP measure. Represents dividends paid per Ordinary
share issued, as disclosed in the financial statements. This measure
provides information on the Company’s dividend performance.
Dividends paid and number of issued shares can be found disclosed
in the financial statements and notes to the financial statements
EAT
European Assets Trust
EFRAG
European Financial Reporting Advisory Group
ESG
Environmental, Social and Governance
EU TAXONOMY
EU Taxonomy for Sustainable Activities
FCA
Financial Conduct Authority
FHSP
The Company’s Family Housing for Service Personnel investment
FMP
Financial Market Participant
FP
Financial Project
FRC
The Financial Reporting Council
GAV
Gross asset value
International Public Partnerships Limited
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Annual Report and financial statements 2022
Annual Report and financial statements 2022
107
GLOSSARY
INCLUDING ALTERNATIVE PERFORMANCE MEASURES continUeD
GDNS
Gas distribution networks
GFSC
The Guernsey Financial Services Commission
GHG
Greenhouse gas emissions
GRESB INFRASTRUCTURE
The Infrastructure Asset Assessment assesses ESG performance at
the asset level for infrastructure asset operators, fund managers and
investors that invest directly in infrastructure
GSLL
Green Sustainability-Linked Loan
HMRB
Flinders University Health and Medical Research Building
IAA
Investment Advisory Agreement
IFRS
International Financial Reporting Standards
IIJA
Infrastructure Investment and Jobs Act
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
The ‘Company’, ‘INPP’, the ‘Group’ (where including
consolidated entities)
INVESTMENT ADVISER
Amber (see above)
IPA
Infrastructure and Projects Authority
IPO
Initial public offering
IRA
Inflation Reduction Act
IRR
The internal rate of return
LIBOR
The London Inter-Bank Offered Rate is an interest-rate average
calculated from estimates submitted by the leading banks in London
NDIF
National Digital Infrastructure Fund
NET ASSET VALUE (‘NAV’)
Non-GAAP measure. Represents the equity attributable to equity
holders of the parent in the Balance Sheet. This terminology is used
as it is common investment sector terminology and so is the most
understandable to the users of the Annual Report. Components of
NAV are further discussed throughout the Annual Report, including
from page 30
NET ASSET VALUE (‘NAV’) PER SHARE
Non-GAAP measure. Represents the equity attributable per share to
equity holders of the parent in the Balance Sheet. This terminology
is used as it is common investment sector terminology and so is the
most understandable to the users of the Annual Report
NET OPERATING CASH FLOWS BEFORE CAPITAL ACTIVITY
Non-GAAP measure. Represents the cash flows from the
Company’s operations before capital activity relating to the
acquisition of new investments, issues of new capital or payment
of dividends. This approach is used to provide investors with an
indication of cash flows generated from operational activity and is
used as part of the cash dividend cover calculations. Components
of net operating cash flows before capital activity are further
discussed throughout the Annual Report, including from page 30
NET ZERO
Net Zero refers to balancing the amount of emitted greenhouse
gases with the equivalent emissions that are either offset or
sequestered. This should primarily be achieved through a rapid
reduction in carbon emissions, but where zero carbon cannot be
achieved, offsetting through carbon credits or sequestration through
rewilding or carbon capture and storage needs to be utilised
NIS
National Infrastructure Strategy
OECD
Organisation for Economic Co-operation and Development
OFGEM
Office of Gas and Electricity Markets
ISSB
International Sustainability Standards Board
OFTO
Offshore Electricity Transmission project
HUNT
Amber’s long-term investor, US Group, Hunt Companies LLC
OFWAT
Water Services Regulation Authority
KID
The Company’s Key Information Document
PCAF
Partnership for Carbon Accounting Financials
KPIs
Key performance indicators
PFI
Projects and private finance initiative
108
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Annual Report and financial statements 2022
PORTFOLIO INFLATION-LINKED RETURN / INFLATION-
LINKED CASH FLOWS
Non-GAAP measure. Calculated by running a ‘plus 1.00%’ inflation
sensitivity for each investment and solving each investment’s
discount rate to return the original valuation. The inflation-linked
cash flows is the increase in the portfolio weighted average discount
rate. This measure provides an indication of the portfolio’s inflation
protection. There is no near comparable in the financial statements
TCFD
Task Force on Climate-related Financial Disclosures
THE COMPANY
International Public Partnerships Limited
TOCs
Train operating companies
PPP
Public-private partnerships
PRI
The UN-backed Principles for Responsible Investment
PRIIPS
Packaged Retail and Insurance-based Investment Product
PWC
The Company’s auditors PricewaterhouseCoopers CI LLP
RNS
Regulatory news service
RPI
UK Retail Price Index
RTS
EU Commission’s Regulatory Technical Standards relating to the
SFDR
SCOPE 1 EMISSIONS
direct emissions from owned or controlled sources
SCOPE 2 EMISSIONS
indirect emissions from the generation of purchased energy
SCOPE 3 EMISSIONS
all indirect emissions (not included in scope 2) that occur in the
value chain of the reporting company, including both upstream and
downstream emissions
SDGS
Sustainable Development Goals
SDR
The proposed UK Sustainability Disclosure Requirements
SFDR
The EU Sustainable Finance Disclosure Regulation
SID
Senior Independent Director
SONIA
SONIA is the effective reference for overnight indexed swaps for
unsecured transactions in the Sterling market
SPV
Special Purpose Vehicle
TOTAL SHAREHOLDER RETURN (‘TSR’)
Non-GAAP measure. Share price appreciation plus dividends
assumed to be reinvested since IPO. The total return based on the
NAV appreciation plus dividends paid since the IPO. There is no
direct reconciliation to the financial statements, being a calculation
instead derived from the Company’s share price. However a nearest
comparison were this measure based on a figure in the financial
statements is provided in the Strategic Report, Investor Relations,
Total Shareholder Return paragraph
TRANSITION RISK
Transition risks include policy changes, reputational impacts, and
shifts in market preferences, norms and technology. Transition
opportunities include those driven by resource efficiency and the
development of new technologies, products and services, which
could capture new markets and sources of funding
UNGC
UN Global Compact
WTW
Willis Towers Watson
International Public Partnerships Limited
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Annual Report and financial statements 2022
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109
KEY CONTACTS
INVESTMENT ADVISER
Amber Fund Management Limited
3 More London Riverside
London
SE1 2AQ
REGISTERED OFFICE
PO Box 286
Floor 2, Trafalgar Court
Les Banques
Guernsey
Channel Islands
GY1 4LY
ADMINISTRATOR AND
COMPANY SECRETARY
Ocorian Administration (Guernsey) Limited
PO Box 286
Floor 2, Trafalgar Court
Les Banques
Guernsey
Channel Islands
GY1 4LY
INDEPENDENT AUDITOR
PricewaterhouseCoopers CI LLP
PO Box 321
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
Channel Islands
GY1 4ND
LEGAL ADVISER
Carey Olsen
PO Box 98, Carey House
Les Banques
Guernsey
Channel Islands
GY1 4BZ
CORPORATE BANKER
Royal Bank of Scotland International
1 Glategny Esplanade
St Peter Port
Guernsey
Channel Islands
GY1 4BQ
CORPORATE BROKERS
Numis Securities Limited
31 Gresham Street
London
EC2V 7QA
PUBLIC RELATIONS
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
110
International Public Partnerships Limited
Annual Report and financial statements 2022
Sustainable
investment means
an investment in an
economic activity
that contributes to
an environmental or
social objective,
provided that the
investment does not
significantly harm
any environmental or
social objective and
that the investee
companies follow
good governance
practices.
The EU Taxonomy is
a classification
system laid down in
Regulation (EU)
2020/852,
establishing a list of
environmentally
sustainable
economic activities.
That Regulation
does not lay down a
list of socially
sustainable
economic activities.
Sustainable
investments with an
environmental
objective might be
aligned with the
Taxonomy or not.
Sustainability
indicators measure
how the
environmental or
social
characteristics
promoted by the
financial product
are attained.
SFDR PERIODIC REPORTING REQUIREMENTS (unaudited)
Product name: International Public Partnerships Ltd (the “Company”)
Legal entity identifier: International Public Partnerships Ltd
Environmental and/or social characteristics
Did this financial product have a sustainable investment objective?
Yes
No
It made sustainable
investments with an
environmental objective: ___%
in economic activities that
qualify as environmentally
sustainable under the EU
Taxonomy
in economic activities that do
not qualify as environmentally
sustainable under the EU
Taxonomy
It promoted Environmental/Social (E/S)
characteristics and
while it did not have as its objective a
sustainable investment, it had a proportion of
___% of sustainable investments
with an environmental objective in economic
activities that qualify as environmentally
sustainable under the EU Taxonomy
with an environmental objective in
economic activities that do not qualify as
environmentally sustainable under the EU
Taxonomy
with a social objective
It made sustainable investments
with a social objective: ___%
It promoted E/S characteristics, but did not
make any sustainable investments
To what extent were the environmental and/or social characteristics
promoted by this financial product met?
Through its investments in infrastructure that support a sustainable society, the Company promotes
environmental and social characteristics but does not have sustainable investment as its objective and
does not invest in sustainable investments, as defined under the SFDR.
The Company has strengthened the alignment of its investment activity with the objectives of the Paris
Agreement, the recommendations of the Taskforce on Climate-related Financial Disclosures (“TCFD”) and
investments that positively contribute towards the UN Sustainable Development Goals (“SDGs”).
In the course of the relevant reporting period, the Company ensured that these environmental and social
characteristics were met in accordance with the Company’s internal policies and procedures, and in the
following ways:
International Public Partnerships Limited
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Annual Report and financial statements 2022
Annual Report and financial statements 2022
108
111
(a)
Sustainable Development Goal Alignment
The Company draws on the SDGs to demonstrate the positive environmental and social characteristics of
its investments. Please refer to page 40 of this report for more information on the Company’s approach
to SDG alignment, and contribution during the period. This page highlights the primary SDGs that are
supported by the Company’s investments, alongside alignment of the full portfolio by fair value.
(b)
Alignment with INPP Exclusion criteria
All investments met the Company’s exclusion criteria, which are summarised below.
The Company did not invest in infrastructure projects or associated businesses that had not demonstrated
the ability or willingness to manage current and future ESG risks effectively, unless as a result of its
involvement, the Company determined it would be able to significantly improve its ESG credentials.
This means the Company did not invest in businesses or sectors relating to arms, tobacco, pornography,
gambling, alcohol or any other sectors that have the potential to lead to human rights abuses. Equally,
the Company did not invest in any infrastructure assets or associated businesses that had an unacceptable
impact on the environment. The Company aligned its investment activities with the objectives of the Paris
Agreement and did not invest in any infrastructure projects or associated businesses that do not have the
potential to support/align with a low-carbon future.
Finally, the Company did not invest in infrastructure or associated businesses that have a track record of;
•
•
•
Corrupt practices;
Poor governance and ethics practices; or
Poor safety or environmental management.
Except for the exclusions stated above, the Company does not typically exclude infrastructure companies,
sectors or asset types based on any particular activity or ESG exposure. Instead, the Company prefers to
engage with the investments in its portfolio and use its position to influence positive change.
(c)
Alignment with INPP’s minimum Governance standards
100% of the portfolio aligned with the Company’s minimum Governance standards. Please refer to page
41 of this report for more information.
(d)
ESG incorporated through the investment process
ESG was considered for all new investments, following the process summarised below.
The consideration of ESG risks and opportunities is a formal element of the investment origination process.
Following a review against the Company’s exclusion criteria, every investment opportunity underwent a
detailed screening and due diligence process, which considered both potentially negative and positive
impacts. In line with international industry practice, potential investments were categorised as follows:
•
•
•
Category A – Investments with the potential to cause adverse environmental and social risks and/or
impacts that are diverse, irreversible or unprecedented in the absence of mitigation;
Category B – Investments with potential limited adverse environmental and social risks and/or
impacts that are few in number, generally site-specific, largely reversible and readily addressed
through mitigation measures; and
Category C – Investments with minimal or no adverse environmental and social risks and/or impacts.
This categorisation then determined the level of due diligence undertaken.
For further information regarding ESG integration across the investment life cycle, please see page 10 of
the Sustainability Report.
112
International Public Partnerships Limited
Annual Report and financial statements 2022
109
How did the sustainability indicators perform?
Information regarding the performance of the Company’s investments against its sustainability indicators is
provided from page 20 of the Company’s Sustainability Report.
…and compared to previous periods?
Not applicable - 2022 was the first period that this has been monitored in the manner required by SFDR.
Comparisons to previous periods will be provided in subsequent reports.
What were the objectives of the sustainable investments that the financial product
partially made and how did the sustainable investment contribute to such objectives?
page 3 as a PDF is corrupt and cannot be placed
The Company promotes environmental or social characteristics but does not have as its objective sustainable
investment.
How did the sustainable investments that the financial product partially made not cause
significant harm to any environmental or social sustainable investment objective?
How were the indicators for adverse impacts on sustainability factors taken into
account?
Not applicable
Were sustainable investments aligned with the OECD Guidelines for Multinational
Enterprises and the UN Guiding Principles on Business and Human Rights? Details:
Not applicable
The EU Taxonomy sets out a “do not significant harm” principle by which
Taxonomy-aligned investments should not significantly harm EU Taxonomy
objectives and is accompanied by specific Union criteria.
The “do no significant harm” principle applies only to those investments
underlying the financial product that take into account the Union criteria for
environmentally sustainable economic activities. The investments underlying the
remaining portion of this financial product do not take into account the Union
criteria for environmentally sustainable economic activities.
Any other sustainable
environmental or social objectives.
investments must also not significantly harm any
Principal
adverse impacts
are the most
significant
negative impacts
of investment
decisions on
sustainability
factors relating
to
environmental,
social and
employee
matters, respect
for human
rights, anti‐
corruption and
anti‐bribery
matters.
International Public Partnerships Limited
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Annual Report and financial statements 2022
Annual Report and financial statements 2022
110113
How did this financial product consider principal adverse impacts on
sustainability factors?
Not applicable.
As detailed in the section entitled "To what extent were the environmental and/or social characteristics
promoted by this financial product met?", every investment opportunity undergoes a detailed screening
and due diligence process during which the potential negative impacts that an investment may have on
an environmental and/or social characteristic are further considered. Those investments with potential
to cause environmental and social risks and/or impacts that are diverse, irreversible or unprecedented
in the absence of mitigation are subject to a higher level of due diligence to ensure that any risks are
sufficiently mitigated and opportunities realised.
The list includes the
investments
constituting the
greatest proportion
of investments of
the financial product
during the reference
period which is: 1
January to 31
December 2022
What were the top investments of this financial product?
Largest investments
Sector
% Assets
Country
Cadent
Tideway
Diabolo
Lincs OFTO
Gas Distribution
Waste water
Transport
Energy Transmission
Angel Trains
FHSP
East Anglia One OFTO
Transport
Other
Energy Transmission
14.5%
13.5%
7.2%
6.3%
6.0%
4.1%
3.6%
Ormonde OFTO
Energy Transmission
3.5%
UK
UK
Belgium
UK
UK
US
UK
UK
Reliance Rail
BeNEX
Transport
Transport
2.9%
2.4%
Australia
Germany
Asset allocation
describes the
share of
investments in
specific assets.
What was the proportion of sustainability-related investments?
Not applicable – as noted above, the Company promotes environmental and social characteristics but
does not have sustainable investment as its objective and therefore did not invest in sustainable
investments, as defined under the SFDR.
What was the asset allocation?
97% of the Company’s investments were used to attain the environmental or social characteristics of the
Company.
114
International Public Partnerships Limited
Annual Report and financial statements 2022
111
How did this financial product consider principal adverse impacts on
sustainability factors?
Not applicable.
As detailed in the section entitled "To what extent were the environmental and/or social characteristics
promoted by this financial product met?", every investment opportunity undergoes a detailed screening
and due diligence process during which the potential negative impacts that an investment may have on
an environmental and/or social characteristic are further considered. Those investments with potential
to cause environmental and social risks and/or impacts that are diverse, irreversible or unprecedented
in the absence of mitigation are subject to a higher level of due diligence to ensure that any risks are
sufficiently mitigated and opportunities realised.
What were the top investments of this financial product?
The list includes the
investments
constituting the
greatest proportion
of investments of
the financial product
during the reference
period which is: 1
January to 31
December 2022
Cadent
Tideway
Diabolo
Lincs OFTO
Angel Trains
FHSP
Largest investments
Sector
% Assets
Country
Gas Distribution
Waste water
Transport
Energy Transmission
Transport
Other
14.5%
13.5%
7.2%
6.3%
6.0%
4.1%
3.6%
Belgium
UK
UK
UK
UK
US
UK
UK
East Anglia One OFTO
Energy Transmission
Ormonde OFTO
Energy Transmission
3.5%
Reliance Rail
BeNEX
Transport
Transport
2.9%
2.4%
Australia
Germany
What was the proportion of sustainability-related investments?
Not applicable – as noted above, the Company promotes environmental and social characteristics but
does not have sustainable investment as its objective and therefore did not invest in sustainable
Asset allocation
describes the
share of
investments in
specific assets.
investments, as defined under the SFDR.
What was the asset allocation?
97% of the Company’s investments were used to attain the environmental or social characteristics of the
Company.
111
International Public Partnerships Limited
International Public Partnerships Limited
Annual Report and financial statements 2022
Annual Report and financial statements 2022
115
In which economic sectors were the investments made? The Company’s investments were in infrastructure assets, in the following sectors: energy, transmission, transport, education, gas distribution, waste water, health, family housing for service personnel, digital, courts. To what extent were the sustainable investments with an environmental objective aligned with the EU Taxonomy? The Company is currently in the process of reviewing and determining the extent whether the Company’s investments align with the EU Taxonomy technical screening criteria contained in the Taxonomy Climate Delegated Act. Therefore, the Company is not currently in a position to disclose how and to what extent its investments are in economic activities that qualify as environmentally sustainable economic activities (as defined in Article 3 of the EU Taxonomy). Therefore, in accordance with the European Commission’s Decision Notice of 13 May 2022 (C(2022) 3051), the Company confirms that its investments are 0% EU Taxonomy-aligned. Did the financial product invest in fossil gas and/or nuclear energy related activities complying with the EU Taxonomy1? Yes: In fossil gas In nuclear energy No Fossil gas and/or nuclear related activities will only compy with the EU Taxonomy where they contribute to limiting climate change (“climate change mitigation”) and do not significantly harm any EU Taxonomy objective – see explanatory not in the left hand margin. The full criteria for fossil gas and nuclear energy economy activitiesthat comply with the EU Taxonomy are laid down in Commission Delegated Regulation (EU) 2022/1214.#1 Aligned with E/S characteristics includes the investments of the financial product used to attain the environmental or social characteristics promoted by the financial product. #2 Other includes the remaining investments of the financial product which are neither aligned with the environmental or social characteristics, nor are qualified as sustainable investments. Investments#1Aligned with E/S characteristics#2 OtherTo comply with the EU Taxonomy, the criteria for fossil gas include limitations on emissions and switching to fully renewable power or low-carbon fuels by the end of 2035. For nuclear energy, the criteria include comprehensive safety and waste management rules. Enabling activities directly enable other activities to make a substantial contribution to an environmental objective. Transitional activities are activities for which low-carbon alternatives are not yet available and among others have greenhouse gas emission levels corresponding to the best performance. 112 116
International Public Partnerships Limited
Annual Report and financial statements 2022
What was the share of investments made in transitional and enabling activities? Not applicable How did the percentage of investments that were aligned with the EU Taxonomy compare with previous reference periods? Not applicable What was the share of sustainable investments with an environmental objective not aligned with the EU Taxonomy?Not applicable What was the share of socially sustainable investments?Not applicable The graphs below show in green the percentage of investments that were aligned with the EU Taxonomy. As there is no appropriate methodology to determine the taxonomy-alignment of sovereign bonds*, the first graph shows the Taxonomy alignment in relation to all the investments of the financial product including sovereign bonds, while the second graph shows the Taxonomy alignment only in relation to the investments of the financial product other than sovereign bonds. *For the purpose of these graphs, ‘sovereign bonds’ consist of all sovereign exposuresare sustainable investments with an environmental objective that do not take into account the criteria for environmentally sustainable economic activities under Regulation (EU) 2020/852. OpExCapExTurnover0%50%100%1. Taxonomy-alignment of investments including sovereign bonds* Other investmentsOpExCapExTurnover0%20%40%60%80%100%2. Taxonomy-alignment of investments excluding sovereign bonds* Other investmentsTaxonomy-aligned activities are expressed as ashare of: -turnoverreflecting theshare of revenuefrom greenactivities ofinvesteecompanies.-capitalexpenditure(CapEx) showingthe greeninvestments madeby investeecompanies, e.g. fora transition to agreen economy.-operationalexpenditure(OpEx) reflectingthe greenoperationalactivities ofinvesteecompanies.113 What investments were included under “other”, what was their purpose and
were there any minimum environmental or social safeguards?
The Company may hold cash reserves and/or enter into derivative transactions for the purposes of
ancillary liquidity, ongoing portfolio management and hedging. Given the purpose of these investments,
there are no minimum environmental and social safeguards applied to such investments. As noted above,
for the reporting period, the value of such “other” assets related to 3% of the Company’s investments.
What actions have been taken to meet the environmental and/or social
characteristics during the reference period?
As noted above, the Company ensured that the environmental and social characteristics were met on a
continuous basis, through the following mandatory practices and in line with the Company’s internal
policies and procedures:
(a)
(b)
(c)
(d)
Sustainable Development Goal Alignment;
Alignment with INPP Exclusion criteria;
Alignment with INPP’s minimum Governance standards; and
ESG incorporated through the investment process.
Please refer to the Company’s 2022 Sustainability Report for a full summary of actions taken to attain the
environmental and social characteristics of the Company.
How did this financial product perform compared to the reference
benchmark?
The Company does not use a defined benchmark at this time.
How does the reference benchmark differ from a broad market index?
Not applicable
How did this financial product perform with regard to the sustainability indicators
to determine the alignment of the reference benchmark with the environmental or
social characteristics promoted?
Not applicable
How did this financial product perform compared with the reference benchmark?
Not applicable
How did this financial product perform compared with the broad market index?
Not applicable
International Public Partnerships Limited
International Public Partnerships Limited
Annual Report and financial statements 2022
Annual Report and financial statements 2022
114117
Reference
benchmarks are
indexes to
measure whether
the financial
product attains the
environmental or
social
characteristics that
they promote.
NOTES
118
International Public Partnerships Limited
Annual Report and financial statements 2022
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International Public Partnerships Limited
c/o Ocorian Administration (Guernsey) Limited
PO Box 286
Floor 2
Trafalgar Court
Les Banques
St Peter Port
Guernsey, Channel Islands GY1 4LY
Tel: +44 1481 742 742
WWW.INTERNATIONALPUBLICPARTNERSHIPS.COM